<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Second Fiduciary Exchange Fund, Inc.
(Name of Registrant as Specified in Its Charter)
Janet E. Sanders
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(l)(ii), 14a-6(i)(1), 14a-6(j)(2)
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transactions applies:
3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11:(1)
4) Proposed maximum aggregate value of transaction:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
(1) Set forth the amount on which the filing fee is calculated and state how it
was determined
<PAGE>
FIDUCIARY EXCHANGE FUND, INC.
SECOND FIDUCIARY EXCHANGE FUND, INC.
THE EXCHANGE FUND OF BOSTON, INC.
24 FEDERAL STREET BOSTON, MA 02110
April 19, 1996
Dear Stockholders:
On June 4, 1996, Special Meetings in lieu of the Annual Meetings of the
Stockholders of Fiduciary Exchange Fund, Inc. and Second Fiduciary Exchange
Fund, Inc., and a Special Meeting of Stockholders of The Exchange Fund of
Boston, Inc. (each a "Fund") will be held to vote on several important
proposals. ADOPTION OF THESE PROPOSALS, WHICH EACH FUND'S DIRECTORS HAVE
APPROVED AND BELIEVE WILL PROVIDE SIGNIFICANT BENEFITS TO THAT FUND AND ITS
STOCKHOLDERS WITHOUT ANY ADVERSE TAX CONSEQUENCES, REQUIRES APPROVAL OF THAT
FUND'S STOCKHOLDERS. As a stockholder, you are entitled to cast one vote for
each share that you own.
VOTING ONLY TAKES A FEW MINUTES -- PLEASE RESPOND PROMPTLY.
YOUR VOTE IS IMPORTANT, NO MATTER HOW MANY SHARES YOU OWN. If the required
votes are not received by June 4, 1996, it will be necessary to send further
mailings to secure it. This is a costly process and is paid for by your Fund.
Therefore, you, as a stockholder, ultimately pay for the expense of a delayed
vote. Please sign and return your proxy promptly to avoid this unnecessary
expense.
The Meetings are called to consider proposals for each Fund to adopt the Hub
and Spoke mutual fund structure and pursue its investment objective through
investing in the Tax-Managed Growth Portfolio (the "Portfolio"), an open-end
management investment company organized on October 23, 1995. The Portfolio has
substantially the same investment objective, policies and restrictions as each
Fund. The investors in the Portfolio as of this date are Capital Exchange Fund,
Inc., Depositors Fund of Boston, Inc., EV Marathon Tax- Managed Growth Fund and
EV Traditional Tax-Managed Growth Fund. The two Tax- Managed Growth Funds are
continuously offered open-end investment companies that recently have been
organized to invest in the Portfolio. In addition, the shareholders of
Diversification Fund, Inc. have approved a proposal to invest that fund's
investable assets in the Portfolio, with the transaction scheduled to take place
on May 31, 1996, at the conclusion of the fund's fiscal year. In adopting this
structure and investing in the Portfolio the Funds would be able to consolidate
their assets on a tax-free basis with those funds. Investing in the Portfolio
will enable each Fund to participate in a larger investment portfolio with a
greater number and a broader diversity of securities holdings. BY PARTICIPATING
IN A MORE DIVERSIFIED PORTFOLIO, EACH FUND MAY ACHIEVE MORE CONSISTENT RETURNS
OVER TIME. BY PARTICIPATING IN A LARGER PORTFOLIO, EACH FUND WILL BE IN A
POSITION TO ACHIEVE HIGHER RETURNS FOR SHAREHOLDERS BY REALIZING DIRECTLY AND
INDIRECTLY CERTAIN ECONOMIES OF SCALE AND OPERATING EFFICIENCIES. The Directors
believe that over time the aggregate per share expenses borne by each Fund's
stockholders should be less than the expenses that would be incurred if that
Fund continued to operate as a stand alone entity. There can, of course, be no
assurance these benefits will be realized and the tax and other consequences of
approval of the proposals are discussed in the accompanying proxy statement.
OTHER PROPOSALS YOU ARE VOTING ON.
At the Meetings, stockholders will be asked to amend each Fund's investment
objective to state more explicitly that consideration is given to investor taxes
in managing the investment portfolio. Stockholders will also be asked to amend
certain fundamental investment restrictions to enable the Fund to pursue
tax-efficient management strategies and to utilize certain modern investment
techniques commonly used by investment professionals. Amendment of the By-Laws
of each Fund to change the fiscal year-end of the Fund to that of the Portfolio
if Proposal 1 is approved also is proposed. Finally, amendment of the Articles
of Organization of each Fund with respect to reorganizations is proposed.
In addition, the stockholders of Fiduciary Exchange Fund, Inc. and Second
Fiduciary Exchange Fund, Inc. will be asked to vote upon matters relating to
an Annual Meeting.
THESE ARE VERY IMPORTANT MEETINGS. IF YOU DO NOT PLAN
TO ATTEND IN PERSON, PLEASE SIGN, DATE AND RETURN THE
ENCLOSED PROXY CARD TODAY.
The matters to be presented to the Meetings are described in detail in the
enclosed proxy statement. THE DIRECTORS BELIEVE THAT ALL OF THE PROPOSALS ARE IN
THE BEST INTERESTS OF EACH FUND AND ITS STOCKHOLDERS. The Directors believe that
converting the Funds to the Hub and Spoke structure will not expose stockholders
to significant new risks and will enable them to participate in a larger, more
diversified and potentially more attractive investment portfolio and to achieve
cost savings over time.
For the Board of Directors of each Fund
/s/ Landon T. Clay
Landon T. Clay, President and Director
<PAGE>
- -------------------------------------------------------------------------------
YOUR DIRECTORS URGE YOU TO VOTE IN FAVOR OF ALL PROPOSALS, AND LOOK
FORWARD TO RECEIVING YOUR PROXY SO YOUR SHARES CAN BE VOTED AT THE
MEETING. FOR YOUR CONVENIENCE AND TO SPEED DELIVERY OF YOUR PROXY,
PLEASE USE THE ENCLOSED POSTAGE-PAID ENVELOPE. YOUR PROMPT RESPONSE IS
APPRECIATED. THANK YOU.
- -------------------------------------------------------------------------------
<PAGE>
FIDUCIARY EXCHANGE FUND, INC.
SECOND FIDUCIARY EXCHANGE FUND, INC.
24 FEDERAL STREET, BOSTON, MA 02110
NOTICE OF SPECIAL MEETINGS IN LIEU OF
ANNUAL MEETINGS OF STOCKHOLDERS
THE EXCHANGE FUND OF BOSTON, INC.
24 FEDERAL STREET, BOSTON, MA 02110
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 4, 1996
A Special Meeting in lieu of the Annual Meeting of Stockholders of Fiduciary
Exchange Fund, Inc. and Second Fiduciary Exchange Fund, Inc., and a Special
Meeting of Stockholders of The Exchange Fund of Boston, Inc. (collectively the
"Funds"), will be held at the principal office of each Fund, 24 Federal Street,
Boston, Massachusetts, on June 4, 1996, commencing at 10:00 A.M. (Boston time),
for the following purposes:
FOR EACH FUND:
1. To consider and act upon a proposal to adopt a new investment policy to
authorize the Fund to invest its investable assets in Tax-Managed Growth
Portfolio an open-end management investment company having substantially
the same investment objective, policies and restrictions as the Fund, and
to supplement investment restrictions to permit such investment.
2. To consider and act upon a proposal to approve an Amendment to the
Fund's By-Laws to change its fiscal year-end.
3. To consider and act upon a proposal to eliminate, reclassify and amend
the Fund's investment objective and certain of the Fund's fundamental
investment policies (as set forth in Exhibit A to the accompanying Proxy
Statement).
4. To consider and act upon a proposal to approve an Amendment to the
Articles of Organization regarding reorganizations.
FOR FIDICUARY EXCHANGE FUND, INC. AND SECOND FIDUCIARY EXCHANGE FUND, INC.
ONLY:
5. To fix the number of Directors, and to elect a Board of Directors for the
ensuing year and until their successors are elected and qualified.
6. To ratify or reject the selection of Deloitte & Touche LLP as the
independent certified public accountants to be employed by a Fund to sign
or certify financial statements which may be filed by the Fund with the
Securities and Exchange Commission in respect of all or any part of its
current fiscal year.
FOR EACH FUND:
7. To consider and act upon any matters incidental to the foregoing purposes
or any of them, and any other matters which may properly come before said
meeting or any adjourned session theeof.
These items are discussed in greater detail in the following pages.
<PAGE>
Each Fund will hold a separate meeting. Stockholders of each Fund will vote
separately. Each meeting is called pursuant to the By-Laws of the Fund. The
Board of Directors of each Fund has fixed the close of business on April 15,
1996 as the record date for the determination of the stockholders of the Fund
entitled to notice of and to vote at the meeting and any adjournments thereof.
/s/ Thomas Otis
April 19, 1996 THOMAS OTIS
Clerk
IMPORTANT -- STOCKHOLDERS CAN HELP THE BOARD OF DIRECTORS OF THEIR FUND AVOID
THE NECESSITY AND ADDITIONAL EXPENSE TO THE FUND OF FURTHER SOLICITATIONS TO
INSURE A QUORUM BY PROMPTLY RETURNING THE ENCLOSED PROXY. THE ENCLOSED ADDRESSED
ENVELOPE REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES AND IS INTENDED FOR
YOUR CONVENIENCE.
<PAGE>
FIDUCIARY EXCHANGE FUND, INC.
SECOND FIDUCIARY EXCHANGE FUND INC.
THE EXCHANGE FUND OF BOSTON, INC.
24 FEDERAL STREET, BOSTON, MASSACHUSETTS 02110
April 19, 1996
PROXY STATEMENT
A proxy is enclosed with the foregoing Notice of the Special Meetings in
lieu of the Annual Meeting's of Stockholders of Fiduciary Exchange Fund, Inc.
(the "Fiduciary Fund") and Second Fiduciary Exchange Fund, Inc. (the "Second
Fiduciary Fund") and a Special Meeting of Stockholders of The Exchange Fund of
Boston, Inc. (the "Exchange Fund"), (collectively the "Funds") to be held June
4, 1996 for the benefit of stockholders who do not expect to be present at the
meeting. This proxy is solicited on behalf of the Board of Directors of each
Fund, and is revocable by the person giving it prior to exercise by a signed
writing filed with the Fund's transfer agent, First Data Investor Services
Group, BOS725, P.O. Box 1559, Boston, Massachusetts 02104, or by executing and
delivering a later dated proxy, or by attending the meeting and voting your
shares in person. Each proxy will be voted in accordance with its instructions;
if no instruction is given, an executed proxy will authorize the persons named
as attorneys, or any of them, to vote in favor of each such matter. This proxy
material is being mailed to stockholders on or about April 19, 1996.
