<PAGE>
PART A
INFORMATION REQUIRED IN A PROSPECTUS
EV TRADITIONAL
WORLDWIDE HEALTH SCIENCES FUND, INC.
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EV TRADITIONAL WORLDWIDE HEALTH SCIENCES FUND, INC. (THE "FUND") IS A MUTUAL
FUND SEEKING LONG-TERM CAPITAL GROWTH BY INVESTING IN A GLOBAL AND DIVERSIFIED
PORTFOLIO OF SECURITIES OF HEALTH SCIENCE COMPANIES. THE FUND INVESTS ITS ASSETS
IN WORLDWIDE HEALTH SCIENCES PORTFOLIO (THE "PORTFOLIO"), A DIVERSIFIED OPEN-END
INVESTMENT COMPANY HAVING THE SAME INVESTMENT OBJECTIVE AS THE FUND, RATHER THAN
BY INVESTING DIRECTLY IN AND MANAGING ITS OWN PORTFOLIO OF SECURITIES.
Shares of the Fund are not deposits or obligations of, or guaranteed or endorsed
by, any bank or other insured depository institution, and are not federally
insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board
or any other government agency. Shares of the Fund involve investment risks,
including fluctuations in value and the possible loss of some or all of the
principal investment.
This Prospectus is designed to provide you with information you should know
before investing in the Fund. Please retain this document for future reference.
A Statement of Additional Information for the Fund dated February 1, 1997, as
supplemented from time to time, has been filed with the Securities and Exchange
Commission and is incorporated herein by reference. The Statement of Additional
Information is available without charge from the Fund's principal underwriter,
Eaton Vance Distributors, Inc. (the "Principal Underwriter"), 24 Federal Street,
Boston, MA 02110 (telephone (800) 225-6265). The sponsor and manager of the Fund
and the administrator of the Portfolio is Eaton Vance Management, 24 Federal
Street, Boston, MA 02110 ("Eaton Vance" or the "Manager"). The Portfolio's
investment adviser is Mehta and Isaly Asset Management, Inc. ("M&I" or the
"Adviser"). The principal business address of the Adviser is 41 Madison Avenue,
40th Floor, New York, NY 10010-2202.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
PAGE PAGE
<S> <C> <C> <C>
Shareholder and Fund Expenses ........................ 2 How to Buy Fund Shares ............................ 10
The Fund's Financial Highlights ....................... 3 How to Redeem Fund Shares ......................... 13
Health Science Investments ............................ 4 Reports to Shareholders ........................... 14
The Fund's Investment Objective ...................... 4 The Lifetime Investing Account/Distribution
Investment Policies and Risks ......................... 5 Options ......................................... 14
Organization of the Fund and the Portfolio ............ 7 The Eaton Vance Exchange Privilege ................ 15
Management of the Fund and the Portfolio .............. 8 Eaton Vance Shareholder Services .................. 16
Distribution Plan ..................................... 9 Distributions and Taxes ........................... 17
Valuing Fund Shares ................................... 10 Performance Information ........................... 18
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</TABLE>
PROSPECTUS DATED FEBRUARY 1, 1997
<PAGE>
SHAREHOLDER AND FUND EXPENSES
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<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
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<S> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price) 4.75%
Sales Charges Imposed on Reinvested Distributions None
Fees to Exchange Shares None
<CAPTION>
ANNUAL FUND AND ALLOCATED PORTFOLIO OPERATING EXPENSES (as a percentage of average daily net assets)
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<S> <C>
Management Fees (after fee reduction) 1.26%
Distribution Plan Fees 0.25
Other Expenses 0.49
----
Total Operating Expenses (after reduction) 2.00%
====
<CAPTION>
EXAMPLE
An investor would pay the following expenses and maximum initial sales charge
on a $1,000 investment, assuming (a) 5% annual return and (b) redemption at the
end of each time period:
<C> <C>
1 Year $ 67
3 Years 107
5 Years 150
10 Years 269
</TABLE>
NOTES:
The table and Example summarize the aggregate expenses of the Portfolio and the
Fund and are designed to help investors understand the costs and expenses they
will bear, directly or indirectly, by investing in the Fund. Other Expenses are
estimated for the current fiscal year. Management Fees include management fees
paid by the Fund, administration fees paid by the Portfolio and investment
advisory fees paid by the Portfolio of 0.25%, 0.25% and 0.97%, respectively. The
advisory fee is assumed to be the same as the actual fee paid by the Fund for
its last fiscal year. The advisory fee is subject to a performance adjustment
beginning September 1, 1997. See "Management of the Fund and the Portfolio." The
management and administration fee information contained in the table assumes
reimbursement to the Fund by the Manager as a result of an expense limitation
agreement. Absent a fee reduction, Management Fees would amount to 1.47%, and
total estimated operating expenses for the fiscal year ending August 31, 1997
would be 2.21%. The Manager of the Fund has agreed to waive its fee and/or
reimburse the Fund for operating expenses to maintain an annual expense ratio of
2.00% or less until August 31, 1999.
The Example should not be considered a representation of past or future
expenses, and actual expenses may be greater or less than those shown. Federal
regulations require the Example to assume a 5% annual return, but actual return
will vary. For further information regarding the expenses of the Fund and the
Portfolio see "The Fund's Financial Highlights," "Management of the Fund and the
Portfolio" and "How to Redeem Fund Shares." A long-term shareholder in the Fund
may pay more than the economic equivalent of the maximum front-end sales charge
permitted by a rule of the National Association of Securities Dealers, Inc. See
"Distribution Plan."
No sales charge is payable at the time of purchase on investments of $1 million
or more. However, a contingent deferred sales charge of 1% will be imposed on
such investments in the event of certain redemptions within 12 months of
purchase. See "How to Buy Fund Shares" and "How to Redeem Fund Shares."
The Fund invests exclusively in the Portfolio. Other investment companies and
investors with different distribution arrangements and fees are investing in the
Portfolio and others may do so in the future. See "Organization of the Fund and
the Portfolio."
<PAGE>
THE FUND'S FINANCIAL HIGHLIGHTS
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The following table sets forth the per share operating performance data for a
share of capital stock outstanding, total return, ratios to average net assets
and other supplemental data for each year indicated. This information for each
fiscal year has been derived from information provided in the Fund's financial
statements which have been examined by Tait, Weller & Baker, independent
certified public accountants for the periods indicated. The Fund's annual report
contains additional performance information which may be obtained without charge
by contacting the Principal Underwriter.
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<TABLE>
ADJUSTED FOR 100% STOCK DIVIDEND --
RECORD DATE SEPTEMBER 23, 1996
- -----------------------------------
<CAPTION>
YEAR ENDED AUGUST 31,
------------------------------------------------------------------------------------------
1996(1) 1995(1) 1994(1) 1993(1) 1992(1) 1991(1) 1990(1) 1989 1988 1987
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
NET ASSET VALUE, at beginning of year $ 11.71 $ 9.15 $ 9.64 $ 8.97 $ 8.57 $ 7.35 $ 6.96 $ 5.30 $ 7.63 $ 6.82
------- ------- ------- ------- ------- ------- ------- ------- -------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.23) (0.17) (0.16) (0.13) (0.13) (0.11) (0.16) (0.43) (0.23) (0.10)
Net realized and unrealized gain
(loss) on investments 3.46 3.41 0.43 1.86 1.15 2.15 0.91 2.09 (1.58) 1.30
------- ------- ------- ------- ------- ------- ------- ------- -------- -------
Total from investment operations 3.23 3.24 0.27 1.73 1.02 2.04 0.75 1.66 (1.81) 1.20
------- ------- ------- ------- ------- ------- ------- ------- -------- -------
LESS DISTRIBUTIONS FROM:
Net realized gain on investments 1.40 0.68 0.76 1.06 0.62 0.81 0.36 -- 0.52 0.39
------- ------- ------- ------- ------- ------- ------- ------- -------- -------
NET ASSET VALUE, at end of year $ 13.54 $ 11.71 $ 9.15 $ 9.64 $ 8.97 $ 8.58 $ 7.35 $ 6.96 $ 5.30 $ 7.63
======= ======= ======= ======= ======= ======= ======= ======= ======== =======
TOTAL RETURN(2) 31.04% 38.13% 2.69% 21.37% 12.04% 30.60% 11.13% 31.32% (25.30)% 19.81%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of year (in
thousands) $55,016 $17,690 $13,231 $10,223 $11,415 $ 6,955 $ 3,771 $ 2,754 $ 2,819 $ 4,015
Ratio of operating expenses to
average net assets(3):
Before expense reimbursement 2.21% 2.44% 2.67% 2.87% 2.59% 3.74% 4.77% 5.54% 5.71% 6.72%
After expense reimbursement N/A N/A 2.50% 2.50% 2.48% 2.50% 3.51% 5.27% 5.59% 6.08%
Ratio of net investment loss to average net assets:
Before expense reimbursement (1.81)% (1.80)% (1.82)% (1.90)% (1.56)% (2.71)% (3.51)% (4.00)% (4.12)% (5.01)%
After expense reimbursement N/A N/A (1.65)% (1.53)% (1.45)% (1.47)% (2.26)% (3.73)% (4.00)% (4.37)%
PORTFOLIO TURNOVER RATE 66% 45% 49% 77% 71% 81% 143% 75% 59% 95%
AVERAGE COMMISSION RATE (PER SHARE OF
SECURITY)(4) $0.0864 N/A N/A N/A N/A N/A N/A N/A N/A N/A
<FN>
(1)Based on average month end shares outstanding.
(2)Calculated without a sales load.
(3)Since September, 1989, the Adviser and prior administrator reimbursed a
portion of their fees, when necessary, in order to allow the Fund to operate
within the expense limitation of any state having jurisdiction over the Fund.
(4)Average commission rate (per share of security) as required by amended disclosure requirements effective September 1, 1995.
</FN>
</TABLE>
<PAGE>
HEALTH SCIENCE INVESTMENTS
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Markets for health sciences products and services have undergone significant
growth over the last 25 years. In the U.S., the Department of Health and Human
Services estimates health care expenditures alone could increase to over 16% of
gross national product by the year 2000, compared to 7.6%, 10.3% and 14.0% in
1972, 1982 and 1992, respectively. Outside the U.S., most developed countries
are seeing similar growth in health care expenditures. In emerging markets,
health care spending is increasing as standards of living are improving and as
revenues become available to fund government and private programs to address
basic health needs. Factors contributing to this growth include demographic
shifts tending to a higher world population and a larger elderly population in
industrialized nations, technological advances, and popular acceptance of and
worldwide familiarity with health care products, resulting in high consumer
demand. In addition to increased demand for health science products and
services, substantial public and private expenditures on basic medical research
and advances in technology have accelerated the pace of medical discoveries. The
Adviser believes that the rate of change may accelerate in the future, causing
certain segments of the business to decline and others to experience growth.
Favorable investment opportunities may be found in companies that provide
products or services designed for the prevention, diagnosis and treatment of
physical and mental disorders.
In making portfolio selections, in addition to evaluating trends in corporate
revenues, earnings and dividends, the Adviser generally considers the amount of
capital currently being expended on research and development, and the nature
thereof. The Adviser believes that dollars invested in research and development
today frequently have significant bearing on future growth.
Portfolio securities generally will be selected from companies in the following
groups:
Biotechnology -- Companies which are producing or plan to produce as a result of
current research, therapeutic drugs, vaccines and diagnostic systems and
reagents based on genetic engineering and the use of monoclonal antibodies or on
recombinant DNA; also, specialty companies catering to the unique requirements
of biotechnology companies such as those providing enzymes, media and
purification equipment.
Diagnostics -- Private organizations that develop or maintain sophisticated
diagnostic equipment such as CAT scanners and Magnetic Resonance Imaging as well
as urological and serological assays.
Managed Healthcare -- Operators of investor-owned hospital chains (including
acute care psychiatric hospitals), nursing centers for the elderly, health
maintenance organizations, and rehabilitation clinics which seek to deliver
hospital care on an efficient cost basis.
Medical Equipment and Supplies -- Companies engaged in the manufacture of
inpatient and outpatient medical (and dental), surgical, laboratory and
diagnostic products (ranging from cotton swabs through kidney dialysis equipment
to CAT scanners).
Pharmaceuticals -- Companies involved with new types of drugs and their delivery
systems.
By focusing on companies such as the foregoing, the Adviser believes that the
opportunity for long-term capital growth exists. Of course, there can be no
assurance that the Portfolio will be able to take advantage of the foregoing
opportunities, or that such investment opportunities will be favorable.
THE FUND'S INVESTMENT OBJECTIVE
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THE FUND'S INVESTMENT OBJECTIVE IS TO SEEK LONG-TERM CAPITAL GROWTH BY INVESTING
IN A GLOBAL AND DIVERSIFIED PORTFOLIO OF SECURITIES OF HEALTH SCIENCE COMPANIES.
It currently seeks to meet its investment objective by investing its assets in
Worldwide Health Sciences Portfolio (the "Portfolio"), a separate registered
investment company that invests in securities of health science companies.
The Fund is intended for long-term investors who can accept international
investment risk and little or no current income. Because the Fund concentrates
its investments in medical research and the health care industry, the Fund is
not intended to be a complete investment program. Prospective investors should
take into account their objectives and other investments when considering the
purchase of Fund shares. The Fund cannot assure achievement of its investment
objective.
INVESTMENT POLICIES AND RISKS
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The Portfolio invests in a global and diversified portfolio of securities of
health science companies. These companies principally are engaged in the
development, production or distribution of products or services related to
scientific advances in health care, including biotechnology, diagnostics,
managed health care and medical equipment and supplies, and pharmaceuticals. At
the time the Fund makes an investment, 50% or more of such a company's sales,
earnings or assets will arise from or will be dedicated to the application of
scientific advances related to health care. The Portfolio may invest in
securities of both established and emerging companies, some of which may be
denominated in foreign currencies.
Under normal market conditions, the Portfolio will invest at least 65% of its
assets in securities of health science companies, including common and preferred
stocks; equity interests in partnerships; convertible preferred stocks; and
other convertible instruments. Convertible debt instruments generally will be
rated below investment grade (i.e., rated lower than Baa by Moody's Investors
Service, Inc. or lower than BBB by Standard & Poor's Ratings Group) or, if
unrated, determined by the Adviser to be of equivalent quality. Convertible debt
securities so rated are commonly called "junk bonds" and have risks similar to
equity securities; they are speculative 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 below investment grade debt securities will not exceed 20% of
total assets. For temporary defensive purposes, such as during abnormal market
or economic conditions, the Portfolio may invest without limit in high grade
debt securities of foreign and United States companies, foreign governments and
the U.S. Government, and their respective agencies, instrumentalities, political
subdivisions and authorities, as well as in high quality money market
instruments. In addition, the Portfolio may temporarily borrow up to 5% of the
value of its total assets to satisfy redemption requests or settle securities
transactions.
An investment in the Fund entails the risk that the principal value of Fund
shares may not increase or may decline. The Portfolio's investments are subject
to the risk of adverse developments affecting particular companies, the health
science industries and securities markets generally. The value of Fund shares
may fluctuate more than shares invested in a broader range of industries. Many
health science companies are subject to substantial governmental regulations
that can affect their prospects. Changes in governmental policies, such as
reductions in the funding of third-party payment programs, may have a material
effect on the demand for particular health care products and services.
Regulatory approvals (often entailing lengthy application and testing
procedures) are also generally required before new drugs and certain medical
devices and procedures may be introduced. Many of the products and services of
companies engaged in medical research and health care are also subject to
relatively high risks of rapid obsolescence caused by progressive scientific and
technological advances. The enforcement of patent, trademark and other
intellectual property laws will affect the value of many such companies. The
Portfolio will invest in securities of emerging growth health science companies,
which may offer limited products or services or which are at the research and
developmental stage with no marketable or approved products or technologies.
INVESTING IN FOREIGN SECURITIES. Investing in securities issued by foreign
companies and governments (including depository receipts) involves
considerations and possible risks not typically associated with investing in
securities issued by the U.S. Government and domestic corporations. The values
of foreign investments are affected by changes in currency rates or exchange
control regulations, application of foreign tax laws (including withholding
tax), changes in governmental administration or economic or monetary policy (in
this country or abroad), or changed circumstances in dealings between nations.
Foreign currency exchange rates may fluctuate significantly over short periods
of time causing the Portfolio's net asset value to fluctuate as well. Costs are
incurred in connection with conversions between various currencies. In addition,
foreign brokerage commissions, custody fees and other costs of investing are
generally higher than in the United States, and foreign securities markets may
be less liquid, more volatile and less subject to governmental supervision than
in the United States. Investments in foreign issuers could be adversely affected
by other factors not present in the United States, including expropriation,
confiscatory taxation, lack of uniform accounting and auditing standards and
potential difficulties in enforcing contractual obligations. In addition to
investing in foreign companies of countries which represent established and
developed economies, the Portfolio may also invest some of its assets in the
emerging economies of lesser developed countries such as China and India, and
countries located in Latin America and Eastern Europe. Consistent with its
investment objective, the Portfolio is not limited in the percentage of assets
it may invest in such securities but the number of health science issuers in
less developed countries is relatively small. The relative risk and cost of
investing in the securities of companies in such emerging economies may be
higher than an investment in securities of companies in more developed
countries. As of the date of this Prospectus, approximately 50% of the
Portfolio's assets were comprised of foreign securities.
DERIVATIVE INSTRUMENTS. The Portfolio may purchase or sell derivative
instruments (which are instruments that derive their value from another
instrument, security, index or currency) to enhance return, to hedge against
fluctuations in securities prices, interest rates or currency exchange rates, or
as a substitute for the purchase or sale of securities or currencies. The
Portfolio's transactions in derivative instruments may be in the U.S. or abroad
and may include the purchase or sale of futures contracts on securities,
securities indices, other indices, other financial instruments or currencies;
options on futures contracts; exchange-traded and over-the-counter covered call
options on securities, indices or currencies (and closing transactions); and
forward foreign currency exchange contracts. The Portfolio's transactions in
derivative instruments involve a risk of loss or depreciation due to:
unanticipated adverse changes in securities prices, interest rates, the other
financial instruments' prices or currency exchange rates; the inability to close
out a position; default by the counterparty; imperfect correlation between a
position and the desired hedge; tax constraints on closing out positions; and
portfolio management constraints on securities subject to such transactions. The
loss on derivative instruments (other than purchased options) may substantially
exceed the Portfolio's initial investment in these instruments. In addition, the
Portfolio may lose the entire premium paid for purchased options that expire
before they can be profitably exercised by the Portfolio. The Portfolio incurs
transaction costs in opening and closing positions in derivative instruments.
There can be no assurance that the Adviser's use of derivative instruments will
be advantageous to the Portfolio.
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.
Forward contracts are individually negotiated and privately traded by currency
traders and their customers. A forward contract involves an obligation to
purchase or sell a specific currency (or basket of currencies) for an agreed
price at a future date, which may be any fixed number of days from the date of
the contract. The Portfolio may engage in cross-hedging by using forward
contracts in one currency (or basket of currencies) to hedge against
fluctuations in the value of securities denominated in a different currency if
an Adviser determines that there is an established historical pattern or
correlation between the two currencies (or the basket of currencies and the
underlying currency). Use of a different foreign currency magnifies the
Portfolio's exposure to foreign currency exchange rate fluctuations. The
Portfolio may also use forward contracts to shift its exposure to foreign
currency exchange rate changes from one currency to another.
CURRENCY SWAPS. The Portfolio may enter into currency swaps for both hedging and
non-hedging purposes. Currency swaps involve the exchange of rights to make or
receive payments in specified currencies. Since currency swaps are individually
negotiated, the Portfolio expects to achieve an acceptable degree of correlation
between its portfolio investments and its currency swap positions. Currency
swaps usually involve the delivery of the entire principal value of one
designated currency in exchange for the other designated currency. Therefore,
the entire principal value of a currency swap is subject to the risk that the
other party to the swap will default on its contractual delivery obligations.
The use of currency swaps is a highly specialized activity which involves
special investment techniques and risks. If the Adviser is incorrect in its
forecasts of market values and currency exchange rates, the Portfolio's
performance will be adversely affected.
REPURCHASE AGREEMENTS. The Portfolio may enter into repurchase agreements (the
purchase of a security coupled with an agreement to resell) with respect to its
permitted investments, but currently intends to do so only with member banks of
the Federal Reserve System or with primary dealers in U.S. Government
securities. In the event of the bankruptcy of the other party to a repurchase
agreement, the Portfolio might experience delays in recovering its cash. To the
extent that, in the meantime, the value of the securities the Portfolio
purchased may have decreased, the Portfolio could experience a loss. The
Portfolio does not expect to invest more than 5% of its total assets in
repurchase agreements under normal circumstances.
RESTRICTED SECURITIES. Securities that are not freely tradeable or which are
subject to restrictions on sale under the Securities Act of 1933 are considered
restricted. Such securities are illiquid and may be difficult to properly value.
The Portfolio's holdings of illiquid securities may not exceed 15% of its net
assets. Illiquid securities include securities legally restricted as to resale
such as commercial paper issued pursuant to Section 4(2) of the Securities Act
of 1933 and securities eligible for resale pursuant to Rule 144A thereunder.
Section 4(2) and Rule 144A securities may, however, be treated as liquid by the
Investment Adviser pursuant to procedures adopted by the Trustees, which require
consideration of factors such as trading activity, availability of market
quotations and number of dealers willing to purchase the security. Such
securities may increase the level of fund illiquidity to the extent qualified
institutional buyers become uninterested in purchasing such securities.
OTHER INVESTMENT COMPANIES. The Portfolio reserves the right to invest up to 10%
of its total assets in the securities of other investment companies unaffiliated
with the Adviser that have the characteristics of closed-end investment
companies. The Portfolio will indirectly bear its proportionate share of any
management fees paid by investment companies in which it invests in addition to
the advisory fee paid by the Portfolio. The value of closed-end investment
company securities, which are usually traded on an exchange, is affected by
demand for the securities themselves, independent of the demand for the
underlying portfolio assets, and, accordingly, such securities can trade at a
discount from their net asset values.
CERTAIN INVESTMENT POLICIES. The Fund and the Portfolio have adopted certain
fundamental investment restrictions and policies which are enumerated in detail
in the Statement of Additional Information and which may not be changed unless
authorized by a shareholder vote and an investor vote. Investment restrictions
are considered at the time of acquisition of assets and, in general, the sale of
portfolio assets generally is not required in the event of a subsequent change
in circumstances. As a matter of fundamental policy, the Portfolio will not
invest 25% or more of its total assets in the securities of issuers in any one
industry other than U.S. Government securities and securities of health science
companies. However, the Portfolio is permitted to invest 25% or more of its
total assets in (i) the securities of issuers located in any one country and
(ii) securities denominated in the currency of any one country. Under normal
market conditions, the Portfolio will hold securities of issuers in an least
three countries.
Except for the fundamental investment restrictions and policies specifically
identified above and enumerated in the Statement of Additional Information, the
investment objective and policies of the Fund and the Portfolio are not
fundamental policies and accordingly may be changed by the Directors of the Fund
and the Trustees of the Portfolio without obtaining the approval of the
shareholders of the Fund or the investors in the Portfolio, as the case may be.
If any changes were made, the Fund might have investment objectives different
from the objectives which an investor considered appropriate at the time the
investor became a shareholder in the Fund. Please refer to the Statement of
Additional Information for further information regarding the investment policies
and risks of the Fund and Portfolio.
ORGANIZATION OF THE FUND AND THE PORTFOLIO
- --------------------------------------------------------------------------------
The Fund is a Maryland corporation incorporated in November, 1984. THE DIRECTORS
OF THE FUND ARE RESPONSIBLE FOR THE OVERALL MANAGEMENT AND SUPERVISION OF ITS
AFFAIRS. The Fund's authorized capital consists of one billion full and
fractional shares of Common Stock, $.001 par value per share. When issued and
outstanding, the shares are fully paid and nonassessable by the Fund and
redeemable as described under "How to Redeem Fund Shares." Shareholders are
entitled to one vote for each full share held. Fractional shares may be voted
proportionately. Shares have no preemptive or conversion rights and are freely
transferable. In the event of the liquidation of the Fund, shareholders are
entitled to share pro rata in the net assets of the Fund available for
distribution to shareholders. The Fund will only hold shareholder meetings when
required by law; no annual meeting is required. The Fund formerly was named the
Medical Research Investment Fund, Inc.
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. The
Portfolio, as well as the Fund, intends to comply with all applicable federal
and state securities laws. 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 Directors of the Fund
believe that neither the Fund nor its shareholders will be adversely affected by
reason of the Fund investing in the Portfolio.
The Directors of the Fund 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 Directors believe that the structure
offers opportunities for substantial growth in the assets of the Portfolio,
affords the potential for economies of scale for the Fund and may over time
result in lower expenses for the Fund (at least when Portfolio assets exceed
certain asset levels).
In addition to selling an interest to the Fund, the Portfolio may sell interests
to other affiliated and non-affiliated mutual funds or institutional investors.
