As filed with the Securities and Exchange Commission on July 15, 2003
1933 Act File No. 333-______
1940 Act File No. 811-21400
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT NO. [ ]
POST-EFFECTIVE AMENDMENT NO. [ ]
AND/OR
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. [ ]
(CHECK APPROPRIATE BOX OR BOXES)
EATON VANCE TAX-ADVANTAGED DIVIDEND INCOME FUND
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
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COPIES OF COMMUNICATIONS TO:
MARK P. GOSHKO, ESQ.
KIRKPATRICK & LOCKHART LLP
75 STATE STREET
BOSTON, MASSACHUSETTS 02109
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: As soon as practicable after
the effective date of this Registration Statement.
If any of the securities being registered on this form are to be offered on a delayed or continuous basis in reliance on Rule 415 under the Securities Act of 1933, other than securities offered in connection with a dividend reinvestment plan, check the following box. [ ]
It is proposed that this filing will become effective (check appropriate
box):
[X] when declared effective pursuant to Section 8(c)
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
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PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM
BEING OFFERING AGGREGATE AMOUNT OF
TITLE OF SECURITIES BEING REGISTERED PRICE PER UNIT OFFERING REGISTRATION
REGISTERED (1) (1) PRICE (1) FEES (1)(2)(3)
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Common Shares of Beneficial 50,000 $20.00 $1,000,000 $80.90
Interest, $0.01 par value
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(1) Estimated solely for purposes of calculating the registration fee,
pursuant to Rule 457(o) under the Securities Act of 1933.
(2) Includes Shares that may be offered to the Underwriters pursuant to an
option to cover over-allotments.
(3) Transmitted prior to filing.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATES AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(c), MAY DETERMINE.
[GRAPHIC OMITTED] [ ] Shares
EATON VANCE TAX-ADVANTAGED DIVIDEND INCOME FUND
INVESTMENT OBJECTIVE AND POLICIES. Eaton Vance Tax-Advantaged Dividend Income Fund (the "Fund") is a newly organized, diversified, closed-end management investment company. The Fund's investment objective is to provide a high level of after-tax total return consisting primarily of tax-advantaged dividend income and capital appreciation.
INVESTMENT ADVISER. The Fund's investment adviser is Eaton Vance Management ("Eaton Vance" or the "Adviser"). As of June 30, 2003, Eaton Vance and its subsidiaries managed approximately $62.7 billion on behalf of funds, institutional clients and individuals.
PORTFOLIO CONTENTS. Under normal market conditions, the Fund will invest at least 80% of its net assets in dividend-paying common and preferred stocks. In pursuing its objective, the Fund invests primarily in common and preferred stocks that pay dividends that qualify for federal income taxation at rates applicable to long-term capital gains ("tax-favored dividends"). The Adviser retains broad discretion to allocate the Fund's investments between common and preferred stocks in a manner that it believes will best effectuate the Fund's objective. Initially, the Fund expects to invest at least 60% of its total assets in common stocks and at least 20% of its total assets in preferred stocks. The Fund may invest in common and preferred stocks of both domestic and foreign issuers.
(CONTINUED ON INSIDE COVER PAGE)
INVESTING IN SHARES INVOLVES CERTAIN RISKS. SEE "INVESTMENT OBJECTIVE, POLICIES AND RISKS" BEGINNING AT PAGE 13.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Price to public Sales load Proceeds to Fund
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Per share $ $ $
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Total $ $ $
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In addition to the sales load, the Fund will pay offering expenses of up to $[ ] per share, estimated to total $[ ], which will reduce the "Proceeds to Fund" (above). Eaton Vance or an affiliate has agreed to pay the amount by which the aggregate of all of the Fund's offering costs (other than the sales load) exceeds $[ ] per share. Eaton Vance or an affiliate has agreed to reimburse all Fund organizational costs.
The underwriters are offering the shares subject to various conditions and expect to deliver the shares to purchasers on or about [ ], 2003.
THE INFORMATION IN THIS PROSPECTUS IS INCOMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES, AND WE ARE NOT SOLICITING OFFERS TO BUY THESE SECURITIES, IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
(CONTINUED FROM PREVIOUS PAGE)
EXCHANGE LISTING. The Fund will apply for the listing of its common shares on the [American Stock Exchange] under the symbol "[ ]."
Because the Fund is newly organized, its common shares have no history of public trading. The shares of closed-end management investment companies frequently trade at a discount from their net asset value. This risk may be greater for investors expecting to sell their shares in a relatively short period after completion of the public offering.
The Fund's net asset value and distribution rate will vary and may be affected by several factors, including changes in stock prices, dividend rates and other factors. Fluctuations in net asset value may be magnified as a result of the Fund's use of leverage, which is a speculative investment technique. An investment in the Fund may not be appropriate for all investors. There is no assurance that the Fund will achieve its investment objective.
The Fund expects to use financial leverage through the issuance of preferred shares and/or through borrowings, initially equal to approximately [34%] of its gross assets (including the amount obtained through leverage). The Adviser anticipates that the use of leverage will result in higher income to Shareholders over time. Use of financial leverage creates an opportunity for increased return but, at the same time, creates special risks. There can be no assurance that a leveraging strategy will be utilized or will be successful. SEE "INVESTMENT OBJECTIVE, POLICIES AND RISKS--USE OF LEVERAGE AND RELATED RISKS" AT PAGE [ ] AND "DESCRIPTION OF CAPITAL STRUCTURE" AT PAGE [ ].
This Prospectus sets forth concisely information you should know before
investing in the shares of the Fund. Please read and retain this Prospectus for
future reference. A Statement of Additional Information dated [ ], 2003, has
been filed with the Securities and Exchange Commission ("SEC") and can be
obtained without charge by calling 1-800-225-6265 or by writing to the Fund. A
table of contents to the Statement of Additional Information is located at page
[ ] of this Prospectus. This Prospectus incorporates by reference the entire
Statement of Additional Information. The Statement of Additional Information is
available along with other Fund-related materials: at the SEC's public reference
room in Washington, DC (call 1-202-942-8090 for information on the operation of
the reference room); the EDGAR database on the SEC's internet site
(http://www.sec.gov); upon payment of copying fees by writing to the SEC's
public reference section, Washington, DC 20549-0102; or by electronic mail at
publicinfo@sec.gov. The Fund's address is The Eaton Vance Building, 255 State
Street, Boston, Massachusetts 02109 and its telephone number is 1-800-225-6265.
The Fund's shares do not represent a deposit or obligation of, and are not guaranteed or endorsed by, any bank or other insured depository institution, and are not federally insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board or any other government agency.
The underwriters named in the Prospectus may purchase up to [ ] additional shares from the Fund under certain circumstances.
You should rely only on the information contained or incorporated by reference in this Prospectus. The Fund has not authorized anyone to provide you with different information. The Fund is not making an offer of these securities in any state where the offer is not permitted. You should not assume that the information contained in this Prospectus is accurate as of any date other than the date on the front of this Prospectus.
Until [ ], 2003 (25 days after the date of this Prospectus), all dealers that buy, sell or trade the shares, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.
TABLE OF CONTENTS -------------------------------------------------------------------------------- Prospectus summary........................................... Custodian and transfer agent The Fund..................................................... Legal opinions........................................ Use of proceeds.............................................. Reports to stockholders............................... Investment objective, policies and risks Independent auditors.................................. Management of the Fund....................................... Additional information................................ Distributions................................................ Table of contents for the Statement of Dividend reinvestment plan................................... Additional Information.......................... Description of capital structure............................. The Fund's privacy policy............................. Underwriting................................................. |
PROSPECTUS SUMMARY
This is only a summary. You should review the more detailed information contained in this Prospectus and in the Statement of Additional Information.
THE FUND
Eaton Vance Tax-Advantaged Dividend Income Fund (the "Fund") is a newly organized, diversified, closed-end management investment company. The Fund offers investors the opportunity to achieve a high level of after-tax total return through a professionally managed portfolio consisting primarily of dividend-paying common and preferred stocks. The Fund's return is expected to consist primarily of tax-advantaged dividend income and capital appreciation. Investments are based on Eaton Vance Management's ("Eaton Vance" or the "Adviser") internal research and ongoing company analysis, which is generally not available to individual investors. An investment in the Fund may not be appropriate for all investors. There is no assurance that the Fund will achieve its investment objective.
THE OFFERING
The Fund is offering [ ] common shares of beneficial interest, par value $0.01 per share (the "Shares"), through a group of underwriters (the "Underwriters") led by [ ], [ ] and [ ]. The Underwriters have been granted an option to purchase up to [ ] additional Shares solely to cover over-allotments, if any. The initial public offering price is $[ ] per share. The minimum purchase in this offering is 100 Shares ($[ ]). See "Underwriting." Eaton Vance or an affiliate has agreed to (i) reimburse all organizational costs and (ii) pay all offering costs (other than sales loads) that exceed $[ ] per Share.
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to provide a high level of after-tax total return consisting primarily of tax-advantaged dividend income and capital appreciation. The Fund pursues its objective by investing its assets primarily in dividend-paying common and preferred stocks.
Under normal market conditions, the Fund will invest at least 80% of its net
assets in dividend-paying common and preferred stocks. This policy may only be
changed following provision of 60 days prior notice to Shareholders. The Fund
will invest primarily in common and preferred stocks that pay dividends that
qualify for federal income taxation at rates applicable to long-term capital
gains ("tax-favored dividends"). The Adviser retains broad discretion to
allocate the Fund's investments between common and preferred stocks in a manner
that it believes will best effectuate the Fund's objective. Initially, the Fund
expects to invest at least 60% of its total assets in common stocks and at least
20% of its total assets in preferred stocks. Under normal market conditions, the
Fund expects to invest primarily in preferred stocks of investment grade quality
(which is at least BBB- as determined by Standard & Poor's Ratings Group ("S&P")
or Fitch Ratings ("Fitch"), Baa3 as determined by Moody's Investors Service,
Inc. ("Moody's") or, if unrated, determined to be of comparable quality by Eaton
Vance). However, the Fund may, from time to time, purchase preferred stocks of
below investment grade quality that, at the time of purchase, are rated at least
B as determined by S&P, Fitch or Moody's or, if unrated, determined to be of
comparable quality by Eaton Vance. The foregoing credit quality policy applies
only at the time a preferred stock is purchased, and the Fund is not required to
dispose of a preferred stock in the event of a downgrade of an assessment of
credit quality or the withdrawal of a rating. Preferred stocks of below
investment grade quality are considered to be predominantly speculative because
of the credit risk of the issuers. See "Prospectus Summary -- Special Risk
Considerations - Non-investment grade securities risk."
The Fund seeks dividend income that qualifies for favorable federal income tax treatment. Under federal income tax law enacted on May 28, 2003, qualifying dividend income received by individual shareholders is taxed at rates equivalent to long-term capital gain tax rates, which reach a maximum of 15%. Qualifying dividend income generally includes dividends from domestic corporations and dividends from foreign corporations that meet certain specified criteria. The Fund generally can pass the tax treatment of tax-favored dividends it receives through to Fund shareholders. For the Fund to receive tax-favored dividends, the Fund must hold the stock associated with an otherwise qualifying dividend for more than 60 days during the 120-day period beginning 60 days before the ex-dividend date (or more than 90 days during the associated 180-day period, in the case of certain preferred stocks). In addition, the Fund cannot be obligated to make payments (pursuant to a short sale or otherwise) with respect to substantially similar or related property. Similar provisions apply to each Shareholder's investment in the Fund. In order for otherwise qualifying Fund dividends received by a Shareholder to be taxable at long-term capital gains
rates, the Shareholder must hold his or her Fund shares for more than 60 days during the 120-day period surrounding the ex-dividend date. The provisions of the Internal Revenue Code applicable to tax-favored dividends are effective through 2008. Thereafter, higher tax rates will apply unless further legislative action is taken.
In addition to investing in stocks that pay tax-favored dividends, the Fund may also invest a portion of its assets in stocks and other securities that generate fully taxable ordinary income. For any year, so long as the Fund's fully taxable ordinary income and net realized short-term gains are offset by expenses of the Fund, all of the Fund's income distributions would be characterized as tax-favored dividends. There can be no assurance that a portion of the Fund's income distributions will not be fully taxable as ordinary income.
The Fund may seek to enhance the level of tax-favored dividend income it receives by engaging in dividend capture trading. In a dividend capture trade, the Fund would sell a stock that has gone ex-dividend to purchase another stock paying a dividend before the next dividend of the stock being sold. By entering into a series of such trades, the Fund could augment the amount of dividend income it receives over the course of a year. In order for dividends to qualify as tax-favored dividends, the Fund must comply with the holding period requirements described above. The use of dividend capture strategies will expose the Fund to increased trading costs and potential for capital loss.
The Fund may invest a significant portion of its assets in each of the utilities and financial services sectors. The utilities sector includes companies engaged in the manufacture, production, generation, transmission, sale and distribution of water, gas, and electric energy as well as companies that provide telecommunication services. Companies in the financial services sector include, for example, commercial banks, savings and loan associations, brokerage and investment companies, insurance companies, and consumer and industrial finance companies. See "Investment objective, policies and risks - Additional Risk Considerations - Sector concentration risk."
A team of Eaton Vance investment professionals is responsible for the overall management of the Fund's investments, including the allocation between common and preferred stocks. Individual members of this team with specialized experience are responsible for the day-to-day management of different portions of the Fund's portfolio. The Fund's investments are actively managed, and securities may be bought or sold on a daily basis.
In selecting securities, the Fund invests primarily in dividend-paying common and preferred stocks of U.S. and non-U.S. companies that produce attractive levels of tax-favored dividend income and are, in the opinion of the Adviser, undervalued or inexpensive relative to the overall market. Stocks may be undervalued in relation to other investments due to adverse economic or other near-term difficulties that cause them not to achieve their expected financial potential. Undervaluation may also arise because companies are misunderstood by investors or because they are out of step with favored market themes. For its investments in common stocks, the Fund also seeks to invest in positions that the Adviser believes have the potential for growth of income and capital appreciation over time. For its investments in preferred stocks, the Fund will also take into consideration the interest rate sensitivity of the investments and the Adviser's interest rate expectations.
Investment decisions are made primarily on the basis of fundamental research. The portfolio managers utilize information provided by, and the expertise of, the Adviser's research staff in making investment decisions. In selecting stocks, the portfolio managers consider (among other factors) a company's earnings or cash flow capabilities, dividend prospects and tax treatment of a company's dividends, the strength of the company's business franchises and estimates of the company's net value. Many of these considerations are subjective.
The Fund seeks to achieve after-tax returns in part by minimizing the taxes incurred by shareholders in connection with the Fund's investment income and realized capital gains. Fund distributions that are taxed as ordinary income are minimized by investing principally in common and preferred stocks that pay tax-favored dividends and by generally avoiding net realized short-term capital gains and fully taxable ordinary income in excess of the Fund's expenses. Fund distributions taxed as long-term capital gains are minimized by avoiding or minimizing the sale of securities with large accumulated capital gains. When a decision is made to sell a particular appreciated security, the portfolio managers will select for sale the share lots resulting in the most favorable tax treatment, generally those with holding periods sufficient to qualify for long-term capital gains treatment that have the highest cost basis. The portfolio managers may sell securities to realize capital losses that can be used to offset realized gains.
To protect against price declines in securities holdings with large accumulated gains, the Fund may use various hedging techniques (such as the purchase and sale of futures contracts on stocks and stock indexes and options thereon, the purchase of put options and the sale of call options on securities held, equity swaps, covered short sales, forward sales of stocks and the purchase and sale of forward currency exchange contracts and currency futures). By using these
techniques rather than selling appreciated securities, the Fund can, with certain limitations, reduce its exposure to price declines in the securities without realizing substantial capital gains under current tax law. These derivative instruments may also be used by the Fund to enhance returns or as a substitute for the purchase or sale of securities. Dividends received on securities with respect to which the Fund is obligated to make payments (pursuant to short sales or otherwise) will be treated as fully taxable ordinary income.
In addition to its primary investment policies involving investments in common and preferred stocks, the Fund may invest to a limited extent in bonds and other debt securities and engage in certain other investment practices. See "Investment objective, policies and risks - Additional investment practices."
LISTING
The Fund will apply for the listing of its common shares on the [American Stock Exchange] under the symbol "[ ]."
LEVERAGE
The Fund expects to use financial leverage through the issuance of preferred shares and/or through borrowings, including the issuance of debt securities. The Fund intends initially to use financial leverage of approximately [34%] of its gross assets (including the amount obtained through leverage). The Fund generally will not use leverage if the Adviser anticipates that it would result in a lower return to holders of the Shares ("Shareholders") over time. Use of financial leverage creates an opportunity for increased return for Shareholders but, at the same time, creates special risks (including the likelihood of greater volatility of net asset value and market price of the Shares), and there can be no assurance that a leveraging strategy will be successful during any period in which it is employed. The Fund currently intends to issue preferred shares approximately one to three months after completion of this offering, subject to market conditions and to the Fund's receipt of a AAA credit rating on such preferred shares from a nationally recognized statistical rating organization ("Rating Agency") (typically, Moody's, S&P or Fitch). During periods in which the Fund is using leverage, the fees paid to Eaton Vance for investment advisory services will be higher than if the Fund did not use leverage because the fees paid will be calculated on the basis of the Fund's gross assets, including proceeds from the issuance of preferred shares and borrowings. See "Investment objective, policies and risks--Use of leverage and related risks" and "Management of the Fund--The Adviser."
INVESTMENT ADVISER AND ADMINISTRATOR
Eaton Vance, an indirect wholly-owned subsidiary of Eaton Vance Corp., is the Fund's investment adviser and administrator. The Adviser and its subsidiaries manage approximately $62.7 billion on behalf of funds, institutional clients and individuals as of June 30, 2003. Twenty-four of the funds are closed-end. See "Management of the Fund."
DISTRIBUTIONS
Commencing with the Fund's first dividend, the Fund intends to make regular
quarterly cash distributions to Shareholders of substantially all of the net
investment income of the Fund. A significant portion of the Fund's investment
income is expected to consist of tax-favored dividends. A portion of the Fund's
income may also be fully taxable. Any such income distributions, as well as any
distributions by the Fund of net realized short-term capital gains, will be
taxed as ordinary income. The amount of each quarterly distribution will vary
depending on a number of factors, including dividends payable on the Fund's
preferred shares or other costs of financial leverage. As portfolio and market
conditions change, the rate of dividends on the Shares and the Fund's dividend
policy could change. Over time, the Fund will distribute all of its net
investment income (after it pays accrued dividends on any outstanding preferred
shares) or other costs of financial leverage. In addition, at least annually,
the Fund intends to distribute any net short-term capital gain and any net
capital gain (which is the excess of net long-term capital gain over short-term
capital loss). The initial distribution is expected to be declared approximately
[ ] days and paid approximately [ ] to [ ] days after the completion of this
offering, depending on market conditions. Shareholders may elect to
automatically reinvest some or all of their distributions in additional Shares
under the Fund's dividend reinvestment plan. See "Distributions and taxes" and
"Dividend reinvestment plan."
DIVIDEND REINVESTMENT PLAN
The Fund has established a dividend reinvestment plan (the "Plan"). Under the Plan, a Shareholder may elect to have all dividend and capital gain distributions automatically reinvested in additional Shares either purchased in the open market, or newly issued by the Fund if the Shares are trading at or above their net asset value. Shareholders may elect to participate in the Plan by completing the dividend reinvestment plan application form. Shareholders who
do not elect to participate in the Plan will receive all distributions in cash paid by check mailed directly to them by PFPC Inc., as dividend paying agent. Shareholders who intend to hold their Shares through a broker or nominee should contact such broker or nominee to determine whether or how they may participate in the Plan. See "Dividend reinvestment plan."
CLOSED-END STRUCTURE
Closed-end funds differ from open-end management investment companies (commonly referred to as mutual funds) in that closed-end funds generally list their shares for trading on a securities exchange and do not redeem their shares at the option of the shareholder. By comparison, mutual funds issue securities redeemable at net asset value at the option of the shareholder and typically engage in a continuous offering of their shares. Mutual funds are subject to continuous asset in-flows and out-flows that can complicate portfolio management, whereas closed-end funds generally can stay more fully invested in securities consistent with the closed-end fund's investment objective and policies. In addition, in comparison to open-end funds, closed-end funds have greater flexibility in the employment of financial leverage and in the ability to make certain types of investments, including investments in illiquid securities. However, shares of closed-end funds frequently trade at a discount from their net asset value. In recognition of the possibility that the Shares might trade at a discount to net asset value and that any such discount may not be in the interest of Shareholders, the Fund's Board of Trustees (the "Board"), in consultation with Eaton Vance, from time to time may review possible actions to reduce any such discount. The Board might consider open market repurchases or tender offers for Shares at net asset value. There can be no assurance that the Board will decide to undertake any of these actions or that, if undertaken, such actions would result in the Shares trading at a price equal to or close to net asset value per Share. The Board might also consider the conversion of the Fund to an open-end mutual fund. The Board believes, however, that the closed-end structure is desirable, given the Fund's investment objective and policies. Investors should assume, therefore, that it is highly unlikely that the Board would vote to convert the Fund to an open-end investment company. Investors should note that the anticipated issuance of preferred shares to provide investment leverage could make a conversion to open-end form more difficult because of the voting rights of preferred shareholders, the costs of redeeming preferred shares and other factors. See "Description of capital structure."
SPECIAL RISK CONSIDERATIONS
NO OPERATING HISTORY
The Fund is a closed-end investment company with no history of operations and is
designed for long-term investors and not as a trading vehicle.
ISSUER RISK
The value of common and preferred stocks may decline for a number of reasons
which directly relate to the issuer, such as management performance, financial
leverage and reduced demand for the issuer's goods and services.
INCOME RISK
The income Shareholders receive from the Fund is based primarily on the
dividends and interest it earns from its investments, which can vary widely over
the short and long-term. If prevailing market interest rates drop, distribution
rates of the Fund's preferred stock and any bond holdings and Shareholder's
income from the Fund could drop as well. The Fund's income also would likely be
affected adversely when prevailing short-term interest rates increase and the
Fund is utilizing leverage.
TAX RISK
The Fund's investment program and the tax treatment of Fund distributions may be
affected by future changes in tax laws and regulations, including changes as a
result of the "sunset" provisions that currently apply to the favorable tax
treatment of qualifying dividend income.
NON-INVESTMENT GRADE SECURITIES RISK
The Fund's investment in preferred stocks and bonds of below investment grade
quality are predominantly speculative because of the credit risk of their
issuers. While offering a greater potential opportunity for capital appreciation
and higher yields, preferred stocks and bonds of below investment grade quality
entail greater potential price volatility and may be less liquid than
higher-rated securities. Issuers of below investment grade quality preferred
stocks and bonds are more likely to default on their payments of
dividends/interest and liquidation value/principal owed to the Fund, and such
defaults will reduce the Fund's net asset value and income distributions. The
prices of these lower quality preferred stocks and bonds are more sensitive to
negative developments than higher rated securities. Adverse business conditions,
such as a decline in the issuer's revenues or an economic downturn, generally
lead to a higher non-payment rate. In addition, such a security may lose
significant value before a default occurs as the market adjusts to expected
higher non-payment rates. The Fund will not invest in preferred stocks or bonds
that are rated at the time of purchase below B as determined by S&P, Moody's or Fitch, or, if unrated, determined to be of comparable quality by Eaton Vance. The Fund will not invest more than 10% of its gross assets in preferred stocks and bonds of below investment grade quality. The foregoing credit quality policies apply only at the time a security is purchased, and the Fund is not required to dispose of securities already owned by the Fund in the event of a change in assessment of credit quality or the removal of a rating.
INTEREST RATE RISK
Interest rate risk is the risk that preferred stocks paying fixed dividend rates
and fixed-rate debt securities will decline in value because of changes in
market interest rates. When interest rates rise the market value of such
securities generally will fall. The Fund's investment in preferred stocks and
fixed-rate debt securities means that the net asset value and price of the
Shares may decline if market interest rates rise. Interest rates are currently
low relative to historic levels. During periods of declining interest rates, an
issuer of preferred stock or fixed-rate debt securities may exercise its option
to redeem securities prior to maturity, forcing the Fund to reinvest in lower
yielding securities. This is known as call risk. During periods of rising
interest rates, the average life of certain types of securities may be extended
because of slower than expected payments. This may lock in a below market yield,
increase the security's duration, and reduce the value of the security. This is
known as extension risk. The value of the Fund's common stock investments may
also be influenced by changes in interest rates.
INVESTMENT AND MARKET RISK
An investment in Shares is subject to investment risk, including the possible
loss of the entire principal amount invested. An investment in Shares represents
an indirect investment in the securities owned by the Fund, substantially all of
which are traded on a securities exchange or in the over-the-counter markets.
The value of these securities, like other market investments, may move up or
down, sometimes rapidly and unpredictably. The Shares at any point in time may
be worth less than the original investment, even after taking into account any
reinvestment of dividends and distributions.
COMMON STOCK RISK
The Fund will have substantial exposure to common stocks. Although common stocks
have historically generated higher average returns than fixed-income securities
over the long term, common stocks also have experienced significantly more
volatility in returns. An adverse event, such as an unfavorable earnings report,
may depress the value of a particular common stock held by the Fund. Also, the
price of common stocks are sensitive to general movements in the stock market
and a drop in the stock market may depress the price of common stocks to which
the Fund has exposure. Common stock prices fluctuate for many reasons, including
changes in investors' perceptions of the financial condition of an issuer or the
general condition of the relevant stock market, or when political or economic
events affecting the issuers occur. In addition, common stock prices may be
sensitive to rising interest rates, as the costs of capital rise and borrowing
costs increase.
PREFERRED STOCK RISK
The Fund will have substantial exposure to preferred stocks. Preferred stocks
involve credit risk, which is the risk that a preferred stock will decline in
price, or fail to pay dividends when expected, because the issuer experiences a
decline in its financial status. In addition to credit risk, investment in
preferred stocks involves certain other risks. Certain preferred stocks contain
provisions that allow an issuer under certain conditions to skip distributions
(in the case of "non-cumulative" preferred stocks) or defer distributions (in
the case of "cumulative" preferred stocks). If the Fund owns a preferred stock
that is deferring its distributions, the Fund may be required to report income
for tax purposes while it is not receiving income on this position. Preferred
stocks often contain provisions that allow for redemption in the event of
certain tax or legal changes or at the issuers' call. In the event of
redemption, the Fund may not be able to reinvest the proceeds at comparable
rates of return. Preferred stocks typically do not provide any voting rights,
except in cases when dividends are in arrears beyond a certain time period,
which varies by issue. Preferred stocks are subordinated to bonds and other debt
instruments in a company's capital structure in terms of priority to corporate
income and liquidation payments, and therefore will be subject to greater credit
risk than those debt instruments. Preferred stocks may be significantly less
liquid than many other securities, such as U.S. government securities, corporate
debt or common stock.
VALUE INVESTING RISK
The Fund focuses its investments on dividend-paying common and preferred stocks
that the Adviser believes are undervalued or inexpensive relative to other
investments. These types of securities may present risks in addition to the
general risks associated with investing in common and preferred stocks. These
securities generally are selected on the basis of an issuer's fundamentals
relative to current market price. Such securities are subject to the risk of
mis-estimation of certain fundamental factors. In addition, during certain time
periods market dynamics may strongly favor "growth" stocks of issuers that do
not display strong fundamentals relative to market price based upon positive
price momentum and other factors. Disciplined adherence to a "value" investment
mandate during such periods can result in significant underperformance relative
to overall market indices and other managed investment vehicles that pursue growth style investments and/or flexible equity style mandates.
SECTOR CONCENTRATION RISK
The Fund may invest a significant portion of its assets of issuers in each of
the utilities sector and the financial services sector. This may make the Fund
more susceptible to adverse economic, political, or regulatory occurrences
affecting these sectors. As concentration in a sector increases, so does the
potential for fluctuation in the net asset value of Shares. See "Investment
objective, policies and risks - Additional Risk Considerations - Sector
concentration risk" for a discussion of the specific risks relating to each of
these sectors.
FOREIGN SECURITY RISK
The prices of foreign securities may be affected by factors not present with
U.S. securities, including currency exchange rates, political and economic
conditions, less stringent regulation and higher volatility. As a result, many
foreign securities may be less liquid and more volatile than U.S. securities.
DERIVATIVES RISK
Derivative transactions (such as futures contracts and options thereon, options,
swaps and short sales) subject the Fund to increased risk of principal loss due
to imperfect correlation or unexpected price or interest rate movements. The
Fund also will be subject to credit risk with respect to the counterparties to
the derivatives contracts purchased by the Fund. If a counterparty becomes
bankrupt or otherwise fails to perform its obligations under a derivative
contract due to financial difficulties, the Fund may experience significant
delays in obtaining any recovery under the derivative contract in a bankruptcy
or other reorganization proceeding. The Fund may obtain only a limited recovery
or may obtain no recovery in such circumstances. As a general matter, dividends
received on hedged stock positions are characterized as ordinary income and are
not eligible for favorable tax treatment.
EFFECTS OF LEVERAGE
There can be no assurance that a leveraging strategy will be utilized by the
Fund or that, if utilized, it will be successful during any period in which it
is employed. Leverage creates risks for Shareholders, including the likelihood
of greater volatility of net asset value and market price of the Shares and the
risk that fluctuations in dividend rates on any preferred shares may affect the
return to Shareholders. To the extent the income derived from securities
purchased with proceeds received from leverage exceeds the cost of leverage, the
Fund's distributions will be greater than if leverage had not been used.
Conversely, if the income from the securities purchased with such proceeds is
not sufficient to cover the cost of leverage, the amount available for
distribution to Shareholders as dividends and other distributions will be less
than if leverage had not been used. In the latter case, Eaton Vance in its best
judgment may nevertheless determine to maintain the Fund's leveraged position if
it deems such action to be appropriate. The costs of an offering of preferred
shares and/or borrowing program will be borne by Shareholders and consequently
will result in a reduction of the net asset value of Shares.