The Board of Directors of each Fund have fixed the close of business April
15, 1996, as the record date for the determination of the stockholders entitled
to notice of and to vote at that meeting and any adjournments thereof.
Stockholders at the close of business on the record date will be entitled to one
vote for each share held. As of April , 1996, there were shares
of capital stock of Fiduciary Fund outstanding shares of
capital stock of Second Fiduciary Fund outstanding and shares of
capital stock of Exchange Fund outstanding. As of such date, the following
stockholders beneficially owned the following number of shares (at least 5% of
outstanding shares); Fiduciary Fund , Second Fiduciary
Fund , Exchange Fund . To the knowledge of each
Fund, no other person owns (of record or beneficially) more than 5% of its
outstanding shares.
The Board of Directors of each Fund know of no business other than that
mentioned in Items 1 through 6 of the Notice of the Meetings which will be
presented for consideration. If any other matters are properly presented, as to
such matters, it is the intention of the persons named as attorneys in the
enclosed proxy to vote the proxies in accordance with their judgment.
<PAGE>
PROPOSAL 1. TO APPROVE A NEW INVESTMENT POLICY
AND TO SUPPLEMENT INVESTMENT RESTRICTIONS TO
PERMIT A NEW INVESTMENT STRUCTURE FOR EACH FUND
SUMMARY
The Board of Directors of each Fund has approved, and is submitting to the
stockholders for approval, the adoption of a new investment policy for the Fund
and the addition of a fundamental investment provision to permit the Fund to
invest its "investable assets" (portfolio securities and cash) in an open-end
management investment company, the Tax-Managed Growth Portfolio (the
"Portfolio"), having substantially the same investment objective, policies and
restrictions as the Fund. The new investment policy and change in the investment
restrictions for a Fund are subject to approval by the Fund's stockholders. If
this Proposal is approved by a Fund's stockholders, the Directors intend to
invest that Fund's investable assets in the Portfolio, thereby converting the
Fund to the Hub and Spoke(R) structure. (Hub and Spoke(R) is a registered
service mark of Signature Financial Group, Inc.)
NEW INVESTMENT POLICY
The Board of Directors of each Fund recommend that the stockholders approve
a new investment policy for the Fund, i.e., to invest its investable assets in
the Portfolio. The Portfolio is a trust which, like the Funds, is registered as
an open-end management company under the Investment Company Act of 1940 (the
"Act"). The Portfolio will have substantially the same investment objective,
policies and restrictions as the Fund if shareholders approve Proposal 3. Eaton
Vance Management ("EVM") is currently the investment adviser of each Fund and
its wholly-owned subsidiary, Boston Management and Research ("BMR"), is the
investment adviser of the Portfolio. EVM, BMR and Eaton Vance Distributors, Inc.
("EVD") are sometimes referred to collectively as the "Eaton Vance"
organization. Accordingly, by investing in the Portfolio, each Fund would seek
its investment objective through its investment in the Portfolio, rather than
through direct investments in securities. The Portfolio in turn would invest in
securities in accordance with its objective, policies and restrictions.
The Portfolio is a no-load investment company organized as a trust under New
York law on October 23, 1995. The interests in the Portfolio are not available
for purchase by members of the general public. As of April 1, 1996, net assets
of the Portfolio totalled $ .
By investing in the Portfolio, each Fund would be able to consolidate its
assets on a tax-free basis with the Portfolio's existing investors and one other
investment company investor. Establishing the Portfolio enables the Eaton Vance
organization to sponsor new investment vehicles that can invest in the Portfolio
without assuming potential liability for each Fund's large unrealized capital
gains. Two continuously offered open-end investment companies have recently been
organized to invest in the Portfolio. Investing in the Portfolio will enable
each Fund to participate in a larger, more diversified and potentially more
attractive investment portfolio. Each Fund would be in a position to benefit,
directly or indirectly, from certain economies of scale, based on the premise
that certain of the expenses of operating an investment portfolio are relatively
fixed and that a larger investment portfolio may eventually achieve a lower
ratio of operating expenses to average net assets. The Directors also believe
that investing in the Portfolio may produce other benefits resulting from such
increased asset size such as the ability to purchase securities in larger
amounts than a Fund currently is able to acquire. See the pro forma expense
tables and the discussion provided below. There can be no assurance that these
anticipated benefits will be realized.
Investors in any Fund will not assume potential liability for the unrealized
capital gains of other investment companies that invest in the Portfolio. During
the first five years after each Fund invests in the Portfolio, the Portfolio
does not intend to distribute securities contributed by that Fund to any
investor in the Portfolio other than the Fund. Therefore, adopting the Hub-and
Spoke structure itself should not subject a Fund's stockholders to increased
capital gain realizations. A more diverse portfolio of investments will,
however, affect investment returns. Although the consistency of returns over
time should improve with a more diversified portfolio, the level of returns
(including dividends) could be higher or lower than what each Fund would achieve
in its current form.
To the extent that each Fund invests its investable assets in the Portfolio,
the Funds would no longer require investment advisory services and would have a
reduced need for certain administrative services. For this reason, if
stockholders of a Fund adopt the new investment policy and approve the addition
to the investment restrictions described in this Proposal, and the Fund invests
its investable assets in the Portfolio, no investment advisory fees will be paid
under the existing investment advisory agreement of that Fund with EVM.
Currently, under their existing investment advisory agreements with EVM, each
Fund pays a monthly fee of 5/96 of 1% (equivalent to .625% annually) of the
average daily net assets of that Fund.
Boston Management and Research acts as investment adviser to the Portfolio
pursuant to an Investment Advisory Agreement between BMR and the Portfolio (the
"Agreement"). BMR, a Massachusetts business trust, is a wholly-owned subsidiary
of EVM. BMR or EVM act as investment adviser to investment companies and various
individual and institutional clients with combined assets under management of
approximately $16 billion. EVM, a Massachusetts business trust, is a
wholly-owned subsidiary of Eaton Vance Corp. ("EVC"), a holding company which
through subsidiaries and affiliates is engaged primarily in investment
management marketing, and administration activities. BMR and EVM employ the same
investment personnel to provide advisory services to their respective clients.
Pursuant to the Agreement, BMR will be paid a monthly fee calculated in the
same manner as the fee currently being paid by each Fund, on average daily net
assets of the Portfolio up to $500 million. On net assets of $500 million and
over the annual fee is reduced as follows:
ANNUALIZED FEE RATE
AVERAGE DAILY NET ASSETS FOR THE MONTH (FOR EACH LEVEL)
- -------------------------------------- ----------------
$500 million but less than $1.0 billion .5625%
$1.0 billion but less than $1.5 billion .5000%
$1.5 billion and over .4375%
If the average daily net assets of the Portfolio should grow to over $500
million, lower advisory fee rates would go into effect in accordance with the
above schedule. Thus, the total investment advisory fee received by EVM and its
subsidiary will not increase as a result of the implementation of the Funds'
proposed investment in the Portfolio.
The Agreement will remain in full force and effect through February 28,
1997, and will continue in full force and effect indefinitely thereafter, but
only so long as such continuance is specifically approved at least annually (i)
by the board of trustees of the Portfolio or by vote of a majority of the
outstanding voting securities (as defined in the Act) of the Portfolio, and (ii)
by the vote of a majority of those trustees of the Portfolio who are not
interested persons (as defined in the Act) of BMR or the Portfolio cast in
person at a meeting called for the purpose of voting on such approval. In
connection with the organization of the Portfolio, the Agreement was approved by
the trustees of the Portfolio, including a majority of those trustees who are
not interested persons of BMR or the Portfolio, on October 23, 1995, and by vote
of EVM and BMR, which were then the holders of all the outstanding voting
securities of the Portfolio, on October 24, 1995. At the time of such action by
the trustees of the Portfolio, Mr. Clay, a director and officer of EVC and Eaton
Vance, Inc. (EVM's and BMR's Trustee, which is a wholly-owned subsidiary of
EVC), and an officer of BMR and EVM, and a Voting Trustee and stockholder of
EVC, was a trustee of the Portfolio.
Under the terms of the Agreement, the Portfolio will employ BMR to act as
investment adviser for and to manage the investment and reinvestment of the
assets of the Portfolio and to administer its affairs, subject to the
supervision of its trustees. BMR furnishes to the Portfolio investment advice
and assistance, administrative services, office space, equipment and clerical
personnel, and investment advisory, statistical and research facilities, and has
arranged for certain members of the BMR organization to serve without salary as
officers or trustees of the Portfolio.
In approving the Agreement for the Portfolio, the trustees of the Portfolio
have taken into account such factors and information as were deemed by them to
be relevant to BMR's investment advisory relationship with the Portfolio. In
their deliberations the trustees have considered: the requirements and needs of
the Portfolio for management and administrative services and facilities, the
desirability of providing for the management of the Portfolio through the Eaton
Vance organization (of which BMR is a part), the nature, extent and quality of
the management and administrative services and facilities heretofore provided by
the Eaton Vance organization to the predecessor funds, the ability of BMR's
personnel, the fiduciary duties and risks to be assumed by the BMR organization
and its commitment to provide management and administrative services and
facilities to the Portfolio on a continuing basis, the aggregate of the
compensation and benefits which will be received by the BMR organization
pursuant to the Agreement, the necessity that the BMR organization maintain its
ability to retain and attract capable personnel to service the Portfolio, the
continuance of appropriate incentives to assure that the BMR organization will
provide high quality management and administrative services to the Portfolio,
the revenues, expenses, financial condition, stability and capabilities of the
Eaton Vance organization, the advantages to the Portfolio of being one of many
investment companies advised and administered by the Eaton Vance organization,
the investment performance of the predecessor funds since its inception, the
various investment strategies and techniques to be employed by BMR to enhance
the Portfolio's investment performance, current developments and trends in the
mutual fund and financial services industries including the entry of large and
highly capitalized companies which are spending and appear to be prepared to
continue to spend substantial amounts to engage personnel and to provide
services for competing mutual funds, and other information and factors which the
trustees believed relevant to the matter.