Such investors will invest in the Portfolio on the same terms and conditions and
will pay a proportionate share of the Portfolio's expenses. However, the other
investors investing in the Portfolio are not required to sell their shares at
the same public offering price as the Fund due to variations in sales
commissions and other operating expenses. Therefore, these differences may
result in differences in returns experienced by investors in the various funds
that invest in the Portfolio. Such differences in returns are also present in
other mutual fund structures, including funds that have multiple classes of
shares. Information regarding other pooled investment entities or funds which
invest in the Portfolio may be obtained by contacting the Principal Underwriter,
24 Federal Street, Boston, MA 02110 (617) 482-8260.
Whenever the Fund as an investor in the Portfolio is requested to vote on
matters pertaining to the Portfolio (other than the termination of the
Portfolio's business, which may be determined by the Trustees of the Portfolio
without investor approval), the Fund will hold a meeting of Fund shareholders
and will vote its interest in the Portfolio for or against such matters
proportionately to the instructions to vote for or against such matters received
from Fund shareholders. The Fund shall vote shares for which it receives no
voting instructions in the same proportion as the shares for which it receives
voting instructions. Other investors in the Portfolio may alone or collectively
acquire sufficient voting interests in the Portfolio to control matters relating
to the operation of the Portfolio, which may require the Fund to withdraw its
investment in the Portfolio or take other appropriate action. Any such
withdrawal could result in a distribution "in kind" of portfolio securities (as
opposed to a cash distribution from the Portfolio). If securities are
distributed, the Fund could incur brokerage, tax or other charges in converting
the securities to cash. In addition, the distribution in kind may result in a
less diversified portfolio of investments or adversely affect the liquidity of
the Fund. Notwithstanding the above, there are other means for meeting
shareholder redemption requests, such as borrowing.
The Fund may withdraw (completely redeem) all its assets from the Portfolio at
any time if the Board of Directors of the Fund 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 Directors of the Fund determines that the
investment objective of the Portfolio is no longer consistent with the
investment objective of the Fund, such Directors 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 from the Portfolio.
MANAGEMENT OF THE FUND AND THE PORTFOLIO
- --------------------------------------------------------------------------------
EATON VANCE MANAGEMENT ("EATON VANCE") ACTS AS THE SPONSOR AND MANAGER OF THE
FUND AND AS THE ADMINISTRATOR OF THE PORTFOLIO. THE PORTFOLIO HAS ENGAGED MEHTA
AND ISALY ASSET MANAGEMENT, INC. ("M&I"), LOCATED AT 41 MADISON AVENUE, 40TH
FLOOR, NEW YORK, NEW YORK 10010-2202 AS ITS INVESTMENT ADVISER (THE "ADVISER").
M&I was incorporated in Delaware on February 24, 1989 and is principally owned
by Samuel D. Isaly, who serves as the President of M&I. The Portfolio is the
only investment company registered under the Investment Company Act of 1940 (the
"1940 Act") advised by M&I, which formerly was named G/A Capital Management,
Inc.
Investment decisions for the Portfolio are made by the portfolio manager, Samuel
D. Isaly. Mr. Isaly has been active in international and health care investing
throughout his career, beginning at Chase Manhattan Bank in New York in 1968. He
studied international economics, mathematics and econometrics at Princeton and
the London School of Economics. His company, Gramercy Associates, was the first
to develop an integrated worldwide system of analysis on the 100 leading
worldwide pharmaceutical companies, with investment recommendations conveyed to
50 leading financial institutions in the United States and Europe beginning in
1982. Gramercy Associates was absorbed into S.G. Warburg & Company Inc. in 1986,
where Mr. Isaly became a Senior Vice President. In July of 1989, Mr. Isaly
joined with Mr. Viren Mehta to found the partnership of Mehta and Isaly. The
operations of the combined effort are (1) to provide investment ideas to
institutional investors on the subject of worldwide health care, (2) to
undertake cross-border merger and acquisition projects in the industry and (3)
to provide investment management services to selected investors. The latter
activity is undertaken primarily through the legal entity Mehta and Isaly Asset
Management, Inc., which is an investment advisory firm registered with the
Securities and Exchange Commission.
For its services, M&I receives a fee computed daily and payable monthly at an
annual rate of 1.00% of the Portfolio's average daily net assets up to $30
million of such assets, 0.90% of the next $20 million of such assets, and 0.75%
on such assets in excess of $50 million. The fee rate declines for net assets of
$500 million and greater. Beginning September 1, 1997, M&I may receive a
performance based adjustment of up to .25% of the average daily net assets of
the Portfolio based upon the investment performance of the Portfolio compared to
the Standard & Poor's Index of 500 Common Stocks over specified periods. For the
fiscal year ended August 31, 1996, M&I received an advisory fee of 0.97% of
average daily net assets, during which time assets were managed at the Fund
level. M&I has agreed to pay the Principal Underwriter the equivalent of
one-third of its advisory fee receipts out of M&I's own resources for the
Principal Underwriter activities as placement agent of the Portfolio.
The Adviser furnishes for the use of the Portfolio office space and all
necessary office facilities, equipment and personnel for servicing the
investments of the Portfolio. The Adviser places the portfolio securities
transactions of the Portfolio with many broker-dealer firms and uses its best
efforts to obtain execution of such transactions at prices which are
advantageous to the Portfolio and at reasonably competitive commission rates.
Subject to the foregoing, the Adviser may consider sales of shares of the Fund
as a factor in the selection of firms to execute portfolio transactions. The
Fund, the Portfolio and M&I have adopted Codes of Ethics relating to personal
securities transactions. The Codes permit M&I personnel to invest in securities
(including securities that may be purchased or held by the Portfolio) for their
own accounts, subject to certain restrictions and reporting procedures.
Eaton Vance, its affiliates and its predecessor companies have been managing
assets of individuals and institutions since 1924 and managing investment
companies since 1931. Eaton Vance acts as investment adviser to investment
companies and various individual and institutional clients with assets under
management of over $17 billion. Eaton Vance is a wholly-owned subsidiary of
Eaton Vance Corp., a publicly-held holding company which through its
subsidiaries and affiliates engages primarily in investment management,
administration and marketing activities. The Principal Underwriter is a
wholly-owned subsidiary of Eaton Vance.
Eaton Vance, acting under the general supervision of the Boards of Directors of
the Fund and of Trustees of the Portfolio, manages and administers the business
affairs of the Fund and the Portfolio. Eaton Vance's services include monitoring
and providing reports to the Directors of the Fund and the Trustees of the
Portfolio concerning the investment performance achieved by the Adviser for the
Portfolio, recordkeeping, preparation and filing of documents required to comply
with federal and state securities laws, supervising the activities of the
transfer agent of the Fund and the custodian of the Portfolio, providing
assistance in connection with Board and shareholders' meetings and other
management and administrative services necessary to conduct the business of the
Fund and the Portfolio. Eaton Vance also furnishes for the use of the Fund and
the Portfolio office space and all necessary office facilities, equipment and
personnel for managing and administering the business affairs of the Fund and
the Portfolio. Eaton Vance does not provide any investment management or
advisory services to the Portfolio or the Fund.
Under its management contract with the Fund, Eaton Vance receives a monthly
management fee in the amount of 1/48 of 1% (equal to 0.25% annually) of the
average daily net assets of the Fund up to $500 million, which fee declines at
intervals above $500 million. Under its administration agreement with the
Portfolio, Eaton Vance receives a monthly administration fee in the amont of
1/48 of 1% (equal to .25% annually) of the average daily net assets of the
Portfolio up to $500 million, which fee declines at intervals above $500
million.
The Fund and the Portfolio, as the case may be, will each be responsible for all
respective costs and expenses not expressly stated to be payable by the Adviser
under the investment advisory agreement, Eaton Vance under the management
contract or the administration agreement, or by the Principal Underwriter under
the distribution agreement. Eaton Vance has agreed that through August 31, 1999,
if the annual aggregate expenses of the Fund (excluding extraordinary expenses)
exceed 2.00% of average daily net assets, then Eaton Vance will reduce its fees
and take other actions to the extent required to reduce Fund expenses.
DISTRIBUTION PLAN
- --------------------------------------------------------------------------------
IN ADDITION TO MANAGEMENT FEES AND OTHER EXPENSES, THE FUND PAYS FOR CERTAIN
EXPENSES PURSUANT TO A DISTRIBUTION PLAN (THE "PLAN") DESIGNED TO MEET THE
REQUIREMENTS OF RULE 12B-1 UNDER THE 1940 ACT. The Plan provides that the Fund
will pay a monthly distribution fee to the Principal Underwriter in an amount
equal to 0.25% of its average daily net assets. The Principal Underwriter
intends to use at least part of such fees to compensate Authorized Firms,
including the Adviser, for personal services rendered to Fund shareholders
and/or the maintenance of shareholder accounts. Aggregate payments to the
Principal Underwriter under the Plan are limited to those permissible pursuant
to a rule of the National Association of Securities Dealers, Inc. (the "NASD
Rule"). The Principal Underwriter may realize a profit from these arrangements.
If the Plan is terminated or not continued in effect, the Fund has no obligation
to reimburse the Principal Underwriter for amounts expended by the Principal
Underwriter in distributing shares of the Fund. For the fiscal year ended August
31, 1996, the Fund paid distribution fees to the prior distributor of the Fund
representing 0.25% of the average daily net assets of the Fund.
VALUING FUND SHARES
- --------------------------------------------------------------------------------
THE FUND VALUES ITS SHARES ONCE ON EACH DAY THE NEW YORK STOCK EXCHANGE (THE
"EXCHANGE") IS OPEN FOR TRADING, as of the close of regular trading on the
Exchange (normally 4:00 p.m. New York time). The Fund's net asset value per
share is determined by IBT Fund Services (Canada) Inc. (as agent for the Fund)
in the manner authorized by the Directors of the Fund. IBT Fund Services
(Canada), Inc. is a subsidiary of Investors Bank & Trust ("IBT"), the Fund's and
the Portfolio's custodian. Net asset value is computed by dividing the value of
the Fund's total assets, less its liabilities, by the number of shares
outstanding. Because the Fund invests its assets in an interest in the
Portfolio, the Fund's net asset value will reflect the value of its interest in
the Portfolio (which, in turn, reflects the underlying value of the Portfolio's
assets and liabilities).
Authorized Firms must communicate an investor's order to the Principal
Underwriter prior to the close of the Principal Underwriter's business day to
receive that day's net asset value per Fund share. It is the Authorized Firms'
responsibility to transmit orders promptly to the Principal Underwriter.
The Portfolio's net asset value is also determined as of the close of regular
trading on the Exchange by IBT Fund Services (Canada) Inc. (as agent for the
Portfolio) based on market or fair value in the manner authorized by the
Trustees of the Portfolio. Exchange traded equity securities generally are
valued at their last sale price. Net asset value is computed by subtracting the
liabilities of the Portfolio from the value of its total assets. For further
information regarding the valuation of the Portfolio's assets, see
"Determination of Net Asset Value" in the Statement of Additional Information.
SHAREHOLDERS MAY DETERMINE THE VALUE OF THEIR INVESTMENT BY MULTIPLYING THE
NUMBER OF FUND SHARES OWNED BY THE CURRENT NET ASSET VALUE PER SHARE.
HOW TO BUY FUND SHARES
- --------------------------------------------------------------------------------
SHARES OF THE FUND MAY BE PURCHASED FOR CASH OR MAY BE ACQUIRED IN EXCHANGE FOR
SECURITIES. Investors may purchase shares of the Fund through Authorized Firms
at the effective public offering price, which price is based on the effective
net asset value per share plus the applicable sales charge. The Fund receives
the net asset value, while the sales charge is divided between the Authorized
Firm and the Principal Underwriter. An Authorized Firm may charge its customers
a fee in connection with transactions executed by that Firm. The Fund may
suspend the offering of shares at any time and may refuse an order for the
purchase of shares.
The sales charge may vary depending on the size of the purchase and the number
of shares of Eaton Vance funds the investor may already own, any arrangement to
purchase additional shares during a 13-month period or special purchase
programs. Complete details of how investors may purchase shares at reduced sales
charges under a Statement of Intention, Right of Accumulation, or various
employee benefit plans are available from Authorized Firms or the Principal
Underwriter.
The current sales charges and dealer commissions are:
SALES CHARGE SALES CHARGE DEALER COMMISSION
AS PERCENTAGE OF AS PERCENTAGE OF AS PERCENTAGE OF
AMOUNT OF PURCHASE AMOUNT INVESTED OFFERING PRICE OFFERING PRICE
- ------------------ --------------- -------------- --------------
Less than $100,000 4.99% 4.75% 4.00%
$100,000 but less than $250,000 3.90 3.75 3.15
$250,000 but less than $500,000 2.83 2.75 2.30
$500,000 but less than $1,000,000 2.04 2.00 1.70
$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 contingent deferred sales charge ("CDSC") of 1% will be
imposed on such investments in the event of certain redemptions within 12
months of purchase. Such purchases made before January 1, 1997 will be subject
to a CDSC of 0.50% in the event of such redemptions.
**A commission on sales of $1 million or more will be paid as follows: 1.00% on
amounts of $1 million or more but less than $3 million; plus 0.50% on amounts
from $3 million but less than $5 million; plus 0.25% on amounts of $5 million
or more. Purchases of $1 million or more will be aggregated over a 12-month
period for purposes of determining the commission to be paid.
The Principal Underwriter may at times allow discounts up to the full sales
charge. During periods when the discount includes the full sales charge,
Authorized Firms may be deemed to be underwriters as that term is defined in the
Securities Act of 1933. The Principal Underwriter may, from time to time, at its
own expense, provide additional incentives to Authorized Firms which employ
registered representatives who sell Fund shares and/or shares of other funds
distributed by the Principal Underwriter. In some instances, such additional
incentives may be offered only to certain Authorized Firms whose representatives
sell or are expected to sell significant amounts of shares. In addition, the
Principal Underwriter may from time to time increase or decrease the dealer
commissions paid to Authorized Firms.
An initial investment in the Fund must be at least $1,000. Once an account has
been established the investor may send investments of $50 or more at any time
directly to the Fund's transfer agent (the "Transfer Agent") as follows: First
Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123. The
$1,000 minimum initial investment is waived for Bank Automated Investing
accounts, which may be established with an investment of $50 or more. See
"Eaton Vance Shareholder Services."
Shares of the Fund may be sold at net asset value to shareholders of the Fund
who were shareholders on August 30, 1996 that have maintained their account
until the subsequent purchase; current and retired Directors and Trustees of
Eaton Vance funds, including the Portfolio; to clients and current and retired
officers and employees of Eaton Vance, its affiliates and other investment
advisers of Eaton Vance sponsored funds; to registered representatives and
employees of Authorized Firms and to bank employees who refer customers to
registered representatives of Authorized Firms; to officers and employees of IBT
and the Transfer Agent; and to such persons' spouses and children under the age
of 21 and their beneficial accounts. Shares may also be issued at net asset
value (1) in connection with the merger of an investment company with the Fund,
(2) to investors making an investment as part of a fixed fee program whereby an
entity unaffiliated with Eaton Vance provides multiple investment services, such
as management, brokerage and custody, and (3) to investment advisors, financial
planners or other intermediaries who place trades for their own accounts or the
accounts of their clients and who charge a management, consulting or other fee
for their services; clients of such investment advisors, financial planners or
other intermediaries who place trades for their own accounts if the accounts are
linked to the master account of such investment advisor, financial planner or
other intermediary on the books and records of the broker or agent; and
retirement and deferred compensation plans and trusts used to fund those plans,
including, but not limited to, those defined in Section 401(a), 403(b) or 457 of
the Internal Revenue Code of 1986, as amended (the "Code") ("Eligible Plans")
and "rabbi trusts." The Principal Underwriter may pay commissions to Authorized
Firms who initiate and are responsible for purchases of shares of the Fund by
Eligible Plans of up to 1.00% of the amount invested in such shares.
No sales charge is payable at the time of purchase where the amount invested
represents redemption proceeds from a mutual fund unaffiliated with Eaton Vance
if the redemption occurred no more than 60 days prior to the purchase of Fund
shares and the redeemed shares were subject to a sales charge. A CDSC of 0.50%
will be imposed on such investments in the event of certain redemptions within
12 months of purchase and the Authorized Firm will be paid a commission on such
sales of 0.50% of the amount invested.
ACQUIRING FUND SHARES IN EXCHANGE FOR SECURITIES. IBT, as escrow agent, will
receive securities acceptable to Eaton Vance, as Manager, in exchange for Fund
shares at the applicable public offering price as determined above. The minimum
value of securities (or securities and cash) accepted for deposit is $5,000.
Securities accepted will be sold on the day of their receipt or as soon
thereafter as possible. The number of Fund shares to be issued in exchange for
securities will be the aggregate proceeds from the sale of such securities,
divided by the applicable public offering price per Fund share on the day such
proceeds are received. Eaton Vance will use reasonable efforts to obtain the
then current market price for such securities, but does not guarantee the best
price available. Eaton Vance will absorb any transaction costs, such as
commissions, on the sale of the securities.
Securities determined to be acceptable should be transferred via book entry or
physically delivered, in proper form for transfer, through an Authorized Firm,
together with a completed and signed Letter of Transmittal in approved form
(available from Authorized Firms), as follows:
IN THE CASE OF BOOK ENTRY:
Deliver through Depository Trust Co.
Broker #2212
Investors Bank & Trust Company
For A/C EV Traditional Worldwide Health Sciences Fund, Inc.
IN THE CASE OF PHYSICAL DELIVERY:
Investors Bank & Trust Company
Attention: EV Traditional Worldwide Health Sciences Fund, Inc.
Physical Securities Processing Settlement Area
89 South Street
Boston, MA 02111
Investors who are contemplating an exchange of securities for shares of the
Fund, or their representatives, must contact Eaton Vance to determine whether
the securities are acceptable before forwarding such securities. Eaton Vance
reserves the right to reject any securities. Exchanging securities for Fund
shares may create a taxable gain or loss. Each investor should consult his or
her tax adviser with respect to the particular federal, state and local tax
consequences of exchanging securities for Fund shares.
STATEMENT OF INTENTION AND ESCROW AGREEMENT. If the investor on an application,
makes a Statement of Intention to invest a specified amount over a
thirteen-month period, then out of the initial purchase (or subsequent purchases
if necessary) 5% of the dollar amount specified on the application shall be held
in escrow by the escrow agent in the form of shares (computed to the nearest
full share at the public offering price applicable to the initial purchase
hereunder) registered in the investor's name. All income dividends and capital
gains distributions on escrowed shares will be paid to the investor or to the
investor's order. When the minimum investment so specified is completed, the
escrowed shares will be delivered to the investor. If the investor has an
accumulation account the shares will remain on deposit under the investor's
account.
If total purchases under this Statement of Intention are less than the amount
specified, the investor will promptly remit to the Principal Underwriter any
difference between the sales charge on the amount specified and on the amount
actually purchased. If the investor does not within 20 days after written
request by the Principal Underwriter or the Authorized Firm pay such difference
in sales charge, the escrow agent will redeem an appropriate number of the
escrowed shares in order to realize such difference. Full shares remaining after
any such redemption together with any excess cash proceeds of the shares so
redeemed will be delivered to the investor or to the investor's order by the
escrow agent.
If total purchases made under this Statement are large enough to qualify for a
lower sales charge than that applicable to the amount specified, all
transactions will be computed at the expiration date of this Statement to give
effect to the lower charge. Any difference in sales charge will be refunded to
the investor in cash, or applied to the purchase of additional shares at the
lower charge if specified by the investor. This refund will be made by the
Authorized Firm and by the Principal Underwriter. If at the time of the
recomputation a firm other than the original firm is placing the orders, the
adjustment will be made only on those shares purchased through the firm then
handling the investor's account.
IF YOU DON'T HAVE AN AUTHORIZED FIRM, EATON VANCE CAN RECOMMEND ONE.
HOW TO REDEEM FUND SHARES
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A SHAREHOLDER MAY REDEEM FUND SHARES IN ONE OF THREE WAYS -- BY MAIL, BY
TELEPHONE OR THROUGH AN AUTHORIZED FIRM. The redemption price will be based on
the net asset value per Fund share next computed after a redemption request is
received in the proper form as described below.
REDEMPTION BY MAIL: Shares may be redeemed by delivering to the Transfer Agent,
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123,
during its business hours a written request for redemption in good order, plus
any share certificates with executed stock powers. Good order means that all
relevant documents must be endorsed by the record owner(s) exactly as the shares
are registered and the signature(s) must be guaranteed by a member of either the
Securities Transfer Association's STAMP program or the New York Stock Exchange's
Medallion Signature Program, or certain banks, savings and loan institutions,
credit unions, securities dealers, securities exchanges, clearing agencies and
registered securities associations as required by a regulation of the Securities
and Exchange Commission and acceptable to the Transfer Agent. In addition, in
some cases, good order may require the furnishing of additional documents such
as where shares are registered in the name of a corporation, partnership or
fiduciary.
REDEMPTION BY TELEPHONE: Shares may be redeemed by telephone provided the
investor has not disclaimed in writing the use of the privilege. Such
redemptions can be effected by calling the Transfer Agent at 800-262-1122,
Monday through Friday, 9:00 a.m. to 4:00 p.m. (Eastern Standard Time). The
proceeds of a telephone redemption may be no greater than the maximum amount
established by the Principal Underwriter (currently $50,000) and may be mailed
only to the account address of record. Shares held by corporations, trusts or
certain other entities, or subject to fiduciary arrangements, may not be
redeemed by telephone. Neither the Fund, the Principal Underwriter nor the
Transfer Agent will be responsible for the authenticity of redemption
instructions received by telephone, provided that reasonable procedures to
confirm that instructions communicated by telephone are genuine have been
followed. Telephone instructions will be tape recorded. In times of drastic
economic or market changes, a telephone redemption may be difficult to
implement.
REDEMPTION THROUGH AN AUTHORIZED FIRM: To sell shares at their net asset value
through an Authorized Firm (a repurchase), a shareholder can place a repurchase
order with the Authorized Firm, which may charge a fee. The value of such shares
is based upon the net asset value calculated after the Principal Underwriter, as
the Fund's agent, receives the order. It is the Authorized Firm's responsibility
to transmit promptly repurchase orders to the Principal Underwriter. Throughout
this Prospectus, the word "redemption" is generally meant to include a
repurchase.
Within seven days after receipt of a redemption request in good order by the
Transfer Agent, the Fund will make payment in cash for the net asset value of
the shares as of the date determined above and reduced by the amount of any
federal income tax required to be withheld. Although the Fund normally expects
to make payment in cash for redeemed shares, the Fund, 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 by the Fund from the Portfolio. The
securities so distributed would be valued pursuant to the Portfolio's valuation
procedures. If a shareholder received a distribution in kind, the shareholder
could incur brokerage or other charges in converting the securities to cash.
If shares were recently purchased, the proceeds of a redemption will not be sent
until the check (including a certified or cashier's check) received for the
shares purchased has cleared. Payment for shares tendered for redemption may be
delayed up to 15 days from the purchase date when the purchase check has not yet
cleared. Redemptions may result in a taxable gain or loss.
Due to the high cost of maintaining small accounts, the Fund reserves the right
to redeem accounts with balances of less than $750. Prior to such a redemption,
shareholders will be given 60 days' written notice to make an additional
purchase. However, no such redemption would be required by the Fund if the cause
of the low account balance was a reduction in the net asset value of Fund
shares. In addition, no account of less than $750 will be redeemed if the
account size was below such amount on August 30, 1996 and no partial redemption
since then has occurred.
If shares have been purchased at net asset value by virtue of the purchase
having been in the amount of $1 million or more and are redeemed within 12
months of purchase, a CDSC of 1% will be imposed on such redemption. (Such
purchases made before January 1, 1997 will be subject to a CDSC of 0.50% in the
event of certain redemptions made within 12 months of purchase.) If shares have
been purchased at net asset value because the amount invested represents
redemption proceeds from a mutual fund unaffiliated with Eaton Vance (as
described under "How to Buy Fund Shares") and are redeemed within 12 months of
purchase, a CDSC of 0.50% will be imposed on such redemption. The CDSC will be
imposed on an amount equal to the lesser of the current market value or the
original purchase price of the shares redeemed. Accordingly, no CDSC will be
imposed on increases in account value above the initial purchase price,
including any distributions that have been reinvested in additional shares. In
determining whether a CDSC is applicable to a redemption, the calculation will
be made in a manner that results in the lowest possible rate being charged. It
will be assumed that redemptions are made first from any shares in the
shareholder's account that are not subject to a CDSC. The CDSC will be retained
by the Principal Underwriter.
The CDSC is waived for redemptions involving certain liquidation, merger or
acquisition transactions involving other investment companies. If a shareholder
reinvests redemption proceeds within a 60-day period and in accordance with the
conditions set forth under "Eaton Vance Shareholder Services -- Reinvestment
Privilege," the shareholder's account will be credited with the amount of any
CDSC paid on such redeemed shares.
REPORTS TO SHAREHOLDERS
- --------------------------------------------------------------------------------
THE FUND WILL ISSUE TO ITS SHAREHOLDERS SEMI-ANNUAL AND ANNUAL REPORTS
CONTAINING FINANCIAL STATEMENTS. Financial statements included in annual reports
are audited by the Fund's independent certified public accountants. Shortly
after the end of each calendar year, the Fund will furnish all shareholders with
information necessary for preparing federal and state tax returns. Consistent
with applicable law, duplicate mailings of shareholder reports and certain other
Fund information to shareholders residing at the same address may be eliminated.
THE LIFETIME INVESTING ACCOUNT/DISTRIBUTION OPTIONS
- --------------------------------------------------------------------------------
AFTER AN INVESTOR MAKES AN INITIAL PURCHASE OF FUND SHARES, THE TRANSFER AGENT
WILL SET UP A LIFETIME INVESTING ACCOUNT FOR THE INVESTOR ON THE FUND'S RECORDS.
