As filed with the Securities and Exchange Commission on February 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. 54 [x]
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940 [x]
AMENDMENT NO. 41 [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)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[x] on May 1, 1999 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 Features 15
Management and Organization 11 Tax Information 16
Valuing Shares 12 Financial Highlights 17
Purchasing Shares 13
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THIS PROSPECTUS CONTAINS IMPORTANT INFORMATION ABOUT THE FUNDS AND THE SERVICES
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
it assets between common stocks and fixed-income securities. The Fund usually
invests between 50% and 70% of net assets in a broadly diversified portfolio of
common stocks of seasoned companies and usually invests between 30% and 50% of
net assets in fixed-income securities (primarily corporate bonds and U.S.
Government securities). Although it invests primarily in domestic securities,
the Fund may invest up to 20% of its assets in foreign 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 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 interest rates. The Fund may engage in derivative
transactions to protect against price declines, to enhance returns or as a
substitute for purchasing or selling securities. The use of these techniques is
subject to certain limitations and exposes the Fund to certain risks. 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 other
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.
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,
a diversified, unmanaged index of corporate and U.S. government bonds and 90-day
Treasury Bills. 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>
Annual Total Returns
Class A shares
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
% % % % % % % % % %
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
</TABLE>
The Fund's highest quarterly total return was ____% for the quarter ended
_________, 19__, and its lowest quarterly return was _____% for the quarter
ended ________, 19___. The year-to-date total return through the end of the most
recent calendar quarter (December 31, 1998 to March 31, 1999) was ____%
<TABLE>
<CAPTION>
One Five Ten
Average Annual Total Return as of December 31, 1998 Year Years Years
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A Shares % % %
Class B Shares % % %
Class C Shares % % %
Standard & Poor's 500 Index % % %
Lehman Brothers Government/Corporate Bond Index % % %
</TABLE>
2
<PAGE>
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 Standard & Poor's 500 Index is an unmanaged index of common stocks
trading in the U.S. The Lehman Govt./Corp. Bond Index is a diversified,
unmanaged index of corporate and U.S. government bonds. The 90-Day Treasury Bill
returns are shown to indicate how the Fund performed relative to a portfolio of
cash equivalents. Investors cannot invest directly in an Index.
BALANCED 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 Class A Class B Class C
investment)
- -------------------------------------------------------------------------------
Maximum Sales Charge (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
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets) Class A Class B Class C
- --------------------------------------------------------------------------------
Management Fees X.XX% X.XX% X.XX%
Distribution and Service (12b-1) Fees 0.00% X.XX% X.XX%
Other Expenses* X.XX% X.XX% X.XX%
----- ----- -----
Total Operating Expenses X.XX% X.XX% X.XX%
*Other Expenses for Class A shares includes a service fee of _____%.
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.
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 $ $ $ $
Class B shares $ $ $ $
Class C shares $ $ $ $
You would pay the following expenses if you did not redeem your shares:
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Class A shares $ $ $ $
Class B shares $ $ $ $
Class C shares $ $ $ $
3
<PAGE>
EATON VANCE GROWTH & INCOME FUND
INVESTMENT OBJECTIVE AND PRINCIPAL STRATEGIES. The Fund's investment objective
is to provide growth of capital and income. The Fund invests primarily in common
stocks of companies that appear to offer good prospects for increases in both
earnings and dividends. Although it invests primarily in domestic common stocks,
the Fund may invest up to 20% of its assets in foreign companies and up to 20%
of net assets in convertible debt securities.
The portfolio manager seeks to purchase securities that are favorably priced in
relation to their fundamental value and which offer the opportunity for
increased earnings and dividends. 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, the fundamentals of the
company deteriorate or to pursue more attractive investment opportunities. The
portfolio manager expects the Fund's yield to approximate the average yield of
common stocks included in the Standard & Poor's 500 Index. If yields on stocks
are low and Fund expenses exceed income, the Fund may not make distributions to
shareholders.
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 Fund may engage in derivative transactions to protect against price
declines, to produce income or as a substitute for purchasing or selling
securities. The use of these techniques is subject to certain limitations and
exposes the Fund to certain risks. 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 other 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.
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>
Annual Total Returns
Class A shares
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
% % % % % % % % % %
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
</TABLE>
The Fund's highest quarterly total return was ____% for the quarter ended
_________, 19__, and its lowest quarterly return was _____% for the quarter
ended ________, 19___. The year-to-date total return through the end of the most
recent calendar quarter (December 31, 1998 to March 31, 1999) was ____%
<TABLE>
<CAPTION>
One Five Ten
Average Annual Total Return as of December 31, 1998 Year Years Years
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A Shares % % %
Class B Shares % % %
Class C Shares % % %
Standard & Poor's 500 Index % % %
</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 Standard & Poor's 500 Index is
an unmanaged index of common stocks trading in the U.S. Investors cannot invest
directly in an Index.
GROWTH & INCOME FUND FEES AND EXPENSES. These tables describe the fees and
expenses that you may pay if you buy and hold shares.
4
<PAGE>
Shareholder Fees
(fees paid directly from your Class A Class B Class C
investment)
- --------------------------------------------------------------------------------
Maximum Sales Charge (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
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets) Class A Class B Class C
- --------------------------------------------------------------------------------
Management Fees X.XX% X.XX% X.XX%
Distribution and Service (12b-1) Fees 0.00% X.XX% X.XX%
Other Expenses* X.XX% X.XX% X.XX%
----- ----- -----
Total Operating Expenses X.XX% X.XX% X.XX%
*Other Expenses for Class A shares includes a service fee of _____%.
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.
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 $ $ $ $
Class B shares $ $ $ $
Class C shares $ $ $ $
You would pay the following expenses if you did not redeem your shares:
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Class A shares $ $ $ $
Class B shares $ $ $ $
Class C shares $ $ $ $
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 exceed
the average of all publicly traded stocks in the United States. Although it
invests primarily in domestic companies, the Fund may invest up to 20% of its
assets in foreign 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. 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, 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 Fund may engage in derivative transactions to protect against price
declines, to enhance returns or as a substitute for purchasing or selling
securities. The use of these techniques is subject to certain limitations and
exposes the Fund to certain risks. 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 other 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.
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>
Annual Total Returns
Class A shares
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
% % % % % % % % % %
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
</TABLE>
The Fund's highest quarterly total return was ____% for the quarter ended
_________, 19__, and its lowest quarterly return was _____% for the quarter
ended ________, 19___. The year-to-date total return through the end of the most
recent calendar quarter (December 31, 1998 to March 31, 1999) was ____%
<TABLE>
<CAPTION>
One Five Ten
Average Annual Total Return as of December 31, 1998 Year Years Years
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A Shares % % %
Class B Shares % % %
Class C Shares % % %
Standard & Poor's Small Cap 600 Index % % %
</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 Standard & Poor's 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.
SPECIAL EQUITIES FUND FEES AND EXPENSES. These tables describe the fees and
expenses that you may pay if you buy and hold shares.
6
<PAGE>
Shareholder Fees
(fees paid directly from your Class A Class B Class C
investment)
- --------------------------------------------------------------------------------
Maximum Sales Charge (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
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets) Class A Class B Class C
- --------------------------------------------------------------------------------
Management Fees X.XX% X.XX% X.XX%
Distribution and Service (12b-1) Fees 0.00% X.XX% X.XX%
Other Expenses* X.XX% X.XX% X.XX%
----- ----- -----
Total Operating Expenses X.XX% X.XX% X.XX%
*Other Expenses for Class A shares includes a service fee of _____%.
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.
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 $ $ $ $
Class B shares $ $ $ $
Class C shares $ $ $ $
You would pay the following expenses if you did not redeem your shares:
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Class A shares $ $ $ $
Class B shares $ $ $ $
Class C shares $ $ $ $
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. The Fund
may also invest up to 20% of it net assets in fixed-income securities. Although
it invests primarily in domestic securities, the Fund may invest up to 20% of
its assets in foreign securities.
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, 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 likely 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
industry could make it difficult for the Fund to provide a predictable 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. The Fund may engage in
derivative transactions to protect against price declines, to enhance returns or
as a substitute for purchasing or selling securities. The use of these
techniques is subject to certain limitations and exposes the Fund to certain
risks. 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 other developments abroad. Some of the securities held by the Fund are
subject to restrictions on resale, making them less liquid and more difficult to
value. The Fund also invests in real estate investment trusts, exposing 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.
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 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>
Annual Total Returns
Class A shares
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
% % % % % % % % % %
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
</TABLE>
The Fund's highest quarterly total return was ____% for the quarter ended
_________, 19__, and its lowest quarterly return was _____% for the quarter
ended ________, 19___. The year-to-date total return through the end of the most
recent calendar quarter (December 31, 1998 to March 31, 1999) was ____%.
8
<PAGE>
<TABLE>
<CAPTION>
One Five Ten
Average Annual Total Return as of December 31, 1998 Year Years Years
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A Shares % % %
Class B Shares % % %
Class C Shares % % %
Standard & Poor's 500 Index % % %
</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 Standard & Poor's 500 Index is an unmanaged index of common stocks
trading in the U.S. Investors cannot invest directly in an Index.
UTILITIES 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 Class A Class B Class C
investment)
- --------------------------------------------------------------------------------
Maximum Sales Charge (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
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets) Class A Class B Class C
- --------------------------------------------------------------------------------
Management Fees X.XX% X.XX% X.XX%
Distribution and Service (12b-1) Fees 0.00% X.XX% X.XX%
Other Expenses* X.XX% X.XX% X.XX%
----- ----- -----
Total Operating Expenses X.XX% X.XX% X.XX%
*Other Expenses for Class A shares includes a service fee of _____%.
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.
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 $ $ $ $
Class B shares $ $ $ $
Class C shares $ $ $ $
You would pay the following expenses if you did not redeem your shares:
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Class A shares $ $ $ $
Class B shares $ $ $ $
Class C shares $ $ $ $
9
<PAGE>
INVESTMENT OBJECTIVES & PRINCIPAL POLICIES AND RISKS
BALANCED FUND. Balanced Fund's investment objectives are to provide current
income and long-term capital growth. The Fund currently seeks to meet its
investment objective by investing in Balanced Portfolio, a separate open-end
investment company that has the same objective and policies as the Fund. 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.
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 assets in fixed-income securities, including preferred stocks,
corporate bonds, U.S. Government securities, money market instruments and
mortgage-backed obligations. Balanced Portfolio may invest in obligations of any
credit quality but will limit investment in obligations rated below investment
grade to not more than 5% of assets.
GROWTH & INCOME FUND. Growth & Income Fund's investment objective is to provide
growth of principal and income. The Fund currently seeks to meet its investment
objective by investing in Growth & Income Portfolio, a separate open-end
investment company that has the same objective and policies as the Fund. 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.
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 obligations rated below investment grade). Obligations rated below
investment grade are more sensitive to changes in the financial condition of the
issuer or the economy (or both) than higher rated obligations.
The Portfolio seeks to generate a yield approximating the average yield of
stocks included in the Standard & Poor's 500 Index. The Fund's ability to
distribute income to shareholders depends on the yields available on common
stocks and the Fund's expenses. If yields are low and expenses exceed income,
the Fund may not make 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. Paying more commissions may
also reduce return. Capital gains distributions will reduce after tax returns
for shareholders holding the Fund in taxable accounts.
SPECIAL EQUITIES FUND. Special Equities Fund's investment objective is to
provide growth of capital. The Fund currently seeks to meet its investment
objective by investing in the Special Equities Portfolio, a separate open-end
investment company that has the same objective and policies as the Fund. 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.
Special Equities Portfolio invests primarily in common stocks of 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 dependent on fewer products or services than more established
companies, may lack substantial capital reserves and do not have established
performance records. Emerging growth stocks frequently have less trading volume
than stocks of more established companies making them more volatile and
difficult to value. Under normal circumstances, Special Equities Portfolio
invests at least 65% of its total assets in equity securities.
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 seeks to meet its investment
objective by investing in the Utilities Portfolio, a separate open-end
investment company that has the same objective and policies as the Fund. 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.
Utilities Portfolio invests principally in dividend-paying common stocks of
utilities companies. The Utilities Portfolio's ability to produce income will
depend largely on the dividend rates of utilities companies. In recent years,
dividend payments by utilities companies have been affected by industry
deregulation (which created price competition) as well as
10
<PAGE>
issuer diversification (moving companies into non-income producing lines of
business). The portfolio manager expects that income produced by the Portfolio
will approximate the average yield of securities listed on the Standard & Poor's
Utilities Index.
"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 company's gross revenues, on a consolidated basis,
are derived from the utilities industry. Under ordinary circumstances, at least
65% of the Portfolio's assets will be invested in utility stocks. The
Portfolio's policy of concentrating in utility stocks may not be changed without
shareholder approval.
Utilities Portfolio may invest up to 20% of its net assets in fixed-income
securities (including investment grade and non-investment grade obligations)
when consistent with achieving total return. Obligations rated below investment
grade are more sensitive to changes in the financial condition of the issuer or
the economy (or both) than higher rated obligations. 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 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.
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. Paying more commissions may also
reduce return. Capital gains distributions will reduce after tax returns for
shareholders holding the Fund in taxable accounts.
COMMON INVESTMENT PRACTICES. Each Portfolio may invest 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.
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.
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. EACH Portfolio may also
temporarily borrow at any time up to 5% of the value of its total assets to
satisfy redemption requests or settle securities transactions.
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.
MANAGEMENT AND ORGANIZATION
MANAGEMENT. Each Portfolio's investment adviser is Boston Management and
Research ("BMR"), a subsidiary of Eaton Vance Management, 24 Federal Street,
Boston, Massachusetts 02110. Eaton Vance has been managing assets since 1924
11
<PAGE>
and managing mutual funds since 1931. Eaton Vance and its subsidiaries currently
manage over $33 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 ____% of its average daily net assets.
Under its investment advisory agreement with Growth & Income Portfolio and
Special Investment Portfolio, BMR receives a monthly advisory fee of 5/96 of 1%
(equivalent to 0.625% annually) of the average daily net assets of each such
Portfolio. For the fiscal year ended December 31, 1998, the Growth & Income
Portfolio and Special Investment Portfolio paid BMR advisory fees equivalent to
____% of such Portfolio's 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 and over. In February 1997,
the Trustees of Utilities Portfolio voted to accept a waiver of BMR's
compensation so that the advisory fees paid by Utilities Portfolio during any
fiscal year or portion thereof will not exceed on an annual basis 0.65% of
average daily net assets up to $500 million and 0.625% on average daily net
assets of $500 million and more, which fee declines further on assets of $1
billion and over. For the fiscal year ended December 31, 1998, the Utilities
Portfolio paid BMR advisory fees equivalent to ____% 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 other Eaton Vance portfolios, has
been an employee of Eaton Vance for more than 5 years, and is a Vice President
of Eaton Vance and BMR.
Timothy P. O'Brien is the portfolio manager of the Utilities Portfolio (since
January 1995). He has been an employee of Eaton Vance 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 employee of Eaton Vance for more than 5 years, and is a Vice
President of Eaton Vance and BMR.
Edward E. Smiley, Jr. is the portfolio manager of the Special Investment
Portfolio (since November 1996). He also manages other Eaton Vance portfolios,
has been an employee of Eaton Vance since November 1996 and, 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.
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
12
<PAGE>
shares is their net asset value, 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.
You may purchase Fund shares for cash or 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.
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.
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
Offering Price Amount Invested Offering Price
Amount of Purchase
- ---------------------------------------------------------------------------------------------------------------------------
<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
* 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 1.00% 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:
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<PAGE>
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 through certain wrap fee programs
and other programs sponsored by investment dealers that charge fees for their
services. Ask your investment dealer for details. Certain persons associated
with Eaton Vance, other advisers to Eaton Vance funds, the transfer agent, the
custodian and investment dealers may purchase shares at net asset value.
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 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. For Class B and Class C shares,
your withdrawals will not be subject to a 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 a 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 have held Class A shares for less than six months, an additional
sales charge may apply if you exchange. 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. Each
Fund pays capital gains at least 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. A portion of
Balanced, Growth & Income and Utilities Funds' 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.
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 ______________________,
independent accountants. The report of __________________________ 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 $ 8.090 $ 8.150 $ 6.840 $ 7.600 $ 7.390
-------- -------- -------- -------- --------
Income (loss) from operations
Net investment income $ 0.208 $ 0.254 $ 0.254 $ 0.283 $ 0.217
Net realized and unrealized gain (loss) 1.492 0.821 1.641 (0.623) 0.833
-------- -------- -------- -------- --------
Total income (loss) from operations $ 1.700 $ 1.075 $ 1.895 $ (0.340) $ 1.050
-------- -------- -------- -------- --------
Less distributions
From net investment income $ (0.200) $ (0.254) $ (0.248) $ (0.275) $ (0.307)
In excess of net investment income -- (0.001) -- -- (0.008)
From net realized gain (0.890) (0.880) (0.377) (0.145) (0.525)
-------- -------- -------- -------- --------
Total distributions $ (1.090) $ (1.135) $ (0.585) $ (0.420) $ (0.840)
-------- -------- -------- -------- --------
Net asset value - End of year $ 8.700 $ 8.090 $ 8.150 $ 6.840 $ 7.600
======== ======== ======== ======== ========
Total return (1) 21.60% 13.61% 28.36% (4.45)% 15.13%
Ratios/Supplemental Data
Net assets, end of year (000's omitted) $263,730 $240,217 $236,870 $200,419 $227,402
Ratios (as a percentage of average daily net assets):
Expenses (2) 0.97% 0.93% 0.95%+ 0.91% 0.90%
Net investment income 2.35% 3.03% 3.60%+ 4.05% 4.07%
Portfolio turnover of the Fund(3) -- -- -- -- 44%
Portfolio turnover of the Portfolio(3) 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 $ 13.560 $ 12.760 $10.900 $12.490
-------- -------- ------- -------
Income (loss) from operations
Net investment income $ 0.163 $ 0.228 $ 0.250 $ 0.250
Net realized and unrealized gain (loss) 3.827 2.272 3.255 (0.765)
-------- -------- ------- -------
Total income (loss) from operations $ 3.990 $ 2.500 $ 3.505 $(0.515)
-------- -------- ------- -------
Less distributions
From net investment income $ (0.170) $ (0.220) $(0.251) $(0.250)
From net realized gain (3.602) (1.480) (1.394) (0.765)
In excess of net realized gain (0.018) -- -- (0.060)
-------- -------- ------- -------
Total distributions $ (3.790) $ (1.700) $(1.645) $(1.075)
-------- -------- ------- -------
Net asset value - End of year $ 13.760 $ 13.560 $12.760 $10.900
======== ======== ======= =======
Total return(1) 30.93% 20.20% 32.77% (4.12)%
Ratios/Supplemental Data
Net assets, end of year (000's omitted) $124,569 $106,775 $99,375 $84,299
Ratios (as a percentage of average daily net assets):
Expenses(2) 1.04% 1.00% 1.04%++ 0.98%
Net investment income 1.07% 1.70% 2.02%++ 2.09%
Portfolio turnover of the Fund(3) -- -- -- 66%
Portfolio turnover of the Portfolio(3) 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 $ 8.950 $ 7.980 $ 6.880 $ 8.430
------- ------- ------- -------
Income (loss) from operations
Net investment income $(0.032) $(0.000) $(0.009) $(0.013)
Net realized and unrealized gain (loss) 0.922 1.874 1.599 (0.807)
------- ------- ------- -------
Total income (loss) from operations $ 0.890 $ 1.865 $ 1.590 $(0.820)
------- ------- ------- -------
Less distributions
From net realized gain $(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 $(2.850) $(0.895) $(0.490) $(0.730)
------- ------- ------- -------
Net asset value - End of year $ 6.990 $ 8.950 $ 7.980 $ 6.880
======= ======= ======= =======
Total return(1) 14.18% 23.76% 23.31% (9.60)%
Ratios/Supplemental Data
Net assets, end of year(000's omitted) $73,144 $76,999 $70,456 $63,852
Ratios (as a percentage of average daily net assets):
Expenses(2) 1.12% 1.04% 1.08% 1.02%
Net investment income (0.46)% (0.10)% (0.12)% (0.17)%
Portfolio turnover of the Fund(3) -- -- -- 37%
Portfolio turnover of the Portfolio(3) 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 $ 8.770 $ 9.130 $ 7.6300 $ 9.1400
-------- -------- -------- --------
Income (loss) from operations
Net investment income $ 0.409 $ 0.626 $ 0.5235 $ 0.5458
Net realized and unrealized gain (loss) 0.887 (0.014)++ 1.5195 (1.6678)
-------- -------- -------- --------
Total income (loss) from operations $ 1.296 $ 0.612 $ 2.0430 $(1.1220)
-------- -------- -------- --------
Less distributions
From net investment income $ (0.331) $ (0.522) $(0.3641) $(0.3880)
In excess of net investment income -- -- (0.0389) --
From net realized gain (1.243) (0.450) (0.0775) --
In excess of net realized gain (0.042) -- (0.0625) --
-------- -------- -------- --------
Total distributions $ (1.616) $ (0.972) $(0.5430) $(0.3880)
-------- -------- -------- --------
Net asset value - End of year $ 8.450 $ 8.770 $ 9.1300 $ 7.6300
======== ======== ======== ========
Total return(1) 16.18% 7.00% 27.52% (12.28)%
Ratios/Supplemental Data
Net assets, end of year(000's omitted) $370,457 $401,974 $457,879 $445,133
Ratios (as a percentage of average daily net assets):
Other Expenses(2) 1.13% 1.23% 1.19% 1.18%
Net investment income 4.06% 5.59% 4.49% 4.90%
Portfolio turnover of the Portfolio(3) 169% 166% 103% 107%
</TABLE>
* For the eleven-month period ended December 31, 1995.
+ 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 record 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 Special Equities Fund, includes the Fund's share of the
Portfolio's allocated expenses. For the Growth & Income Fund, includes the
Fund's share of the Portfolio's 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 and for the period from October 28, 1993 to December 31, 1993.
(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.
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.
24 Federal Street
Boston, MA 02110
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 COMBEQP5/1
21
<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 Policies Redeeming Shares
and Risks 4 Shareholder Account 7
Management and Organization 4 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. Although it invests primarily in domestic companies, the Fund may invest
up to 20% of its assets in foreign 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. 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, 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 Fund may engage in derivative transactions to protect against price
declines, to enhance returns or as a substitute for purchasing or selling
securities. The use of these techniques is subject to certain limitations and
exposes the Fund to certain risks. 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 other 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.
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.
Annual Total Returns
%
1998
The Fund's highest quarterly total return was _____% for the quarter ended
_______, 199__, and its lowest quarterly total return was ____% for the quarter
ended ______, 199__.
One
Average Annual Total Return as of December 31, 1998 Year Life of Fund
- --------------------------------------------------------------------------------
Fund Shares % %
Standard & Poor's 600 Small Cap Index % %
These returns reflect the maximum sales charge (5.75%). Life of Fund returns are
calculated from January 31, 1997. The S&P 600 Small Cap Index is a broad-based,
widely recognized, unmanaged index of 600 small capitalization companies.