As discussed under "Management of the Fund," the fee paid to Eaton Vance will be calculated on the basis of the Fund's gross assets, including proceeds from the issuance of preferred shares and/or borrowings, so the fees will be higher when leverage is utilized. See "Investment objective, policies and risks--Use of leverage and related risks."
The Fund currently intends to seek a AAA credit rating on any preferred shares from a Rating Agency. The Fund may be subject to investment restrictions of the Rating Agency as a result. These restrictions may impose asset coverage or portfolio composition requirements that are more stringent than those imposed on the Fund by the Investment Company Act of 1940, as amended (the "Investment Company Act" or "1940 Act"). It is not anticipated that these covenants or guidelines will impede Eaton Vance in managing the Fund's portfolio in accordance with its investment objective and policies. See "Description of capital structure--Preferred shares."
Financial leverage may also be achieved through the purchase of certain derivative instruments. The Fund's use of derivative instruments exposes the Fund to special risks. See "Investment objective, policies and risks--Additional investment practices" and "--Additional risk considerations."
LIQUIDITY RISK
The Fund may invest in securities for which there is no readily available
trading market or which are otherwise illiquid. The Fund may not be able to
readily dispose of such securities at prices that approximate those at which the
Fund could sell such securities if they were more widely traded and, as a result
of such illiquidity, the Fund may have to sell other investments or engage in
borrowing transactions if necessary to raise cash to meet its obligations. In
addition, the limited liquidity could affect the market price of the debt securities, thereby adversely affecting the Fund's net asset value and ability to make dividend distributions.
INFLATION RISK
Inflation risk is the risk that the value of assets or income from investment
will be worth less in the future as inflation decreases the value of money. As
inflation increases, the real value of the Shares and distributions thereon can
decline. In addition, during any periods of rising inflation, dividend rates of
preferred shares of the Fund would likely increase, which would tend to further
reduce returns to Shareholders.
MARKET PRICE OF SHARES
The shares of closed-end management investment companies often trade at a
discount from their net asset value, and the Fund's Shares may likewise trade at
a discount from net asset value. The trading price of the Fund's Shares may be
less than the public offering price. This risk may be greater for investors who
sell their Shares in a relatively short period after completion of the public
offering.
MANAGEMENT RISK
The Fund is subject to management risk because it is an actively managed
portfolio. Eaton Vance and the individual portfolio managers will apply
investment techniques and risk analyses in making investment decisions for the
Fund, but there can be no guarantee that these will produce the desired results.
MARKET DISRUPTION
The terrorist attacks in the United States on September 11, 2001 had a
disruptive effect on the securities markets. The Fund cannot predict the effects
of similar events in the future on the U.S. economy and securities markets.
These terrorist attacks and related events, including the war in Iraq, have led
to increased short-term market volatility and may have long-term effects on U.S.
and world economies and markets. A similar disruption of the financial markets
could impact interest rates, auctions, secondary trading, ratings, credit risk,
inflation and other factors relating to the Shares.
ANTI-TAKEOVER PROVISIONS
The Fund's Agreement and Declaration of Trust includes provisions that could
have the effect of limiting the ability of other persons or entities to acquire
control of the Fund or to change the composition of its Board. See "Description
of capital structure--Anti-takeover provisions in the Declaration of Trust."
SUMMARY OF FUND EXPENSES
The purpose of the table below is to help you understand all fees and expenses that you, as a Shareholder, would bear directly or indirectly. The following table assumes the issuance of preferred shares in an amount equal to [34%] of the Fund's total assets (after issuance), and shows Fund expenses as a percentage of net assets attributable to common shares.
Shareholder transaction expenses
Sales load paid by you (as a percentage of offering price)... [ ]%
Expenses borne by the Fund................................... [ ]%(1)(2)
Dividend reinvestment plan fees.............................. None(3)
|
PERCENTAGE OF NET ASSETS
ATTRIBUTABLE
TO COMMON SHARES
(ASSUMING THE ISSUANCE
OF PREFERRED SHARES)(4)
--------------------------------------------------------------------------------
Annual expenses
Investment advisory fee..................................... [ ]%
Other expenses.............................................. [ ]%
-------
Total annual expenses....................................... [ ]%
Fee and expense reimbursements (years 1-5).................. ([ ])%(5)
-------
Net annual expenses (years 1-5)............................. [ ]%(5)
-------
|
(1) Eaton Vance or an affiliate has agreed to reimburse all organizational costs and pay all offering costs (other than sales load) that exceed $[ ] per Share.
(2) If the Fund offers preferred shares, costs of that offering, estimated to be slightly more than [ ]% of the total amount of the preferred share offering, will effectively be borne by common shareholders and result in the reduction of the net asset value of the common shares. Assuming the issuance of preferred shares in an amount equal to [34]% of the Fund's total assets (after issuance), those offering costs are estimated to be not more than approximately $[ ] or $[ ] per common share ([ ]% of the offering price).
(3) You will be charged a $5.00 service charge and pay brokerage charges if you direct the plan agent to sell your Shares held in a dividend reinvestment account.
(4) Stated as percentages of net assets attributable to common shares assuming no issuance of preferred shares or borrowings, the Fund's expenses would be estimated to be as follows:
PERCENTAGE OF NET ASSETS
ATTRIBUTABLE
TO COMMON SHARES
(ASSUMING NO PREFERRED SHARES
ARE ISSUED OR OUTSTANDING)
--------------------------------------------------------------------------------
Annual expenses
Investment advisory fee........................................ [ ]%
Other expenses................................................. [ ]%
-------
Total annual expenses.......................................... [ ]%
Fees and expense reimbursements (years 1-5) ([ ])%
-------
Net annual expenses (years 1-5)................................ [ ]%
-------
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(5) Eaton Vance has contractually agreed to reimburse the Fund for fees and other expenses in the amount of [ ]% of average weekly total assets of the Fund for the first [5] full years of the Fund's operations, [ ]% of average weekly total assets of the Fund in year [6], [ ]% in year [7] and [ ]% in year [8]. For this purpose, total assets (and gross assets in "Management of the Fund--The Adviser") shall be calculated by deducting accrued liabilities of the Fund not including the amount of any preferred shares outstanding or the principal amount of any indebtedness for money borrowed. Without the reimbursement, Total net annual expenses would be estimated to be [ ]% of average weekly net assets (or, assuming no issuance of preferred shares or borrowings, [ ]% of average weekly net assets) attributable to common shares. Eaton Vance may voluntarily reimburse additional fees and expenses but is under no obligation to do so. Any such voluntary reimbursements may be terminated at any time.
The expenses shown in the table are based on estimated amounts for the Fund's first year of operations and assume that the Fund issues approximately [ ] common shares. See "Management of the Fund" and "Dividend reinvestment plan."
The following example illustrates the expenses that you would pay on a $1,000 investment in common shares (including the sales load of $[ ], estimated offering expenses of this offering of $[ ] and the estimated preferred share offering costs assuming preferred shares are issued representing [34]% of the Fund's total assets (after issuance) of $[ ]), assuming (1) total net annual expenses of [ ]% of net assets attributable to common shares in years 1 through [5], increasing to [ ]% in years [9] and [10] and (2) a 5% annual return(1):
The example should not be considered a representation of future expenses. Actual expenses may be higher or lower.
(1) The example assumes that the estimated Other expenses set forth in the Annual expenses table are accurate, that fees and expenses increase as described in note 2 below and that all dividends and distributions are reinvested at net asset value. Actual expenses may be greater or less than those assumed. Moreover, the Fund's actual rate of return may be greater or less than the hypothetical 5% return shown in the example.
(2) Assumes reimbursement of fees and expenses of [ ]% of average weekly total assets of the Fund in year [6], [ ]% in year [7] and [ ]% in year [8] and no reimbursement of fees or expenses in years[9] and [10]. Eaton Vance has not agreed to reimburse the Fund for any portion of its fees and expenses beyond [2011].
The Fund
The Fund is a newly organized, diversified, closed-end management investment company registered under the 1940 Act. The Fund was organized as a Massachusetts business trust on July 10, 2003 pursuant to a Declaration of Trust governed by the laws of The Commonwealth of Massachusetts and has no operating history. The Fund's principal office is located at The Eaton Vance Building, 255 State Street, Boston, Massachusetts 02109 and its telephone number is 1-800-225-6265.
This Prospectus relates to the initial public offering of the Fund's common shares of beneficial interest, $0.01 par value (the "Shares"). See "Underwriting."
USE OF PROCEEDS
The net proceeds of this offering of Shares will be approximately $[ ] (or $[ ] assuming exercise of the Underwriters' over-allotment option in full), which, after payment of the estimated offering expenses, will be invested in accordance with the Fund's investment objective and policies as soon as practicable, but, in no event, under normal market conditions, later than three months after the receipt thereof. Pending such investment, the proceeds may be invested in high-quality, short-term debt securities. Eaton Vance or an affiliate has agreed to (i) reimburse all organizational costs and (ii) pay all offering costs of the Fund (other than sales loads) that exceed $[ ] per Share.
INVESTMENT OBJECTIVE, POLICIES AND RISKS
INVESTMENT OBJECTIVE
The Fund's investment objective is to provide a high level of after-tax total return consisting primarily of tax-advantaged dividend income and capital appreciation. The Fund pursues its objective by investing its assets primarily in dividend-paying common and preferred stocks.
PRIMARY INVESTMENT POLICIES
GENERAL COMPOSITION OF THE FUND
Under normal market conditions, the Fund will invest at least 80% of its net
assets in dividend-paying common and preferred stocks. This policy may only be
changed following provision of 60 days prior notice to Shareholders. The Fund
will invest primarily in common and preferred stocks that pay dividends that
qualify for federal income taxation at rates applicable to long-term capital
gains ("tax-favored dividends"). The Adviser retains broad discretion to
allocate the Fund's investments between common and preferred stocks in a manner
that it believes will best effectuate the Fund's objective. Initially, the Fund
expects to invest at least 60% of its total assets in common stocks and at least
20% of its total assets in preferred stocks. Under normal market conditions, the
Fund expects to invest primarily in preferred stocks of investment grade quality
(which is at least BBB- as determined by Standard & Poor's Ratings Group ("S&P")
or Fitch Ratings ("Fitch"), Baa3 as determined by Moody's Investors Service,
Inc. ("Moody's") or, if unrated, determined to be of comparable quality by Eaton
Vance). However, the Fund may, from time to time, purchase preferred stocks of
below investment grade quality that at the time of purchase are rated at least B
as determined by S&P, Fitch or Moody's or, if unrated, determined to be of
comparable quality by Eaton Vance. The foregoing credit quality policy applies
only at the time a preferred stock is purchased, and the Fund is not required to
dispose of a preferred stock in the event of a downgrade of an assessment of
credit quality or the withdrawal of a rating. Preferred stocks of below
investment grade quality are considered to be predominantly speculative because
of the credit risk of the issuers. See "Investment objective, policies and risks
-- Additional risk considerations - Non-investment grade securities risk."
In addition to investing in stocks that pay tax-favored dividends, the Fund may also invest a portion of its assets in stocks and other securities that generate fully taxable ordinary income. For any year, so long as the Fund's fully taxable ordinary income and net realized short-term gains are offset by expenses of the Fund, all of the Fund's income distributions would be characterized as tax-favored dividends. There can be no assurance that a portion of the Fund's income distributions will not be fully taxable.
The Fund may seek to enhance the level of tax-favored dividend income it receives by engaging in dividend capture trading. In a dividend capture trade, the Fund would sell a stock that has gone ex-dividend to purchase another stock paying a dividend before the next dividend of the stock being sold. By entering into a series of such trades, the Fund could augment the amount of dividend income it receives over the course of a year. In order for dividends to qualify as tax favored dividends, the Fund must comply with the holding period requirements described above. The use of dividend capture strategies will expose the Fund to increased trading costs and potential for capital loss.
The Fund may invest a significant portion of its assets in each of the utilities and financial services sectors. The utilities sector includes companies engaged in the manufacture, production, generation, transmission, sale and distribution of water gas and electric energy, as well as companies engaged in the communication field. Companies in the financial services sector include, for example, commercial banks, savings and loan associations, brokerage and investment companies, insurance companies, and consumer and industrial finance companies. See "Investment objective, policies and risks - Additional Risk Considerations - Sector concentration risk."
A team of Eaton Vance investment professionals is responsible for the overall management of the Fund's investments, including the allocation between common and preferred stocks. Individual members of this team with specialized experience are responsible for the day-to-day management of different portions of the Fund's portfolio. The Fund's investments are actively managed, and securities may be bought or sold on a daily basis.
In selecting securities, the Fund invests primarily in dividend-paying common and preferred stocks of U.S. and non-U.S. companies that produce attractive levels of tax-favored dividend income and are, in the opinion of the Adviser, undervalued or inexpensive relative to the overall market. Stocks may be undervalued in relation to other investments due to adverse economic or other near-term difficulties that cause them not to achieve their expected financial potential. Under valuation may also arise because companies are misunderstood by investors or because they are out of step with favored market themes. For its investments in common stock, the Fund also seeks to invest in positions that the Adviser believes have the potential for growth of income and capital appreciation over time. For its investment in preferred stocks, the Fund will also take into consideration the interest rate sensitivity of the investments and the Adviser's interest rate expectations.
Investment decisions are made primarily on the basis of fundamental research. The portfolio managers utilize information provided by, and the expertise of, the Adviser's research staff in making investment decisions. In selecting stocks, the portfolio managers consider (among other factors) a company's earnings or cash flow capabilities, dividend prospects and tax treatment of a company's dividends, the strength of the company's business franchises and estimates of the company's net value. Many of these considerations are subjective.
TAX-MANAGED INVESTING
The Fund seeks to achieve long-term after-tax returns in part by minimizing the
taxes incurred by shareholders in connection with the Fund's investment income
and realized capital gains. Fund distributions that are taxed as ordinary income
are minimized by investing principally in common and preferred stocks that pay
tax-favored dividends (as described below) and by generally avoiding net
realized short-term capital gains and fully taxable ordinary income in excess of
the Fund's expenses. Fund distributions taxed as long-term capital gains are
minimized by avoiding or minimizing the sale of securities with large
accumulated capital gains. When a decision is made to sell a particular
appreciated security, the portfolio managers will select for sale the share lots
resulting in the most favorable tax treatment, generally those with holding
periods sufficient to qualify for long-term capital gains treatment that have
the highest cost basis. The portfolio managers may sell securities to realize
capital losses that can be used to offset realized gains.
To protect against price declines in securities holdings with large accumulated gains, the Fund may use various hedging techniques (such as the purchase and sale of futures contracts on stocks and stock indexes and options thereon, the purchase of put options and the sale of call options on securities held, equity swaps, covered short sales, forward sales of stocks and the purchase and sale of forward currency exchange contracts and currency futures). By using these techniques rather than selling appreciated securities, the Fund can, with certain limitations, reduce its exposure to price declines in the securities without realizing substantial capital gains under current tax law. These derivative instruments may also be used by the Fund to enhance returns or as a substitute for the purchase or sale of securities. Dividends received on securities with respect to which the Fund is obligated to make payments (pursuant to short sales or otherwise) will be treated as fully taxable ordinary income.
Taxes are a major influence on the net returns that investors receive on their taxable investments. There are five components of the returns of a regulated investment company that invests in equities - price appreciation, distributions of qualifying dividend income, distributions of other investment income and distributions of realized short-term and long-term capital gains - which are treated differently for federal income tax purposes. Distributions of income
other than qualifying dividend income and distributions of net realized short-term gains (on stocks held for one year or less) are taxed as ordinary income, at rates as high as 35%. Distributions of qualifying dividend income and net realized long-term gains (on stocks held for more than one year) are taxed at rates up to 15%. Returns derived from price appreciation are untaxed until the shareholder sells his or her shares. Upon sale, a capital gain or loss (short-term, if the shareholder has held his or her shares for one year or less, otherwise long-term) equal to the difference between the net proceeds of such sale and the shareholder's adjusted tax basis is realized. As described above, the Fund seeks to achieve favorable after-tax returns in part by minimizing the taxes incurred by shareholders in connection with the Fund's net investment income and net realized gains.
As discussed above, the Fund seeks dividend income that qualifies for favorable federal income tax treatment. Under federal income tax law enacted on May 28, 2003, qualifying dividend income received by individual Shareholders is taxed at rates equivalent to long-term capital gain tax rates, which reach a maximum of 15%. Qualifying dividend income generally includes dividends from domestic corporations and dividends from foreign corporations that meet certain specified criteria. The Fund generally can pass the tax treatment of tax-favored dividends it receives through to Fund Shareholders. For the Fund to receive tax-favored dividends, the Fund must hold the stock associated with an otherwise qualifying dividend for more than 60 days during the 120-day period beginning 60 days before the ex-dividend date. In addition, the Fund cannot be obligated to make payments (pursuant to a short sale or otherwise) with respect to substantially similar or related property. Similar provisions apply to each shareholder's investment in the Fund. In order for otherwise qualifying Fund dividends received by a Shareholder to be taxable at long-term capital gains rates, the Shareholder must hold his or her Fund shares for more than 60 days during the 120-day period surrounding the ex-dividend date. The provisions of the Internal Revenue Code applicable to tax-favored dividends are effective through 2008. Thereafter, higher tax rates will apply unless further legislative action is taken.
COMMON STOCKS
Common stock represents an equity ownership interest in an issuer. The Fund will
have substantial exposure to common stocks. Although common stocks have
historically generated higher average returns than fixed-income securities over
the long term, common stocks also have experienced significantly more volatility
in returns. An adverse event, such as an unfavorable earnings report, may
depress the value of a particular common stock held by the Fund. Also, the price
of common stocks are sensitive to general movements in the stock market and a
drop in the stock market may depress the price of common stocks to which the
Fund has exposure. Common stock prices fluctuate for many reasons including
changes in investors' perceptions of the financial condition of an issuer or the
general condition of the of the relevant stock market, or when political or
economic events affecting the issuers occur. In addition, common stock prices
may be sensitive to rising interest rates, as the costs of capital rise and
borrowing costs increase.
PREFERRED STOCKS
Preferred stock like common stock represents an equity ownership in an issuer.
Generally, preferred stock has a priority of claim over common stock in dividend
payments and upon liquidation of the issuer. Unlike common stock, preferred
stock does not usually have voting rights. Preferred stock in some instances is
convertible into common stock.
Although they are equity securities, preferred stocks have certain characteristics of both debt and common stock. They are debt-like to the extent that their promised income is contractually fixed. They are common stock-like since they do not have rights to precipitate bankruptcy proceedings or collection activities in the event of missed payments. Furthermore, they have many of the key characteristics of equity due to their subordinated position in an issuer's capital structure and because their quality and value are heavily dependent on the profitability of the issuer rather than on any legal claims to specific assets or cash flows.
In order to be payable, dividends on preferred stock must be declared by the issuer's Board of Directors. In addition, distributions on preferred stock may be subject to deferral and are thus may not be automatically payable. Income payments on typical preferred stocks are cumulative, causing dividends and distributions to accrue even if not declared by the board of directors or otherwise made payable. There is no assurance that dividends on preferred stocks in which the Fund invests will be declared or otherwise made payable. The Fund currently intends to invest in non-cumulative preferred stock, although the Adviser would consider, among other factors, their non-cumulative nature in making any decision to purchase or sell such securities.
Shares of preferred stock have a liquidation value that generally equals the original purchase price at the date of issuance. The market values of preferred stock may be affected by favorable and unfavorable changes impacting companies in utilities and financial services sectors, which are prominent issuers of preferred stock. See Investment objective, policies and risks - Additional Risk Considerations - Sector concentration risk." They may also be affected by actual and anticipated changes in tax laws, such as changes in corporate and individual income tax rates and in the dividends received deduction or the characterization of dividends as tax favored as described above.
Because the claim on an issuer's earnings represented by preferred stock may become onerous when interest rates fall below the rate payable on the stock or for other reasons, the issuer may redeem preferred stock, generally after an initial period in which the stock is not redeemable. Thus, in declining interest rate environments in particular, the Fund's holdings of higher dividend-paying preferred stocks may be reduced and the Fund may be unable to acquire securities paying comparable rates with the redemption proceeds.
ADDITIONAL INVESTMENT PRACTICES
FOREIGN SECURITIES
The Fund may invest a substantial portion of its assets in securities of foreign
issuers. The Fund will not invest in issuers located in emerging market
countries. The value of foreign securities is affected by changes in currency
rates, foreign tax laws (including withholding tax), government policies (in
this country or abroad), relations between nations and trading, settlement,
custodial and other operational risks. In addition, the costs of investing
abroad are generally higher than in the United States, and foreign securities
markets may be less liquid, more volatile and less subject to governmental
supervision than markets in the United States. Foreign investments also could be
affected by other factors not present in the United States, including
expropriation, armed conflict, confiscatory taxation, lack of uniform accounting
and auditing standards, less publicly available financial and other information
and potential difficulties in enforcing contractual obligations. As an
alternative to holding foreign-traded securities, the Fund may invest in
dollar-denominated securities of foreign companies that trade on U.S. exchanges
or in the U.S. over-the-counter market (including depositary receipts which
evidence ownership in underlying foreign securities).
REAL ESTATE INVESTMENT TRUSTS
The Fund may invest in real estate companies structured as "real estate
investment trusts" ("REITs"). REITs are financial vehicles that pool investors'
capital to purchase or finance real estate. REITs may concentrate their
investments in specific geographic areas or in specific property types, i.e.,
hotels, shopping malls, residential complexes and office buildings. The market
value of REIT shares and the ability of REITs to distribute income may be
adversely affected by numerous factors, including rising interest rates, changes
in the national, state and local economic climate and real estate conditions,
perceptions of prospective tenants of the safety, convenience and attractiveness
of the properties, the ability of the owners to provide adequate management,
maintenance and insurance, the cost of complying with the Americans with
Disabilities Act, increasing competition and compliance with environmental laws,
changes in real estate taxes and other operating expenses, adverse changes in
governmental rules and fiscal policies, adverse changes in zoning laws, and
other factors beyond the control of the issuers. In addition, distributions
received by the Fund from REITs may consist of dividends, capital gains and/or
return of capital. As REITs generally pay a higher rate of dividends than most
other operating companies, to the extent application of the Fund's investment
strategy results in the Fund investing in REIT shares, the percentage of the
Fund's dividend income received from REIT shares will likely exceed the
percentage of the Fund's portfolio which is comprised of REIT shares. Generally
REIT income distributions will not, subject to certain exceptions, be treated as
tax-favored dividends.
CORPORATE BONDS AND OTHER DEBT SECURITIES
In addition to its primary investment policies, the Fund may invest in a wide
variety of bonds, debentures and similar debt securities of varying maturities
and durations issued by corporations and other business entities, including
limited liability companies. Debt securities in which the Fund may invest may
pay fixed or variable rates of interest. Bonds and other debt securities
generally are issued by corporations and other issuers to borrow money from
investors. The issuer pays the investor a fixed or variable rate of interest and
normally must repay the amount borrowed on or before maturity. Certain debt
securities are "perpetual" in that they have no maturity date. The Fund will
only invest in bonds and other debt securities that are rated at least B by S&P,
Fitch or Moody's or, if unrated, determined to be of comparable quality by Eaton
Vance. Debt securities of below investment grade quality, commonly known as
"junk bonds," are considered to be predominantly speculative in nature because
of the because of the credit risk of the issuers. See "Investment objective,
policies and risks -- Additional Risk Considerations -- Non-investment grade
securities risk."
WARRANTS
The Fund may invest in equity and index warrants of domestic and international
issuers. Equity warrants are securities that give the holder the right, but not
the obligation, to subscribe for newly created equity issues of the issuing
company or a related company at a fixed price either on a certain date or during
a set period. Changes in the value of a warrant do not necessarily correspond to
changes in the value of its underlying security. The price of a warrant may be
more volatile than the price of its underlying security, and a warrant may offer
greater potential for capital appreciation as well as capital loss. Warrants do
not entitle a holder to dividends or voting rights with respect to the
underlying security and do not represent any rights in the assets of the issuing
company. A warrant ceases to have value if it is not exercised prior to its
expiration date. These factors can make warrants more speculative than other
types of investments.
CONVERTIBLE SECURITIES AND BONDS WITH WARRANTS ATTACHED
The Fund may invest in preferred stocks and fixed-income obligations that are
convertible into common stocks of domestic and foreign issuers, and bonds issued
as a unit with warrants. Convertible securities in which the Fund may invest,
comprised of both convertible debt and convertible preferred stock, may be
converted at either a stated price or at a stated rate into underlying shares of
common stock. Because of this feature, convert often securities enable an
investor to benefit from increases in the market price of the underlying common
stock. Convertible securities often provide higher yields than the underlying
equity securities, but generally offer lower yields than non-convertible
securities of similar quality. The value of convertible securities fluctuates in
relation to changes in interest rates like bonds, and, in addition, fluctuates
in relation to the underlying common stock.
SHORT SALES
The Fund may sell a security short if it owns at least an equal amount of the
security sold short or another security convertible or exchangeable for an equal
amount of the security sold short without payment of further compensation (a
short sale against-the-box). In a short sale against-the-box, the short seller
is exposed to the risk of being forced to deliver appreciated stock to close the
position if the borrowed stock is called in by the lender. These transactions
may also require the current recognition of taxable gain under certain tax rules
applicable to constructive sales. The Fund expects normally to close its short
sales against-the-box by delivering newly acquired stock.
The ability to use short sales against-the-box, certain equity swaps and certain equity collar strategies as a tax-efficient management technique with respect to holdings of appreciated securities is limited to circumstances in which the hedging transaction is closed out within thirty days of the end of the Fund's taxable year and the underlying appreciated securities position is held unhedged for at least the next sixty days after the hedging transaction is closed. Dividends received on securities with respect to which the Fund is obligated to make payments (pursuant to short sales or otherwise) will be treated as fully taxable ordinary income.
TEMPORARY INVESTMENTS
During unusual market circumstances, the Fund may invest temporarily in cash or
cash equivalents, which may be inconsistent with the Fund's investment
objective. Cash equivalents are highly liquid, short-term securities such as
commercial paper, time deposits, certificates of deposit, short-term notes and
short-term U.S. Government obligations.
FOREIGN CURRENCY TRANSACTIONS
The value of foreign assets as measured in U.S. dollars may be affected
favorably or unfavorably by changes in foreign currency rates and exchange
control regulations. Currency exchange rates can also be affected unpredictably
by intervention by U.S. or foreign governments or central banks, or the failure
to intervene, or by currency controls or political developments in the U.S. or
abroad. Foreign currency exchange transactions may be conducted on a spot (i.e.,
cash) basis at the spot rate prevailing in the foreign currency exchange market
or through entering into derivative currency transactions. Currency futures
contracts are exchange-traded and change in value to reflect movements of a
currency or a basket of currencies. Settlement must be made in a designated
currency.
Forward foreign currency exchange contracts are individually negotiated and privately traded so they are dependent upon the creditworthiness of the counterparty. Such contracts may be used when a security denominated in a foreign currency is purchased or sold, or when the receipt in a foreign currency of dividend or interest payments on such a security is anticipated. A forward contract can then "lock in" the U.S. dollar price of the security or the U.S. dollar equivalent of such dividend or interest payment, as the case may be. Additionally, when the Adviser believes that the currency of a particular foreign country may suffer a substantial decline against the U.S. dollar, it may enter into a forward contract to sell, for a fixed amount of dollars, the amount of foreign currency approximating the value of some or all of the securities held that are denominated in such foreign currency. The precise matching of the forward contract amounts and the value of the securities involved will not generally be possible. In addition, it may not be possible to hedge against long-term currency changes. Cross-hedging may be used by using forward contracts in one currency (or basket of currencies) to hedge against fluctuations in the value of securities denominated in a different currency if the Adviser determines that there is an established historical pattern of correlation between the two currencies (or the basket of currencies and the underlying currency). Use of a different foreign currency magnifies exposure to foreign currency exchange rate fluctuations. Forward contracts may also be used to shift exposure to foreign currency exchange rate changes from one currency to another. Short-term hedging provides a means of fixing the dollar value of only a portion of portfolio assets.
Currency transactions are subject to the risk of a number of complex political and economic factors applicable to the countries issuing the underlying currencies. Furthermore, unlike trading in most other types of instruments, there is no systematic reporting of last sale information with respect to the foreign currencies underlying the derivative currency transactions. As a result, available information may not be complete. In an over-the-counter trading environment, there are no daily price fluctuation limits. There may be no liquid
secondary market to close out options purchased or written, or forward contracts entered into, until their exercise, expiration or maturity. There is also the risk of default by, or the bankruptcy of, the financial institution serving as a counterparty.
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS
Securities may be purchased on a "forward commitment" or "when-issued" basis
(meaning securities are purchased or sold with payment and delivery taking place
in the future) in order to secure what is considered to be an advantageous price
and yield at the time of entering into the transaction. However, the return on a
comparable security when the transaction is consummated may vary from the return
on the security at the time that the forward commitment or when-issued
transaction was made. From the time of entering into the transaction until
delivery and payment is made at a later date, the securities that are the
subject of the transaction are subject to market fluctuations. In forward
commitment or when-issued transactions, if the seller or buyer, as the case may
be, fails to consummate the transaction the counterparty may miss the
opportunity of obtaining a price or yield considered to be advantageous. Forward
commitment or when-issued transactions may be expected to occur a month or more
before delivery is due. However, no payment or delivery is made until payment is
received or delivery is made from the other party to the transaction. Forward
commitment or when-issued transactions are not entered into for the purpose of
investment leverage.
ILLIQUID SECURITIES
The Fund may invest in securities for which there is no readily available
trading market or are otherwise illiquid. Illiquid securities include securities
legally restricted as to resale, such as commercial paper issued pursuant to
Section 4(2) of the Securities Act of 1933, as amended, and securities eligible
for resale pursuant to Rule 144A thereunder. Section 4(2) and Rule 144A
securities may, however, be treated as liquid by the Adviser pursuant to
procedures adopted by the Board, which require consideration of factors such as
trading activity, availability of market quotations and number of dealers
willing to purchase the security. If the Fund invests in Rule 144A securities,
the level of portfolio illiquidity may be increased to the extent that eligible
buyers become uninterested in purchasing such securities.