This account is a complete record of all transactions between the investor and
the Fund which at all times shows the balance of shares owned. The Fund will not
issue share certificates except upon request.
Each time a transaction takes place in a shareholder's account, the shareholder
will receive a statement showing complete details of the transaction and the
current balance in the account. (Under certain investment plans, statements may
be sent only quarterly.) THE LIFETIME INVESTING ACCOUNT PERMITS A SHAREHOLDER TO
MAKE ADDITIONAL INVESTMENTS IN SHARES BY SENDING A CHECK FOR $50 OR MORE to the
Transfer Agent.
Any questions concerning a shareholder's account or services available may be
directed by telephone to EATON VANCE SHAREHOLDER SERVICES at 800-225-6265,
extension 2, or in writing to the Transfer Agent, First Data Investor Services
Group, P.O. Box 5123, Westborough, MA 01581-5123 (please provide the name of the
shareholder, the Fund and the account number).
THE FOLLOWING DISTRIBUTION OPTIONS WILL BE AVAILABLE TO ALL LIFETIME INVESTING
ACCOUNTS and may be changed as often as desired by written notice to the Fund's
dividend disbursing agent, First Data Investor Services Group, P.O. Box 5123,
Westborough, MA 01581-5123. The currently effective option will appear on each
account statement.
Share Option -- Dividends and capital gains will be reinvested in additional
shares.
Income Option -- Dividends will be paid in cash, and capital gains will be
reinvested in additional shares.
Cash Option -- Dividends and capital gains will be paid in cash.
The Share Option will be assigned if no other option is specified.
Distributions, including those reinvested, will be reduced by any withholding
required under federal income tax laws.
If the Income Option or Cash Option has been selected, dividend and/or capital
gains distribution checks which are returned by the United States Postal Service
as not deliverable or which remain uncashed for six months or more will be
reinvested in the account in shares at the then current net asset value.
Furthermore, the distribution option on the account will be automatically
changed to the Share Option until such time as the shareholder selects a
different option.
DISTRIBUTION INVESTMENT OPTION. In addition to the distribution options set
forth above, dividends and/or capital gains may be invested in additional shares
of another Eaton Vance fund. Before selecting this option, a shareholder should
obtain a prospectus of the other Eaton Vance fund and consider its objectives
and policies carefully.
"STREET NAME" ACCOUNTS. If shares of the Fund are held in a "street name"
account with an Authorized Firm, all recordkeeping, transaction processing and
payments of distributions relating to the beneficial owner's account will be
performed by the Authorized Firm, and not by the Fund and its Transfer Agent.
Since the Fund will have no record of the beneficial owner's transactions, a
beneficial owner should contact the Authorized Firm to purchase, redeem or
exchange shares, to make changes in or give instructions concerning the account,
or to obtain information about the account. The transfer of shares in a "street
name" account to an account with another dealer or to an account directly with
the Fund involves special procedures and will require the beneficial owner to
obtain historical purchase information about the shares in the account from the
Authorized Firm. Before establishing a "street name" account with an investment
firm, or transferring the account to another investment firm, an investor
wishing to reinvest distributions should determine whether the firm which will
hold the shares allows reinvestment of distributions in "street name" accounts.
THE EATON VANCE EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
Shares of the Fund currently may be exchanged for shares of any of the following
funds: Eaton Vance Cash Management Fund, Eaton Vance Income Fund of Boston,
Eaton Vance Municipal Bond Fund L.P., Eaton Vance Tax Free Reserves and any fund
in the Eaton Vance Traditional Group of Funds, on the basis of the net asset
value per share of each fund at the time of the exchange (plus, in the case of
an exchange made within six months of the date of purchase of shares subject to
an initial sales charge, an amount equal to the difference, if any, between the
sales charge previously paid on the shares being exchanged and the sales charge
payable on the shares being acquired). Exchange offers are available only in
states where shares of the fund being acquired may be legally sold.
Each exchange must involve shares which have a net asset value of at least
$1,000. The exchange privilege may be changed or discontinued without penalty.
Shareholders will be given sixty (60) days' notice prior to any termination or
material amendment of the exchange privilege. The Fund does not permit the
exchange privilege to be used for "Market Timing" and may terminate the exchange
privilege for any shareholder account engaged in Market Timing activity. Any
shareholder account for which more than two round-trip exchanges are made within
any twelve-month period will be deemed to be engaged in Market Timing.
Furthermore, a group of unrelated accounts for which exchanges are entered
contemporaneously by a financial intermediary will be considered to be engaged
in Market Timing.
Shares of the Fund which are subject to a CDSC may be exchanged into any of the
above funds without incurring the CDSC. The shares acquired in an exchange may
be subject to a CDSC upon redemption. For purposes of computing the CDSC payable
upon the redemption of shares acquired in an exchange, the holding period of the
original shares is added to the holding period of the shares acquired in the
exchange.
The Transfer Agent makes exchanges at the next determined net asset value after
receiving an exchange request in good order (see "How to Redeem Fund Shares").
Consult the Transfer Agent for additional information concerning the exchange
privilege. Applications and prospectuses of other funds are available from
Authorized Firms or the Principal Underwriter. The prospectus for each fund
describes its investment objectives and policies, and shareholders should obtain
a prospectus and consider these objectives and policies carefully before
requesting an exchange.
Shares of certain other funds for which Eaton Vance acts as investment adviser
or administrator may be exchanged for Fund shares on the basis of the net asset
value per share of each fund at the time of the exchange (plus, in the case of
an exchange made within six months of the date of purchase of shares, an amount
equal to the difference, if any, between the sales charge previously paid on the
shares being exchanged and the sales charge payable on the shares being
acquired). Any such exchange is subject to any restrictions or qualifications
set forth in the current prospectus of any such fund.
Telephone exchanges are accepted by the Transfer Agent provided that the
investor has not disclaimed in writing the use of the privilege. To effect such
exchanges, call the Transfer Agent at 800-262-1122, Monday through Friday, 9:00
a.m. to 4:00 p.m. (Eastern Standard Time). Shares acquired by telephone exchange
must be registered in the same name(s) and with the same address as the shares
being exchanged. Neither the Fund, the Principal Underwriter nor the Transfer
Agent will be responsible for the authenticity of exchange instructions received
by telephone, provided that reasonable procedures to confirm that instructions
communicated are genuine have been followed. Telephone instructions will be tape
recorded. In times of drastic economic or market changes, a telephone exchange
may be difficult to implement. An exchange may result in a taxable gain or loss.
EATON VANCE SHAREHOLDER SERVICES
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THE FUND OFFERS THE FOLLOWING SERVICES, WHICH ARE VOLUNTARY, INVOLVE NO EXTRA
CHARGE, AND MAY BE CHANGED OR DISCONTINUED WITHOUT PENALTY AT ANY TIME. Full
information on each of the services described below and an application, where
required, are available from Authorized Firms or the Principal Underwriter. The
cost of administering such services for the benefit of shareholders who
participate in them is borne by the Fund as an expense to all shareholders.
INVEST-BY-MAIL -- FOR PERIODIC SHARE ACCUMULATION: Once the $1,000 minimum
investment has been made, checks of $50 or more payable to the order of EV
Traditional Worldwide Health Sciences Fund, Inc. may be mailed directly to the
Transfer Agent, First Data Investor Services Group, P.O. Box 5123, Westborough,
MA 01581-5123 at any time -- whether or not distributions are reinvested. The
name of the shareholder, the Fund and the account number should accompany each
investment.
BANK AUTOMATED INVESTING -- FOR REGULAR SHARE ACCUMULATION: Cash investments of
$50 or more may be made automatically each month or quarter from the
shareholder's bank account. The $1,000 minimum initial investment and small
account redemption policy are waived for these accounts.
STATEMENT OF INTENTION: Purchases of $100,000 or more made over a 13-month
period are eligible for reduced sales charges. See "How to Buy Fund Shares --
Statement of Intention and Escrow Agreement."
RIGHT OF ACCUMULATION: Purchases may qualify for reduced sales charges when the
current market value of holdings (shares at current offering price) plus new
purchases reaches $100,000 or more. Shares of the Eaton Vance funds listed under
"The Eaton Vance Exchange Privilege" may be combined under the Statement of
Intention and Right of Accumulation.
WITHDRAWAL PLAN: A shareholder may draw on shareholdings systematically with
monthly or quarterly checks in an amount specified by the shareholder. A minimum
deposit of $5,000 in shares is required. The maintenance of a withdrawal plan
concurrently with purchases of additional shares would be disadvantageous
because of the sales charge included in such purchases.
REINVESTMENT PRIVILEGE: A shareholder who has redeemed shares may reinvest any
portion or all of the redemption proceeds (plus that amount necessary to acquire
a fractional share to round off the purchase to the nearest full share) in
shares of the Fund, or, provided that the shares redeemed have been held for at
least 60 days, in shares of any of the other funds offered by the Principal
Underwriter subject to an initial sales charge, provided that the reinvestment
is effected within 60 days after such redemption, and the privilege has not been
used more than once in the prior 12 months. Shares are sold to a reinvesting
shareholder at the net asset value next determined following timely receipt of a
written purchase order by the Principal Underwriter or by the fund the shares of
which are to be purchased (or by such fund's transfer agent). The privilege is
also available to shareholders of the Funds listed under "The Eaton Vance
Exchange Privilege" who wish to reinvest such redemption proceeds in shares of
the Fund. If a shareholder reinvests redemption proceeds within the 60-day
period, the shareholder's account will be credited with the amount of any CDSC
paid on such redeemed shares. To the extent that any shares of the Fund are sold
at a loss and the proceeds are reinvested in shares of the Fund (or other shares
of the Fund are acquired) within the period beginning 30 days before and ending
30 days after the date of the redemption, some or all of the loss generally will
not be allowed as a tax deduction. Shareholders should consult their tax
advisers concerning the tax consequences of reinvestments.
TAX-SHELTERED RETIREMENT PLANS: Shares of the Fund are available for purchase in
connection with certain tax-sheltered retirement plans. Detailed information
concerning these plans, including certain exceptions to minimum investment
requirements, and copies of the plans are available from the Principal
Underwriter. This information should be read carefully and consultation with an
attorney or tax adviser may be advisable. The information sets forth the service
fee charged for retirement plans and describes the federal income tax
consequences of establishing a plan. Participant accounting services (including
trust fund reconciliation services) will be offered only through third party
recordkeepers and not by the Principal Underwriter. Under all plans, dividends
and distributions will be automatically reinvested in additional shares.
DISTRIBUTIONS AND TAXES
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DISTRIBUTIONS. The Fund's present policy is to make (A) at least one
distribution annually (normally in December) of all or substantially all of the
investment income (if any) allocated to the Fund by the Portfolio (less the
Fund's direct and allocated expenses), and (B) at least one distribution
annually of all or substantially all of the net realized capital gains (if any)
allocated to the Fund by the Portfolio (reduced by any available capital loss
carryforwards from prior years). Shareholders may reinvest all distributions in
shares of the Fund without a sales charge at the net asset value per share as of
the close of business on the record date.
The net investment income consists of the Fund's allocated share of the net
investment income of the Portfolio, less all actual and accrued expenses of the
Fund determined in accordance with generally accepted accounting principles. The
Portfolio's net investment income consists of all income accrued on the
Portfolio's assets, less all actual and accrued expenses of the Portfolio
determined in accordance with generally accepted accounting principles. The
Fund's net realized capital gains, if any, consist of the net realized capital
gains (if any) allocated to the Fund by the Portfolio for tax purposes, after
taking into account any available capital loss carryovers.
TAXES. Distributions by the Fund which are derived from the Fund's allocated
share of the Portfolio's net investment income, net short-term capital gains and
certain foreign exchange gains are taxable to shareholders as ordinary income,
whether received in cash or reinvested in additional shares of the Fund. The
Fund's distributions will generally not qualify for the dividends-received
deduction for corporate shareholders.
Capital gains referred to in clause (B) above, if any, realized by the Portfolio
and allocated to the Fund for the Fund's fiscal year, which ends on August 31,
will usually be distributed by the Fund prior to the end of December.
Distributions by the Fund of long-term capital gains allocated to the Fund by
the Portfolio are taxable to shareholders as long-term capital gains, whether
paid in cash or reinvested in additional shares of the Fund and regardless of
the length of time Fund shares have been owned by the shareholder.
If shares are purchased shortly before the record date of a distribution, the
shareholder will pay the full price for the shares and then receive some portion
of the price back as a taxable distribution. The amount, timing and character of
the Fund's distributions to shareholders may be affected by special tax rules
governing the Portfolio's activities in options, futures and forward foreign
currency exchange transactions or certain other investments.
Certain distributions, if declared by the Fund in October, November or December
and paid the following January, will be taxable to shareholders as if received
on December 31 of the year in which they are declared.
Sales charges paid upon a purchase of shares of the Fund cannot be taken into
account for purposes of determining gain or loss on a redemption or exchange of
the shares before the 91st day after their purchase to the extent a sales charge
is reduced or eliminated in a subsequent acquisition of shares of the Fund or of
another fund pursuant to the Fund's reinvestment or exchange privilege. Any
disregarded amounts will result in an adjustment to the shareholder's tax basis
in some or all of any other shares acquired.
The Fund intends to qualify as a regulated investment company under the Code and
to satisfy all requirements necessary to be relieved of federal taxes on income
and gains it distributes to shareholders. In satisfying these requirements, the
Fund will treat itself as owning its proportionate share of each of the
Portfolio's assets and as entitled to the income of the Portfolio properly
attributable to such share.
As a regulated investment company under the Code, the Fund does not pay federal
income or excise taxes to the extent that it distributes to shareholders its net
investment income and net realized capital gains in accordance with the timing
requirements imposed by the Code. As a partnership under the Code, the Portfolio
does not pay federal income or excise taxes.
Income realized by the Portfolio from certain investments and allocated to the
Fund may be subject to foreign income taxes, and the Fund may make an election
under Section 853 of the Code that would allow shareholders to claim a credit or
deduction on their federal income tax returns for (and treat as additional
amounts distributed to them) their pro rata portion of the Fund's allocated
share of qualified taxes paid by the Portfolio to foreign countries. This
election may be made only if more than 50% of the assets of the Fund, including
its allocable share of the Portfolio's assets, at the close of a taxable year
consists of securities in foreign corporations. The Fund will send a written
notice of any such election (not later than 60 days after the close of its
taxable year) to each shareholder indicating the amount to be treated as the
proportionate share of such taxes. The availability of foreign tax credits or
deductions for shareholders is subject to certain additional restrictions and
limitations.
The Fund will provide its shareholders annually with tax information notices and
Forms 1099 to assist in the preparation of their federal and state tax returns
for the prior calendar year's distributions, proceeds from the redemption or
exchange of Fund shares, and federal income tax (if any) withheld by the Fund's
Transfer Agent.
Shareholders should consult with their tax adviser concerning the applicability
of state, local or other taxes to an investment in the Fund.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
FROM TIME TO TIME, THE FUND MAY ADVERTISE ITS AVERAGE ANNUAL TOTAL RETURN. The
Fund's average annual total return is determined by computing the average annual
percentage change in value of $1,000 invested at the maximum public offering
price (which includes the maximum sales charge) for specified periods, assuming
reinvestment of all distributions. The Fund may also publish annual and
cumulative total return figures from time to time. The Fund may use total return
figures, together with comparisons with the Consumer Price Index, various
domestic and foreign securities indices and performance studies prepared by
independent organizations, in advertisements and in information furnished to
present or prospective shareholders.
The Fund may also furnish total return calculations based on investments at
various sales charge levels or at net asset value. Any performance data which is
based on the net asset value per share would be lower if a sales charge were
taken into account. The Fund's performance may be compared in publications to
the performance of various indices and investments for which reliable data is
available, and to averages, performance rankings, or other information prepared
by recognized mutual fund statistical services.
Investors should note that the investment results of the Fund will fluctuate
over time, and any presentation of the Fund's total return for any prior period
should not be considered a representation of what an investment may earn or what
the Fund's total return may be in any future period. The Fund's investment
results are based on many factors, including market conditions, the composition
of the security holdings of the Portfolio and the operating expenses of the Fund
and the Portfolio. Investment results also often reflect the risks associated
with the particular investment objective and policies of the Fund and the
Portfolio. Among others, these factors should be considered when comparing the
Fund's investment results to those of other mutual funds and other investment
vehicles. If the expenses of the Fund or the Portfolio are allocated to Eaton
Vance, the Fund's performance will be higher.
The following chart reflects the annual investment returns of the Fund for
one-year periods ending August 31 and does not take into account any sales
charge which investors may bear.
5 Year Average Annual Total Return -- 20.38%*
10 Year Average Annual Total Return -- 15.74%*
1985(1) 0.80%
1986 36.04%
1987 19.81%
1988 (25.30%)
1989 31.32%
1990 11.13%
1991 30.61%
1992 12.04%
1993 21.37%
1994 2.68%
1995 38.13%
1996 31.04%
(1) From the start of business, July 26, 1985, to August 31, 1985.
* Absent an expense reduction, the Fund would have had lower returns.
<PAGE>
[logo]
EATON VANCE
- --------------------
Mutual Funds
EV TRADITIONAL
WORLDWIDE HEALTH
SCIENCES FUND, INC.
PROSPECTUS
FEBRUARY 1, 1997
EV TRADITIONAL WORLDWIDE
HEALTH SCIENCES FUND, INC.
24 FEDERAL STREET
BOSTON, MA 02110
- --------------------------------------------------------------------------------
SPONSOR AND MANAGER OF EV TRADITIONAL WORLDWIDE HEALTH SCIENCES FUND, INC.
ADMINISTRATOR OF WORLDWIDE HEALTH SCIENCES PORTFOLIO
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
ADVISER OF WORLDWIDE HEALTH SCIENCES PORTFOLIO
Mehta and Isaly Asset Management, Inc., 41 Madison Avenue,
New York, NY 10010-2202
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111
TRANSFER AGENT
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123
(800) 262-1122
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand, L.L.P., One Post Office Square, Boston, MA 02109
T-HSP
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
February 1, 1997
EV TRADITIONAL
WORLDWIDE HEALTH SCIENCES FUND, INC.
24 Federal Street
Boston, Massachusetts 02110
(800) 225-6265
TABLE OF CONTENTS Page
PART I
Additional Information About Investment Policies ................... 1
Investment Restrictions ............................................ 5
Management of the Fund and the Portfolio ........................... 6
Custodian .......................................................... 9
Service for Withdrawal ............................................. 9
Determination of Net Asset Value ................................... 9
Investment Performance ............................................. 10
Taxes .............................................................. 11
Portfolio Security Transactions .................................... 13
Other Information .................................................. 15
Appendix ........................................................... 16
PART II
Fees and Expenses .................................................. a-1
Board Members and Officers ......................................... a-2
Services for Accumulation .......................................... a-3
Principal Underwriter .............................................. a-4
Distribution Plan .................................................. a-4
Performance Information ............................................ a-5
Control Persons and Principal Holders of Securities ................ a-5
Other Information .................................................. a-5
Independent Accountants ............................................ a-5
Financial Statements ............................................... a-6
Report of Independent Accountants .................................. a-8
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY THE FUND'S PROSPECTUS DATED FEBRUARY 1, 1997, AS SUPPLEMENTED
FROM TIME TO TIME, WHICH IS INCORPORATED HEREIN BY REFERENCE. THIS STATEMENT OF
ADDITIONAL INFORMATION SHOULD BE READ IN CONJUNCTION WITH SUCH PROSPECTUS, A
COPY OF WHICH MAY BE OBTAINED WITHOUT CHARGE BY CONTACTING EATON VANCE
DISTRIBUTORS, INC. (THE "PRINCIPAL UNDERWRITER") (SEE BACK COVER FOR ADDRESS AND
PHONE NUMBER). THIS STATEMENT OF ADDITIONAL INFORMATION IS SOMETIMES REFERRED TO
HEREIN AS THE "SAI." CAPITALIZED TERMS USED IN THIS SAI AND NOT OTHERWISE
DEFINED HAVE THE MEANINGS GIVEN THEM IN THE FUND'S PROSPECTUS.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART I
ADDITIONAL INFORMATION ABOUT INVESTMENT POLICIES
The Fund is subject to the same investment policies as those of the
Portfolio. The Fund currently seeks to achieve its objective by investing in the
Portfolio.
Foreign Investments. Under normal market conditions, the Portfolio will invest
in securities of issuers located in at least three different countries.
Investing in securities issued by companies whose principal business activities
are outside the United States may involve significant risks not present in
domestic investments. For example, there is generally less publicly available
information about foreign companies, particularly those not subject to the
disclosure and reporting requirements of the U.S. securities laws. Foreign
issuers are generally not bound by uniform accounting, auditing, and financial
reporting requirements and standards of practice comparable to those applicable
to domestic issuers. Investments in foreign securities also involve the risk of
possible adverse changes in investment or exchange control regulations,
expropriation or confiscatory taxation, limitation on the removal of funds or
other assets of the Portfolio, political or financial instability or diplomatic
and other developments which could affect such investments. Further, economies
of particular countries or areas of the world may differ favorably or
unfavorably from the economy of the United States. It is anticipated that in
most cases the best available market for foreign securities will be on exchanges
or in over-the-counter markets located outside of the United States. Foreign
stock markets, while growing in volume and sophistication, are generally not as
developed as those in the United States, and securities of some foreign issuers
(particularly those located in developing countries) may be less liquid and more
volatile than securities of comparable U.S. companies. In addition, foreign
brokerage commissions are generally higher than commissions on securities traded
in the United States and may be non-negotiable. In general, there is less
overall governmental supervision and regulation of foreign securities markets,
broker-dealers, and issuers than in the United States.
Foreign Currency Transactions. Because investments in companies whose principal
business activities are located outside of the United States will frequently
involve currencies of foreign countries, and because assets of the Portfolio may
temporarily be held in bank deposits in foreign currencies during the completion
of investment programs, 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. 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 Portfolio at one rate, while
offering a lesser rate of exchange should the Portfolio desire to resell that
currency to the dealer.
Emerging Companies. The investment risk associated with emerging companies is
higher than that normally associated with larger, older companies due to the
greater business risks associated with small size, the relative age of the
company, limited product lines, distribution channels and financial and
managerial resources. Further, there is typically less publicly available
information concerning smaller companies than for larger, more established ones.
The securities of small companies are often traded only over-the-counter and may
not be traded in the volumes typical of trading on a national securities
exchange. As a result, in order to sell this type of holding, the Portfolio may
need to discount the securities from recent prices or dispose of the securities
over a long period of time. The prices of this type of security may be more
volatile than those of larger companies which are often traded on a national
securities exchange.
Currency Swaps. Currency swaps require maintenance of a segregated account
described under "Asset Coverage for Derivative Investments" below. The Portfolio
will not enter into any currency swap unless the credit quality of the unsecured
senior debt or the claims-paying ability of the other party thereto is
considered to be investment grade by the Adviser. If there is a default by the
other party to such a transaction, the Portfolio will have contractual remedies
pursuant to the agreements related to the transaction. The swap market has grown
substantially in recent years with a large number of banks and investment
banking firms acting both as principals and as agents utilizing standardized
swap documentation. As a result, the swap market has become relatively liquid in
comparison with the markets for other similar instruments which are traded in
the interbank market.
Forward Foreign Currency Exchange Transactions. The Portfolio may enter into
forward foreign currency exchange contracts in several circumstances. First,
when the Portfolio enters into a contract for the purchase or sale of a security
denominated in a foreign currency, or when the Portfolio anticipates the receipt
in a foreign currency of dividend or interest payments on such a security which
it holds, the Portfolio may desire to "lock in" the U.S. dollar price of the
security or the U.S. dollar equivalent of such dividend or interest payment, as
the case may be. By entering into a forward contract for the purchase or sale,
for a fixed amount of dollars, of the amount of foreign currency involved in the
underlying transactions, the Portfolio will attempt to protect itself against an
adverse change in the relationship between the U.S. dollar and the subject
foreign currency during the period between the date on which the security is
purchased or sold, or on which the dividend or interest payment is declared, and
the date on which such payments are made or received.
Additionally, when management of the Portfolio believes that the currency of
a particular foreign country may suffer a substantial decline against the U.S.
dollar, it may enter into a forward contract to sell, for a fixed amount of
dollars, the amount of foreign currency approximating the value of some or all
of the securities held by the Portfolio denominated in such foreign currency.
The precise matching of the forward contract amounts and the value of the
securities involved will not generally be possible because the future value of
such securities in foreign currencies will change as a consequence of market
movements in the value of those securities between the date on which the
contract is entered into and the date it matures. The precise projection of
short-term currency market movements is not possible, and short-term hedging
provides a means of fixing the dollar value of only a portion of the Portfolio's
foreign assets.
Special Risks Associated With Currency Transactions. Transactions in forward
contracts, as well as futures and options on foreign currencies, are subject to
the risk of governmental actions affecting trading in or the prices of
currencies underlying such contracts, which could restrict or eliminate trading
and could have a substantial adverse effect on the value of positions held by
the Portfolio. In addition, the value of such positions could be adversely
affected by a number of other complex political and economic factors applicable
to the countries issuing the underlying currencies.
Furthermore, unlike trading in most other types of instruments, there is no
systematic reporting of last sale information with respect to the foreign
currencies underlying forward contracts, futures contracts and options. As a
result, the available information on which the Portfolio's trading systems will
be based may not be as complete as the comparable data on which the Portfolio
makes investment and trading decisions in connection with securities and other
transactions. Moreover, because the foreign currency market is a global,
twenty-four hour market, events could occur on that market which will not be
reflected in the forward, futures or options markets until the following day,
thereby preventing the Portfolio from responding to such events in a timely
manner.