Investors cannot invest directly in an index.
FEES AND EXPENSES OF THE FUND. These tables describe the fees and expenses that
you may pay if you buy and hold shares.
2
<PAGE>
Shareholder Fees
(fees paid directly from your investment)
- --------------------------------------------------------------------------------
Maximum Sales Charge (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 0.00%
Other Expenses* X.XX%
-----
Total Annual Fund Operating Expenses X.XX%
* Other Expenses includes service fees of _____%.
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
- --------------------------------------------------------------------------------
$ $ $ $
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 dependent on fewer products or services than more established
companies, may lack substantial capital reserves and do not have established
performance records. Emerging growth stocks frequently have less trading volume
than stocks of more established companies, making them more volatile and
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 exchange-traded
and over-the-counter options, exchange-traded 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.
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 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.
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. The Portfolio may also temporarily borrow
at any time up to 5% of the value of its total assets to satisfy redemption
requests or settle securities transactions.
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. Paying more commissions may also reduce
return. Capital gains distributions will reduce after tax returns for
shareholders holding Fund shares in taxable accounts.
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.
MANAGEMENT AND ORGANIZATION
MANAGEMENT. The Fund's investment adviser is Eaton Vance Management ("Eaton
Vance"), 24 Federal Street, Boston, MA 02110. Eaton Vance has been managing
assets since 1924 and managing mutual funds since 1931. Eaton Vance and its
subsidiaries currently manage over $33 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
4
<PAGE>
0.75% annually) of the average daily net assets of the Fund up to $500 million,
and the fee will be reduced at various asset levels over $500 million. 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 _____% of its average daily net
assets.
Edward E. Smiley, Jr. is the portfolio manager of the Portfolio (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 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.
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. 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.
You may purchase Fund shares for cash or 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.
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
investment amount and Fund policy of redeeming accounts with low account
balances are waived for bank automated investing accounts.
5
<PAGE>
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> <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 redemptions 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.
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 $100,000 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 $100,000 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 through certain wrap fee programs and
other programs sponsored by investment dealers that charge fees for their
services. Ask your investment dealer for details. Certain persons associated
with Eaton Vance, other advisers to Eaton Vance funds, the transfer agent, the
custodian and investment dealers may purchase shares at net asset value.
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 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. A minimum account size of $5,000
is required to establish a systematic withdrawal plan. Because purchases of Fund
shares are subject to a 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 have held Fund shares for less than six months, an additional sales charge
may apply if you exchange. 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 will be
taxable as ordinary income. Distributions of any long-term capital gains are
taxable as long-term gains. 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.
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
___________________________, independent accountants. The report of
__________________________ 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 1997
- -------------------------------------------------------------------------------
Net asset value - Beginning of year $ $10.000
- -------
Income (loss) from operations
Net investment income $ $ 0.017
Net realized and unrealized gain (loss) 1.871
- -------
Total income (loss) from operations $ 1.888
- -------
Less distributions
From net investment income $ $(0.956)
In excess of net investment income(2) (0.102)
- -------
Total distributions $ $(1.058)
Net asset value - End of year $10.830
- -------
Total return(1) 19.26%
Ratios/Supplemental Data+:
Net assets, end of year (000's omitted) $ $ 307
Ratios (as a percentage of average daily net assets):
Expenses 0.00%
Net investment income 0.18%
Portfolio turnover 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 10.13%
Net investment income (9.95)%
Net investment income per share $(0.90)
(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) 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.
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.
24 Federal Street
Boston, MA 02110
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 TEGP
<PAGE>
LOGO
Investing
for the
21st
Century(R)
EATON VANCE
EMERGING MARKETS FUND
A mutual fund investing in emerging markets countries
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 Objectives & Principal Redeeming Shares 7
Policies and Risks 4 Shareholder Account
Management and Organization 4 Features 8
Valuing Shares 5 Tax Information 9
Purchasing Shares 5 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 STRATEGY. The Fund's investment objective is
to seek long-term capital appreciation. The Fund invests in equity securities of
companies located in emerging market countries, which includes countries in
Asia, Latin America, the Middle East, Southern Europe, Eastern Europe, Africa
and the region comprising the former Soviet Union. In managing the portfolio,
the portfolio manager looks for stocks that will grow in value over time,
regardless of short-term market fluctuations.
The Fund currently invests its assets in a separate registered investment
company with the same objective and policies.
PRINCIPAL RISK FACTORS. The value of Fund shares is sensitive to stock market
volatility in emerging market countries. If there is a decline in the value of
exchange-listed 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. 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 or less-developed countries, these risks can be significant. The Fund
invests in companies with a broad range of market capitalizations, including
smaller companies. 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.
Annual Total Returns Class B Shares
0.0% 0.0% 0.0% 0.0% 0.0%
1994 1995 1996 1997 1998
The Fund's highest quarterly total return was ______________% for the quarter
ended , and its lowest quarterly total return was _____________% for the quarter
ended ___________________. The year-to-date total return through the end of the
most recent calendar quarter (December 31, 1998 to March 31, 1999) was
_________%.
<TABLE>
<CAPTION>
One Five Life of
Average Annual Total Return as of December 31, 1998 Year Years Fund
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A Shares 0.0% % .0 %
Class B Shares 0.0% % %
Morgan Stanley Capital International Emerging Markets Index 0.0% % %
</TABLE>
These returns reflect the maximum sales charge for Class A (5.75%) and any
applicable CDSC for Class B. The Class A performance shown above for the period
prior to November 30, 1994 is the performance of Class B shares, adjusted for
the sales charge that applies to Class A shares (but not adjusted for any other
differences in the expenses of the classes). Class A shares performance is for
the period beginning November 30, 1994. Life of Fund returns are calculated from
November 30, 1994. The Morgan Stanley Capital International Emerging Markets
Index is an unmanaged index of stocks in emerging markets. Investors cannot
invest directly in an index.
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) Class A Class B
- --------------------------------------------------------------------------------
Maximum Sales Charge (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
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets) Class A Class B
- --------------------------------------------------------------------------------
Management Fees 0.00% 0.00%
Distribution and Service (12b-1) Fees** 0.00% 0.00%
Other Expenses 0.00% 0.00%
----- -----
Total Annual Fund Operating Expenses 0.00% 0.00%
**Long-term shareholders of Class B shares 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:
1 Year 3 Years
- --------------------------------------------------------------------------------
Class A shares $00 $00
Class B shares $00 $00
You would pay the following expenses if you did not redeem your shares:
1 Year 3 Years
- --------------------------------------------------------------------------------
Class A shares $00 $00
Class B shares $00 $00
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 policies may be changed without shareholder approval. The Trustees
of the Trust 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 in 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 Fund 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 investment in foreign securities involves considerations and
possible risks not typically associated with investing in securities issued by
the U.S. Government and domestic corporations. The values of foreign investments
are affected by changes in currency rates or exchange control regulations,
application of foreign tax laws (including withholding tax), changes in
governmental administration or economic or monetary policy (in this country or
abroad) or changed circumstances in dealings between nations. Currency exchange
rates may fluctuate significantly over short periods of time causing the
Portfolio's net asset value to fluctuate as well. Costs are incurred in
connection with conversions between various currencies. In addition, foreign
brokerage commissions, custody fees and other costs of investing are generally
higher than in the United States, and foreign securities markets may be less
liquid, more volatile and less subject to governmental supervision than in the
United States. Investments in foreign issuers could be 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. Transactions in the securities of foreign
issuers could be subject to settlement delays and risk of loss.
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. The Portfolio may also
temporarily borrow at any time up to 5% of the value of its total assets to
satisfy redemption requests or settle securities transactions.
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
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 Portfolio or shareholders. The Year 2000 concern
may also adversely impact issuers of secutities held by the Portfolio.
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, the Portfolio
paid advisory fees of 00% of its average daily net assets.
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
4
<PAGE>
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 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 $32 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.
Kiersten Christensen is the portfolio manager of the Portfolio (since May 1,
1996). She has been an employee of LGM for at least five years.
ORGANIZATION. The Fund is a series of 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. 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.
You may purchase Fund shares for cash or 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.
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
5
<PAGE>
investment amount and Fund policy of redeeming accounts with low account
balances are waived for bank automated investing accounts.
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
* 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:
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 through certain wrap fee programs
and other programs sponsored by investment dealers that charge fees for their
services. Ask your investment dealer for details. Certain persons associated
with Eaton Vance, other advisers to Eaton Vance funds, the transfer agent, the
custodian and investment dealers may purchase shares at net asset value.
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).
6
<PAGE>
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 .75% of
average daily net assets annually. Class A shares pay a distribution fee of .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. All classes pay service fees for personal and/or account
services not exceeding 0.25% of average daily net assets annually. 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.
7
<PAGE>
SHAREHOLDER ACCOUNT FEATURES
Once you purchase shares, the transfer agent establishes a Lifetime Investing
Account 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. For Class B shares, your
withdrawals will not be subject to a 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 a 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 have held Class A shares for less than six months, an additional
sales charge may apply if you exchange. 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
8
<PAGE>
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 will be
taxable as ordinary income. Distributions of any long-term capital gains are
taxable as long-term gains. 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.
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.
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 ,
independent accountants. The report of _______________________________________
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 $12.720 $10.050 $ 9.960 $10.000
------- ------- ------- -------
Income (loss) from
operations:
Net investment loss $(0.012) $(0.143) $(0.268) $(0.003)
Net realized and
unrealized gain
(loss) on
investments (0.436) 2.988 0.358 (0.037)
------- ------- ------- -------
Total income (loss)
from operations $(0.448) $ 2.845 $ 0.090 $(0.040)
------- ------- ------- -------
Less
distributions:
From net realized
gain on investments -- $(0.175) -- --
In excess of net
realized gain on
investments (0.362) -- -- --
Total distributions $(0.362) $(0.175) -- --
------- ------- ------- -------
Net asset value - End of year $11.910 $12.720 $10.050 $ 9.96
======= ======= ======= =======
Total Return(1) (3.48)% 28.49% 0.90% (0.40)%
Ratios/Supplemental Data+:
Net assets, end of year (000's omitted) $ 9,074 $ 6,725 $ 1,801 $ 229
Ratios (as a percentage of average daily net assets):
Expenses(2)(3) 3.50% 3.41% 6.19% 0.75+
Expenses after custodian fee reduction(2) 3.32% 3.19% 6.19% --
Net investment loss (1.92)% (1.76)% (4.64)% (0.75)%+
Portfolio turnover 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>
Ratios (as a percentage of average daily net assets):
Expenses(2)(3) 3.79% 4.52% 11.35% 9.14%+
Expenses after custodian fee reduction(2) 3.61% 4.30% 11.35% --
Net investment loss (2.21)% (2.87)% (9.80)% (9.14)%+
Net investment loss per share $(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 ex-dividend date. Total return is not computed on an
annualized basis. Capital gains distributions, if any, are assumed to be
reinvested at the net asset value on the ex-dividend date.
(2) Includes the Fund's share of 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.
24 Federal Street
Boston, MA 02110
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
GREATER INDIA FUND
A 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.
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 primarily in equity
securities of companies in India and surrounding countries of the Indian
subcontinent. Greater India investments are typically listed on stock exchanges
or traded in the over-the-counter markets in countries of the Indian
subcontinent, but also include securities traded in markets outside these
countries, including securities trading in the form of Global Depositary
Receipts and American Depositary Receipts. 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 Fund currently invests its assets in a separate registered investment
company with the same objective and policies.
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, 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 or less-developed 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.
Investors should be aware that the securities markets in the Indian subcontinent
are substantially smaller, less liquid and more volatile than the major
securities markets in the United States. 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 as the result of any 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 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.
Annual Total Returns Class B Shares
0.0% 0.0% 0.0% 0.0% 0.0%
1994 1995 1996 1997 1998
The Fund's highest quarterly total return was ___________% for the quarter ended
______________________ , and its lowest quarterly total return was______ % for
the quarter ended _______________. The year-to-date total return through the end
of the most recent calendar quarter (December 31, 1998 to March 31, 1999) was
_____%.
<TABLE>
<CAPTION>
One Five Life of
Average Annual Total Return as of December 31, 1998 Year Years Fund
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A Shares 0.0% 0.0% 0.0%
Class B Shares 0.0% 0.0% 0.0%
Bombay Stock Exchange Index 0.0% 0.0% 0.0%
</TABLE>
These returns reflect the maximum sales charge for Class A (5.75%) and any
applicable CDSC for Class B. The Class A performance shown above for the period
prior to May 2, 1994 is the performance of Class B shares, adjusted for the
sales charge that applies to Class B shares (but not adjusted for any other
differences in the expenses of the classes). Class A shares performance is for
the period beginning May 2, 1994. 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.
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) Class A Class B
- -------------------------------------------------------------------------------
Maximum Sales Charge (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
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets) Class A Class B
- --------------------------------------------------------------------------------
Management Fees 0.00% 0.00%
Distribution and Service (12b-1) Fees** 0.00% 0.00%
Other Expenses 0.00% 0.00%
------ ------
Total Annual Fund Operating Expenses 0.00% 0.00%
**Long-term shareholders of Class B shares 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:
1 Year 3 Years
- --------------------------------------------------------------------------------
Class A shares $00 $00
Class B shares $00 $00
You would pay the following expenses if you did not redeem your shares:
1 Year 3 Years
- --------------------------------------------------------------------------------
Class A shares $00 $00
Class B shares $00 $00
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
the South Asia 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 Portfolio seeks to achieve its objective by investing in a carefully
selected and continuously managed portfolio consisting primarily of equity
securities of companies in India and surrounding countries of the Indian
subcontinent. A company will be considered to be in India or another country if
it is domiciled or has significant operations in that country. The Portfolio
will, under normal market conditions, invest at least 65% of its total assets in
such securities ("Greater India investments") and at least 50% of its total
assets in equity securities of Indian companies. 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 to attempt
to mitigate 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
characteristic of the United States. Governmental actions can have a significant
effect on the economic conditions in such countries, which could adversely
affect the value and liquidity of the Portfolio's investments. Although the
governments of India, Pakistan and Sri Lanka have recently begun to institute
economic reform policies, there can be no assurance that they will continue to
pursue such policies or, if they do, that such policies will succeed. Such
countries have in the past failed to recognize private property rights and have
at times nationalized or expropriated the assets of private companies. The laws
of countries in the region relating to limited liability of corporate
shareholders, fiduciary duties of officers and directors, and the bankruptcy of
state enterprises are generally less well developed that or different from such
laws in the United States. It may be more difficult to obtain a judgement 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 of the Portfolio
of additional investments. Monsoons and natural disasters also can affect the
value of Portfolio investments.
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
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 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. Transactions in the
securities of foreign issuers could be subject to settlement delays and risk of
loss.
The stock markets in the region are undergoing a period of growth and change,
which may result in trading or price volatility and difficulties in the
settlement and recording of transactions, and in interpreting and applying the
relevant laws and regulations. The securities industries in these countries are
comparatively underdeveloped, and stockbrokers and other intermediaries may not
perform as well as their counterparts in the United States and other more
developed securities markets. Physical delivery of securities in small lots
generally has been required in India and a shortage of vault capacity and
trained personnel has existed among qualified custodial Indian banks. The
Portfolio may be unable to sell securities where the registration process is
incomplete and may experience delays in receipt of dividends. If trading volume
is limited by operational difficulties, the ability of the Portfolio to invest
its assets may be impaired.
Settlement of securities transactions in the Indian subcontinent may be delayed
and is generally less frequent than in the United States, which could affect the
liquidity of the Portfolio's assets. In addition, disruptions due to work
stoppages and trading improprieties in these securities markets have caused such
markets to close. If extended closings were to occur in stock markets where the
Portfolio was heavily invested, the Fund's ability to redeem Fund shares could
become correspondingly impaired. To mitigate these risks, the Portfolio may
maintain a higher cash position that it otherwise would, thereby possibly
diluting its return, or the Portfolio may have to sell more liquid securities
which it would not otherwise choose to sell. In some cases, the Portfolio may
find it necessary or desirable to borrow funds on a short-term
4
<PAGE>
basis, within the limits of the Investment Company Act of 1940 (the "1940 Act"),
to help meet redemption requests or settle securities transactions. Such
borrowings would result in increased expense to the Fund. The Fund may suspend
redemption privileges or postpone the date of payment for more than seven days
after a redemption order is received under certain circumstances.
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.
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 Eaton Vance
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
Eaton Vance or shareholders. The Year 2000 concern may also adversely impact
issuers of securities held by the Portfolio.
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, the Portfolio
paid advisory fees of 00% 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 an employee of
Lloyd George for at least 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 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 $32 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
5
<PAGE>
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. 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.
You may purchase Fund shares for cash or 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.
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.
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 $100,00 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 through certain wrap fee programs
and other programs sponsored by investment dealers that charge fees for their
services. Ask your investment dealer for details. Certain persons associated
with Eaton Vance, other advisers to Eaton Vance funds, the transfer agent, the
custodian and investment dealers may purchase shares at net asset value.
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 .75% of
average daily net assets annually. Class A shares pay a distribution fee of .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. All classes pay service fees for personal and/or account
services not exceeding 0.25% of average daily net assets annually. 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 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. For Class B shares, your
withdrawals will not be subject to a 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 a 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 have held Class A shares for less than six months, an additional
sales charge may apply if you exchange. 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 will be
taxable as ordinary income. Distributions of any long-term capital gains are
taxable as long-term gains. 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.
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.
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
____________________________, independent accountants. The report of
________________________________ 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 $ 5.910 $ 6.550 $ 9.840 $10.000
------- ------- ------- -------
Income (loss) from operations
Net investment loss $(0.126) $(0.099)++ $(0.176) $(0.065)
Net realized and unrealized gain
(loss) on investments 0.446 (0.541) (3.114) (0.095)
------- ------- ------- -------
Total income (loss) from operations $ 0.320 $(0.640) $(3.290) $(0.160)
------- ------- ------- -------
Net asset value - End of year $ 6.230 $ 5.910 $ 6.550 $ 9.840
======= ======= ======= =======
Total return(1) 5.42% (9.77)% (33.43)% (1.60)%
Ratios/Supplemental Data:
Net assets, end of year (000's omitted) $68,812 $74,661 $21,041 $38,925
Ratios (as a percentage of average daily net assets):
Expenses(2)(3) 3.08% 2.88% 3.31% 2.54%+
Expenses after custodian fee reduction(2) 3.05% 2.65% 2.90% --
Net investment loss (1.67)% (1.46)% (1.74)% (1.42)%
Portfolio turnover of the Portfolio 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 ex-dividend date. Total return is not computed on an
annualized basis. Capital gains distributions, if any, are assumed to be
reinvested at the net asset value on the ex-dividend date.
(2) Includes the Fund's share of 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.
<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.
24 Federal Street
Boston, MA 02110
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
24 Federal Street
Boston, Massachusetts 02110
(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 ......................................... 5
Management and Organization ..................................... 6
Investment Advisory and Administrative Services ................. 11
Other Service Providers ......................................... 12
Purchasing and Redeeming Shares ................................. 13
Sales Charges ................................................... 14
Performance ..................................................... 18
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 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. A Portfolio may only write a put option on a security that it intends
ultimately to acquire for its investment portfolio.
To the extent that a Portfolio enters into futures contracts, options on
futures contracts and options on foreign currencies traded on an exchange
regulated by the 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. The Portfolios do not intend to write a covered 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 engage in the writing of call option
contracts on securities which are owned by the Portfolio ("covered call
options") when, in the opinion of the Trustees of the Portfolio, such activity
is advisable and appropriate. Utilities Portfolio may write (sell) covered call
and put options on securities, currencies and indices. If a written covered call
option is exercised, the Portfolio will be unable to realize further price
appreciation on the underlying securities and portfolio turnover will increase,
resulting in higher brokerage costs. Utilities Portfolio may purchase call and
put options on any securities in which it may invest or options on any
securities index composed of securities in which it may invest. Utilities
Portfolio does not intend to purchase an option on any security if, after such
transaction, more than 5% of its net assets, as measured by the aggregate of all
premiums paid for all such options it holds, would be so invested.
Each 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, Portfolio would have to exercise its options in order to
realize any profit and would incur transaction costs upon the sale of underlying
securities pursuant to the exercise of put options. Reasons for the absence of a
liquid secondary market on an exchange include the following: (i) there may be
insufficient trading interest in certain options; (ii) restrictions may be
imposed by an exchange on opening transactions or closing transactions or both;
(iii) trading halts, suspensions or other restrictions may be imposed with
respect to particular classes or series of options or underlying securities;
(iv) unusual or unforeseen circumstances may interrupt normal operations on an
exchange; (v) the facilities of an exchange or the Options Clearing Corporation
may not at all times be adequate to handle current trading volume; or (vi) one
or more exchanges could, for economic or other reasons, decide or be compelled
at some future date to discontinue the trading of options (or a particular class
or series of options), in which event the secondary market on that exchange (or
in that class or series of options) would cease to exist, although outstanding
options on that exchange that had been issued by the Options Clearing
Corporation as a result of trades on that exchange would continue to be
exercisable in accordance with their terms.
The writing of options could result in significant increases in the
portfolio turnover rate, especially during periods when market prices of the
underlying securities appreciate.
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. 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. Under present regulatory policies, including those
of the Board of Governors of the Federal Reserve System and the Commission, such
loans may be made to member firms of the New York Stock Exchange and would be
required to be secured continuously by collateral in cash, cash equivalents or
U.S. Government securities held by a Portfolio's custodian and maintained on a
current basis at an amount at least equal to the market value of the securities
loaned which will be marked to market daily. Each Portfolio would have the right
to call a loan and obtain the securities loaned at any time on five days'
notice. During the existence of a loan, a Portfolio will continue to receive the
equivalent of the interest or dividends paid by the issuer on the securities
loaned and would also receive interest on investment of the collateral. The
Portfolio would not, however, have the right to vote any securities having
voting rights during the existence of the loan, but would call the loan in
anticipation of an important vote to be taken among holders of the securities or
the giving or withholding of their consent on a material matter affecting the
investment. As with other extensions of credit, there are risks of delay in
recovery or even loss of rights in the securities loan, if the borrower of the
securities fails financially. However, the loans would be made only to
organizations deemed by the investment adviser to be of good standing and, when,
in its judgment, the consideration which can be earned from securities loans of
this type justifies the attendant risk. Securities lending involves
administration expenses, including finders' fees. If the investment adviser
determines to make securities loans, it is intended that the value of the
securities loaned would not exceed 30% of the Portfolio's total assets.
Securities lending involves risks of delay in recovery or even loss of rights on
the securities loaned if the borrower fails financially. At the present time,
the Trustees of such Portfolios have not made a determination to engage in this
activity, and have no present intention of making such a determination during
the current fiscal year.