It may be difficult to sell such securities at a price representing the fair value until such time as such securities may be sold publicly. Where registration is required, a considerable period may elapse between a decision to sell the securities and the time when it would be permitted to sell. Thus, the Fund may not be able to obtain as favorable a price as that prevailing at the time of the decision to sell. The Fund may also acquire securities through private placements under which it may agree to contractual restrictions on the resale of such securities. Such restrictions might prevent their sale at a time when such sale would otherwise be desirable.
SWAPS
Swap contracts may be purchased or sold to hedge against fluctuations in
securities prices, interest rates or market conditions, to change the duration
of the overall portfolio, to mitigate default risk or to gain exposure to
particular securities, baskets of securities, indices or currencies. In a
standard "swap" transaction, two parties agree to exchange the returns (or
differentials in rates of return) to be exchanged or "swapped" between the
parties, which returns are calculated with respect to a "notional amount," i.e.,
the return on or increase in value of a particular dollar amount invested at a
particular interest rate or in a "basket" of securities representing a
particular index.
INTEREST RATE SWAPS. The Fund will enter into interest rate and total return swaps only on a net basis, i.e., the two payment streams are netted out, with the Fund receiving or paying, as the case may be, only the net amount of the two payments. Interest rate swaps involve the exchange by the Fund with another party of their respective commitments to pay or receive interest (e.g., an exchange of fixed rate payments for floating rate payments). The Fund will only enter into interest rate swaps on a net basis. If the other party to an interest rate swap defaults, the Fund's risk of loss consists of the net amount of payments that the Fund is contractually entitled to receive. The net amount of the excess, if any, of the Fund's obligations over its entitlements will be maintained in a segregated account by the Fund's custodian. The Fund will not enter into any interest rate swap unless the claims-paying ability of the other party thereto is considered to be investment grade by the Adviser. If there is a default by the other party to such a transaction, the Fund will have contractual remedies pursuant to the agreements related to the transaction. These instruments are traded in the over-the-counter market.
Interest rate swaps involve the exchange by the Fund with another party of their respective commitments to pay or receive interests (e.g., an exchange of fixed rate payments for floating rate payments). The use of interest rate swaps is a highly specialized activity which involves investment techniques and risks different from those associated with ordinary portfolio securities transactions. If the Adviser is incorrect in its forecasts of market values, interest rates and other applicable factors, the investment performance of the Fund would be unfavorably affected.
TOTAL RETURN SWAPS. As stated above, the Fund will enter into total return swaps only on a net basis. Total return swaps are contracts in which one party agrees to make payments of the total return from the underlying asset(s) which may include securities, baskets of securities, or securities indices during the specified period, in return for payments equal to a fixed or floating rate of interest or the total return from other underlying asset(s).
FUTURES AND OPTIONS ON FUTURES
The Fund may purchase and sell various kinds of financial futures contracts and
options thereon to seek to hedge against changes in interest rates, for other
risk management purposes or to gain exposure to certain securities, indices and
currencies. Futures contracts may be based on various debt securities and
securities indices. Such transactions involve a risk of loss or depreciation due
to unanticipated adverse changes in securities prices, which may exceed the
fund's initial investment in these contracts. The Fund will only purchase or
sell futures contracts or related options in compliance with the rules of the
Commodity Futures Trading Commission. These transactions involve transaction
costs. There can be no assurance that Eaton Vance's use of futures will be
advantageous to the Fund. Rating Agency guidelines on any preferred shares
issued by the Fund may limit use of these transactions.
SECURITIES LENDING
The Fund 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. In the
judgment of the Adviser, the loans will be made only to organizations whose
credit quality or claims paying ability is considered to be at least investment
grade and when the expected returns, net of administrative expenses and any
finders' fees, justifies the attendant risk. Securities loans currently are
required to be secured continuously by collateral in cash, cash equivalents
(such as money market instruments) or other liquid securities held by the
custodian and maintained in an amount at least equal to the market value of the
securities loaned. The financial condition of the borrower will be monitored by
the Adviser on an ongoing basis. Distributions of any income realized from
securities lending will be fully taxable.
BORROWINGS
The Fund may borrow money to the extent permitted under the 1940 Act as
interpreted, modified or otherwise permitted by regulatory authority having
jurisdiction, from time to time. The Fund may from time to time borrow money to
add leverage to the portfolio. The Fund may also borrow money for temporary
administrative purposes.
REVERSE REPURCHASE AGREEMENTS
The Fund may enter into reverse repurchase agreements. Under a reverse
repurchase agreement, the Fund temporarily transfers possession of a portfolio
instrument to another party, such as a bank or broker-dealer, in return for
cash. At the same time, the Fund agrees to repurchase the instrument at an
agreed upon time (normally within seven days) and price, which reflects an
interest payment. The Fund may enter into such agreements when it is able to
invest the cash acquired at a rate higher than the cost of the agreement, which
would increase earned income.
When the Fund enters into a reverse repurchase agreement, any fluctuations in the market value of either the securities transferred to another party or the securities in which the proceeds may be invested would affect the market value of the Fund's assets. As a result, such transactions may increase fluctuations in the market value of the Fund's assets. While there is a risk that large fluctuations in the market value of the Fund's assets could affect net asset value, this risk is not significantly increased by entering into reverse repurchase agreements, in the opinion of the Adviser. Because reverse repurchase agreements may be considered to be the practical equivalent of borrowing funds, they constitute a form of leverage. Such agreements will be treated as subject to investment restrictions regarding "borrowings." If the Fund reinvests the proceeds of a reverse repurchase agreement at a rate lower than the cost of the agreement, entering into the agreement will lower the Fund's yield.
PORTFOLIO TURNOVER
As noted above, the Adviser may sell securities to realize capital losses that
can be used to offset capital gains or in connection with dividend recapture
strategies. Use of these tax management strategies will increase portfolio
turnover. Although the Fund cannot accurately predict its portfolio turnover
rate, it may exceed 100% (excluding turnover of securities having a maturity of
one year or less). A high turnover rate (100% or more) necessarily involves
greater expenses to the Fund and may result in a realization of net short-term
capital gains.
USE OF LEVERAGE AND RELATED RISKS
The Fund expects to use leverage through the issuance of preferred shares, and/or through borrowings, including the issuance of debt securities. The Fund initially intends to use leverage of approximately [34%] of its gross assets (including the amount obtained from leverage). The Fund generally will not use
leverage if the Adviser anticipates that it would result in a lower return to Shareholders for any significant amount of time. The Fund also may borrow money as a temporary measure for extraordinary or emergency purposes, including the payment of dividends and the settlement of securities transactions which otherwise might require untimely dispositions of Fund securities.
Leverage creates risks for holders of the Shares, including the likelihood of greater volatility of net asset value and market price of the Shares. There is a risk that fluctuations in the dividend rates on any preferred shares may adversely affect the return to the holders of the Shares. If the income from the securities purchased with such funds is not sufficient to cover the cost of leverage, the return on the Fund will be less than if leverage had not been used, and therefore the amount available for distribution to Shareholders as dividends and other distributions will be reduced. The Adviser in its best judgment nevertheless may determine to maintain the Fund's leveraged position if it deems such action to be appropriate in the circumstances.
Changes in the value of the Fund's portfolio (including investments bought with the proceeds of the preferred shares offering) will be borne entirely by the Shareholders. If there is a net decrease (or increase) in the value of the Fund's investment portfolio, the leverage will decrease (or increase) the net asset value per share to a greater extent than if the Fund were not leveraged. During periods in which the Fund is using leverage the fees paid to Eaton Vance for investment advisory services will be higher than if the Fund did not use leverage because the fees paid will be calculated on the basis of the Fund's gross assets, including proceeds from the issuance of preferred shares. As discussed under "Description of capital structure," the Fund's issuance of preferred shares may alter the voting power of Shareholders.
Capital raised through leverage will be subject to dividend or interest payments, which may exceed the income and appreciation on the assets purchased. The issuance of preferred shares involves offering expenses and other costs and may limit the Fund's freedom to pay dividends on Shares or to engage in other activities. The issuance of a class of preferred shares having priority over the Fund's Shares creates an opportunity for greater return per Share, but at the same time such leveraging is a speculative technique in that it will increase the Fund's exposure to capital risk. Unless the income and appreciation, if any, on assets acquired with offering proceeds exceed the cost of issuing additional classes of securities (and other Fund expenses), the use of leverage will diminish the investment performance of the Fund's Shares compared with what it would have been without leverage.
The Fund may be subject to certain restrictions on investments imposed by guidelines of one or more Rating Agencies that may issue ratings for any preferred shares issued by the Fund. These guidelines may impose asset coverage or Fund composition requirements that are more stringent than those imposed on the Fund by the 1940 Act. It is not anticipated that these covenants or guidelines will impede the Adviser from managing the Fund's portfolio in accordance with the Fund's investment objective and policies.
Under the Investment Company Act, the Fund is not permitted to issue preferred
shares unless immediately after such issuance the total asset value of the
Fund's portfolio is at least 200% of the liquidation value of the outstanding
preferred shares (i.e., such liquidation value may not exceed 50% of the Fund's
total assets). In addition, the Fund is not permitted to declare any cash
dividend or other distribution on its Shares unless, at the time of such
declaration, the net asset value of the Fund's portfolio (determined after
deducting the amount of such dividend or other distribution) is at least 200% of
such liquidation value. If preferred shares are issued, the Fund intends, to the
extent possible, to purchase or redeem preferred shares, from time to time, to
maintain coverage of any preferred shares of at least 200%. If the Fund issues
preferred shares amounting to [34%] leverage, there will be an asset coverage of
[ %]. Normally, holders of the Shares will elect five of the Trustees of the
Fund and holders of any preferred shares will elect two. In the event the Fund
failed to pay dividends on its preferred shares for two years, preferred
shareholders would be entitled to elect a majority of the Trustees until the
dividends are paid.
To qualify for federal income taxation as a "regulated investment company," the Fund must distribute in each taxable year at least 90% of its net investment income (including net interest income and net short-term gain). The Fund also will be required to distribute annually substantially all of its income and capital gain, if any, to avoid imposition of a nondeductible 4% federal excise tax. If the Fund is precluded from making distributions on the Shares because of any applicable asset coverage requirements, the terms of the preferred shares may provide that any amounts so precluded from being distributed, but required to be distributed for the Fund to meet the distribution requirements for qualification as a regulated investment company, will be paid to the holders of the preferred shares as a special dividend. This dividend can be expected to decrease the amount that holders of preferred shares would be entitled to receive upon redemption or liquidation of the shares.
The Fund's willingness to issue new securities for investment purposes, and the amount the Fund will issue, will depend on many factors, the most important of which are market conditions and interest rates. Successful use of a leveraging strategy may depend on the Adviser's ability to predict correctly interest rates
and market movements, and there is no assurance that a leveraging strategy will be successful during any period in which it is employed.
Assuming the utilization of leverage in the amount of [34%] of the Fund's gross assets and an annual dividend rate on preferred shares of [ ]% payable on such leverage based on market rates as of the date of this Prospectus, the additional income that the Fund must earn (net of expenses) in order to cover such dividend payments is [___]. The Fund's actual cost of leverage will be based on market rates at the time the Fund undertakes a leveraging strategy, and such actual cost of leverage may be higher or lower than that assumed in the previous example.
The following table is designed to illustrate the effect on the return to a holder of the Fund's Shares of leverage in the amount of approximately [34]% of the Fund's gross assets, assuming hypothetical annual returns of the Fund's portfolio of minus 10% to plus 10%. As the table shows, leverage generally increases the return to Shareholders when portfolio return is positive and greater than the cost of leverage and decreases the return when the portfolio return is negative or less than the cost of leverage. The figures appearing in the table are hypothetical and actual returns may be greater or less than those appearing in the table.
Assumed portfolio return (net of expenses) ([ ])% ([ ])% [ ]% [ ]% [ ]% Corresponding Share return assuming [34]% leverage ([ ])% ([ ])% ([ ])% [ ]% [ ]% |
Until the Fund issues preferred shares, the Shares will not be leveraged, and the risks and special considerations related to leverage described in this Prospectus will not apply. Such leveraging of the Shares cannot be achieved until the proceeds resulting from the use of leverage have been invested in accordance with the Fund's investment objective and policies.
ADDITIONAL RISK CONSIDERATIONS
NO OPERATING HISTORY
The Fund is a closed-end investment company with no history of operations and is
designed for long-term investors and not as a trading vehicle.
ISSUER RISK
The value of common and preferred stocks may decline for a number of reasons
which directly relate to the issuer, such as management performance, financial
leverage and reduced demand for the issuer's goods and services.
INCOME RISK
The income Shareholders receive from the Fund is based primarily on the
dividends and interest it earns from its investments, which can vary widely over
the short and long-term. If prevailing market interest rates drop, distribution
rates of the Fund's preferred stock and any bond holdings and Shareholder's
income from the Fund could drop as well. The Fund's income also would likely be
affected adversely when prevailing short-term interest rates increase and the
Fund is utilizing leverage.
TAX RISK
The Fund's investment program and the tax treatment of Fund distributions may be
affected by future changes in tax laws and regulations, including changes as a
result of the "sunset" provisions that currently apply to the favorable tax
treatment of qualifying dividend income.
NON-INVESTMENT GRADE SECURITIES RISK
The Fund's investment in preferred stocks and bonds of below investment grade
quality are predominantly speculative because of the credit risk of their
issuers. While offering a greater potential opportunity for capital appreciation
and higher yields, preferred stocks and bonds of below investment grade quality
entail greater potential price volatility and may be less liquid than
higher-rated securities. Issuers of below investment grade quality preferred
stocks and bonds are more likely to default on their payments of
dividends/interest and liquidation value/principal owed to the Fund, and such
defaults will reduce the Fund's net asset value and income distributions. The
prices of these lower quality preferred stocks and bonds are more sensitive to
negative developments than higher rated securities. Adverse business conditions,
such a decline in the issuer's revenues or an economic downturn, generally lead
to a higher non-payment rate. In addition, such as a security may lose
significant value before a default occurs as the market adjusts to expected
higher non-payment rates. The Fund will not invest in preferred stocks or bonds
that are rated, at the time of purchase, below B as determined by S&P, Moody's
or Fitch, or, if unrated, determined to be of comparable quality by Eaton Vance.
The Fund will not invest more than 10% of its gross assets in preferred stocks
and bonds of below investment grade quality. The foregoing credit quality
policies apply only at the time a security is purchased, and the Fund is not
required to dispose of securities already owned by the Fund in the event of a change in assessment of credit quality or the removal of a rating.
INTEREST RATE RISK
Interest rate risk is the risk that preferred stocks paying fixed dividend rates
and fixed-rate debt securities will decline in value because of changes in
market interest rates. When interest rates rise the market value of such
securities generally will fall. The Fund's investment in preferred stocks and
fixed-rate debt securities means that the net asset value and price of the
Shares may decline if market interest rates rise. Interest rates are currently
low relative to historic levels. During periods of declining interest rates, an
issuer of preferred stock or fixed-rate debt securities may exercise its option
to redeem securities prior to maturity, forcing the Fund to reinvest in lower
yielding securities. This is known as call risk. During periods of rising
interest rates, the average life of certain types of securities may be extended
because of slower than expected payments. This may lock in a below market yield,
increase the security's duration, and reduce the value of the security. This is
known as extension risk. The value of the Funds common stock investments may
also be influenced by changes in interest rates.
INVESTMENT AND MARKET RISK
An investment in Shares is subject to investment risk, including the possible
loss of the entire principal amount invested. An investment in Shares represents
an indirect investment in the securities owned by the Fund, substantially all of
which are traded on a securities exchange or in the over-the-counter markets.
The value of these securities, like other market investments, may move up or
down, sometimes rapidly and unpredictably. The Shares at any point in time may
be worth less than the original investment, even after taking into account any
reinvestment of dividends and distributions.
VALUE INVESTING RISK
The Fund focuses its investments on dividend-paying common and preferred stocks
that the Adviser believes are undervalued or inexpensive relative to other
investments. These types of securities may present risks in addition to the
general risks associated with investing in common and preferred stocks. These
securities generally are selected on the basis of an issuer's fundamentals
relative to current market price. Such securities are subject to the risk of
mis-estimation of certain fundamental factors. In addition, during certain time
periods market dynamics may strongly favor "growth" stocks of issuers that do
not display strong fundamentals relative to market price based upon positive
price momentum and other factors. Disciplined adherence to a "value" investment
mandate during such periods can result in significant underperformance relative
to overall market indices and other managed investment vehicles that pursue
growth style investments and/or flexible equity style mandates.
SECTOR CONCENTRATION RISK
The Fund may invest a significant portion of its assets of issuers in each of
the utilities sector and the financial services sector. This may make the Fund
more susceptible to adverse economic, political, or regulatory occurrences
affecting these sectors. As concentration in a sector increases, so does the
potential for fluctuation in the net asset value of Shares.
The utilities sector generally includes companies engaged in the generation, transmission or distribution of electric energy, gas, or water, or, in certain instances, the providing of communications services. Certain segments of this sector and individual companies within such segments may not perform as well as the sector as a whole. Many utility companies historically have been subject to risks of increases in fuel, purchased power and other operating costs, high interest costs on borrowings needed for capital improvement programs and costs associated with compliance with and changes in environmental and other governmental regulations. In particular, regulatory changes with respect to nuclear and conventionally fueled power generating and transmission facilities could increase costs or impair the ability of the utility companies to operate and utilize such facilities, thus reducing the utility companies' earnings or resulting in losses. Rates of return on investment of certain utility companies are subject to review by government regulators. There can be no assurance that changes in regulatory policies or accounting standards will not negatively affect utility companies' earnings or dividends. Costs incurred by utilities, such as fuel and purchased power costs, often are subject to immediate market action resulting from such things as political or military forces operating in geographic regions where oil production is concentrated or global or regional weather conditions, such as droughts, while the rate of return of utility companies generally are subject to review and limitation by state public utility commissions, which often results in a lag or an absence of correlation between costs and return. It is also possible that costs may not be offset by return. Utilities have, in recent years, been affected by increased competition, which could adversely affect the profitability or viability of such utilities. Electric utilities may also be subject to increasing economic pressures dues to deregulation of generation, transmission and other aspects of their business.
The industries within the financial services sector are subject to extensive government regulation which can limit both the amounts and types of loans and other financial commitments they can make, and the interest rates and fees they can charge. Profitability can be largely dependent on the availability and cost of capital funds and the rate of corporate and consumer debt defaults, and can fluctuate significantly when interest rates change. Credit losses resulting from
financial difficulties of borrowers can negatively affect the financial services industries. Insurance companies can be subject to severe price competition. The financial services industries are currently undergoing relatively rapid change as existing distinctions between financial service segments become less clear. For example, recent business combinations have included insurance, finance, and securities brokerage under single ownership. Some primarily retail corporations have expanded into securities and insurance industries.
The banking industry can be significantly affected by the recent adoption of legislation that has reduced the separation between commercial and investment banking businesses and changed the laws governing capitalization and the savings and loan industry. While providing diversification, this new legislation could expose banks to well-established competitors, particularly as the historical distinctions between banks and other financial institutions erode. Increased competition can also result from the broadening of regional and national interstate banking powers, which has already reduced the number of publicly traded banks. In addition, general economic conditions are important to banks that face exposure to credit losses and can be significantly affected by changes in interest rates.
The brokerage and investment management industries can be significantly affected by changes in regulations, brokerage commission structure, and a competitive environment combined with the high operating leverage inherent in companies in this industry. The performance of companies in these industries can be closely tied to the stock and bond markets and can suffer during market declines. Revenues can depend on overall market activity.
The insurance industry can be significantly affected by interest rates, general economic conditions, and price and marketing competition. Property and casualty insurance profits can be affected by weather catastrophes and other natural disasters. Life and health insurance profits can be affected by mortality and morbidity rates. Insurance companies can be adversely affected by inadequacy of cash reserves, the inability to collect from reinsurance carriers, liability for the coverage of environmental clean-up costs from past years, and as yet unanticipated liabilities. Also, insurance companies are subject to extensive government regulation, including the imposition of maximum rate levels, and can be adversely affected by proposed or potential tax law changes.
DERIVATIVES RISK
Derivative transactions (such as futures contracts and options thereon, options,
swaps and short sales) subject the Fund to increased risk of principal loss due
to imperfect correlation or unexpected price or interest rate movements. The
Fund also will be subject to credit risk with respect to the counterparties to
the derivatives contracts purchased by the Fund. If a counterparty becomes
bankrupt or otherwise fails to perform its obligations under a derivative
contract due to financial difficulties, the Fund may experience significant
delays in obtaining any recovery under the derivative contract in a bankruptcy
or other reorganization proceeding. The Fund may obtain only a limited recovery
or may obtain no recovery in such circumstances. As a general matter, dividends
received on hedged stock positions are characterized as ordinary income and are
not eligible for favorable tax treatment.
INFLATION RISK
Inflation risk is the risk that the value of assets or income from investment
will be worth less in the future as inflation decreases the value of money. As
inflation increases, the real value of the Shares and distributions thereon can
decline. In addition, during any periods of rising inflation, dividend rates of
preferred shares of the Fund would likely increase, which would tend to further
reduce returns to Shareholders.
MARKET PRICE OF SHARES
The shares of closed-end management investment companies often trade at a
discount from their net asset value, and the Fund's Shares may likewise trade at
a discount from net asset value. The trading price of the Fund's Shares may be
less than the public offering price. This risk may be greater for investors who
sell their Shares in a relatively short period after completion of the public
offering.
MANAGEMENT RISK
The Fund is subject to management risk because it is an actively managed
portfolio. Eaton Vance and the individual portfolio managers will apply
investment techniques and risk analyses in making investment decisions for the
Fund, but there can be no guarantee that these will produce the desired results.
MARKET DISRUPTION
The terrorist attacks in the United States on September 11, 2001 had a
disruptive effect on the securities markets. The Fund cannot predict the effects
of similar events in the future on the U.S. economy and securities markets.
These terrorist attacks and related events, including the war in Iraq, have led
to increased short-term market volatility and may have long-term effects on U.S.
and world economies and markets. A similar disruption of the financial markets
could impact interest rates, auctions, secondary trading, ratings, credit risk, inflation and other factors relating to the Shares.
ANTI-TAKEOVER PROVISIONS
The Fund's Agreement and Declaration of Trust includes provisions that could
have the effect of limiting the ability of other persons or entities to acquire
control of the Fund or to change the composition of its Board. See "Description
of capital structure--Anti-takeover provisions in the Declaration of Trust."
MANAGEMENT OF THE FUND
BOARD OF TRUSTEES
The management of the Fund, including general supervision of the duties performed by the Adviser under the Advisory Agreement (as defined below), is the responsibility of the Fund's Board under the laws of The Commonwealth of Massachusetts and the 1940 Act.
THE ADVISER
Eaton Vance acts as the Fund's investment adviser under an Investment Advisory Agreement (the "Advisory Agreement"). The Adviser's principal office is located at The Eaton Vance Building, 255 State Street, Boston, MA 02109. Eaton Vance, its affiliates and predecessor companies have been managing assets of individuals and institutions since 1924 and of investment companies since 1931. Eaton Vance (or its affiliates) currently serves as the investment adviser to investment companies and various individual and institutional clients with combined assets under management of approximately $62.7 billion as of June 30, 2003. Eaton Vance is an indirect, wholly-owned subsidiary of Eaton Vance Corp., a publicly-held holding company, which through its subsidiaries and affiliates engages primarily in investment management, administration and marketing activities.
Under the general supervision of the Fund's Board, the Adviser will carry out the investment and reinvestment of the assets of the Fund, will furnish continuously an investment program with respect to the Fund, will determine which securities should be purchased, sold or exchanged, and will implement such determinations. The Adviser will furnish to the Fund investment advice and office facilities, equipment and personnel for servicing the investments of the Fund. The Adviser will compensate all Trustees and officers of the Fund who are members of the Adviser's organization and who render investment services to the Fund, and will also compensate all other Adviser personnel who provide research and investment services to the Fund. In return for these services, facilities and payments, the Fund has agreed to pay the Adviser as compensation under the Advisory Agreement a fee in the amount of [ ]% of the average weekly gross assets of the Fund. Gross assets of the Fund shall be calculated by deducting accrued liabilities of the Fund not including the amount of any preferred shares outstanding or the principal amount of any indebtedness for money borrowed. During periods in which the Fund is using leverage, the fees paid to Eaton Vance for investment advisory services will be higher than if the Fund did not use leverage because the fees paid will be calculated on the basis of the Fund's gross assets, including proceeds from any borrowings and from the issuance of preferred shares.
Thomas E. Faust Jr. (Executive Vice President and Chief Investment Officer of Eaton Vance), Judith A. Saryan, Michael R. Mach, and Thomas H. Luster and other Eaton Vance investment professionals comprise the investment team responsible for the overall management of the Fund's investments as well as allocations of the Fund's assets between common and preferred stocks. Ms. Saryan, Mr. Mach, and Mr. Luster are the portfolio managers responsible for the day-to-day management of specific segments of the Fund's investment portfolio.
Ms. Saryan has been an Eaton Vance portfolio manager since 1999 and is a Vice President of Eaton Vance and Boston Management and Research, an Eaton Vance subsidiary ("BMR"). She also manages another Eaton Vance portfolio. Prior to joining Eaton Vance, Ms. Saryan was a portfolio manager and equity analyst for State Street Global Advisors (1980-1999). Mr. Mach has been an Eaton Vance portfolio manager since 1999 and is a Vice President of Eaton Vance and BMR. He also manages other Eaton Vance portfolios. Prior to joining Eaton Vance, Mr. Mach was a Managing Director and Senior Analyst for Robertson Stephens (1998-1999). Mr. Luster has been an Eaton Vance portfolio manager and fixed income analyst since 1994 and is a Vice President of Eaton Vance and BMR. He also manages a number of other Eaton Vance portfolios. Prior to joining Eaton Vance, Mr. Luster consulted for Deloitte & Touche (1990-1994).
The Fund and the Adviser have adopted a Code of Ethics relating to personal securities transactions. The Code permits Adviser personnel to invest in securities (including securities that may be purchased or held by the Fund) for their own accounts, subject to certain pre-clearance, reporting and other restrictions and procedures contained in such Code.
Eaton Vance serves as administrator of the Fund but currently receives no compensation for providing administrative services to the Fund. Under an Administration Agreement with the Fund ("Administration Agreement"), Eaton Vance is responsible for managing the business affairs of the Fund, subject to the supervision of the Fund's Board. Eaton Vance will furnish to the Fund all office facilities, equipment and personnel for administering the affairs of the Fund. Eaton Vance's administrative services include recordkeeping, preparation and filing of documents required to comply with federal and state securities laws, supervising the activities of the Fund's custodian and transfer agent, providing assistance in connection with the Trustees' and shareholders' meetings, providing service in connection with any repurchase offers and other administrative services necessary to conduct the Fund's business.
DISTRIBUTIONS
The Fund intends to make regular quarterly cash distributions to Shareholders of
the net investment income of the Fund, after payment of interest on any
outstanding borrowings or dividends on any outstanding preferred shares. A
significant portion of the Fund's investment income is expected to consist of
tax-favored dividends. A portion of the Fund's income may also be fully taxable.
Any such income distributions, as well as any distributions by the Fund of net
realized short-term capital gains, will taxed as ordinary income. Distributions
to Shareholders cannot be assured, and the amount of each quarterly distribution
will vary depending on a number of factors, including dividends payable on the
preferred shares of the Fund or other costs of financial leverage. As portfolio
and market conditions change, the rate of dividends on the Shares and the Fund's
dividend policy could change. Over time, the Fund will distribute all of its net
investment income (after it pays accrued dividends on any outstanding preferred
shares or other costs of financial leverage). In addition, at least annually,
the Fund intends to distribute any net short-term capital gain and any net
capital gain (which is the excess of net long-term capital gain over short-term
capital loss). The initial distribution is expected to be declared approximately
[ ] days and paid approximately [ ] to [ ] days after the completion of this
offering, depending on market conditions. Shareholders may elect to
automatically reinvest some or all of their distributions in additional Shares
under the Fund's dividend reinvestment plan. See "Dividend reinvestment plan."
While there are any borrowings or preferred shares outstanding, the Fund may not
be permitted to declare any cash dividend or other distribution on its Shares in
certain circumstances. See "Description of capital structure."
FEDERAL INCOME TAX MATTERS
The following discussion of federal income tax matters is based on the advice of Kirkpatrick & Lockhart LLP, counsel to the Fund.
The Fund intends to make quarterly distributions of net investment income after payment of dividends on any outstanding preferred shares or interest on any outstanding borrowings. The Fund intends to distribute annually any net short-term capital gain (which are taxable as ordinary income) and any net capital gain. Distributions of the Fund's net capital gains ("capital gain dividends"), if any, are taxable to Shareholders as long-term capital gains, regardless of the length of time Shares have been held by Shareholders. Distributions, if any, in excess of the Fund's earnings and profits will first reduce the adjusted tax basis of a holder's Shares and, after that basis has been reduced to zero, will constitute capital gains to the Shareholder (assuming the Shares are held as a capital asset). See below for a summary of the maximum tax rates applicable to capital gains (including capital gain dividends). A corporation that owns Fund shares generally will not be entitled to the dividends received deduction with respect to all the dividends it receives from the Fund. Fund dividend payments that are attributable to qualifying dividends received by the Fund from certain domestic corporations may be designated by the Fund as being eligible for the dividends received deduction.
Under the recently enacted "JOBS AND GROWTH TAX RELIEF RECONCILIATION ACT OF 2003" (the "TAX ACT"), certain income distributions paid by the Fund to individual taxpayers are taxed at rates equal to those applicable to net long-term capital gains (15%, or 5% for individuals in the 10% or 15% tax brackets). This tax treatment applies only if certain holding period requirements are satisfied by the Shareholder and the dividends are attributable to QUALIFIED DIVIDENDS received by the Fund itself. For this purpose, "QUALIFIED DIVIDENDS" means dividends received by the Fund from United States corporations and qualifying foreign corporations, provided that the Fund satisfies certain holding period requirements in respect of the stock of such corporations. In the case of securities lending transactions, payments in lieu of dividends are not qualified dividends. Dividends received by the Fund from REITs are qualified dividends eligible for this lower tax rate only in limited circumstances. These special rules relating to the taxation of ordinary income dividends from regulated investment companies generally apply to taxable years beginning after December 31, 2002 and beginning before January 1, 2009.