Portfolio Manager. Duncan W. Richardson, Vice President of EVM and BMR has
acted as the portfolio manager of the Portfolio since inception and of its
predecessor, Capital Exchange Fund, Inc., since March of 1990. Mr. Richardson
has acted as the portfolio manager of Fiduciary Fund since March, 1990 and of
Second Fiduciary Fund since December, 1995. Thomas E. Faust, Jr., Vice President
of EVM and BMR has acted as the portfolio manager of Exchange Fund since
September of 1993.
The Agreement provides that it may be terminated at any time without penalty
on sixty days' notice by BMR or by the trustees of the Portfolio or by vote of a
majority of the outstanding voting securities of the Portfolio, and that it
shall automatically terminate in the event of its assignment. The Agreement
provides that BMR may render services to others and engage in other business
activities. The Agreement also provides that BMR shall not be liable for any
loss incurred in connection with the performance of its duties, or action taken
or omitted under the Agreement in the absence of willful misfeasance, bad faith
or gross negligence in the performance of its duties or by reason of its
reckless disregard of its obligations and duties thereunder, or for any losses
which may be sustained in the acquisition, holding or disposition of any
security or other investment.
EVM currently acts as investment adviser to Vance, Sanders Exchange Fund
which has a similar investment objective and net assets of $ as of March
31, 1996. The current rate of compensation as a percentage of net assets is
.600%. The foregoing fund may become an investor in the Portfolio at a future
time.
Upon exchange of the investable assets of a Fund for an interest in the
Portfolio, that Fund will retain the services of EVM under an administrative
services agreement to act as administrator of the Fund. The Funds will not
retain the services of an investment adviser since each Fund seeks to achieve
its investment objective by investing its assets in the Portfolio. Under each
administrative services agreement, EVM would provide a Fund with general office
facilities and supervise the overall administration of the Fund. For these
services EVM currently receives no compensation. The Directors of each Fund may
determine, in the future, to compensate EVM for its services under the
administrative services agreement.
The Portfolio and each Fund, as the case may be, will each be responsible
for all respective costs and expenses not expressly stated to be payable by BMR
under the investment advisory agreement with the Portfolio, or by EVM under the
administrative services agreement with that Fund. Such costs and expenses to be
borne by the Portfolio and a Fund, 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; expenses of
acquiring, holding and disposing of securities and other investments; fees and
expenses of registering under the securities laws and governmental fees;
expenses of reporting to stockholders and investors; proxy statements and other
expenses of stockholders' or investors' meetings; insurance premiums; printing
and mailing expenses; interest, taxes and corporate fees; legal and accounting
expenses; compensation and expenses of trustees or Directors, as the case may
be, not affiliated with BMR or EVM; and investment advisory fees and, if any,
administrative services fees. The Portfolio and the Fund will also each bear
expenses incurred in connection with litigation in which the Portfolio or the
Fund, as the case may be, is a party and any legal obligation to indemnify its
respective officers and trustees or Directors, as the case may be, with respect
thereto.
The following tables show the actual expenses of Fiduciary Fund and Second
Fiduciary Fund for the fiscal year ended December 31, 1995, and of Exchange Fund
for the six months ended December 31, 1995 (annualized) and a pro forma
adjustment thereof assuming a particular Fund had invested its investable assets
in the Portfolio for the entire period then ended. The pro forma adjustment
includes the estimated costs of converting a Fund to the Hub and Spoke structure
and the estimated costs of this proxy solicitation (approximately $4,000 per
Fund). The pro forma adjustment assumes that: (i) the holders of interests in
the Portfolio are the existing investors in the Portfolio, an additional
investment company investor which will invest in the Portfolio on May 31, 1996
and a particular Fund; and (ii) the average daily net assets of that Fund and
the Portfolio were equal to the actual average daily net assets of the Fund, the
Portfolio and, if necessary, the investors in the Portfolio prior to such
investment on the pro forma date.
FIDUCIARY FUND
OPERATING EXPENSES FOR THE FISCAL YEAR
ENDED DECEMBER 31, 1995
PRO FORMA (ASSUMING THAT THE AVERAGE
DAILY NET ASSETS INVESTED BY
THE FUND IN THE PORTFOLIO WERE
APPROXIMATELY $334,472,000)
------------------------------------
ACTUAL FUND PORTFOLIO TOTAL
------ ---- --------- -----
Annual Fund Operating Expenses
Investment advisory fees 0.625% -- 0.625% 0.625%
Other expenses 0.195% 0.095% 0.085% 0.180%
------ ------ ------ ------
Total Fund Operating Expenses 0.820% 0.095% 0.710% 0.805%
====== ====== ====== ======
Assuming that Fiduciary Fund, the existing investors and an additional
investment company investor which will invest in the Portfolio on May 31, 1996
were the holders of interests in the Portfolio and that the Fund was fully
invested therein, the net asset value per share, distributions per share and net
investment income per share of the Fund would have been about the same on a pro
forma basis as the actual net asset value, distributions and net investment
income per share of the Fund during the period indicated. If Second Fiduciary
Fund and Exchange Fund also invested in the Portfolio, the projected operating
total expense ratio would be reduced to approximately 0.80%.
SECOND FIDUCIARY FUND
OPERATING EXPENSES FOR THE FISCAL YEAR
ENDED DECEMBER 31, 1995
PRO FORMA (ASSUMING THAT THE AVERAGE
DAILY NET ASSETS INVESTED BY
THE FUND IN THE PORTFOLIO WERE
APPROXIMATELY $348,841,000)
------------------------------------
ACTUAL FUND PORTFOLIO TOTAL
------ ---- --------- -----
Annual Fund Operating Expenses
Investment advisory fees 0.625% -- 0.625% 0.625%
Other expenses 0.175% 0.090% 0.080% 0.170%
------ ------ ------ ------
Total Fund Operating Expenses 0.800% 0.090% 0.705% 0.795%
====== ====== ====== ======
Assuming that Second Fiduciary Fund, the existing investors and an
additional investment company investor which will invest in the Portfolio on May
31, 1996 were the holders of interests in the Portfolio and that the Fund was
fully invested therein, the net asset value per share, distributions per share
and net investment income per share of the Fund would have been about the same
on a pro forma basis as the actual net asset value, distributions and net
investment income per share of the Fund during the period indicated. If
Fiduciary Fund and Exchange Fund also invested in the Portfolio, the projected
operating total expense ratio would be reduced to approximately 0.79%.
EXCHANGE FUND
OPERATING EXPENSES FOR THE SIX MONTHS
ENDED DECEMBER 31, 1995
(ANNUALIZED AS A PERCENT OF AVERAGE DAILY NET ASSETS)
PRO FORMA (ASSUMING THAT THE AVERAGE
DAILY NET ASSETS INVESTED BY
THE FUND IN THE PORTFOLIO WERE
APPROXIMATELY $353,329,000)
----------------------------------
ACTUAL FUND PORTFOLIO TOTAL
------ ---- --------- -----
Annual Fund Operating Expenses
Investment advisory fees 0.625% -- 0.625% 0.625%
Other expenses 0.205% 0.085% 0.080% 0.165%
------ ------ ------ ------
Total Fund Operating Expenses 0.830% 0.085% 0.705% 0.790%
====== ====== ====== ======
Assuming that Exchange Fund, the existing investors and an additional
investment company investor which will invest in the Portfolio on May 31, 1996
were the only holders of interests in the Portfolio and that the Fund was fully
invested therein, the net asset value per share, distributions per share and net
investment income per share of the Fund would have been about the same on a pro
forma basis as the actual net asset value, distributions and net investment
income per share of the Fund during the period indicated. If Fiduciary Fund and
Second Fiduciary Fund also invested in the Portfolio, the projected operating
total expense ratio would be reduced to approximately 0.78%.
In recommending that the stockholders authorize the conversion of each Fund
to the Hub and Spoke structure, the Directors of that Fund have taken into
account and evaluated the possible effects which increased assets in the
Portfolio may have on the expense ratio of that Fund. After carefully weighing
the costs involved against the anticipated benefits of converting a Fund to the
Hub and Spoke structure, the Board of Directors of each Fund recommend that the
stockholders of that Fund vote to approve Proposal 1.
If Proposal 1 is approved by stockholders of a Fund, the relevant Board of
Directors expects to implement the investment for that Fund by causing the Fund
to exchange its investable assets (portfolio securities and cash) as well as
certain other assets (including receivables for securities sold from the
portfolio and receivables for dividends and interest on portfolio securities)
for an interest in the Portfolio. The proposed transaction will not alter the
rights and privileges of stockholders of the Fund. The value of a stockholder's
investment in the Fund will be the same immediately after the Fund's investment
in the Portfolio as immediately before that investment. Of course, the value of
a stockholder's investment in the Fund may fluctuate thereafter.
Each Fund would be able to withdraw its investment in the Portfolio at any
time, if the relevant Directors determine that it is in the best interests of a
Fund to do so. Upon any such withdrawal, the Directors of that Fund would
consider what action might be taken, including the investment of the investable
assets of the Fund in another pooled investment entity having substantially the
same investment objective as the Fund or the retention of an investment adviser
to manage the Fund's assets in accordance with its investment policies as is
presently the case.
DESCRIPTION OF THE PORTFOLIO
The investment objective of the Portfolio is the same as the objective of
the Fund, assuming Proposal 3 is approved. The Portfolio seeks to achieve its
investment objective through investments limited to the types of securities in
which each Fund is authorized to invest. The investment restrictions and
policies of the Portfolio are such that the Portfolio may not invest in any
security or engage in any transaction which would not be permitted by the
investment restrictions and policies of a Fund if that Fund were to invest
directly in such a security or engage directly in such a transaction, again
assuming Proposal 3 is approved.
If the proposed investment in the Portfolio is implemented, that Fund's
assets would no longer be directly invested in a portfolio of securities but
would rather be invested in the securities of a single issuer, i.e., the
Portfolio, which is a New York trust, and is registered as an open-end
management investment company under the Act. Nevertheless, inasmuch as the
assets of the Portfolio would be directly invested in a portfolio of securities,
each Fund believes there are no material risks of investing in the Portfolio
that are different from those to which stockholders of that Fund are currently
subject.
The approval of the Portfolio's investors (i.e., holders of interests in the
Portfolio, such as the Funds) would be required to change any of its investment
restrictions; however, any change in nonfundamental investment policies would
not require such approval. For a discussion of when Fund stockholders would be
requested to vote on Portfolio matters, see page 10 below.
Like each Fund, the Portfolio determines its net asset value 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. The Portfolio's net asset value is
computed by determining the value of the Portfolio's total assets (the
securities it holds plus any cash or other assets, including interest accrued
but not yet received), and subtracting all of the Portfolio's liabilities
(including accrued expenses).