ASSET COVERAGE REQUIREMENTS. Transactions involving when-issued securities,
forward contracts, futures contracts and options (other than options that a
Portfolio has purchased) expose a Portfolio to an obligation to another party. A
Portfolio will not enter into any such transactions unless it owns either (1) an
offsetting ("covered") position in securities or other options, forward
contracts or futures contracts, or (2) cash or liquid securities (such as
readily marketable common stock and money market instruments) with a value
sufficient at all times to cover its potential obligations not covered as
provided in (1) above. The Portfolios will comply with Commission guidelines
regarding cover for these instruments and, if the guidelines so require, set
aside cash or liquid securities in a segregated account with its custodian in
the prescribed amount. The securities in the segregated account will be marked
to market daily. Assets used as cover or held in a segregated account maintained
by the Portfolio's custodian cannot be sold while the position requiring
coverage or segregation is outstanding unless they are replaced with other
appropriate assets. As a result, the commitment of a large portion of a
Portfolio's assets to segregated accounts or to cover could impede portfolio
management or the Portfolio's ability to meet redemption requests or other
current obligations.
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 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. Over-the-counter ("OTC") derivative
instruments in which the Utilities Portfolio may invest involve an enhanced risk
that the issuer or counterparty will fail to perform its contractual
obligations. Some derivative instruments are not readily marketable or may
become illiquid under adverse market conditions. The staff of the Commission
takes the position that purchased OTC options, and assets used as cover for
written OTC options, are subject to the Portfolio's 15% limit on illiquid
investments. 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.
LEVERAGE THROUGH BORROWING. Upon trustee approval, the Utilities Portfolio may
from time to time increase its ownership of portfolio securities above the
amounts otherwise possible by borrowing from banks on an unsecured basis at
fixed or variable rates of interest and investing the borrowed funds. The
investment adviser currently anticipates that the Utilities Portfolio would
incur borrowings for the purpose of acquiring additional income-producing
securities when it is believed that the interest payable with respect to such
borrowings will be exceeded by (a) the income payable on the securities acquired
with such borrowings or (b) the anticipated total return (a combination of
income and appreciation) on such securities. Such borrowings might be made, for
example, when short-term interest rates fall below the yields available from the
securities acquired with the borrowed funds or the total return anticipated from
such securities.
The Utilities Portfolio is required to maintain asset coverage of at least
300% with respect to such borrowings, which means that the Portfolio may borrow
an amount up to 50% of the value of its net assets (not including such
borrowings). The Portfolio may be required to dispose of securities held by it
on unfavorable terms if market fluctuations or other factors reduce such asset
coverage to less than 300%.
Leveraging will exaggerate any increase or decrease in the market value of
the securities held by the Utilities Portfolio. Money borrowed for leveraging
will be subject to interest costs which may or may not exceed the income from
the securities purchased. The Utilities Portfolio may also be required to
maintain minimum average balances in connection with such borrowing or to pay a
commitment or other fee to maintain a line of credit; either of these
requirements will increase the cost of borrowing over the stated interest rate.
Unless the income and appreciation, if any, on assets acquired with borrowed
funds exceeds the cost of borrowing, the use of leverage will diminish the
investment performance of the Portfolio compared with what it would have been
without leverage.
Successful use of a leveraging strategy depends on the investment adviser's
ability to predict correctly interest rates and market movements, and there is
no assurance that a leverage strategy will be successful during any period in
which it is employed. Leverage may be viewed as a speculative activity.
The ability of the Utilities Portfolio to borrow could be partially or
entirely curtailed in the event that the Credit Control Act of 1969 were to be
invoked and the Federal Reserve Board were to limit or prohibit certain
extensions of credit. This Act empowers the Federal Reserve Board, when
authorized by the President, to regulate directly the costs and allocation of
funds in the credit market.
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). Growth & Income Portfolio may
invest 5% or less of net assets in investment grade bonds. Utilities Portfolio
intends to limit its investment in obligations rated investment grade or below
investment grade to 10% of net assets.
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%. High portfolio turnover involves correspondingly greater brokerage
commissions and other transaction costs, which will be borne directly by a
Portfolio. It may also result in the realization of capital gains.
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. 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. 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 Total Return Fund and
Portfolio, no more than 25% of its net assets (taken at current value) may
be held as collateral for such sales at any one time.
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 borrowing policies set forth above and may not invest more than 15% of
net assets in illiquid securities.
MANAGEMENT AND ORGANIZATION
FUND MANAGEMENT. The Trustees of theTrust 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 24 Federal Street, Boston, Massachusetts 02110. 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
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, NY 10020
DONALD R. DWIGHT (68), 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
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.
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.
TIMOTHY P. O'BRIEN (44), Vice President of Utilities Portfolio
Vice President of BMR and Eaton Vance.
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.
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.
Messrs. Hayes (Chairman), Reamer and Thorndike are members of the Special
Committee of the Board of Trustees of the Trust and of the Portfolios. The
purpose of the Special Committee is to consider, evaluate and make
recommendations to the full Board of Trustees concerning (i) all contractual
arrangements with service providers to the Funds and the Portfolios, including
investment advisory (Portfolio only), administrative, transfer agency, custodial
and fund accounting and distribution services, and (ii) all other matters in
which Eaton Vance or its affiliates has any actual or potential conflict of
interest with the Funds, the Portfolios or its investors therein.
The Nominating Committee of the Board of Trustees of the Trust and the
Portfolios is comprised of four Trustees who are not "interested persons" as
that term is defined under the 1940 Act ("noninterested Trustees"). The
Committee has four-year staggered terms, with one member rotating off the
Committee to be replaced by another noninterested Trustee. The purpose of the
Committee is to recommend to the Board nominees for the position of
noninterested Trustee and to assure that at least a majority of the Board of
Trustees is independent of Eaton Vance and its affiliates.
Messrs. Treynor (Chairman) and Dwight are members of the Audit Committee of
the Board of Trustees of the Trust and of the Portfolios. The Audit Committee's
functions include making recommendations to the Trustees regarding the selection
of the independent accountants, and reviewing matters relative to trading and
brokerage policies and practices, accounting and auditing practices and
procedures, accounting records, internal accounting controls, and the functions
performed by the custodian, transfer agent and dividend disbursing agent of the
Trust and of the Portfolios.
Trustees of the Portfolios that are not affiliated with the investment
adviser may elect to defer receipt of all or a percentage of their annual fees
in accordance with the terms of a Trustees Deferred Compensation Plan (the
"Trustees" Plan"). Under the Trustees' Plan, an eligible Trustee may elect to
have his deferred fees invested by a Portfolio in the shares of one or more
funds in the Eaton Vance Family of Funds, and the amount paid to the Trustees
under the Trustees' Plan will be determined based upon the performance of such
investments. Deferral of Trustees' fees in accordance with the Trustees' Plan
will have a negligible effect on the Portfolios' assets, liabilities, and net
income per share, and will not obligate 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) $ $ $ $ $ $ $
Balanced Portfolio
Growth & Income Portfolio
Special Equities Portfolio
Utilities Portfolio
Trust and Fund Complex (6) (7) (8)
- ----------
(1) As of May 1, 1999, the Eaton Vance fund complex consists of registered investment companies or series thereof.
(2) The Trust consisted of Funds as of December 31, 1998.
(3) Mr. Dwight received deferred compensation from each Portfolio as follows: Balanced -- $ ; Growth & Income -- $ ;
Special Equities -- $ ; Utilities -- $ .
(4) Mr. Hayes received deferred compensation from each Portfolio as follows: Balanced -- $ Growth & Income -- $ ; Special
Equities -- $ ; Utilities -- $ .
(5) Mr. Thorndike received deferred compensation from each Portfolio as follows: Balanced -- $ Growth & Income -- $ ; Special
Equities -- $ ; Utilities -- $ .
(6) Includes $ of deferred compensation.
(7) Includes $ of deferred compensation.
(8) Includes $ of deferred compensation.
(9) 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.
</TABLE>
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. On July 21, 1992, the Trust changed its name from
Eaton Vance Special Equities Fund to Eaton Vance Special Investment Trust. The
Funds were reorganized as Class A shares (formerly EV Traditional Investors
Fund, EV Traditional Special Equities Fund, EV Traditional Stock Fund and EV
Traditional Total Return Fund), Class B shares (formerly EV Marathon Investors
Fund, EV Marathon Special Equities Fund, EV Marathon Stock Fund and EV Marathon
Total Return Fund) and Class C shares (formerly EV Classic Investors Fund, EV
Classic Special Equities Fund, EV Classic Stock Fund and EV Classic Total Return
Fund) of Eaton Vance Special Investment Trust on January 1, 1998, so information
herein prior to such date is for the Funds when they were separate series of the
Trust (or a separate corporation) and before they became multiple-class funds.
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.
The Utilities Portfolio has agreed to pay BMR under the Investment Advisory
Agreement the following fee rate, which fee has been waived by BMR as follows:
<TABLE>
<CAPTION>
CURRENT CONTRACTUAL
AVERAGE DAILY NET ASSETS FOR THE MONTH ANNUALIZED FEE RATE ANNUALIZED FEE RATE
--------------------------------------------------------------------------------------------
<S> <C> <C>
Up to $500 million 0.6500% 0.7500%
$500 million but less than $1 billion 0.6250% 0.6875%
$1 billion but less than $1.5 billion 0.6000% 0.6250%
$1.5 billion but less than $2 billion 0.5500% 0.5625%
$2 billion but less than $3 billion 0.5000% 0.5000%
$3 billion and over 0.4375% 0.4375%
</TABLE>
As at December 31, 1998, the Utilities Portfolio had net assets of $ . For
the fiscal years ended December 31, 1998, 1997 and 1996, the Utilities Portfolio
paid BMR advisory fees of $ , $2,839,559 and $3,690,566, respectively
(equivalent to %, 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 $ . For
the fiscal years ended December 31, 1998, 1997 and 1996, the Balanced Portfolio
paid BMR advisory fees of $ , $1,964,597 and $1,794,096, respectively
(equivalent to %, 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 $
. For the fiscal years ended December 31, 1998, 1997 and 1996, the Special
Equities Portfolio paid BMR advisory fees of $ , $488,529 and $477,560,
respectively (equivalent to %, 0.625% and 0.625%, respectively, 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 $ .
For the fiscal years ended December 31, 1998, 1997 and 1996, the Growth & Income
Portfolio paid BMR advisory fees of $ , $856,583 and $706,803, respectively
(equivalent to %, 0.625% and 0.625%, respectively, 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. 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"), 24 Federal
Street, Boston, MA 02110, 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 acts as custodian
for the Trust and the Portfolios. IBT has the custody of all cash and securities
representing a Fund's interest in a Portfolio, has custody of each Portfolio's
assets, maintains the general ledger of each Portfolio and each Fund, and
computes the daily net asset value of interests in each Portfolio and the net
asset value of shares of each Fund. In such capacity it attends to details in
connection with the sale, exchange, substitution, transfer or other dealings
with 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, 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.
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.
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 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.
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 invetment
dealers; to officers and employees of IBT and the transfer agent; 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. For information concerning the
total return of the Classes of a Fund, see Appendix A, Appendix B and Appendix
C.
For Utilities Portfolio, yield is computed separately for each Class of the
Fund pursuant to a standardized formula by dividing net investment income per
share earned during a recent thirty-day period by the maximum offering price
(including the maximum sales charge for Class A shares) per share on the last
day of the period and annualizing the resulting figure. Net investment income
per share is calculated from the yields to maturity of all debt obligations held
by the Portfolio based on prescribed methods, reduced by accrued Fund and Class
expenses for the period with the resulting number being divided by the average
daily number of Class shares outstanding and entitled to receive distributions
during the period. This yield figure does not reflect the deduction of any CDSCs
which (if applicable) are imposed on certain redemptions at the rates set forth
under "Sales Charges" in the prospectus. Yield calculations assume the current
maximum initial sales charge for Class A shares set forth under "Sales Charges"
in the prospectus. (Actual yield may be affected by variations in sales charges
on investments.)
Utilities Fund's yield may be compared to relevant indices, such as the
Consumer Price Index and various domestic securities indices. A Fund's total
return, yield and comparisons with these indices may be used in advertisements
and in information furnished to present or prospective shareholders. In
addition, evaluations of a Fund's performance or rankings or ratings of mutual
funds (which include a Fund) made by independent sources may be used in
advertisements and in information furnished to present or prospective
shareholders. A Fund's performance may differ from that of other investors in
its corresponding Portfolio, including any other investment companies.
Information, charts and illustrations showing the effect of compounding interest
or relating to inflation and taxes (including their effects on the dollar and
the return on stocks and other investment vehicles) may also be included in
advertisements and materials furnished to present and prospective investors.
Each Fund may provide information to investors concerning the volatility or
beta of the Fund. Beta is a measure of risk which shows a Fund's volatility
relative to the Standard & Poor's 500 Composite Index, an unmanaged index of
common stocks (and a commonly used measure of U.S. stock market performance). A
fund with a beta of 1 would perform exactly like the market index; a beta of 2
would mean its performance was twice as volatile as the index, positive or
negative. Each Fund may also provide information concerning its portfolio
turnover rate and dividend paying record (or the record of issuers in which a
Fund may invest) in information provided to investors. Each Fund may also
provide information on the utilities industry in general and the demand for
utility services.
Information used in advertisements and in materials furnished to present or
prospective shareholders may include statistics, data and performance studies
prepared by independent organizations, or included in various publications
reflecting the investment performance or return achieved by various classes and
types of investments (e.g., common stocks, small company stocks, long-term
corporate bonds, long-term government bonds, intermediate- term government
bonds, U.S. Treasury bills) over various periods of time. This information may
also include a discussion of the nature of stocks, bonds, or other investments.
This information may be used to illustrate the benefits of long-term investments
in common stocks and fixed-income securities. This diversification is commonly
referred to as "asset allocation." Information about the portfolio allocation,
portfolio turnover rate and holdings of the Portfolio may be included in
advertisements and other material furnished to present and prospective
shareholders.
Information used in advertisements and 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 ordinary income and net income in accordance with the
timing requirements imposed by the Code, so as to maintain its RIC status and to
avoid paying any federal income or excise tax. Each Fund so qualified for its
taxable year ended December 31, 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 the capital gain net
income which is the excess of its realized capital gains over its realized
capital losses, generally computed on the basis of the one-year period ending on
October 31 of such year, after reduction by (i) any available capital loss
carryforwards, and (ii) 100% of any income from the prior year (as previously
computed) that was not paid out during such year and on which the Fund paid no
federal income tax. Under current law, provided that a Fund qualifies as a RIC
and a Portfolio is treated as a partnership for Massachusetts and federal tax
purposes, neither the Fund nor the Portfolio should be liable for any income,
corporate excise or franchise tax in the Commonwealth of Massachusetts.
Each Fund's distributions of net investment income and the excess of net
short-term capital gain over net long-term capital loss and certain foreign
exchange gains earned by its corresponding Portfolio and allocated to the Fund
are taxable to shareholders of the Fund as ordinary income whether received in
cash or reinvested in additional shares. Each Fund's distributions of the excess
of net long-term capital gain over net short-term capital loss (including any
capital loss carried forward from prior years) earned by its corresponding
Portfolio and allocated to the Fund are taxable to shareholders of the Fund as
long-term capital gains, whether received in cash or reinvested in additional
shares, and regardless of the length of time their shares have been held.
Distributions by a Fund reduce the net asset value of the Fund's shares.
Should a distribution reduce the net asset value below a shareholder's cost
basis, such distribution would be taxable to the shareholder even though, from
an investment standpoint, it may constitute a return of capital. Therefore,
investors should consider the tax implications of buying shares immediately
before a distribution.
A portion of distributions made by a Fund which are derived from dividends
received by its corresponding Portfolio from domestic corporations and allocated
to the Fund may qualify for the dividends-received deduction for corporations.
The dividends-received deduction for corporate shareholders is reduced to the
extent the shares of a Fund with respect to which the dividends are received are
treated as debt-financed under federal income tax law and is eliminated if the
shares are deemed to have been held for less than a minimum period, generally 46
days. Receipt of certain distributions qualifying for the deduction may result
in reduction of the tax basis of the corporate shareholder's shares.
Distributions eligible for the dividends-received deduction may give rise to or
increase an alternative minimum tax for corporations.
Any loss realized upon the redemption or exchange of shares of a Fund with a
tax holding period of 6 months or less will be treated as a long-term capital
loss to the extent of any distribution of net long-term capital gains with
respect to such shares. In addition, all or a portion of a loss realized on a
redemption or other disposition of Fund shares may be disallowed under "wash
sale" rules if other Fund shares are acquired (whether through reinvestment of
dividends or otherwise) within a period beginning 30 days before and ending 30
days after the date of such redemption or other disposition. Any disallowed loss
will result in an adjustment to the shareholder's tax basis in some or all of
the other shares acquired.
Investments in lower-rated or unrated securities may present special tax
issues for a Portfolio and hence for its corresponding Fund to the extent actual
or anticipated defaults may be more likely with respect to such securities. Tax
rules are not entirely clear about issues such as when a Portfolio may cease to
accrue interest, original issue discount, or market discount; when and to what
extent deductions may be taken for bad debts or worthless securities; how
payments received on obligations in default should be allocated between
principal and income; and whether exchanges of debt obligations in a workout
context are taxable.
A Portfolio's transactions in options, futures contracts and forward
contracts will be subject to special tax rules that may affect the amount,
timing and character of Fund distributions to shareholders. For example, certain
positions held by a Portfolio on the last business day of each taxable year will
be "marked to market" (i.e., treated as if closed out on such day), and any
resulting gain or loss will generally be treated as 60% long-term and 40%
short-term capital gain or loss. Certain positions held by a Portfolio that
substantially diminish the Portfolio's risk of loss with respect to other
positions in its portfolio may constitute "straddles," which are subject to tax
rules that may cause deferral of Portfolio losses, adjustments in the holding
period of Portfolio securities, and conversion of short-term capital losses into
long-term capital losses. A Portfolio may make certain elections to mitigate
adverse consequences of these tax rules and may have to limit its activities in
options, futures contracts and forward contracts in order to enable each Fund to
maintain its RIC status for federal income tax purposes.
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, the Fund will not be
eligible to pass through to shareholders their proportionate share of foreign
taxes paid by the Portfolio and allocated to the Fund, with the result that
shareholders will not include in income, and will not be entitled to take any
foreign tax credits or deductions for, foreign taxes paid by the Portfolio and
allocated to the Fund. However, 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. Certain foreign exchange gains and losses realized by a Portfolio
and allocated to a Fund will be treated as ordinary income and losses. 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.
Special tax rules apply to Individual Retirement Accounts ("IRAs") and other
retirement plans and shareholders investing through IRAs or such plans should
consult their tax advisers for more information.
Amounts paid by a Fund to individuals and certain other shareholders who
have not provided a Fund with their correct taxpayer identification number
("TIN") and certain certifications required by the Internal Revenue Service (the
"IRS"), as well as shareholders with respect to whom a Fund has received certain
information from the IRS or a broker, may be subject to "backup" withholding of
federal income tax arising from a Fund's taxable dividends and other
distributions as well as the proceeds of redemption transactions (including
repurchases and exchanges), at a rate of 31%. An individual's TIN is generally
his or her social security number.
Non-resident alien individuals, foreign corporations and certain other
foreign entities generally will be subject to a U.S. withholding tax at a rate
of 30% on a Fund's distributions from its ordinary income and the excess of its
net short-term capital gain over its net long-term capital loss, unless the tax
is reduced or eliminated by an applicable tax convention. Distributions from the
excess of a Fund's net long-term capital gain over its net short-term capital
loss received by such shareholders and any gain from the sale or other
disposition of shares of a Fund generally will not be subject to U.S. federal
income taxation, provided that non-resident alien status has been certified by
the shareholder. Different U.S. tax consequences may arise if: (i) the
shareholder is engaged in a trade or business in the United States; (ii) the
shareholder is present in the United States for a sufficient period of time
during a taxable year to be treated as a U.S. resident (generally 180 days or
more); or (iii) the shareholder fails to provide any required certifications
regarding its status as a non-resident alien investor. Foreign shareholders
should consult their tax advisers regarding the U.S. and foreign tax
consequences of an investment in a Fund.
The foregoing discussion does not address the special tax rules applicable
to certain classes of investors, such as IRAs and other retirement plans,
tax-exempt entities, insurance companies and financial institutions.
Shareholders should consult their own tax advisers with respect to special tax
rules that may apply in their particular situations, as well as the state,
local, and, where applicable, foreign tax consequences of investing in a Fund.
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.
The following table shows for each of the fiscal years ended December 31,
1998, 1997 and 1996, brokerage commissions paid by each Portfolio:
PORTFOLIO 12/31/98 12/31/97 12/31/96
- --------- -------- -------- --------
Balanced .................. $ $ 150,611 $ 214,373
Growth & Income ........... 311,584 360,161
Special Equities .......... 200,452 158,360
Utilities ................. 1,341,755 1,611,869
All of such portfolio security transactions were directed to firms which
provided some research services to BMR or its affiliates (although many of such
firms may have been selected in any particular transaction primarily because of
their execution capabilities), and the amounts of such transactions for the
fiscal years ended December 31, 1998, 1997 and 1996, respectively, were as
follows: Balanced -- $ , $101,577,000 and $127,306,565; Growth & Income --
$ , $194,723,039 and $186,550,857; Special Equities -- $ ,
$83,316,207 and $70,221,501; and Utilities -- $ , $765,570,46
and $509,690,960.
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.
<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
- -- $ ; Growth & Income Fund -- $ ; Special Equities Fund -- $ ;
and Utilities Fund -- $ . Of these amounts, the following was paid to
investment dealers and the balance of which was retained by the principal
underwriter: Balanced Fund -- $ ; Growth & Income Fund -- $ ;
Special Equities Fund -- $ ; and Utilities Fund -- $ .
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 INVESTMENT DEALERS
- -------------------------- ------------------- ------------------
<S> <C> <C>
Balanced Fund
December 31, 1998 $ $
December 31, 1997 99,860 17,650
December 31, 1996 177,591 27,563
Growth & Income Fund
December 31, 1998 $ $
December 31, 1997 34,726 5,522
December 31, 1996 23,928 4,468
Special Equities Fund
December 31, 1998 $ $
December 31, 1997 0 1,361
December 31, 1996 11,071 1,905
Utilities Fund
December 31, 1998 $ $
December 31, 1997 57,041 10,096
December 31, 1996 65,149 12,115
</TABLE>
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 for repurchase transactions handled by it $2.50
for each such transaction which aggregated as follows: Balanced Fund -- $ ;
Growth & Income Fund -- $ ; Special Equities Fund -- $ ; and
Utilitlies Fund -- $ .
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.