A dividend will not be treated as qualified dividend income of the Shareholder if (1) the dividend is received with respect to any share held for fewer than 61 days during the 120-day period beginning on the date which is 60 days before the date on which such share becomes ex-dividend with respect to such dividend, (2) to the extent that the recipient is under an obligation (whether pursuant to a short sale or otherwise) to make related payments with respect to positions in substantially similar or related property, or (3) if the recipient elects to have the dividend treated as investment income for purposes of the limitation on deductibility of investment interest.
The Fund will inform Shareholders of the source and tax status of all distributions promptly after the close of each calendar year.
Selling Shareholders will generally recognize gain or loss in an amount equal to the difference between the Shareholder's adjusted tax basis in the Shares sold and the amount received. If the Shares are held as a capital asset, the gain or loss will be a capital gain or loss. The maximum tax rate applicable to net capital gains recognized by individuals and other non-corporate taxpayers is (i) the same as the maximum ordinary income tax rate for gains recognized on the sale of capital assets held for one year or less, or (ii) 15% for gains recognized on the sale of capital assets held for more than one year (as well as certain capital gain dividends) (5% for individuals in the 10% or 15% tax brackets). Any loss on a disposition of Shares held for six months or less will be treated as a long-term capital loss to the extent of any capital gain dividends received with respect to those Shares. For purposes of determining whether Shares have been held for six months or less, the holding period is suspended for any periods during which the Shareholder's risk of loss is diminished as a result of holding one or more other positions in substantially similar or related property, or through certain options or short sales. Any loss realized on a sale or exchange of Shares will be disallowed to the extent those Shares are replaced by other Shares within a period of 61 days beginning 30 days before and ending 30 days after the date of disposition of the Shares (whether through the reinvestment of distributions, which could occur, for example, if the Shareholder is a participant in the Plan (as defined below) or otherwise). In that event, the basis of the replacement Shares will be adjusted to reflect the disallowed loss.
An investor should be aware that, if Shares are purchased shortly before the record date for any taxable dividend (including a capital gain dividend), the purchase price likely will reflect the value of the dividend and the investor then would receive a taxable distribution likely to reduce the trading value of such Shares, in effect resulting in a taxable return of some of the purchase price. Taxable distributions to individuals and certain other non-corporate Shareholders, including those who have not provided their correct taxpayer identification number and other required certifications, may be subject to "backup" federal income tax withholding at the fourth lowest rate of tax applicable to a single individual (in 2003, 28%).
The foregoing briefly summarizes some of the important federal income tax consequences to Shareholders of investing in Shares, reflects the federal tax law as of the date of this Prospectus, and does not address special tax rules applicable to certain types of investors, such as corporate and foreign investors. Investors should consult their tax advisors regarding other federal, state or local tax considerations that may be applicable in their particular circumstances, as well as any proposed tax law changes.
DIVIDEND REINVESTMENT PLAN
Pursuant to the Fund's dividend reinvestment plan (the "Plan"), a Shareholder may elect to have all distributions of dividends (including all capital gain dividends) automatically reinvested in Shares. Shareholders may elect to participate in the Plan by completing the dividend reinvestment plan application form. If Shareholders do not participate, such Shareholders will receive all distributions in cash paid by check mailed directly to them by PFPC Inc., as dividend paying agent.
PFPC Inc. (the "Plan Agent") serves as agent for the Shareholders in administering the Plan. Shareholders who elect not to participate in the Plan will receive all distributions of dividends in cash paid by check mailed directly to the Shareholder of record (or if the Shares are held in street or other nominee name, then to the nominee) by PFPC Inc., as disbursing agent. Participation in the Plan is completely voluntary and may be terminated or resumed at any time without penalty by written notice if received by the Plan Agent prior to any dividend record date.
Shares will be acquired by the Plan Agent or an independent broker-dealer for the participants' accounts, depending upon the circumstances described below, either (i) through receipt of additional previously authorized but unissued Shares from the Fund ("newly issued Shares") or (ii) by purchase of outstanding Shares on the open market ("open-market purchases") on the [American Stock Exchange] or elsewhere. If on the payment date for the dividend, the net asset value per Share is equal to or less than the market price per Share plus estimated brokerage commissions (such condition being referred to herein as "market premium"), the Plan Agent will invest the dividend amount in newly issued Shares on behalf of the participants. The number of newly issued Shares to be credited to each participant's account will be determined by dividing the dollar amount of the dividend by the net asset value per Share on the date the
Shares are issued, provided that the maximum discount from the then current market price per Share on the date of issuance may not exceed 5%. If on the dividend payment date the net asset value per Share is greater than the market value plus estimated brokerage commissions (such condition being referred to herein as "market discount"), the Plan Agent will invest the dividend amount in Shares acquired on behalf of the participants in open-market purchases.
In the event of a market discount on the dividend payment date, the Plan Agent will have up to 30 days after the dividend payment date to invest the dividend amount in Shares acquired in open-market purchases. If, before the Plan Agent has completed its open-market purchases, the market price of a Share exceeds the net asset value per Share, the average per Share purchase price paid by the Plan Agent may exceed the net asset value of the Fund's Shares, resulting in the acquisition of fewer Shares than if the dividend had been paid in newly issued Shares on the dividend payment date. Therefore, the Plan provides that if the Plan Agent is unable to invest the full dividend amount in open-market purchases during the purchase period or if the market discount shifts to a market premium during the purchase period, the Plan Agent will cease making open-market purchases and will invest the uninvested portion of the dividend amount in newly issued Shares.
The Plan Agent maintains all Shareholders' accounts in the Plan and furnishes written confirmation of all transactions in the accounts, including information needed by Shareholders for tax records. Shares in the account of each Plan participant will be held by the Plan Agent on behalf of the Plan participant, and each Shareholder proxy will include those Shares purchased or received pursuant to the Plan. The Plan Agent will forward all proxy solicitation materials to participants and vote proxies for Shares held pursuant to the Plan in accordance with the instructions of the participants.
In the case of Shareholders such as banks, brokers or nominees that hold Shares for others who are the beneficial owners, the Plan Agent will administer the Plan on the basis of the number of Shares certified from time to time by the record Shareholder's name and held for the account of beneficial owners who participate in the Plan.
There will be no brokerage charges with respect to Shares issued directly by the Fund as a result of dividends payable either in Shares or in cash. However, each participant will pay a pro rata share of brokerage commissions incurred with respect to the Plan Agent's open-market purchases in connection with the reinvestment of dividends.
Shareholders participating in the Plan may receive benefits not available to Shareholders not participating in the Plan. If the market price (plus commissions) of the Fund's Shares is above their net asset value, participants in the Plan will receive Shares of the Fund at less than they could otherwise purchase them and will have Shares with a cash value greater than the value of any cash distribution they would have received on their Shares. If the market price plus commissions is below the net asset value, participants will receive distributions in Shares with a net asset value greater than the per Share value of any cash distribution they would have received on their Shares. However, there may be insufficient Shares available in the market to make distributions in Shares at prices below the net asset value. Also, since the Fund does not redeem its Shares, the price on resale may be more or less than the net asset value.
Experience under the Plan may indicate that changes are desirable. Accordingly, upon 30 days' notice to Plan participants, the Fund reserves the right to amend or terminate the Plan. Shareholders will be charged a $5.00 service charge and pay brokerage charges if such Shareholder directs the Plan Agent to sell Shares held in a dividend reinvestment account.
All correspondence concerning the Plan should be directed to the Plan Agent at PFPC Inc., P.O. Box 43027, Providence, RI 02940-3027. Please call 1-800-331-1710 between the hours of 9:00 a.m. and 5:00 p.m. Eastern Standard Time if you have questions regarding the Plan.
The Fund is an unincorporated business trust established under the laws of The Commonwealth of Massachusetts by an Agreement and Declaration of Trust dated July [ ], 2003 and filed with the Secretary of The Commonwealth on June [ ], 2003 (the "Declaration of Trust"). The Declaration of Trust provides that the Trustees of the Fund may authorize separate classes of shares of beneficial interest. The Trustees have authorized an unlimited number of Shares. The Fund intends to hold annual meetings of Shareholders in compliance with the requirements of the [American Stock Exchange].
SHARES
The Declaration of Trust permits the Fund to issue an unlimited number of full
and fractional Shares of beneficial interest, $0.01 par value per Share. Each
Share represents an equal proportionate interest in the assets of the Fund with
each other Share in the Fund. Holders of Shares will be entitled to the payment
of dividends when, as and if declared by the Board. The 1940 Act or the terms of
any borrowings or preferred shares may limit the payment of dividends to the
holders of Shares. Each whole Share shall be entitled to one vote as to matters
on which it is entitled to vote pursuant to the terms of the Declaration of
Trust on file with the SEC. Upon liquidation of the Fund, after paying or
adequately providing for the payment of all liabilities of the Fund and the
liquidation preference with respect to any outstanding preferred shares, and
upon receipt of such releases, indemnities and refunding agreements as they deem
necessary for their protection, the Trustees may distribute the remaining assets
of the Fund among the holders of the Shares. The Declaration of Trust provides
that Shareholders are not liable for any liabilities of the Fund, requires
inclusion of a clause to that effect in every agreement entered into by the Fund
and indemnifies shareholders against any such liability. Although shareholders
of an unincorporated business trust established under Massachusetts law, in
certain limited circumstances, may be held personally liable for the obligations
of the Fund as though they were general partners, the provisions of the
Declaration of Trust described in the foregoing sentence make the likelihood of
such personal liability remote.
While there are any borrowings or preferred shares outstanding, the Fund may not be permitted to declare any cash dividend or other distribution on its Shares, unless at the time of such declaration, (i) all accrued dividends on preferred shares or accrued interest on borrowings have been paid and (ii) the value of the Fund's total assets (determined after deducting the amount of such dividend or other distribution), less all liabilities and indebtedness of the Fund not represented by senior securities, is at least 300% of the aggregate amount of such securities representing indebtedness and at least 200% of the aggregate amount of securities representing indebtedness plus the aggregate liquidation value of the outstanding preferred shares (expected to equal the aggregate original purchase price of the outstanding preferred shares plus redemption premium, if any, together with any accrued and unpaid dividends thereon, whether or not earned or declared and on a cumulative basis). In addition to the requirements of the 1940 Act, the Fund may be required to comply with other asset coverage requirements as a condition of the Fund obtaining a rating of the preferred shares from a Rating Agency. These requirements may include an asset coverage test more stringent than under the 1940 Act. This limitation on the Fund's ability to make distributions on its Shares could in certain circumstances impair the ability of the Fund to maintain its qualification for taxation as a regulated investment company for federal income tax purposes. The Fund intends, however, to the extent possible to purchase or redeem preferred shares or reduce borrowings from time to time to maintain compliance with such asset coverage requirements and may pay special dividends to the holders of the preferred shares in certain circumstances in connection with any such impairment of the Fund's status as a regulated investment company. See "Investment objective, policies and risks" and "Distributions and taxes." Depending on the timing of any such redemption or repayment, the Fund may be required to pay a premium in addition to the liquidation preference of the preferred shares to the holders thereof.
The Fund has no present intention of offering additional Shares, except as described herein. Other offerings of its Shares, if made, will require approval of the Board. Any additional offering will not be sold at a price per Share below the then current net asset value (exclusive of underwriting discounts and commissions) except in connection with an offering to existing Shareholders or with the consent of a majority of the Fund's outstanding Shares. The Shares have no preemptive rights.
The Fund generally will not issue Share certificates. However, upon written request to the Fund's transfer agent, a share certificate will be issued for any or all of the full Shares credited to an investor's account. Share certificates that have been issued to an investor may be returned at any time.
REPURCHASE OF SHARES AND OTHER DISCOUNT MEASURES
Because shares of closed-end management investment companies frequently trade at
a discount to their net asset values, the Board has determined that from time to
time it may be in the interest of Shareholders for the Fund to take corrective
actions. The Board, in consultation with Eaton Vance, will review at least
annually the possibility of open market repurchases and/or tender offers for the
Shares and will consider such factors as the market price of the Shares, the net asset value of the Shares, the liquidity of the assets of the Fund, effect on the Fund's expenses, whether such transactions would impair the Fund's status as a regulated investment company or result in a failure to comply with applicable asset coverage requirements, general economic conditions and such other events or conditions which may have a material effect on the Fund's ability to consummate such transactions. There are no assurances that the Board will, in fact, decide to undertake either of these actions or if undertaken, that such actions will result in the Fund's Shares trading at a price which is equal to or approximates their net asset value. In recognition of the possibility that the Shares might trade at a discount to net asset value and that any such discount may not be in the interest of Shareholders, the Board, in consultation with Eaton Vance, from time to time may review possible actions to reduce any such discount.
PREFERRED SHARES
The Declaration of Trust authorizes the issuance of an unlimited number of
shares of beneficial interest with preference rights, including preferred shares
(the "preferred shares"), having a par value of $0.01 per share, in one or more
series, with rights as determined by the Board, by action of the Board without
the approval of the Shareholders.
Under the requirements of the 1940 Act, the Fund must, immediately after the issuance of any preferred shares, have an "asset coverage" of at least 200%. Asset coverage means the ratio which the value of the total assets of the Fund, less all liability and indebtedness not represented by senior securities (as defined in the 1940 Act), bears to the aggregate amount of senior securities representing indebtedness of the Fund, if any, plus the aggregate liquidation preference of the preferred shares. If the Fund seeks a rating of the preferred shares, asset coverage requirements, in addition to those set forth in the 1940 Act, may be imposed. The liquidation value of the preferred shares is expected to equal their aggregate original purchase price plus redemption premium, if any, together with any accrued and unpaid dividends thereon (on a cumulative basis), whether or not earned or declared. The terms of the preferred shares, including their dividend rate, voting rights, liquidation preference and redemption provisions, will be determined by the Board (subject to applicable law and the Fund's Declaration of Trust) if and when it authorizes the preferred shares. The Fund may issue preferred shares that provide for the periodic redetermination of the dividend rate at relatively short intervals through an auction or remarketing procedure, although the terms of the preferred shares may also enable the Fund to lengthen such intervals. At times, the dividend rate as redetermined on the Fund's preferred shares may approach or exceed the Fund's return after expenses on the investment of proceeds from the preferred shares and the Fund's leverage structure would result in a lower rate of return to Shareholders than if the Fund were not so structured.
In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Fund, the terms of any preferred shares may entitle the holders of preferred shares to receive a preferential liquidating distribution (expected to equal the original purchase price per share plus redemption premium, if any, together with accrued and unpaid dividends, whether or not earned or declared and on a cumulative basis) before any distribution of assets is made to holders of Shares. After payment of the full amount of the liquidating distribution to which they are entitled, the preferred shareholders would not be entitled to any further participation in any distribution of assets by the Fund.
Holders of preferred shares, voting as a class, shall be entitled to elect two of the Fund's Trustees. Under the 1940 Act, if at any time dividends on the preferred shares are unpaid in an amount equal to two full years' dividends thereon, the holders of all outstanding preferred shares, voting as a class, will be allowed to elect a majority of the Fund's Trustees until all dividends in default have been paid or declared and set apart for payment. In addition, if required by the Rating Agency rating the preferred shares or if the Board determines it to be in the best interests of the Shareholders, issuance of the preferred shares may result in more restrictive provisions than required by the 1940 Act being imposed. In this regard, holders of the preferred shares may be entitled to elect a majority of the Fund's Board in other circumstances, for example, if one payment on the preferred shares is in arrears.
The Fund currently intends to seek a AAA credit rating for the preferred shares from a Rating Agency. The Fund intends that, as long as preferred shares are outstanding, the composition of its portfolio will reflect guidelines established by such Rating Agency. Although, as of the date hereof, no such Rating Agency has established guidelines relating to the preferred shares, based on previous guidelines established by such Rating Agencies for the securities of other issuers, the Fund anticipates that the guidelines with respect to the preferred shares will establish a set of tests for portfolio composition and asset coverage that supplement (and in some cases are more restrictive than) the applicable requirements under the 1940 Act. Although, at this time, no assurance can be given as to the nature or extent of the guidelines which may be imposed in connection with obtaining a rating of the preferred shares, the Fund currently anticipates that such guidelines will include asset coverage requirements which are more restrictive than those under the 1940 Act, restrictions on certain portfolio investments and investment practices, requirements that the Fund maintain a portion of its assets in short-term, high-quality, fixed-income securities and certain mandatory redemption requirements relating to the preferred shares. No assurance can be given that the guidelines actually imposed with respect to the preferred shares by such Rating Agency will be more or less restrictive than as described in this Prospectus.
ANTI-TAKEOVER PROVISIONS IN THE DECLARATION OF TRUST
The Declaration of Trust includes provisions that could have the effect of
limiting the ability of other entities or persons to acquire control of the Fund
or to change the composition of its Board, and could have the effect of
depriving Shareholders of an opportunity to sell their Shares at a premium over
prevailing market prices by discouraging a third party from seeking to obtain
control of the Fund. These provisions may have the effect of discouraging
attempts to acquire control of the Fund, which attempts could have the effect of
increasing the expenses of the Fund and interfering with the normal operation of
the Fund. The Board is divided into three classes, with the term of one class
expiring at each annual meeting of Shareholders. At each annual meeting, one
class of Trustees is elected to a three-year term. This provision could delay
for up to two years the replacement of a majority of the Board. A Trustee may be
removed from office only for cause by a written instrument signed by the
remaining Trustees or by a vote of the holders of at least two-thirds of the
class of shares of the Fund that elected such Trustee and are entitled to vote
on the matter.
In addition, the Declaration of Trust requires the favorable vote of the holders of at least 75% of the outstanding shares of each class of the Fund, voting as a class, then entitled to vote to approve, adopt or authorize certain transactions with 5%-or-greater holders of a class of shares and their associates, unless the Board shall by resolution have approved a memorandum of understanding with such holders, in which case normal voting requirements would be in effect. For purposes of these provisions, a 5%-or-greater holder of a class of shares (a "Principal Shareholder") refers to any person who, whether directly or indirectly and whether alone or together with its affiliates and associates, beneficially owns 5% or more of the outstanding shares of any class of beneficial interest of the Fund. The transactions subject to these special approval requirements are: (i) the merger or consolidation of the Fund or any subsidiary of the Fund with or into any Principal Shareholder; (ii) the issuance of any securities of the Fund to any Principal Shareholder for cash; (iii) the sale, lease or exchange of all or any substantial part of the assets of the Fund to any Principal Shareholder (except assets having an aggregate fair market value of less than $1,000,000, aggregating for the purpose of such computation all assets sold, leased or exchanged in any series of similar transactions within a twelve-month period); or (iv) the sale, lease or exchange to the Fund or any subsidiary thereof, in exchange for securities of the Fund, of any assets of any Principal Shareholder (except assets having an aggregate fair market value of less than $1,000,000, aggregating for the purposes of such computation all assets sold, leased or exchanged in any series of similar transactions within a twelve-month period).
The Board has determined that provisions with respect to the Board and the 75% voting requirements described above, which voting requirements are greater than the minimum requirements under Massachusetts law or the 1940 Act, are in the best interest of Shareholders generally. Reference should be made to the Declaration of Trust on file with the SEC for the full text of these provisions.
CONVERSION TO OPEN-END FUND
The Fund may be converted to an open-end management investment company at any
time if approved by the lesser of (i) two-thirds or more of the Fund's then
outstanding Shares and preferred shares (if any), each voting separately as a
class, or (ii) more than 50% of the then outstanding Shares and preferred shares
(if any), voting separately as a class if such conversion is recommended by at
least 75% of the Trustees then in office. If approved in the foregoing manner,
conversion of the Fund could not occur until 90 days after the shareholders'
meeting at which such conversion was approved and would also require at least 30
days' prior notice to all shareholders. The composition of the Fund's portfolio
likely would prohibit the Fund from complying with regulations of the SEC
applicable to open-end management investment companies. Accordingly, conversion
likely would require significant changes in the Fund's investment policies and
liquidation of a substantial portion of its relatively illiquid portfolio.
Conversion of the Fund to an open-end management investment company also would
require the redemption of any outstanding preferred shares and could require the
repayment of borrowings, which would eliminate the leveraged capital structure
of the Fund with respect to the Shares. In the event of conversion, the Shares
would cease to be listed on the [American Stock Exchange] or other national
securities exchange or market system. The Board believes, however, that the
closed-end structure is desirable, given the Fund's investment objective and
policies. Investors should assume, therefore, that it is unlikely that the Board
would vote to convert the Fund to an open-end management investment company.
Shareholders of an open-end management investment company may require the
company to redeem their shares at any time (except in certain circumstances as
authorized by or under the 1940 Act) at their net asset value, less such
redemption charge, if any, as might be in effect at the time of a redemption.
The Fund expects to pay all such redemption requests in cash, but intends to
reserve the right to pay redemption requests in a combination of cash or
securities. If such partial payment in securities were made, investors may incur
brokerage costs in converting such securities to cash. If the Fund were
converted to an open-end fund, it is likely that new Shares would be sold at net
asset value plus a sales load.
The underwriters named below (the "Underwriters"), acting through [ ].
[ ] and [ ] as lead managers and [ ], [ ], [ ] and [ ]
as their representatives (together with the lead managers, the
"Representatives"), have severally agreed, subject to the terms and conditions
of the Underwriting Agreement with the Fund and Eaton Vance (the "Underwriting
Agreement"), to purchase from the Fund the number of Shares set forth opposite
their respective names. The Underwriters are committed to purchase and pay for
all of such Shares (other than those covered by the over-allotment option
described below) if any are purchased.
The Fund has granted to the Underwriters an option, exercisable for 45 days from the date of this Prospectus, to purchase up to an additional [ ] Shares to cover over-allotments, if any, at the initial offering price. The Underwriters may exercise such option solely for the purpose of covering Underwriting over-allotments incurred in the sale of the Shares offered hereby. To the extent that the Underwriters exercise this option, each of the Underwriters will have a firm commitment, subject to certain conditions, to purchase an additional number of Shares proportionate to such Underwriter's initial commitment.
The Fund has agreed to pay a commission to the Underwriters in the amount of
$[ ] per Share ([ ]% of the public offering price per Share). The
Representatives have advised the Fund that the Underwriters may pay up to
$[ ] per Share from such commission to selected dealers who sell the Shares
and that such dealers may reallow a concession of up to $[ ] per Share to
certain other dealers who sell Shares. Eaton Vance or an affiliate has agreed to
(i) reimburse all organizational costs and (ii) pay all offering costs of the
Fund that exceed $[ ] per Share. Investors must pay for any Shares purchased on
or before [ ], 2003.
Prior to this offering, there has been no public market for the Shares or any other securities of the Fund. Consequently, the offering price for the Shares was determined by negotiation among the Fund and the Representatives. There can be no assurance, however, that the price at which Shares sell after this offering will not be lower than the price at which they are sold by the Underwriters or that an active trading market in the Shares will develop and continue after this offering. The minimum investment requirement is 100 Shares ($[ ]).
The Fund and Eaton Vance have each agreed to indemnify the several Underwriters for or to contribute to the losses arising out of certain liabilities, including liabilities under the Securities Act of 1933, as amended.
The Fund has agreed not to offer, sell or register with the Securities and Exchange Commission any additional equity securities of the Fund, other than issuances of Shares, including pursuant to the Fund's Plan, and issuances in connection with any preferred shares, each as contemplated in this Prospectus, for a period of 180 days after the date of the Underwriting Agreement without the prior written consent of the Representatives.
The Representatives have informed the Fund that the Underwriters do not intend to confirm sale to any accounts over which they exercise discretionary authority.
In connection with this offering, the Underwriters may purchase and sell Shares in the open market. These transactions may include over-allotment and stabilizing transactions and purchases to cover syndicate short positions created in connection with this offering. Stabilizing transactions consist of certain bids or purchases for the purpose of preventing or retarding a decline in the market price of the Shares and syndicate short positions involve the sale by the Underwriters of a greater number of Shares than they are required to purchase from the Fund in this offering. The Underwriters also may impose a penalty bid, whereby selling concessions allowed to syndicate members or other broker-dealers in respect of the Shares sold in this offering for their account may be reclaimed by the syndicate if such Shares are repurchased by the syndicate in stabilizing or covering transactions. These activities may stabilize, maintain or otherwise affect the market price of the Shares, which may be higher than the price that might otherwise prevail in the open market;
and these activities, if commenced, may be discontinued at any time without notice. These transactions may be effected on the [American Stock Exchange] or otherwise.
The Fund anticipates that the Representatives and certain other Underwriters may from time to time act as brokers or dealers in connection with the execution of its portfolio transactions after they have ceased to be Underwriters and, subject to certain restrictions, may act as such brokers while they are Underwriters.
In connection with the offering, certain of the Underwriters or selected dealers may distribute prospectuses electronically.
CUSTODIAN AND TRANSFER AGENT
Investors Bank & Trust Company ("IBT"), 200 Clarendon Street, Boston, MA 02116 is the custodian of the Fund and will maintain custody of the securities and cash of the Fund. IBT maintains the Fund's general ledger and computes net asset value per share at least weekly. IBT also attends to details in connection with the sale, exchange, substitution, transfer and other dealings with the Fund's investments and receives and disburses all funds. IBT also assists in preparation of shareholder reports and the electronic filing of such reports with the SEC.
PFPC Inc., P.O. Box 43027, Providence, RI 02940-3027 is the transfer agent and dividend disbursing agent of the Fund.
LEGAL OPINIONS
Certain legal matters in connection with the Shares will be passed upon for the Fund by Kirkpatrick & Lockhart LLP, Boston, Massachusetts, and for the Underwriters by [ ], [CITY], [STATE].
REPORTS TO STOCKHOLDERS
The Fund will send to Shareholders unaudited semi-annual and audited annual reports, including a list of investments held.
INDEPENDENT AUDITORS
[ ], Boston, Massachusetts, are the independent auditors for the Fund and will audit the Fund's financial statements.
ADDITIONAL INFORMATION
The Prospectus and the Statement of Additional Information do not contain all of the information set forth in the Registration Statement that the Fund has filed with the SEC. The complete Registration Statement may be obtained from the SEC upon payment of the fee prescribed by its rules and regulations. The Statement of Additional Information can be obtained without charge by calling 1-800-225-6265.
Statements contained in this Prospectus as to the contents of any contract or other documents referred to are not necessarily complete, and, in each instance, reference is made to the copy of such contract or other document filed as an exhibit to the Registration Statement of which this Prospectus forms a part, each such statement being qualified in all respects by such reference.
TABLE OF CONTENTS FOR THE STATEMENT OF ADDITIONAL INFORMATION
Additional investment information and restrictions........................ Trustees and officers..................................................... Investment advisory and other services.................................... Determination of net asset value.......................................... Portfolio trading......................................................... Taxes..................................................................... Other information......................................................... Independent auditors...................................................... Independent auditors' report.............................................. Financial statements...................................................... Appendix A: Ratings....................................................... A-1 Appendix B: Performance related and comparative information............... B-1 |
THE FUND'S PRIVACY POLICY
The Fund is committed to ensuring your financial privacy. This notice is being sent to comply with privacy regulations of the Securities and Exchange Commission. The Fund has in effect the following policy with respect to nonpublic personal information about its customers:
o Only such information received from you, through application forms or otherwise, and information about your Fund transactions will be collected.
o None of such information about you (or former customers) will be disclosed to anyone, except as permitted by law (which includes disclosure to employees necessary to service your account).
o Policies and procedures (including physical, electronic and procedural safeguards) are in place that are designed to protect the confidentiality of such information.
For more information about the Fund's privacy policies call 1-800-262-1122.
[GRAPHIC OMITTED]
STATEMENT OF ADDITIONAL INFORMATION
, 2003
EATON VANCE TAX-ADVANTAGED DIVIDEND INCOME FUND
THE EATON VANCE BUILDING
255 STATE STREET
BOSTON, MASSACHUSETTS 02109
(800) 225-6265
Page
----
Additional investment information and restrictions.............................3
Trustees and officers..........................................................8
Investment advisory and other services........................................11
Determination of net asset value..............................................13
Portfolio trading.............................................................14
Taxes.........................................................................16
Other information.............................................................19
Independent auditors..........................................................19
Independent Auditors' Report..................................................20
Statement Of Assets And Liabilities...........................................21
Notes to financial statements.................................................22
APPENDIX A: Ratings..........................................................23
APPENDIX B: Performance related and comparative information...................29
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THIS STATEMENT OF ADDITIONAL INFORMATION ("SAI") IS NOT A PROSPECTUS AND IS AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR ACCOMPANIED BY THE PROSPECTUS OF EATON VANCE TAX-ADVANTAGED DIVIDEND INCOME FUND (THE "FUND") DATED , 2003, AS SUPPLEMENTED FROM TIME TO TIME, WHICH IS INCORPORATED HEREIN BY REFERENCE. THIS SAI SHOULD BE READ IN CONJUNCTION WITH SUCH PROSPECTUS, A COPY OF WHICH MAY BE OBTAINED WITHOUT CHARGE BY CONTACTING YOUR FINANCIAL INTERMEDIARY OR CALLING THE FUND AT 1-800-225-6265.
THE INFORMATION IN THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT COMPLETE AND MAY BE CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS |
STATEMENT OF ADDITIONAL INFORMATION, WHICH IS NOT A PROSPECTUS, IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
Capitalized terms used in this SAI and not otherwise defined have the meanings given them in the Fund's Prospectus.
ADDITIONAL INVESTMENT INFORMATION AND RESTRICTIONS
Primary investment strategies are described in the Prospectus. The following is a description of the various investment policies that may be engaged in, whether as a primary or secondary strategy, and a summary of certain attendant risks. Eaton Vance may not buy any of the following instruments or use any of the following techniques unless it believes that doing so will help to achieve the Fund's investment objectives.