Securities listed on securities exchanges or in the NASDAQ National Market
are valued at closing sale prices. Unlisted or listed securities for which
closing sale prices are not available are valued at the closing bid prices.
Short-term obligations maturing in sixty days or less are valued at amortized
cost, which approximates market. Other assets are valued at fair value using
methods determined in good faith by the Trustees.
Each Fund's net asset value is determined at the same time and on the same
days that the net asset value of the Portfolio is calculated. Net asset value
per share is computed by determining the value of the Fund's assets (its
investment in the Portfolio and other assets), subtracting all of the Fund's
liabilities (including accrued expenses), and dividing the result by the total
number of shares outstanding at such time.
As a partnership under the Internal Revenue Code, the Portfolio does not pay
Federal income or excise taxes. Provided the Fund qualifies as a regulated
investment company for Federal income tax purposes and the Portfolio is treated
as a partnership for Federal and Massachusetts tax purposes, neither is liable
for income, corporate excise tax or franchise tax in Massachusetts.
Interests in the Portfolio have no pre-emptive or conversion rights, and are
fully paid and non-assessable, except as set forth below. The Portfolio normally
will not hold meetings of holders of such interests except as required under the
Act. The Portfolio would be required to hold a meeting of holders in the event
that at any time less than a majority of the trustees holding office had been
elected by holders. The trustees of the Portfolio continue to hold office until
their successors are elected and have qualified. Holders holding a specified
percentage interest in the Portfolio may call a meeting of holders in the
Portfolio for the purpose of removing any trustee. A trustee of the Portfolio
may be removed upon a majority vote of holders in the Portfolio qualified to
vote in the election. The Act requires the Portfolio to assist its holders in
calling such a meeting. Upon liquidation of the Portfolio, holders in the
Portfolio would be entitled to share pro rata in the net assets of the Portfolio
available for distribution to holders.
Each holder in the Portfolio is entitled to a vote in proportion to its
share of the interests in the Portfolio. Except as described below, whenever a
Fund is requested to vote on matters pertaining to the Portfolio, the Fund will
hold a meeting of its stockholders and will cast its votes proportionately as
instructed by Fund stockholders.
Subject to applicable statutory and regulatory requirements, a Fund would
not request a vote of its stockholders with respect to (a) any proposal relating
to the Portfolio, which proposal, if made with respect to the Fund, would not
require the vote of the stockholders of the Fund, or (b) any proposal, with
respect to the Portfolio that is identical, in all material respects, to a
proposal that has previously been approved by stockholders of the Fund. Any
proposal submitted to holders in the Portfolio, and that is not required to be
voted on by stockholders of the Fund, would nonetheless be voted on by the
Directors of that Fund.
Investments in the Portfolio may not be transferred, but a holder may
withdraw all or any portion of its investment at any time at net asset value.
Each holder in the Portfolio, including each Fund, will be liable for all
obligations of the Portfolio. However, the risk of a holder in the Portfolio
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. Thus, stockholders of the Funds should
not experience losses from the new investment structure itself.
The Portfolio has its own board of trustees, including a majority of
trustees who are not "interested" persons of the Portfolio as defined in the
Act. The present trustees of the Portfolio are identical to the present
Directors of each Fund.
TAX CONSIDERATIONS
The Internal Revenue Service has issued private letter rulings to numerous
investment companies, including other EVM advised funds, to the effect that this
type of transaction will not result in recognition of capital gains. Such
rulings are not binding on the Service with respect to the Funds. Nevertheless,
each Fund has received an opinion of tax counsel, Brown & Wood, to the effect
that, although there is no judicial authority directly on point, the
contribution of its assets to the Portfolio in exchange for an interest in the
Portfolio will not result in the recognition of gain or loss to the Fund for
federal income tax purposes pursuant to Internal Revenue Code Section 721 and
related authorities. The Funds have not applied for a ruling from the Internal
Revenue Service to the same effect and legal opinions are not binding on the
Service. If it were determined that the transaction was taxable, a Fund would
realize and recognize gain in an amount equal to the appreciation (undiminished
by losses) in the transferred assets as of the date of the transfer (the "deemed
gain"). If a Fund did not make a distribution to its stockholders equal to all
or a portion of the deemed gain, the Fund could be subject to tax (plus interest
and penalties) on all or a portion of the deemed gain. Alternatively, if a Fund
were to make a distribution to its stockholders in an amount equal to all or a
portion of the deemed gain, then its stockholders at the time of such
distribution would be taxed on the amount distributed and the Fund could be
required to pay penalties and/or interest. Depending on the amount and nature of
the deemed gain and the Fund's previous distributions of gains with respect to
the same taxable year, the Fund might be required to make the distribution
described in the preceding sentence in order to preserve its qualification under
the Internal Revenue Code (the "Code") as a regulated investment company.
As of March 28, 1996, the gross unrealized appreciation in the assets of the
Funds on a federal income tax basis was $44,232,557 for Fiduciary Fund
$59,983,823 for Second Fiduciary Fund and $63,655,383 for Exchange Fund. The
amount of gross unrealized appreciation in the assets of a Fund at the time of
transfer of that Fund's assets to the Portfolio may be more or less than the
amount indicated in the preceding sentence, and no assurance can be given as to
the magnitude of such amount at the time of such transfer.
As regulated investment companies under the Code, the Funds do not pay
federal income or excise taxes to the extent that they distribute to
stockholders their net investment income and net realized capital gains in
accordance with the timing requirements imposed by the Code.
Stockholders redeeming a Fund's shares will not recognize additional capital
gains as a result of the use of the Hub and Spoke structure. Such shareholders
will generally receive securities during the first five years after the
conversion which were held by the Fund on the conversion date, and thereafter
could receive such securities or any other portfolio securities then held by the
Portfolio.
PROPOSED SUPPLEMENT TO INVESTMENT RESTRICTIONS
Certain of each Fund's investment restrictions must be amended, eliminated
or reclassified in order for that Fund to invest its investable assets in the
Portfolio. (See investment restrictions (1), (4), (10), (13) and (14) in Exhibit
A.) The Board of Directors of each Fund has approved, subject to a stockholder
vote, a supplemental provision to be added to the investment restrictions to
permit a Fund to invest its investable assets in the Portfolio.
The Board of Directors of each Fund propose that these restrictions and all
other investment restrictions be supplemented with an additional fundamental
investment provision as follows: "(15) Notwithstanding the investment policies
and restrictions of the Fund, the Fund may invest all of its investable assets
in an open-end management investment company with substantially the same
investment objective, policies and restrictions as the Fund."
The additional investment provision would also apply to any conflicting
nonfundamental investment policies. (The current investment restrictions would
also be revised if Proposal 3 is approved.)
EVALUATION BY THE FUNDS' DIRECTORS
The Board of Directors of each Fund has carefully considered Proposal 1,
which will in effect authorize the conversion of the Fund to the Hub and Spoke
structure. Each Board has carefully evaluated the potential benefits that would
be associated with this Proposal. In this regard, each Board believes that the
Portfolio will benefit from other collective investment vehicles which will have
investors who would not otherwise be investors in the relevant Fund. Investors
in the Portfolio include Capital Exchange Fund, Inc., Depositors Fund of Boston,
Inc., EV Marathon Tax-Managed Growth Fund, EV Traditional Tax-Managed Growth
Fund and Diversification Fund, Inc. (on May 31, 1996) and may include other
established investment companies advised by Eaton Vance with substantially the
same investment objectives and policies as the Fund. By adopting the
Hub-and-Spoke structure the Funds can participate in a larger, more diversified
and potentially more attractive investment portfolio. By this pooling of assets
the Portfolio is likely, over time, to achieve a variety of operating economies.
The larger asset size of the Portfolio, in the Board's view, can be expected to
permit the purchase of investments in larger amounts than the Funds currently
are able to purchase, which may reduce certain operating expenses indirectly
borne by the Fund's stockholders. In general, to the extent that certain
operating costs are relatively fixed and currently are borne by a Fund alone,
these expenses would instead be borne in whole or in part by the Portfolio and
shared by the Fund's stockholders with other investors in the Portfolio. There
can be no assurance that such benefits will be realized. The Board also
recognized that BMR could benefit from the proposed structure because such
structure could enable BMR to increase its assets under management through the
development of new vehicles to attract investor assets.
The Directors of each Fund believe that over time the aggregate per share
expenses of that Fund and the Portfolio should be less than the expenses that
would be incurred by the Fund if it continued to retain the services of an
investment adviser and to invest directly in securities although there can be no
assurance that such expense savings will be realized. The Boards also considered
risks associated with an investment in the Portfolio. The Directors believe that
the Portfolio's investment policies and restrictions involve substantially the
same risks as are associated with that Fund's direct investment in securities.
Based on their consideration, analysis and evaluation of the above factors
and other information deemed by them to be relevant to this Proposal, each
Fund's Board of Directors (including the Independent Directors) have concluded
that it would be in the best interests of the Fund and its stockholders to
approve a new investment policy and supplement to the Fund's investment
restrictions to enable the Fund to invest its investable assets in the
Portfolio. If Proposal 1 is approved it is anticipated that each Fund would
convert to the Hub and Spoke(R) structure and invest in the Portfolio as of the
end of June 1996 which is the current fiscal year end for Exchange Fund and the
six-month fiscal period for Fiduciary Fund and Second Fiduciary Fund.
VOTE REQUIRED TO APPROVE PROPOSAL 1
Approval by the stockholders of each Fund of the new investment policy and
supplement to its fundamental investment restrictions requires the affirmative
vote of a majority of the outstanding voting securities of the Fund which term
as used in this Proxy Statement means the vote of the lesser of (a) more than
50% of the outstanding shares of the Fund, or (b) 67% of the shares of the Fund
present at the meeting if the holders of more than 50% of the outstanding shares
of the Fund are present or represented by proxy at the meeting.
THE DIRECTORS OF EACH FUND RECOMMEND THAT THE STOCKHOLDERS OF THE FUND VOTE
TO APPROVE THIS PROPOSAL. Implementation of this Proposal is dependent upon
approval of Proposals 2 and 3. In the event the stockholders of a Fund fail to
approve this Proposal, the Directors would continue to retain EVM as the
investment adviser for that Fund to manage the Fund's assets through direct
investments in securities, and the Fund's existing investment advisory agreement
between EVM and the Fund would continue in effect in its current form.