Settlements of over-the-counter forward contracts or of the exercise of
foreign currency options generally must occur within the country issuing the
underlying currency, which in turn requires parties to such contracts to accept
or make delivery of such currencies in conformity with any United States or
foreign restrictions and regulations regarding the maintenance of foreign
banking relationships, fees, taxes or other charges.
Unlike currency futures contracts and exchange-traded options, options on
foreign currencies and forward contracts are not traded on contract markets
regulated by the CFTC or (with the exception of certain foreign currency
options) the Securities and Exchange Commission (the "Commission"). To the
contrary, such instruments are traded through financial institutions acting as
market-makers. (Foreign currency options are also traded on the Philadelphia
Stock Exchange subject to Commission regulation). In an over-the-counter trading
environment, many of the protections associated with transactions on exchanges
will not be available. For example, there are no daily price fluctuation limits,
and adverse market movements could therefore continue to an unlimited extent
over a period of time. Although the purchaser of an option cannot lose more than
the amount of the premium plus related transaction costs, this entire amount
could be lost. Moreover, an option writer could lose amounts substantially in
excess of its initial investment due to the margin and collateral requirements
associated with such option positions. Similarly, there is no limit on the
amount of potential losses on forward contracts to which the Portfolio is a
party.
In addition, over-the-counter transactions can only be entered into with a
financial institution willing to take the opposite side, as principal, of the
Portfolio's position unless the institution acts as broker and is able to find
another counterparty willing to enter into the transaction with the Portfolio.
Where no such counterparty is available, it will not be possible to enter into a
desired transaction. There also may be no liquid secondary market in the trading
of over-the-counter contacts, and the Portfolio may be unable to close out
options purchased or written, or forward contracts entered into, until their
exercise, expiration or maturity. This in turn could limit the Portfolio's
ability to realize profits or to reduce losses on open positions and could
result in greater losses.
Furthermore, over-the-counter transactions are not backed by the guarantee
of an exchange's clearing corporation. The Portfolio will therefore be subject
to the risk of default by, or the bankruptcy of, the financial institution
serving as its counterparty. One or more of such institutions also may decide to
discontinue its role as market-maker in a particular currency, thereby
restricting the Portfolio's ability to enter into desired hedging transactions.
The Portfolio will enter into over-the-counter transactions only with parties
whose creditworthiness has been reviewed and found satisfactory by the Adviser.
The purchase and sale of exchange-traded foreign currency options, however,
are subject to the risks of the availability of a liquid secondary market
described above, as well as the risks regarding adverse market movements,
margining of options written, the nature of the foreign currency market,
possible intervention by governmental authorities and the effect of other
political and economic events. In addition, exchange-traded options on foreign
currencies involve certain risks not presented by the over-the-counter market.
For example, exercise and settlement of such options must be made exclusively
through the Options Clearing Corporation ("OCC"), which has established banking
relationships in applicable foreign countries for this purpose. As a result, the
OCC may, if it determines that foreign governmental restrictions or taxes would
prevent the orderly settlement of foreign currency option exercises, or would
result in undue burdens on the OCC or its clearing member, impose special
procedures for exercise and settlement, such as technical changes in the
mechanics of delivery of currency, the fixing of dollar settlement prices or
prohibitions on exercise.
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 purchased OTC options, and assets used as cover for written
OTC options, are subject to the Portfolio's 15% limit on illiquid investments.
However, with respect to options written with primary dealers in U.S. Government
securities pursuant to an agreement requiring a closing purchase transaction at
a formula price, the amount of illiquid securities may be calculated with
reference to the formula price. 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. If the Portfolio has not complied
with the 5% CFTC test set forth in the Fund's prospectus, to evidence its
hedging intent, the Portfolio expects that, on 75% or more of the occasions on
which it takes a long futures or option on futures position, it will have
purchased or will be in the process of purchasing, equivalent amounts of related
securities at the time when the futures or options position is closed out.
However, in particular cases, when it is economically advantageous for the
Portfolio to do so, a long futures or options position may be terminated (or an
option may expire) without a corresponding purchase of securities.
The Portfolio 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 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 CFTC-regulated exchanges.
In order to hedge its current or anticipated portfolio positions, the
Portfolio may use futures contracts on securities held in its Portfolio or on
securities with characteristics similar to those of the securities held by the
Portfolio. If, in the opinion of the Adviser, there is a sufficient degree of
correlation between price trends for the securities held by the Portfolio and
futures contracts based on other financial instruments, securities indices or
other indices, the Portfolio may also enter into such futures contracts as part
of its hedging strategy.
All call and put options on securities written by the Portfolio will be
covered. This means that, in the case of call option, the Portfolio will own the
securities subject to the call option or an offsetting call option so long as
the call option is outstanding. In the case of a put option, the Portfolio will
own an offsetting put option or will have deposited with its custodian cash or
liquid securities with a value at least equal to the exercise price of the put
option. The Portfolio may only write a put option on a security that it intends
to acquire for its investment portfolio.
Repurchase Agreements. Under a repurchase agreement the Portfolio buys a
security at one price and simultaneously promise to sell that same security back
to the seller at a higher price. At no time will the Portfolio commit more than
15% of its net assets to repurchase agreements which mature in more than seven
days and other illiquid securities. The Portfolio's repurchase agreements will
provide that the value of the collateral underlying the repurchase agreement
will always be at least equal to the repurchase price, including any accrued
interest earned on the repurchase agreement, and will be marked to market daily.
Reverse Repurchase Agreements. The Portfolio may enter into reverse repurchase
agreements. Under a reverse repurchase agreement, the Portfolio temporarily
transfers possession of a portfolio instrument to another party, such as a bank
or broker-dealer, in return for cash. At the same time, the Portfolio agrees to
repurchase the instrument at an agreed upon time (normally within seven days)
and price, which reflects an interest payment. The Portfolio expects that it
will enter into reverse repurchase agreements when it is able to invest the cash
so acquired at a rate higher than the cost of the agreement, which would
increase the income earned by the Portfolio. The Portfolio could also enter into
reverse repurchase agreements as a means of raising cash to satisfy redemption
requests without the necessity of selling portfolio assets.
When the Portfolio enters into a reverse repurchase agreement, any
fluctuations in the market value of either the securities transferred to another
party or the securities in which the proceeds may be invested would affect the
market value of the Portfolio's assets. As a result, such transactions may
increase fluctuations in the market value of the Portfolio's assets. While there
is a risk that large fluctuations in the market value of the Portfolio's assets
could affect the Portfolio's net asset value, this risk is not significantly
increased by entering into reverse repurchase agreements, in the opinion of the
Adviser. Because reverse repurchase agreements may be considered to be the
practical equivalent of borrowing funds, they constitute a form of leverage. If
the Portfolio reinvests the proceeds of a reverse repurchase agreement at a rate
lower than the cost of the agreement, entering into the agreement will lower the
Portfolio's yield.
At all times that a reverse repurchase agreement is outstanding, the
Portfolio will maintain cash or high grade liquid securities in a segregated
account at its custodian bank with a value at least equal to its obligation
under the agreement. Securities and other assets held in the segregated account
may not be sold while the reverse repurchase agreement is outstanding, unless
other suitable assets are substituted. While the Adviser does not consider
reverse repurchase agreements to involve a traditional borrowing of money,
reverse repurchase agreements will be included within the aggregate limitation
on "borrowings" contained in the Portfolio's investment restriction (1) set
forth below.
Portfolio Turnover. The Portfolio cannot accurately predict its portfolio
turnover rate, but it is anticipated that the annual turnover rate will
generally not exceed 100% (excluding turnover of securities having a maturity of
one year or less). A 100% annual turnover rate would occur, for example, if all
the securities in the portfolio were replaced once in a period of one year. A
high turnover rate (100% or more) necessarily involves greater expenses to the
Portfolio. The Portfolio engages in portfolio trading (including short-term
trading) if it believes that a transaction including all costs will help in
achieving its investment objective either by increasing income or by enhancing
the Portfolio's net asset value. High portfolio turnover may also result in the
realization of substantial net short-term capital gains. In order for the Fund
to continue to qualify as a regulated investment company for federal tax
purposes, less than 30% of the annual gross income of the Fund must be derived
from the sale of securities (including its share of gains from the sale of
securities held by the Portfolio) held for less than three months.
Lending Portfolio Securities. If the Adviser decides to make securities loans,
the Portfolio may seek to increase its income by lending portfolio securities to
broker-dealers or other institutional borrowers. 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 holder of
the securities or the giving or holding of their consent on a material matter
affecting the investment. Securities lending involves administration expenses,
including finders' fees. If the Adviser decides to make securities loans, it is
intended that the value of the securities loaned would not exceed 1/3 of the
Portfolio's total assets. Securities lending involves administrative expenses
including finders' fees. As of the present time, the Trustees of the Portfolio
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 for Derivative Instruments. Transactions involving reverse
repurchase agreements, currency swaps, the lending of Portfolio securities or
forward contracts, 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 or other options 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. (Only the
net obligations 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
Fund'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.
INVESTMENT RESTRICTIONS
The following investment restrictions of the Fund are designated as
fundamental policies and as such cannot be changed without the approval of the
holders of a majority of the Fund's outstanding voting securities, which as used
in this SAI means the lesser of (a) 67% of the shares of the Fund, present or
represented by proxy at a meeting if the holders of more than 50% of the shares
are present or represented at the meeting or (b) more than 50% of the shares of
the Fund. Accordingly the Fund may not:
(1) Borrow money or issue any senior securities except as permitted by the
Investment Company Act of 1940;
(2) Purchase any securities on margin except that the Fund may obtain such
short-term credits as may be necessary for the clearance of purchases and sales
of securities;
(3) Underwrite securities of other issuers;
(4) Invest in real estate including interests in real estate limited
partnerships (although it may purchase and sell securities which are secured by
real estate and securities of companies which invest or deal in real estate);
(5) Purchase or sell commodities or commodity contacts with respect to
physical commodities;
(6) 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;
(7) With respect to 75% of its total assets, invest more than 5% of its
assets in the securities of any one issuer (except securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities), or invest
in the securities of any issuer if as a result the Fund holds more than 10% of
the outstanding voting securities of such issuer;
(8) Sell securities short unless at all times when a short position is open
the Fund either owns an equal amount of such securities or owns securities
convertible into or exchangeable, without payment of any further consideration,
for securities of the same issue as, and equal in amount to, the securities sold
short; or
(9) Invest in the securities of any one industry, except the medical
research and health care industry (and except securities issued or guaranteed by
the U.S. Government, its agencies or instrumentalities) if as a result more than
25% of the Fund's total assets would be invested in the securities of such
industry.
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 numbered investment restrictions adopted by the
Fund; such restrictions cannot be changed without the approval of a "majority of
the outstanding voting securities" of the Portfolio.
The Fund and the Portfolio have each adopted the following investment
policies which may be changed without shareholder or investor approval. Neither
the Fund nor the Portfolio may (i) invest more than 15% of its net assets in
securities which are not readily marketable, including repurchase agreements
with remaining maturities in excess of seven days and restricted securities.
(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 the Fund or Portfolio, or their delegate, determines to be liquid.);
(ii) invest in warrants if as a result more than 2% of the value of the Fund's
or Portfolio's total assets would be invested in warrants which are not listed
on a recognized stock exchange, or more than 5% of the Fund's or the Portfolio's
total assets, as the case may be, would be invested in warrants regardless of
whether listed on such exchanges; (iii) purchase or retain the securities of any
issuer if to the knowledge of the Fund or Portfolio any officer, director or
trustee of the Fund, the Portfolio or of its investment adviser own beneficially
more than 1/2 of 1% of the outstanding securities of such issuer and together
they own beneficially more than 5% of the securities of such issuer; (iv) invest
in companies for the purpose of exercising control or management; or (v) invest
in or sell put options, call options, straddles, spreads or any combination
thereof, except that the Fund may write covered call options or enter into
closing purchase transactions and except that the Fund may enter into futures
contracts and related options.
Whenever an investment policy or investment restriction set forth in the
Prospectus or this SAI states a maximum percentage of assets that may be
invested in any security or other asset or describes a policy regarding quality
standards, such percentage limitation or standard shall be determined
immediately after and as a result of the Fund's or the Portfolio's acquisition
of such security or other asset. Accordingly, any later increase or decrease
resulting from a change in values, assets or other circumstances, other than a
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. Nevertheless, under normal market conditions the Fund
and the Portfolio must take actions necessary to comply with its policy of
investing at least 65% of total assets in equity securities of health science
companies. Moreover, the Fund and the Portfolio must always be in compliance
with its borrowing policy set forth below.
Although permissible under the Fund's investment restrictions, the Fund has
no present intention during the coming fiscal year to: borrow money; pledge its
assets; or make loans to other persons.
MANAGEMENT OF THE FUND AND THE PORTFOLIO
Eaton Vance acts as the sponsor and manager of the Fund and the
administrator of the Portfolio. The Portfolio has engaged M&I as its investment
adviser.
THE ADVISER
As investment adviser to the Portfolio, the Adviser manages the Portfolio's
investments, subject to the supervision of the Board of Trustees of the
Portfolio. The Adviser is also responsible for effecting all security
transactions on behalf of the Portfolio, including the allocation of principal
transactions and portfolio brokerage and the negotiation of commissions. See
"Portfolio Security Transactions." The advisory fee rate on average daily net
assets is reduced to .70% on assets of $500 million but less than $1 billion, to
.65% on assets of $1 billion but less than $1.5 billion, to .60% on assets of
$1.5 billion but less than $2 billion, to .55% on assets of $2 billion but less
than $3 billion and .50% on assets of $3 billion and over.
The performance fee adjustment to the advisory fee is as follows: After 12
months, the basic advisory fee is subject to upward or downward adjustment
depending upon whether, and to what extent, the investment performance of the
Portfolio differs by at least one percentage point from the record of the
Standard & Poor's Index of 500 Common Stocks over the same period. Each
percentage point difference is multiplied by a performance adjustment rate of
0.025%. The maximum adjustment plus/minus is 0.25%. One twelfth (1/12) of this
adjustment is applied each month to the average daily net assets of the
Portfolio over the entire performance period. This adjustment shall be based on
a rolling period of up to and including the most recent 36 months. Portfolio
performance shall be total return as computed under Rule 482 under the
Securities Act of 1933.
The Portfolio's investment advisory agreement with the Adviser remains in
effect until February 28, 1997; it may be continued indefinitely thereafter so
long as such continuance is approved at least annually (i) by the vote of a
majority of the Trustees of the Portfolio who are not interested persons of the
Portfolio cast in person at a meeting specifically called for the purpose of
voting on such approval and (ii) by the Board of Trustees of the Portfolio or by
vote of a majority of the outstanding voting securities of the Portfolio. The
agreement may be terminated at any time without penalty on sixty days' written
notice by the Board of Trustees of either party or by vote of the majority of
the outstanding voting securities of the Portfolio, and the agreement will
terminate automatically in the event of its assignment. The agreement provides
that the Adviser may render services to others. The agreement also provides
that, in the absence of willful misfeasance, bad faith, gross negligence or
reckless disregard of obligations or duties under the agreement on the part of
the Adviser, the Adviser shall not be liable to the Portfolio or to any
shareholder for any act or omission in the course of or connected with rendering
services or for any losses sustained in the purchase, holding or sale of any
security.
MANAGER, SPONSOR AND ADMINISTRATOR
Eaton Vance, its affiliates and its predecessor companies have been managing
assets of individuals and institutions since 1924 and managing investment
companies since 1931. They maintain a large staff of experienced fixed-income
and equity investment professionals to service the needs of their clients. The
fixed-income division focuses on all kinds of taxable investment-grade and
high-yield securities, tax-exempt investment-grade and high-yield securities,
and U.S. Government securities. The equity division, with a staff of
approximately 30 professionals, covers stocks ranging from blue chip to emerging
growth companies. Eaton Vance manages more than 150 mutual funds, as well as
retirement plans, pension funds and endowments.
See "Management of the Fund and the Portfolio" in the Prospectus for a
description of the services Eaton Vance performs as the manager and sponsor of
the Fund and the administrator of the Portfolio. Under Eaton Vance's management
contract with the Fund and administration agreement with the Portfolio, Eaton
Vance receives a monthly management fee from the Fund and a monthly
administration fee from the Portfolio. Each fee is computed by applying the
annual asset rate applicable to that portion of the average daily net assets of
the Fund or the Portfolio throughout the month in each Category as indicated
below:
ANNUAL
CATEGORY AVERAGE DAILY NET ASSETS ASSET RATE
- ---------- ------------------------ ----------
1 less than $500 million ................................ 0.25%
2 $500 million but less than $1 billion ................. 0.23333
3 $1 billion but less than $1.5 billion ................. 0.21667
4 $1.5 billion but less than $2 billion ................. 0.20
5 $2 billion but less than $3 billion ................... 0.18333
6 $3 billion and over ................................... 0.1667
For the management fees that the Fund paid to Eaton Vance, see "Fees and
Expenses" in Part II.
Eaton Vance's management contract with the Fund and its administration
agreement with the Portfolio will remain in effect from year to year, so long as
such continuance is approved annually by the vote of a majority of the Board of
the Fund or the Trustees of the Portfolio, as the case may be. Each agreement
may be terminated at any time without penalty on sixty days' written notice by
the relevant Board 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. Each agreement
was initially approved by the Boards, including the non-interested members, of
the Trust or the Portfolio.
To the extent necessary to comply with U.S. tax law, Eaton Vance has
employed IBT Trust Company (Cayman) Ltd. to serve as the sub-administrator of
the Portfolio. The sub-administrator maintains the Portfolio's principal office
and certain of its records and provides administrative assistance in connection
with meetings of the Portfolio's Trustees and interestholders.
The Fund and the Portfolio, as the case may be, will each be responsible for
all of its respective costs and expenses not expressly stated to be payable by
an Adviser under the investment advisory agreement, by Eaton Vance under the
management contract or the administration agreement, or by the Principal
Underwriter under the distribution agreement. Such costs and expenses to be
borne by each of the Fund or the Portfolio, as the case may be, include, without
limitation: custody and transfer agency fees and expenses, including those
incurred for determining net asset value and keeping accounting books and
records; expenses of pricing and valuation services; the cost of share
certificates; membership dues in investment company organizations; brokerage
commissions and fees; fees and expenses of registering under the securities
laws; expenses of reports to shareholders and investors; proxy statements, and
other expenses of shareholders' or investors' meetings; insurance premiums,
printing and mailing expenses; interest, taxes and corporate fees; legal and
accounting expenses; compensation and expenses of Directors or Trustees not
affiliated with Eaton Vance or an Adviser; distribution and service fees payable
by the Fund under its Rule 12b-1 distribution plan; and investment advisory,
management and administration fees. The Fund and the Portfolio, as the case may
be, will also each bear expenses incurred in connection with any litigation in
which the Fund or the Portfolio, as the case may be, is a party and any legal
obligation to indemnify its respective officers and Directors or Trustees with
respect thereto, to the extent not covered by insurance.
Eaton Vance and EV are both wholly-owned subsidiaries of EVC. BMR is a
wholly-owned subsidiary of Eaton Vance. Eaton Vance and BMR are both
Massachusetts business trusts, and EV is the trustee of Eaton Vance and BMR. The
Directors of EV are Landon T. Clay, M. Dozier Gardner, James B. Hawkes and
Benjamin A. Rowland, Jr. The Directors of EVC consist of the same persons and
John G.L. Cabot and Ralph Z. Sorenson. Mr. Clay is chairman, Mr. Gardner is vice
chairman and Mr. Hawkes is president and chief executive officer of EVC, Eaton
Vance, BMR and EV. All of the issued and outstanding shares of Eaton Vance and
of EV are owned by EVC. All of the issued and outstanding shares of BMR are
owned by Eaton Vance. All shares of the outstanding Voting Common Stock of EVC
are deposited in a Voting Trust which expires December 31, 1997, the Voting
Trustees of which are Messrs. Clay, Gardner, Hawkes and Rowland and Thomas E.
Faust, Jr. The Voting Trustees have unrestricted voting rights for the election
of Directors of EVC. All of the outstanding voting trust receipts issued under
said Voting Trust are owned by certain of the officers of Eaton Vance and BMR
who are also officers or officers and Directors of EVC and EV. As of January 1,
1997, Messrs. Clay, Gardner and Hawkes each owned 24% of such voting trust
receipts and Messrs. Rowland and Faust owned 15% and 13%, respectively, of such
voting trust receipts. Mr. Otis, who is an officer, Director or Trustee of the
Fund and/or the Portfolio, is a member of the EVC, Eaton Vance, BMR and EV
organizations. Messrs. Murphy, O'Connor, Richardson and Woodbury and Ms. Sanders
are officers of the Fund and/or the Portfolio, and are also members of the Eaton
Vance, BMR and/or EV organizations. Eaton Vance will receive the fees paid under
the management agreement and its wholly-owned subsidiary, Eaton Vance
Distributors, Inc., as Principal Underwriter, will receive its portion of the
sales charge on shares of the Fund sold through investment dealers.
EVC owns all of the stock of Energex Energy Corporation, which engages in
oil and gas exploration and development. In addition, Eaton Vance owns all the
stock of Northeast Properties, Inc., which is engaged in real estate investment.
EVC also owns 24% of the Class A shares of Lloyd George Management (B.V.I.)
Limited, a registered investment adviser. EVC owns all the stock of Fulcrum
Management, Inc. and MinVen, Inc., which are engaged in precious metal mining
venture investment and management. EVC, BMR, Eaton Vance and EV may also enter
into other businesses.
Eaton Vance mutual funds are distributed by the Principal Underwriter both
within the United States and offshore. The Principal Underwriter believes that
an investment professional can provide valuable services to you to help you
reach your investment goals. Meeting investment goals requires time, objectivity
and investment savvy. Before making an investment recommendation, a
representative can help you carefully consider your short- and long-term
financial goals, your tolerance for investment risk, your investment time frame,
and other investments you may already own. Your professional investment
representatives are knowledgeable about financial markets, as well as the wide
range of investment opportunities available. A representative can provide you
with tailored financial advice and help you decide when to buy, sell or
persevere with your investments.
CUSTODIAN
IBT acts as custodian for the Fund and the Portfolio. IBT has the custody of
all cash and securities of the Fund and all securities of the Portfolio
purchased in the United States, and its subsidiary, IBT Fund Services (Canada)
Inc., 1 First Canadian Place, King Street West, Toronto, Ontario, Canada,
maintains the Fund's and the Portfolio's general ledger and computes the daily
net asset value of interests in the Portfolio and the net asset value of shares
of the Fund. In such capacities, IBT attends to details in connection with the
sale, exchange, substitution, transfer or other dealings with the Fund's and the
Portfolio's respective investments, receives and disburses all funds, and
performs various other ministerial duties upon receipt of proper instructions
from the Fund and the Portfolio, respectively.
Portfolio securities, if any, purchased by the Portfolio in the U.S. are
maintained in the custody of IBT or of other domestic banks or depositories.
Portfolio securities purchased outside of the U.S. are maintained in the custody
of foreign banks and trust companies that are member of IBT's Global Custody
Network, or foreign depositories used by such foreign banks and trust companies.
Each of the domestic and foreign custodial institutions holding portfolio
securities has been approved by the Board of Trustees of the Portfolio in
accordance with regulations under the 1940 Act.
IBT charges fees which are competitive within the industry. These fees for
the Portfolio relate to (1) custody services based upon a percentage of the
market values of Portfolio securities; (2) bookkeeping and valuation services
provided at an annual rate; (3) activity charges, primarily the result of the
number of portfolio transactions; and (4) reimbursement of out-of-pocket
expenses. These fees are then reduced by a credit for cash balances of the
Portfolio at the custodian equal to 75% of the 91-day U.S. Treasury Bill auction
rate applied to the Portfolio's average daily collected balances. The portion of
the fee for the Fund related to bookkeeping and pricing services is based upon a
percentage of the Fund's net assets and the portion of the fee related to
financial statement preparation is a fixed amount. Landon T. Clay, a Director of
EVC and an officer, Trustee or Director of other entities in the Eaton Vance
organization, owns approximately 13% of the voting stock of Investors Financial
Services Corp., the holding company parent of IBT. Management believes that such
ownership does not create an affiliated person relationship between the Fund or
Portfolio and IBT under the 1940 Act.
IBT also provides services in connection with the preparation of shareholder
reports and the electronic filing of such reports with the Commission for which
it receives a separate fee.
SERVICE FOR WITHDRAWAL
The Transfer Agent will send to the shareholder regular monthly or quarterly
payments of any permitted amount designated by the shareholder (see "Eaton Vance
Shareholder Services - Withdrawal Plan" in the Fund's current Prospectus) based
upon the value of the shares held. The checks will be drawn from share
redemptions and hence, although they are a return of principal may require the
recognition of taxable gain or loss. Income dividends and capital gain
distributions in connection with withdrawal 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. Either the shareholder,
the Fund's transfer agent or the Principal Underwriter will be able to terminate
the withdrawal plan at any time without penalty.