<PAGE>
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT -- BALANCED FUND
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 $ $ % % % %
5 Years Ended 12/31/98 12/31/93 $ $ % % % %
1 Year Ended 12/31/98 12/31/97 $ $ % % % %
<CAPTION>
VALUE OF A $1,000 INVESTMENT -- GROWTH & INCOME FUND
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
- ------------------------- ------------ ------------ -------------- ---------- ---------- ---------- ----------
<C> <C> <C> <C> <C> <C> <C> <C>
10 Years ended 12/31/98 12/31/88 $ $ % % % %
5 Years Ended 12/31/98 12/31/93 $ $ % % % %
1 Year Ended 12/31/98 12/31/97 $ $ % % % %
<CAPTION>
VALUE OF A $1,000 INVESTMENT -- SPECIAL EQUITIES FUND
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
- ------------------------- ------------ ------------ -------------- ---------- ---------- ---------- ----------
<C> <C> <C> <C> <C> <C> <C> <C>
10 Years ended 12/31/98 12/31/88 $ $ % % % %
5 Years Ended 12/31/98 12/31/93 $ $ % % % %
1 Year Ended 12/31/98 12/31/97 $ $ % % % %
<CAPTION>
VALUE OF A $1,000 INVESTMENT -- UTILITIES FUND
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
- ------------------------- ------------ ------------ -------------- ---------- ---------- ---------- ----------
<C> <C> <C> <C> <C> <C> <C> <C>
10 Years ended 12/31/98 12/31/88 $ $ % % % %
5 Years Ended 12/31/98 12/31/93 $ $ % % % %
1 Year Ended 12/31/98 12/31/97 $ $ % % % %
</TABLE>
<PAGE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of February 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 February 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 Inc. was the record owner of 5.6% 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, (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 .. $ $ $ $ ( %) $ $
Growth &
Income .... $ $ $ $ ( %) $ $
Special
Equities .. $ $ $ $ ( %) $ $
Utilities . $ $ $ $ ( %) $ $
</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 -- $ ;
Growth & Income -- $ ; Special Equities -- $ ; and
Utilities -- $ .
PERFORMANCE INFORMATION
The tables below indicate the cumulative and average annual total return on
a hypothetical investment in shares of $1,000. Total return for the period prior
to January 1, 1998 reflects the total return of the predecessor to Class B.
Total return prior to the Predecessor Fund's commencement of operations reflects
the total return of Class A, adjusted to reflect the Class B sales charge. The
Class A total return has not been adjusted to reflect certain other expenses
(such as distribution and/or service fees). If such adjustments were made, the
Class B total return would be different. Past performance is not indicative of
future results. Investment return and principal value will fluctuate; shares,
when redeemed, may be worth more or less than their original cost. Information
presented with two asterisks (**) includes the effect of subsidizing expenses.
Return would have been lower without subsidies.
<PAGE>
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT -- BALANCED FUND
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 $ $ % % % %
5 Years
Ended
12/31/98 12/31/93 $1,000 $ $ % % % %
1 Year
Ended
12/31/98 12/31/97 $1,000 $ $ % % % %
- ------------------
*Predecessor Fund commenced operations on November 2, 1993.
</TABLE>
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT -- GROWTH & INCOME FUND
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 $ $ % % % %
5 Years
Ended
12/31/98 12/31/93 $1,000 $ $ % % % %
1 Year
Ended
12/31/98** 12/31/97 $1,000 $ $ % % % %
- ------------------
*Predecessor Fund commenced operations on August 17, 1994.
</TABLE>
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT -- SPECIAL EQUITIES FUND
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 $ $ % % % %
5 Years
Ended
12/31/98 12/31/93 $1,000 $ $ % % % %
1 Year
Ended
12/31/98** 12/31/97 $1,000 $ $ % % % %
- ------------------
*Predecessor Fund commenced operations on August 22, 1994.
</TABLE>
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT -- UTILITIES FUND
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 $ $ % % % %
5 Years
Ended
12/31/98 12/31/93 $1,000 $ $ % % % %
1 Year
Ended
12/31/98 12/31/97 $1,000 $ $ % % % %
- ------------------
*Predecessor Fund commenced operations on November 1, 1993.
</TABLE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of February 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 14.5%
BISYS Brokerage Services Inc. Concord, CA 9.4%
GROWTH & INCOME Merrill Lynch, Pierce, Fenner & Smith, Inc. Jacksonville, FL 15.2%
FUND --
SPECIAL EQUITIES FUND Merrill Lynch, Pierce, Fenner & Smith, Inc. Jacksonville, FL 24.7%
PaineWebber FBO PaineWebber CDN FBO Weehawken, NJ 7.6%
George Caryotakis
Donaldson Lufkin Jenrette Securities Corporation Inc. Jersey City, NJ 6.8%
UTILITIES FUND -- Merrill Lynch, Pierce, Fenner & Smith, Inc. Jacksonville, FL 17.9%
</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, (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 .. $ $ $ $ ( %) $ $
Growth &
Income .... $ $ $ $ ( %) $ $
Special
Equities .. $ $ $ $ ( %) $ $
Utilities . $ $ $ $ ( %) $ $
</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 --
$ ; Growth & Income -- $ ; Special Equities -- $ ; and
Utilities -- $ .
PERFORMANCE INFORMATION
The tables below indicate the cumulative and average annual total return on
a hypothetical investment in shares of $1,000. Total return for the period prior
to January 1, 1998 reflects the total return of the predecessor to Class C.
Total return prior to the Predecessor Fund's commencement of operations reflects
the total return of Class B, adjusted to reflect the Class C sales charge. The
Class B total return has not been adjusted to reflect certain other expenses
(such as distribution and/or service fees). If such adjustments were made, the
Class C total return would be different. Past performance is not indicative of
future results. Investment return and principal value will fluctuate; shares,
when redeemed, may be worth more or less than their original cost. Information
presented with two asterisks (**) includes the effect of subsidizing expenses.
Return would have been lower without subsidies.
<PAGE>
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT -- BALANCED FUND
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 $ $ % % % %
5 Years
Ended
12/31/98 12/31/93 $1,000 $ $ % % % %
1 Year
Ended
12/31/98 12/31/97 $1,000 $ $ % % % %
- ------------------
*Predecessor Fund commenced operations on November 2, 1993.
</TABLE>
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT -- GROWTH & INCOME FUND
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 $ $ % % % %
5 Years
Ended
12/31/98 12/31/93 $1,000 $ $ % % % %
1 Year
Ended
12/31/98** 12/31/97 $1,000 $ $ % % % %
- ------------------
*Predecessor Fund commenced operations on November 4, 1994.
</TABLE>
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT -- SPECIAL EQUITIES FUND
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 $ $ % % % %
5 Years
Ended
12/31/98 12/31/93 $1,000 $ $ % % % %
1 Year
Ended
12/31/98 12/31/97 $1,000 $ $ % % % %
- ------------------
*Predecessor Fund commenced operations on November 17, 1994.
</TABLE>
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT -- UTILITIES FUND
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 $ $ % % % %
5 Years
Ended
12/31/98 12/31/93 $1,000 $ $ % % % %
1 Year
Ended
12/31/98 12/31/97 $1,000 $ $ % % % %
- ------------------
*Predecessor Fund commenced operations on November 1, 1993.
</TABLE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of February 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 15.6%
GROWTH & INCOME Frontier Trust Co. FBO West Florida Pharmacies Inc. Ambler, PA 16.0%
FUND -- 401(k) Savings & Retirement Plan
Merrill Lynch, Pierce, Fenner & Smith Inc. Jacksonville, FL 13.7%
Frontier Trust Co. FBO Panama Pharmacy Inc. 401(k) Ambler, PA 6.2%
Savings & Retirement Plan
SPECIAL EQUITIES FUND -- Frontier Trust Co. FBO MWI Broward Inc. 401(k) Ambler, PA 27.8%
Savings & Retirement Plan
Frontier Trust Co. FBO Silikal North America Inc. Ambler, PA 17.8%
401(k) Savings & Retirement Plan
Merrill Lynch, Pierce, Fenner & Smith, Inc. Jacksonville, FL 6.2%
UTILITIES FUND -- Merrill Lynch, Pierce, Fenner & Smith, Inc. Jacksonville, FL 20.6%
Frontier Trust Co. FBO Paper & Chemical Supply 401(k) Amber, 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.
Part B
Information Required in a Statement of Additional Information
STATEMENT OF
ADDITIONAL INFORMATION
May 1, 1999
EATON VANCE EMERGING GROWTH FUND
24 Federal Street
Boston, Massachusetts 02110
(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, are subject to the Fund's 15% limit on illiquid
investments. The Fund's ability to terminate OTC derivative instruments may
depend on the cooperation of the counterparties to such contracts. The Fund
expects to purchase and write only exchange-traded options until such time as
the Fund's management determines that the OTC options market is sufficiently
developed and the Fund has amended its prospectus so that appropriate disclosure
is furnished to prospective and existing shareholders. For thinly traded
derivative instruments, the only source of price quotations may be the selling
dealer or counterparty. In addition, certain provisions of the 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.)
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 securities short if it owns at
least an equal amount of the security sold short or another security convertible
or exchangeable for an equal amount of the security sold short without payment
of further compensation (a short sale against-the-box). Under current tax law,
short sales against-the-box enable the Fund to hedge its exposure to securities
that is holds without selling the securities and recognizing gains. A short sale
against-the-box requires that the short seller absorb certain costs so long as
the position is open. In a short sale against-the-box, the short seller is
exposed to the risk of being forced to deliver appreciated stock to close the
position if the borrowed stock is called in, causing a taxable gain to be
recognized. The Fund expects normally to close its short sales against-the-box
by delivering newly-acquired stock. The Fund's ability to utilize short sales
may be limited if proposed tax legislation is enacted. No more than 20% of the
Fund's assets will be subject to short sales at any one time.
LENDING PORTFOLIO SECURITIES. The Fund may seek to increase its income by
lending portfolio securities. Under present regulatory policies, including those
of the Board of Governors of the Federal Reserve System and the Commission, such
loans may be made to member firms of the Exchange, and would be required to be
secured continuously by collateral in cash or cash equivalents maintained on a
current basis at an amount at least equal to the market value of the securities
loaned. The Fund would have the right to call a loan and obtain the securities
loaned at any time on five days' notice. During the existence of a loan, the
Fund would continue to receive the equivalent of the interest or dividends paid
by the issuer on the securities loaned and would also receive the interest on
investment of the collateral. The Fund would not, however, have the right to
vote any securities having voting rights during the existence of the loan, but
would call the loan in anticipation of an important vote to be taken among
holders of the securities or of the giving or withholding of their consent on a
material matter affecting the investment. As with other
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<PAGE>
extensions of credit there are risks of delay in recovery or even loss of rights
in the collateral should the borrower of the securities fail financially.
However, the loans would be made only to firms deemed by the investment adviser
to be of good standing, and when, in its judgment, the consideration which can
be earned currently from securities loans of this type (net of administrative,
expenses and finders' fees) justifies the attendant risk. Securities lending
involves administration expenses, including finders' fees. If the investment
adviser determines to make securities loans, it is not intended that the value
of the securities loaned would exceed 30% of the Fund's total assets.
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.
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);
(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
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<PAGE>
(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. 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 24 Federal
Street, Boston, Massachusetts 02110. Those Trustees who are "interested persons"
of the Trust or the Fund, as defined in the 1940 Act, are indicated by an
asterisk(*).
JESSICA M. BIBLIOWICZ (39), 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
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<PAGE>
DONALD R. DWIGHT (68), 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
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.
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
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.
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<PAGE>
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.
Messrs. Hayes (Chairman), Reamer and Thorndike are members of the Special
Committee of the Board of Trustees of the Trust. The purpose of the Special
Committee is to consider, evaluate and make recommendations to the full Board of
Trustees concerning (i) all contractual arrangements with service providers to
the Fund, including administrative, transfer agency, custodial and fund
accounting and distribution services, and (ii) all other matters in which Eaton
Vance or its affiliates has any actual or potential conflict of interest with
the Fund or its shareholders.
The Nominating Committee of the Board of Trustees of the Trust is comprised
of four Trustees who are not "interested persons" as that term is defined under
the 1940 Act ("noninterested Trustees"). The Committee has four-year staggered
terms, with one member rotating off the Committee to be replaced by another
noninterested Trustee. The purpose of the Committee is to recommend to the Board
nominees for the position of noninterested Trustee and to assure that at least a
majority of the Board of Trustees is independent of Eaton Vance and its
affiliates.
Messrs. Treynor (Chairman) and Dwight are members of the Audit Committee of
the Board of Trustees of the Trust. The Audit Committee's functions include
making recommendations to the Board of Trustees regarding the selection of the
independent accountants, and reviewing matters relative to trading and brokerage
policies and practices, accounting and auditing practices and procedures,
accounting records, internal accounting controls, and the functions performed by
the custodian, transfer agent and dividend disbursing agent of the Trust.
Trustees of the Trust who not affiliated with the Investment Adviser may
elect to defer receipt of all or a percentage of their annual fees in accordance
with the terms of a Trustees Deferred Compensation Plan (the "Trustees' Plan").
Under the Trustees' Plan, an eligible Trustee may elect to have his deferred
fees invested by the Fund in the shares of one or more funds in the Eaton Vance
Family of Funds, and the amount paid to the Trustees under the Trustees' Plan
will be determined based upon the performance of
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<PAGE>
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> <C>
Aggregate Aggregate Total Compensation
Compensation Compensation from Trust and
Name from Trust(2) from Fund Fund Complex
- ---- ---------- --------- ------------
Jessica M. Bibliowicz(6)............................. $ $ $
Donald R. Dwight..................................... (3)
Samuel L. Hayes, III................................. (4)
Lynn A. Stout(6).....................................
John L. Thorndike.................................... (5)
Jack L. Treynor......................................
(1) As of May 1, 1999, the Eaton Vance fund complex consists of _______ registered investment companies or series thereof.
(2) The Trust consisted of Funds as of December 31, 1998.
(3) Includes $ of deferred compensation.
(4) Includes $ of deferred compensation.
(5) Includes $ 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.
</TABLE>
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, 1998, the Fund changed it name from EV Traditional
Emerging Growth Fund to Eaton Vance Emerging Growth Fund. 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.
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 communization
with shareholders about such a meeting.
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<PAGE>
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 $_____ . 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 $______ 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 $______ 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.
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<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. 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"), 24 Federal
Street, Boston, Massachusetts 02110, 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 $_____ and $32,
respectively, of which $_____ and $6, respectively, was received by the
principal underwriter and $_____ 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.
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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 02110, 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.
The Trustees of the Trust have established the following procedures for the
fair valuation of the Fund's assets under normal market conditions. Securities
listed on foreign or U.S. securities exchanges or in the NASDAQ National Market
System generally are valued at closing sale prices or, if there were no sales,
at the mean between the closing bid and asked prices therefor on the exchange
where such securities are principally traded or on such National Market System.
Unlisted or listed securities for which closing sale prices are not available
are valued at the mean between the latest bid and asked prices on the principal
market where the security was traded. An option is valued at the last sale price
as quoted on the principal exchange or board of trade on which such option or
contract is traded or, in the absence of a sale, at the mean between the last
bid and asked prices. Futures positions on securities or currencies are
generally valued at closing settlement prices. Short-term debt securities with a
remaining maturity of 60 days or less are valued at amortized cost. If
securities were acquired with a remaining maturity of more than 60 days, their
amortized cost value will be based on their value on the sixty-first day prior
to maturity. Other fixed income and debt securities, including listed securities
and securities for which price quotations are available, will normally be valued
on the basis of valuations furnished by a pricing service. All other securities
are valued at fair value as determined in good faith by or at the direction of
the Trustees.
Generally, trading in the foreign securities owned by the Fund is
substantially completed each day at various times prior to the close of the
Exchange. The values of these securities used in determining the net asset value
of the Fund's shares are computed as of such times. Occasionally, events
affecting the value of foreign securities may occur between such times and the
close of the Exchange which will not be reflected in the computation of the
Fund's net asset value (unless the Fund deems that such events would
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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.
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 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.
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<PAGE>
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; 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
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<PAGE>
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 $100,000 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 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.
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<PAGE>
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 $_______ , of which $_________ was paid to
investment dealers and the balance 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. Total returns may be calculated based
on a purchase at net asset value and at varying sales charge levels.
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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
VALUE OF A $1,000 INVESTMENT
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 $ $ % % % %
1 Year Ended
12/31/98 12/31/97
</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
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<PAGE>
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.
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.
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<PAGE>
CERTAIN HOLDERS OF FUND SHARES
As of February 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 67.8% of the outstanding shares and Robert A. Chisholm, Melrose,
MA and Brian Jacobs, Cohasset, MA held of record and beneficially owned 6.8% 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
ordinary income and net income in accordance with the timing requirements
imposed by the Code, so as to maintain its RIC status and to avoid paying any
federal income or excise tax.
In order to avoid incurring a federal excise tax obligation, the Code
requires that the Fund distribute (or be deemed to have distributed) by December
31 of each calendar year at least 98% of its ordinary income (not including
tax-exempt income) for such year, at least 98% of its capital gain net income
(which is the excess of its realized capital gains over its realized capital
losses), generally computed on the basis of the one-year period ending on
October 31 of such year, after reduction by (i) any available capital loss
carryforwards and (ii) 100% of any income and capital gains from the prior year
(as previously computed) that was not paid out during such year and on which the
Fund was not taxed. Under current law, provided that the Fund qualifies as a
RIC, the Fund should not be liable for any income, excise or franchise tax in
the Commonwealth of Massachusetts.
Foreign exchange gains and losses realized by the Fund in connection with
the its investments in foreign securities and certain options, futures or
forward contracts or foreign currency may be treated as ordinary income and
losses under special tax rules. Certain options, futures or forward contracts of
the Fund may be required to be marked to market (i.e., treated as if closed out)
on the last day of each taxable year, and any gain or loss realized with respect
to these contracts may be required to be treated as 60% long-term and 40%
short-term gain or loss. Positions of the Fund in securities and offsetting
options, swaps, futures or forward contracts may be treated as "straddles" and
be subject to other special rules that may affect the amount, timing and
character of the Fund's distributions to shareholders. Certain uses of foreign
currency and foreign currency derivatives such as options, futures, forward
contracts and swaps and investment by the Fund in certain "passive foreign
investment companies" may be limited or a tax election may be made, if
available, in order to preserve the Fund's qualification as a RIC or avoid
imposition of a tax on the Fund.
Distributions of the excess of net long-term capital gains over short-term
capital losses earned by the Fund, taking into account any capital loss
carryforwards that may be available to the Fund in years after its first taxable
year, are taxable to shareholders of the Fund as long-term capital gains,
whether received in cash or in additional shares and regardless of the length of
time their shares have been held. Certain distributions, if declared in October,
November or December and paid the following January, will be taxed to
shareholders as if received on December 31 of the year in which they are
declared.
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<PAGE>
Any loss realized upon the redemption or exchange of shares of the Fund
with a tax holding period of 6 months or less will be treated as a long-term
capital loss to the extent of any distribution of net long-term capital gains
with respect to such shares. In addition, a loss realized on a redemption of
Fund shares may be disallowed under certain "wash sale" rules if other Fund
shares are acquired (whether through reinvestment of dividends or otherwise)
within a period beginning 30 days before and ending 30 days after the date of
such redemption. Any disallowed loss will result in an adjustment to the
shareholder's tax basis in some or all of the other shares acquired.
Amounts paid by the Fund to individuals and certain other shareholders who
have not provided the Fund with their correct taxpayer identification number
("TIN") and certain certifications required by the Internal Revenue Service (the
"IRS"), as well as shareholders with respect to whom the Fund has received
certain information from the IRS or a broker, may be subject to "backup"
withholding of federal income tax arising from the Fund's taxable dividends and
other distributions as well as the proceeds of redemption transactions
(including repurchases and exchanges) at a rate of 31%. An individual's TIN is
generally his or her social security number.
Non-resident alien individuals, foreign corporations and certain other
foreign entities generally will be subject to a U.S. withholding tax at a rate
of 30% on the Fund's distributions from its ordinary income and the excess of
its net short-term capital gain over its net long-term capital loss, unless the
tax is reduced or eliminated by an applicable tax convention. Distributions from
the excess of the Fund's net long-term capital gain over its net short-term
capital loss received by such shareholders and any gain from the sale or other
disposition of shares of the Fund generally will not be subject to U.S. federal
income taxation, provided that non-resident alien status has been certified by
the shareholder. Different U.S. tax consequences may arise if: (i) the
shareholder is engaged in a trade or business in the United States; (ii) the
shareholder is present in the United States for a sufficient period of time
during a taxable year to be treated as a U.S. resident (generally 180 days or
more); or (iii) the shareholder fails to provide any required certifications
regarding its status as a non-resident alien investor. Foreign shareholders
should consult their tax advisers regarding the U.S. and foreign tax
consequences of an investment in the Fund.
The foregoing discussion does not describe many of the tax rules applicable
to IRAs nor does it address the special tax rules applicable to certain other
classes of investors, such as other retirement plans, tax-exempt entities,
insurance companies and financial institutions. Shareholders should consult
their own tax advisers with respect to these or other special tax rules that may
apply in their particular situations, as well as the state, local, and, where
applicable, foreign tax consequences of investing in the Fund.
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
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<PAGE>
rendered by the broker-dealer in other transactions, and the reasonableness of
the commission or spread, if any. Transactions on stock exchanges and other
agency transactions involve the payment by the Fund of negotiated brokerage
commissions. Such commissions vary among different broker-dealer firms, and a
particular broker-dealer may charge different commissions according to such
factors as the difficulty and size of the transaction and the volume of business
done with such broker-dealer. Transactions in foreign securities usually involve
the payment of fixed brokerage commissions, which are generally higher than
those in the United States. There is generally no stated commission in the case
of securities traded in the over-the-counter markets, but the price paid or
received by the Fund usually includes an undisclosed dealer markup or markdown.
In an underwritten offering the price paid by the Fund includes a disclosed
fixed commission or discount retained by the underwriter or dealer. Although
commissions paid on portfolio transactions will, in the judgment of Eaton Vance,
be reasonable in relation to the value of the services provided, commissions
exceeding those which another firm might charge may be paid to broker-dealers
who were selected to execute transactions on behalf of the Fund and Eaton
Vance's other clients in part for providing brokerage and research services to
Eaton Vance.
As authorized in Section 28(e) of the Securities Exchange Act of 1934, a
broker or dealer who executes a portfolio transaction on behalf of the Fund may
receive a commission which is in excess of the amount of commission another
broker or dealer would have charged for effecting that transaction if Eaton
Vance determines in good faith that such compensation was reasonable in relation
to the value of the brokerage and research services provided. This determination
may be made on the basis of either that particular transaction or on the basis
of overall responsibilities which Eaton Vance and its affiliates have for
accounts over which it exercises investment discretion. In making any such
determination, Eaton Vance will not attempt to place a specific dollar value on
the brokerage and research services provided or to determine what portion of the
commission should be related to such services. Brokerage and research services
may include advice as to the value of securities, the advisability of investing
in, purchasing or selling securities, and the availability of securities or
purchasers or sellers of securities; furnishing analyses and reports concerning
issuers, industries, securities, economic factors and trends, portfolio strategy
and the performance of accounts; and effecting securities transactions and
performing functions incidental thereto (such as clearance and settlement); and
the "Research Services" referred to in the next paragraph.
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
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<PAGE>
or accounts paid commissions to the broker-dealer through which such Research
Service was obtained. The advisory fee paid by the Fund is not reduced because
Eaton Vance receives such Research Services. Eaton Vance evaluates the nature
and quality of the various Research Services obtained through broker-dealer
firms and attempts to allocate sufficient commissions to such firms to ensure
the continued receipt of Research Services which Eaton Vance believes are useful
or of value to it in rendering investment advisory services to its clients.