PROPOSAL 2. TO APPROVE AN AMENDMENT TO THE
BY-LAWS OF EACH FUND
The Directors of each Fund recommend amending each Fund's By-Laws to change
the fiscal year end of that Fund to October 31 effective at the time of
conversion if Proposal 1 is approved by the Fund's shareholders. The purpose of
this change is to establish the same fiscal year end for the Funds and the
Portfolio which will substantially reduce audit costs in future years. Approval
of the amendment requires the affirmative vote of a majority of the outstanding
shares of stock, and implementation is dependent on approval of Proposals 1 and
3.
PROPOSAL 3. TO APPROVE THE ELIMINATION,
RECLASSIFICATION AND/OR AMENDMENT OF THE FUND'S
INVESTMENT OBJECTIVE AND CERTAIN FUNDAMENTAL
INVESTMENT POLICIES
The Act requires registered investment companies like the Funds to have
certain specific investment policies which can be changed only by a shareholder
vote. Investment companies may also elect to designate other policies which may
be changed only by a shareholder vote. Both types of policies are often referred
to as "fundamental" policies. (In this Proxy Statement, the word "restriction"
is sometimes used to describe a policy.) Some fundamental policies have been
adopted in the past by the Funds to reflect certain regulatory, business or
industry conditions which are no longer in effect. Accordingly, the Directors
authorized a review of the Funds' fundamental policies to simplify and modernize
those policies which are required to be fundamental, and to eliminate as
fundamental any policies which are not required to be fundamental under the
positions of the staff of the Securities and Exchange Commission in interpreting
the Act, in which case, depending on the circumstances, the policy would be
reclassified as a nonfundamental policy in the same or a modified form, or
eliminated. Nonfundamental policies can be changed by the Directors without
stockholder approval. Revision of fundamental policies have been approved by
shareholders of numerous other funds advised by EVM, and if these revisions are
approved then the uniformity of such policies would serve to facilitate EVM's
compliance efforts.
This Proposal seeks stockholder approval of changes which are intended to
accomplish the foregoing goals. In addition, the revised policies would be in
conformity with those of the Portfolio to allow implementation of the Hub and
Spoke structure. Because an investor in the Portfolio has registered its
securities with state securities ("Blue Sky") laws, each Fund's policies should
also be conformed to such laws. The proposed changes to the fundamental policies
are discussed in detail below. Please refer to the changes to the policies as
set forth in Exhibit A (which does not include the additional fundamental
investment provision to be added if Proposal 1 is approved). By reducing to a
minimum those policies which can be changed only by stockholder vote, each Fund
would be able to avoid the costs and delay associated with a future stockholder
meeting and the Directors believe that EVM's ability to manage the Fund's
portfolio in a changing regulatory or investment environment will be enhanced.
Accordingly, investment management opportunities will be increased. The
references to the Funds' investment restrictions correspond to the paragraphs in
Exhibit A. If this Proposal is approved, the restrictions would be reordered.
Aside from the changes to restrictions (6), (7), (11) and (12), the proposed
changes will not affect current management of either Fund's portfolio. See "Use
of Modern Investment Management Techniques" below.
RECLASSIFICATION AND AMENDMENT OF THE INVESTMENT OBJECTIVE
Each Fund's present investment objective is "to seek long-term growth of
capital and income." Among the principal investment policies are that the Fund
invests in "a diversified list of common stocks representing a number of
different industries" and that "one of the factors which will be considered
before any portfolio securities are sold will be the resulting tax liability."
It is proposed that the investment objective be modified to express more
explicitly the focus on investing in a diversified portfolio of stocks, and the
consideration given to investor taxation in managing the investment portfolio.
The proposed new objective is to "achieve long-term, after-tax returns for its
shareholders through investing in a diversified portfolio of equity securities."
The proposed change would not affect portfolio management.
Modifying the statement of each Fund's investment objective in the manner
proposed will clarify the management focus of the Funds. The Funds and other
investment vehicles that invest in the Portfolio need to adopt the same
objective as the Portfolio. Expressing the investment objective in a way that
emphasizes the focus on after-tax returns is thought to enhance the investor
appeal of these investment vehicles, potentially leading to greater success in
adding additional assets to the Portfolio than if the present statement of the
Funds' objective were retained. As discussed in Proposal 1, adding additional
assets should enable the Fund to realize certain portfolio benefits and
economies of scale.
The Directors of each Fund also propose that the objective become
"nonfundamental", which means the Directors could change it without stockholder
approval in the future. The Directors have no present intention to change the
objective other than as discussed above, and intend to submit any further
proposed change which would be material to stockholders in advance for approval.
ELIMINATION OF CERTAIN RESTRICTIONS
The Directors propose to delete Restrictions (3) and (7) because such
restrictions are not required to be fundamental policies under the Act or state
"Blue Sky" laws and/or the practices referred to therein are otherwise governed
by the Act.
Restriction (3) concerning investment in other investment companies prohibit
a Fund from investing in securities of other investment companies and investment
funds. Investment in other investment companies is regulated by the Act and this
restriction does not contain all of the provisions in the Act regarding such
investments.
Restriction (7) concerning pledging, mortgaging or hypothecating the assets
of a Fund is being deleted as pledging restrictions are no longer required by
state law. Restriction (6), as revised, contains limitations on leverage.
RECLASSIFICATION OF CERTAIN RESTRICTIONS
The Directors also propose that Restrictions (4) and (10) be eliminated as
fundamental, but be retained as nonfundamental policies of each Fund (which
could be thereafter changed or eliminated by Director vote). Each of these
restrictions is required under various state "Blue Sky" laws and/or federal
laws, but are not required to be fundamental policies of a Fund.
Restriction (4) concerning investments in unseasoned issuers limits
investment in securities of companies with less than three years continuous
operation to 5% of total assets. The Funds' investment policies generally
contemplate investing in seasoned issuers.
Restriction (10) concerning investing for control prohibits a Fund from
investing for control or management of other companies. Such investments would
be difficult because of the Act's diversification requirements contained in
Restrictions (1) and (2), and are regulated by the Act's provisions on
affiliated transactions.
As a result of this proposed reclassification of two investment restrictions
as nonfundamental, a future change in either restriction could be effected by
the Directors without stockholder approval if the Directors determined that such
change was appropriate and desirable. The Directors have no present intention of
amending or eliminating the foregoing restrictions which would be reclassified.
The Directors believe, however, that this reclassification of restrictions will
permit a Fund to respond more rapidly to future changes in the Funds'
competitive and regulatory environment.
AMENDMENT OF CERTAIN RESTRICTIONS
The Trustees also propose the amendment of five fundamental policies.
Restrictions (1) and (2) concerning diversification of assets by issuer is
more restrictive than needed to comply with the Act and Subchapter M of the
Internal Revenue Code. The revised restrictions comport with these statutes
primarily by having the diversification tests apply to 75%, instead of 100%, of
total assets.
Restriction (6) concerning borrowing has been revised by permitting
borrowing and the issuance of senior securities consistent with the Act. The
positions of staff of the Securities and Exchange Commission on borrowings and
senior securities have evolved in recent years with the development of new
investment strategies, such as reverse repurchase agreements and futures
transactions. Each Fund would like the ability to consider use of new investment
techniques consistent with the Act as interpretations of the Act are further
developed. The new restriction would no longer prohibit the use of borrowing for
investment purposes, but the Investment Adviser has no intention to engage in
such borrowings.
Restriction (11) concerning lending has been amended to reflect current
regulatory restraints and proposed changes to the lending policy of other Eaton
Vance funds. None of the Funds expect to lend, if at all, more than 30% of the
value of its total assets.
Restriction (12) concerning investments in real estate and commodities is
being amended in order to expressly permit a Fund to invest in securities
secured by real estate and securities of companies which invest or deal in real
estate which was previously implied, and to permit the use of financial futures
contracts for the reasons described below.
USE OF CERTAIN TECHNIQUES FOR TAX-EFFICIENT MANAGEMENT
Since the Funds commenced operation (Fiduciary Fund and Second Fiduciary
Fund in 1967 and Exchange Fund in 1963), certain techniques for the tax-
efficient management of equity portfolios have been developed and come into wide
use among investment professionals. Consistent with the investment objective,
the Portfolio (through which the Funds will invest if Proposal 1 is adopted)
intends to employ them. Restrictions (6) regarding senior securities, (7)
regarding pledging, (11) regarding lending of portfolio securities and (12)
regarding nonphysical commodity contracts need to be revised or eliminated for a
Fund to invest in the Portfolio and have it employ these techniques.
The Portfolio may purchase or sell certain derivative instruments to hedge
against securities price declines and currency movements, and to enhance
returns. The Portfolio may engage in transactions in derivative instruments
(which derive their value by reference to other securities, indices,
instruments, or currencies) in the U.S. and abroad. Such transactions may
include the purchase and sale of stock index futures contracts and options on
stock index futures; the purchase of put options and the sale of call options on
securities held in the Portfolio; equity swaps; and the purchase and sale of
forward currency exchange contracts and currency futures. The Portfolio may use
transactions in derivative instruments as a substitute for the purchase and sale
of securities. Derivative transactions may be more advantageous in a given
circumstance than transactions involving securities due to more favorable tax
treatment, lower transaction costs, or greater liquidity. While many derivative
instruments have built-in leveraging characteristics, the Portfolio will not use
them to leverage its net assets. The purchase and sale of derivative instruments
is a highly specialized activity that can expose the Portfolio to a significant
risk of loss. The built-in leveraging inherent to many derivative instruments
can result in losses that substantially exceed the initial amount paid or
received. Equity swaps and over-the-counter options are private contracts in
which there is a risk of loss in the event of a default on an obligation to pay
by a counterparty. Derivative instruments may be difficult to value, may be
illiquid, and may be subject to wide swings in valuation caused by changes in
the value of an underlying security, index, instrument, or currency. There can
be no assurance that the use of derivative instruments will be advantageous to
the Portfolio. The Portfolio will only enter into equity swaps and
over-the-counter options contracts with counterparties whose credit quality or
claims paying ability are considered to be investment grade by BMR. In addition,
at the time of entering into a transaction, the Portfolio's credit exposure to
any one counterparty will be limited to 5% or less of the net assets of the
Portfolio. The Portfolio's investment in illiquid assets, which may include
equity swaps and over-the-counter options, may not represent more than 15% of
net assets at the time any such illiquid assets are acquired. All futures
contracts entered into by the Portfolio will be traded on exchanges or boards of
trade that are licensed and regulated by the Commodities Futures Trading
Commission (the "CFTC") and must be executed through a futures commission
merchant or brokerage firm that is a member of the relevant exchange. Under CFTC
regulations, the Portfolio may only enter into futures contracts if, immediately
thereafter, the value of the aggregate initial margin with respect to all
currently outstanding non-hedging positions in futures contracts does not exceed
5% of the Portfolio's net asset value, after taking into account unrealized
profits and losses on such positions. The foregoing use of derivatives, however,
may be limited by proposed tax legislation.