TAX-MANAGED INVESTING. Taxes are a major influence on the net returns that investors receive on their taxable investments. There are five components of the returns of a regulated investment company that invests in equities - price appreciation, distributions of qualifying dividend income, distributions of other investment income and distributions of realized short-term and long-term capital gains - which are treated differently for federal income tax purposes. Distributions of income other than qualifying dividend income and distributions of net realized short-term gains (on stocks held for one year or less) are taxed as ordinary income, at rates currently as high as 35%. Distributions of qualifying dividend income and net realized long-term gains (on stocks held for more than one year) are currently taxed at rates up to 15%. Returns derived from price appreciation are untaxed until the shareholder redeems his or her shares. Upon redemption, a capital gain (short-term), if the shareholder has held his or her shares for one year or less, otherwise long-term) equal to the difference between the net proceeds of the redemption and the shareholder's adjusted tax basis is realized. As described in the prospectus, the Fund seeks to achieve favorable after-tax returns in part by minimizing the taxes incurred by Shareholders in connection with the Fund's net investment income and net realized gains.
EQUITY INVESTMENTS. The Fund invests primarily in dividend-paying common stocks and preferred stocks. The Fund also may invest in debt securities, warrants and other securities and instruments.
DERIVATIVE INSTRUMENTS. Derivative instruments (which are instruments that derive their value from another instrument, security, index or currency) may be purchased or sold to enhance return (which may be considered speculative) to hedge against fluctuations in securities prices, market conditions or currency exchange rates, or as a substitute for the purchase or sale of securities or currencies. Such transactions may be in the U.S. or abroad and may include the purchase or sale of futures contracts on indices and options on stock index futures, the purchase of put options and the sale of call options on securities held, equity swaps and the purchase and sale of currency futures and forward foreign currency exchange contracts. Transactions in derivative instruments involve a risk of loss or depreciation due to: unanticipated adverse changes in securities prices, interest rates, indices, the other financial instruments' prices or currency exchange rates; the inability to close out a position; default by the counterparty; imperfect correlation between a position and the desired hedge; tax constraints on closing our positions; and portfolio management constraints on securities subject to such transactions. The loss on derivative instruments (other than purchased options) may substantially exceed an investment in these instruments. In addition, the entire premium paid for purchased options may be lost before than can be profitably exercised. Transaction costs are incurred in opening and closing positions. Derivative instruments may sometimes increase or leverage exposure to a particular market risk, thereby increasing price volatility. Over-the-counter ("OTC") derivative instruments, equity swaps and forward sales of stock involve an enhanced risk that the issuer or counterparty will fail to perform its contractual obligations. Some derivative instruments are not readily marketable or may become illiquid under adverse market conditions. In addition, during period of market volatility, a commodity exchange may suspend or limit trading in an exchange-traded derivative instrument, which may make the contract temporarily illiquid and difficult to price. Commodity exchanges may also establish daily limits on the amount that the price of a futures contract or futures option can vary from the previous day's settlement price. Once the daily limit is reached, no trades may be made that day at a price beyond the limit. This may prevent the closing out of positions to limit losses. The staff of the SEC takes the position that certain purchased OTC options, and assets used as cover for written OTC options, are illiquid. The ability to terminate OTC derivative instruments may depend on the cooperation of the counterparties to such contracts. For thinly traded derivative instruments, the only source of price quotations may be the selling dealer or counterparty. In addition, certain provisions of the Code limit the use of derivative instruments. Under regulations of the CFTC, the use of futures transactions for non-hedging purposes is limited. There can be no assurance that the use of derivative instruments will be advantageous.
Foreign exchange traded futures contracts and options thereon may be used only if the investment adviser determines that trading on such foreign exchange does not entail risks, including credit and liquidity risks, that are materially greater than the risks associated with trading on CFTC-regulated exchanges.
A put option on a security may be written only if the investment adviser intends to acquire the security. Call options written on securities will be covered by ownership of the securities subject to the call option or an offsetting option.
CORPORATE BONDS AND OTHER DEBT SECURITIES
The Fund may invest in corporate bonds including below investment grade quality, commonly known as "junk bonds" ("Non-Investment Grade Bonds"). Investments in Non-Investment Grade Bonds generally provide greater income and increased opportunity for capital appreciation than investments in higher quality securities, but they also typically entail greater price volatility and principal and income risk, including the possibility of issuer default and bankruptcy. Non-Investment Grade Bonds are regarded as predominantly speculative with respect to the issuer's continuing ability to meet principal and interest payments. Debt securities in the lowest investment grade category also may be considered to possess some speculative characteristics by certain rating agencies. In addition, analysis of the creditworthiness of issuers of Non-Investment Grade Bonds may be more complex than for issuers of higher quality securities.
Non-Investment Grade Bonds may be more susceptible to real or perceived adverse economic and competitive industry conditions than investment grade securities. A projection of an economic downturn or of a period of rising interest rates, for example, could cause a decline in Non-Investment Grade Bond prices because the advent of recession could lessen the ability of an issuer to make principal and interest payments on its debt obligations. If an issuer of Non-Investment Grade Bonds defaults, in addition to risking payment of all or a portion of interest and principal, the Fund may incur additional expenses to seek recovery. In the case of Non-Investment Grade Bonds structured as zero-coupon, step-up or payment-in-kind securities, their market prices will normally be affected to a greater extent by interest rate changes, and therefore tend to be more volatile than securities which pay interest currently and in cash. Eaton Vance seeks to reduce these risks through diversification, credit analysis and attention to current developments in both the economy and financial markets.
The secondary market on which Non-Investment Grade Bonds are traded may be less liquid than the market for investment grade securities. Less liquidity in the secondary trading market could adversely affect the net asset value of the Shares. Adverse publicity and investor perceptions, whether or not based on fundamental analysis, may decrease the values and liquidity of Non-Investment Grade Bonds, especially in a thinly traded market. When secondary markets for Non-Investment Grade Bonds are less liquid than the market for investment grade securities, it may be more difficult to value the securities because such valuation may require more research, and elements of judgment may play a greater role in the valuation because there is no reliable, objective data available. During periods of thin trading in these markets, the spread between bid and asked prices is likely to increase significantly and the Fund may have greater difficulty selling these securities. The Fund will be more dependent on Eaton Vance's research and analysis when investing in Non-Investment Grade Bonds. Eaton Vance seeks to minimize the risks of investing in all securities through in-depth credit analysis and attention to current developments in interest rate and market conditions.
A general description of the ratings of securities by S&P, Fitch and Moody's is set forth in Appendix A to this SAI. Such ratings represent these rating organizations' opinions as to the quality of the securities they rate. It should be emphasized, however, that ratings are general and are not absolute standards of quality. Consequently, debt obligations with the same maturity, coupon and rating may have different yields while obligations with the same maturity and coupon may have the same yield. For these reasons, the use of credit ratings as the sole method of evaluating Non-Investment Grade Bonds can involve certain risks. For example, credit ratings evaluate the safety or principal and interest payments, not the market value risk of Non-Investment Grade Bonds. Also, credit rating agencies may fail to change credit ratings in a timely fashion to reflect events since the security was last rated. Eaton Vance does not rely solely on credit ratings when selecting securities for the Fund, and develops its own independent analysis of issuer credit quality.
In the event that a rating agency or Eaton Vance downgrades its assessment of the credit characteristics of a particular issue, the Fund is not required to dispose of such security. In determining whether to retain or sell a downgraded security, Eaton Vance may consider such factors as Eaton Vance's assessment of the credit quality of the issuer of such security, the price at which such security could be sold and the rating, if any, assigned to such security by other rating agencies. However, analysis of the creditworthiness of issuers of Non-Investment Grade Bonds may be more complex than for issuers of high quality debt securities.
SHORT SALES
The Fund may sell a security short if it owns at least an equal amount of the security sold short or another security convertible or exchangeable for an equal amount of the security sold short without payment of further compensation (a short sale against-the-box). In a short sale against-the-box, the short seller is exposed to the risk of being forced to deliver appreciated stock to close the position if the borrowed stock is called in by the lender. These transactions may also require the current recognition of taxable gain under certain tax rules applicable to constructive sales. The Fund expects normally to close its short sales against-the-box by delivering newly-acquired stock.
The ability to use short sales against-the-box, certain equity swaps and certain equity collar strategies as a tax-efficient management technique with respect to holdings of appreciated securities is limited to circumstances in which the hedging transaction is closed out within thirty days of the end of the Fund's taxable year and the underlying appreciated securities position is held unhedged for at least the next sixty days after the hedging transaction is closed.
Purchasing securities to close out the short position can itself cause the price of the securities to rise further, thereby exacerbating the loss. Short-selling exposes the Fund to unlimited risk with respect to that security due to the lack of an upper limit on the price to which an instrument can rise. Although the Fund reserves the right to utilize short sales, the Adviser is under no obligation to utilize shorts at all.
FOREIGN INVESTMENTS
Because foreign companies are not subject to uniform accounting, auditing and financial reporting standards, practices and requirements comparable to those applicable to U.S. companies, there may be less publicly available information about a foreign company than about a domestic company. Volume and liquidity in most foreign debt markets is less than in the United States and securities of some foreign companies are less liquid and more volatile than securities of comparable U.S. companies. There is generally less government supervision and regulation of securities exchanges, broker-dealers and listed companies than in the United States. Mail service between the United States and foreign countries may be slower or less reliable than within the United States, thus increasing the risk of delayed settlements portfolio transactions or loss of certificates for portfolio securities. Payment for securities before delivery may be required. In addition, with respect to certain foreign countries, there is the possibility of expropriation or confiscatory taxation, political or social instability, or diplomatic developments which could affect investments in those countries. Moreover, individual foreign economics may differ favorably or unfavorably from the U.S. economy in such respects as growth of gross national product, rate of inflation, capital reinvestment, resource self-sufficiency and balance of payments position. Foreign securities markets, while growing in volume and sophistication, are generally not as developed as those in the United States, and securities of some foreign issuer (particularly those located in developing countries) may be less liquid and more volatile than securities of comparable U.S. companies.
American Depositary Receipts (ADRs), European Depositary Receipts (EDRs) and Global Depositary Receipts (GDRs) may be purchased. ADRs, EDRs and GDRs are certificates evidencing ownership of shares of foreign issuer and are alternatives to directly purchasing the underlying foreign securities in their national markets and currencies. However, they continue to be subject to many of the risks associated with investing directly in foreign securities. These risks include foreign exchange risk as well as the political and economic risks of the underlying issuer's country. ADRs, EDRs and GDRs may be sponsored or unsponsored. Unsponsored receipts are established without the participation of the issuer. Unsponsored receipts may involve higher expenses, they may not pass-though voting or other shareholder rights, and they may be less liquid.
SECURITIES LENDING
As described in the Prospectus, the Fund may lend a portion of its portfolio securities to broker-dealers or other institutional borrowers. Loans will be made only to organizations whose credit quality or claims paying ability is considered by the Adviser to be at least investment grade. All securities loans will be collateralized on a continuous basis by cash or U.S. government securities having a value, marked to market daily, of at least 100% of the market value of the loaned securities. The Fund may receive loan fees in connection with loans that are collateralized by securities or on loans of securities for which there is special demand. The Fund may also seek to earn income on securities loans by reinvesting cash collateral in securities consistent with its investment objective and policies, seeking to invest at rates that are higher than the "rebate" rate that it normally will pay to the borrower with respect to such cash collateral. Any such reinvestment will be subject to the investment policies, restrictions and risk considerations described in the Prospectus and in this SAI.
Securities loans may result in delays in recovering, or a failure of the borrower to return, the loaned securities. The defaulting borrower ordinarily would be liable to the Fund for any losses resulting from such delays or failures, and the collateral provided in connection with the loan normally would also be available for that purpose. Securities loans normally may be terminated by either the Fund or the borrower at any time. Upon termination and the return of the loaned securities, the Fund would be required to return the related cash or securities collateral to the borrower and it may be required to liquidate longer term portfolio securities in order to do so. To the extent that such securities have decreased in value, this may result in the Fund realizing a loss at a time when it would not otherwise do so. The Fund also may incur losses if it is unable to reinvest cash collateral at rates higher than applicable rebate rates paid to borrowers and related administrative costs. These risks are substantially the same as those incurred through investment leverage, and will be subject to the investment policies, restrictions and risk considerations described in the Prospectus and in this SAI.
The Fund will receive amounts equivalent to any interest or other distributions paid on securities while they are on loan, and the Fund will not be entitled to exercise voting or other beneficial rights on loaned securities. The Fund will exercise its right to terminate loans and thereby regain these rights whenever the Adviser considers it to be in the Fund's interest to do so, taking into account the related loss of reinvestment income and other factors.
TEMPORARY INVESTMENTS
The Fund may invest temporarily in cash or cash equivalents. Cash equivalents are highly liquid, short-term securities such as commercial paper, certificates of deposit, short-term notes and short-term U.S. Government obligations.
INVESTMENT RESTRICTIONS
The following investment restrictions of the Fund are designated as fundamental policies and as such cannot be changed without the approval of the holders of a majority of the Fund's outstanding voting securities, which as used in this SAI means the lesser of (a) 67% of the shares of the Fund present or represented by proxy at a meeting if the holders of more than 50% of the outstanding shares are present or represented at the meeting or (b) more than 50% of outstanding shares of the Fund. As a matter of fundamental policy the Fund may not:
(1) Borrow money, except as permitted by the Investment Company Act of 1940 (the "1940 Act"). The 1940 Act currently requires that any indebtedness incurred by a closed-end investment company have an asset coverage of at least 300%;
(2) Issue senior securities, as defined in the 1940 Act, other than (a) preferred shares which immediately after issuance will have asset coverage of at least 200%, (b) indebtedness which immediately after issuance will have asset coverage of at least 300%, or (c) the borrowings permitted by investment restriction (1) above. The 1940 Act currently defines "senior security" as any bond, debenture, note or similar obligation or instrument constituting a security and evidencing indebtedness, and any stock of a class having priority over any other class as to distribution of assets or payment of dividends. Debt and equity securities issued by a closed-end investment company meeting the foregoing asset coverage provisions are excluded from the general 1940 Act prohibition on the issuance of senior securities;
(3) Purchase securities on margin (but the Fund may obtain such short-term credits as may be necessary for the clearance of purchases and sales of securities). The purchase of investment assets with the proceeds of a permitted borrowing or securities offering will not be deemed to be the purchase of securities on margin;
(4) Underwrite securities issued by other persons, except insofar as it may technically be deemed to be an underwriter under the Securities Act of 1933 in selling or disposing of a portfolio investment;
(5) Make loans to other persons, except by (a) the acquisition of loan interests, debt securities and other obligations in which the Fund is authorized to invest in accordance with its investment objectives and policies, (b) entering into repurchase agreements, and (c) lending its portfolio securities;
(6) Purchase or sell real estate, although it may purchase and sell securities which are secured by interests in real estate and securities of issuers which invest or deal in real estate. The Fund reserves the freedom of action to hold and to sell real estate acquired as a result of the ownership of securities;
(7) Purchase or sell physical commodities or contracts for the purchase or sale of physical commodities. Physical commodities do not include futures contracts with respect to securities, securities indices, currencies, interest or other financial instruments; and
(8) With respect to 75% of its total assets, invest more than 5% of its total assets in the securities of a single issuer or purchase more than 10% of the outstanding voting securities of a single issuer, except obligations issued or guaranteed by the U.S. government, its agencies or instrumentalities and except securities of other investment companies; or invest more 25% or more of its total assets in any single industry (other than securities issued or guaranteed by the U.S. government or its agencies or instrumentalities).
The Fund may borrow money as a temporary measure for extraordinary or emergency purposes, including the payment of dividends and the settlement of securities transactions which otherwise might require untimely dispositions of Fund securities. The 1940 Act currently requires that the Fund have 300% asset coverage with respect to all borrowings other than temporary borrowings.
For purposes of construing restriction (8), securities of the U.S. Government, its agencies, or instrumentalities are not considered to represent industries.
The Fund has adopted the following nonfundamental investment policy which may be changed by the Board without approval of the Fund's shareholders. As a matter of nonfundamental policy, the Fund may not make short sales of securities or maintain a short position, unless at all times when a short position is open it either owns an equal amount of such securities or owns securities convertible into or exchangeable, without payment of any further consideration, for securities of the same issue as, and equal in amount to, the securities sold short.
Upon the Board's approval, the Fund may invest more than 10% of its total assets in one or more other management investment companies (or may invest in affiliated investment companies) to the extent permitted by the 1940 Act and rules thereunder.
Whenever an investment policy or investment restriction set forth in the Prospectus or this SAI states a maximum percentage of assets that may be invested in any security or other asset or describes a policy regarding quality standards, such percentage limitation or standard shall be determined immediately after and as a result of the Fund's acquisition of such security or asset. Accordingly, any later increase or decrease resulting from a change in values, assets or other circumstances or any subsequent rating change made by a rating service (or as determined by the Adviser if the security is not rated by a rating agency) will not compel the Fund to dispose of such security or other asset. Notwithstanding the foregoing, the Fund must always be in compliance with the borrowing policies set forth above.
The Trustees of the Fund are responsible for the overall management and supervision of the affairs of the Fund. The Trustees and officers of the Fund are listed below. Except as indicated, each individual has held the office shown or other offices in the same company for the last five years. The business address of each Trustee and officer is The Eaton Vance Building, 255 State Street, Boston, Massachusetts 02109. As used in this SAI, "EVC" refers to Eaton Vance Corp., "EV" refers to Eaton Vance, Inc., "BMR" refers to Boston Management and Research, and "EVD" refers to Eaton Vance Distributors Inc. EVC and EV are the corporate parent and trustee, respectively, of Eaton Vance and BMR.
TRUSTEES
NUMBER OF
PORTFOLIOS IN
TERM OF OFFICE FUND COMPLEX OTHER
NAME AND POSITION(S) AND LENGTH PRINCIPAL OCCUPATION(S) OVERSEEN BY DIRECTORSHIPS
DATE OF BIRTH WITH THE FUND OF SERVICE DURING PAST FIVE YEARS TRUSTEE(1) HELD
---------------- ------------- -------------- ----------------------- ------------- -------------
Alan R. Dynner Trustee and Since 07/10/03 Vice President, Secretary None
10/10/40 Secretary Three Years And Chief Legal Officer of
BMR, Eaton Vance, EVD, EV and
EVC. Officer of 191
registered investment
companies managed by Eaton
Vance or BMR.
James B. Hawkes Trustee and Since 07/10/03 Chairman, President and 191 Director of EVC
11/9/41 Vice President Three Years Chief Executive Officer of
BMR, Eaton Vance, EVC and EV;
Director of EV and EVC; Vice
President and Director of
EVD. Trustee and/or officer
of 191 registered investment
companies in the Eaton Vance
Fund Complex. Mr. Hawkes is
an interested person because
of his positions with BMR,
Eaton Vance, EVC and EV,
which are affiliates of the
Fund.
---------
(1) Includes both master and feeder funds in master-feeder structure.
Additional trustees shall be elected prior to the filing of pre-effective amendment to the Registration Statement.
6
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PRINCIPAL OFFICERS WHO ARE NOT TRUSTEES
Term of Office
Position(s) and Length
Name and Date of Birth with the Fund of Service Principal Occupations During Past Five Years
----------------------------- -------------------------- --------------------------------------------
Thomas E. Faust Jr. President Since 07/10/03 Executive Vice President of Eaton Vance, BMR,
5/31/58 EVC and EV; Chief Investment Officer of Eaton
Vance and BMR and Director of EVC. Chief
Executive Officer of Belair Capital Fund LLC,
Belcrest Capital Fund LLC, Belmar Capital
Fund LLC; Belport Capital Fund LLC and
Belrose Capital Fund LLC (private investment
companies sponsored by Eaton Vance). Officer
of 51 registered investment companies managed
by Eaton Vance or BMR
James L. O'Connor Treasurer Since 07/10/03 Vice President of BMR, Eaton Vance and EVD.
4/1/45 Officer of 113 registered investment
companies managed by Eaton Vance or BMR.
Thomas H. Luster Vice President Since 07/10/03 Vice President of Eaton Vance or BMR. Officer
of 13 registered investment companies managed
by Eaton Vance or BMR.
Michael R. Mach Vice President Since 07/10/03 Vice President of Eaton Vance and BMR.
Previously, Managing Director and Senior
Analyst for Robertson Stephens (1998-1999).
Officer of 24 registered investment companies
managed by Eaton Vance or BMR.
Judith A. Saryan Vice President Since 07/10/03 Vice President of Eaton Vance and BMR.
Previously, Portfolio Manager and Equity
Analyst for State Street Global Advisors
(1980-1999). Officer of 23 registered
investment companies managed by Eaton Vance
or BMR.
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[The Governance Committee of the Board of Trustees of the Fund is comprised of
those Trustees who are not "interested persons" of the Fund, as that term is
defined under the 1940 Act ("noninterested Trustees"). [ ] currently serves as
the Governance Committee's chair. The purpose of the Committee is to undertake a
periodic review of, and make recommendations with respect to: (i) the Board's
performance; (ii) Trustee compensation; (iii) appointment of new Trustees; (iv)
identity, duties and composition of the various Board committees; (v)
development and maintenance of the Board's membership, structure and operations;
(vi) policies and procedures adopted or approved by the Board to comply with
regulatory requirements that relate to fund governance; and (vii) any other
matters related to fund governance.]
[The Trustees will, when a vacancy exists or is anticipated, consider any nominee for Trustee recommended by a shareholder if such recommendation is submitted to the Trustees in writing and contains sufficient background information concerning the individual to enable a proper judgment to be made as
to such individual's qualifications.] [[ ] and [ ] are members of the Audit Committee of the Board of Trustees of the Fund. The Audit Committee's functions include making recommendations to the |
Trustees regarding the selection and performance of the independent accountants, and reviewing matters relative to accounting and auditing practices and procedures, accounting records, and the internal accounting controls, of the Fund, and certain service providers.]
[[ ] and [ ] are members of the Special Committee of the Board of Trustees of the Fund. The purpose of the Special Committee is to consider, evaluate and make recommendations to the full Board of Trustees concerning (i) all contractual arrangements with service providers to the Fund, including investment advisory, administrative, transfer agency, custodial and fund accounting and distribution services, and (ii) all other matters in which Eaton Vance or its affiliates has any actual or potential conflict of interest with the Fund.]
As of the date of this SAI, no Committee has held any meetings.
When considering approval of the investment advisory agreement between the Fund and the Adviser, the noninterested Trustees considered, among other things, the following:
+ An independent report comparing the fees and expenses of the Fund;
+ Information on the relevant peer group(s) of funds;
+ The economic outlook and the general investment outlook in the relevant
investment markets;
+ Eaton Vance's results and financial condition and the overall organization
of the Adviser;
+ Arrangements regarding the distribution of Fund shares;
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+ The procedures used to determine the fair value of the Fund's assets;
+ The allocation of brokerage, including allocations to soft dollar brokerage and allocations to firms that sell Eaton Vance fund shares;
+ Eaton Vance's management of the relationship with the custodian, subcustodians and fund accountants;
+ The resources devoted to Eaton Vance's compliance efforts undertaken on behalf of the funds it manages and the record of compliance with the investment policies and restrictions and with policies on personal securities transactions;
+ The quality nature, cost and character of the administrative and other non-investment management services provided by Eaton Vance and its affiliates;
+ Investment management staffing;
+ Operating expenses (including transfer agency expenses) to be paid to third parties; and
+ Information to be provided to investors, including the Fund's shareholders.
In addition to the factors mentioned above, the noninterested Trustees also reviewed the level of the Adviser's profits in respect of the management of the Eaton Vance funds, including the Fund. The noninterested Trustees considered the profits realized by Eaton Vance and its affiliates in connection with the operation of the Fund. The noninterested Trustees also considered Eaton Vance's profit margins in comparison with available industry data.
The noninterested Trustees did not consider any single factor as controlling in determining whether or not to approve the investment advisory agreement. Nor are the items described herein all encompassing of the matters considered by the noninterested Trustees. In assessing the information provided by Eaton Vance and its affiliates, the noninterested Trustees also took into consideration the benefits to shareholders of investing in a fund that is part of a large family of funds which provides a large variety of shareholder services.
Based on their consideration of all factors that they deemed material and assisted by the advice of their independent counsel, the non-interested Trustees concluded that the approval of the investment advisory agreement, including the fee structure (described herein) is in the interests of shareholders.
SHARE OWNERSHIP
[The following table shows the dollar range of equity securities beneficially owned by each Trustee in the Fund and all Eaton Vance Funds overseen by the Trustee as of December 31, 2002.
AGGREGATE DOLLAR RANGE OF EQUITY
DOLLAR RANGE OF SECURITIES OWNED IN ALL REGISTERED
EQUITY SECURITIES FUNDS OVERSEEN BY TRUSTEE IN THE
NAME OF TRUSTEE OWNED IN THE FUND EATON VANCE FUND COMPLEX
--------------- ----------------- ----------------------------------
INTERESTED TRUSTEES
Alan R. Dynner...... None None
James B. Hawkes..... None over $100,000
NONINTERESTED TRUSTEES
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As of December 31, 2002, no noninterested Trustee or any of their immediate family members owned beneficially or of record any class of securities of EVC, EVD or any person controlling, controlled by or under common control with EVC or EVD.
During the calendar years ended December 31, 2001 and December 31, 2002, no noninterested Trustee (or their immediate family members) had:
1. Any direct or indirect interest in Eaton Vance, EVC, EVD or any person controlling, controlled by or under common control with EVC or EVD;
2. Any direct or indirect material interest in any transaction or series of similar transactions with (i) the Trust or any Fund; (ii) another fund managed by EVC, distributed by EVD or a person controlling, controlled by or under common control with EVC or EVD; (iii) EVC or EVD; (iv) a person controlling, controlled by or under common control with EVC or EVD; or (v) an officer of any of the above; or
3. Any direct or indirect relationship with (i) the Trust or any Fund; (ii)
another fund managed by EVC, distributed by EVD or a person controlling,
controlled by or under common control with EVC or EVD; (iii) EVC or EVD;
(iv) a person controlling, controlled by or under common control with EVC
or EVD; or (v) an officer of any of the above.
During the calendar years ended December 31, 2001 and December 31, 2002, no officer of EVC, EVD or any person controlling, controlled by or under common control with EVC or EVD served on the Board of Directors of a company where a noninterested Trustee of the Fund or any of their immediate family members served as an officer.
Trustees of the Fund who are not affiliated with the Adviser may elect to defer receipt of all or a percentage of their annual fees in accordance with the terms of a Trustees Deferred Compensation Plan (the "Trustees' Plan"). Under the Trustees' Plan, an eligible Trustee may elect to have his deferred fees invested by the Fund in the shares of one or more funds in the Eaton Vance Family of Funds, and the amount paid to the Trustees under the Trustees' Plan will be determined based upon the performance of such investments. Deferral of Trustees' fees in accordance with the Trustees' Plan will have a negligible effect on the Fund's assets, liabilities, and net income per share, and will not obligate the Fund to retain the services of any Trustee or obligate the Fund to pay any particular level of compensation to the Trustee. The Fund does not have a retirement plan for its Trustees.
The fees and expenses of the noninterested Trustees of the Fund are paid by the Fund. (The Trustees of the Fund who are members of the Eaton Vance organization receive no compensation from the Fund.) During the Fund's fiscal year ending August 31, 2004, it is anticipated that the noninterested Trustees of the Fund will earn the following compensation in their capacities as Trustees. For the year ended December 31, 2002, the noninterested Trustees earned the compensation set forth below in their capacities as Trustees from the funds in the Eaton Vance fund complex(1).]
* Estimated
(1) AS OF JUNE 2003, THE EATON VANCE FUND COMPLEX CONSISTED OF 191 REGISTERED INVESTMENT COMPANIES OR SERIES THEREOF.
INVESTMENT ADVISORY AND OTHER SERVICES
Eaton Vance, its affiliates and its predecessor companies have been managing assets of individuals and institutions since 1924 and of investment companies since 1931. They maintain a large staff of experienced fixed-income, senior loan and equity investment professionals to service the needs of their clients. The equity group covers stocks ranging from blue chip to emerging growth companies. Eaton Vance and its affiliates act as adviser to a family of mutual funds, and individual and various institutional accounts. The fixed-income group focuses on all kinds of taxable investment-grade and high-yield securities, tax-exempt investment-grade and high-yield securities, and U.S. Government securities. The senior loan group focuses on senior floating rate loans, unsecured loans and other floating rate debt securities such as notes, bonds and asset backed securities, including corporations, hospitals, retirement plans, universities, foundations and trusts.
The Fund will be responsible for all of its costs and expenses not expressly stated to be payable by Eaton Vance under the Advisory Agreement or Administration Agreement. Such costs and expenses to be borne by the Fund 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, stock exchange listing fees and governmental fees; rating agency fees and preferred share remarketing expenses; expenses of reports to shareholders, proxy statements and other expenses of shareholders' meetings; insurance premiums; printing and mailing expenses; interest, taxes and corporate fees; legal and accounting expenses; compensation and expenses of Trustees not affiliated with Eaton Vance; expenses of conducting repurchase offers for the purpose of repurchasing Fund shares; and investment advisory and administration fees. The Fund will also bear expenses incurred in connection with any litigation in which the Fund is a party and any legal obligation to indemnify its officers and Trustees with respect thereto, to the extent not covered by insurance.
The Advisory Agreement with the Adviser continues in effect to [ ] and from year to year so long as such continuance is approved at least annually (i) by the vote of a majority of the noninterested Trustees of the Fund or of the Adviser cast in person at a meeting specifically called for the purpose of voting on such approval and (ii) by the Board of Trustees of the Fund or by vote of a majority of the outstanding interests of the Fund. The Fund's Administration Agreement continues in effect from year to year so long as such continuance is approved at least annually by the vote of a majority of the Fund's Trustees. Each agreement may be terminated at any time without penalty on sixty (60) days' written notice by the Trustees of the Fund or Eaton Vance, as applicable, or by vote of the majority of the outstanding shares of the Fund. Each agreement will terminate automatically in the event of its assignment. Each agreement provides that, in the absence of willful misfeasance, bad faith, gross negligence or reckless disregard of its obligations or duties to the Fund under such agreements on the part of Eaton Vance, Eaton Vance shall not be liable to the Fund for any loss incurred, to the extent not covered by insurance.