Subject to the requirement that Eaton Vance shall use its best efforts to
seek to execute portfolio security transactions at advantageous prices and at
reasonably competitive commission rates or spreads, Eaton Vance is authorized to
consider as a factor in the selection of any broker-dealer firm with whom Fund
portfolio orders may be placed the fact that such firm has sold or is selling
shares of the Fund or of other investment companies sponsored by Eaton Vance.
This policy is not inconsistent with a rule of the NASD, which rule provides
that no firm which is a member of the NASD shall favor or disfavor the
distribution of shares of any particular investment company or group of
investment companies on the basis of brokerage commissions received or expected
by such firm from any source.
Securities considered as investments for the Fund may also be appropriate
for other investment accounts managed by Eaton Vance or its affiliates. Whenever
decisions are made to buy or sell securities by the Fund and one or more of such
other accounts simultaneously, Eaton Vance will allocate the security
transactions (including "hot" issues) in a manner which it believes to be
equitable under the circumstances. As a result of such allocations, there may be
instances where the Fund will not participate in a transaction that is allocated
among other accounts. If an aggregated order cannot be filled completely,
allocations will generally be made on a pro rata basis. An order may not be
allocated on a pro rata basis where, for example (i) consideration is given to
portfolio managers who have been instrumental in developing or negotiating a
particular investment; (ii) consideration is given to an account with
specialized investment policies that coincide with the particulars of a specific
investment; (iii) pro rata allocation would result in odd-lot or de minimis
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 and for the period from the
start of business, January 2, 1997, to December 31, 1997, Eaton Vance paid
brokerage commissions of $__________ and $17,708, respectively, all of which was
paid in respect of portfolio security transactions aggregating approximately
$_____________ and $513,711, respectively, 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.
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<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
May 1, 1999
EATON VANCE EMERGING MARKETS FUND
24 Federal Street
Boston, Massachusetts 02110
(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 to them in the prospectus. This SAI
contains additional information about:
Page
Strategies and Risks ............................................. 2
Investment Restrictions .......................................... 6
Management and Organization ...................................... 7
Investment Advisory and Administrative Services .................. 12
Other Service Providers .......................................... 14
Purchasing and Redeeming Shares .................................. 15
Sales Charges .................................................... 16
Performance ...................................................... 20
Taxes ............................................................ 21
Portfolio Security Transactions .................................. 22
Financial Statements ............................................. 24
Appendices:
A: Class A Fees, Performance and Ownership ................... a-1
B: Class B Fees, Performance and Ownership ................... b-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 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.
SECURITIES TRADING MARKETS. The securities markets in Emerging Market
Countries are substantially smaller, less liquid and more volatile than the
major securities markets in the United States. A high proportion of the
shares of many issuers may be held by a limited number of persons and
financial institutions, which may limit the number of shares available for
investment by the Portfolio. The prices at which the Portfolio may acquire
investments may be affected by trading by persons with material non-public
information and by securities transactions by brokers in anticipation of
transactions by the Portfolio in particular securities. Emerging Market
Country securities markets are susceptible to being influenced by large
investors trading significant blocks of securities. Similarly, volume and
liquidity in the bond markets in Emerging Market Countries are less than in
the United States and, at times, price volatility can be greater than in the
United States. The limited liquidity of securities markets in Emerging Market
Countries may also affect the Portfolio's ability to acquire or dispose of
securities at the price and time it wishes to do so.
The stock markets in many Emerging Market Countries are undergoing a
period of growth and change, which may result in trading or price volatility
and difficulties in the settlement and recording of transactions, and in
interpreting and applying the relevant laws and regulations. The securities
industries in these countries are comparatively underdeveloped, and
stockbrokers and other intermediaries may not perform as well as their
counterparts in the United States and other more developed securities
markets.
Settlement of securities transactions may be delayed and is generally
less frequent than in the United States, which could affect the liquidity of
the Portfolio's assets. In addition, disruptions due to work stoppages and
trading improprieties in these securities markets have caused such markets to
close. If extended closings were to occur in stock markets where the
Portfolio was heavily invested, the Fund's ability to redeem Fund shares
could become correspondingly impaired. To mitigate these risks, the Portfolio
may maintain a higher cash position than it otherwise would, thereby possibly
diluting its return, or the Portfolio may have to sell liquid securities that
it would not otherwise choose to sell. In some cases, the Portfolio may find
it necessary or desirable to borrow funds on a short-term basis, within the
limits of the Investment Company Act of 1940 (the "1940 Act"), to help meet
redemption requests or settle securities transactions. Such borrowings would
result in increased expense to the Fund.
The Portfolio will invest in Emerging Market Countries, in which
political and economic structures may be undergoing significant evolution and
rapid development. Such countries may lack the social, political and economic
stability characteristics of the United States. Certain of such countries may
have in the past failed to recognize private property rights and have at
times nationalized or expropriated the assets of private companies. The laws
of Emerging Market Countries relating to limited liability of corporate
shareholders, fiduciary duties of officers and directors, and the bankruptcy
of state enterprises may be less well developed than or different from such
laws in the United States. It may be more difficult to obtain a judgment in a
court of an Emerging Market Country than it is in the United States. In
addition, unanticipated political or social developments may affect the
values of the Portfolio's investments in those countries and the availability
to the Portfolio of additional investments in those countries.
Governmental actions can have a significant effect on the economic
conditions in Emerging Market Countries, which could adversely affect the
value and liquidity of the Portfolio's investments. Although some governments
in Emerging Market Countries have recently begun to institute economic reform
policies, there can be no assurances that they will continue to pursue such
policies or, if they do, that such policies will succeed.
FOREIGN CURRENCY TRANSACTIONS. The value of the assets of the Portfolio as
measured in U.S. dollars may be affected favorably or unfavorably by changes
in foreign currency exchange rates and exchange control regulations. Currency
exchange rates can also be affected unpredictably by intervention by U.S. or
foreign governments or central banks, or the failure to intervene, or by
currency controls or political developments in the U.S. or abroad. The
Portfolio may conduct its foreign currency exchange transactions on a spot
(i.e., cash) basis at the spot rate prevailing in the foreign currency
exchange market or through entering into swaps, forward contracts, options or
futures on currency.
When the Portfolio enters into a contract for the purchase or sale of a
security denominated in a foreign currency, or when the Portfolio anticipates
the receipt in a foreign currency of dividend or interest payments on such a
security which it holds, the Portfolio may desire to "lock in" the U.S. dollar
price of the security or the U.S. dollar equivalent of such dividend or
interest payment, as the case may be. Additionally, when the Adviser believes
that the currency of a particular foreign country may suffer a substantial
decline against the U.S. dollar, it may enter into a forward contract to sell,
for a fixed amount of dollars, the amount of foreign currency approximating
the value of some or all of the securities held by the Portfolio denominated
in such foreign currency. The Portfolio may engage in cross-hedging by using
forward contracts in one currency (or basket of currencies) to hedge against
fluctuations in the value of securities denominated in a different currency if
the Adviser determines that there is an established historical pattern or
correlation between the two currencies (or the basket of currencies and the
underlying currency).
OTHER INVESTMENT COMPANIES. The Portfolio reserves the right to invest up to
10% of its total assets, calculated at the time of purchase, in the securities
of other investment companies unaffiliated with the Adviser or the Manager
that have the characteristics of closed-end investment companies. The
Portfolio will indirectly bear its proportionate share of any management fees
paid by investment companies in which it invests in addition to the advisory
fee paid by the Portfolio. The value of closed-end investment company
securities, which are usually traded on an exchange, is affected by demand for
the securities themselves, independent of the demand for the underlying
portfolio assets, and, accordingly, such securities can trade at a discount
from their net asset values.
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. See "Taxes."
LIMITATIONS ON FUTURES CONTRACTS AND OPTIONS. The Portfolio does not intend to
write a covered option on any security if after such transaction more than 15%
of its net assets, as measured by the aggregate value of the securities
underlying all covered calls and puts written by the Portfolio, would be
subject to such options. The Portfolio will only write a put option on a
security which it intends to ultimately acquire for its portfolio. The
Portfolio does not intend to purchase any options if after such transaction
more than 5% of its net assets, as measured by the aggregate of all premiums
paid for all such options held by the Portfolio, would be so invested. The
Portfolio may enter into futures contracts, and options on futures contracts,
traded on a foreign exchange only if the Adviser determines that trading on
each such foreign exchange does not subject the Portfolio to risks, including
credit and liquidity risks, that are materially greater than the risks
associated with trading on United States CFTC-regulated exchanges.
To the extent that the Portfolio enters into futures contracts, options on
futures contracts and options on foreign currencies traded on an exchange
regulated by the Commodity Futures Trading Commission ("CFTC"), in each case
that are not for bona fide hedging purposes (as defined by the CFTC), the
aggregate initial margin and premiums required to establish these positions
(excluding the amount by which options are "in-the-money") may not exceed 5%
of the liquidation value of the Portfolio's investments, after taking into
account unrealized profits and unrealized losses on any contracts the
Portfolio has entered into.
REPURCHASE AGREEMENTS. Under a repurchase agreement the Portfolio buys a
security at one price and simultaneously promises to sell that same security
back to the seller at a higher price. At no time will the Portfolio commit
more than 15% of its net assets to repurchase agreements which mature in more
than seven days and other illiquid securities. The Portfolio's repurchase
agreements will provide that the value of the collateral underlying the
repurchase agreement will always be at least equal to the repurchase price,
including any accrued interest earned on the repurchase agreement, and will be
marked to market daily. In the event of the bankruptcy of the other party to a
repurchase agreement, the Portfolio might experience delays in recovering its
cash. To the extent that, in the meantime, the value of the securities the
Portfolio purchased may have decreased, the Portfolio could experience a loss.
REVERSE REPURCHASE AGREEMENTS. The Portfolio may enter into reverse
repurchase agreements. Under a reverse repurchase agreement, the Portfolio
temporarily transfers possession of a portfolio instrument to another party,
such as a bank or broker-dealer, in return for cash. At the same time, the
Portfolio agrees to repurchase the instrument at an agreed upon time (normally
within seven days) and price, which reflects an interest payment. The
Portfolio expects that it will enter into reverse repurchase agreements when
it is able to invest the cash so acquired at a rate higher than the cost of
the agreement, which would increase the income earned by the Portfolio. The
Portfolio could also enter into reverse repurchase agreements as a means of
raising cash to satisfy redemption requests without the necessity of selling
portfolio assets.
When the Portfolio enters into a reverse repurchase agreement, any
fluctuations in the market value of either the securities transferred to
another party or the securities in which the proceeds may be invested would
affect the market value of the Portfolio's assets. As a result, such
transactions may increase fluctuations in the market value of the Portfolio's
assets. While there is a risk that large fluctuations in the market value of
the Portfolio's assets could affect the Portfolio's net asset value, this risk
is not significantly increased by entering into reverse repurchase agreements,
in the opinion of the Adviser. Because reverse repurchase agreements may be
considered to be the practical equivalent of borrowing funds, they constitute
a form of leverage. If the Portfolio reinvests the proceeds of a reverse
repurchase agreement at a rate lower than the cost of the agreement, entering
into the agreement will lower the Portfolio's yield.
UNLISTED SECURITIES. The Portfolio may invest in securities of companies that
are neither listed on a stock exchange nor traded over the counter. Unlisted
securities may include investments in new and early stage companies, which may
involve a high degree of business and financial risk that can result in
substantial losses and may be considered speculative. Such securities will
generally be deemed to be illiquid. Because of the absence of any public
trading market for these investments, the Portfolio may take longer to
liquidate these positions than would be the case for publicly traded
securities. Although these securities may be resold in privately negotiated
transactions, the prices realized from these sales could be less than those
originally paid by the Portfolio or less than what may be considered the fair
value of such securities. Furthermore, issuers whose securities are not
publicly traded may not be subject to public disclosure and other investor
protection requirements applicable to publicly traded securities. If such
securities are required to be registered under the securities laws of one or
more jurisdictions before being resold, the Portfolio may be required to bear
the expenses of registration. In addition, any capital gains realized on the
sale of such securities may be subject to higher rates of taxation than taxes
payable on the sale of listed securities.
ASSET COVERAGE REQUIREMENTS. Transactions involving reverse repurchase
agreements, currency swaps, forward contracts or futures contracts and options
(other than options that the Portfolio has purchased) expose the Portfolio to
an obligation to another party. The Portfolio will not enter into any such
transactions unless it owns either (1) an offsetting ("covered") position in
securities, currencies, swaps, or other options, futures contracts or forward
contracts, or (2) cash or liquid securities (such as readily marketable common
stock and money market instruments) with a value sufficient at all times to
cover its potential obligations not covered as provided in (1) above. (Only
the net obligation of a swap will be covered.) The Portfolio will comply with
Commission guidelines regarding cover for these instruments and, if the
guidelines so require, set aside cash or liquid securities in a segregated
account with its custodian in the prescribed amount. The securities in the
segregated account will be marked to market daily.
Assets used as cover or held in a segregated account maintained by the
Portfolio's custodian cannot be sold while the position requiring coverage or
segregation is outstanding unless they are replaced with other appropriate
assets. As a result, the commitment of a large portion of the Portfolio's
assets to segregated accounts or to cover could impede portfolio management or
the Portfolio's ability to meet redemption requests or other current
obligations.
PORTFOLIO TURNOVER. The Portfolio cannot accurately predict its portfolio
turnover rate, but it is anticipated that the annual turnover rate will
generally not exceed 100% (excluding turnover of securities having a maturity
of one year or less). A 100% annual turnover rate could occur, for example, if
all the securities in the portfolio were replaced once in a period of one
year. A high turnover rate (100% or more) necessarily involves greater
expenses to the Portfolio. Short-term trading may be advisable in light of a
change in circumstances of a particular company or within a particular
industry, or in light of general market, economic or political conditions.
High portfolio turnover may also result in the realization of substantial net
short-term capital gains.
LENDING PORTFOLIO SECURITIES. The Portfolio may seek to increase its income by
lending portfolio securities to broker-dealers or other institutional
borrowers. Under present regulatory policies of the Commission, such loans are
required to be secured continuously by collateral in cash, cash equivalents or
U.S. Government securities held by the Portfolio's custodian and maintained on
a current basis at an amount at least equal to market value of the securities
loaned, which will be marked to market daily. Cash equivalents include
certificates of deposit, commercial paper and other short-term money market
instruments. The financial condition of the borrower will be monitored by the
Adviser on an ongoing basis. The Portfolio would continue to receive the
equivalent of the interest or dividends paid by the issuer on the securities
loaned and would also receive a fee, or all or a portion of the interest on
investment of the collateral. The Portfolio would have the right to call a
loan and obtain the securities loaned at any time on up to five business days'
notice. The Portfolio would not have the right to vote any securities having
voting rights during the existence of a loan, but could call the loan in
anticipation of an important vote to be taken among holders of the securities
or the giving or holding of their consent on a material matter affecting the
investment. If the Adviser decides to make securities loans, it is intended
that the value of the securities loaned would not exceed one-third of the
Portfolio's total assets. As with other extensions of credit there are risks
of delay in recovery or even loss of rights in the securities loaned if the
borrower of the securities fails financially. However, the loans will be made
only to organizations deemed by the Adviser to be sufficiently creditworthy
and when, in the judgment of the Adviser, the consideration which can be
earned from securities loans of this type, net of administrative expenses and
any finders fees, justifies the attendant risk.
INVESTMENT RESTRICTIONS
The following investment restrictions of the Fund are designated as
fundamental and as such cannot be changed without the approval by the holders
of a majority of the Fund's outstanding voting securities which as used in
this SAI means the lesser of (a) 67% 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) Borrow money or issue senior securities except as permitted by the
Investment Company Act of 1940;
(2) Purchase any securities on margin (but the Fund and the Portfolio may
obtain such short-term credits as may be necessary for the clearance of
purchases and sales of securities);
(3) Underwrite securities of other issuers;
(4) Invest in real estate including interests in real estate limited
partnerships (although it may purchase and sell securities which are secured
by real estate and securities of companies which invest or deal in real
estate) or in commodities or commodity contracts for the purchase or sale of
physical commodities;
(5) Make loans to any person except by (a) the acquisition of debt
securities and making portfolio investments, (b) entering into repurchase
agreements and (c) lending portfolio securities;
(6) With respect to 75% of its total assets, invest more than 5% of its
total assets (taken at current value) in the securities of any one issuer, or
invest in more than 10% of the outstanding voting securities of any one
issuer, except obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities and except securities of other investment
companies; or
(7) Concentrate its investments in any particular industry, but, if deemed
appropriate for the Fund's objective, up to 25% of the value of its assets may
be invested in securities of companies in any one industry (although more than
25% may be invested in securities issued or guaranteed by the U.S. Government
or its agencies or instrumentalities).
Notwithstanding the investment policies and restrictions of the Fund, the
Fund may invest its assets in an open-end management investment company with
substantially the same investment objective, policies and restrictions as the
Fund. Notwithstanding the investment policies and restrictions of the
Portfolio, the Portfolio may invest part of its assets in another investment
company consistent with the 1940 Act.
The Portfolio has adopted substantially the same fundamental investment
restrictions as the foregoing investment restrictions adopted by the Fund;
such restrictions cannot be changed without the approval of a "majority of the
outstanding voting securities" of the Portfolio.
For as long as a feeder fund of the Portfolio has registered shares in
Hong Kong, the Portfolio may not (i) invest more than 10% of its net assets in
the securities of any one issuer or, purchase more than 10% of any class of
security of any one issuer, provided, however, up to 30% of the Portfolio's
net asset value may be invested in Government and public securities of the
same issue; and the Portfolio may invest all of its assets in Government and
other public securities in at least six different issues, (ii) invest more
than 15% of net assets in securities which are not listed or quoted on any
stock exchange, over-the-counter market or other organized securities market
that is open to the international public and on which such securities are
regularly traded (a "Market"), (iii) invest more than 15% of net assets in
warrants and options for non-hedging purposes, (iv) write call options on
Portfolio investments exceeding 25% of its total net asset value in terms of
exercise price, (v) enter into futures contracts on an unhedged basis where
the net total aggregate value of contract prices, whether payable by or to the
Portfolio under all outstanding futures contracts, together with the aggregate
value of holdings under (vi) below exceeds 20% of the net asset value of the
Portfolio, (vi) invest in physical commodities (including gold, silver,
platinum or other bullion) and commodity based investments (other than shares
in companies engaged in producing, processing or trading in commodities) which
value together with the net aggregate value of the holdings described in (v)
above, exceeds 20% of the Portfolio's net asset value, (vii) purchase shares
of other investment companies exceeding 10% of net assets. In addition, the
investment objective of any scheme in which the Portfolio invests must not be
to invest in investments prohibited by this undertaking and where the scheme's
investment objective is to invest primarily in investments which are
restricted by this undertaking, such holdings must not be in contravention of
the relevant limitation, (viii) borrow more than 25% of its net assets
(provided that for the purposes of this paragraph, back to back loans are not
to be categorized as borrowings), (ix) write uncovered options, (x) invest in
real estate (including options, rights or interests therein but excluding
shares in real estate companies), (xi) assume, guarantee, endorse or otherwise
become directly or contingently liable for, or in connection with, any
obligation or indebtedness of any person in respect of borrowed money without
the prior written consent of the custodian of the Portfolio, (xii) engage in
short sales involving a liability to deliver securities exceeding 10% of its
net assets provided that any security which the Portfolio does sell short must
be actively traded on a market, (xiii) subject to paragraph (v) above,
purchase an investment with unlimited liability or (xiv) purchase any nil or
partly-paid securities unless any call thereon could be met in full out of
cash or near cash held by it in the amount of which has not already been taken
into account for the purposes of (ix) above.
The Fund and the Portfolio have adopted the following investment policies
which may be changed without shareholder or investor approval. 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. 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 Emerging Market
investments. Moreover, the Fund and Portfolio must always be in compliance
with the borrowing policies set forth above and may not hold more than 15% of
net assets in illiquid securities.
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 24 Federal Street, Boston, Massachusetts 02110. The
business address of Lloyd George 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
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, NY 10020
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 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.
Address: 175 Federal Street, Boston, Massachusetts 02110
JACK L. TREYNOR (68), 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 (32), Vice President, Assistant Secretary and Assistant
Treasurer of the Portfolio
Director of LGM and Chief Investment Officer of the Adviser.
Address: 3808 One Exchange Square, Central, Hong Kong
WILLIAM WALTER RALEIGH KERR (48), Vice President and Assistant Treasurer of
the Portfolio
Director, Finance Director and Chief Operating Officer of the Adviser.
Director of LGM.
Address: 3808 One Exchange Square, Central, Hong Kong
EDWARD E. SMILEY, JR. (53), Vice President of the Trust
Vice President of Eaton Vance and BMR since November 1, 1996; Senior Product
Manager, Equity Management for TradeStreet Investment Associates, Inc., a
wholly-owned subsidiary of Nations Bank (1992-1996).
JAMES L. O'CONNOR (53), 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), Reamer and Thorndike are members of the Special
Committee of the Board of Trustees of the Trust and Messrs. Hayes, Dwight and
Reamer, are members of the Special Committee of the Board of Trustees of the
Portfolio. The purpose of the Special Committee is to consider, evaluate and
make recommendations to the full Board of Trustees concerning (i) all
contractual arrangements with service providers to the Fund and the Portfolio,
including investment advisory (Portfolio only), administrative, transfer
agency, custodial and fund accounting and distribution services, and (ii) all
other matters in which Eaton Vance, the Adviser or its affiliates has any
actual or potential conflict of interest with the Fund, the Portfolio or
investors therein.
The Nominating Committee of the Board of Trustees of the Trust and the
Portfolio is comprised of all Trustees 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 Adviser or its
affiliates.
Messrs. Treynor and Dwight are members of the Audit Committee of the Board
of Trustees of the Trust and Messrs. Hayes, Chen and Dwight are members of the
Audit Committee of the Board of Trustees of the Portfolio. The Audit
Committee's functions include making recommendations to the Trustees regarding
the selection of the independent certified public accountants, and reviewing
matters relative to trading and brokerage policies and practices, accounting
and auditing practices and procedures, accounting records, internal accounting
controls, and the functions performed by the custodian, transfer agent and
dividend disbursing agent of the Trust and of the Portfolio.
Trustees of the Portfolio (except Mr. Chen) who are not affiliated with
Eaton Vance 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 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 Portfolio's assets,
liabilities, and net income per share, and will not obligate the Portfolio to
retain the services of any Trustee or obligate the Portfolio to pay any
particular level of compensation to the Trustees. Neither the Portfolio nor
the Trust 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>
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) .................. $ $ $ $ $ $ $ $
Portfolio .................
Trust and Fund
Complex ................. (3) (4) (5)
- ------------
(1) As of May 1, 1999, the Eaton Vance fund complex consists of 153 registered investment companies or series thereof.
(2) The Trust consisted of 7 Funds as of December 31, 1998.
(3) Includes $ deferred compensation.
(4) Includes $ deferred compensation.
(5) Includes $ deferred compensation.
(6) Ms. Bibliowicz and Ms. Stout were elected Trustees on October 30, 1998 and will receive compensation approximating the other
Trustees after November 1, 1998.