In addition, the Portfolio may seek to earn income by lending portfolio
securities to broker-dealers or other institutional borrowers. As with other
extensions of credit there are risks of delay in recovery or even loss of rights
in the securities loaned if the borrower of the securities fails financially.
However, the loans will be made only to organizations deemed by BMR to be
sufficiently creditworthy and when, in the judgment of BMR, the consideration
which can be earned from securities loans of this type justifies the attendant
risk. Moreover, the tax consequences of the income received would be considered
before lending was implemented.
VOTE REQUIRED TO APPROVE PROPOSAL 3
Approval of any part of this Proposal requires the affirmative vote of a
majority of the outstanding voting securities of a Fund as defined under
Proposal 1. Implementation of any part of this Proposal is not dependent upon
any other proposal herein.
The Directors have considered various factors and believe that this Proposal
will increase investment management flexibility and is in the best interests of
each Fund's stockholders. If the Proposal is not approved, that Fund's present
objective and fundamental restrictions will remain in effect and a stockholder
vote would be required before the Fund could engage in activities prohibited by
a fundamental restriction. The Directors recommend that the stockholders vote in
favor of the elimination, reclassification and/ or amendment of their Fund's
investment objective and restrictions as described above.
PROPOSAL 4. TO APPROVE AN AMENDMENT TO EACH
FUND'S ARTICLES OF ORGANIZATION
REGARDING REORGANIZATIONS
In order to facilitate a possible tax-free reorganization between each Fund
(assuming it invests substantially all of its assets in the Portfolio in
accordance with Proposal 1) and similarly structured and managed investment
companies sponsored by Eaton Vance, the Directors of each Fund recommend that
the stockholders authorize an Amendment to that Fund's Articles of Organization
to reduce the stockholder vote required for such a transaction from two-thirds
to a majority.
Under Massachusetts General Laws Chapter 156, Section 75, the affirmative
vote of two-thirds of the outstanding shares is required to approve a
reorganization unless the Articles of Organization provide for a less onerous
requirement which can be no less than a majority. Because of the expense and
delay that can be involved in obtaining a two-thirds vote, the Directors of each
Fund recommend the change be approved.
A reorganization may be in the stockholders' interest in the future to
reduce costs. Any specific proposal to reorganize would be the subject of a
separate proxy solicitation in which stockholders would receive proxy materials
describing the proposal.
An affirmative vote of two-thirds of the outstanding shares of a Fund
entitled to vote at this meeting will be required to authorize the Amendment for
that Fund. THE DIRECTORS UNANIMOUSLY RECOMMEND THAT THE SHAREHOLDERS OF EACH
FUND VOTE TO AMEND THE ARTICLES OF ORGANIZATION. The Amendment would apply to
any type of reorganization permitted under Massachusetts law. Failure to receive
an affirmative vote on this Proposal will not preclude acting on any other
Proposal set forth in this Proxy Statement which has received the required
affirmative vote.
CERTAIN INFORMATION REGARDING BMR, EVM
AND THE OFFICERS OF THE FUNDS AND THE PORTFOLIO
INVESTMENT ADVISERS
Eaton Vance Management ("EVM") or Boston Management and Research ("BMR") act
as investment adviser to investment companies and various individual and
institutional clients, with combined assets under management of approximately
$16 billion. EVM provides administrative and management services to certain
Eaton Vance funds, as well as The Wright Managed Income Trust, The Wright
Managed Equity Trust, The Wright EquiFund Equity Trust and The Wright Managed
Blue Chip Series Trust. EVM and its affiliates also provide investment
management services to substantial individual and institutional investment
counsel accounts.
There are no financial conditions known by the Eaton Vance organization
which would impair the financial ability of BMR to fulfill its commitment to the
Portfolio under the proposed investment advisory agreement. BMR and EVM are
Massachusetts business trusts, and EV is the trustee of BMR and EVM. The
Directors of EV are Landon T. Clay, H. Day Brigham, Jr., 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
and Mr. Gardner is president and chief executive officer of EVC, EVM, BMR and
EV. All shares of the outstanding Voting Common Stock of EVC are deposited in a
Voting Trust which expires on December 31, 1996, the Voting Trustees of which
are Messrs. Clay, Brigham, Gardner, Hawkes, and Rowland. The Voting Trustees
have unrestricted voting rights for the election of Directors of EVC. All of the
outstanding voting trust receipts issued under said Voting Trust are owned by
certain of the officers of BMR and EVM who are also officers and Directors of
EVC and EV. As of , 1996, Messrs. Clay, Gardner and Hawkes each owned 24% of
such voting trust receipts, and Messrs. Rowland and Brigham owned 15% and 13%,
respectively. The address of EVC, EVM, BMR, EV and of its Directors or Trustees
is 24 Federal Street, Boston, Massachusetts 02110.
As of , 1996 there were 9,429,746 shares of Non-Voting Common Stock of
EVC outstanding, 19,360 shares of which were held by EVM. As at such date,
Landon T. Clay owned 1,800,058 shares (or 19.09%) of such Non-Voting Common
Stock of EVC then outstanding, and M. Dozier Gardner owned 280,787 shares (or
2.98%) of such Non-Voting Common Stock. EVC has issued outstanding options to
the following individuals covering the number of shares of EVC NonVoting Common
Stock set forth after their names: M. Dozier Gardner (32,017); Benjamin A.
Rowland, Jr., (25,373); and James B. Hawkes (148,946).
EVC owns all the stock of Energex Energy Corp., which engages in oil and gas
operations. EVM owns all the stock of Northeast Properties, Inc., which is
engaged in real estate investment management and consulting. EVC owns all the
stock of Fulcrum Management, Inc. and MinVen, Inc., which are engaged in the
development of precious metal properties. EVC also owns 24% of the Class A
shares of Lloyd George Management (BVI) Limited, a registered investment
adviser. EVC, BMR, EVM and EV may also enter into other businesses.
EATON VANCE DISTRIBUTORS, INC.
Eaton Vance Distributors, Inc. ("EVD") (a wholly-owned subsidiary of EVM)
acts as Principal Underwriter for over 140 investment companies, each of which
makes a continuous offering of shares.
EVD also acts as the Placement Agent for the Portfolio. The Placement Agent
Agreement is renewable annually by the Portfolio's Board of Trustees (including
a majority of the Independent Trustees), may be terminated on sixty days' notice
either by such Trustees or by vote of a majority of the outstanding voting
securities of the Portfolio or on six months' notice by the Placement Agent and
is automatically terminated upon assignment.
OFFICERS OF THE FUNDS AND THE PORTFOLIO
The officers of the Funds and the Portfolio, with their ages indicated in
parenthesis, are as follows (unless otherwise indicated, each of the Fund
officers listed holds the same office with each Fund): Landon T. Clay (70),
President and Director of the Funds since 1970 and of the Portfolio; James B.
Hawkes, Jr., (54), Vice President of the Funds since 1971 and of the Portfolio;
Thomas E. Faust, Jr. (37), Vice President of the Second Fiduciary Fund since
December 18, 1995 and Exchange Fund since September, 1993; Duncan W. Richardson
(38), Vice President Fiduciary Fund since March, 1990 and of the Portfolio;
James L. O'Connor (51), Treasurer of the Funds since 1989 and of the Portfolio;
Thomas Otis (64), Clerk of the Funds since 1969 and of the Portfolio; Janet E.
Sanders (60), Assistant Treasurer and Assistant Clerk of the Funds since 1990
and of the Portfolio; A. John Murphy (33), Assistant Clerk of the Funds since
April 18, 1995 and of the Portfolio; and Eric G. Woodbury (38), Assistant Clerk
of the Funds since August 7, 1995 and of the Portfolio. Except as indicated, all
officers of the Funds have served in that capacity for the last five years and
all officers of the Portfolio have served since October 23, 1995. All of the
officers of the Funds and the Portfolio have been employed by BMR, EVM or their
predecessors for more than five years except Mr. Murphy, Assistant Vice
President of EVM, BMR and EV since March 1, 1994 and an employee of EVM since
March 1993, was State Regulations Supervisor, The Boston Company from 1991-1993
and Registration Specialist, Fidelity Management & Research Co., from 1986-1991;
and Mr. Woodbury, Vice President of EVM since February 1993, who was an
associate attorney at Dechert, Price & Rhoades and Gaston & Snow prior thereto.
Mr. Hawkes is an officer, Director, and a stockholder of EVC, an officer and
Director of EV, and an officer of EVM and BMR. Messrs. Faust, Murphy, O'Connor,
Richardson, Ms. Sanders and Mr. Woodbury are officers of EVM, BMR and EV, and
stockholders of EVC. Mr. Otis is an officer and stockholder of EVC and an
officer of EVM, BMR and EV. Because of their positions with BMR, EVM and EV or
their ownership of stock of EVC, Mr. Clay (an Officer and Director of the Funds
and officer and trustee of the Portfolio), as well as the other officers of the
Funds and the Portfolio, will benefit from the advisory fees paid by the
Portfolio to BMR and the Portfolio.
PROPOSALS 5 AND 6 APPLY TO
FIDUCIARY FUND AND SECOND FIDUCIARY FUND ONLY
PROPOSAL 5. ELECTION OF DIRECTORS
It is the present intention that the enclosed proxy will, unless authority
to vote for election to office is specifically withheld by executing the proxy
in the manner stated thereon, be used for the purpose of voting to fix the
number of Directors for the ensuing year at six, and of voting in favor of the
election of the nominees named below for the respective offices indicated below,
to hold office for a term of one year and until their successors are elected and
qualified. The nominee whose names is preceded by an asterisk(*) is an
"interested person" (as defined in the Investment Company Act of 1940) by reason
of his affiliations with the Funds, the Funds' investment adviser, EVM or BMR,
EVM's wholly-owned subsidiary, or EVC, which owns all of the outstanding stock
of EVM, and of EVM's and BMR's trustee, Eaton Vance, Inc. ("EV"), which is a
wholly-owned subsidiary of EVC.