Eaton Vance is a business trust organized under Massachusetts law. EV serves as
trustee of Eaton Vance. Eaton Vance and EV are subsidiaries of EVC, a Maryland
corporation and publicly-held holding company. EVC through its subsidiaries and
affiliates engages primarily in investment management, administration and
marketing activities. The Directors of EVC are James B. Hawkes, John G. L.
Cabot, Thomas E. Faust Jr., Leo I. Higdon, Jr., John M. Nelson, Vincent M.
O'Reilly and Ralph Z. Sorenson. All shares of the outstanding Voting Common
Stock of EVC are deposited in a voting trust, the voting trustees of which are
Messrs. James B. Hawkes, Jeffrey P. Beale, Alan R. Dynner, Thomas E. Faust Jr.,
Thomas J. Fetter, Scott H. Page, Duncan W. Richardson, William M. Steul, Payson
F. Swaffield, Michael W. Weilheimer and Wharton P. Whitaker (all of whom are
officers of Eaton Vance). The voting trustees have unrestricted voting rights for the election of Directors of EVC. All of the outstanding voting trust receipts issued under said voting trust are owned by certain of the officers of BMR and Eaton Vance who are also officers, or officers and Directors of EVC and EV. As indicated under "Trustees and Officers", all of the officers of the Fund (as well as Mr. Hawkes who is also a Trustee) hold positions in the Eaton Vance organization.
EVC and its affiliates and their officers and employees from time to time have transactions with various banks, including the custodian of the Fund, IBT. It is Eaton Vance's opinion that the terms and conditions of such transactions were not and will not be influenced by existing or potential custodial or other relationships between the Fund and such banks.
CODE OF ETHICS
The Adviser and the Fund have adopted a Code of Ethics governing personal securities transactions. Under the Code, Eaton Vance employees may purchase and sell securities (including securities held or eligible for purchase by the Fund) subject to certain pre-clearance and reporting requirements and other procedures.
The Code can be reviewed and copied at the Securities and Exchange Commission's public reference room in Washington, DC (call 1-202-942-8090 for information on the operation of the public reference room); on the EDGAR Database on the SEC's Internet site (http:/www.sec.gov); or, upon payment of copying fees, by writing the SEC's public reference section, Washington, DC 20549-0102, or by electronic mail at publicinfo@sec.gov.
INVESTMENT ADVISORY SERVICES
Under the general supervision of the Fund's Board of Trustees, Eaton Vance will carry out the investment and reinvestment of the assets of the Fund, will furnish continuously an investment program with respect to the Fund, will determine which securities should be purchased, sold or exchanged, and will implement such determinations. Eaton Vance will furnish to the Fund investment advice and provide related office facilities and personnel for servicing the investments of the Fund. Eaton Vance will compensate all Trustees and officers of the Fund who are members of the Eaton Vance organization and who render investment services to the Fund, and will also compensate all other Eaton Vance personnel who provide research and investment services to the Fund.
ADMINISTRATIVE SERVICES
Under the Administration Agreement, Eaton Vance is responsible for managing the business affairs of the Fund, subject to the supervision of the Fund's Board of Trustees. Eaton Vance will furnish to the Fund all office facilities, equipment and personnel for administering the affairs of the Fund. Eaton Vance will compensate all Trustees and officers of the Fund who are members of the Eaton Vance organization and who render executive and administrative services to the Fund, and will also compensate all other Eaton Vance personnel who perform management and administrative services for the Fund. Eaton Vance's administrative services include recordkeeping, preparation and filing of documents required to comply with federal and state securities laws, supervising the activities of the Fund's custodian and transfer agent, providing assistance in connection with the Trustees and shareholders' meetings, providing services in connection with quarterly repurchase offers and other administrative services necessary to conduct the Fund's business.
DETERMINATION OF NET ASSET VALUE
The net asset value per Share of the Fund is determined no less frequently than weekly, generally on the last day of the week that the New York Stock Exchange (the "Exchange") is open for trading, as of the close of regular trading on the Exchange (normally 4:00 p.m. New York time). The Fund's net asset value per Share is determined by IBT, in the manner authorized by the Trustees of the Fund. Net asset value is computed by dividing the value of the Fund's total assets, less its liabilities by the number of shares outstanding.
The Trustees of the Fund have established the following procedures for fair valuation of the Fund's assets under normal market conditions. Marketable securities listed on foreign or U.S. securities exchanges generally are valued
at closing sale prices or, if there were no sales, at the mean between the closing bid and asked prices therefor on the exchange where such securities are principally traded (such prices may not be used, however, where an active over-the-counter market in an exchange listed security better reflects current market value). Marketable securities listed in the NASDAQ National Market System are valued at the NASDAQ official closing price. Unlisted or listed securities for which closing sale prices are not available are valued at the mean between the latest bid and asked prices. An option is valued at the last sale price as quoted on the principal exchange or board of trade on which such option or contract is traded, or in the absence of a sale, at the mean between the last bid and asked prices.
The Adviser and the Valuation Committee may implement new pricing methodologies
or expand mark-to-market valuation of debt securities whose market prices are
not readily available in the future, which may result in a change in the Fund's
net asset value per share. The Fund's net asset value per share will also be
affected by fair value pricing decisions and by changes in the market for such
debt securities. In determining the fair value of a debt security, the Adviser
will consider relevant factors, data, and information, including: (i) the
characteristics of and fundamental analytical data relating to the debt
security, including the cost, size, current interest rate, period until next
interest rate reset, maturity and base lending rate of the debt security, the
terms and conditions of the debt security and any related agreements, and the
position of the debt security in the Borrower's debt structure; (ii) the nature,
adequacy and value of the collateral, including the Fund's rights, remedies and
interests with respect to the collateral; (iii) the creditworthiness of the
Borrower, based on an evaluation of its financial condition, financial
statements and information about the Borrower's business, cash flows, capital
structure and future prospects; (iv) information relating to the market for the
debt security, including price quotations for and trading in the debt security
and interests in similar debt security and the market environment and investor
attitudes towards the debt security and interests in similar debt securities;
(v) the experience, reputation, stability and financial condition of the Agent
and any intermediate participants in the debt security; and (vi) general
economic and market conditions affecting the fair value of the debt security.
The fair value of each debt security is reviewed and approved by the Adviser's
Valuation Committee and the Fund's Trustees.
Debt securities for which the over-the-counter market is the primary market are normally valued on the basis of prices furnished by one or more pricing services at the mean between the latest available bid and asked prices. OTC options are valued at the mean between the bid and asked prices provided by dealers. Financial futures contracts listed on commodity exchanges and exchange-traded options are valued at closing settlement prices. Short-term obligations having remaining maturities of less than 60 days are valued at amortized cost, which approximates value, unless the Trustees determine that under particular circumstances such method does not result in fair value. As authorized by the Trustees, debt securities (other than short-term obligations) may be valued on the basis of valuations furnished by a pricing service which determines valuations based upon market transactions for normal, institutional-size trading units of such securities. Securities for which there is no such quotation or valuation and all other assets are valued at fair value as determined in good faith by or at the direction of the Fund's Trustees.
All other securities are valued at fair value as determined in good faith by or at the direction of the Trustees.
Generally, trading in the foreign securities owned by the Fund is substantially completed each day at various times prior to the close of the Exchange. The values of these securities used in determining the net asset value of the Fund generally are computed as of such times. Occasionally, events affecting the value of foreign securities may occur between such times and the close of the New York Stock Exchange which will not be reflected in the computation of the Fund's net asset value (unless the Fund deems that such events would materially affect its net asset value, in which case an adjustment would be made and reflected in such computation).
PORTFOLIO TRADING
Decisions concerning the execution of portfolio security transactions, including the selection of the market and the executing firm, are made by the Adviser. The Adviser is also responsible for the execution of transactions for all other accounts managed by it. The Adviser places the portfolio security transactions of the Fund and of all other accounts managed by it for execution with many firms. The Adviser uses its best efforts to obtain execution of portfolio security transactions at prices which are advantageous to the Fund and at reasonably competitive spreads or (when a disclosed commission is being charged) at reasonably competitive commission rates. In seeking such execution, the
Adviser will use its best judgment in evaluating the terms of a transaction, and will give consideration to various relevant factors, including without limitation the full range and quality of the executing firm's services, the value of the brokerage and research services provided, the responsiveness of the firm to the Adviser, the size and type of the transaction, the nature and character of the market for the security, the confidentiality, speed and certainty of effective execution required for the transaction, the general execution and operational capabilities of the executing firm, the reputation, reliability, experience and financial condition of the firm, the value and quality of the services rendered by the firm in this and other transactions, and the reasonableness of the spread or commission, if any.
Transactions on stock exchanges and other agency transactions involve the payment of negotiated brokerage commissions. Such commissions vary among different broker-dealer firms, and a particular broker-dealer may charge different commissions according to such factors as the difficulty and size of the transaction and the volume of business done with such broker-dealer. Transactions in foreign securities often involve the payment of brokerage commissions, which may be higher than those in the United States. There is generally no stated commission in the case of securities traded in the over-the- counter markets, but the price paid or received usually includes an undisclosed dealer markup or markdown. In an underwritten offering the price paid often includes a disclosed fixed commission or discount retained by the underwriter or dealer.
Fixed income obligations which may be purchased and sold by the Fund are generally traded in the over-the-counter market on a net basis (i.e., without commission) through broker-dealers or banks acting for their own account rather than as brokers, or otherwise involve transactions directly with the issuers of such obligations. The Fund may also purchase fixed income and other securities from underwriters, the cost of which may include undisclosed fees and concessions to the underwriters.
Although spreads or commissions paid on portfolio security transactions will, in the judgment of the Adviser, be reasonable in relation to the value of the services provided, commissions exceeding those which another firm might charge may be paid to broker-dealers who were selected to execute transactions on behalf of the Adviser's clients in part for providing brokerage and research services to the Adviser.
As authorized in Section 28(e) of the Securities Exchange Act of 1934, a broker or dealer who executes a portfolio transaction on behalf of the Fund may receive a commission which is in excess of the amount of commission another broker or dealer would have charged for effecting that transaction if the Adviser determines in good faith that such compensation was reasonable in relation to the value of the brokerage and research services provided. This determination may be made on the basis of that particular transaction or on the basis of overall responsibilities which the Adviser and its affiliates have for accounts over which they exercise investment discretion. In making any such determination, the Adviser will not attempt to place a specific dollar value on the brokerage and research services provided or to determine what portion of the commission should be related to such services. Brokerage and research services may include advice as to the value of securities, the advisability of investing in, purchasing, or selling securities, and the availability of securities or purchasers or sellers of securities; furnishing analyses and reports concerning issuers, industries, securities, economic factors and trends, portfolio strategy and the performance of accounts; effecting securities transactions and performing functions incidental thereto (such as clearance and settlement); and the "Research Services" referred to in the next paragraph.
It is a common practice of the investment advisory industry and of the advisers of investment companies, institutions and other investors to receive research, analytical, statistical and quotation services, data, information and other services, products and materials which assist such advisers in the performance of their investment responsibilities ("Research Services") from broker-dealer firms which execute portfolio transactions for the clients of such advisers and from third parties with which such broker-dealers have arrangements. Consistent with this practice, the Adviser receives Research Services from many broker-dealer firms with which the Adviser places the Fund's transactions and from third parties with which these broker-dealers have arrangements. These Research Services include such matters as general economic, political, business and market information, industry and company reviews, evaluations of securities and portfolio strategies and transactions, proxy voting data and analysis services, technical analysis of various aspects of the securities market, recommendations as to the purchase and sale of securities and other portfolio transactions, financial, industry and trade publications, news and information services, pricing and quotation equipment and services, and research oriented computer hardware, software, data bases and services. Any particular Research Service obtained through a broker-dealer may be used by the Adviser in connection with client accounts other than those accounts which pay commissions
to such broker-dealer. Any such Research Service may be broadly useful and of value to the Adviser in rendering investment advisory services to all or a significant portion of its clients, or may be relevant and useful for the management of only one client's account or of a few clients' accounts, or may be useful for the management of merely a segment of certain clients' accounts, regardless of whether any such account or accounts paid commissions to the broker-dealer through which such Research Service was obtained. The advisory fee paid by the Fund is not reduced because the Adviser receives such Research Services. The Adviser evaluates the nature and quality of the various Research Services obtained through broker-dealer firms and attempts to allocate sufficient portfolio security transactions to such firms to ensure the continued receipt of Research Services which the Adviser believes are useful or of value to it in rendering investment advisory services to its clients.
The Fund and the Adviser may also receive Research Services from underwriters and dealers in fixed-price offerings, which Research Services are reviewed and evaluated by the Adviser in connection with its investment responsibilities. The investment companies sponsored by the Adviser or its affiliates may allocate trades in such offerings to acquire information relating to the performance, fees and expenses of such companies and other mutual funds, which information is used by the Trustees of such companies to fulfill their responsibility to oversee the quality of the services provided by various entities, including the Adviser, to such companies. Such companies may also pay cash for such information.
Subject to the requirement that the Adviser shall use its best efforts to seek and execute portfolio security transactions at advantageous prices and at reasonably competitive spreads or commission rates, the Adviser is authorized to consider as a factor in the selection of any broker-dealer firm with whom portfolio orders may be placed the fact that such firm has sold or is selling shares of the Fund or of other investment companies sponsored by the Adviser. This policy is not inconsistent with a rule of the National Association of Securities Dealers, Inc. ("NASD"), which rule provides that no firm which is a member of the NASD shall favor or disfavor the distribution of shares of any particular investment company or group of investment companies on the basis of brokerage commissions received or expected by such firm from any source.
Securities considered as investments for the Fund may also be appropriate for other investment accounts managed by the Adviser or its affiliates. Whenever decisions are made to buy or sell securities by the Fund and one or more of such other accounts simultaneously, the Adviser will allocate the security transactions (including "hot" issues) in a manner which it believes to be equitable under the circumstances. As a result of such allocations, there may be instances where the Fund will not participate in a transaction that is allocated among other accounts. If an aggregated order cannot be filled completely, allocations will generally be made on a pro rata basis. An order may not be allocated on a pro rata basis where, for example: (i) consideration is given to portfolio managers who have been instrumental in developing or negotiating a particular investment; (ii) consideration is given to an account with specialized investment policies that coincide with the particulars of a specific investment; (iii) pro rata allocation would result in odd-lot or de minimis amounts being allocated to a portfolio or other client; or (iv) where the Adviser reasonably determines that departure from a pro rata allocation is advisable. While these aggregation and allocation policies could have a detrimental effect on the price or amount of the securities available to the Fund from time to time, it is the opinion of the Trustees of the Fund that the benefits from the Adviser's organization outweigh any disadvantage that may arise from exposure to simultaneous transactions.
TAXES
The following discussion of federal income tax matters is based on the advice of Kirkpatrick & Lockhart LLP, counsel to the Fund. The Fund intends to elect to be treated and to qualify each year as a RIC under the Code. Accordingly, the Fund intends to satisfy certain requirements relating to sources of its income and diversification of its assets and to distribute substantially all of its net income and net short-term and long-term capital gains (after reduction by any available capital loss carryforwards) in accordance with the timing requirements imposed by the Code, so as to maintain its RIC status and to avoid paying any federal income or excise tax. To the extent it qualifies for treatment as a RIC and satisfies the above-mentioned distribution requirements, the Fund will not be subject to federal income tax on income paid to its shareholders in the form of dividends or capital gain distributions.
In order to avoid incurring a federal excise tax obligation, the Code requires that the Fund distribute (or be deemed to have distributed) by December 31 of
each calendar year an amount at least equal to the sum of (i) 98% of its ordinary income for such year and (ii) 98% of its capital gain net income (which is the excess of its realized net long-term capital gain over its realized net short-term capital loss), generally computed on the basis of the one-year period ending on October 31 of such year, after reduction by any available capital loss carryforwards, plus 100% of any ordinary income and capital gain net income from the prior year (as previously computed) that were not paid out during such year and on which the Fund paid no federal income tax. Under current law, provided that the Fund qualifies as a RIC for federal income tax purposes, the Fund should not be liable for any income, corporate excise or franchise tax in The Commonwealth of Massachusetts.
If the Fund does not qualify as a RIC for any taxable year, the Fund's taxable income will be subject to corporate income taxes, and all distributions from earnings and profits, including distributions of net capital gain (if any), will be taxable to the shareholder as ordinary income. In addition, in order to requalify for taxation as a RIC, the Fund may be required to recognize unrealized gains, pay substantial taxes and interest, and make certain distributions.
Under the recently enacted "JOBS AND GROWTH TAX RELIEF RECONCILIATION ACT of
2003" (the "Tax Act"), certain ordinary income distributions received from the
Fund may be taxed at new tax rates equal to those applicable to net long-term
capital gains (15%, or 5% for individuals in the 10% or 15% tax brackets), but
only if certain holding period requirements are satisfied and the dividends are
attributable to QUALIFIED DIVIDENDS received by the Fund itself. For this
purpose, "QUALIFIED DIVIDENDS" means dividends received by the Fund after
December 31, 2002 from United States corporations and qualifying foreign
corporations, provided that the Fund satisfies certain holding period
requirements in respect of the stock of such corporations. In the case of
securities lending transactions, payments in lieu of dividends are not qualified
dividends. Dividends received by the Fund from REITs are qualified dividends
eligible for this lower tax rate only in limited circumstances. These special
rules relating to the taxation of ordinary income dividends from regulated
investment companies generally apply to taxable years beginning after December
31, 2002 and beginning before January 1, 2009. The Fund will provide notice to
its shareholders of the amount of any distribution which may be taken into
account as a qualified dividend which is eligible for the new capital gains tax
rates. . A dividend will not be treated as qualified dividend income if (1) the
dividend is received with respect to any share held for fewer than 61 days
during the 120-day period beginning on the date which is 60 days before the date
on which such share becomes ex-dividend with respect to such dividend (or, in
the case of certain preferred shares, 91 days during the 180-day period
beginning 90 days before such ex-dividend date), (2) to the extent that the
recipient is under an obligation (whether pursuant to a short sale or otherwise)
to make related payments with respect to positions in substantially similar or
related property, (3) if the recipient elects to have the dividend treated as
investment income for purposes of the limitation on deductibility of investment
interest, or (4) if the dividend is received from a foreign corporation that is
(a) not eligible for the benefits of a comprehensive income tax treaty with the
United States (except in the case of dividends paid on stock of such foreign
corporation readily tradable on an established securities market in the United
States) or (b) treated as a foreign personal holding company, foreign investment
company or passive foreign investment company.
The Fund's investment in zero coupon and certain other securities will cause it to realize income prior to the receipt of cash payments with respect to these securities. Such income will be accrued daily by the Fund and, in order to avoid a tax payable by the Fund, the Fund may be required to liquidate securities that it might otherwise have continued to hold in order to generate cash so that the Fund may make required distributions to its shareholders.
Investments in lower rated or unrated securities may present special tax issues for the Fund to the extent that the issuers of these securities default on their obligations pertaining thereto. The Code is not entirely clear regarding the federal income tax consequences of the Fund's taking certain positions in connection with ownership of such distressed securities.
Any recognized gain or income attributable to market discount on long-term debt obligations (i.e., obligations with a term of more than one year except to the extent of a portion of the discount attributable to original issue discount) purchased by the Fund is taxable as ordinary income. A long-term debt obligation is generally treated as acquired at a market discount if purchased after its original issue at a price less than (i) the stated principal amount payable at maturity, in the case of an obligation that does not have original issue discount or (ii) in the case of an obligation that does have original issue discount, the sum of the issue price and any original issue discount that accrued before the obligation was purchased, subject to a DE MINIMIS exclusion.
The Fund's investments in options, futures contracts, hedging transactions, forward contracts (to the extent permitted) and certain other transactions will be subject to special tax rules (including mark-to-market, constructive sale, straddle, wash sale, short sale and other rules), the effect of which may be to accelerate income to the Fund, defer Fund losses, cause adjustments in the holding periods of securities held by the Fund, convert capital gain into ordinary income and convert short-term capital losses into long-term capital losses. These rules could therefore affect the amount, timing and character of distributions to shareholders. The Fund may be required to limit its activities in options and futures contracts in order to enable it to maintain its RIC status.
Any loss realized upon the sale or exchange of Fund shares with a holding period of 6 months or less will be treated as a long-term capital loss to the extent of any capital gain distributions received with respect to such shares. In addition, all or a portion of a loss realized on a redemption or other disposition of Fund shares may be disallowed under "wash sale" rules to the extent the shareholder acquires other shares of the same Fund (whether through the reinvestment of distributions or otherwise) within the period beginning 30 days before the redemption of the loss shares and ending 30 days after such date. Any disallowed loss will result in an adjustment to the shareholder's tax basis in some or all of the other shares acquired.
Sales charges paid upon a purchase of shares cannot be taken into account for purposes of determining gain or loss on a sale of the shares before the 91st day after their purchase to the extent a sales charge is reduced or eliminated in a subsequent acquisition of shares of the Fund (or of another fund) pursuant to the reinvestment or exchange privilege. Any disregarded amounts will result in an adjustment to the shareholder's tax basis in some or all of any other shares acquired.
Dividends and distributions on the Fund's shares are generally subject to federal income tax as described herein to the extent they do not exceed the Fund's realized income and gains, even though such dividends and distributions may economically represent a return of a particular shareholder's investment. Such distributions are likely to occur in respect of shares purchased at a time when the Fund's net asset value reflects gains that are either unrealized, or realized but not distributed. Such realized gains may be required to be distributed even when the Fund's net asset value also reflects unrealized losses. Certain distributions declared in October, November or December and paid in the following January will be taxed to shareholders as if received on December 31 of the year in which they were declared. In addition, certain other distributions made after the close of a taxable year of the Fund may be "spilled back" and treated as paid by the Fund (except for purposes of the 4% excise tax) during such taxable year. In such case, Shareholders will be treated as having received such dividends in the taxable year in which the distributions were actually made.
Amounts paid by the Fund to individuals and certain other shareholders who have not provided the Fund with their correct taxpayer identification number ("TIN") and certain certifications required by the Internal Revenue Service (the "IRS") as well as shareholders with respect to whom the Fund has received certain information from the IRS or a broker may be subject to "backup" withholding of federal income tax arising from the Fund's taxable dividends and other distributions as well as the gross proceeds of sales of shares, at a rate of up to 30% for amounts paid during 2003. An individual's TIN is generally his or her social security number. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules from payments made to a Shareholder may be refunded or credited against such Shareholder's U.S. federal income tax liability, if any, provided that the required information is furnished to the IRS.
The foregoing discussion does not address the special tax rules applicable to certain classes of investors, such as tax-exempt entities, foreign investors, insurance companies and financial institutions. Shareholders should consult their own tax advisers with respect to special tax rules that may apply in their particular situations, as well as the state, local, and, where applicable, foreign tax consequences of investing in the Fund.
The Fund will inform Shareholders of the source and tax status of all distributions promptly after the close of each calendar year. The IRS has taken the position that if a RIC has more than one class of shares, it may designate distributions made to each class in any year as consisting of no more than that class's proportionate share of particular types of income for that year, including ordinary income and net capital gain. A class's proportionate share of a particular type of income for a year is determined according to the percentage of total dividends paid by the RIC during that year to the class. Accordingly,
the Fund intends to designate a portion of its distributions in capital gain dividends in accordance with the IRS position.
Although the matter is not free from doubt, due to the absence of direct regulatory or judicial authority, in the opinion of Kirkpatrick & Lockhart LLP, counsel to the Fund, under current law the manner in which the Fund intends to allocate items of ordinary income and net capital gain among the Fund's Common Shares and Auction Preferred Shares will be respected for federal income tax purposes. It is possible that the IRS could disagree with counsel's opinion and attempt to reallocate the Fund's net capital gain or other taxable income.
STATE AND LOCAL TAXES
Shareholders should consult their own tax advisers as the state or local tax consequences of investing in the Fund.
OTHER INFORMATION
The Fund is an organization of the type commonly known as a "Massachusetts business trust." Under Massachusetts law, shareholders of such a trust may, in certain circumstances, be held personally liable as partners for the obligations of the trust. The Declaration of Trust contains an express disclaimer of shareholder liability in connection with the Fund property or the acts, obligations or affairs of the Fund. The Declaration of Trust also provides for indemnification out of the Fund property of any shareholder held personally liable for the claims and liabilities to which a shareholder may become subject by reason of being or having been a shareholder. Thus, the risk of a shareholder incurring financial loss on account of shareholder liability is limited to circumstances in which the Fund itself is unable to meet its obligations. The Fund has been advised by its counsel that the risk of any shareholder incurring any liability for the obligations of the Fund is remote.
The Declaration of Trust provides that the Trustees will not be liable for errors of judgment or mistakes of fact or law; but nothing in the Declaration of Trust protects a Trustee against any liability to the Fund or its shareholders to which he would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence, or reckless disregard of the duties involved in the conduct of his office. Voting rights are not cumulative, which means that the holders of more than 50% of the shares voting for the election of Trustees can elect 100% of the Trustees and, in such event, the holders of the remaining less than 50% of the shares voting on the matter will not be able to elect any Trustees.
The Declaration of Trust provides that no person shall serve as a Trustee if shareholders holding two-thirds of the outstanding shares have removed him from that office either by a written declaration filed with the Fund's custodian or by votes cast at a meeting called for that purpose. The Declaration of Trust further provides that the Trustees of the Fund shall promptly call a meeting of the shareholders for the purpose of voting upon a question of removal of any such Trustee or Trustees when requested in writing so to do by the record holders of not less than 10 per centum of the outstanding shares.
The Fund's Prospectus and this SAI do not contain all of the information set forth in the Registration Statement that the Fund has filed with the SEC. The complete Registration Statement may be obtained from the SEC upon payment of the fee prescribed by its Rules and Regulations.
INDEPENDENT AUDITORS
[ ], Boston, Massachusetts are the independent auditors for the Fund, providing audit services, tax return preparation, and assistance and consultation with respect to the preparation of filings with the SEC.
INDEPENDENT AUDITORS' REPORT
To the Trustees and Shareholder of
Eaton Vance Tax-Advantaged Dividend Income Fund:
We have audited the accompanying statement of assets and liabilities of Eaton Vance Tax-Advantaged Dividend Income Fund (the "Fund") as of [ ] and the related statement of operations for the period from June 24, 2003 (date of organization) through [ ]. These financial statements are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Eaton Vance Tax-Advantaged Dividend Income Fund as of [ ], and the result of its operations for the period from June 24, 2003 (date of organization) through [ ] in conformity with accounting principles generally accepted in the United States of America.
[ ]
Boston, Massachusetts
[ ], 2003
STATEMENT OF ASSETS AND LIABILITIES
[ ], 2003
LIABILITIES
Accrued offering costs......................................... $
Accrued organizational costs...................................
--------
Total liabilities.............................................. $
========
Net assets applicable to [ ] common shares
of beneficial interest issued and outstanding $
========
NET ASSET VALUE AND OFFERING PRICE PER SHARE..................... $
========
STATEMENT OF OPERATIONS
PERIOD FROM JULY 11, 2003 (DATE OF ORGANIZATION)
THROUGH [ ], 2003
INVESTMENT INCOME.............................................. $ -
--------
EXPENSES
Organization costs........................................... $
Expense reimbursement........................................
--------
Net expenses............................................... $ -
--------
NET INVESTMENT INCOME........................................ $ -
========
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See notes to financial statements.
NOTES TO FINANCIAL STATEMENT
NOTE 1: ORGANIZATION
The Fund was organized as a Massachusetts business trust on July 10, 2003, and has been inactive since that date except for matters relating to its organization and registration as a diversified, closed-end management investment company under the Investment Company Act of 1940, as amended, and the Securities Act of 1933, as amended, and the sale of [ ] common shares to Eaton Vance Management, the Fund's Investment Adviser.
Eaton Vance Management, or an affiliate, has agreed to reimburse all organizational costs, estimated at approximately [$ ].
Eaton Vance Management, or an affiliate, has agreed to pay all offering costs (other than sales loads) that exceed [$ ] per common share.
The Fund's investment objective is to provide a high level of current income. The Fund may, as a secondary objective, also seek capital appreciation to the extent consistent with its primary goal of high current income.
NOTE 2: ACCOUNTING POLICIES
The Fund's financial statements are prepared in accordance with accounting principles generally accepted in the United States of America which require the use of management estimates. Actual results may differ from those estimates.
The Fund's share of offering costs will be recorded within paid in capital as a reduction of the proceeds from the sale of common shares upon the commencement of Fund operations. The offering costs reflected above assume the sale of [ ] common shares.
NOTE 3: INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an investment advisory agreement between the Adviser and the Fund, the Fund has agreed to pay an investment advisory fee, payable on a monthly basis, at an annual rate of [ ]% of the average weekly gross assets of the Fund. Gross assets of the Fund shall be calculated by deducting accrued liabilities of the Fund not including the amount of any preferred shares outstanding or the principal amount of any indebtedness for money borrowed.
In addition, Eaton Vance has contractually agreed to reimburse the Fund for fees and other expenses in the amount of [ ]% of the average weekly gross assets for the first 5 full years of the Fund's operations, [ ]% of average weekly gross assets in year 6, [ ]% in year 7 and [ ]% in year 8.
NOTE 4: FEDERAL INCOME TAXES
The Fund intends to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income, including any net realized gain on investments.
DESCRIPTION OF SECURITIES RATINGS+
MOODY'S INVESTORS SERVICE, INC.
LONG-TERM DEBT SECURITIES AND PREFERRED STOCK RATINGS
Aaa: Bonds and preferred stock which are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt edged." Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues.
Aa: Bonds and preferred stock which are rated Aa are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long term risk appear somewhat larger than the Aaa securities.
A: Bonds and preferred stock which are rated A possess many favorable investment attributes and are to be considered as upper-medium-grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment sometime in the future.
Baa: Bonds and preferred stock which are rated Baa are considered as medium-grade obligations (i.e., they are neither highly protected nor poorly secured). Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds and preferred stock lack outstanding investment characteristics and in fact have speculative characteristics as well.