</TABLE>
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 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 Eaton Vance Emerging Markets
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 have the authority under the Declaration of Trust to create
additional classes of shares with differing 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. 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 of its shareholders by
reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office.
Under Massachusetts law, if certain conditions prevail, shareholders of a
Massachusetts business trust (such as the Trust) could be deemed to have
personal liability for the obligations of the Trust. Numerous investment
companies registered under the 1940 Act have been formed as Massachusetts
business trusts, and management is not aware of an instance where such
liability has been imposed. The Trust's Declaration of Trust contains an
express disclaimer of liability on the part of the Fund shareholders and the
Trust's By-laws provide that the Trust shall assume the defense on behalf of
any Fund shareholders. (The Declaration also contains provisions limiting the
liability of a series or class to that series or class). Moreover, the Trust's
By-laws also provide for indemnification out of the property of the Fund of
any shareholder held personally liable solely by reason of being or having
been a shareholder for all loss or expense arising from such liability. The
assets of the Fund are readily marketable and will ordinarily substantially
exceed its liabilities. In light of the nature of the Fund's business and the
nature of its assets, management believes that the possibility of the Fund's
liability exceeding its assets, and therefore the shareholder's risk of
personal liability, is remote.
As permitted by Massachusetts law, there will normally be no meetings of
shareholders for the purpose of electing Trustees unless and until such time
as less than a majority of the Trustees of the Trust holding office have been
elected by shareholders. In such an event the Trustees then in office will
call a shareholder's meeting for the election of Trustees. Except for the
foregoing circumstances and unless removed by action of the shareholders in
accordance with the Trust's By-laws, the Trustees shall continue to hold
office and may appoint successor Trustees.
The Trust's By-laws provide that no person shall serve a Trustee if
shareholders holding two-thirds of the outstanding shares have removed him
from that office either by a written declaration filed with the Trust's
custodian or by votes cast at a meeting called for that purpose. The By-laws
further provide that under certain circumstances the shareholders may call a
meeting to remove a Trustee and that the Trust is required to provide
assistance in communicating with shareholders about such a meeting.
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 $ . For
the fiscal year ended December 31, 1998, the investment adviser earned
advisory fees of $ (equivalent to 0.75% of the Portfolio's average
daily net assets for such year). 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 each such year). To enhance the
net income of the Portfolio, the investment adviser made a reduction of its
asvisory fee in the amount of $36,117 and $44,320, respectively.
As of December 31, 1998, the Fund had net assets of $ . For the
fiscal year ended December 31, 1998, Eaton Vance earned management fees of
$ (equivalent to % of the Fund's Class B average daily net assets for
such year). For the fiscal year ended December 31, 1997, Eaton Vance earned
management fees of $24,909 (equivalent to 0.25% of the Fund's average daily
net assets for such year). For the fiscal year ended December 31, 1996, absent
a fee reduction, Eaton Vance would have earned management fees of $10,732
(equivalent to 0.25% of the Fund's average daily net assets for such year). To
enhance the net income of the Fund, Eaton Vance made a reduction of the full
amount of its management fee and Eaton Vance was allocated a portion of
expenses related to the operation of the Fund in the amount of $7,616.
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 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 specializes in providing investment
management services with respect to equity securities of companies trading in
Asian securities markets, and also those of emerging markets. LGM currently
manages portfolios for both private clients and institutional investors
seeking long-term capital growth and has advised Eaton Vance's international
equity funds since 1992. LGM's core investment team consists of fourteen
experienced investment professionals who have worked together over a number of
years successfully managing client portfolios in non-U.S. stock markets. The
team has a unique knowledge of, and experience with, Asian and emerging
markets. LGM analysts cover Asia, the India subcontinent, Russia and Eastern
Europe, Latin America, Australia and New Zealand from offices in Hong Kong,
London and Mumbai. 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 investment adviser and LGM have adopted a conservative management
style, providing a blend of Asian and multinational expertise with the most
rigorous international standards of fundamental security analysis. Although
focused primarily in Asia, the investment adviser and LGM maintain a network
of international contacts in order to monitor international economic and stock
market trends and offer clients a global management service.
The directors of the 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.
Mr. Lloyd George was born in London in 1952 and educated at Eton College,
where he was a King's Scholar, and at Oxford University. Prior to founding
LGM, Mr. Lloyd George was Managing Director of Indosuez Asia Investment
Services Ltd. In 1983 Mr. Lloyd George launched and managed the Henderson
Japan Special Situations Trust. Prior to that he spent four years with the
Fiduciary Trust Company of New York researching international securities, in
the United States and Europe, for the United Nations Pension Fund.
Eaton Vance and the investment adviser follow a common investment
philosophy, striving to identify companies with outstanding management and
earnings growth potential by following a disciplined management style,
adhering to the most rigorous international standards of fundamental security
analysis, placing heavy emphasis on research, visiting every company owned,
and closely monitoring political and economic developments.
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 Portfolio had net assets of $ . For
the fiscal year ended December 31, 1998, Eaton Vance earned administration
fees of $ , (equivalent to 0.25% of the Portfolio's average daily net
assets for such year). For the fiscal years ended December 31, 1997 and 1996,
Eaton Vance earned administration fees of $47,925 and $20,096, respectively
(equivalent to 0.25% of the Portfolio's average daily net assets for each such
year). To enhance the net income of the Portfolio, Eaton Vance was allocated
expenses related to the operation of the Portfolio in the amount of $17,039
and $14,221, respectively.
Eaton Vance's management contract with the 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 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 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. 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. 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. The Fund and 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
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.
OTHER SERVICE PROVIDERS
PRINCIPAL UNDERWRITER. Eaton Vance Distributors, Inc. ("EVD"), 24 Federal
Street, Boston, MA 02110, 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 Board of Trustees of the Trust
(including a majority of the noninterested Trustees) may be terminated on six
months' notice by either party and is automatically terminated upon
assignment. The principal underwriter distributes 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. Securities listed on foreign or U.S. securities exchanges or in
the NASDAQ National Market System generally are valued at closing sale prices
or, if there were no sales, at the mean between the closing bid and asked
prices therefor on the exchange where such securities are principally traded
or on such National Market System. Unlisted or listed securities for which
closing sale prices are not available are valued at the mean between the
latest bid and asked prices. An option is valued at the last sale price as
quoted on the principal exchange or board of trade on which such option or
contract is traded, or in the absence of a sale, the mean between the last bid
and asked price. Futures positions on securities or currencies are generally
valued at closing settlement prices. 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.
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 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.
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 registered representatives and employees of investment dealers and
bank employees who refer customers to registered representatives of invetment
dealers; to officers and employees of IBT and the transfer agent; 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 the
Fund, (2) to investors making an investment as part of a fixed fee program
whereby an entity unaffiliated with the investment adviser provides multiple
investment services, such as management, brokerage and custody, and (3) to
investment advisors, financial planners or other intermediaries who place
trades for their own accounts or the accounts of their clients and who charge
a management, consulting or other fee for their services; clients of such
investment advisors, financial planners or other intermediaries who place
trades for their own accounts if the accounts are linked to the master account
of such investment advisor, financial planner or other intermediary on the
books and records of the broker or agent; and retirement and deferred
compensation plans and trusts used to fund those plans, including, but not
limited to, those defined in Section 401(a), 403(b) or 457 of the Internal
Revenue Code of 1986, as amended (the "Code") 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 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 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 at the end of the period, and (iv) the deduction of any CDSC at the
end of the period. For information concerning the total return of the Classes
of the Fund, see Appendix A and Appendix B.
Total return may be compared to relevant indices, such as the Consumer
Price Index and various domestic and foreign securities indices. The Fund's
total return and comparisons with these indices may be used in advertisements
and in information furnished to present or prospective shareholders. The
Fund's performance may differ from that of other investors in the Portfolio
including the other investment companies. In addition, evaluations of the
Fund's performance or rankings 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 material furnished to present and prospective investors.
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 in materials furnished to present
or prospective shareholders may include statistics, data and performance
studies prepared by independent organizations or included in various
publications reflecting the investment performance or return achieved by
various classes and types of investments (e.g. common stocks, small company
stocks, long-term corporate bonds, long-term government bonds, intermediate-
term government bonds, U.S. Treasury bills) over various periods of time. This
information may be used to illustrate the benefits of long-term investments in
common stocks. Information about the portfolio allocation, portfolio turnover
and holdings of the Portfolio may be included in advertisements and other
material furnished to present and prospective shareholders.
Information used in advertisements and materials furnished to present and
prospective investors may include statements or illustrations relating to the
appropriateness of certain types of securities and/or mutual funds to meet
specific financial goals. Such information may address:
-- cost associated with aging parents;
-- funding a college education (including its actual and estimated cost);
-- health care expenses (including actual and projected expenses);
-- long-term disabilities (including the availability of, and coverage
provided by, disability insurance); and
-- retirement (including the availability of social security benefits, the
tax treatment of such benefits and statistics and other information
relating to maintaining a particular standard of living and outliving
existing assets).
Such information may also address different methods for saving money and
the results of such methods, as well as the benefits of investing in equity
securities. Such information may describe: the potential for growth; the
performance of equities as compared to other investment vehicles; and the
value of investing as early as possible and regularly, as well as staying
invested. The benefits of investing in equity securities by means of a mutual
fund may also be included (such benefits may include diversification,
professional management and the variety of equity mutual fund products).
Information in advertisements and material furnished to present and
prospective investors may include profiles of different types of investors
(i.e., investors with different goals and assets) and different investment
strategies for meeting specific financial goals. Such information may provide
hypothetical illustrations which include: results of various investment
strategies; performance of an investment in the Fund over various time
periods; and results of diversifying assets among several investments with
varying performance. Information in advertisements and material furnished to
present and prospective investors may also include quotations (including
editorial comments) and statistics concerning investing in securities, as well
as investing in particular types of securities and the performance of such
securities.
The Trust (or Principal Underwriter) may provide investors with
information on global investing, which may include descriptions, comparisons,
charts and/or illustrations of foreign and domestic equity market
capitalizations; returns obtained by foreign and domestic securities; and the
effects of globally diversifying an investment portfolio (including volatility
analysis and performance information). Such information may be provided for a
variety of countries over varying time periods.
The Trust (or Principal Underwriter) may provide information about Eaton
Vance, its affiliates and other investment advisers to the funds in the Eaton
Vance Family of Funds in sales material or advertisements provided to
investors or prospective investors. Such material or advertisements may also
provide information on the use of investment professionals by such investors.
TAXES
Each series of the Trust is treated as a separate entity for accounting
and tax purposes. The Fund intends to elect to be treated, and to qualify each
year as a regulated investment company ("RIC") under the Code. Accordingly,
the Fund intends to satisfy certain requirements relating to sources of its
income and diversification of its assets and to distribute substantially all
of its ordinary income and net income in accordance with the timing
requirements imposed by the Code, so as to maintain its RIC status and to
avoid any federal income or excise tax. Because the Fund invests its assets in
the Portfolio, the Portfolio normally must satisfy the applicable source of
income and diversification requirements in order for the Fund to also satisfy
these requirements.
Under current law, provided that the Fund qualifies as a RIC and the
Portfolio is treated as a partnership for Massachusetts and federal tax
purposes, neither the Fund nor the Portfolio should be liable for any income,
corporate excise or franchise tax in the Commonwealth of Massachusetts.
Certain foreign exchange gains and losses realized by the Portfolio and
allocated to the Fund in connection with the Portfolio's investments in
foreign securities and foreign currency related options, futures or forward
contracts or foreign currency may be treated as ordinary income and losses
under special tax rules. Certain options, futures or forward contracts of the
Portfolio may be required to be marked to market (i.e., treated as if closed
out) on the last day of each taxable year, and any gain or loss realized with
respect to these contracts may be required to be treated as 60% long-term and
40% short-term gain or loss or, in the case of certain contracts relating to
foreign currency, as ordinary income or loss. Positions of the Portfolio in
securities and offsetting options, futures or forward contracts may be treated
as "straddles" which are subject to tax rules that may cause deferral of
Portfolio losses, adjustments on the holding periods of Portfolio securities,
and other changes in the short-term or long-term characterization of capital
gains or losses, the effect of which may be to change the amount, timing and
character of the Fund's distributions to shareholders. Certain uses of foreign
currency and foreign currency derivatives such as options, futures, forward
contracts and swaps and investment by the Portfolio in certain "passive
foreign investment companies" may be limited or a tax election may be made, if
available, in order to preserve the Fund's qualification as a RIC or avoid
imposition of a tax on the Fund.
The Portfolio anticipates that it will be subject to foreign taxes on its
income (including, in some cases, capital gains) from foreign securities. Tax
conventions between certain countries and the U.S. may reduce or eliminate
such taxes. If more than 50% of the Fund's total assets, taking into account
its allocable share of the Portfolio's total assets, at the close of any
taxable year of the Fund consists of stock or securities of foreign
corporations, the Fund may file an election with the Internal Revenue Service
(the "IRS") pursuant to which shareholders of the Fund will be required to (i)
include in ordinary gross income (in addition to taxable dividends actually
received) their pro rata shares of foreign income taxes paid by the Portfolio
and allocated to the Fund even though not actually received, and (ii) treat
such respective pro rata portions as foreign income taxes paid by them.
Shareholders may then deduct such pro rata portions of foreign income taxes in
computing their taxable incomes, or, alternatively, use them as foreign tax
credits, subject to applicable limitations, against their U.S. income taxes.
Shareholders who do not itemize deductions for federal income tax purposes
will not, however, be able to deduct their pro rata portion of foreign taxes
deemed paid by the Fund, although such shareholders will be required to
include their shares of such taxes in gross income. Shareholders who claim a
foreign tax credit for such foreign taxes may be required to treat a portion
of dividends received from the Fund as separate category income for purposes
of computing the limitations on the foreign tax credit. Tax-exempt
shareholders will ordinarily not benefit from this election. Each year that
the Fund files the election described above, its shareholders will be notified
of the amount of (i) each shareholder's pro rata share of foreign income taxes
paid by the Portfolio and allocated to the Fund and (ii) the portion of Fund
dividends which represents income from each foreign country. If the Fund does
not make this election, it may deduct its allocated share of such taxes in
computing its investment company taxable income.
Any loss realized upon the redemption or exchange of shares of the Fund
with a tax holding period of 6 months or less will be treated as a long-term
capital loss to the extent of any distribution of net long-term capital gains
with respect to such shares. All or a portion of a loss realized upon a
taxable disposition of Fund shares may be disallowed under "wash sale" rules
if other Fund shares are purchased (whether through reinvestment of dividends
or otherwise) within 30 days before or after the disposition. Any disallowed
loss will result in an adjustment to the shareholder's tax basis in some or
all of the other shares acquired.
Amounts paid by the Fund to individuals and certain other shareholders who
have not provided the Fund with their correct taxpayer identification number
("TIN") and certain certifications required by the IRS, as well as
shareholders with respect to whom the Fund has received certain information
from the IRS or a broker, may be subject to "backup" withholding of federal
income tax arising from the Fund's dividends and other distributions as well
as the proceeds of redemption transactions (including repurchases and
exchanges) at a rate of 31%. An individual's TIN is generally his or her
social security number.
The foregoing discussion does not address the special tax rules applicable
to certain classes of investors, such as IRAs and other retirement plans, tax-
exempt entities, insurance companies and financial institutions. Shareholders
should consult their own tax advisers with respect to these or other special
tax rules that may apply in their particular situations, as well as the state,
local, and, 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 include such matters as general economic, political, business and
market information, and market reviews, 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 $ , $248,818 and $129,070, respectively,
with respect to portfolio security transactions. Of this amount, approximately
$ , $145,648 and $116,154, respectively, was paid in respect of
portfolio security transactions aggregating approximately $ ,
$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 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.
<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 $ . During
the fiscal year ended December 31, 1998, Class A made service fee payments to
the principal underwriter and investment dealers aggregating $ , of
which $ 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, were $ , of which
$ , was received by the principal underwriter. For the fiscal year ended
December 31, 1998, investment dealers received $ 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 $ for repurchase
transactions handled by it.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return
on a hypothetical investment in shares of $1,000. Total return for the period
prior to January 1, 1998 reflects the total return of the predecessor to Class
A. Total return prior to December 8, 1994 reflects the total return of Class
B, adjusted to reflect the Class A sales charge. The Class B total return has
not been adjusted reflect certain other expenses (such as distribution and/or
service fees). If such adjustments were made the Class A total return would be
different. The "Value of Initial Investment" reflects the deduction of the
maximum sales charge of 5.75%. Past performance is not indicative of future
results. Investment return and principal value will fluctuate; shares, when
redeemed, may be worth more or less than their original cost. Two asterisks
(**) indicates subsidized expenses. Return would have been lower without
subsidies.
<TABLE>
VALUE OF $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** 11/30/94* $ $ % % %
1 Year Ended
12/31/98** 12/31/96 $ $ % % % %
</TABLE>
- ----------
*Predecessor Fund commenced operations on November 30, 1994.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of February 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 February 1, 1998, Merrill Lynch, Pierce, Fenner & Smith,
Inc., Jacksonville, FL 32246 was the record owner of approximately 5.1% of the
outstanding Class A shares which were held on behalf of its customers who are
beneficial owners of such shares, and as to which it had voting power under
certain limited circumstances. In addition, as of the same date, the Profit
Sharing Retirement Plan and the Savings Plan and Trust of Eaton Vance and Mars &
Co. c/o IBT Co., Boston, MA were the record owners of 24.5%, 9.2% and 5.3%,
respectively, of the Class A shares of the Fund. To the knowledge of the Trust,
no other person owned of record or beneficially 5% or more of the Fund's
outstanding Class A shares as of such date.
<PAGE>
APPENDIX B
CLASS B 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 $ on sales of Class B
shares. During the same period, the Fund made distribution payments to the
principal underwriter aggregating $ and the principal underwriter
received approximately $ 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 $ (which amount was equivalent to
% 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 $ , of which $ 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 $ 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.
<TABLE>
VALUE OF A $1,000 INVESTMENT
<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 $ $ % % % %
1 Year Ended
12/31/98** 12/31/97 $1,000 $ $ % % % %
- ----------
</TABLE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of February 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 February 1, 1999, Merrill, Lynch, Pierce, Fenner & Smith,
Inc., Jacksonville, FL 32246 was the record owner of approximately 19.1% of
the outstanding Class B shares which were held on behalf of its customers who
are beneficial owners of such shares, and as to which it had voting power
under certain limited circumstances. To the knowledge of the Trust, no other
person owned of record or beneficially 5% or more of the Fund's outstanding
Class B shares as of such date.
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
May 1, 1999
EATON VANCE GREATER INDIA FUND
24 Federal Street
Boston, Massachusetts 02110
(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 ......................................... 14
Sales Charges ........................................................... 16
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 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.
American Depositary Receipts (ADRs) as well as other "hybrid" forms of
ADRs, including European Depositary Receipts (EDRs) and Global Depositary
Receipts (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.
REGIONAL TAXES. The Fund and the Portfolio each intends to conduct its
respective affairs in such a manner that it will not be resident in India or
any other country in the Indian subcontinent for local tax purposes. The
Portfolio's income from certain regional sources will be subject to tax by
those countries as described below.
India imposes withholding tax on interest and dividends at a rate of 20%.
Withholding tax of 10% is currently imposed on gains from sales of shares held
one year or more and 30% on gains from sales of shares held less than one
year. The withholding rate on gains from sales of debt securities is currently
10% if the securities have been held 12 months or more and 30% if the
securities have been held less than 12 months. The Portfolio is considering
investing in India through a Republic of Mauritius company to take advantage
of the favorable tax treaty between the countries. There can be no assurance
such an investment structure would be effective.
Pakistan currently imposes withholding tax on dividends at rates of
between 7.5% and 20%. There is currently no withholding tax on capital gains
from listed shares. This exemption will expire in June 2000. Sri Lanka imposes
15% withholding tax on dividends and interest, but does not impose withholding
tax on capital gains of listed shares.
SECURITIES TRADING MARKETS. The securities markets in the Indian
subcontinent are substantially smaller, less liquid and more volatile than the
major securities markets in the United States. A high proportion of the shares
of many issuers may be held by a limited number of persons and financial
institutions, which may limit the number of shares available for investment by
the Portfolio. The prices at which the Portfolio may acquire investments may
be affected by trading by persons with material non-public information and by
securities transactions by brokers in anticipation of transactions by the
Portfolio in particular securities. The securities markets in the region are
susceptible to being influenced by large investors trading significant blocks
of securities. Similarly, volume and liquidity in the bond markets in these
countries are less than in the United States and, at times, price volatility
can be greater than in the United States. The limited liquidity of these
securities markets may also affect the Portfolio's ability to acquire or
dispose of securities at the price and time it wishes to do so.
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. See "Taxes."
LIMITATIONS ON FUTURES CONTRACTS AND OPTIONS. The Portfolio will only write a
put option on a security which it intends to ultimately acquire for its
portfolio. The Portfolio does not intend to purchase any options if after such
transaction more than 5% of its net assets, as measured by the aggregate of
all premiums paid for all such options held by the Portfolio, would be so
invested. The Portfolio may enter into futures contracts, and options on
futures contracts, traded on a foreign exchange, only if the 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 taxation than taxes
payable on the sale of listed securities.
ASSET COVERAGE REQUIREMENTS. Transactions involving reverse repurchase
agreements, currency swaps, forward contracts or futures contracts and options
(other than options that the Portfolio has purchased) expose the Portfolio to
an obligation to another party. The Portfolio will not enter into any such
transactions unless it owns either (1) an offsetting ("covered") position in
securities, currencies, swaps, or other options, futures contracts or forward
contracts, or (2) cash or liquid securities (such as readily marketable common
stock and money market instruments) with a value sufficient at all times to
cover its potential obligations not covered as provided in (1) above. (Only
the net obligation of a swap will be covered.) The Portfolio will comply with
Commission guidelines regarding cover for these instruments and, if the
guidelines so require, set aside cash or liquid securities in a segregated
account with its custodian in the prescribed amount. The securities in the
segregated account will be marked to market daily.
Assets used as cover or held in a segregated account maintained by the
Portfolio's custodian cannot be sold while the position requiring coverage or
segregation is outstanding unless they are replaced with other appropriate
assets. As a result, the commitment of a large portion of the Portfolio's
assets to segregated accounts or to cover could impede portfolio management or
the Portfolio's ability to meet redemption requests or other current
obligations.
PORTFOLIO TURNOVER. The Portfolio cannot accurately predict its portfolio
turnover rate, but it is anticipated that the annual turnover rate will
generally not exceed 100% (excluding turnover of securities having a maturity
of one year or less). A 100% annual turnover rate could occur, for example, if
all the securities in the portfolio were replaced once in a period of one
year. A high turnover rate (100% or more) necessarily involves greater
expenses to the Portfolio. Short-term trading may be advisable in light of a
change in circumstances of a particular company or within a particular
industry, or in light of general market, economic or political conditions.
High portfolio turnover may also result in the realization of substantial net
short-term capital gains.