DETERMINATION OF NET ASSET VALUE
The net asset value per share is computed daily, Monday through Friday, as
of the close of regular trading on the New York Stock Exchange (the "Exchange"),
which is currently 4:00 p.m., Eastern time, except that the net asset value will
not be computed on the following holidays: New Year's Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. The Portfolio's net asset value also will be determined on any
day in which there is sufficient trading in its portfolio securities that the
net asset value might be affected materially, but only if on any such day the
Portfolio is required to sell or redeem shares. The net asset value per share is
computed by dividing the value of the securities held by the Portfolio plus any
cash or other assets (including any accrued interest and dividends receivable
but not yet received) minus all liabilities (including accrued expenses) by the
total number of Portfolio shares outstanding at such time.
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.
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 share are computed as of such times. Occasionally, events
affecting the value of foreign securities may occur between such times and the
close of the Exchange which will not be reflected in the computation of the
Portfolio's net asset value (unless the Portfolio deems that such events would
materially affect its net asset value, in which case an adjustment would be made
and reflected in such computation). Foreign securities and currency held by the
Portfolio will be valued in U.S. dollars; such values will be computed by the
custodian based on foreign currency exchange rate quotations.
Each investor in the Portfolio, including the Fund, may add to or reduce its
investment in the Portfolio on each day the Exchange is open for trading
("Portfolio Business Day") as of the close of regular trading on the Exchange.
The 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 represents that investor's share of
the aggregate interests in the Portfolio on such prior day. Any additions or
withdrawals, which are to be effected on that day, will then be effected. Each
investor's percentage of the aggregate interests 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
regular trading on the Exchange (normally 4:00 p.m., New York time), on such 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 effected on such
day, and (ii) the denominator of which is the aggregate net asset value of the
Portfolio as of the close of such trading on such 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 by all investors in the Portfolio. The percentage so
determined will then be applied to determine the value of the investor's
interest in the Portfolio for the current Portfolio Business Day.
INVESTMENT PERFORMANCE
Average annual total return is determined by multiplying a hypothetical
initial purchase order of $1,000 by the average annual compound rate of return
(including capital appreciation/depreciation, and dividends and distributions
paid and reinvested) for the stated period and annualizing the result. The
calculation assumes that all distributions are reinvested at net asset value on
the reinvestment dates during the period, and either (i) the deduction of the
maximum sales charge from the initial $1,000 purchase order or (ii) a complete
redemption of the investment and, if applicable, the deduction of the CDSC at
the end of the period.
Total return may be compared to relevant indices, such as the Consumer Price
Index and various domestic and foreign securities indices, such as the Standard
& Poor's Index 500 Stock Index. In addition, the Fund's total return may be
compared to indices available through Lipper Analytical Services, Inc. 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.
Information used in advertisements and in materials furnished to present or
prospective shareholders may include statistics, data and performance studies
prepared by independent organizations (e.g. Ibbotson Associates, Standard &
Poor's Ratings Group, Merrill Lynch Private Client Group, Bloomberg, L.P., Dow
Jones & Company, Inc., and the Federal Reserve Board) or included in various
publications (e.g. The Wall Street Journal, Barron's and The Decade: Wealth of
Investments in U.S. Stocks, Bonds, Bills & Inflation) 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. From time to time, evaluations of the
Fund's performance or ranking of mutual funds (which include the Fund) made by
independent sources (e.g., Lipper Analytical Services, Inc., CDA/Weisenberger
and Morningstar, Inc.) 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 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 Fund 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 Fund 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
See also "Distribution and Taxes" in the Fund's current Prospectus.
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 all of its net investment income
and net realized capital gains in accordance with the timing requirements
imposed by the Code, so as to avoid any federal income or excise tax on the
Fund. 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 satisfy them. The Portfolio will allocate
at least annually among its investors, including the Fund, each investor's
distributive share of the Portfolio's net investment income, net realized
capital gains, and any other items of income, gain, loss, deduction or credit.
The Portfolio will make allocations to the Fund in 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, the Fund
will be deemed (i) to own its proportionate share of each of the assets of the
Portfolio and (ii) to be entitled to the gross income of the Portfolio
attributable to such share.
In order to avoid federal excise tax, 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 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 any available capital loss
carryforwards, and 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. Further, 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 is liable for any income, corporate excise or franchise tax in the
Commonwealth of Massachusetts or State of Maryland.
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 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 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. Positions of the
Portfolio in securities and offsetting options, futures or forward contracts may
be treated as "straddles" and be subject to other special rules that may, upon
allocation of the Portfolio's income, gain or loss to the Fund, 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 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 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.
The Portfolio will allocate at least annually to the Fund and its other
investors their respective distributive shares of any net investment income and
net capital gains which have been recognized for federal income tax purposes
(including unrealized gains at the end of the Portfolio's fiscal year on certain
options and futures transactions that are required to be marked-to-market). Such
amounts will be distributed by the Fund to its shareholders in cash or
additional shares, as they elect. Shareholders of the Fund will be advised of
the nature of the distributions.
Distributions by the Fund of the excess of net long-term capital gains over
short-term capital losses earned by the Portfolio and allocated to the Fund,
taking into account any capital loss carryforwards that may be available to the
Fund in years after its first taxable year, are taxable to shareholders of the
Fund as long-term capital gains, whether received in cash or in additional
shares and regardless of the length of time their shares have been held. Certain
distributions, if declared in October, November or December and paid the
following January, will be taxed to shareholders as if received on December 31
of the year in which they are declared.
Any loss realized upon the redemption or exchange of shares 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.
The Fund will not be subject to Massachusetts or Maryland income, corporate
excise or franchise taxation as long as it qualifies as a RIC under the Code.
Special tax rules apply to Individual Retirement Accounts ("IRAs") and
shareholders investing through IRAs should consult their tax advisers for more
information. Amounts paid by the Fund to individuals and certain other
shareholders who have not provided the Fund with their correct taxpayer
identification number and certain certifications required by the Internal
Revenue Service (the "IRS"), as well as shareholders with respect to whom the
Fund has received notification from the IRS or a broker, may be subject to
"backup" withholding of federal income tax from the Fund's taxable dividends and
distributions and the proceeds of redemptions (including repurchases and
exchanges) at a rate of 31%. An individual's taxpayer identification number is
generally his or her social security number.
Non-resident alien individuals, foreign corporations and certain other
foreign entities generally will be subject to a U.S. withholding tax at a rate
of 30% on the Fund's distributions from its ordinary income and the excess of
its net short-term capital gain over its net long-term capital loss, unless the
tax is reduced or eliminated by an applicable tax treaty. Distributions from the
excess of the Fund's net long-term capital gain over its net short-term capital
loss received by such shareholders and any gain from the sale or other
disposition of shares of the Fund generally will not be subject to U.S. federal
income taxation, provided that non-resident alien status has been certified by
the shareholder. Different U.S. tax consequences may result if the shareholder
is engaged in a trade or business in the United States, is present in the United
States for a sufficient period of time during a taxable year to be treated as a
U.S. resident, or fails to provide any required certifications regarding status
as a non-resident alien investor. Foreign shareholders should consult their tax
advisers regarding the U.S. and foreign tax consequences of an investment in the
Fund.
The foregoing discussion does not 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 or 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 Adviser.
The Adviser places the portfolio security transactions of the Portfolio and
of certain other accounts managed by the Adviser for execution with many
broker-dealer firms. The Adviser uses its best efforts to obtain execution of
portfolio transactions at prices which are advantageous to the Portfolio and
(when a disclosed commission is being charged) at reasonably competitive
commission rates. In seeking such execution, the Adviser will use its best
judgment in evaluating the terms of a transaction, and will give consideration
to various relevant factors, including without limitation the size and type of
the transaction, the general execution and operational capabilities of the
broker-dealer, the nature and character of the market for the security, the
confidentiality, speed and certainty of effective execution required for the
transaction, the reputation, reliability, experience and financial condition of
the broker-dealer, the value and quality of services rendered by the
broker-dealer in other transactions, and the reasonableness of the commission,
if any. Transactions on stock exchanges and other agency transactions involve
the payment by the Portfolio of negotiated brokerage commissions. Such
commissions vary among different broker-dealer firms, and a particular
broker-dealer may charge different commissions according to such factors as the
difficulty and size of the transaction and the volume of business done with such
broker-dealer. Transactions in foreign securities usually involve the payment of
fixed brokerage commissions, which are generally higher than those in the United
States. There is generally no stated commission in the case of securities traded
in the over-the-counter markets, but the price paid or received by the Portfolio
usually includes an undisclosed dealer markup or markdown. In an underwritten
offering the price paid by the Portfolio includes a disclosed fixed commission
or discount retained by the underwriter or dealer. Although commissions paid on
portfolio transactions will, in the judgment of the Adviser, be reasonable in
relation to the value of the services provided, commissions exceeding those
which another firm might charge may be paid to broker-dealers who were selected
to execute transactions on behalf of the Portfolio and the Adviser's other
clients in part for providing brokerage and research services to the Adviser.
As authorized in Section 28(e) of the Securities Exchange Act of 1934, a
broker or dealer who executes a portfolio transaction on behalf of the Portfolio
may receive a commission which is in excess of the amount of commission another
broker or dealer would have charged for effecting that transaction if the
Adviser determines in good faith that such commission was reasonable in relation
to the value of the brokerage and research services provided. This determination
may be made on the basis of either that particular transaction or on the basis
of overall responsibilities which the Adviser and its affiliates have for
accounts over which it exercises investment discretion. In making any such
determination, the Adviser will not attempt to place a specific dollar value on
the brokerage and research services provided or to determine what portion of the
commission should be related to such services. Brokerage and research services
may include advice as to the value of securities, the advisability of investing
in, purchasing or selling securities, and the availability of securities or
purchasers or sellers of securities; furnishing analyses and reports concerning
issuers, industries, securities, economic factors and trends, portfolio strategy
and the performance of accounts; and effecting securities transactions and
performing functions incidental thereto (such as clearance and settlement); and
the "Research Services" referred to in the next paragraph.
It is a common practice 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, the Adviser may receive Research Services from broker-dealer firms
with which the Adviser places the portfolio transactions of the Portfolio and
from third parties with which these broker-dealers have arrangements. These
Research Services may include such matters as general economic and market
reviews, industry and company reviews, evaluations of securities and portfolio
strategies and transactions and recommendations as to the purchase and sale of
securities and other portfolio transactions, financial, industry and trade
publications, news and information services, pricing and quotation equipment and
services, and research oriented computer hardware, software, data bases and
services. Any particular Research Service obtained through a broker-dealer may
be used by the Adviser in connection with client accounts other than those
accounts which pay commissions to such broker-dealer. Any such Research Service
may be broadly useful and of value to the Adviser in rendering investment
advisory services to all or a significant portion of its clients, or may be
relevant and useful for the management of only one client's account or of a few
clients' accounts, or may be useful for the management of merely a segment of
certain clients' accounts, regardless of whether any such account or accounts
paid commissions to the broker-dealer through which such Research Service was
obtained. The advisory fee paid by the Portfolio is not reduced because the
Adviser receives such Research Services. The Adviser evaluates the nature and
quality of the various Research Services obtained through broker-dealer firms
and attempts to allocate sufficient commissions to such firms to ensure the
continued receipt of Research Services which the Adviser believes are useful or
of value to it in rendering investment advisory services to its clients.
Subject to the requirement that the Adviser shall use its best efforts to
seek to execute portfolio security transactions of the Portfolio at advantageous
prices and at reasonably competitive commission rates or spreads, the Adviser is
authorized to consider as a factor in the selection of any broker-dealer firm
with whom Portfolio orders may be placed the fact that such firm has sold or is
selling shares of the Fund or of other investment companies sponsored by Eaton
Vance. This policy is not inconsistent with a rule of the 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 the Adviser or its
affiliates. The Adviser will attempt to allocate equitably portfolio
transactions among the Portfolio and the portfolios of its other investment
accounts whenever decisions are made to purchase or sell securities by the
Portfolio and one or more of such other accounts simultaneously. In making such
allocations, the main factors to be considered are the respective investment
objectives of the Portfolio and such other accounts, the relative size of
portfolio holdings of the same or comparable securities, the availability of
cash for investment by the Portfolio and such accounts, the size of investment
commitments generally held by the Portfolio and such accounts and the opinions
of the persons responsible for recommending investments to the Portfolio and
such accounts. While this procedure 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 Portfolio that the benefits available from
the Adviser's organization outweigh any disadvantage that may arise from
exposure to simultaneous transactions.
OTHER INFORMATION
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 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.
The Portfolio's Declaration of Trust provides that the Portfolio will
terminate 120 days after the complete withdrawal of the Fund or any other
investor in the Portfolio, unless either the remaining investors, by unanimous
vote at a meeting of such investors, or a majority of the Trustees of the
Portfolio, by written instrument consented to by all investors, agree to
continue the business of the Portfolio. This provision is consistent with
treatment of the Portfolio as a partnership for federal income tax purposes.
The right to redeem shares of the Fund can be suspended and the payment of
the redemption price deferred when the Exchange is closed (other than for
customary weekend and holiday closings), during periods when trading on the
Exchange is restricted as determined by the Commission, or during any emergency
as determined by the Commission which makes it impracticable for the Portfolio
to dispose of its securities or value its assets, or during any other period
permitted by order of the Commission for the protection of investors.
<PAGE>
Appendix
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EATON VANCE
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MUTUAL FUNDS
[medical graphic]
EATON VANCE
WORLDWIDE HEALTH
SCIENCES FUNDS
Participate in the Accelerating Revolution in Global Health Sciences
EV TRADITIONAL WORLDWIDE HEALTH SCIENCES FUND ("A")
EV MARATHON WORLDWIDE HEALTH SCIENCES FUND ("B")
[globe graphic]
EATON VANCE
GLOBAL MANAGEMENT--GLOBAL DISTRIBUTION
<PAGE>
[logo]
EATON VANCE
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MUTUAL FUNDS
THE CASE FOR HEALTH SCIENCES
THE ACCELERATING REVOLUTION
In no other discipline has innovation been more dramatic--or critical to human
existence--than in the field of health sciences, which embraces both medical
research and health care. Indeed, the health sciences industry is in the midst
of a revolution that began in this century and is accelerating as we approach
its close.
o The discovery of penicillin in the late 1920s was the catalyst for the modern
health care revolution. That discovery fostered the realization that disease
could be cured with drugs and was the foundation for today's
multi-billion-dollar pharmaceutical industry.
o More recently, technological breakthroughs like computerized axial tomography
(CAT scans), magnetic resonance imaging (MRI) and ultrasound have
revolutionized diagnostic capabilities, while heart-lung machines, kidney
dialysis and pacemakers are among the many devices that complement drugs and
surgery in treating illness.
o The discovery of the structure of DNA and the cracking of the genetic code
are perhaps the most notable breakthroughs. Not only have they produced
exciting recombinant/cloning therapies, they have opened new research
frontiers that are transforming health sciences even today.
o Today, all over the world, new drugs and treatments are in some stage of
development. Within the next few years, we will witness some startling
discoveries and, within many of our lifetimes, the health sciences industry
will achieve breakthroughs, so revolutionary, that none of us now can even
imagine.
The large and small companies engaged in the pursuit of tomorrow's innovations
(and those who invest in them) have the potential to profit handsomely.
- --------------------------------------------------------------------------------
THE HEALTH SCIENCES UNIVERSE
[medical graphic]
The health sciences universe includes companies principally engaged in the
development, production or distribution of products and services related to
health care.
Biotechnology: Companies producing or planning to produce diagnostic and
therapeutic drugs using recombinant and molecular biology and rational drug
design platforms to treat and cure diseases.
Pharmaceuticals: Companies involved in large-scale, global discovery and
development of innovative prescription drugs and diagnostics,
over-the-counter products, delivery systems, nutrition, animal health and
sometimes chemical and agricultural products.
[microscope graphic]
Diagnostics: Companies that develop or maintain sophisticated diagnostic
equipment such as CAT scanners and Magnetic Resonance Imaging, as well as
urological and serological assays.
Managed Health Care: Operations of investor-owned hospital chains (including
acute care psychiatric hospitals), nursing centers, health maintenance
organizations, and rehabilitation clinics which seek to deliver hospital care
on an efficient cost basis.
Medical Equipment and Supplies: Companies engaged in the manufacture of
inpatient and outpatient medical (and dental), surgical, laboratory and
diagnostic products (ranging from cotton swabs through kidney dialysis
equipment to CAT scanners).
[beakers with solution graphic]
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- --------------------------------------------------------------------------------
FUND SHARES ARE NOT INSURED BY THE FDIC AND ARE NOT DEPOSITS OR OTHER
OBLIGATIONS OF, OR GUARANTEED BY, ANY DEPOSITORY INSTITUTION. SHARES ARE
SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL INVESTED.
- --------------------------------------------------------------------------------
<PAGE>
WORLD DEMOGRAPHICS ARGUE FOR A
COMING EXPLOSION IN HEALTH CARE
The health sciences industry knows no borders or political frontiers. In the
U.S. and the developed countries of Europe and Asia, as well as in emerging
countries, demographics are at work that should push demand steadily upward.
IN THE MATURE ECONOMIES
The mature economies of the world house 14% of the earth's population, yet
account for 80% of all health care expenditures. What's more, individuals over
age 65 account for a substantially greater proportion of spending than younger
age groups, and that trend should continue as the populations of the world's
mature economies age.
Sources: PSMI International Data Bases; Central Intelligence Agency
o In 1900 in the U.S., for example, there were 3.1 million people age 65 or
older. By 1993, there were 32.8 million, or 10 times as many.*
o In the U.S., the 75-and-over age group is growing at the fastest pace, soon
to be replaced by those 85 and older. By the year 2050, it is projected that
the over-85 population will exceed 18 million people.*
* Source: U.S. Bureau of the Census
o The oldest of the "baby boomers" turned 50 in 1996. As this generation ages,
its demand for health care and, hence, its health care expenditures, should
escalate dramatically.
o Over the past two decades, health care expenditures have been increasing in
many countries throughout the world. In the U.S., for example, heath care
costs amounted to $884.2 billion in 1993, or 13.9% of Gross Domestic Product
(GDP), compared to only 5.9% of GDP in 1965.
Source: U.S. Department of Labor
AGING AMERICA
Population Growth 1900-2050
(in millions)
85 and older 65 and older
1900 0.1 3.1
1920 0.2 4.9
1940 0.4 9.0
1960 0.9 16.7
1980 2.2 25.7
1990 3.0 30.0
2000 4.3 35.3
2010 5.7 40.1
2020 6.5 53.3
2030 8.4 70.2
2050 18.2 78.9
Source: U.S. Bureau of the Census
IN THE EMERGING ECONOMIES
o Presently, the emerging markets account for 86% of the world's population,
but only 20% of global health care expenditures. But the potential lies in
how much they WILL spend. Where the per capita spending per year is $270 in
the west, it is only $15 in the emerging markets.
Sources: PSMI International Data Bases; Central Intelligence Agency
o It is estimated that over 10% of the emerging market population -- a consumer
group similar in size to the population of established economies -- can now
afford western prices. And the percentage will surely increase as
liberalization in these markets produces a growing middle class.
Source: Mehta and Isaly
ADVANCES CREATE DEMAND
Beyond demographics, the very innovations within the health sciences industry
create demand for products and services that improve our quality of life in a
highly cost-effective manner.
For example, if you were diagnosed with a peptic ulcer, surgery was the
accepted treatment. Then came Tagamet(TM), Zantac(TM) and Prilosec(TM).
Today, ulcers are more treatable than the common cold. (According to the
August 5, 1996 edition of FORTUNE, Zantac(TM) is the most successful drug
ever produced, generating over $27 billion in worldwide sales since it was
introduced in 1981.)
There are numerous unmet needs that the health sciences industry will seek to
answer in the future.
[Beakers with solutions graphic]
HISTORY OF STRONG PERFORMANCE
Although past performance cannot guarantee future results, over the past 10
years, the health and biotechnology sector has outperformed both the Standard &
Poor's 500 Index and the Morgan Stanley Capital International Index.
A HISTORY OF STRONG PERFORMANCE
HEALTH/BIOTECH FUNDS VERSUS WORLD MARKETS
Growth of $100, 12/31/85 - 6/30/96
MSCI S&P LIPPER HEALTH/
WORLD INDEX 500 BIOTECH FUNDS
1986 100 100 100
1987 142.800003 118.660004 116.599998
1988 166.729996 124.900002 117.650002
1989 206.669998 145.639999 132.160004
1990 242.210007 191.800003 191.080002
1991 202.199997 185.850006 232.880005
1992 240.550003 242.479996 398.51001
1993 229.339996 260.959991 329.130005
1994 284.440002 276.380005 344.709991
1995 312.170013 319.399994 422.700012
1996 376.820007 421.929993 611.02002
Sources: Lipper Analytical Services, Inc.; Standard & Poor's; MSCI.
The Lipper Health/Biotechnology Funds Average is composed of open-end mutual
funds that invest at least 65% of their equity portfolios in shares of companies
engaged in health care, medicine and biotechnology. The Standard & Poor's 500
Composite Index is an unmanaged index of 500 capitalization-weighted common
stocks and is commonly used as a measure of U.S. stock market performance. The
Morgan Stanley Capital International World Index is an unmanaged,
capitalization-weighted index composed of a sample of companies representative
of the market structure of 22 world markets, including the U.S., which are
generally open to foreign investments.
NOW EATON VANCE OFFERS YOU AN EASY, AFFORDABLE WAY TO PARTICIPATE IN THE GROWTH
POTENTIAL OF HEALTH SCIENCES ... THE EV WORLDWIDE HEALTH SCIENCES FUNDS.
THE CASE FOR
EV WORLDWIDE HEALTH SCIENCES FUNDS
INVESTMENT OBJECTIVE
The objective of the Eaton Vance Worldwide Health Sciences Funds is long-term
capital growth. The Funds seek to achieve their objective by investing in the
Worldwide Health Sciences Portfolio* (the "Portfolio"). The Portfolio is a
diversified, open-end investment company having the same investment objective as
the Funds.
* Formerly the Medical Research Investment Fund, Inc.
INVESTMENT STRATEGY
Recognizing that health sciences is truly a global industry and that knowledge
is not confined to any one region, the Funds' adviser, Mehta and Isaly Asset
Management, Inc., takes a worldwide investment perspective. Its current
investment strategy is...
o All investments are selected for their long-term potential.
o Generally, between 20% and 40% of the Portfolio assets are invested in 10 to
15 major pharmaceutical companies with market capitalizations greater than $2
billion. The selection of major companies is based on potential to increase
market share.
o The remaining 60% to 80% of assets are invested in 15 to 20 smaller
biotechnology and speciality health care companies. Selection is based on
Portfolio potential to achieve above-average growth.
o Portfolio holdings are distributed between the United States, Europe and the
Far East, which includes Australia.
o The goal is to achieve a high level of capital growth with controlled risk.
- --------------------------------------------------------------------------------
GEOGRAPHICAL ALLOCATION OF PORTFOLIO ASSETS
AS OF 7/31/96
WORLDWIDE DATASTREAM WORLD
HEALTH SCIENCES PORTFOLIO PHARMACEUTICALS INDEX
BIG CAP 42%* BIG CAP 94%*
FAR EAST 36% FAR EAST 29%
AMERICAS 16% AMERICAS 36%
EUROPE 48% EUROPE 35%
SMALLER CAP 56% SMALLER CAP 6%
FAR EAST 25% FAR EAST 27%
AMERICAS 48% AMERICAS 13%
EUROPE 27% EUROPE 60%
CASH: 2%
* market capitalization of $2 billion or more
In assembling the Portfolio, The Funds' adviser has focussed on smaller cap
companies, which account for two-thirds of all research being undertaken in the
worldwide health sciences industry. This weighting contrasts sharply with the
makeup of the Datastream World Pharmaceuticals Index, whose composition includes
94% large cap companies.
Source: Datastream; Mehta and Isaly
- --------------------------------------------------------------------------------
INVESTMENT UNIVERSE
According to a 1993 study by Hoffmann-La Roche (which the Funds' adviser
believes is the most current), the 20 largest research and development companies
in the world, with market capitalizations of $2 billion and up, had about 1,100
drugs in various stages of research. The small firms, of which there are
hundreds, had over 2,300 drugs in research. In other words, the smaller
companies are undertaking over two-thirds of the scientific research, and, in
the opinion of the Funds' adviser, this is where there is the greatest potential
for dramatic appreciation on investment.
FIRMS ARE EVALUATED DIFFERENTLY
o THE LARGE COMPANIES: Here, the Funds' adviser looks for future increase in
market share, which correlates well with the stock price.
o THE SMALLER COMPANIES: Here the focus is to look for "promise," -- for truly
innovate therapies that go beyond treating just the symptoms. The realization
of such promise will determine a company's future market share and so, just
as with the larger firms, will determine its future earnings and stock price.
All the new compounds (drugs) that will be on the market in the year 2000 are in
development now, and the Funds' investment adviser believes it knows about each
through its extensive investment research activities.
[hand holding test tube graphic]
THE CASE FOR
MEHTA AND ISALY ASSET MANAGEMENT, INC.
Mehta and Isaly Asset Management, Inc. (formerly G/A Capital Management, Inc.),
a New York-based investment advisory company founded in 1989, brings a unique
combination of scientific and financial expertise to the management of the
Funds. The firm includes 10 professional and 5 support staff who specialize in
pharmaceutical, biotechnology and health care analysis with a global
perspective.
At least four important differences distinguish Mehta and Isaly from other
investment management firms.
o First, all 10 professionals are analysts. The Funds' Portfolio averages 30
holdings at any one time. Probably no other management company has such a high
ratio of analysts to portfolio holdings.
o Second, four of the analysts hold Ph.D. degrees in scientific disciplines.