DIRECTORS
NAME AND PRINCIPAL OCCUPATIONS OVER
OTHER INFORMATION PAST FIVE YEARS
- ----------------- --------------------------
*LANDON T. CLAY President of the Fund. Chairman of the Board of
Age: 70, has been a EVC, EV, EVM, BMR and Director of EVC and EV. He
Director since 1970. also serves as a Director, Managing General
Partner, Director General Partner, Trustee and/or
officer of fifteen investment companies advised or
administered by EVM or BMR.
DONALD R. DWIGHT Mr. Dwight is President of Dwight Partners, Inc.
Age: 65; has been a (a corporate relations and communications
Director since 1986. company) founded in 1988; Chairman of the Board
of Newspapers of New England, Inc., since 1982. He
also serves as a Director, Managing General
Partner, Director General Partner, or Trustee of
seventy-nine investment companies advised or
administered by EVM or BMR.
SAMUEL L. HAYES, III Dr. Hayes is the Jacob H. Schiff Professor of
Age: 61; has been a Investment Banking at Harvard Graduate School of
Director since 1986. Business Administration. He also serves as a
Director, Managing General Partner, Director
General Partner, or Trustee of eighty-two
investment companies advised or administered by EVM
or BMR.
NORTON H. REAMER President and a Director of United Asset
Age: 60; has been a Management Corporation, Direcctor, Chairman and
Director since 1986. President of UAM Funds (mutual funds). He also
serves as a Director, Managing General Partner,
Director General Partner, or Trustee of seventy-
nine investment companies advised or administered
by EVM or BMR.
JOHN L. THORNDIKE Director of Fiduciary Company Incorporated in
Age 69; has been a Boston, Massachusetts; a Trustee of the Boston
Director since 1971. Symphony Orchestra. He also serves as a Director,
Managing General Partner, Director General Partner,
or Trustee of seventy-nine investment companies
advised or administered by EVM or BMR.
JACK L. TREYNOR An investment adviser and consultant. Associate
Age: 66; has been a Professor of Finance, Loyola-Marymount
Director since 1971. University, Los Angeles, California (until May
1989). Mr. Treynor is also a member of the
Advisory Board of the Institute for Quantitive
Research in Finance. He also serves as a
Director, Managing General Partner, Director
General Partner, or Trustee of seventy-seven
investment companies advised or administered by
EVM or BMR.
As of March 31, 1996, none of the Directors or officers of the Funds
beneficially owned shares of the Funds.
It is not expected that any of the nominees referred to above will decline
or become unavailable for election, but in case this should happen, the
discretionary power given in the proxy may be used to vote for a substitute
nominee or nominees or to vote to fix the number of Directors for the ensuing
year at less than six (unless authority to vote for election of all nominees is
specifically withheld by executing the proxy in the manner stated thereon).
Messrs. Thorndike (Chairman), Hayes and Reamer are members of the Special
Committee of the Board of Directors of each Fund. The Special Committee's
functions include a continuous review of each Fund's investment advisory
agreement with the investment adviser, making recommendations to the Board
regarding the compensation of those Directors who are not members of the
investment adviser's organization, and making recommendations to the Board
regarding candidates to fill vacancies, as and when they occur, in the ranks of
those Directors who are not "interested persons" of the Fund or the investment
adviser. The Board will, when a vacancy exists or is anticipated, consider any
nominee for Director of a Fund recommended by a shareholder if such
recommendation is submitted to the Board in writing and contains sufficient
background information concerning the individual to enable a proper judgment to
be made as to such individual's qualifications.
Messrs. Treynor (Chairman) and Dwight are members of the Audit Committee of
the Board of Directors of each of the Funds. The Audit Committee's functions
include making recommendations to the Board regarding the selection of the
independent public accountants, and reviewing with such accountants and the
Treasurer of each Fund matters relative to 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.
During each Fund's last fiscal year, the Board of Directors held
meetings, the Special committee held meetings and the Audit Committee
held meeting. Mr. Clay attended fewer than 75% of such Board meetings.
The fees and expenses of those Directors of a Fund who are not members of
the Eaton Vance organization are paid by the Fund.
<TABLE>
During the fiscal years ending ("FYE") on the dates indicated below, the
Directors of the Funds received the following compensation in their capacities
as such, and, during the year ended December 31, 1995, received the following
compensation in their capacities as Directors and/or Trustees of the other funds
in the Eaton Vance Fund Complex<F1>:
<CAPTION>
AGGREGATE
AGGREGATE COMPENSATION AGGREGATE
COMPENSATION FROM SECOND COMPENSATION TOTAL
FROM FIDUCIARY FIDUCIARY FROM EXCHANGE COMPENSATION
FUND FOR EXCHANGE FUND FUND FOR FROM
NAME FYE 12/31/95 FOR FYE 12/31/95 FYE 6/30/95 FUND COMPLEX<F1>
- ---- ------------ ---------------- ----------- ----------------
<S> <C> <C> <C> <C>
Donald R. Dwight<F2> $ 909 $1,132 $1,132 $135,000
Samuel L. Hayes, III<F3> 978 1,207 1,207 150,000
Norton H. Reamer 973 1,223 1,223 135,000
John L. Thorndike 1,035 1,304 1,304 140,000
Jack L. Treynor 979 1,223 1,223 140,000
<FN>
- ----------
<F1> The Eaton Vance fund complex consists of 219 registered investment companies or series thereof.
<F2> Includes $306, $380, $380 and $35,000, respectively, of deferred compensation from Fiduciary Fund,
Second Fiduciary Fund, Exchange Fund and total from the Fund Complex.
<F3> Includes $388, $603, $603 and $51,331, respectively, of deferred compensation from Fiduciary Fund,
Second Fiduciary Fund, Exchange Fund and total from the Fund Complex.
</TABLE>
Directors of a Fund that are not affiliated with the Investment Adviser may
elect to defer receipt of all or a percentage of their annual fees in accordance
with the terms of a Deferred Compensation Plan (the "Plan"). Under the Plan, an
eligible Director may elect to have his deferred fees invested by a 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 Plan will be determined based upon the
performance of such investments. Deferral of Directors' fees in accordance with
the Plan will have a negligible effect on the Portfolio's assets, liabilities,
and net income per share, and will not obligate the Portfolio to retain the
services of any Director or obligate the Portfolio to pay any particular level
of compensation to the Director. If Proposal 1 is approved, the Plan will cease
to be effective as to the fees paid to Directors of each Fund, but will be
effective as to the fees paid to the Trustees of the Portfolio.
Each Fund's charter provides that the Fund will indemnify its Directors and
officers against liabilities and expenses incurred in connection with any
litigation or proceeding in which they may be involved because of their offices
with the Fund. However, no indemnification will be provided to any Director or
officer for any liability to the Fund or its shareholders by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
6. RATIFICATION OF SELECTION OF ACCOUNTANTS
A majority of the members of each Board of Directors who are not interested
persons of the Fund have selected Deloitte & Touche LLP, 125 Summer Street,
Boston, Massachusetts 02110, as independent certified public accountants to sign
or certify any financial statements which may be filed by the Fund with the
Securities and Exchange Commission in respect of all or any part of the Fund's
fiscal year ending December 31, 1996 (or October 31, 1996 if Proposal 2 is
approved), the employment of such accountants being expressly conditioned upon
the right of the relevant Fund, by vote of a majority of the outstanding capital
stock at any meeting called for the purpose, to terminate such employment
forthwith without any penalty. Such selection was made pursuant to provisions of
Section 32(a) of the Investment Company Act of 1940, and is subject to
ratification or rejection by the stockholders at this meeting. The Funds are
informed that no member of Deloitte & Touche LLP has any direct or material
indirect interest in any Fund.
The Funds' independent certified public accountants provide customary
professional services in connection with the audit function for a management
investment company such as the Funds, including services leading to the
expression of opinions on the financial statements included in each Fund's
annual report to stockholders, opinions on financial statements and other data
included in each Fund's annual report to the Securities and Exchange Commission,
opinions on financial statements included in amendments to each Fund's
registration statement, and preparation of each Fund's Federal tax returns. The
nature and scope of the professional services of the accountants have been
approved by the Audit Committee of each Fund's Board of Directors, which has
considered the possible effect thereof on the independence of the accountants.
Representatives of Deloitte & Touche LLP are not expected to be present at
the meeting but have been given the opportunity to make a statement if they so
desire and will be available should any matter arise requiring their presence.
It is intended that proxies not limited to the contrary will be voted in
favor of ratifying the selection of Deloitte & Touche LLP, as the independent
certified public accountants to be employed by a Fund to sign or certify
financial statements required to be signed or certified by independent public
accountants and filed with the Securities and Exchange Commission in respect of
all or part of the current fiscal year.
NOTICE TO BANKS AND BROKER/DEALERS
Each Fund has previously solicited all Nominee and Broker/Dealer accounts as
to the number of additional proxy statements required to supply owners of
shares. Should additional proxy material be required for beneficial owners,
please forward such requests to: First Data Investor Services Group, Eaton Vance
Group of Funds, Proxy Department, P.O. Box 9122 Hingham, MA 02043-9717.
ADDITIONAL INFORMATION
The expense of preparing, printing and mailing this Proxy Statement and
enclosures and the cost of soliciting proxies on behalf of the Board of
Directors of each Fund will be borne by that Fund. Proxies will be solicited by
mail and may be solicited in person or by telephone or telegraph by officers of
the Fund, by personnel of its investment adviser, EVM, its transfer agent, First
Data Investor Services Group, by broker-dealer firms or by a professional
solicitation organization. The expenses connected with the solicitation of these
proxies and with any further proxies which may be solicited by a Fund's
officers, by EVM's personnel, by its transfer agent, First Data Investor
Services Group, or by broker-dealer firms, in person, by telephone or by
telegraph will be borne by the Fund. Each Fund will reimburse banks,
broker-dealer firms, and other persons holding shares registered in their names
or in the names of their nominees, for their expenses incurred in sending proxy
material to and obtaining proxies from the beneficial owners of such shares.
All proxy cards solicited by the Board of Directors that are properly
executed and received by the Clerk prior to the meeting, and which are not
revoked, will be voted at the meeting. Shares represented by such proxies will
be voted in accordance with the instructions thereon. If no specification is
made on the proxy card, it will be voted for the matters specified on the proxy
card. All proxies not voted, will not be counted toward establishing a quorum.