LENDING PORTFOLIO SECURITIES. The Portfolio may seek to increase its income
by lending portfolio securities to broker-dealers or other institutional
borrowers. Under present regulatory policies of the Commission, such loans are
required to be secured continuously by collateral in cash, cash equivalents or
U.S. Government securities held by the Portfolio's custodian and maintained on
a current basis at an amount at least equal to market value of the securities
loaned, which will be marked to market daily. Cash equivalents include
certificates of deposit, commercial paper and other short-term money market
instruments. The financial condition of the borrower will be monitored by the
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.
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, 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. 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 borrowing policies set forth above and may not hold more than 15% of
net assets in illiquid securities.
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 24 Federal Street, Boston, Massachusetts 02110. 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
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, NY 10020
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 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.
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.
Messrs. Hayes (Chairman), Reamer and Thorndike are members of the Special
Committee of the Board of Trustees of the Trust and Messrs. Hayes, Dwight and
Reamer, are members of the Special Committee of the Board of Trustees of the
Portfolio. The purpose of the Special Committee is to consider, evaluate and
make recommendations to the full Board of Trustees concerning (i) all
contractual arrangements with service providers to the Fund and the Portfolio,
including investment advisory (Portfolio only), administrative, transfer
agency, custodial and fund accounting and distribution services, and (ii) all
other matters in which Eaton Vance, the investment adviser or its affiliates
has any actual or potential conflict of interest with the Fund, the Portfolio
or investors therein.
The Nominating Committee of the Board of Trustees of the Trust and the
Portfolio is comprised of all Trustees 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. Treynor and Dwight are members of the Audit Committee of the Board
of Trustees of the Trust and Messrs. Hayes, Chen and Dwight are members of the
Audit Committee of the Board of Trustees of the Portfolio. The Audit
Committee's functions include making recommendations to the Trustees regarding
the selection of the independent certified public accountants, and reviewing
matters relative to trading and brokerage policies and practices, accounting
and auditing practices and procedures, accounting records, internal accounting
controls, and the functions performed by the custodian, transfer agent and
dividend disbursing agent of the Trust and of the Portfolio.
Trustees of the Portfolio (except Mr. Chen) who are not affiliated with
the investment adviser may elect to defer receipt of all or a percentage of
their annual fees received from certain Eaton Vance sponsored funds in
accordance with the terms of a Trustees Deferred Compensation Plan (the
"Trustees" Plan"). Under the Trustees' Plan, an eligible Trustee may elect to
have his deferred fees invested by the Portfolio in the shares of one or more
funds in the Eaton Vance Family of Funds, and the amount paid to the Trustees
under the Trustees' Plan will be determined based upon the performance of such
investments. Deferral of Trustees' fees in accordance with the Trustees' Plan
will have a negligible effect on the Portfolio's assets, liabilities, and net
income per share, and will not obligate the Portfolio to retain the services
of any Trustee or obligate the Portfolio to pay any particular level of
compensation to the Trustee. 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) ................. $ -- $ -- $ $ $ $ $ $
South Asia Portfolio
-- --
Trust and Fund
Complex ................ (3) (4) (5)
</TABLE>
- ------------
(1) As of May 1, 1999, the Eaton Vance Fund complex consists of 152 registered
investment companies or series thereof.
(2) The Trust consisted of 8 Funds as of December 31, 1998.
(3) Includes $ of deferred compensation.
(4) Includes $ of deferred compensation.
(5) Includes $ of deferred compensation.
(6) Ms. Bibliowicz and Ms. Stout were elected Trustees on October 30, 1998 and
will receive compensation approximating the other Trustees after November
1, 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 $ . For
the fiscal years ended December 31, 1998, 1997 and 1996, the investment
adviser earned advisory fees of $ , $817,285 and $807,758, respectively,
(equivalent to 0.75% of the Portfolio's average daily net assets for each such
year).
As of December 31, 1998, the Fund had net assets of $ . For the
fiscal year ended December 31, 1998, Eaton Vance earned management fees of
$ (equivalent to % of the Fund's Class B average daily net
assets for such day). For the fiscal years ended December 31, 1997 and 1996,
Eaton Vance earned management fees of $208,205 and $191,631, respectively,
(equivalent to 0.25% of the Fund'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 specializes in providing investment
management services with respect to equity securities of companies trading in
Asian securities markets, and also those of emerging markets. LGM currently
manages portfolios for both private clients and institutional investors
seeking long-term capital growth and has advised Eaton Vance's international
equity funds since 1992. LGM's core investment team consists of thirteen
experienced investment professionals who have worked together over a number of
years successfully managing client portfolios in non-U.S. stock markets. The
team has a unique knowledge of, and experience with, Asian and emerging
markets. LGM analysts cover Asia, the India subcontinent, Russia and Eastern
Europe, Latin America, Australia and New Zealand from offices in Hong Kong,
London and Mumbai. 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 investment adviser and LGM have adopted a conservative management
style, providing a blend of Asian and multinational expertise with the most
rigorous international standards of fundamental security analysis. Although
focused primarily in Asia, the investment adviser and LGM maintain a network
of international contacts in order to monitor international economic and stock
market trends and offer clients a global management service.
The directors of the 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.
Mr. Lloyd George was born in London in 1952 and educated at Eton College,
where he was a King's Scholar, and at Oxford University. Prior to founding
LGM, Mr. Lloyd George was Managing Director of Indosuez Asia Investment
Services Ltd. In 1983 Mr. Lloyd George launched and managed the Henderson
Japan Special Situations Trust. Prior to that he spent four years with the
Fiduciary Trust Company of New York researching international securities, in
the United States and Europe, for the United Nations Pension Fund.
Eaton Vance and the investment adviser follow a common investment
philosophy, striving to identify companies with outstanding management and
earnings growth potential by following a disciplined management style,
adhering to the most rigorous international standards of fundamental security
analysis, placing heavy emphasis on research, visiting every company owned,
and closely monitoring political and economic developments.
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 Portfolio had net assets of $ . For
the fiscal years ended December 31, 1997, 1996 and 1995, Eaton Vance earned
administration fees of $ , $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. 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, as the case may be, will each be
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"), 24 Federal
Street, Boston, MA 02110, 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 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 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 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.
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 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.
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 registered representatives and employees of investment dealers and
bank employees who refer customers to registered representatives of invetment
dealers; to officers and employees of IBT and the transfer agent; 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 the
Fund, (2) to investors making an investment as part of a fixed fee program
whereby an entity unaffiliated with the investment adviser provides multiple
investment services, such as management, brokerage and custody, and (3) to
investment advisors, financial planners or other intermediaries who place
trades for their own accounts or the accounts of their clients and who charge
a management, consulting or other fee for their services; clients of such
investment advisors, financial planners or other intermediaries who place
trades for their own accounts if the accounts are linked to the master account
of such investment advisor, financial planner or other intermediary on the
books and records of the broker or agent; and retirement and deferred
compensation plans and trusts used to fund those plans, including, but not
limited to, those defined in Section 401(a), 403(b) or 457 of the Internal
Revenue Code of 1986, as amended (the "Code") 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. 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 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 ordinary income and net income in accordance with the
timing requirements imposed by the Code, so as to maintain its RIC status and
to avoid paying any federal income or excise tax. The Fund qualified as a RIC
under the Code for its taxable year ended December 31, 1997. Because the Fund
invests its assets in the Portfolio, the Portfolio normally must satisfy the
applicable source of income and diversification requirements in order for the
Fund to also satisfy these requirements.
Under current law, provided that the Fund qualifies as a RIC for federal
income tax purposes and the Portfolio is treated as a partnership for
Massachusetts and federal tax purposes, neither the Fund nor the Portfolio
should be liable for any income, corporate excise or franchise tax in the
Commonwealth of Massachusetts.
Certain foreign exchange gains and losses realized by the Portfolio and
allocated to the Fund in connection with the Portfolio's investments in
foreign securities and foreign currency related options, futures or forward
contracts or foreign currency may be treated as ordinary income and losses
under special tax rules. Certain options, futures or forward contracts of the
Portfolio may be required to be marked to market (i.e., treated as if closed
out) on the last day of each taxable year, and any gain or loss realized with
respect to these contracts may be required to be treated as 60% long-term and
40% short-term gain or loss or, in the case of certain contracts relating to
foreign currency, as ordinary income or loss. Positions of the Portfolio in
securities and offsetting options, futures or forward contracts may be treated
as "straddles" which are subject to tax rules that may cause deferral of
Portfolio losses, adjustments in the holding periods of Portfolio securities,
and other changes in the short-term or long-term characterization of capital
gains or losses, the effect of which may be to change the amount, timing and
character of the Fund's distributions to shareholders. Certain uses of foreign
currency and foreign currency derivatives such as options, futures, forward
contracts and swaps and investment by the Portfolio in certain "passive
foreign investment companies" may be limited or a tax election may be made, if
available, in order to preserve the Fund's qualification as a RIC or avoid
imposition of a tax on the Fund.
The Portfolio anticipates that it will be subject to foreign taxes on its
income (including, in some cases, capital gains) from foreign securities. Tax
conventions between certain countries and the U.S. may reduce or eliminate
such taxes. If more than 50% of the Fund's total assets, taking into account
its allocable share of the Portfolio's total assets, at the close of any
taxable year of the Fund consists of stock or securities of foreign
corporations, the Fund may file an election with the Internal Revenue Service
(the "IRS") pursuant to which shareholders of the Fund will be required to (i)
include in ordinary gross income (in addition to taxable dividends actually
received) their pro rata shares of foreign income taxes paid by the Portfolio
and allocated to the Fund even though not actually received, and (ii) treat
such respective pro rata portions as foreign income taxes paid by them.
Shareholders may then deduct such pro rata portions of foreign income taxes in
computing their taxable incomes, or, alternatively, use them as foreign tax
credits, subject to applicable limitations, against their U.S. income taxes.
Shareholders who do not itemize deductions for federal income tax purposes
will not, however, be able to deduct their pro rata portion of foreign taxes
deemed paid by the Fund, although such shareholders will be required to
include their shares of such taxes in gross income. Shareholders who claim a
foreign tax credit for such foreign taxes may be required to treat a portion
of dividends received from the Fund as a separate category of income for
purposes of computing the limitations on the foreign tax credit. Tax-exempt
shareholders will ordinarily not benefit from this election. Each year that
the Fund files the election described above, its shareholders will be notified
of the amount of (i) each shareholder's pro rata share of foreign income taxes
paid by the Portfolio and allocated to the Fund and (ii) the portion of Fund
dividends which represents income from each foreign country. If the Fund does
not make this election, it may deduct its allocated share of such taxes in
computing its investment company taxable income.
Any loss realized upon the redemption or exchange of shares of the Fund
with a tax holding period of 6 months or less will be treated as a long-term
capital loss to the extent of any distribution of net long-term capital gains
with respect to such shares. All or a portion of a loss realized upon a
taxable disposition of Fund shares may be disallowed under "wash sale" rules
if other Fund shares are purchased (whether through reinvestment of dividends
or otherwise) within 30 days before or after the disposition. Any disallowed
loss will result in an adjustment to the shareholder's tax basis in some or
all of the other shares acquired.
Amounts paid by the Fund to individuals and certain other shareholders who
have not provided the Fund with their correct taxpayer identification number
("TIN") and certain certifications required by the IRS, as well as
shareholders with respect to whom the Fund has received certain information
from the IRS or a broker, may be subject to "backup" withholding of federal
income tax arising from the Fund's taxable dividends and other distributions
as well as the proceeds of redemption transactions (including repurchases and
exchanges) at a rate of 31%. An individual's TIN is generally his or her
social security number.
The foregoing discussion does not address the special tax rules applicable
to certain classes of investors, such as IRAs and other retirement plans, tax-
exempt entities, insurance companies and financial institutions. Shareholders
should consult their own tax advisers with respect to these or other special
tax rules that may apply in their particular situations, as well as the state,
local, and, 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 $ , $870,799 and $886,617 respectively, with
respect to portfolio security transactions. Of this amount, approximately
$ , $766,327 and $625,933, respectively, was paid in respect of portfolio
security transactions aggregating approximately $ , $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.
<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 $ . During
the fiscal year ended December 31, 1998, Class A made service fee payments to
the principal underwriter and investment dealers aggregating $ , of
which $ 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, were $ , of which
$ , was received by the principal underwriter. For the fiscal year ended
December 31, 1998, investment dealers received $ 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 $ 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.
VALUE OF A $1,000 INVESTMENT
<TABLE>
<CAPTION>
TOTAL RETURN TOTAL RETURN
EXCLUDING MAXIMUM INCLUDING MAXIMUM
VALUE OF VALUE OF SALES CHARGE SALES CHARGE
INVESTMENT INVESTMENT INITIAL INVESTMENT ------------------------- -------------------------
PERIOD DATE INVESTMENT ON 12/31/98 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ----------------------- ---------- ---------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of the Fund 5/2/94 $ $ % % % %
1 Year Ended
12/31/98 12/31/97 $ $ % % % %
</TABLE>
- ----------
*Predecessor Fund commenced operations on May 2, 1994.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of February 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 February 1, 1999, Merrill Lynch, Pierce, Fenner & Smith,
Inc., Jacksonville, FL 32246 was the record
owner of approximately 12.4% of the Class A shares of
the Fund, which were 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 Profit Sharing Retirement Plan
of Eaton Vance was the record owner of 9.1% 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 $ on sales of Class B
shares. During the same period, the Fund made distribution payments to the
Principal Underwriter under the Distribution Plan aggregating $ and the
principal underwriter received approximately $ 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 $
(which amount was equivalent to % 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 $ , of which $ 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 $ 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 $ $ % % % %
1 Year Ended
12/31/98 12/31/97 $1,000 $ $ % % % %
</TABLE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of February 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 February 1, 1999, Merrill Lynch, Pierce, Fenner & Smith,
Inc., Jacksonville, FL 32246 was the record owner of approximately 9.4% 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.
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 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 is the seventh largest country in the world, covering an area of
approximately 3,300,000 square kilometers. It is situated in South Asia and is
bordered by Nepal, Bhutan and China in the north, Myanmar and Bangladesh in
the east, Pakistan in the west and Sri Lanka in the south.
India's population is currently estimated at approximately 1.054 million;
the figure in 1991, according to the official census, was 846 million. Most of
the population still lives in rural areas. Approximately 84 percent are
Hindus, 11 percent Muslims, 2 percent Sikhs, 2 percent Christians and 1
percent Buddhists. The official language is Hindi, with English also being
used widely in official and business communications. With a middle class of
approximately 150 million people, India constitutes one of the largest markets
in the world.
Unlike certain other emerging market countries, India has a long tradition
of trade and markets, despite the central planning of the economy carried out
by the Indian government in the first decades after India's independence. The
Bombay Stock Exchange, for example, was founded over 120 years ago, is the
oldest stock exchange in Asia and currently lists almost 5,700 companies, more
than the New York Stock Exchange.
India became independent from the United Kingdom in 1947. It is governed
by a parliamentary democracy under the Constitution of India, under which the
executive, legislative and judicial functions are separated. India has been
engaged in a policy of gradual economic reform since the mid-1980's. In 1991,
the Government of Prime Minister Narasimha Rao had introduced far-reaching
measures with the goal of reducing government intervention in the economy,
strengthening India's industrial base, expanding exports and increasing
economic efficiency. The main focus of the policy was to place more authority
for making business decisions in the hands of those who operate the
businesses. The system of industrial licenses known as the "License Raj", by
means of which the government controlled many private sector investment
decisions, was substantially modified. Government approvals required to
increase, reduce or change production have been greatly reduced.
Modern economic development in India began in the mid-1940's with the
publication of the Bombay Plan. The Planning Commission was established in
1950 to assess the country's available resources and to identify growth areas.
A centrally planned economic model was adopted, and in order to control the
direction of private investment, most investment and major economic decisions
required government approval. Foreign investment was allowed only selectively.
This protectionist regime held back development of India's economy until the
mid-1980's when there began a gradual move towards the liberalization and
market orientation of the economy. After the liberalization measures, which
began in 1985, the annual growth of the country's real gross domestic product
has risen from an average 3-4% since the 1940's to an average 5.7% between
1991 and 1997.
Since 1991, the Indian government has continued to adopt measures to
further open the economy to private investment, attract foreign capital and
speed up the country's industrial growth rate. For example, the banking
industry has recently been opened to the private sector, including to foreign
investors. Most banks were nationalized in 1969, and no new privately owned
banks had been permitted. The Government is now granting new banking licenses.
The Government also has recently permitted foreign brokerage firms to operate
in India on behalf of Foreign Institutional Investors ("FIIs"), and has
permitted foreign investors to own majority stakes in Indian asset management
companies. In 1992, it was announced that FIIs would be able to invest
directly in the Indian capital markets. In September 1992, the guidelines for
FIIs were published and a number of such investors have been registered by the
Securities and Exchange Board of India, including the Adviser. In 1995, FII
regulations were supplemented and the Parliament approved the establishment of
central share depositories. Beginning in September 1995, several measures have
been adopted to establish securities depositories and permit trading without
share certificates. Such trading in selected securities has begun, but the
process is not yet well-defined.
The government has also cut subsidies to ailing public sector businesses.
Further cuts, and privatizations, are expected, although resistance by labor
unions and other interest groups may hinder this process. Continuing the
reform process, recent budgets have implemented tax cuts for the corporate
sector and reductions in import duties. In sum, the government's new policies
seek to expand opportunities for entrepreneurship in India. The recently
concluded mid term elections of 1998 to the Indian parliament has resulted in
a fragmented verdict with no single party able to muster the required
majority. The right wing Bharatiya Janata Party (BJP) has formed a coalition
government with the support of a number of small, regional parties. Mr. Atai
Bihari Vaypayee is the new Prime Minister and Mr. Yashwant Sinha the new
Finance Minister. It is unclear to what extent the new government will endorse
these policies.
Foreign investors have responded to these trends by putting resources into
the Indian economy. According to the Reserve Bank of India, total inflows,
including both foreign direct and foreign portfolio investment, rose from
about $150 million in fiscal year 1992 to over $4.6 billion in fiscal year
1997. India's foreign exchange reserves, which had fallen to about $1 billion
in 1991, were over $28 billion in November, 1997. Future direction of foreign
investment flows, however is dependent on clear cut policy thrust from the new
government.
In view of these trends, the Adviser believes that India now represents
one of the Asian economies most likely to experience significant growth in the
next several years. This growth may be expected to manifest itself in rising
share prices of many companies participating in the Indian economy.
Pakistan and Sri Lanka have also taken steps to liberalize their economies
and improve economic growth. In Pakistan, Prime Minister Mohammad Nawaz
Sharif, although involved in political controversy in late 1997, has attempted
to continue many of the liberalization policies already established. In Sri
Lanka, the government continues to review and revise laws, regulations and
procedures with the goal of promoting a competitive business environment and
reducing unnecessary government regulation. As a result, international
investors have showed increasing interest in Pakistan and Sri Lanka. The
Portfolio has no current intention to invest more than 5% of its assets in
companies in the Indian subcontinent located in other than India, Pakistan or
Sri Lanka.
INDIA. The Indian population is comprised of diverse religious and linguistic
groups. Despite this diversity, India is the world's largest democracy and has
had one of the more stable political systems among the world's developing
nations. However, periodic sectarian conflict among India's religious and
linguistic groups could adversely affect Indian businesses, temporarily close
stock exchanges or other institutions, or undermine or distract from
government efforts to liberalize the Indian economy
PAKISTAN. The military has been, and continues to be, an important factor in
Pakistani government and politics, and the civilian government continues to
rely on the support of the army. Ethnic unrest and troubled relations with
India are also continuing problems. In 1996, political uncertainty caused the
economy to slow down. In early 1997, with a popularly elected Government in
place, plans for faster economic reforms were established. Certain principals
of Islam, the official State religion, may affect the ability to implement
free market reforms.
SRI LANKA. Insurrection and political violence among Sri Lanka's ethnic
groups, including terrorist actions by the Tamil Tigers separatist
organization have periodically disrupted Sri Lanka's government and economy.
Although Sri Lanka's government is currently fairly stable, there can be no
assurance that such stability will continue.
INDIA
India's Parliament consists of the Lok Sabha (House of the People) and the
Rajya Sabha (Council of States). The Lok Sabha is elected directly by
universal suffrage for a period of five years while the Rajya Sabha comprises
members indirectly elected by the States and Union Territories for a six-year
term and members nominated by the President of India.
The President of India is the constitutional head of the executive branch
of government and exercises powers under the Constitution with the advice of
the Council of Ministers, headed by the Prime Minister. The Prime Minister and
the Council of Ministers, who are responsible to the Lok Sabha, hold effective
executive power. The present Prime Minister Mr. IK Gujral, who took office in
May 1997 to lead the United Front, a coalition of 13 different parties
resigned in late 1997 following withdrawal of support by the Congress party.
Following these developments mid-term elections have been called and are
likely to be held in February/March 1998. Changes in Indian government
policies or future developments in the Indian economy could have an adverse
effect on the operations of the Fund.
India comprises 6 Union Territories and 26 States. Each state has a
governor, a council of ministers and a legislature. The Union Territories are
administered by the central government in New Delhi. There is a general system
of local government throughout the country.
The Judiciary consists of the Supreme Court of India, located at New
Delhi, and High Courts located in each State. The Judiciary is independent of
the Executive and the Legislature. The Supreme Court is vested with powers to
determine disputes between the Union Territories and the States or between
States, to enforce fundamental rights and to act as the guardian of the
Constitution. All judges of the Supreme Court and High Courts are appointed by
the President of India. The Constitution provides that the judges cannot be
removed from office unless impeached by both Houses of Parliament.
With a rising oil import bill, adverse balance of payments and a large
foreign debt, India had reached a position where it was unable to obtain
further commercial borrowings. In July 1991, the Finance Minister, Dr.
Manmohan Singh, presented his first budget and announced a "New Industrial
Policy". In consequence, for many industrial sectors, it became no longer
necessary to obtain government approval for new investments. Foreign companies
could now hold up to 51% of an Indian company (and in some cases up to 74%) as
opposed to 40% previously.
The process of liberalization was taken further with the budget of
February 1992 when the Rupee was made partially convertible and import tariffs
were reduced. Personal tax rates were brought down. The office of the
Controller of Capital Issues which had determined the pricing of shares issued
by companies was abolished.
The budgets for 1995 and 1996 further rationalized indirect taxes regime
by reducing excise duties on a variety of items and slashing peak import
tariffs down to 50%. The 1997 budget reduced the peak rate of custom duty from
50% to 40%, and lowered corporate and personal income taxes. For the year
ended March 31, 1997, GDP grew 5.3%. Inflation, however, was 10.3%.
PAKISTAN
Pakistan, occupying an area of about 800,000 square kilometers, is bounded
in the south by the Arabian Sea and India and in the north by China and
Afghanistan. To the west and northwest are Iran and Afghanistan and to the
east is India. The capital is Islamabad. Karachi is the biggest commercial and
industrial city.
Pakistan is the world's ninth most populous country. The population is
currently estimated at approximately 137 million, with an annual population
growth rate of 3.0%. The national language is Urdu, although English is widely
spoken and understood throughout the country.