Ba: Bonds and preferred stock which are rated Ba are judged to have speculative elements; their future cannot be considered as well-assured. Often the protection of interest and principal payments may be very moderate and thereby not well safeguarded during other good and bad times over the future. Uncertainty of position characterizes bonds in this class.
B: Bonds and preferred stock which are rated B generally lack characteristics of the desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small.
Caa: Bonds and preferred stock which are rated Caa are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest.
Ca: Bonds and preferred stock which are rated Ca represent obligations which are speculative in a high degree. Such issues are often in default or have other marked shortcomings.
C: Bonds and preferred stock which are rated C are the lowest rated class of bonds, and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing.
ABSENCE OF RATING: Where no rating has been assigned or where a rating has been suspended or withdrawn, it may be for reasons unrelated to the quality of the issue.
Should no rating be assigned, the reason may be one of the following:
1. An application for rating was not received or accepted.
+ The ratings indicated herein are believed to be the most recent ratings available at the date of this SAI for the securities listed. Ratings are generally given to securities at the time of issuance. While the rating agencies may from time to time revise such ratings, they undertake no obligation to do so, and the ratings indicated do not necessarily represent ratings which would be given to these securities on the date of the Fund's fiscal year end.
2. The issue or issuer belongs to a group of securities or companies that are not rated as a matter of policy.
3. There is a lack of essential data pertaining to the issue or issuer.
4. The issue was privately placed, in which case the rating is not published in Moody's publications.
Suspension or withdrawal may occur if new and material circumstances arise, the effects of which preclude satisfactory analysis; if there is no longer available reasonable up-to-date data to permit a judgment to be formed; if a bond is called for redemption; or for other reasons.
NOTE: Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating classification from Aa through B in its bond rating system. The modifier 1 indicates that the security ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that the issue ranks in the lower end of its generic rating category.
SHORT-TERM DEBT SECURITIES RATINGS
Moody's short-term debt ratings are opinions of the ability of issuers to repay punctually senior debt obligations. These obligations have an original maturity not exceeding one year, unless explicitly noted.
Moody's employs the following three designations, all judged to be investment grade, to indicate the relative repayment ability of rated issuers:
PRIME-1: Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1 repayment
ability will often be evidenced by many of the following characteristics:
leading market positions in well-established industries; high rates of return on
funds employed; conservative capitalization structure with moderate reliance on
debt and ample asset protection; broad margins in earnings coverage of fixed
financial charges and high internal cash generation; and well-established access
to a range of financial markets and assured sources of alternate liquidity.
PRIME-2: Issuers rated Prime-2 (or supporting institutions) have a strong ability for repayment of senior short-term debt obligations. This will normally be evidenced by many of the characteristics cited above but to a lesser degree. Earnings trends and coverage ratios, while sound, may be more subject to variation. Capitalization characteristics, while still appropriate, may be more affected by external conditions. Ample alternate liquidity is maintained.
PRIME-3: Issuers rated Prime-3 (or supporting institutions) have an acceptable ability for repayment of senior short-term obligations. The effect of industry characteristics and market compositions may be more pronounced. Variability in earnings and profitability may result in changes in the level of debt protection measurements and may require relatively high financial leverage. Adequate alternate liquidity is maintained.
NOT PRIME: Issuers rated Not Prime do not fall within any of the Prime rating categories.
STANDARD & POOR'S RATINGS GROUP
INVESTMENT GRADE
AAA: Debt and preferred stock rated AAA have the highest rating assigned by S&P. Capacity to pay interest and repay principal is extremely strong.
AA: Debt rated AA have a very strong capacity to pay interest and repay principal and differs from the highest rated issues only in small degree.
A: Debt and preferred stock rated A have a strong capacity to pay interest and repay principal although it is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher rated categories.
BBB: Debt and preferred stock rated BBB are regarded as having an adequate capacity to pay interest and repay principal. Whereas it normally exhibit adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for debt in this category than in higher rated categories.
SPECULATIVE GRADE
Debt and preferred stock rated BB, B, CCC, CC and C are regarded as having predominantly speculative characteristics with respect to capacity to pay interest and repay principal. BB indicates the least degree of speculation and C the highest. While such debt will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major exposures to adverse conditions.
BB: Debt and preferred stock rated BB have less near-term vulnerability to default than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions which could lead to inadequate capacity to meet timely interest and principal payments. The BB rating category is also used for debt subordinated to senior debt that is assigned an actual or implied BBB-- rating.
B: Debt and preferred stock rated B have a greater vulnerability to default but currently has the capacity to meet interest payments and principal repayments. Adverse business, financial, or economic conditions will likely impair capacity or willingness to pay interest and repay principal. The B rating category is also used for debt subordinated to senior debt that is assigned an actual or implied BB or BB-- rating.
CCC: Debt and preferred stock rated CCC have a currently identifiable vulnerability to default, and is dependent upon favorable business, financial, and economic conditions to meet timely payment of interest and repayment of principal. In the event of adverse business, financial, or economic conditions, it is not likely to have the capacity to pay interest and repay principal. The CCC rating category is also used for debt subordinated to senior debt that is assigned an actual or implied B or B-- rating.
CC: The rating CC is typically applied to debt subordinated to senior debt and preferred stock which is assigned an actual or implied CCC debt rating.
C: The rating C is typically applied to debt subordinated to senior debt and preferred stock which is assigned an actual or implied CCC-- debt rating. The C rating may be used to cover a situation where a bankruptcy petition has been filed, but debt service payments are continued.
C1: The Rating C1 is reserved for income bonds on which no interest is being paid.
D: Debt and preferred stock rated D is in payment default. The D rating category is used when interest payments or principal payments are not made on the date due even if the applicable grace period has not expired, unless S&P believes that such payments will be made during such grace period. The D rating also will be used upon the filing of a bankruptcy petition if debt service payments are jeopardized.
Plus (+) or Minus (-): The ratings from AA to CCC may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories.
p: The letter "p" indicates that the rating is provisional. A provisional rating assumes the successful completion of the project being financed by the debt being rated and indicates that payment of debt service requirements is largely or entirely dependent upon the successful and timely completion of the project. This rating, however, while addressing credit quality subsequent to completion of the project, makes no comment on the likelihood of, or the risk of default upon failure of such completion. The investor should exercise his own judgment with respect to such likelihood and risk.
L: The letter "L" indicates that the rating pertains to the principal amount of those bonds to the extent that the underlying deposit collateral is insured by the Federal Deposit Insurance Corp. and interest is adequately collateralized. In the case of certificates of deposit, the letter "L" indicates that the deposit, combined with other deposits being held in the same right and capacity, will be honored for principal and accrued pre-default interest up to the federal insurance limits within 30 days after closing of the insured institution or, in the event that the deposit is assumed by a successor insured institution, upon maturity.
NR: NR indicates no rating has been requested, that there is insufficient information on which to base a rating, or that S&P does not rate a particular type of obligation as a matter of policy.
COMMERCIAL PAPER
COMMERCIAL PAPER RATING DEFINITIONS
A S&P's commercial paper rating is a current assessment of the likelihood of timely payment of debt having an original maturity of no more than 365 days. Ratings are graded into several categories, ranging from A for the highest quality obligations to D for the lowest. These categories are as follows:
A-1: A short-term obligation rated A-1 is rated in the highest category by S&P. The obligor's capacity to meet its financial commitment on the obligation is strong. Within this category, certain obligations are designated with a plus sign (+). This indicates that the obligor's capacity to meet its financial commitment on these obligations is extremely strong.
A-2: A short-term obligation rated A-2 is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher rating categories. However, the obligor's capacity to meet its financial commitment on the obligation is satisfactory.
A-3: A short-term obligation rated A-3 exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.
B: A short-term obligation rated B is regarded as having significant speculative characteristics. The obligor currently has the capacity to meet its financial commitment on the obligation; however, it faces major ongoing uncertainties which could lead to the obligor's inadequate capacity to meet its financial commitment on the obligation.
C: A short-term obligation rated C is currently vulnerable to nonpayment and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation.
D: A short-term obligation rated D is in payment default. The D rating category is used when payments on an obligation are not made on the date due even if the applicable grace period has not expired, unless S&P believes that such payments will be made during such grace period. The D rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action if payments on an obligation are jeopardized.
A commercial paper rating is not a recommendation to purchase, sell or hold a security inasmuch as it does not comment as to market price or suitability for a particular investor. The ratings are based on current information furnished to S&P by the issuer or obtained from other sources it considers reliable. S&P does not perform an audit in connection with any rating and may, on occasion, rely on unaudited financial information. The ratings may be changed, suspended, or withdrawn as a result of changes in or unavailability of such information.
FITCH RATINGS
INVESTMENT GRADE RATINGS
AAA: Bonds and preferred stocks are considered to be investment grade and of the highest credit quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by reasonably foreseeable events.
AA: Bonds and preferred stocks are considered to be investment grade and of very high credit quality. The obligor's ability to pay interest and repay principal is very strong, although not quite as strong as bonds rated 'AAA'. Because bonds rated in the 'AAA' and 'AA' categories are not significantly vulnerable to foreseeable future developments, short-term debt of these issuers is generally rated 'F-1+'.
A: Bonds and preferred stocks are considered to be investment grade and of high credit quality. The obligor's ability to pay interest and repay principal is considered to be strong, but may be more vulnerable to adverse changes in economic conditions and circumstances than bonds with higher ratings.
BBB: Bonds and preferred stocks are considered to be investment grade and of satisfactory credit quality. The obligor's ability to pay interest and repay principal is considered to be adequate. Adverse changes in economic conditions and circumstances, however, are more likely to have adverse impact on these bonds, and therefore, impair timely payment. The likelihood that the ratings of these bonds will fall below investment grade is higher than for bonds with higher ratings.
BELOW INVESTMENT GRADE RATINGS
BB: Bonds and preferred stocks are considered speculative. The obligor's ability to pay interest and repay principal may be affected over time by adverse economic changes. However, business and financial alternatives can be identified that could assist the obligor in satisfying its debt service requirements.
B: Bonds and preferred stocks are considered highly speculative. While bonds in this class are currently meeting debt service requirements, the probability of continued timely payment of principal and interest reflects the obligor's limited margin of safety and the need for reasonable business and economic activity throughout the life of the issue.
CCC: Bonds and preferred stocks have certain identifiable characteristics which, if not remedied, may lead to default. The ability to meet obligations requires an advantageous business and economic environment.
CC: Bonds and preferred stocks are minimally protected. Default in payment of interest and/or principal seems probable over time.
C: Bonds and preferred stocks are in imminent default in payment of interest or principal.
DDD, DD and D: Bonds and preferred stocks are in default on interest and/or principal payments. Such bonds are extremely speculative and should be valued on the basis of their ultimate recovery value in liquidation or reorganization of the obligor. 'DDD' represents the highest potential for recovery on these bonds, and 'D' represents the lowest potential for recovery.
Plus (+) or Minus (-): The ratings from AA to C may be modified by the addition of a plus or minus sign to indicate the relative position of a credit within the rating category.
NR: Indicates that Fitch does not rate the specific issue.
Conditional: A conditional rating is premised on the successful completion of a project or the occurrence of a specific event.
INVESTMENT GRADE SHORT-TERM RATINGS
Fitch's short-term ratings apply to debt obligations that are payable on demand or have original maturities of generally up to three years, including commercial paper, certificates of deposit, medium-term notes, and municipal and investment notes.
F-1+: Exceptionally Strong Credit Quality. Issues assigned this rating are regarded as having the strongest degree of assurance for timely payment.
F-1: Very Strong Credit Quality. Issues assigned this rating reflect an assurance of timely payment only slightly less in degree than issues rated 'F-1+'.
F-2: Good Credit Quality. Issues carrying this rating have a satisfactory degree of assurance for timely payment, but the margin of safety is not as great as the 'F-1+' and 'F-1' categories.
F-3: Fair Credit Quality. Issues carrying this rating have characteristics suggesting that the degree of assurance for timely payment is adequate, however, near-term adverse change could cause these securities to be rated below investment grade.
* * * * * * * *
Notes: Bonds which are unrated expose the investor to risks with respect to capacity to pay interest or repay principal which are similar to the risks of lower-rated speculative bonds. The Fund is dependent on the Adviser's judgment, analysis and experience in the evaluation of such bonds.
Investors should note that the assignment of a rating to a bond by a rating service may not reflect the effect of recent developments on the issuer's ability to make interest and principal payments.
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(1) FINANCIAL STATEMENTS:
Included in Part A:
Not applicable.
Included in Part B:
Independent Auditor's Report*
Statement of Assets and Liabilities*
Notes to Financial Statement*
(2) EXHIBITS:
(a) Agreement and Declaration of Trust dated July 10, 2003 filed herewith.
(b) By-Laws filed herewith.
(c) Not applicable.
(d) Form of Specimen Certificate for Common Shares of Beneficial Interest to be filed by amendment.
(e) Form of Dividend Reinvestment Plan to be filed by amendment.
(f) Not applicable.
(g)(1) Form of Investment Advisory Agreement dated , 2003, to be filed by amendment.
(2) Form of Expense Reimbursement Arrangement dated , 2003, to
be filed by amendment.
(h)(1) Form of Underwriting Agreement to be filed by amendment.
(2) Form of Master Agreement Among Underwriters to be filed by
amendment.
(3) Form of Master Selected Dealers Agreement to be filed by
amendment.
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(i) The Securities and Exchange Commission has granted the Registrant an exemptive order that permits the Registrant to enter into deferred compensation arrangements with its independent Trustees. See in the matter of Capital Exchange Fund, Inc., Release No. IC-20671 (November 1, 1994).
(j)(1) Master Custodian Agreement with Investors Bank & Trust Company , 2003 to be filed by amendment.
(2) Extension Agreement dated August 31, 2000 to Master Custodian
Agreement with Investors Bank & Trust Company filed as Exhibit
(g)(4) to Post-Effective Amendment No. 85 of Eaton Vance
Municipals Trust (File Nos. 33-572, 811-4409) filed with the
Commission on January 23, 2001 (Accession No.
0000940394-01-500027) and incorporated herein by reference.
(3) Delegation Agreement dated December 11, 2000, with Investors Bank & Trust Company filed as Exhibit (j)(e) to Amendment No. 5 to the Registration Statement of the Eaton Vance Prime Rate Reserves (File Nos. 333-32267, 811-05808) filed April 3, 2002 (Accession No. 0000940394-01-500126) and incorporated herein by reference.
(k)(1) Amendment to the Transfer Agency and Services Agreement dated , 2003 to be filed by amendment.
(2) Transfer Agency and Services Agreement dated December 21, 1998, as amended and restated on June 16, 2003 filed herewith.
(3) Form of Administration Agreement dated , 2003 to be filed by amendment.
(l) Opinion and Consent of Kirkpatrick & Lockhart LLP as to Registrant's Common Shares to be filed by amendment.
(m) Not applicable.
(n) Consent of Independent Auditors' to be filed by amendment.
(o) Not applicable.
(p) Letter Agreement with Eaton Vance Management to be filed by amendment.
(q) Not applicable.
(r) Code of Ethics adopted by Eaton Vance Corp., Eaton Vance Management, Boston Management and Research, Eaton Vance Distributors, Inc. and the Eaton Vance Funds effective September 1, 2000, as revised June 4, 2002, filed as Exhibit (p) to Post-Effective Amendment No. 45 to the Registration Statement of Eaton Vance Investment Trust (File Nos. 33-1121, 811-4443) filed with the Commission on July 24, 2002 (Accession No. 0000940394-02-000462) and incorporated herein by reference.
(s) Power of Attorney dated , 2003 to be filed by amendment.
ITEM 25. MARKETING ARRANGEMENTS
See Form of Underwriting Agreement to be filed by amendment.
ITEM 26. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The approximate expenses in connection with the offering are as follows:
Registration and Filing Fees $ National Association of Securities Dealers, Inc. Fees
American Stock Exchange Fees Costs of Printing and Engraving Accounting Fees and Expenses Legal Fees and Expenses ________ Total $ ________ |
ITEM 27. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL
None.
ITEM 28. NUMBER OF HOLDERS OF SECURITIES
Set forth below is the number of record holders as of , 2003, of each class of securities of the Registrant:
Title of Class Number of Record Holders
-------------- ------------------------
Common Shares of Beneficial 0
interest, par value $0.01 per
share
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ITEM 29. INDEMNIFICATION
The Registrant's By-Laws contain, and the form of Underwriting Agreement to be filed by amendment is expected to contain, provisions limiting the liability, and providing for indemnification, of the Trustees and officers under certain circumstances.
Registrant's Trustees and officers are insured under a standard investment company errors and omissions insurance policy covering loss incurred by reason of negligent errors and omissions committed in their official capacities as such.
Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended (the "Securities Act"), may be permitted to directors, officers and controlling persons of the Registrant pursuant to the provisions described in this Item 29, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
ITEM 30. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Reference is made to: (i) the information set forth under the caption "Investment Advisory and Other Services" in the Statement of Additional information; (ii) the Eaton Vance Corp. 10-K filed under the Securities Exchange Act of 1934 (File No. 1-8100); and (iii) the Form ADV of Eaton Vance Management (File No. 801-15930) filed with the Commission, all of which are incorporated herein by reference.
ITEM 31. LOCATION OF ACCOUNTS AND RECORDS
All applicable accounts, books and documents required to be maintained by the Registrant by Section 31(a) of the Investment Company Act of 1940 and the Rules promulgated thereunder are in the possession and custody of the Registrant's custodian, Investors Bank & Trust Company, 200 Clarendon Street, 16th Floor, Boston, MA 02116, and its transfer agent, PFPC Inc., 4400 Computer Drive, Westborough, MA 01581-5120, with the exception of certain corporate documents and portfolio trading documents which are in the possession and custody of Eaton Vance Management, The Eaton Vance Building, 255 State Street, Boston, MA 02109. Registrant is informed that all applicable accounts, books and documents required to be maintained by registered investment advisers are in the custody and possession of Eaton Vance Management.
ITEM 32. MANAGEMENT SERVICES
Not applicable.
ITEM 33. UNDERTAKINGS
1. The Registrant undertakes to suspend offering of Common Shares until the prospectus is amended if (1) subsequent to the effective date of this Registration Statement, the net asset value declines more than 10 percent from its net asset value as of the effective date of this Registration Statement or (2) the net asset value increases to an amount greater than its net proceeds as stated in the prospectus.
2. Not applicable.
3. Not applicable.
4. Not applicable.
5. The Registrant undertakes that:
a. for the purpose of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in the form of prospectus filed by the Registrant pursuant to 497(h) under the 1933Act shall be deemed to be part of the Registration Statement as of the time it was declared effective; and
b. for the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
6. The Registrant undertakes to send by first class mail or other means designed to ensure equally prompt delivery, within two business days of receipt of an oral or written request, its Statement of Additional Information.
NOTICE
A copy of the Agreement and Declaration of Trust of Eaton Vance Tax-Advantaged Dividend Income Fund is on file with the Secretary of State of the Commonwealth of Massachusetts and notice is hereby given that this instrument is executed on behalf of the Registrant by an officer of the Registrant as an officer and not individually and that the obligations of or arising out of this instrument are not binding upon any of the Trustees, officers or shareholders individually, but are binding only upon the assets and property of the Registrant.
SIGNATURES
Pursuant to requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Boston and the Commonwealth of Massachusetts, on the 14th day of July 2003.
EATON VANCE TAX-ADVANTAGED DIVIDEND
INCOME FUND
By: /s/ Thomas E. Faust Jr.
-----------------------------
Thomas E. Faust Jr.
President
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Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Thomas E. Faust Jr. President and Principal July 14, 2003
------------------------------
Thomas E. Faust Jr. Executive Officer
/s/ James L. O'Connor Treasurer and Principal July 14, 2003
------------------------------
James L. O'Connor Financial and Accounting
Officer
/s/ James B. Hawkes Trustee July 14, 2003
------------------------------
James B. Hawkes
/s/Alan R. Dynner Trustee July 14, 2003
------------------------------
Alan R. Dynner
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INDEX TO EXHIBITS
(a) Agreement and Declaration of Trust dated July 10, 2003
(b) By-Laws
(k)(2) Transfer Agency and Services Agreement dated December 21, 1998, as amended and restated on June 16, 2003
EATON VANCE TAX-ADVANTAGED DIVIDEND INCOME FUND
AGREEMENT AND DECLARATION OF TRUST
Dated July 10, 2003
TABLE OF CONTENTS
ARTICLE I - NAME AND DEFINITIONS............................................ 1
Section 1.1. Name............................................... 1
Section 1.2. Definitions........................................ 1
ARTICLE II - TRUSTEES....................................................... 3
Section 2.1. Management of the Trust............................ 3
Section 2.2 Number of Trustees................................. 3
Section 2.3 Terms of Office of Trustee......................... 3
Section 2.4 Resignation and Appointment of Trustees............ 3
Section 2.5 Vacancies.......................................... 4
Section 2.6 Delegation of Power to Other Trustees.............. 4
Section 2.7 Removal of Trustees................................ 4
Section 2.8. General Powers..................................... 4
Section 2.9. Investments........................................ 5
Section 2.10. Legal Title........................................ 6
Section 2.11. By-Laws............................................ 7
Section 2.12. Distribution and Repurchase of Shares.............. 7
Section 2.13. Delegation......................................... 7
Section 2.14. Collection and Payment............................. 7
Section 2.15. Expenses........................................... 7
Section 2.16. Committees......................................... 7
Section 2.17. Miscellaneous Powers............................... 8
Section 2.18. Litigation......................................... 8
ARTICLE III - CONTRACTS..................................................... 8
Section 3.1. Principal Underwriter.............................. 8
Section 3.2. Investment Adviser................................. 9
Section 3.3. Administrator...................................... 9
Section 3.4. Other Service Providers............................ 9
Section 3.5. Transfer Agents.................................... 9
Section 3.6. Custodian.......................................... 9
Section 3.7. Affiliations....................................... 9
ARTICLE IV - LIMITATIONS OF LIABILITY OF SHAREHOLDERS, TRUSTEES
AND OTHERS..................................................... 10
Section 4.1. No Personal Liability of Shareholders, Trustees,
Officers and Employees............................. 10
Section 4.2. Trustee's Good Faith Action; Advice to Others;
No Bond or Surety.................................. 10
Section 4.3. Indemnification.................................... 10
Section 4.4. No Duty of Investigation........................... 11
Section 4.5. Reliance on Records and Experts.................... 11
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ARTICLE V - SHARES OF BENEFICIAL INTEREST................................... 11
Section 5.1. Shares of Beneficial Interest...................... 11
Section 5.2. Voting Powers...................................... 11
Section 5.3. Rights of Shareholders............................. 12
Section 5.4. Trust Only......................................... 12
Section 5.5. Issuance of Shares................................. 12
ARTICLE VI - REDEMPTIONS AND REPURCHASES.................................... 13
Section 6.1. Redemptions and Repurchases of Shares.............. 13
Section 6.2. Manner of Payment.................................. 13
Section 6.3. Involuntary Redemption............................. 13
ARTICLE VII - DETERMINATION OF NET ASSET VALUE, NET INCOME AND
DISTRIBUTIONS................................................. 14
Section 7.1. Net Asset Value.................................... 14
Section 7.2. Dividends and Distributions........................ 14
Section 7.3. Power to Modify Foregoing Procedures............... 15
ARTICLE VIII - DURATION; TERMINATION OF TRUST OR A CLASS OR SERIES;
MERGERS; AMENDMENTS.......................................... 15
Section 8.1. Duration........................................... 15
Section 8.2. Merger or Termination of the Trust or a Series
or a Class......................................... 15
Section 8.3. Amendments......................................... 15
Section 8.4. Certain Transactions............................... 16
Section 8.5. Conversion......................................... 18
ARTICLE IX - MISCELLANEOUS.................................................. 18
Section 9.1. Use of the Words "Eaton Vance"..................... 18
Section 9.2. Notices............................................ 18
Section 9.3. Filing of Copies, References, Headings and
Counterparts....................................... 18
Section 9.4. Applicable Law..................................... 19
Section 9.5. Provisions in Conflict with Law or Regulations..... 19
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AGREEMENT AND DECLARATION OF TRUST, made July 10, 2003 by the Trustees hereunder and by the holders of beneficial interest to be issued hereunder as hereinafter provided and
WITNESSETH:
WHEREAS, the Trust has been formed to carry on the business of an investment company; and
WHEREAS, the Trustees have agreed to manage all property coming into their hands as trustees of a Massachusetts voluntary association with transferable shares in accordance with the provisions hereinafter set forth;
NOW, THEREFORE, the Trustees declare that all money and property contributed to the trust established hereunder shall be held and managed under this Agreement and Declaration of Trust for the benefit of the holders, from time to time, of the shares of beneficial interest to be issued hereunder and subject to the provisions set forth below.
ARTICLE I
SECTION 1.1. NAME. The name of the trust created hereby is Eaton Vance Tax-Advantaged Dividend Income Fund.
SECTION 1.2. DEFINITIONS. Wherever they are used herein, the following terms have the following respective meanings:
(a) "Administrator" means the party, other than the Trust, to a contract described in Section 3.3 hereof.
(b) "By-Laws" means the By-Laws referred to in Section 2.11 hereof, as from time to time amended.
(c) "Class" means any class of Shares designated by the Trustees as such following any division of Shares of the Trust into two or more Classes as provided in Section 5.1 hereof.
(d) The term "Commission" has the meaning given the term in the 1940 Act.
(e) "Custodian" means any Person other than the Trust who has custody of
any Trust Property as required by Section 17(f) of the 1940 Act, but does not
include a system for the central handling of securities described in said
Section 17(f).
(f) "Declaration" means this Declaration of Trust as amended from time to time.
(g) "His" shall include the feminine and neuter, as well as the masculine, genders.
(h) The term "Interested Person" has the meaning specified in the 1940 Act subject, however, to such exceptions and exemptions as may be granted by the Commission in any rule, regulation or order.
(i) "Investment Adviser" means the party, other than the Trust, to an agreement described in Section 3.2 hereof.
(j) The "1940 Act" means the Investment Company Act of 1940 and the Rules and Regulations thereunder, as amended from time to time.
(k) "Outstanding Shares" means those Shares shown from time to time on the books of the Trust or its Transfer Agent as then issued and outstanding.
(l) "Person" means and includes individuals, corporations, limited liability companies, partnerships, trusts, associations, firms, joint ventures and other entities, whether or not legal entities, as well as governments, instrumentalities, and agencies and political subdivisions thereof, and quasi-governmental agencies and instrumentalities.
(m) "Principal Underwriter" means a party, other than the Trust, to a contract described in Section 3.1 hereof.
(n) "Prospectus" means the Prospectus and Statement of Additional Information, if any, included in the Registration Statement of the Trust under the Securities Act of 1933 as such Prospectus and Statement of Additional Information, if any, may be amended or supplemented and filed with the Commission from time to time.
(o) "Registration Statement" means the Registration Statement of the Trust under the Securities Act of 1933 as such Registration Statement may be amended and filed with the Commission from time to time.
(p) "Series" means any series of Shares designated by the Trustees as such following the division of Shares of any Class into two or more Series as provided in Section 5.1 hereof.
(q) "Shareholder" means a record owner of Outstanding Shares.
(r) "Shares" means the equal proportionate transferable units of interest into which the beneficial interest in the Trust shall be divided from time to time, or, if more than one Class or Series is authorized by the Trustees, the equal proportionate transferable units into which each Class or Series shall be divided from time to time.
(s) "Transfer Agent" means any Person other than the Trust who maintains the Shareholder records of the Trust, such as the list of Shareholders, the number of Shares credited to each account, and the like.
(t) "Trust" means the Trust named in Section 1.1.
(u) The "Trustees" means the persons who have signed this Declaration, so long as they shall continue in office in accordance with the terms hereof, and all other persons who now serve or may from time to time be duly elected, qualified and serving as Trustees in accordance with the provisions of Article II hereof and the By-Laws of the Trust, and reference herein to a Trustee or the Trustees shall refer to such person or persons in his capacity or their capacities as trustees hereunder.
(v) "Trust Property" means any and all property, real or personal, tangible or intangible, which is owned or held by or for the account of the Trust or the Trustees, including any and all assets of or allocated to any Class or Series, as the context may require.
(w) Except as such term may be otherwise defined by the Trustees in connection with any meeting or other action of Shareholders or in conjunction with the establishment of any Class or Series, the term "vote" when used in connection with an action of Shareholders shall include a vote taken at a meeting of Shareholders or the consent or consents of Shareholders taken without such a meeting.
ARTICLE II
SECTION 2.1. MANAGEMENT OF THE TRUST. The business and affairs of the Trust shall be managed by the Trustees and they shall have all powers and authority necessary, appropriate or desirable to perform that function.
SECTION 2.2. NUMBER OF TRUSTEES. The number of Trustees shall be such number as shall be fixed from time to time by a written instrument signed by a majority of the Trustees, provided, however, that the number of Trustees shall in no event be less than two (2) nor more than fifteen (15). No reduction in the number of Trustees shall have the effect of removing any Trustee from office prior to the expiration of his term unless the Trustee is specifically removed pursuant to Section 2.3 or Section 2.7 of this Article II at the time of decrease.
SECTION 2.3. TERM OF OFFICE OF TRUSTEES. The Board of Trustees shall be
divided into three classes. Within the limits above specified, the number of the
Trustees in each class and the class which each Trustee is assigned shall be
determined by resolution of the Board of Trustees. The term of office of the
first class shall expire on the date of the first annual meeting of Shareholders
or special meeting in lieu thereof following the effective date of the
Registration Statement. The term of office of the second class shall expire on
the date of the second annual meeting of Shareholders or special meeting in lieu
thereof following the effective date of the Registration Statement. The term of
office of the third class shall expire on the date of the third annual meeting
of Shareholders or special meeting in lieu thereof following the effective date
of the Registration Statement. Upon expiration of the term of office of each
class as set forth above, the number of Trustees in such class, as determined by
the Board of Trustees, shall be elected for a term expiring on the date of the
third annual meeting of Shareholders or special meeting in lieu thereof
following such expiration to succeed the Trustees whose terms of office expire.