This means they are able to evaluate the viability of drugs and technologies
under development in the biotech sector.
o Third, analysts cover the health sciences industry from a global perspective.
This enables the firm to "buy the best there is," wherever it is. Every
portfolio acquisition is examined in a worldwide, not a country-by-country,
perspective.
o Fourth, the Portfolio is managed to remain fully invested. Reason:there are
always exciting opportunities; the question is which ones, and at which time,
will best serve the Portfolio's objective?
In addition to serving as investment adviser to the Funds, Mehta and Isaly
provides advice to 15 pharmaceutical companies worldwide and 80 institutional
investors in the U.S., Europe and Japan. Total assets under management are over
$250 million.
HOW THE ADVISER SEEKS TO CONTROL RISK
In Mehta and Isaly's view, there are two principal forms of risk associated with
investment in health sciences:technological risk and financial risk.
While there is a large component of chance in technological risk, (i.e.,
assessing the viability of products, therapies and technologies under
development) the firm strives to reduce that risk by carrying out an intensive
valuation process. This is where the team of scientific analysts proves
invaluable.
Mehta and Isaly focuses on 11 smaller-company research and therapeutic
subsectors. Then, working across the global spectrum of firms engaged in the
same pursuits, it evaluates competition, market potential and probabilities of
achieving a major breakthrough.
In addition, Mehta and Isaly seeks to control financial risk by diversifying the
Portfolio both geographically and by market capitalization, as well as thorough
painstaking financial analysis and field trips to targeted Portfolio companies.
- --------------------------------------------------------------------------------
HOW PORTFOLIO HOLDINGS ARE SELECTED
1) Mehta and Isaly keeps 300 companies on computer file
o 200 based in United States
o 100 based in Europe and Far East
2) Staff does initial screening on products and valuation
3) 200 companies are chosen for firm's assignment list
o Staff meets with company management
o Acquires in-depth perspective
o Does valuation screens
o Evaluates products and therapies
o Assesses markets
o Determines financial position
4) List is further narrowed to 100 companies
o Intensive contact with management
5) 25 to 30 companies are selected for Portfolio
o Staff closely monitors each one
- --------------------------------------------------------------------------------
ABOUT EATON VANCE
With a history that dates to 1924, Eaton Vance is a Boston-based investment
management firm. The company serves as the Funds' sponsor and administrator.
Eaton Vance features...
o Over seven decades of investment management expertise in U.S. equities
o More than 25 professionals specializing in security analysis and equity
management
o Over $17 billion in assets under management
o More than 150 mutual funds, as well as retirement plans, pension funds and
endowments
ABOUT RISK
Eaton Vance and Mehta and Isaly believe opportunities for long-term growth of
capital are excellent for many health sciences companies. The Funds, however,
should not be considered a complete investment program due to lack of industry
diversification.
The health sciences industry generally is subject to substantial government
regulation. Accordingly, changes in government policies or regulation could have
a material effect on the demand for products and services offered by health
science companies and, therefore, could affect the performance of the Funds.
Enforcement of intellectual property laws will effect the value of many
companies. It should be recognized that foreign securities and markets in which
the Portfolio invests pose different and greater risks than those customarily
associated with domestic securities and their markets. Furthermore, investors
should consider other risks associated with a portfolio which contains
international securities, including fluctuations in foreign currency exchange
rates and political and economic instability. In addition, the Portfolio may
invest up to 20% of its total assets in below investment grade securities and up
to 100% of its assets in the securities of emerging companies. Emerging
companies, especially foreign emerging companies, may not be as liquid as larger
domestic companies. The net asset value of Fund shares will fluctuate over time
and investors may experience losses.
SHAREHOLDER SERVICES
o Investment minimum, $1,000; subsequent investments of $50 or more.
o Reinvest fund distributions automatically.
o Free exchange of your shares for those of other Eaton Vance Funds (with the
same distribution plan) with the ease of a phone call. The exchange privilege
may be changed or discontinued at any time.
o Bank draft investing for automatic monthly or quarterly investments from a
checking account.
o Tax-sheltered retirement plans. Purchase shares of the Funds in an Individual
Retirement Account, 401(k) Plan, Pension or Profit-Sharing Plan or a 403(b)
Retirement Plan.
o Systematic withdrawal plans for automatic periodic withdrawals from a fund
account.
Withdrawals from Marathon Fund outside an allowed systematic withdrawal plan may
be subject to a contingent deferred sales charge. See prospectus for details.
IT PAYS TO SEEK PROFESSIONAL ADVICE
You have crucial investment goals -- your children's education, a comfortable
retirement, financial independence. Or all three. Meeting those goals requires
time, objectivity and investment savvy. Most people do not hesitate to consult a
professional for advice in other important areas of their lives. With your
financial future at stake, why not seek the help of a professional investment
representative! Before making an investment recommendation, your representative
can help you carefully consider --
o your short- and long-term financial goals
o your tolerance for investment risk
o your investment time frame
o the other investments you may already own
Your investment representative is knowledgeable about financial markets, as well
as the wide range of investment opportunities available. Your representative can
help you decide when to buy, sell or persevere with your investments. With your
professional investment representative, you have someone you can depend on for
tailored financial advice -- today, and during the years to come.
Take a closer look at the Eaton Vance Worldwide Health Sciences Funds. We think
you'll agree they represent an exciting global investment opportunity. Your
professional investment adviser and Eaton Vance are there to help you capture
the growth potential of the world's health sciences industry.
For more complete information about EV Marathon Worldwide Health Siences Fund,
EV Traditional Worldwide Health Sciences Fund or any other Eaton Vance fund,
including distribution plans, charges and expenses, please write or call your
financial adviser for a prospectus(es). Read the prospectus(es) carefully before
you invest or send money. The Funds' objective and certain policies are
nonfundamental and may be changed without shareholder approval. The Funds are
intended for long-term investors and are not meant to be a complete investment
program.
Ask your investment adviser how EV Marathon Worldwide Health Sciences Fund or EV
Traditional Worldwide Health Sciences Fund, Inc. might fit into your portfolio.
[logo]
EATON VANCE
- --------------
MUTUAL FUNDS
(C) 1996 EATON VANCE DISTRIBUTORS. INC., 24 Federal Street, Boston, MA 02110
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EV TRADITIONAL WORLDWIDE HEALTH
SCIENCES FUND, INC.
FEES AND EXPENSES
Through August 31, 1996, the Fund invested directly in securities rather
than investing in the Portfolio. In addition, some current service providers and
some fee rates differ from the providers and rates in effect prior to August 31,
1996.
ADVISER
During the fiscal years ended August 31, 1996 and 1995, the Fund paid the
Adviser $350,234 and $138,826, respectively, in advisory fees. The Adviser
received advisory fees of $121,553 during the fiscal year ended August 31, 1994
and pursuant to the expense limitation previously in effect, the Adviser
reimbursed $16,868 during such period.
MANAGER AND ADMINISTRATOR
The prior administrator (manager) of the Fund was paid $114,411 and $58,707,
respectively, for its services during the fiscal years ended August 31, 1996 and
1995.
DISTRIBUTION PLAN
Pursuant to the Distribution Plan in effect during the fiscal years ended
August 31, 1996, the Fund paid $90,449 in 12b-1 fees to the prior distributor.
PRINCIPAL UNDERWRITER
The Fund has authorized EVD to act as its agent in repurchasing shares at
the rate of $2.50 for each repurchase transaction handled by EVD. EVD estimates
that the expenses incurred by it in acting as repurchase agent for the Fund will
exceed the amounts paid therefor by the Fund. No fees have been paid to date.
BROKERAGE
During the fiscal years ended August 31, 1996, 1995, and 1994, the Fund paid
$184,676, $29,541 and $40,651, respectively, in brokerage commissions.
DIRECTORS AND TRUSTEES
The fees and expenses of those Directors of the Fund and Trustees of the
Portfolio who are not members of the Eaton Vance organization (the noninterested
Directors and Trustees) are paid by the Fund and the Portfolio, respectively.
(Board members who are members of the Eaton Vance organization receive no
compensation from the Fund or the Portfolio.) For the fiscal year ending August
31, 1997, it is estimated that the noninterested Directors and Trustees of the
Fund and the Portfolio will receive the following compensation in such
capacities, and during the year ended September 30, 1996, the noninterested
Directors of the Fund and Trustees of the Portfolio earned the following
compensation in their capacities as Trustees of the funds in the Eaton Vance
fund complex(1):
ESTIMATED ESTIMATED
AGGREGATE AGGREGATE TOTAL COMPENSATION
COMPENSATION COMPENSATION FROM TRUST AND
NAME FROM FUND FROM PORTFOLIO FUND COMPLEX
- ---- --------- -------------- ------------
Donald R. Dwight ....... $88 $256 $142,500(2)
Samuel L. Hayes, III ... 79 325 153,750(3)
Norton H. Reamer ....... 78 305 142,500
John L. Thorndike ...... 82 338 147,500
Jack L. Treynor ........ 88 318 147,500
- ----------
(1) The Eaton Vance fund complex consists of 228 registered investment companies
or series thereof.
(2) Includes $42,500 of deferred compensation.
(3) Includes $37,500 of deferred compensation.
For the year ending August 31, 1996, the Directors of the Fund were Dr.
John J. Maggio, Philip C. Smith and Dr. Eugene E. Weise, and their combined
fees paid or accrued for such year were $4,250.
BOARD MEMBERS AND OFFICERS
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 Board Member and officer is 24 Federal Street, Boston,
Massachusetts 02110, which is also the address of the Fund's sponsor and
manager, Eaton Vance Management ("Eaton Vance"); of Eaton Vance's wholly-owned
subsidiary, Boston Management and Research ("BMR"); of Eaton Vance's parent,
Eaton Vance Corp. ("EVC"); and of Eaton Vance's trustee, Eaton Vance, Inc.
("EV"). Eaton Vance and EV are both wholly-owned subsidiaries of EVC. Those
Board Members who are "interested persons" of the Fund, as defined in the 1940
Act by virtue of their affiliation with Eaton Vance, BMR, M&I, EVC or EV, are
indicated by an asterisk(*).
OFFICERS AND DIRECTORS OF THE FUND
JAMES B. HAWKES (55), President and Director*
President and Chief Executive Officer of Eaton Vance, BMR, EVC and EV, and a
Director of EVC and EV. Director or Trustee and officer of various investment
companies managed by Eaton Vance or BMR.
DONALD R. DWIGHT (65), Director
President of Dwight Partners, Inc. (a corporate relations and communications
company) founded in 1988. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: Clover Mill Lane, Lyme, New Hampshire 03768
SAMUEL L. HAYES, III (61), Director
Jacob H. Schiff Professor of Investment Banking, Harvard University Graduate
School of Business Administration. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: Harvard University Graduate School of Business Administration,
Soldiers Field Road, Boston, Massachusetts 02163
NORTON H. REAMER (61), Director
President and Director, United Asset Management Corporation, (a holding company
owning institutional investment management firms); Chairman, President and
Director, UAM Funds (mutual funds). Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: One International Place, Boston, Massachusetts 02110
JOHN L. THORNDIKE (70), Director
Director, Fiduciary Company Incorporated. Director or Trustee of various
investment companies managed by Eaton Vance or BMR.
Address: 175 Federal Street, Boston, Massachusetts 02110
JACK L. TREYNOR (66), Director
Investment Adviser and Consultant. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: 504 Via Almar, Palos Verdes Estates, California 90274
OFFICERS
JAMES L. O'CONNOR (51), Treasurer
Vice President of Eaton Vance, BMR and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
THOMAS OTIS (65), Secretary
Vice President and Secretary of Eaton Vance, BMR, EVC and EV. Officer of various
investment companies managed by Eaton Vance or BMR.
JANET E. SANDERS (61), Assistant Treasurer and Assistant Secretary
Vice President of Eaton Vance, BMR and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
A. JOHN MURPHY (34), Assistant Secretary
Assistant Vice President of BMR, Eaton Vance and EV since March 1, 1994;
employee of Eaton Vance since March 1993. State Regulations Supervisor, The
Boston Company (1991-1993). Officer of various investment companies managed by
Eaton Vance or BMR. Mr. Murphy was elected Assistant Secretary of the Trust on
March 27, 1995.
ERIC G. WOODBURY (39), Assistant Secretary
Vice President of Eaton Vance since February 1993; formerly, associate attorney
at Dechert, Price & Rhoads. Officer of various investment companies managed by
Eaton Vance or BMR. Mr. Woodbury was elected Assistant Secretary of the Trust
on June 19, 1995.
OFFICERS AND TRUSTEES OF THE PORTFOLIO
The Trustees and officers of the Portfolio are identical to the Directors
and officers of the Fund, except for the following additional officer of the
Portfolio:
SAMUEL D. ISALY (51), Vice President
President of Mehta and Isaly Asset Management, Inc. since 1989; Senior Vice
President of S.G. Warburg & Co., Inc. from 1986 through 1989; and President
of Gramercy Associates, a health care industry consulting firm, from 1983
through 1986.
Address: Mehta and Isaly Asset Management, Inc., 41 Madison Avenue, 40th
Floor, New York, NY 10010-2202
Messrs. Hayes (Chairman), Reamer and Thorndike are members of the Special
Committee of the Board of the Fund and Portfolio. The purpose of the Special
Committee is to consider, evaluate and make recommendations to the full Board
concerning (i) all contractual arrangements with service providers to the Fund
or Portfolio, including administrative services, 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 Portfolio or its shareholders or interestholders.
The Nominating Committee is comprised of four Directors who are not
"interested persons" as that term is defined under the Investment Company Act of
1940 ("noninterested Directors"). The Committee has four-year staggered terms,
with one member rotating off the Committee to be replaced by another
noninterested Director of the Fund. The purpose of the Committee is to recommend
to the Board nominees for the position of noninterested Director and to assure
that at least a majority of the Board of Directors is independent of Eaton Vance
and its affiliates.
Messrs. Treynor (Chairman) and Dwight are members of the Audit Committee of
the Board of Directors. The Audit Committee's functions include making
recommendations to the Board of Directors 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 Fund.
Directors of the Fund who are not affiliated with an 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 "Directors" Plan"). Under
the Directors' Plan, an eligible Director 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 Directors under the Directors' Plan
will be determined based upon the performance of such investments. Deferral of
Directors' fees in accordance with the Directors' 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 Director or obligate the Fund to
pay any particular level of compensation to the Director. Neither the Portfolio
nor the Fund has a retirement plan for its Trustees.
SERVICES FOR ACCUMULATION
The following services are voluntary, involve no extra charge, other than
the sales charge included in the offering price, and may be changed or
discontinued without penalty at any time.
INTENDED QUANTITY INVESTMENT -- STATEMENT OF INTENTION.If it is anticipated
that $100,000 or more of Fund shares and shares of the other continuously
offered open-end funds listed under "The Eaton Vance Exchange Privilege" in the
Prospectus will be purchased within a 13-month period, a Statement of Intention
should be signed so that shares may be obtained at the same reduced sales charge
as though the total quantity were invested in one lump sum. Shares held under
the Right of Accumulation (see below) as of the date of the Statement will be
included toward the completion of the Statement. The Statement authorizes the
Transfer Agent to hold in escrow sufficient shares (5% of the dollar amount
specified in the Statement) which can be redeemed to make up any difference in
sales charge on the amount intended to be invested and the amount actually
invested. Execution of a Statement does not obligate the shareholder to purchase
or the Fund to sell the full amount indicated in the Statement, and should the
amount actually purchased during the 13-month period be more or less than that
indicated on the Statement, price adjustments will be made accordingly. For
sales charges and other information on quantity purchases, see "How to Buy Fund
Shares" in the Prospectus. Any investor considering signing a Statement of
Intention should read it carefully.
RIGHT OF ACCUMULATION -- CUMULATIVE QUANTITY DISCOUNT.The applicable sales
charge level for the purchase of shares is calculated by taking the dollar
amount of the current purchase and adding it to the value (calculated at the
maximum current offering price) of the shares the shareholder owns in his or her
account(s) in the Fund and in the other continuously offered open-end funds
listed under "The Eaton Vance Exchange Privilege" in the Prospectus. The sales
charge on the shares being purchase will then be at the rate applicable to the
aggregate amount. For example, if the shareholder owned shares valued at $80,000
and purchased an additional $20,000 of shares, the sales charge for the $20,000
purchase would be at the rate of 3.75% of the offering price (3.90% of the net
amount invested), which is the rate applicable to single transactions of
$100,000. For sales charges on quantity purchases, see "How to Buy Fund Shares"
in the Prospectus. Shares purchased (i) by an individual, his or her spouse and
their children under the age of twenty-one and (ii) by a trustee, guardian or
other fiduciary of a single trust estate or a single fiduciary account, will be
combined for the purpose of determining whether a purchase will qualify for the
Right of Accumulation and if qualifying, the applicable sales charge level.
For any such discount to be made available, at the time of purchase a
purchaser or any Authorized Firm which has an agreement with the Principal
Underwriter must provide the Principal Underwriter (in the case of a purchase
made through an Authorized Firm) or the Transfer Agent (in the case of an
investment made by mail) with sufficient information to permit verification that
the purchase order qualifies for the accumulation privilege. Confirmation of the
order is subject to such verification. The Right of Accumulation privilege may
be amended or terminated at any time as to purchases occurring thereafter.
PRINCIPAL UNDERWRITER
Shares of the Fund may be continuously purchased at the public offering
price through Authorized Firms which have agreements with the Principal
Underwriter. The public offering price is the net asset value next computed
after receipt of the order, plus, where applicable, a variable percentage sales
charge depending upon the amount of purchase as indicated by the sales charge
table set forth in the Prospectus. Such table is applicable to purchases of
shares alone or in combination with purchases of certain other funds offered by
the Principal Underwriter, made at a single time by (i) an individual, or an
individual, his or her spouse and their children under the age of twenty-one,
purchasing shares for his or her or their own account; and (ii) a trustee or
other fiduciary purchasing shares for a single trust estate or a single
fiduciary account. The table is also presently applicable to (1) purchases of
shares, alone or in combination with purchases of any of the other funds offered
by the Principal Underwriter through one dealer aggregating $100,000 or more
made by any of the persons enumerated above within a thirteen-month period
starting with the first purchase pursuant to a written Statement of Intention,
in the form provided by the Principal Underwriter, which includes provisions for
a price adjustment depending upon the amount actually purchased within such
period (a purchase not made pursuant to such Statement may be included
thereunder is the Statement if filed within 90 days of such purchase); or (2)
purchases of shares pursuant to the Right of Accumulation and declared as such
at the time of purchase.
Subject to the applicable provisions of the 1940 Act, the Fund may issue
shares at net asset value in the event that an investment company (whether a
regulated or private investment company or a personal holding company) is merged
or consolidated with or acquired by the Fund. Normally no sales charges will be
paid in connection with an exchange of shares for the assets of such investment
company.
Shares may be sold at net asset value to any officer, director, trustee,
general partner or employee of the Fund, the Portfolio or any investment company
for which Eaton Vance or BMR acts as investment adviser, any investment
advisory, agency, custodial or trust account managed or administered by Eaton
Vance or by any parent, subsidiary or other affiliate of Eaton Vance, or any
officer, director, trustee or employee of any parent, subsidiary or other
affiliate of Eaton Vance. The terms "officer," "director," "trustee," "general
partner" or "employee" as used in this paragraph include any such person's
spouse and minor children, and also retired officers, directors, trustees,
general partners and employees and their spouses and minor children. Shares may
also be sold at net asset value to registered representatives and employees of
certain investment dealers and to such person's spouses and children under the
age of 21 and their beneficial accounts.
The Fund reserves the right to suspend or limit the offering of shares to
the public at any time.
The Principal Underwriter acts as principal in selling shares of the Fund
under the distribution agreement with the Fund. The distribution agreement is
renewable annually by the Fund's Board of Directors (including a majority of its
Directors who are not interested persons of the Principal Underwriter or the
Fund), may be terminated on six months' notice by either party, and is
automatically terminated upon assignment. The Principal Underwriter distributes
Fund shares on a "best efforts" basis under which it is required to take and pay
for only such shares as may be sold. The Principal Underwriter allows Authorized
Firms discounts from the applicable public offering price which are alike for
all Authorized Firms. See "How to Buy Fund Shares" in the Prospectus for the
discounts allowed to Authorized Firms. The Principal Underwriter may allow, upon
notice to all Authorized Firms, discounts up to the full sales charge during the
periods specified in the notice. During periods when the discount includes the
full sales charge, such Authorized Firms may be deemed to be underwriters as
that term is defined in the Securities Act of 1933.
DISTRIBUTION PLAN
As described in the Prospectus, in addition to the fees and expenses
described herein, the Fund finances distribution activities and bears expenses
associated with the distribution of its shares pursuant to a distribution plan
(the "Plan") designed to meet the requirements of Rule 12b-1 under the 1940 Act.
Pursuant to such Rule, the Plan has been approved by the Board of Directors
of the Fund (including a majority of those Directors who are not interested
persons of the Fund and who have no direct or indirect financial interest in the
operation of the Plan). Under the Plan, the President or a Vice President of the
Fund shall provide to the Directors for their review, and the Directors shall
review at least quarterly, a written report of the amounts expended under the
Plan and the purposes for which such expenditures were made. The Plan remains in
effect from year to year provided such continuance is approved at least annually
by a vote of the Board of Directors and by a majority of those Directors who are
not interested persons of the Fund and who have no direct or indirect financial
interest in the operation of the Plan. The Plan may not be amended to increase
materially the payments described therein without approval of the shareholders
of the Fund, and all material amendments of the Plan must also be approved by
the Directors in the manner described above. The Plan may be terminated at any
time by vote of a majority of the Directors who are not interested persons of
the Fund and who have no direct or indirect financial interest in the operation
of the Plan or by a vote of a majority of the outstanding voting securities of
the Fund. If the Plan is terminated or not continued in effect, the Fund has no
obligation to reimburse the Principal Underwriter for amounts expended by the
Principal Underwriter in distributing shares of the Fund. So long as the Plan is
in effect, the selection and nomination of Directors who are not interested
persons of the Fund shall be committed to the discretion of the Directors who
are not such interested persons. The Directors have determined that in their
judgment there is a reasonable likelihood that the Plan will benefit the Fund
and its shareholders.
The Plan is intended to compensate the Principal Underwriter for its
distribution services to the Fund by paying the Principal Underwriter monthly
distribution fees in connection with the sale of shares of the Fund.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return on
a hypothetical investment of $1,000 in shares of the Fund covering the ten-,
five- and one-year periods ended August 31, 1996.
<TABLE>
VALUE OF A $1,000 INVESTMENT
<CAPTION>
TOTAL RETURN TOTAL RETURN
EXCLUDING MAXIMUM INCLUDING MAXIMUM
VALUE OF SALES CHARGE SALES CHARGE
INVESTMENT INVESTMENT AMOUNT OF INVESTMENT ---------------------------- ---------------------------
PERIOD* DATE INVESTMENT** ON 8/31/96 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
10 Years Ended
8/31/96 8/31/86 $952.54 $4,106.97 331.16% 15.74% 310.70% 15.17%
5 Years Ended
8/31/96 8/31/91 $952.25 $2,406.83 152.75% 20.38% 140.68% 19.20%
1 Year Ended
8/31/96 8/31/95 $952.40 $1,248.04 31.04% 31.04% 24.80% 24.80%
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.
<FN>
*Absent an expense reduction, performance would have been lower.
**Initial investment less current maximum sales charge of 4.75%.
</FN>
</TABLE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of October 31, 1996, the current Directors and officers of the Fund, as a
group, owned in the aggregate less than 1% of the outstanding shares of the
Fund. As of October 31, 1996, to the knowledge of the Fund, no person owns of
record or beneficially 5% or more of the Fund's outstanding shares as of such
date.
OTHER INFORMATION
The Fund was incorporated in Maryland on November 7, 1984. On August 30,
1996, the Fund changed its name from Medical Research Investment Fund, Inc.
INDEPENDENT ACCOUNTANTS
For the fiscal year ending August 31, 1996 and the audit of the Fund for
such year, Tait, Weller & Baker, Two Penn Center Plaza, Suite 700, Philadelphia,
Pennsylvania, has served as the Fund's independent accountants. For future
fiscal periods, Coopers & Lybrand L.L.P., One Post Office Square, Boston,
Massachusetts, will be the independent accountants of the Fund, providing audit
services, tax return preparation, and assistance and consultation with respect
to the preparation of filings with the Commission. Coopers & Lybrand Chartered
Accountants, Toronto, Canada, are the independent accountants for the Portfolio.
FINANCIAL STATEMENTS
At the time of the audit of the Portfolio, its name was Global Health
Sciences Portfolio. The financial statements of the Fund, which are included in
the Fund's Annual Report to Shareholders dated August 31, 1996, are incorporated
by reference into this SAI and have been so incorporated in reliance on the
report of Tait, Weller & Baker, independent certified public accountants, as
experts in accounting and auditing.
<PAGE>
GLOBAL HEALTH SCIENCES PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
JUNE 3, 1996
ASSETS:
Cash .................................................. $100,010
Deferred organization expenses ........................ 12,000
--------
Total assets ...................................... $112,010
LIABILITIES:
Accrued organization expenses ......................... 12,000
--------
NET ASSETS ................................................ $100,010
========
NOTES:
(1) Global Health Sciences Portfolio (the "Portfolio") was organized as a New
York Trust on March 26, 1996 and has been inactive since that date, except
for matters relating to its organization and registration as an investment
company under the Investment Company Act of 1940 and the sale of interests
therein at the purchase price of $100,000 to Boston Management & Research
and the sale of interest therein at the purchase price of $10 to Eaton Vance
Management (the "Initial Interests").