Pakistan was created in 1947, in response to the demands of Indian Muslims
for an independent homeland, by the partition from British India of two Muslim
majority areas. In 1971, a civil war in East Pakistan culminated in
independence for East Pakistan (now Bangladesh). Over the past 50 years,
Pakistan and India have gone to war two times, and intermittent border
exchanges occur at times. In particular, relations with India remain
unfriendly over the disputed territory of Kashmir, with its majority Muslim
population.
Pakistan has a federal parliamentary system in which its provinces enjoy
considerable autonomy. The head of state is the President, who has certain
important executive powers but is generally required by the Constitution to
act on the advice of the Prime Minister. The President is elected for a period
of five years by the members of the National Assembly, the Senate and the four
provincial assemblies. The Prime Minister may remain in office as long as he
or she has the support of the National Assembly but not beyond the five-year
term of Parliament. The Prime Minister is currently Mr. Mohammad Nawaz Sharif,
of the Pakistan Muslim League.
Mr. Nawaz Sharif was preceded as Prime Minister by Mr. Meraj Khalid who
was named to head an interim government until the new government could be
elected following the Presidential removal of the Ms. Benazir Bhutto's
Government on November 3, 1996. Mr. Nawaz Sharif was elected on February 3,
1997 to a five year term. The caretaker government of Prime Minister Meraj
Khalid in consultation with President Farooq Leghari introduced certain
structural reforms into the Pakistan economy in order to reduce the budget
deficit, including the reduction of non-developmental projects and government
spending by reducing the number of government agencies and by making the State
Bank of Pakistan ("Central Bank") largely autonomous. Mr. Nawaz Sharif's
government is expected to continue the implementation of most of these
reforms, alongside accelerating the process of privatization and deregulation
of the economy to enhance industrial, commercial and export activities.
Periodic civil unrest witnessed in 1995 appears to have largely subsided
and the metropolitan city of Karachi, the commercial heart of Pakistan, has
largely regained its stability and economic vibrance. Therefore, in addition
to the ongoing international investment in infrastructure projects, foreign
and national private investments may gain momentum in other sectors of the
economy.
The Federal Shariat Court, a constitutionally established body which has
exclusive jurisdiction to determine whether any law in Pakistan violates the
principles of Islam, the official State religion, ruled in November 1991 that
a number of legal provisions in Pakistan violated Islamic principles relating
to Riba (an Islamic term generally accepted as being analogous to interest)
and instructed the Government of Pakistan to conform these provisions to
Islamic principles. It is believed that strict conformity with the ruling of
the Shariat Court would substantially disrupt a variety of commercial
relationships in Pakistan involving the payment of interest, although the
extent and nature of any such disruption on the Pakistani economy, or any
segment thereof (other than the banking system), is uncertain. The ruling of
the Shariat Court has been appealed and will have no effect until the Shariat
Appellate Bench of the Supreme Court of Pakistan renders a decision on the
appeal. A hearing on the appeal was held in November 1993 but, in early 1994
at the request of the Government of Pakistan, the appeal is still continuing.
In addition, pursuant to the Enforcement of Shariat Act, 1991 (the "Shariat
Act"), the Government of Pakistan has appointed a commission to recommend
steps to be taken to introduce suitable alternatives by which an economic
system in Pakistan conforming to Islamic principles could be established.
Since the current popularly elected government favors a free market economy,
the commission may propose a pragmatic approach to the requirements of the
Constitution and the Shariat Act with a view to avoiding any substantial
disruption to the economy of Pakistan. There can be no assurance, however,
that the commission will propose such an approach or that implementation of
the steps recommended by the commission or the effect of the ultimate decision
of the courts in Pakistan on this issue will not adversely affect the economy
in Pakistan.
OVERVIEW OF THE ECONOMY AND RECENT DEVELOPMENTS
Economic development since 1955 has taken place within the framework of
successive five-year plans which established growth targets and allocations of
public sector investment. In addition, annual development plans are prepared
indicating yearly allocation of investment and the program for economic
development in the public and private sectors.
For most of the 1980's, the Pakistani economy showed strong growth, with
GDP increasing at over 6% per annum. Over the past decade, despite a rapid
increase in the labor force, real wages in both rural and urban areas rose
substantially. However, the latter part of the decade was characterized by
increasing fiscal and external deficits, infrastructure deficiencies and
disruptions in production. In 1989, the government initiated a three year
structural adjustment program with the assistance of the International
Monetary Fund. The program sought to redress the growing macroeconomic
imbalances resulting from the large fiscal deficits and to increase
productivity through major structural reforms in the industrial and financial
sectors.
The government of Pakistan has been heavily involved in the economy
through ownership of financial and industrial enterprises, investment policies
and incentives, and taxation programs established in the five-year economic
plans. Recent governments, however, have announced various liberalization
measures, including banking reforms and a number of measures designed to
encourage the private sector.
In February 1991, the government announced a twenty-five point
liberalization and reform package. In particular, no approval would be
required for the issue and transfer of shares and the issue of capital by
companies in all but a few specified industries, and Pakistanis residing
overseas and foreign investors would be permitted to purchase listed shares
and to transfer capital and dividends without approval. The government has
also embarked on a major privatization program and a large number of public
sector entities have been offered for sale. Government owned banks,
telecommunications and power generation and gas distribution companies are
scheduled for privatization.
Pakistan's GDP growth for 1997 is approximately 5.2%. The projection for
economic growth for 1998 is approximately 6.5%. Inflation in 1997 was in
excess of 10%.
SRI LANKA
Sri Lanka, historically known as Ceylon, is an island of about 65,000
square kilometers, situated off the southeast coast of India. It has a
relatively well-educated population, with nearly 25% of the 17 million Sri
Lankans speaking English and a literacy rate (in Sinhalese and Tamil) of
nearly 90%.
A former British colony, Ceylon became an independent Commonwealth in 1948
and became the Democratic Socialist Republic of Sri Lanka in 1972. Sri Lanka
is governed by a popularly elected President and unicameral Parliament.
In the parliamentary elections held in August 1994, the People's Alliance
led by Mrs. Chandrika Kumaratunga managed to form the government ending the
17-year regime of the United National Party. The People's Alliance has further
consolidated its position by the victory of Mrs. Chandrika Kumaratunga in the
presidential elections held in November 1994. The new government has accorded
top priority for settling the ethnic conflict with the Tamils in the north and
had initiated peace talks with the LTTE. In 1997, however, hostility with the
Tamil Tigers was continuing.
OVERVIEW OF THE ECONOMY AND RECENT DEVELOPMENTS
The Sri Lankan government recently has reviewed and revised laws,
regulations and procedures to promote a competitive business environment,
remove distortions, and reduce unnecessary government regulation. The
government has liberalized trade and encourages private ownership, including
foreign investment. Laws pertaining to tax, labor standards, customs and
environmental norms have been designed to attract more investment. There are
now few exchange controls, a fairly stable currency, and many incentives for
private investors. With guidance from the World Bank, IMF and U.S. advisers,
government enterprises are being privatized, financial services liberalized,
manufacturing for exports encouraged, a stock exchange formed, and foreign
investment actively sought. About eighty percent of the land in Sri Lanka is
still owned by the government, including most tea, rubber and coconut
plantations. The government did privatize the management of these estates
recently, however.
Sri Lanka's economy is primarily agricultural, but the manufacturing and
service sectors have grown greatly in the past decade, partly in response to
the Sri Lankan government's efforts to diversify and liberalize its economy.
In 1991 gross foreign exchange earnings from apparel exports exceeded earnings
from the entire agricultural sector (tea, rubber and coconut) for the first
time.
The financial system is reasonably sophisticated, and basic legislation
for private corporations is in place. Commercial banks are the principal
source of finance. However, the increase in net government borrowing (because
of budget deficits) has reduced credit to the private sector. Inflation, which
was about 21% in 1990, has come down to approximately 10-11%, but remains a
concern.
Sri Lanka is actively working to improve its basic infrastructure. A $500
million expansion of the telecommunications network has begun. The Colombo
container port -- the 25th busiest in the world -- is expected to increase its
capacity soon, and new dry dock services are under construction.
The economic statement announced by the new government in January 1995
attempts a careful balance between the compulsions for welfare measures and
the need for attracting fresh investments. The privatization program is
scheduled to continue with the private sector given a major role in
infrastructure development. The new government has also presented its maiden
budget in February 1995 in which it has tried to do a delicate balancing act
between an extensive array of consumer subsidies on wheat, diesel and
fertilizers with a steep cut in import tariffs on consumer goods. Defense
spending increased to 14% of total government expenditures in 1996.
Although tourism has been adversely affected by the conflict with the
Tamils, GDP growth was more than 5% in 1997.
<PAGE>
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 herewith.
(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 herewith.
(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).
(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.
C-1
<PAGE>
(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) Opinion of Internal Counsel filed as Exhibit (i) to
Post-Effective Amendment No. 53 and incorporated herein by
reference.
(j) Not applicable
(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
C-2
<PAGE>
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) Not applicable
(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 herewith.
(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 herewith.
(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 herewith.
(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 herewith.
(7) Power of Attorney for Total Return Portfolio dated August 11,
1997 filed as Exhibit (17)(g) to
C-3
<PAGE>
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 herewith.
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.
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 Underwiter 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
C-4
<PAGE>
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
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
C-5
<PAGE>
ITEM 30. UNDERTAKINGS
Not applicable
C-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, and the
Investment Company Act of 1940, the Registrant 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 February 23, 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 on February 23, 1999.
SIGNATURE TITLE
--------- -----
/s/ James B. Hawkes
- ------------------- President (Chief Executive Officer) and Trustee
James B. Hawkes
/s/ James L. O'Connor
- --------------------- Treasurer (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*
- -------------- Trustee
Lynn A. Stout
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)
C-7
<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
February 23, 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 on February 23, 1999.
SIGNATURE TITLE
--------- -----
/s/ James B. Hawkes
- ------------------- President (Chief Executive Officer) and Trustee
James B. Hawkes
/s/ James L. O'Connor
- --------------------- Treasurer (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*
- -------------- Trustee
Lynn A. Stout
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)
C-8
<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
February 23, 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 on February 23, 1999.
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)
C-9
<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
February 23, 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 on February 23, 1999.
SIGNATURE TITLE
--------- -----
/s/ James B. Hawkes
- ------------------- President (Chief Executive Officer) and Trustee
James B. Hawkes
/s/ James L. O'Connor
- --------------------- Treasurer (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*
- -------------- Trustee
Lynn A. Stout
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)
C-10
<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
February 23, 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 on February 23, 1999.
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)
C-11
<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
February 23, 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 on February 23, 1999.
SIGNATURE TITLE
--------- -----
/s/ James B. Hawkes
- ------------------- President (Chief Executive Officer) and Trustee
James B. Hawkes
/s/ James L. O'Connor
- --------------------- Treasurer (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*
- -------------- Trustee
Lynn A. Stout
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)
C-12
<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
February 23, 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 on February 23, 1999.
SIGNATURE TITLE
--------- -----
/s/ James B. Hawkes
- ------------------- President (Chief Executive Officer) and Trustee
James B. Hawkes
/s/ James L. O'Connor
- --------------------- Treasurer (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*
- -------------- Trustee
Lynn A. Stout
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)
C-13
<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
- ----------- -----------
(a)(4) Amendment and Restatement of Establishment and Designation of
Series of Shares dated February 22, 1999.
(e)(1)(d) Schedule A-3 dated February 22, 1999.
(p)(1)(a) Power of Attorney for Special Investment Trust dated November 16,
1998.
(4)(a) Power of Attorney for Special Investment Portfolio dated November
16, 1998
(5)(a) Power of Attorney for Balanced Portfolio dated November 16, 1998.
(6)(a) Power of Attorney for Growth & Income Portfolio dated November
16, 1998.
(7)(a) Power of Attorney for Utilities Portfolio dated November 16,
1998.
C-14
<PAGE>
Exhibit (a)(4)
EATON VANCE SPECIAL INVESTMENT TRUST
Amendment and Restatement
of
Establishment and Designation of Series of Shares
of Beneficial Interest, Without Par Value
(as amended and restated February 22, 1999)
WHEREAS, the Trustees of Eaton Vance Special Investment Trust, a
Massachusetts business trust (the "Trust"), have previously designated separate
series (or "Funds"); and
WHEREAS, the Trustees now desire to add one additional series, i.e.,
Eaton Vance Institutional Emerging Markets Fund effective this date and to
change the name of one existing series (i.e., EV Traditional Emerging Growth
Fund to Eaton Vance Emerging Growth Fund) effective May 1, 1999, and to
redesignate the series or Funds pursuant to Section 5.1 of Article V of the
Trust's Amended and Restated Declaration of Trust dated September 27, 1993 (as
further Amended) (the "Declaration of Trust");
NOW, THEREFORE, the undersigned, being at least a majority of the duly
elected and qualified Trustees presently in office of the Trust, hereby divide
the shares of beneficial interest of the Trust into the following separate
series ("Funds"), each Fund to have the following special and relative rights:
1. The Funds shall be designated as follows:
Eaton Vance Balanced Fund
Eaton Vance Emerging Markets Fund
Eaton Vance Greater India Fund
Eaton Vance Growth & Income Fund
Eaton Vance Institutional Emerging Markets Fund
Eaton Vance Institutional Short Term Treasury Fund
Eaton Vance Special Equities Fund
Eaton Vance Utilities Fund
Eaton Vance Emerging Growth Fund (effective May 1, 1999)
2. Each Fund shall be authorized to invest in cash, securities, instruments
and other property as from time to time described in the Trust's then currently
effective registration statements under the Securities Act of 1933 and the
Investment Company Act of 1940. Each share of beneficial interest of each Fund
("share") shall be redeemable, shall be entitled to one vote (or fraction
thereof in respect of a fractional share) on matters on which shares of that
Fund shall be entitled to vote and shall represent a pro rata beneficial
interest in the assets allocated to that Fund, all as provided in the
Declaration of Trust. The proceeds of sales of shares of each Fund, together
with any income and gain thereon, less any diminution or expenses thereof, shall
irrevocably belong to such Fund, unless otherwise required by law. Each share of
a Fund shall be entitled to receive its pro rata share of net assets of that
Fund upon liquidation of that Fund.
3. Shareholders of each Fund shall vote separately as a class to the extent
provided in Rule 18f-2, as from time to time in effect, under the Investment
Company Act of 1940.
4. The assets and liabilities of the Trust shall be allocated among the
above-referenced Funds as set forth in Section 5.5 of Article V of the
Declaration of Trust, except as provided below:
(a) Costs incurred by each Fund in connection with its organization and
start-up, including Federal and state registration and qualification fees and
expenses of the initial public offering of such Fund's shares, shall (if
applicable) be borne by such Fund and deferred and amortized over the five year
period beginning on the date that such Fund commences operations.
<PAGE>
(b) Reimbursement required under any expense limitation applicable to the
Trust shall be allocated among those Funds whose expense ratios exceed such
limitation on the basis of the relative expense ratios of such Funds.
(c) The liabilities, expenses, costs, charges and reserves of the Trust
(other than the management and investment advisory fees or the organizational
expenses paid by the Trust) which are not readily identifiable as belonging to
any particular Fund shall be allocated among the Funds on an equitable basis as
determined by the Trustees.
5. The Trustees (including any successor Trustees) shall have the right at
any time and from time to time to reallocate assets and expenses or to change
the designation of any Fund now or hereafter created, or to otherwise change the
special and relative rights of any such Fund, and to terminate any Fund or add
additional Funds as provided in the Declaration of Trust.
6. Any Fund may merge or consolidate with any other corporation,
association, trust or other organization or may sell, lease or exchange all or
substantially all of its property, including its good will, upon such terms and
conditions and for such consideration when and as authorized by the Trustees;
and any such merger, consolidation, sale, lease or exchange shall be deemed for
all purposes to have been accomplished under and pursuant to the statutes of the
Commonwealth of Massachusetts. The Trustees may also at any time sell and
convert into money all the assets of any Fund. Upon making provision for the
payment of all outstanding obligations, taxes and other liabilities, accrued or
contingent, of such Fund, the Trustees shall distribute the remaining assets of
such Fund ratably among the holders of the outstanding shares. Upon completion
of the distribution of the remaining proceeds or the remaining assets as
provided in this paragraph 6, the Fund shall terminate and the Trustees shall be
discharged of any and all further liabilities and duties hereunder with respect
to such Fund and the right, title and interest of all parties with respect to
such Fund shall be canceled and discharged.
7. The Declaration of Trust authorizes the Trustees to divide each Fund and
any other series of shares into two or more classes and to fix and determine the
relative rights and preferences as between, and all provisions applicable to,
each of the different classes so established and designated by the Trustees.
Each Fund (except Eaton Vance Emerging Growth Fund, Eaton Vance Institutional
Emerging Markets Fund and Eaton Vance Institutional Short Term Treasury Fund)
shall have classes of shares established and designated as Class A, Class B,
Class C and Class I shares, and the Trustees may designate additional classes in
the future. For purposes of allocating liabilities among classes, each class of
that Fund shall be treated in the same manner as a separate series.
Dated: February 22, 1999
/s/ Jessica M. Bibliowicz /s/ Norton H. Reamer
- ------------------------- --------------------
Jessica M. Bibliowicz Norton H. Reamer
/s/ Donald R. Dwight /s/ Lynn A. Stout
- -------------------- -----------------
Donald R. Dwight Lynn A. Stout
/s/ James B. Hawkes /s/ John L. Thorndike
- ------------------- ---------------------
James B. Hawkes John L. Thorndike
/s/ Samuel L. Hayes, III /s/ Jack L. Treynor
- ------------------------ -------------------
Samuel L. Hayes, III Jack L. Treynor
2
<PAGE>
Exhibit (e)(1)(d)
SCHEDULE A-3
EATON VANCE SPECIAL INVESTMENT TRUST
DISTRIBUTION AGREEMENT
EFFECTIVE: FEBRUARY 22, 1999
<TABLE>
<CAPTION>
<S> <C>
Name of Fund Adopting this Agreement Prior Agreements Relating to Class B and/or Class C Assets
- ------------------------------------ ----------------------------------------------------------
Eaton Vance Institutional Emerging Markets Fund N/A
</TABLE>
<PAGE>
Exhibit (p)(1)(a)
POWER OF ATTORNEY
We, the undersigned Trustees of Eaton Vance Special Investment Trust, a
Massachusetts business trust, do hereby severally constitute and appoint Alan R.
Dynner, James B. Hawkes and Eric G. Woodbury, or any of them, to be true,
sufficient and lawful attorneys, or attorney for each of us, to sign for each of
us, in the name of each of us in the capacities indicated below, any and all
amendments (including post-effective amendments) to the Registration Statement
on Form N-1A filed by Eaton Vance Special Investment Trust with the Securities
and Exchange Commission in respect of shares of beneficial interest and other
documents and papers relating thereto.
IN WITNESS WHEREOF we have hereunto set our hands on the dates set opposite
our respective signatures.
Signature Title Date
- --------- ----- ----
/s/ Jessica M. Bibliowicz Trustee November 16, 1998
- ---------------------------
Jessica M. Bibliowicz
/s/ Lynn A. Stout Trustee November 16, 1998
- ---------------------------
Lynn A. Stout
<PAGE>
Exhibit (p)(4)(a)
POWER OF ATTORNEY
We, the undersigned Trustees of Special Investment Portfolio, a New York
trust, do hereby severally constitute and appoint Alan R. Dynner, James B.
Hawkes and Eric G. Woodbury, or any of them, to be true, sufficient and lawful
attorneys, or attorney for each of us, to sign for each of us, in the name of
each of us in the capacities indicated below, any and all amendments (including
post-effective amendments) to the Registration Statement on Form N-1A filed by
Eaton Vance Special Investment Trust with the Securities and Exchange Commission
in respect of shares of beneficial interest and other documents and papers
relating thereto.
IN WITNESS WHEREOF we have hereunto set our hands on the dates set opposite
our respective signatures.
Signature Title Date
- --------- ----- ----
/s/ Jessica M. Bibliowicz Trustee November 16, 1998
- ---------------------------
Jessica M. Bibliowicz
/s/ Lynn A. Stout Trustee November 16, 1998
- ---------------------------
Lynn A. Stout
<PAGE>
Exhibit (p)(5)(a)
POWER OF ATTORNEY
We, the undersigned Trustees of Balanced Portfolio, a New York trust, do
hereby severally constitute and appoint Alan R. Dynner, James B. Hawkes and Eric
G. Woodbury, or any of them, to be true, sufficient and lawful attorneys, or
attorney for each of us, to sign for each of us, in the name of each of us in
the capacities indicated below, any and all amendments (including post-effective
amendments) to the Registration Statement on Form N-1A filed by Eaton Vance
Special Investment Trust with the Securities and Exchange Commission in respect
of shares of beneficial interest and other documents and papers relating
thereto.
IN WITNESS WHEREOF we have hereunto set our hands on the dates set opposite
our respective signatures.
Signature Title Date
- --------- ----- ----
/s/ Jessica M. Bibliowicz Trustee November 16, 1998
- ---------------------------
Jessica M. Bibliowicz
/s/ Lynn A. Stout Trustee November 16, 1998
- ---------------------------
Lynn A. Stout
<PAGE>
Exhibit (p)(6)(a)
POWER OF ATTORNEY
We, the undersigned Trustees of Growth & Income Portfolio, a New York
trust, do hereby severally constitute and appoint Alan R. Dynner, James B.
Hawkes and Eric G. Woodbury, or any of them, to be true, sufficient and lawful
attorneys, or attorney for each of us, to sign for each of us, in the name of
each of us in the capacities indicated below, any and all amendments (including
post-effective amendments) to the Registration Statement on Form N-1A filed by
Eaton Vance Special Investment Trust with the Securities and Exchange Commission
in respect of shares of beneficial interest and other documents and papers
relating thereto.
IN WITNESS WHEREOF we have hereunto set our hands on the dates set opposite
our respective signatures.
Signature Title Date
- --------- ----- ----
/s/ Jessica M. Bibliowicz Trustee November 16, 1998
- ---------------------------
Jessica M. Bibliowicz
/s/ Lynn A. Stout Trustee November 16, 1998
- ---------------------------
Lynn A. Stout
<PAGE>
Exhibit (p)(7)(a)
POWER OF ATTORNEY
We, the undersigned Trustees of Utilities Portfolio, a New York trust, do
hereby severally constitute and appoint Alan R. Dynner, James B. Hawkes and Eric
G. Woodbury, or any of them, to be true, sufficient and lawful attorneys, or
attorney for each of us, to sign for each of us, in the name of each of us in
the capacities indicated below, any and all amendments (including post-effective
amendments) to the Registration Statement on Form N-1A filed by Eaton Vance
Special Investment Trust with the Securities and Exchange Commission in respect
of shares of beneficial interest and other documents and papers relating
thereto.
IN WITNESS WHEREOF we have hereunto set our hands on the dates set opposite
our respective signatures.
Signature Title Date
- --------- ----- ----
/s/ Jessica M. Bibliowicz Trustee November 16, 1998
- ---------------------------
Jessica M. Bibliowicz
/s/ Lynn A. Stout Trustee November 16, 1998
- ---------------------------
Lynn A. Stout