Broker non-votes will be counted toward establishing a quorum and for
determining whether sufficient votes have been received for approval of the
Proposal to be acted upon. Stockholders should note that while votes to abstain
will count toward establishing a quorum, passage of any Proposal being
considered at the meeting will occur only if a sufficient number of votes are
cast for the Proposal. Accordingly, votes to abstain, broker non-votes and votes
against will have the same effect in determining whether a Proposal is approved.
In the event that sufficient votes by the stockholders of a Fund in favor of
any Proposal set forth in the Notice of this meeting are not received by June 4,
1996, the persons named as attorneys in the enclosed proxy may propose one or
more adjournments of the meeting to permit further solicitation of proxies. A
stockholder vote may be taken on one or more of the Proposals in this Proxy
Statement prior to such adjournment if sufficient votes have been received and
it is otherwise appropriate. Any such adjournment will require the affirmative
vote of the holders of a majority of the shares present in person or by proxy at
the session of the meeting to be adjourned. The persons named as attorneys in
the enclosed proxy will vote in favor of such adjournment those proxies which
they are entitled to vote in favor of the Proposal for which further
solicitation of proxies is to be made. They will vote against any such
adjournment those proxies required to be voted against such Proposal. The costs
of any such additional solicitation and of any adjourned session will be borne
by the relevant Fund.
Each Fund will furnish, without charge a copy of the Fund's most recent
Annual and Semi-Annual Reports to any stockholder upon request. Stockholders
desiring to obtain a copy of such reports should direct all written requests to:
Thomas Otis, Clerk, 24 Federal Street, Boston, Massachusetts 02110, or should
call Eaton Vance Shareholder Services at 1-800-225-6265.
FIDUCIARY EXCHANGE FUND, INC.
SECOND FIDUCIARY EXCHANGE FUND, INC.
THE EXCHANGE FUND OF BOSTON, INC.
April 19, 1996
<PAGE>
EXHIBIT A
FIDUCIARY EXCHANGE FUND, INC.
SECOND FIDUCIARY EXCHANGE FUND, INC.
THE EXCHANGE FUND OF BOSTON, INC.
FUNDAMENTAL INVESTMENT POLICIES
[PROPOSED ADDITIONS IN ITALICS AND PROPOSED DELETIONS IN BRACKETS]
As a matter of fundamental investment policy, each Fund may not:
(1) With respect to 75% of its total assets, invest [purchase the securities
of any issuer if such purchase at the time thereof would cause] more than five
percent (5%) of its [the] total assets [of the Corporation] (taken at market
value) [to be invested] in the securities of any one [such] issuer, except
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities and except securities of other investment companies. [The
foregoing limitation shall not apply to investments in Government securities as
defined in the Investment Company Act of 1940.]
(2) With respect to 75% of its total assets, invest [purchase securities of
any issuer if such purchase at the time thereof would cause] more than ten
percent (10%) of its assets in the outstanding voting securities of any one
issuer, except obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities and except securities of other investment
companies [any class of securities of such issuer to be held by the Corporation.
For this purpose all outstanding bonds and other evidences of indebtedness shall
be deemed to be a single class of securities of the issuer, and all kinds of
stock of an issuer preferred over the common stock as to dividends or in
liquidation shall be deemed to constitute a single class regardless of relative
priorities, series designations, conversion rights and other differences.]
(3) [Purchase securities issued by any other investment company or
investment trust except by purchase in the open market where no commission or
profit to a sponsor or dealer results from such purchase other than the
customary broker's commission, or except when such purchase, though not made in
the open market, is part of a plan of merger or consolidation.]
(4)*Purchase securities of any issuer which has a record of less than three (3)
years' continuous operation including, however, in such three (3) years the
operation of any predecessor company or companies, partnership or individual
enterprise if the issuer whose securities are proposed as an investment for
funds of the Corporation has come into existence as a result of a merger,
consolidation, reorganization, or the purchase of substantially all the assets
of such predecessor company or companies, partnership or individual enterprise,
provided that nothing in this restriction shall prevent (a) the purchase of
securities of a company substantially all of whose assets are (i) securities of
one or more companies which have had a record of three (3) years' continuous
operation, or (ii) assets of an independent division of another company, which
division has had a record of three (3) years' continuous operation; (b) the
purchase of securities of (i) a public utility subject to supervision or
regulation as to its rates or charges by a commission or board or officer of the
United States or of any state or territory thereof, or of the government of
Canada or of any province or territory of Canada or (ii) companies operating or
formed for the purpose of operating pipe or transmission lines for the
transmission of oil, gas or electric energy or like products; provided that no
security shall be purchased pursuant to exception (a) or (b) of this restriction
if such purchase at the time thereof will cause more than five percent (5%) of
the total assets of the Fund (taken at market value) to be invested in
securities of companies which would not then be eligible for purchase but for
those exceptions.
(5) Purchase or retain in its portfolio any securities issued by an issuer
any of whose officers, directors, trustees, or security-holders is an officer or
Director of the Corporation, or is a member, officer, director or trustee of the
Investment Adviser of the Corporation, if after the purchase of the securities
of such issuer by the Corporation one or more of such persons owns beneficially
more than one-half of one percent (1/2%) of the shares or securities, or both
(all taken at market value), of such issuer, and such persons owning more than
one-half of one percent (1/2%) of such shares or securities together own
beneficially more than five percent (5%) of such shares or securities, or both
(all taken at market value).
(6) Borrow money or issue senior securities except as permitted by the
Investment Company Act of 1940 [amounts in excess of ten percent (10%) of the
gross assets of the Corporation taken at cost determined in accordance with good
accounting practice, and no borrowing shall be undertaken except as a temporary
measure for extraordinary or emergency purposes.]
(7) [Pledge, mortgage, or hypothecate the assets of the Corporation.]
(8) Purchase any securities or evidences of interest therein on "margin,"
that is to say in a transaction in which it has borrowed all or a portion of the
purchase price and pledged the purchased securities or evidences of interest
therein as collateral for the amount so borrowed;
(9) Sell or contract to sell any security which it does not own unless by
virtue of its ownership of other securities it has at the time of sale a right
to obtain securities equivalent in kind and amount to the securities sold and
provided that if such right is conditional the sale is made upon the same
conditions.
(10)* Invest for the purpose of exercising control or management of other
companies;
(11) Make loans to other persons, except by (a) the acquisition of debt
securities and making portfolio investments, (b)entering into repurchase
agreements and (c) lending portfolio securities;
(12) Buy or sell real estate (although it may purchase and sell securities
which are secured by real estate and securities of companies which invest or
deal in real estate), commodities or commodity contracts for the purchase or
sale of physical commodities;
(13) Engage in the underwriting of securities; or
(14) Concentrate its investments in any particular industry, but if it is
deemed appropriate for the attainment of the Fund's objective, up to 25% of the
value of its assets may be invested in any one industry.
- ----------
*This restriction would become nonfundamental if Proposal 3 is approved.
<PAGE>
SECOND FIDUCIARY EXCHANGE FUND, INC. THIS PROXY IS SOLICITED ON BEHALF OF
PROXY THE BOARD OF DIRECTORS OF THE FUND
KNOW ALL MEN BY THESE PRESENTS: That the undersigned, revoking previous proxies
for such stock, hereby appoints H. Day Brigham, Jr., Landon T. Clay and Eric G.
Woodbury, or any of them, attorneys of the undersigned, with full power of
substitution, to vote all stock of Second Fiduciary Exchange Fund, Inc., which
the undersigned is entitled to vote at the Special Meeting in lieu of the Annual
Meeting of the Stockholders of said Fund to be held on June 4, 1996, at the
principal office of the Fund, 24 Federal Street, Boston, Massachusetts 02110, at
10:00 A.M. (Boston time), and at any and all adjournments thereof. Receipt of
the Notice of and Proxy Statement for said Meeting is acknowledged.
The shares represented by this proxy will be voted on the following matters as
specified below and on the reverse side by the undersigned. If no specification
is made, this proxy will be voted in favor of all such matters. Note: This proxy
must be returned in order for your shares to be voted.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1. To adopt a new investment policy and to supplement investment
restrictions to permit a new investment structure as described
in the Proxy Statement. FOR [ ] AGAINST [ ] ABSTAIN [ ] 1
2. To approve an Amendment to the By-Laws of the Fund. FOR [ ] AGAINST [ ] ABSTAIN [ ] 2
3. To approve the revision of the Fund's investment objective and certain
of the Fund's investment policies as set forth in Exhibit A to the
Proxy Statement as follows:
3.A. Reclassification and amendment of the investment objective. FOR [ ] AGAINST [ ] ABSTAIN [ ] 3A
3.B. Eliminate the restriction concerning investment in other investment companies. FOR [ ] AGAINST [ ] ABSTAIN [ ] 3B
3.C. Eliminate the restriction concerning pledging. FOR [ ] AGAINST [ ] ABSTAIN [ ] 3C
3.D. Reclassify the restriction concerning investment in unseasoned issuers. FOR [ ] AGAINST [ ] ABSTAIN [ ] 3D
3.E. Reclassify the restriction concerning investing for control. FOR [ ] AGAINST [ ] ABSTAIN [ ] 3E
3.F. Amend the restrictions concerning diversification. FOR [ ] AGAINST [ ] ABSTAIN [ ] 3F
3.G. Amend the restriction concerning borrowing and senior securities. FOR [ ] AGAINST [ ] ABSTAIN [ ] 3G
3.H. Amend the restriction concerning lending. FOR [ ] AGAINST [ ] ABSTAIN [ ] 3H
3.I. Amend the restriction concerning real estate and commodities. FOR [ ] AGAINST [ ] ABSTAIN [ ] 3I
4. To approve an amendment to the Articles of Organization. FOR [ ] AGAINST [ ] ABSTAIN [ ] 4
5. To fix the number of Directors, and to elect Directors. FOR the following nominees, [ ] WITHHOLD AUTHORITY [ ] 5
except those whose names to vote for any
L.T. Clay, D.R. Dwight, S.L. Hayes, III, are inserted on the line below: of the nominees.
N.H. Reamer, J.L. Thorndike, J.L. Treynor
6. To ratify the selection of Deloitte & Touche LLP as independent public FOR [ ] AGAINST [ ] ABSTAIN [ ] 6
accountants of the Fund.
</TABLE>
As to any other matter, or if any of the nominees named in the Proxy Statement
are not available for election, said attorneys shall vote in accordance with
their judgment.
THE DIRECTORS RECOMMEND A VOTE IN FAVOR OF
ALL MATTERS
________________________________________________________
________________________________________________________
Please sign exactly as your name or names appear at left.
Dated: __________________________, 1996
013