(2) Organization expenses are being deferred and will be amortized on a
straight-line basis over a period not to exceed five years, commencing on
the effective date of the Portfolio's initial offering of its interests. The
amount paid by the Portfolio on any withdrawal by the holders of the Initial
Interests of any of the respective Initial Interests will be reduced by a
portion of any unamortized organization expenses, determined by the
proportion of the amount of the Initial Interests withdrawn to the Initial
Interests then outstanding.
(3) At 4:00 p.m., New York City time, on each business day of the Portfolio, the
value of an investor's interest in the Portfolio is equal to the product of
(i) the aggregate net asset value of the Portfolio multiplied by (ii) the
percentage representing that investor's share of the aggregate interest in
the Portfolio effective for that day.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Investors of
Global Health Sciences Portfolio:
We have audited the accompanying statement of assets and liabilities of Global
Health Sciences Portfolio (a New York Trust) as of June 3, 1996. This financial
statement is the responsibility of the Portfolio's management. Our
responsibility is to express an opinion on this financial statement based on our
audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the financial position of Global Health Sciences
Portfolio as of June 3, 1996, in conformity with generally accepted accounting
principles.
/s/Coopers & Lybrand Chartered Accountants
---------------------------------------
Coopers & Lybrand Chartered Accountants
Toronto, Ontario
June 21, 1996
<PAGE>
EV Traditional
Worldwide Health
Sciences Fund, Inc.
[LOGO:HOUSE]
[PHOTO OF MOUNTAIN AND BOATS OMITTED]
Annual
Shareholder Report
August 31, 1996
To Shareholders
We are happy to welcome shareholders of EV Traditional Worldwide
Health Sciences Fund with this first annual report, capping a most
successful year. In August, the shareholders of Medical Research
Investment Fund approved the conversion of the Fund to a Hub-and-
Spoke structure and engaged Eaton Vance Management as the Fund's
administrator and Eaton Vance Distributors as the Fund's
distributor. Founded in 1924, Eaton Vance currently manages more
than $17 billion in more than 150 mutual funds. As part of the Eaton
Vance family, the Fund's shareholders will have expanded exchange
options with access to the entire range of Eaton Vance funds,
including domestic and global equity funds as well as a wide range
of fixed income products.
Samuel D. Isaly and Mehta and Isaly Asset Management, the Fund's
portfolio manager and investment adviser, respectively, since 1989,
will continue to fulfill these responsibilities.
EV Traditional Worldwide Health Sciences Fund: Another year of
stellar performance ...
For the year ended August 31, 1996, the Fund had a total return of
31.0%. That performance was the result of a rise in net asset value
per share from $23.41 to $27.08 (before giving effect to the 100%
stock dividend on September 23, 1996), and the reinvestment of $2.80
in capital gains distributions. By comparison, the S&P 500* - an
unmanaged index of U.S. common stocks - rose 18.7% during the same
period.
* It is not possible to invest directly in the Index.*
Morningstar gives the Fund its
coveted five-star rating ...
Reflecting the Fund's fine long-term performance, Morningstar - the
nation's leading mutual fund rating service - gave the Medical
Research Investment Fund (prior to its name change) its overall
five-star rating for the period ending August 31, 1996. The Fund
also earned a five-star rating for the five-year period (among 1007
funds) and ten-year period (among 541 funds), during which it had
average annual total returns of 20.4% and 15.7%, respectively.
Mehta and Isaly Asset
Management: Proven biomedical
expertise with a global reach ...
Mehta and Isaly Asset Management specializes in global
pharmaceutical, biotechnology, and health care research. Over the
years, Mehta and Isaly has demonstrated the analytical expertise and
financial acumen that is vital to success in health care investing.
We at Eaton Vance look forward to a long and successful association.
In the pages that follow, Mehta and Isaly partner and Fund portfolio
manager Samuel D. Isaly discusses his investment style, the current
state of the health care industry, and his outlook for the coming
year.
[PHOTO OF JAMES B. HAWKES OMITTED]
Sincerely,
/S/James B. Hawkes
James B. Hawkes,
President
October 20, 1996
Management Discussion: Samuel D. Isaly
An interview with Samuel D. Isaly, A Partner of
Mehta and Isaly Asset Management, Inc., and Portfolio Manager of
Worldwide Health Sciences Portfolio.
Q: To begin, Sam, how would you describe the Portfolio's investment
approach?
A: Our investment goals are to achieve a high level of capital
growth while mitigating risk through active portfolio management.
Our investment approach is very research-intensive. We maintain a
worldwide perspective, with the ability to invest in a global
universe of pharmaceutical, biotech, and health care companies. That
gives us access to a wide range of opportunities while allowing us
to spread our market risk across a global universe of stocks.
Q: How is the Portfolio structured?
A: We maintain a very focused structure. Typically, one segment of
the Portfolio - between 20% and 40% - is invested in ten to twenty
large-cap companies. Another segment - between 60% and 80% - may be
invested in fifteen to twenty smaller companies. Naturally, the
percentages may vary within this range, according to changes in
market conditions and valuations. Within those broad parameters, we
seek out promising opportunities in North America, Europe, and the
Far East.
Recently, the Portfolio has been 55% invested in international
stocks and 45% invested in the U.S., but those bands are subject to
change as well. We believe that the drug and pharmaceutical industry
is an increasingly global industry, with no single country or region
enjoying a monopoly on knowledge, research, or development. That
philosophy provides us a broad canvas to work with.
Q: You indicated that you use a very focused approach. What do you
mean?
A: We tend to concentrate our investments as much as possible.
Usually, the Portfolio will consist of no more than twenty-five to
thirty stocks at a given time. Given the vast number of health care
companies and the complex nature of health care developments, we
believe we can perform the most thorough research - and best achieve
our performance objectives - by concentrating our focus on a
discrete group of stocks.
[PHOTO OF SAMUEL D. ISALY OMITTED]
Fund shares are not guaranteed by the FDIC and are not deposits or
other obligations of, or guaranteed by, any depository institution.
Shares are subject to investment risks, including possible loss of
principal invested.
[GRAPHIC VERTICAL BAR CHART OMITTED: This chart entitled "The Aging
of America" charts the growth in two demographic groups - those
aged 85 and older and those aged 65 and older - from 1900 through
2050]
Caption reads: U.S. Population Growth 1900-2050 (in millions)
85 Years + 65 Years +
-------- ----------
1900 0.1 3.1
1920 0.2 4.9
1940 0.4 9
1960 0.9 16.7
1980 2.2 25.7
1990 3 30
2000 4.3 35.3
2010 5.7 40.1
2020 6.5 53.5
2030 8.4 70.2
2050 18.2 78.9
Footnote reads:
Source: U.S. Bureau of the Census
(bullet) In 1900, there were 3.1 million people age 65 or older. By
1993, there were 32.8 million, or 10 times as many.
(bullet) In the U.S., the 75-and-over age group is the fastest
growing demographic group, soon to be replaced by the over-85
population. By the year 2050, it is projected that the over-85
population will exceed 18 million people.
(bullet) The oldest of America's "Baby Boomers" turned 50 in 1996.
As this generation ages, their demand for health care will rise
sharply, as will their health care expenditures.
Q. Sam, the Fund turned in an excellent showing in the past year -
up 31% - and, in fact, earned Morningstar's five-star rating* for
the one-, five-, and ten-year periods ending August 31. What
accounts for this year's strong performance?
A. The Fund benefited from a powerful advance by some of its
biotechnology stocks, as well as a more modest increase in major
drug stocks. Investors may recall that, in the immediate aftermath
of the health care reform proposals of 1993, major drug stocks went
into sharp decline as companies and investors alike worried about
the outlook for drug pricing. In that harsh environment, the entire
pharmaceutical sector was under pressure.
In the period since the reform proposals were defeated, major drug stocks
have rallied sharply. Meanwhile, smaller biotech companies have continued
to make research progress on many different fronts. In addition, the drug
sector has been characterized by an increasing consolidation, highlighted
by several large mergers, such as the Pharmacia-Uphohn merger in 1995. The
result has been a much healthier industry and a more robust environment
for the entire drug sector.
*Morningstar ratings reflect historical risk-adjusted performance
through 8/31/96 and are subject to change. Past performance is no
guarantee of future results. Funds are assigned ratings from 1 star
(lowest) to 5 stars ( highest). Ratings are calculated from the
funds' 3-, 5-, and 10-year returns (with fee adjustment) in excess
of 90-day Treasury bill returns. The top 10% of the funds in a
category receive 5 stars.
Q: Could you describe briefly the criteria you use in your selection
process?
A: Yes. First and foremost, we seek companies that have long-term
potential. That's true whether we're looking at companies here in
the U.S. or abroad. For the large-cap, major drug companies, we look
for a potential to increase market share. We like to see a good
array of products in the development pipeline, and, complementing
that, a strong marketing organization that can get the new
treatments into use by physicians.
Q: And what about the smaller companies?
A: For the smaller, specialty companies, we're attracted by a
company's ability to post above-average growth rates. We look
especially for those with an edge in research for a given
application, such as a biotech company whose research is uniquely
targeted. Interestingly, according to a recent study presented by
Roche Holdings, small biotech companies have conducted the majority
of biotechnology discovery/research programs - around two-thirds -
while the large drug companies have accounted for the remainder. A
research breakthrough, even for a drug with a relatively narrow
application, may have an enormously positive impact on the smaller
company.
Q. Could you give some examples of stocks in the Portfolio?
A. Certainly. Ares-Serono, a medium-sized Swiss-based drug company,
is the Portfolio's largest holding. In the past, the company has
focused on extracting and distilling drugs from human sources,
including tissue- or urine-based products. Its most important
product to date has been a fertility-enhancement drug that helps
induce ovulation. More recently, the company has been able to
engineer the drug through biotech processes that are more cost-
effective than the extraction method. In addition, the company is a
leading European manufacturer of beta interferon, which is used to
treat multiple sclerosis and it is also a leading producer of human
growth hormone, used to strengthen muscle in AIDS patients.
[GRAPHIC OMITTED pie chart]
Worldwide Health Sciences Fund:
Asset Allocation*
North America - Specialty 34.7%
Europe - Specialty 22.1%
Far East - Specialty 12.6%
Far East Majors 12.2%
Europe - Majors 11.4%
North America - Majors 7.0%
Footnote reads:
*Based on market value as of August 31, 1996
Because the Portfolio is actively managed, geographical
and sector allocations are subject to change.
Q. What stocks do you like in the U.S.?
A. Warner-Lambert Co. is a major drug maker with an $18 billion
market cap. Historically, the company has had a relatively poor
track record in research and development. However, there are signs
that this is about to change. The company is scheduled to release
two new drugs in 1997 - an anti-cholesterol drug and another to
treat diabetes - that should provide a major boost to earnings. In
addition, Warner has a powerful, marketing arm and a strong line of
over-the-counter drugs that, in our view, makes it a strong takeover
candidate.
[PHOTO OF LAB TOOLS OMITTED]
Biotech Companies:
The Right Rx for Growth.
Despite pricing pressures in the 1990s, pharmaceutical
sales should continue to outpace inflation.
Sales Forecast 1996-2000:
Unit Growth 2.5%
Pricing Growth 1.0%
New Product Growth 2.5%
----
Total Sales Growth: 6.0%
Source: Mehta and Isaly Asset Management, Inc.
Q. And what about smaller companies?
A. Agouron Pharmaceuticals is a U.S.-based biotech company that is
developing a line of important treatments. One of its first products
- - to be marketed under the name Viracept- is a protease inhibitor
that dramatically improves the outlook for AIDS patients. The drug
is nearing the end of clinical trials and should reach FDA approval
soon thereafter. The company has also developed a new class of
candidate-drugs called matrix metallo proteinases (MMP). These MMP
candidates appear to be effective in treating a wide variety of
cancers, including the spread of prostate cancer.
Q. How do you manage risk within the Portfolio?
A. We manage risk in several ways. Naturally, there is foreign
market risk tied to investing in any single, foreign country. We
help mitigate that risk by investing in companies and countries
around the world. Second, there is financial risk in a business
characterized by large expenditures for marketing, research and
development. We lessen that risk by doing exhaustive financial
analysis to monitor the financial well-being of these companies.
Finally, and perhaps most important of all, there is technological
risk associated with the fast pace of breakthroughs as well as the
often uncertain processes of clinical trials and approvals. We
mitigate that risk by investing in both large companies as well as
small companies. Large-cap and small-cap companies tend to develop
at widely varying growth rates. Investing in a mix of both helps to
temper the risk of a technological setback at any single company.
But exhaustive research is the key to assessing technological risk,
and each of our analysts has an intimate knowledge of the basic
science involved in the pharmaceuticals they cover.
A Health Sciences Primer
The health sciences universe includes companies principally engaged
in the development, production or distribution of products and
services related to health care.
Biotechnology: Companies producing or planning to produce diagnostic
and therapeutic drugs using recombinant and molecular biology and
rational drug design platforms to treat and cure diseases.
Pharmaceuticals: Companies involved in large-scale, global discovery
and development of innovative prescription drugs and diagnostics,
over-the-counter products, delivery systems, nutrition, animal
health and sometimes chemical and agricultural products.
Diagnostics: Companies that develop or maintain sophisticated
diagnostic equipment such as CAT scanners and magnetic resonance
imaging, as well as urological and serological assays.
Managed Health Care: Operations of investor-owned hospital chains
(including acute care psychiatric hospitals), nursing centers,
health maintenance organizations, and rehabilitation clinics which
seek to deliver hospital care on an efficient cost basis.
Medical Equipment and Supplies: Companies engaged in the manufacture
of inpatient and outpatient medical (and dental), surgical,
laboratory and diagnostic products (ranging from cotton swabs
through kidney dialysis equipment to CAT scanners).
Q. Sam, what's your outlook for the drug and biotech sectors?
A. I'm optimistic that the growth phase we've witnessed will
continue. Demographic trends are clearly favorable as aging
populations in the U.S. and elsewhere will result in higher drug
volumes. Clearly, the political environment, so negative earlier in
the decade, has become considerably less onerous for the drug
industry in the past two years. That's a positive develop-ment with
respect to the pricing flexibility of major companies, while
also providing encourage-ment for research and development. Moreover,
the quickened pace of research among smaller biotech companies continues
to produce breakthroughs.
In addition, the merger activity of recent years is likely to
continue as drug companies seek to acquire further research
capabilities and enhance their marketing prowess. Finally, given the
general market run-up of the past two years and an increasingly
uncertain economic climate, consumers staples such as the drug
stocks are likely to receive increasing attention from investors.
Naturally, past trends cannot accurately indicate future
performance. But given the increasing demand and the continued
breakthroughs on the research front, the future for the
pharmaceutical sector is bright. We're determined that EV
Traditional Worldwide Health Sciences Fund will share in that
future.
[GRAPHIC WORM CHART OMITTED:Comparison of Change in Value of a $10,000
investment in EV Traditional Worldwide Health Sciences Fund, the Standard
& Poor's 500 500 Index and the MSCI Europe-Australasia-Far East Index]
Caption reads: From August 31, 1996 through August 31, 1996
Inset Box info. reads:
- ------------------------------------------------------------------
AVERAGE Value of
ANNUAL 1 5 10 Investment at
RETURNS Year Year Year 8/31/196
- ------------------------------------------------------------------
Include. max.sales charge 24.8% 19.2% 15.2% $41,070
- ------------------------------------------------------------------
Without max. sales chg. 31.0% 20.4% 15.7% $43,116
- ------------------------------------------------------------------
Data from worm chart reads:
Date Fund @ NAV Fund w/SC S&P Index EAFE Index
-------- ---------- --------- --------- ----------
8/31/86 $10,000 $9,525 $10,000 $10,000
9/30/87 $8,738 $8,324 $9,228 $9,900
10/31/87 $9,225 $8,787 $9,733 $9,241
11/30/87 $9,139 $8,705 $9,942 $9,775
12/31/87 $9,092 $8,660 $9,743 $10,296
1/31/87 $10,191 $9,707 $11,027 $11,392
2/28/87 $11,494 $10,949 $11,434 $11,735
3/31/87 $11,604 $11,053 $11,821 $12,700
4/30/87 $11,423 $10,881 $11,686 $14,046
5/31/87 $11,518 $10,971 $11,756 $14,048
6/30/87 $11,769 $11,210 $12,411 $13,603
7/31/87 $11,879 $11,315 $13,009 $13,582
8/31/87 $11,981 $11,412 $13,464 $14,603
9/30/87 $11,669 $11,115 $13,230 $14,376
10/31/87 $9,009 $8,582 $10,351 $12,364
11/30/87 $8,114 $7,729 $9,467 $12,489
12/31/87 $8,764 $8,348 $10,248 $12,863
1/31/88 $9,245 $8,807 $10,662 $13,095
2/28/88 $9,532 $9,080 $11,108 $13,972
3/31/88 $9,490 $9,040 $10,831 $14,833
4/30/88 $9,364 $8,919 $10,933 $15,052
5/31/88 $9,077 $8,646 $10,968 $14,573
6/30/88 $9,288 $8,847 $11,549 $14,191
7/31/88 $9,338 $8,895 $11,486 $14,640
8/31/88 $8,950 $8,525 $11,043 $13,691
9/30/88 $9,254 $8,815 $11,585 $14,292
10/31/88 $9,254 $8,815 $11,886 $15,518
11/30/88 $8,815 $8,397 $11,662 $16,445
12/31/88 $9,001 $8,573 $11,938 $16,540
1/31/89 $9,642 $9,185 $12,787 $16,834
2/28/89 $9,524 $9,072 $12,417 $16,924
3/31/89 $10,022 $9,547 $12,783 $16,595
4/30/89 $10,571 $10,069 $13,424 $16,752
5/31/89 $10,858 $10,343 $13,895 $15,844
6/30/89 $10,326 $9,836 $13,909 $15,581
7/31/89 $11,500 $10,954 $15,138 $17,541
8/31/89 $11,753 $11,195 $15,373 $16,755
9/30/89 $12,471 $11,879 $15,396 $17,521
10/31/89 $12,175 $11,597 $15,009 $16,821
11/30/88 $12,768 $12,162 $15,257 $17,670
12/31/89 $13,097 $12,475 $15,710 $18,326
1/31/90 $12,723 $12,120 $14,629 $17,648
2/28/90 $12,519 $11,925 $14,754 $16,420
3/31/90 $12,795 $12,187 $15,235 $14,713
4/30/90 $12,732 $12,128 $14,825 $14,600
5/31/90 $14,092 $13,423 $16,189 $16,270
6/30/90 $14,367 $13,685 $16,189 $16,131
7/31/90 $14,358 $13,677 $16,104 $16,362
8/31/90 $13,061 $12,441 $14,585 $14,778
9/30/90 $11,959 $11,392 $13,974 $12,722
10/31/90 $13,710 $13,059 $13,881 $14,709
11/30/90 $13,607 $12,961 $14,713 $13,845
12/31/90 $13,806 $13,151 $15,221 $14,075
1/31/91 $14,492 $13,805 $15,852 $14,534
2/28/91 $16,213 $15,444 $16,919 $16,097
3/31/91 $16,740 $15,946 $17,423 $15,134
4/30/91 $16,382 $15,605 $17,429 $15,287
5/31/91 $16,362 $15,586 $18,102 $15,451
6/30/91 $15,467 $14,733 $17,385 $14,320
7/31/91 $16,462 $15,680 $18,165 $15,027
8/31/91 $17,058 $16,249 $18,522 $14,726
9/30/91 $17,655 $16,817 $18,314 $15,560
10/31/91 $18,769 $17,879 $18,531 $15,785
11/30/91 $18,261 $17,394 $17,717 $15,052
12/31/91 $19,635 $18,703 $19,838 $15,834
1/31/92 $20,839 $19,850 $19,443 $15,501
2/28/92 $19,997 $19,048 $19,629 $14,950
3/31/92 $19,326 $18,409 $19,339 $13,967
4/30/92 $18,154 $17,293 $19,878 $14,037
5/31/92 $19,251 $18,338 $19,897 $14,981
6/30/92 $18,644 $17,760 $19,707 $14,275
7/31/92 $18,740 $17,851 $20,483 $13,915
8/31/92 $19,113 $18,206 $19,992 $14,792
9/30/92 $18,900 $18,003 $20,328 $14,505
10/31/92 $19,273 $18,358 $20,371 $13,748
11/30/92 $19,971 $19,023 $20,987 $13,882
12/31/92 $20,079 $19,126 $21,347 $13,958
1/31/93 $19,477 $18,553 $21,497 $13,960
2/28/93 $18,984 $18,083 $21,723 $14,386
3/31/93 $20,079 $19,126 $22,276 $15,644
4/30/93 $21,427 $20,410 $21,710 $17,133
5/31/93 $22,932 $21,844 $22,203 $17,499
6/30/93 $22,053 $21,007 $22,382 $17,230
7/31/93 $21,825 $20,789 $22,263 $17,837
8/31/93 $23,197 $22,096 $23,029 $18,804
9/30/93 $23,570 $22,452 $22,958 $18,385
10/31/93 $24,413 $23,254 $23,403 $18,956
11/30/93 $24,340 $23,185 $23,101 $17,303
12/31/93 $25,382 $24,177 $23,489 $18,556
1/31/94 $26,384 $25,132 $24,252 $20,129
2/28/94 $25,251 $24,053 $23,524 $20,077
3/31/94 $23,728 $22,603 $22,606 $19,217
4/30/94 $23,494 $22,379 $22,866 $20,037
5/31/94 $23,299 $22,193 $23,150 $19,926
6/30/94 $22,271 $21,214 $22,703 $20,212
7/31/94 $22,336 $21,276 $23,417 $20,411
8/31/94 $23,820 $22,689 $24,298 $20,898
9/30/94 $24,171 $23,024 $23,812 $20,245
10/31/94 $23,833 $22,702 $24,309 $20,924
11/30/94 $24,090 $22,947 $23,349 $19,923
12/31/94 $23,752 $22,625 $23,808 $20,052
1/31/95 $24,891 $23,710 $24,386 $19,287
2/28/95 $25,467 $24,259 $25,266 $19,236
3/31/95 $25,706 $24,486 $26,119 $20,441
4/30/95 $26,212 $24,968 $26,849 $21,216
5/31/95 $27,336 $26,039 $27,824 $20,968
6/30/95 $28,967 $27,592 $28,604 $20,606
7/31/95 $31,328 $29,841 $29,513 $21,894
8/31/95 $32,902 $31,341 $29,503 $21,065
9/30/95 $33,352 $31,769 $30,870 $21,481
10/31/95 $32,776 $31,220 $30,716 $20,910
11/30/95 $34,168 $32,546 $31,977 $21,497
12/31/95 $38,291 $36,474 $32,723 $22,368
1/31/96 $40,218 $38,309 $33,790 $22,466
2/28/96 $40,282 $38,370 $34,024 $22,547
3/31/96 $40,632 $38,704 $34,477 $23,032
4/30/96 $42,495 $40,478 $34,940 $23,707
5/31/96 $44,437 $42,328 $35,739 $23,276
6/30/96 $44,214 $42,116 $36,021 $23,413
7/31/96 $40,680 $38,749 $34,373 $22,735
8/31/96 $43,116 $41,070 $35,019 $22,790
Footnote reads: Past performance is not indicative of future results.
Investment returns and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their
original cost. Source: Towers Data Systems, Bethesda, MD.
Fund Performance
In accordance with SEC guidelines, we are including a performance
chart comparing your Fund's total return with that of a broad-based
investment index. The lines on the chart represent the total returns
of $10,000 hypothetical invest-ments in EV Traditional Worldwide
Health Sciences Fund, Inc. the unmanaged S&P 500 Stock Index, and
the unmanaged Morgan Stanley Capital International Europe,
Australasia, Far East Index (MSCI EAFE).
Total Return Figures
The solid blue line on the chart represents the Fund's performance
at net asset value. The total return figure reflects Fund expenses,
and trans-action costs, and reinvestment of dividend income and
capital gain distributions. The dotted blue line represents the
Fund's performance including the 4.75% maximum current sales charge.
The solid black line represents the performance of the S&P 500, a
broad-based, unmanaged index of U.S. common stocks. The dotted black
line repre-sents the performance of the MSCI EAFE Index, a widely
recognized, unmanaged index of foreign common stocks. The Index's
total return does not reflect any commissions or expenses that would
be incurred if an investor individually purchased or sold the
securities represented in the Index. It is not possible to invest
directly in the Indices.
EV Traditional Worldwide Health Sciences Fund, Inc.
Portfolio of Investments
August 31, 1996
<TABLE>
<CAPTION>
COMMON STOCKS AND WARRANTS - 93.7%
- ---------------------------------------------------------------------------------------------------
Market
Value Percentage of
Security Shares (Note 1-A) Net Assets
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MAJOR CAPITALIZATION - North America (11.5%)
Biogen, Inc. (a) 25,000 $1,743,750 3.2%
Centocor, Inc. (a) 40,000 1,355,000 2.5
Genetics Institute, Inc. (a) 21,000 1,302,000 2.4
Warner-Lambert Co. 32,000 1,904,000 3.4
----------- ------
6,304,750 11.5
----------- ------
SPECIALTY CAPITALIZATION - North America (27.6%)
Agouron Pharmaceuticals, Inc. (a).. 40,000 1,560,000 2.8
Alexion Pharmaceuticals, Inc. (a) 100,000 850,000 1.5
Arris Pharmaceutical Corp. (a) 90,000 967,500 1.7
Cytel Corp. (a) 167,000 480,125 0.9
CytoTherapeutics, Inc. (a) 82,500 948,750 1.7
Incyte Pharmaceuticals, Inc. (a) 30,000 1,218,750 2.2
Isis Pharmaceuticals, Inc. (a) 150,000 1,968,750 3.6
Millennium Pharmaceuticals (a) 50,000 912,500 1.7
Pharmacopeia, Inc. (a) 85,000 1,763,750 3.2
SangStat Medical Corp. (a) 100,000 1,962,500 3.6
Sequana Therapeutics, Inc. (a) 60,000 990,000 1.8
Vertex Pharmaceuticals, Inc. (a) 50,000 1,587,500 2.9
----------- ------
15,210,125 27.6
----------- ------
MAJOR CAPITALIZATION - Europe (10.7%)
Altana 3,000 2,278,110 4.1
Ciba-Geigy AG 1,400 1,801,548 3.3
Sandoz AG 1,500 1,792,305 3.3
----------- ------
5,871,963 10.7
----------- ------
SPECIALTY CAPITALIZATION - Europe (20.7%)
Ares-Serono 4,000 4,243,640 7.7
Cambridge Antibody Technology, Ltd. (a)(Note 5) 59,734 1,373,882 2.5
Cambridge Antibody Technology, Ltd.-
Warrants (a)(Note 5) 3,100 31,000 0.1
Celltech (a) 150,000 1,291,500 2.3
Ethical Holdings ADR (a) 150,000 1,181,250 2.2
Swiss Serum Institute (a) 232 3,262,440 5.9
----------- ------
11,383,712 20.7
----------- ------
MAJOR CAPITALIZATION - Far East (11.4%)
Banyu Pharmaceutical Co. 140,000 $1,828,400 3.30%
Sankyo Co. Ltd. 60,000 1,490,400 2.7
Takeda Chemical Industries 90,000 1,557,000 2.8
Taisho Pharmaceutical Co. 70,000 1,404,200 2.6
----------- ------
6,280,000 11.4
----------- ------
SPECIALTY CAPITALIZATION - Far East (11.8%)
Biota Holdings Limited (a) 644,640 2,037,062 3.7
Biota Holdings Limited - Warrants (a) 78,738 173,224 0.3
Rohto Pharmaceutical 191,000 2,074,260 3.8
Teikoku Hormone Manufacturing 160,000 2,193,600 4.0
----------- ------
6,478,146 11.8
----------- ------
TOTAL INVESTMENTS (Cost $42,475,495) 51,528,696 93.7
OTHER ASSETS, LESS LIABILITIES 2,487,146 6.3
----------- ------
NET ASSETS $55,015,842 100.00%
=========== ======
(a) Non-income producing security.
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Statement of Assets and Liabilities
August 31, 1996
- ----------------------------------------------------------------------------------------------------
<S> <C>
Assets:
Investments in securities at market (identified cost $42,475,495)(Note 1-A) $51,528,696
Cash 3,517,979
Receivables:
Capital stock sold 998,532
Investment securities sold 45,000
Dividends 11,040
-----------
Total Assets 56,101,247
-----------
Liabilities:
Payables:
Capital stock redeemed 509,612
Investment securities purchased 429,086
Accrued advisory and administrative fees 51,500
Other accrued expenses 95,207
-----------
Total Liabilities 1,085,405
-----------
Net Assets $55,015,842
===========
Net Asset Value; Offering Price and Redemption Price Per Share:
($55,015,842 (divided by) 4,063,933 shares outstanding) $0.001 par value,
1 billion shares authorized (Note 6) $ 13.54
===========
Sources of Net Assets:
Paid in capital $43,500,242
Undistributed net investment deficit (653,017)
Accumulated net realized gain on investments 3,115,416
Net unrealized appreciation of investments 9,053,201
------------
Total $55,015,842
============
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
For the Year Ended August 31, 1996
- ----------------------------------------------------------------------------------
<S> <C> <C>
Investment Income:
Income:
Dividends (net of foreign taxes of $29,721) $ 138,857
----------
Expenses (Note 2):
Investment advisory fees 350,234
Administration fees 114,411
Transfer agent fees 96,009
Audit and legal fees 93,968
Distribution fees 90,449
Registration fees 22,877
Directors fees 14,389
Miscellaneous 15,272
----------
Total expenses 797,609
Less: Custodian fees paid indirectly (Note 4) 5,735
----------
Net expenses 791,874
----------
Net investment loss (653,017)
----------
Realized and Unrealized Gain on Investments:
Net realized gain on investments 4,038,381
Unrealized appreciation of investments:
Beginning of year $4,119,043
End of year 9,053,201
----------
Net increase in unrealized appreciation of investments 4,934,158
----------
Net realized and unrealized gain on investments 8,972,539
----------
Net increase in net assets resulting from operations $8,319,522
==========
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
- -------------------------------------------------------------------------------------------
Year Ended August 31,
1996 1995
----------- ----------
<S> <C> <C>
Operations:
Net investment loss $ (653,017) $ (250,511)
Net realized gain on investments 4,038,381 1,851,967
Net unrealized appreciation of investments 4,934,158 3,162,489
----------- -----------
Net increase in net assets resulting from
operations 8,319,522 4,763,945
Distributions to Shareholders:
Distributions from net realized gains from security
transactions (2,558,056) (995,491)
Capital Share Transactions:
Increase in net assets resulting from capital share
transactions (Note 3) 31,564,676 690,545
----------- -----------
Total increase in net assets 37,326,142 4,458,999
Net Assets:
Beginning of year 17,689,700 13,230,701
----------- -----------
End of year (including net investment deficit of
$653,017 and $215,599, respectively) $55,015,842 $17,689,700
=========== ===========
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights
- ----------------------------------------------------------------------------------------------------------------------------
The following table sets forth the per share operating performance data for a share of capital stock outstanding,
total return, ratios to average net assets and other supplemental data for each year indicated.
Adjusted for 100% stock dividend --
- --------------------------------------------
Record date September 23, 1996 (Note 6)
- --------------------------------------------
Year Ended August 31,
----------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Per Share Data1
Net asset value at beginning of year $ 11.71 $ 9.15 $ 9.64 $ 8.97 $ 8.57
------- ------- ------- ------- -------
Income from investment operations:
Net investment loss (0.23) (0.17) (0.16) (0.13) (0.13)
Net realized and unrealized gain (loss)
on investments 3.46 3.41 0.43 1.86 1.15
------- ------- ------- ------- -------
Total from investment operations 3.23 3.24 0.27 1.73 1.02
------- ------- ------- ------- -------
Less distributions from:
Net realized gain on investments 1.40 0.68 0.76 1.06 0.62
------- ------- ------- ------- -------
Net asset value at end of year $ 13.54 $ 11.71 $ 9.15 $ 9.64 $ 8.97
------- ------- ------- ------- -------
Total Return2 31.04% 38.13% 2.69% 21.37% 12.04%
======= ======= ======= ======= =======
Ratios/Supplemental Data
Net assets at end of year (in thousands) $55,016 $17,690 $13,231 $10,223 $11,415
Ratio of operating expenses to average net assets3:
Before expense reimbursement 2.21% 2.44% 2.67% 2.87% 2.59%
After expense reimbursement N/A N/A 2.50% 2.50% 2.48%
Ratio of net investment loss to average net assets:
Before expense reimbursement (1.81)% (1.80)% (1.82)% (1.90)% (1.56)%
After expense reimbursement N/A N/A (1.65)% (1.53)% (1.45)%
Portfolio turnover rate 66% 45% 49% 77% 71%
Average commission rate (per share of security)4 $0.0864 N/A N/A N/A N/A
1 Based on average month end shares outstanding
2 Calculated without sales charges
3 See Note 2 regarding a limitation on the advisory and administrative fees
4 Average commission rate (per share of security) as required by amended disclosure requirements effective September 1, 1995.
See notes to financial statements
</TABLE>
Notes to Financial Statements
August 31, 1996
Note 1 - Summary of Significant
Accounting Policies
EV Traditional Worldwide Health Sciences Fund, Inc. (the "Fund" )
(formerly Medical Research Investment Fund, Inc.) is a diversified,
open-end management investment company. The Fund's primary
investment objective is long-term growth of capital, a goal it seeks
by investing primarily in common stocks, and securities convertible
into common stocks, of domestic and foreign companies engaged in
medical research and the health care industry. Current income is a
secondary objective. The following is a summary of significant
accounting policies consistently followed by the Fund in the
preparation of its financial statements.
A) Security Valuation - Securities listed on a recognized stock
exchange, whether U.S. or foreign, are valued at the last reported
sale price on that exchange prior to the time when assets are valued
or prior to the close of trading on the New York Stock Exchange. In
the event there are no sales, the last available sale price will be
used. If a security is traded on more than one exchange, the
security is valued at the last sale price on the exchange where the
stock is primarily traded. Securities for which market quotations
are not readily available and other assets are valued on a
consistent basis at fair value as determined in good faith by or
under the supervision of the Fund's officers in a manner
specifically authorized by the Board of Directors.
B) Dividends and Distributions to Shareholders - Substantially all
of the Fund's net investment income, if any, and net realized
capital gains, if any, are distributed annually. Income dividends
and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to
differing treatments for net operating losses.
C) Federal Income Taxes - The Fund s policy is to comply with the
provisions of the Internal Revenue Code applicable to regulated
investment companies and to distribute to shareholders each year all
of its taxable income, including any net realized gain on
investments. Accordingly, no provision for federal income or excise
tax is necessary.
D) Foreign Currency Translation - Investments denominated in foreign
currencies are translated into U.S. dollars at the bid price of such
currencies against U.S. dollars last quoted by a major bank on the
valuation date. The cost of foreign portfolio securities is
determined using historical exchange rates.
E) Use of Estimates - The preparation of the financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expense
during the reporting period. Actual results could differ from those
estimates.
F) Other - Investment transactions are accounted for on the trade
date. The cost of investments sold is determined by use of the
specific identification method for both financial reporting and
income tax purposes. Dividend income is recorded on the ex-dividend
date, except that certain dividends from foreign securities are
recorded on the ex-dividend date or as soon thereafter as the Fund
is informed of the dividend.
Note 2 - Investment Advisory Fees, Administrator's Fees and Other
Transactions with Affiliates (See Note 7)
Pursuant to the Advisory Agreement, G/A Capital Management, Inc.
("G/ACM") served as the Investment Adviser of the Fund. Under this
agreement, G/ACM received a monthly fee at the annual rate of 1% of
the Fund's first $30 million in average net assets, 0.90% of the
next $20 million in average net assets, and 0.75% of average net
assets in excess of $50 million. The Investment Adviser had
voluntarily agreed to waive its fee until the assets of the Fund
reach a level permitting the Fund to pay these fees and still
maintain an expense ratio of 2.5% or less. For the fiscal year ended
August 31, 1996, no waiver was required pursuant to this provision.
Under an Administration Agreement between the Fund and its
Administrator, Capstone Asset Management Company ("CAMCO"), CAMCO
supervised all aspects of the Fund's operations other than the
management of its investments. For its services, CAMCO received a
fee at the annual rate of 0.25% of the Fund's average daily net
assets. CAMCO had voluntarily agreed to waive its fees until the
assets of the Fund reach a level permitting the Fund to pay these
fees and maintain an expense ratio of 2.5% or less. For the fiscal
year ended August 31, 1996, no waiver was required pursuant to this
provision. In addition, CAMCO was also paid a monthly fee of $2,000
for costs representing certain accounting and bookkeeping services.
These fees, which amounted to $24,000 for the year ended August 31,
1996, are not subject to the previously discussed waiver.
Capstone Asset Planning Company ("CAPCO") served as Distributor and
Underwriter to the Fund. CAPCO is an affiliate of CAMCO, and both
are wholly-owned subsidiaries of Capstone Financial Services, Inc.
("CFS").
Pursuant to a distribution plan established in accordance with Rule
12b-1 under the Investment Company Act of 1940, CAPCO paid certain
registered broker-dealers, financial institutions or other industry
professionals ("Service Organizations"), fees at the annual rate of
0.25% of the average daily net assets of the Fund for whom the
Service Organizations were the dealers or owners of record. The Fund
reimbursed CAPCO for the payment of such fees, which for the year
ended August 31, 1996, amounted to $90,450. Of this amount,
approximately 60% was paid to CAPCO and 14% was paid to G/ACM for
accounts on which they acted as servicers.
Certain officers of the Fund were also officers and directors of
G/ACM, CAMCO, CAPCO and CFS. During the year ended August 31, 1996,
Directors of the Fund who are not "interested persons" received
Directors' fees of $4,250. All other officers and Directors serve
without compensation from the Fund.
Note 3 - Capital Stock
<TABLE>
<CAPTION>
Capital stock has been adjusted to reflect a 100% stock dividend
declared to shareholders of record at the opening of business on
September 23, 1996 (See Note 6). Transactions in capital stock were
as follows:
Year Ended August 31,
------------------------------------------------
1996 1995
--------------------- -----------------------
Shares Amount Shares Amount
--------- ----------- ------- ----------
<S> <C> <C> <C> <C>
Shares sold 5,439,762 $68,676,368 253,786 $ 2,499,420
Shares issued to
shareholders in
reinvestment of
distributions 236,367 2,491,303 112,302 958,500
--------- ----------- ------- ----------
5,676,129 71,167,671 366,088 3,457,920
Shares redeemed (3,123,278) (39,602,995) (300,844) (2,767,375)
--------- ----------- ------- ----------
Net increase 2,552,851 $31,564,676 65,244 $ 690,545
========= =========== ======= ==========
</TABLE>
Note 4 - Investments/Custody
Purchases and sales of securities other than short-term notes
aggregated $47,894,452 and $23,071,509, respectively. At August 31,
1996 the cost of investments for Federal income tax purposes was
$42,475,495. Accumulated net unrealized appreciation on investments
was $9,053,201 consisting of $10,015,564 gross unrealized
appreciation and $962,363 gross unrealized depreciation. The Fund's
Custodian has provided credits in the amount of $5,735 against
custodian charges based on the uninvested cash balances of the Fund.
Note 5 - Restricted Securities
In February 1993, the Fund acquired 9,000 shares of common stock of
Cambridge Antibody Technology Limited ("CAT") at a cost of $297,000
by entering into a Subscription Agreement between the Fund, CAT and
Peptide Technology Limited ("Peptech"). The Subscription Agreement
granted to the Fund an option to require Peptech, the major
shareholder of CAT, to purchase up to 85% of the CAT shares owned by
the Fund on September 1, 1995 (the "Put Option"), subject to certain
conditions. The Put Option was exercised by the fund, but was
cancelled in December 1995 when the Fund received an additional
4,734 shares of CAT from Peptech in exchange for the Fund's
withdrawal of the Put Options.
In separate transactions that occurred in December 1995 and August
1996, the Fund acquired an additional 46,000 shares of CAT, bringing
the total number of shares owned by the Fund to 59,734. The value of
the CAT shares and warrants at August 31, 1996 is $1,404,882,
representing 2.6% of the Fund s net assets. Management has valued
the common stock at $23 per share and $10 per warrant, which
reflects recent market activity. Valuation of the security is
continually monitored and is reviewed by the Board of Directors at
least quarterly.
Note 6 - Subsequent Event
At the close of business, August 30, 1996, the Fund transferred
substantially all of its assets to the Worldwide Health Sciences
Portfolio in exchange for an interest in the Portfolio.
On September 18, 1996, the Fund's Directors declared a $1.22 capital
gain distribution payable September 20, 1996 to stockholders of
record September 18, 1996.
In addition, the Directors also declared a 100% stock dividend
payable to stockholders of record at the opening of business on
September 23, 1996.
Note 7 - Special Meeting of Stockholders (Unaudited)
Medical Research Investment Fund, Inc. (the "Fund") held a special
meeting of stockholders on August 29, 1996. On July 24, 1996, the
record date for the meeting, the Fund had 1,808,676.062 shares
outstanding, of which 1,208,275.755 shares were represented at the
meeting. The votes at the meeting were as follows:
Item 1: To approve a new investment policy and to supplement
investment restrictions to permit a new investment structure as
described in the Proxy Statement for the meeting.
Number of Shares
------------------------
Affirmative 916,238.573
Against 54,104,658
Abstain 16,084.524
Item 2A: To authorize the Fund to vote at a meeting of holders of
interests in the Portfolio to elect six trustees of the Portfolio.
Number of Shares
Nominees for Trustee Affirmative Withheld
- -------------------- -------------- ---------------
Donald R. Dwight 1,156,614.309 51,661.446
James B. Hawkes 1,155,608.488 52,667.267
Samuel L. Hayes, III 1,156,183.489 52,092.266
Norton H. Reamer 1,155,920.482 52,355.273
John L. Thorndike 1,156,074.581 52,201,174
Jack L. Treynor 1,156,120.696 52,155.059
Item 2B: To authorize the Fund to vote at a meeting of holders of
interests in the Portfolio to approve the Investment Advisory
Agreement between the Portfolio and Mehta and Isaly Asset
Management, Inc. (formerly G/A Capital Management, Inc.) as set
forth in Exhibit A to the Proxy Statement for the Meeting.
Number of Shares
------------------------
Affirmative 918,181.003
Against 49,286.807
Abstain 18,959.945
Item 3: To fix the number of Directors at six, and to elect
Directors
Number of Shares
Nominees for Director Affirmative Withheld
- -------------------- -------------- ---------------
Donald R. Dwight 1,151,350.596 56,925.159
James B. Hawkes 1,150,265.260 58,010.495
Samuel L. Hayes, III 1,150,902.001 57,373.754
Norton H. Reamer 1,150,896.841 57,378.914
John L. Thorndike 1,150,528.093 57,747.662
Jack L. Treynor 1,150,861.663 57,414.092
Item 4: To ratify the selection of Tait, Weller & Baker as
independent public accountants of the Fund for the current fiscal
year.
Number of Shares
------------------------
Affirmative 1,135,966.673
Against 52,652.749
Abstain 19,656.333
Item 5: To approve the revision of the Fund's investment objective
and certain of the Fund's investment policies as set forth in
Exhibit B to the Proxy Statement for the meeting as follows:
A. Reclassification and amendment of the investment objective and
basic policies.
Number of Shares
------------------------
Affirmative 899,960.065
Against 57,039.369
Abstain 29,428.321
B. Eliminate the restriction concerning investment in other
investment companies.
Number of Shares
------------------------
Affirmative 892,336.970
Against 64,541.221
Abstain 29,549.564
C. Eliminate the restriction concerning pledging.
Number of Shares
------------------------
Affirmative 890,847.723
Against 64,578.922
Abstain 31,001.110
D. Reclassify the restriction concerning investing in affiliated issuers.
Number of Shares
------------------------
Affirmative 888,931.129
Against 66,766.231
Abstain 30,730.395
E. Reclassify the restriction concerning investing for control.
Number of Shares
------------------------
Affirmative 893,771.863
Against 61,407.799
Abstain 31,248.093
F. Reclassify the restriction concerning options and futures.
Number of Shares
------------------------
Affirmative 888,272.290
Against 67,627.141
Abstain 30,528.324
G. Reclassify the restriction concerning warrants.
Number of Shares
------------------------
Affirmative 892,555.847
Against 63,372.559
Abstain 30,499.349
H. Reclassify the restriction concerning exploration programs.
Number of Shares
------------------------
Affirmative 890,200.791
Against 63,914.454
Abstain 32,312.510
I. Reclassify and amend the restriction concerning illiquid
securities.
Number of Shares
------------------------
Affirmative 887,411.339
Against 66,427.639
Abstain 32,588.777
J. Reclassify and amend the restriction concerning unseasoned
issuers.
Number of Shares
------------------------
Affirmative 887,198.540
Against 66,532.600
Abstain 32,696.615
K. Amend the restriction concerning underwriting.
Number of Shares
------------------------
Affirmative 893,596.085
Against 62,108.223
Abstain 30,723.447
L. Amend the restriction concerning real estate.
Number of Shares
------------------------
Affirmative 889,624.969
Against 67,558.294
Abstain 29,244.492
M. Amend the restriction concerning lending.
Number of Shares
------------------------
Affirmative 888,909.247
Against 67,463.039
Abstain 30,055.469
N. Amend the restriction concerning short sales.
Number of Shares
------------------------
Affirmative 888,815.265
Against 67,748.177
Abstain 29,864.313
O. Amend the restriction concerning senior securities.
Number of Shares
------------------------
Affirmative 891,259.867
Against 62,591.854
Abstain 32,576.034
P. Amend the restriction concerning borrowing.
Number of Shares
------------------------
Affirmative 887,394.141
Against 68,196.564
Abstain 30,837.050
Q. Amend the restriction concerning commodities.
Number of Shares
------------------------
Affirmative 887,389.408
Against 70,810.765
Abstain 28,227.582
Report of Independent Certified Public Accountants
To the Shareholders and Board of Directors
of EV Traditional Worldwide Health Sciences Fund, Inc.
We have audited the accompanying statement of assets and liabilities
of EV Traditional Worldwide Health Sciences Fund, Inc. (formerly
Medical Research Investment Fund, Inc.), including the portfolio of
investments, as of August 31, 1996, and the related statement of
operations for the year then ended, the statement of changes in net
assets for each of the two years in the period then ended, and
financial highlights for each of the periods presented. These
financial statements and financial highlights are the responsibility
of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with generally accepted
auditing principles. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.
Our procedures included confirmation of securities owned as of
August 31, 1996 by correspondence with the custodian and brokers. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of EV Traditional Worldwide Health Sciences Fund,
Inc. as of August 31, 1996, and the results of its operations,
changes in its net assets and financial highlights for the periods
presented, in conformity with generally accepted accounting
principles.
Tait, Weller & Baker
Philadelphia, Pennsylvania
September 20, 1996
(except for Note 6 as to which
the date is September 23, 1996)
[This page intentionally left blank.]
EV Traditional
Worldwide Health
Sciences Fund, Inc.
Officers
- ----------------
James B. Hawkes
President, Director
James L. O'Connor
Treasurer
Thomas Otis
Secretary
Directors
- ----------------
Donald R. Dwight
President, Dwight Partners, Inc.
Chairman, Newspapers of New England, Inc.
Samuel L. Hayes, III
Jacob H. Schiff Professor of Investment Banking,
Harvard University Graduate School of Business Administration
Norton H. Reamer
President and Director, United Asset
Management Corporation
John L. Thorndike
Director, Fiduciary Company Incorporated
Jack L. Treynor
Investment Adviser and Consultant
Worldwide Health
Science Portfolio
Officers
- ----------------
James B. Hawkes
President and Trustee
Samuel D. Isaly
Vice President and Portfolio Manager
James L. O'Connor
Vice President and Treasurer
Thomas Otis
Vice President and Assistant Secretary
Trustees
- ----------------
Donald R. Dwight
President, Dwight Partners, Inc.
Chairman, Newspapers of New England, Inc.
Samuel L. Hayes, III
Jacob H. Schiff Professor of Investment Banking,
Harvard University Graduate School of Business Administration
Norton H. Reamer
President and Director, United Asset
Management Corporation
John L. Thorndike
Director, Fiduciary Company Incorporated
Jack L. Treynor
Investment Adviser and Consultant
Sponsor and Manager of
EV Traditional Worldwide Health
Sciences Fund, Inc. &
Administrator of Worldwide Health Sciences Portfolio
Eaton Vance Management
24 Federal Street
Boston, MA 02110
Adviser of
Worldwide Health Sciences Portfolio
Mehta and Isaly Asset Management, Inc.
41 Madison Avenue
New York, NY 10010-2202
Principal Underwriter
Eaton Vance Distributors, Inc.
24 Federal Street
Boston, MA 02110
(617) 482-8260
Custodian
Investors Bank & Trust Company
89 South Street
P.O. Box 1537
Boston, MA 02205-1537
Transfer Agent
First Data Investor Services Group, Inc.
P.O. Box 5123
Westborough, MA 01581-5123
(800) 262-1122
This report must be preceded or accompanied by a current prospectus
which contains more complete information on the Fund, including its
distribution plan, sales charges and expenses. Please read the
prospectus carefully before you invest or send money.
EV Traditional
Worldwide Health Sciences Fund, Inc.
24 Federal Street
Boston, MA 02110
T-HSSRC-10/96
<PAGE>
[logo]
EATON VANCE
- --------------------
Mutual Funds
EV TRADITIONAL
WORLDWIDE HEALTH
SCIENCES FUND, INC.
STATEMENT OF
ADDITIONAL INFORMATION
FEBRUARY 1, 1997
EV TRADITIONAL
WORLDWIDE HEALTH SCIENCES FUND, INC.
24 FEDERAL STREET
BOSTON, MA 02110
- --------------------------------------------------------------------------------
SPONSOR AND MANAGER OF EV TRADITIONAL WORLDWIDE HEALTH SCIENCES FUND, INC.
ADMINISTRATOR OF WORLDWIDE HEALTH SCIENCES PORTFOLIO
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
ADVISER OF WORLDWIDE HEALTH SCIENCES PORTFOLIO
Mehta and Isaly Asset Management, Inc., 41 Madison Avenue,
New York, NY 10010-2202
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111
TRANSFER AGENT
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123
(800) 262-1122
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., One Post Office Square, Boston, MA 02109
T-HSSAI