The Trustees shall be elected at an annual meeting of the Shareholders or
special meeting in lieu thereof called for that purpose, except as provided in
Section 2.3 of this Article and each Trustee elected shall hold office until his
successor shall have been elected and shall have qualified; except (a) that any
Trustee may resign his trust (without need for prior or subsequent accounting)
by an instrument in writing signed by him and delivered to the other Trustees,
which shall take effect upon such delivery or upon such later date as is
specified therein; (b) that any Trustee may be removed (provided the aggregate
number of Trustees after such removal shall not be less than the number required
by Section 2.2 hereof) for cause, at any time by written instrument, signed by
the remaining Trustees, specifying the date when such removal shall become
effective; and (c) that any Trustee who requests in writing to be retired or who
has become incapacitated by illness or injury may be retired by written
instrument signed by a majority of the other Trustees, and he shall execute and
deliver such documents as the remaining Trustees shall require for the purpose
of conveying to the Fund or the remaining Trustees any Fund property held in the
name of the resigning or removed Trustee. Upon the incapacity or death of any
Trustee, his legal representative shall execute and deliver on his behalf such
document as the remaining Trustees shall require as provided in the preceding
sentence.
SECTION 2.4. RESIGNATION AND APPOINTMENT OF TRUSTEES. In case of the declination, death, resignation, retirement, removal or inability of any of the Trustees, or in case a vacancy shall, by reason of any increase in number, or for any other reason, exist, the remaining Trustees or, prior to the public offering of Shares of the Fund, if only one Trustee shall then remain in office, the remaining Trustee, shall fill such vacancy by appointing such other person as they, or anyone of them, in their discretion, shall see fit. Such appointment shall be evidenced by a written instrument signed by a majority of the remaining Trustees or by the remaining Trustee, as the case may be. Any such appointment shall not become effective, however, until the person named in the written
instrument or appointment shall have accepted in writing such appointment and
agreed in writing to be bound by the terms of the Declaration. Within twelve
months of such appointment, the Trustees shall cause notice of such appointment
to be mailed to each Shareholder at his address as recorded on the books of the
Fund. An appointment of a Trustee may be made by the Trustees then in office and
notice thereof mailed to Shareholders as aforesaid in anticipation of a vacancy
to occur by reason of retirement, resignation or increase in number of Trustees
effective at a later date, provided that said appointment shall become effective
only at or after the effective date of said retirement, resignation or increase
in number of Trustees. The power of appointment is subject to the provisions of
Section 16(a) of the 1940 Act.
SECTION 2.5. VACANCIES. The death, declination, resignation, retirement, removal or incapacity of the Trustees, or any one of them, shall not operate to annul the Fund or to remove any existing agency created pursuant to the terms of this Declaration. Whenever a vacancy in the number of Trustees shall occur, until such vacancy is filled as provided in Section 2.3, the Trustees in office, regardless of their number, shall have all the duties imposed upon the Trustees by the Declaration and only such Trustees shall be counted for the purposes of establishing the existence of a quorum or performing such duties or exercising such powers of the Trustees as described in this Declaration. A written instrument certifying the existence of such vacancy signed by a majority of the Trustees shall be conclusive evidence of the existence of such vacancy.
SECTION 2.6. DELEGATION OF POWER TO OTHER TRUSTEES. Subject to the provisions of the 1940 Act, any Trustee may, by power of attorney, delegate his power for a period not exceeding six (6) months at any one time to any other Trustee or Trustees; provided that in no case shall less than two (2) Trustees personally exercise the powers granted to the Trustees under the Declaration except as herein otherwise expressly provided.
SECTION 2.7. REMOVAL OF TRUSTEES BY THE SHAREHOLDERS. The Fund shall comply with the provisions of Section 16(c) of the 1940 Act as though applicable to the Fund, and with interpretations hereof by the Commission staff, insofar as such provisions and interpretations provide for the removal of trustees of common-law trusts and the calling of Shareholder meetings for such purpose; provided, however, that the Fund may at any time or from time to time apply to the Commission for one or more exemptions from all or part of said Section 16(c) or a staff interpretation thereof and, if exemptive order(s) or interpretation(s) are issued or provided by the Commission or its staff, such order(s) or interpretation(s) shall be deemed part of Section 16(c) for the purpose of applying this Section 2.7.
SECTION 2.8. GENERAL POWERS. The Trustees in all instances shall act as principals for and on behalf of the Trust and their acts shall bind the Trust. The business and affairs of the Trust shall be managed by the Trustees and they shall have full power and authority to do any and all acts and to make and execute any and all contracts and instruments that they may consider necessary, appropriate or desirable in connection with the management of the Trust. The Trustees shall not be bound or limited in any way by present or future laws, practices or customs in regard to trust investments or to other investments which may be made by fiduciaries, but shall have full authority and power to make any and all investments which they, in their uncontrolled discretion, shall deem proper to promote, implement or accomplish the various objectives and interests of the Trust and of its Classes and Series. The Trustees shall have full power and authority to adopt such accounting and tax accounting practices as they consider appropriate for the Trust and for any Class or Series. The Trustees shall have exclusive and absolute control over the Trust Property and over the business of the Trust to the same extent as if the Trustees were the sole owners of the Trust Property and business in their own right, and with such full powers of delegation as the Trustees may exercise from time to time. The Trustees shall have power to conduct the business of the Trust and carry on its operations in any and all of its branches and maintain offices both within and without The Commonwealth of Massachusetts, in any and all states of the United States of America, in the District of Columbia, and in any and all commonwealths, territories, dependencies, colonies, possessions, agencies, and instrumentalities of the United States of America and of foreign governments, and to do all such other things as they deem necessary, appropriate or desirable in order to promote or implement the interests of the Trust or of any Class or Series although such things are not herein specifically mentioned. Any determination as to what is in the interests of the Trust or of any Class or Series made by the Trustees in good faith shall be conclusive and binding upon
all Shareholders. In construing the provisions of this Declaration, the presumption shall be in favor of a grant of plenary power and authority to the Trustees.
The enumeration of any specific power in this Declaration shall not be construed as limiting the aforesaid general and plenary powers.
SECTION 2.9. INVESTMENTS. The Trustees shall have full power and authority:
(a) To operate as and carry on the business of an investment company, and exercise all the powers necessary and appropriate to the conduct of such operations.
(b) To acquire or buy, and invest Trust Property in, own, hold for investment or otherwise, and to sell or otherwise dispose of, all types and kinds of securities and investments of any kind including, but not limited to, stocks, profit-sharing interests or participations and all other contracts for or evidences of equity interests, bonds, debentures, warrants and rights to purchase securities, and interests in loans, certificates of beneficial interest, bills, notes and all other contracts for or evidences of indebtedness, money market instruments including bank certificates of deposit, finance paper, commercial paper, bankers' acceptances and other obligations, and all other negotiable and non-negotiable securities and instruments, however named or described, issued by corporations, trusts, associations or any other Persons, domestic or foreign, or issued or guaranteed by the United States of America or any agency or instrumentality thereof, by the government of any foreign country, by any State, territory or possession of the United States, by any political subdivision or agency or instrumentality of any state or foreign country, or by any other government or other governmental or quasi-governmental agency or instrumentality, domestic or foreign; to acquire and dispose of interests in domestic or foreign loans made by banks and other financial institutions; to deposit any assets of the Trust in any bank, trust company or banking institution or retain any such assets in domestic or foreign cash or currency; to purchase and sell gold and silver bullion, precious or strategic metals, and coins and currency of all countries; to engage in "when issued" and delayed delivery transactions; to enter into repurchase agreements, reverse repurchase agreements and firm commitment agreements; to employ all types and kinds of hedging techniques and investment management strategies; and to change the investments of the Trust and of each Class or Series.
(c) To acquire (by purchase, subscription or otherwise), to hold, to trade in and deal in, to acquire any rights or options to purchase or sell, to sell or otherwise dispose of, to lend and to pledge any Trust Property or any of the foregoing securities, instruments or investments; to purchase and sell options on securities, currency, precious metals and other commodities, indices, futures contracts and other financial instruments and assets and enter into closing and other transactions in connection therewith; to enter into all types of commodities contracts, including without limitation the purchase and sale of futures contracts on securities, currency, precious metals and other commodities, indices and other financial instruments and assets; to enter into forward foreign currency exchange contracts and other foreign exchange and currency transactions of all types and kinds; to enter into interest rate, currency and other swap transactions; and to engage in all types and kinds of hedging and risk management transactions.
(d) To exercise all rights, powers and privileges of ownership or interest in all securities and other assets included in the Trust Property, including without limitation the right to vote thereon and otherwise act with respect thereto; and to do all acts and things for the preservation, protection, improvement and enhancement in value of all such securities and assets.
(e) To acquire (by purchase, lease or otherwise) and to hold, use, maintain, lease, develop and dispose of (by sale or otherwise) any type or kind of property, real or personal, including domestic or foreign currency, and any right or interest therein.
(f) To borrow money and in this connection issue notes, commercial paper or other evidence of indebtedness; to secure borrowings by mortgaging, pledging or otherwise subjecting as security all or any part of the Trust Property; to endorse, guarantee, or undertake the performance of any obligation or engagement of any other Person; to lend all or any part of the Trust Property to other Persons; and to issue general unsecured or other obligations of the Trust, and enter into indentures or agreements relating thereto.
(g) To aid, support or assist by further investment or other action any Person, any obligation of or interest which is included in the Trust Property or in the affairs of which the Trust or any Class or Series has any direct or indirect interest; to do all acts and things designed to protect, preserve, improve or enhance the value of such obligation or interest; and to guarantee or become surety on any or all of the contracts, securities and other obligations of any such Person.
(h) To join other security holders in acting through a committee, depositary, voting trustee or otherwise, and in that connection to deposit any security with, or transfer any security to, any such committee, depositary or trustee, and to delegate to them such power and authority with relation to any security (whether or not so deposited or transferred) as the Trustees shall deem proper, and to agree to pay, and to pay, such portion of the expenses and compensation of such committee, depositary or trustee as the Trustees shall deem proper.
(i) To carry on any other business in connection with or incidental to any of the foregoing powers referred to in this Declaration, to do everything necessary, appropriate or desirable for the accomplishment of any purpose or the attainment of any object or the furtherance of any power referred to in this Declaration, either alone or in association with others, and to do every other act or thing incidental or appurtenant to or arising out of or connected with such business or purposes, objects or powers.
(j) To the extent necessary or appropriate to give effect to the preferences, special or relative rights and privileges of any Class or Series, to allocate assets, liabilities, income and expenses of the Trust to particular Classes or Series or to apportion the same among two or more Classes or Series.
The foregoing clauses shall be construed both as objects and powers, and shall not be held to limit or restrict in any manner the general and plenary powers of the Trustees.
Notwithstanding any other provision herein, the Trustees shall have full power in their discretion, without any requirement of approval by Shareholders, to invest part or all of the Trust Property (or part or all of the assets of any Class or Series), or to dispose of part or all of the Trust Property (or part or all of the assets of any Class or Series) and invest the proceeds of such disposition, in securities issued by one or more other investment companies registered under the 1940 Act. Any such other investment company may (but need not) be a trust (formed under the laws of the State of New York or of any other state) which is classified as a partnership for federal income tax purposes.
SECTION 2.10. LEGAL TITLE. Legal title to all the Trust Property shall be vested in the Trustees who from time to time shall be in office. The Trustees may hold any security or other Trust Property in a form not indicating any trust, whether in bearer, unregistered or other negotiable form, and may cause legal title to any security or other Trust Property to be held by or in the name of one or more of the Trustees, or in the name of the Trust or any Class or Series, or in the name of a custodian, subcustodian, agent, securities
depository, clearing agency, system for the central handling of securities or other book-entry system, or in the name of a nominee or nominees of the Trust or a Class or Series, or in the name of a nominee or nominees of a custodian, subcustodian, agent, securities depository, clearing agent, system for the central handling of securities or other book-entry system, or in the name of any other Person as nominee. The right, title and interest of the Trustees in the Trust Property shall vest automatically in each Person who may hereafter become a Trustee. Upon the termination of the term of office, resignation, removal or death of a Trustee he shall automatically cease to have any right, title or interest in any of the Trust Property, and the right, title and interest of such Trustee in the Trust Property shall vest automatically in the remaining Trustees.
SECTION 2.11. BY- LAWS. The Trustees shall have full power and authority to adopt By-Laws providing for the conduct of the business of the Trust and containing such other provisions as they deem necessary, appropriate or desirable, and, subject to the voting powers of one or more Classes or Series, to amend and repeal such By-Laws. Unless the By-Laws specifically require that Shareholders authorize or approve the amendment or repeal of a particular provision of the By-Laws, any provision of the By-Laws may be amended or repealed by the Trustees without Shareholder authorization or approval.
SECTION 2.12. DISTRIBUTION AND REPURCHASE OF SHARES. The Trustees shall have full power and authority to issue, sell, repurchase, redeem, retire, cancel, acquire, hold, resell, reissue, dispose of, transfer, and otherwise deal in Shares. Shares may be sold for cash or property or other consideration whenever and in such amounts and manner as the Trustees deem desirable. The Trustees shall have full power to provide for the distribution of Shares either through one or more principal underwriters or by the Trust itself, or both.
SECTION 2.13. DELEGATION. The Trustees shall have full power and authority to delegate from time to time to such of their number or to officers, employees or agents of the Trust or to other Persons the doing of such things and execution of such agreements or other instruments either in the name of the Trust or any Class or Series of the Trust or the names of the Trustees or otherwise as the Trustees may deem desirable or expedient.
SECTION 2.14. COLLECTION AND PAYMENT. The Trustees shall have full power and authority to collect all property due to the Trust; to pay all claims, including taxes, against the Trust or Trust Property; to prosecute, defend, compromise, settle or abandon any claims relating to the Trust or Trust Property; to foreclose any security interest securing any obligations, by virtue of which any property is owed to the Trust; and to enter into releases, agreements and other instruments.
SECTION 2.15. EXPENSES. The Trustees shall have full power and authority to incur on behalf of the Trust or any Class or Series and pay any costs or expenses which the Trustees deem necessary, appropriate, desirable or incidental to carry out, implement or enhance the business or operations of the Trust or any Class or Series thereof, and to pay compensation from the funds of the Trust to themselves as Trustees. The Trustees shall determine the compensation of all officers, employees and Trustees of the Trust. The Trustees shall have full power and authority to cause the Trust to charge all or any part of any cost, expense or expenditure (including without limitation any expense of selling or distributing Shares) or tax against the principal or capital of the Trust or any Class or Series, and to credit all or any part of the profit, income or receipt to the principal or capital of the Trust or any Class or Series.
SECTION 2.16. COMMITTEES. The Trustees may appoint from their own number, and terminate, any one or more committees consisting of two or more Trustees, including an executive committee which may, when the Trustees are not in session, exercise some or all of the power and authority of the Trustees as the Trustees may determine.
SECTION 2.17. MISCELLANEOUS POWERS. The Trustees shall have full power and authority to: (a) distribute to Shareholders all or any part of the earnings or profits, surplus (including paid-in surplus), capital (including paid-in capital) or assets of the Trust or of any Class or Series, the amount of such distributions and the manner of payment thereof to be solely at the discretion of the Trustees; (b) employ, engage or contract with such Persons as the Trustees may deem desirable for the transaction of the business or operations of the Trust or any Class or Series thereof; (c) enter into or cause the Trust or any Class or Series thereof to enter into joint ventures, partnerships (whether as general partner, limited partner or otherwise) and any other combinations or associations; (d) purchase and pay for entirely out of Trust property such insurance as they may deem necessary or appropriate for the conduct of the business, including, without limitation, insurance policies insuring the assets of the Trust and payment of distributions and principal on its portfolio investments, and insurance policies insuring the Shareholders, Trustees, officers, employees, agents, investment advisers or managers, principal underwriters, or independent contractors of the Trust individually against all claims and liabilities of every nature arising by reason of holding, being or having held any such office or position, or by reason of any action alleged to have been taken or omitted by any such person as Shareholder, Trustee, officer, employee, agent, investment adviser or manager, principal underwriter, or independent contractor, including any action taken or omitted that may be determined to constitute negligence, whether or not the Trust would have the power to indemnify such person against such liability; (e) establish pension, profit-sharing, share purchase, and other retirement, incentive and benefit plans for any Trustees, officers, employees and agents of the Trust; (f) indemnify or reimburse any Person with whom the Trust or any Class or Series thereof has dealings, including without limitation the Investment Adviser, Administrator, Principal Underwriter, Transfer Agent, financial service firms and other agents, to such extent as the Trustees shall determine; (g) guarantee the indebtedness or contractual obligations of other Persons; (h) determine and change the fiscal year of the Trust and the methods by which its books, accounts and records shall be kept; and (i) adopt a seal for the Trust, but the absence of such seal shall not impair the validity of any instrument executed on behalf of the Trust.
SECTION 2.18 LITIGATION. The Trustees shall have full power and authority, in the name and on behalf of the Trust, to engage in and to prosecute, defend, compromise, settle, abandon, or adjust by arbitration or otherwise, any actions, suits, proceedings, disputes, claims and demands relating to the Trust, and out of the assets of the Trust or any Class or Series thereof to pay or to satisfy any liabilities, losses, debts, claims or expenses (including without limitation attorneys' fees) incurred in connection therewith, including those of litigation, and such power shall include without limitation the power of the Trustees or any committee thereof, in the exercise of their or its good faith business judgment, to dismiss or terminate any action, suit, proceeding, dispute, claim or demand, derivative or otherwise, brought by any Person, including a Shareholder in his own name or in the name of the Trust or any Class or Series thereof, whether or not the Trust or any Class or Series thereof or any of the Trustees may be named individually therein or the subject matter arises by reason of business for or on behalf of the Trust or any Class or Series thereof.
ARTICLE III
SECTION 3.1. PRINCIPAL UNDERWRITER. The Trustees may in their discretion from time to time authorize the Trust to enter into one or more contracts providing for the sale of the Shares. Pursuant to any such contract the Trust may either agree to sell the Shares to the other party to the contract or appoint such other party its sales agent for such Shares. In either case, any such contract shall be on such terms and conditions as the Trustees may in their discretion determine; and any such contract may also provide for the sale of Shares by such other party as principal or as agent of the Trust.
SECTION 3.2. INVESTMENT ADVISER. The Trustees may, subject to any approvals by Shareholders required by applicable law, in their discretion from time to time authorize the Trust to enter into one or more investment advisory agreements whereby the other party or parties to any such agreements shall undertake to furnish the Trust investment advisory and research facilities and services and such other facilities and services, if any, as the Trustees shall consider desirable and all upon such terms and conditions as the Trustees may in their discretion determine. Notwithstanding any provisions of this Declaration, the Trustees may authorize the Investment Adviser, in its discretion and without any prior consultation with the Trust, to buy, sell, lend and otherwise trade and deal in any and all securities, commodity contracts and other investments and assets of the Trust and to engage in and employ all types of transactions and strategies in connection therewith. Any such action taken pursuant to such agreement shall be deemed to have been authorized by all of the Trustees.
The Trustees may also authorize the Trust to employ, or authorize the Investment Adviser to employ, one or more sub-investment advisers from time to time to perform such of the acts and services of the Investment Adviser and upon such terms and conditions as may be agreed upon between the Investment Adviser and such sub-investment adviser and approved by the Trustees.
SECTION 3.3. ADMINISTRATOR. The Trustees may in their discretion from time to time authorize the Trust to enter into one or more administration agreements, whereby the other party to such agreement shall undertake to furnish to the Trust or a Series or a Class thereof such administrative facilities and services and such other facilities and services, if any, as the Trustees consider desirable and all upon such terms and conditions as the Trustees may in their discretion determine.
The Trustees may also authorize the Trust to employ or authorize the Administrator to employ one or more sub-administrators from time to time to perform such of the acts and services of the Administrator and upon such terms and conditions as may be agreed upon between the Administrator and such sub-administrator and approved by the Trustees.
SECTION 3.4. OTHER SERVICE PROVIDERS. The Trustees may in their discretion from time to time authorize the Trust to enter into one or more agreements whereby the other party or parties to any such agreements will undertake to provide to the Trust or any Class or Series or Shareholders or beneficial owners of Shares such services as the Trustees consider desirable and all upon such terms and conditions as the Trustees in their discretion may determine.
SECTION 3.5. TRANSFER AGENTS. The Trustees may in their discretion from time to time appoint one or more transfer agents for the Trust or any Class or Series thereof. Any contract with a transfer agent shall be on such terms and conditions as the Trustees may in their discretion determine.
SECTION 3.6. CUSTODIAN. The Trustees may appoint a bank or trust company having an aggregate capital, surplus and undivided profits (as shown in its last published report) of at least $2,000,000 as a custodian of the Trust or any Class or Series with authority as its agent to hold cash and securities owned by the Trust or the Class or Series and to release and deliver the same and otherwise to perform such duties as the Trustees may specify, all upon such terms and conditions as may be agreed upon between the Trust and the Custodian.
SECTION 3.7. AFFILIATIONS. The fact that:
(i) any of the Shareholders, Trustees or officers of the Trust is a shareholder, creditor, director, officer, partner, trustee or employee of or has any interest in any Person or any parent or affiliate of any such Person, with which a contract or agreement of the character described in this Article III has been or will be made, or that any such Person, or any parent or affiliate thereof, is a Shareholder of or has an interest in the Trust, or that
(ii) any such Person also has similar contracts, agreements or plans with other investment companies (including, without limitation, the investment companies referred to in the last paragraph of Section 2.9) or Persons, or has other business activities or interests, shall not affect in any way the validity of any such contract, agreement or plan or disqualify any Shareholder, Trustee or officer of the Trust from authorizing, voting upon or executing the same or create any liability or accountability to the Trust or its Shareholders.
ARTICLE IV
SECTION 4.1. NO PERSONAL LIABILITY OF SHAREHOLDERS, TRUSTEES, OFFICERS AND EMPLOYEES. No Shareholder shall be subject to any personal liability whatsoever to any Person in connection with Trust Property or the acts, obligations or affairs of the Trust or any Class or Series thereof. All Persons dealing or contracting with the Trustees as such or with the Trust or any Class or Series thereof or having any claim against the Trust or any Class or Series thereof shall have recourse only to the Trust or such Class or Series for the payment of their claims or for the payment or satisfaction of claims, obligations or liabilities arising out of such dealings or contracts. No Trustee, officer or employee of the Trust, whether past, present or future, shall be subject to any personal liability whatsoever to any such Person, and all such Persons shall look solely to the Trust Property, or to the assets of one or more specific Class or Series of the Trust if the claim arises from the act, omission or other conduct of such Trustee, officer or employee with respect to only such Class or Series, for satisfaction of claims of any nature arising in connection with the affairs of the Trust or such Class or Series. If any Shareholder, Trustee, officer or employee, as such, of the Trust is made a party to any suit or proceeding to enforce any such liability of the Trust or any Class or Series thereof, he shall not, on account thereof, be held to any personal liability.
SECTION 4.2. TRUSTEE'S GOOD FAITH ACTION; ADVICE TO OTHERS; NO BOND OR SURETY. The exercise by the Trustees of their powers and discretions hereunder shall be binding upon all Interested Parties. A Trustee shall not be liable for errors of judgment or mistakes of fact or law. The Trustees shall not be responsible or liable in any event for any neglect or wrongdoing of them or of any officer, agent, employee, consultant, investment adviser or other adviser, administrator, distributor or principal underwriter, custodian or transfer, dividend disbursing, shareholder servicing or accounting agent of the Trust, nor shall any Trustee be responsible for the act or omission of any other Trustee. The Trustees may take advice of counsel or other experts with respect to the meaning and operation of this Declaration and their duties as Trustees, and shall be under no liability for any act or omission in accordance with such advice or for failing to follow such advice. In discharging their duties, the Trustees, when acting in good faith, shall be entitled to rely upon the records, books and accounts of the Trust and upon reports made to the Trustees by any officer, employee, agent, consultant, accountant, attorney, investment adviser or other adviser, principal underwriter, expert, professional firm or independent contractor. The Trustees as such shall not be required to give any bond or surety or any other security for the performance of their duties. No provision of this Declaration shall protect any Trustee or officer of the Trust against any liability to the Trust or its Shareholders to which he would otherwise be subject by reason of his own willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office.
SECTION 4.3. INDEMNIFICATION. The Trustees may provide, whether in the By-Laws or by contract, vote or other action, for the indemnification by the Trust or by any Class or Series thereof of the Shareholders, Trustees, officers and employees of the Trust and of such other Persons as the Trustees in the exercise of their discretion may deem appropriate or desirable. Any such indemnification may be mandatory or permissive, and may be insured against by policies maintained by the Trust.
SECTION 4.4. NO DUTY OF INVESTIGATION. No purchaser, lender or other Person dealing with the Trustees or any officer, employee or agent of the Trust or a Class or Series thereof shall be bound to make any inquiry concerning the validity of any transaction purporting to be made by the Trustees or by said officer, employee or agent or be liable for the application of money or property paid, loaned, or delivered to or on the order of the Trustees or of said officer, employee or agent. Every obligation, contract, instrument, certificate, Share, other security or undertaking of the Trust or a Class or Series, and every other act or thing whatsoever executed in connection with the Trust shall be conclusively presumed to have been executed or done by the executors thereof only in their capacity as Trustees under this Declaration or in their capacity as officers, employees or agents of the Trust. Every written obligation, contract, instrument, certificate, Share, other security or undertaking of the Trust or a Class or Series made or issued by the Trustees may recite that the same is executed or made by them not individually, but as Trustees under the Declaration, and that the obligations of the Trust or a Class or Series thereof under any such instrument are not binding upon any of the Trustees or Shareholders individually, but bind only the Trust Property or the Trust Property of the applicable Class or Series, and may contain any further recital which they may deem appropriate, but the omission of any such recital shall not operate to bind the Trustees or Shareholders individually.
SECTION 4.5. RELIANCE ON RECORDS AND EXPERTS. Each Trustee, officer or employee of the Trust shall, in the performance of his duties, be fully and completely justified and protected with regard to any act or any failure to act resulting from reliance in good faith upon the records, books and accounts of the Trust or a Class or Series thereof, upon an opinion or other advice of legal counsel, or upon reports made or advice given to the Trust or a Class or Series thereof by any Trustee or any of the Trust's officers or employees or by the Investment Adviser, the Administrator, the Custodian, a Principal Underwriter, Transfer Agent, accountants, appraisers or other experts, advisers, consultants or professionals selected with reasonable care by the Trustees or officers of the Trust, regardless of whether the person rendering such report or advice may also be a Trustee, officer or employee of the Trust.
ARTICLE V
SECTION 5.1. SHARES OF BENEFICIAL INTEREST. The interest of the beneficiaries of the Trust initially shall be divided into common shares of beneficial interest of $.01 par value. The number of common shares authorized hereunder is unlimited. All shares issued, including, without limitation, those issued in connection with a dividend or distribution or a share split, shall be fully paid and nonassessable. The Trustees may, without Shareholder approval, authorize one or more Classes of Shares (which Classes may without Shareholder approval be divided by the Trustees into two or more Series), Shares of each such Class or Series having such preferences, voting powers and special or relative rights or privileges (including conversion rights, if any) as the Trustees may determine and as shall be set forth in a resolution adopted in accordance with the By-Laws. The number of Shares of each Class or Series authorized shall be unlimited except as the By-Laws may otherwise provide. The Trustees may from time to time divide or combine the Shares of any Class or Series into a greater or lesser number without thereby changing the proportionate beneficial interest in the Class or Series.
The ownership of Shares shall be recorded on the books of the Trust or a transfer or similar agent. No certificates certifying the ownership of Shares shall be issued except as the Trustees may otherwise determine from time to time. The Trustees may make such rules as they consider appropriate for the issuance of Share certificates, the transfer of Shares and similar matters. The record books of the Trust as kept by the Trust or any transfer or similar agent, as the case may be, shall be conclusive as to who are the Shareholders of each Class or Series and as to the number of Shares of each Class or Series held from time to time by each Shareholder. The Trustees may at any time discontinue the issuance of Share certificates and may, by written notice to each Shareholder, require the surrender of Share certificates to the Trust for cancellation. Such surrender and cancellation shall not affect the ownership of Shares in the Trust.
SECTION 5.2. VOTING POWERS. Subject to the voting powers of one or more Classes or Series, the Shareholders shall have power to vote only (i) with respect to the election of Trustees, (ii) for the removal of Trustees as provided for herein, (iii) with respect to any Investment Adviser as required by applicable law, (iv) with respect to any termination or amendment of this Trust, or with respect to certain transactions, to the extent and as provided in Article VIII, (v) to the same extent as the stockholders of a Massachusetts business corporation as to whether or not a court action, proceeding or claim should or should not be brought or maintained derivatively or as a class action on behalf of the Trust or the Shareholders, and (vi) with respect to such additional matters relating to the Trust as may be required by law, this Declaration, the By-Laws or any registration of the Trust with the Securities and Exchange Commission (or any successor agency) or any state, or as the Trustees may consider necessary or desirable. Each whole Share shall be entitled to one vote as to any matter on which it is entitled to vote and each fractional Share shall be entitled to a proportionate fractional vote. Notwithstanding any other provision of this Declaration, on any matter submitted to a vote of Shareholders, all Shares of the Trust then entitled to vote shall, except as otherwise provided in the By-Laws or required by applicable law, be voted in the aggregate as a single Class without regard to Classes or Series. There shall be no cumulative voting in the election of Trustees.
SECTION 5.3. RIGHTS OF SHAREHOLDERS. The ownership of the Trust Property of every description and the right to conduct any business of the Trust are vested exclusively in the Trustees, and the Shareholders shall have no interest therein other than the beneficial interest conferred by their Shares, and they shall have no right to call for any partition or division of any property, profits, rights or interests of the Trust or of any Class or Series nor can they be called upon to share or assume any losses of the Trust or of any Class or Series or suffer an assessment of any kind by virtue of their ownership of Shares. The Shares shall be personal property giving only the rights specifically set forth in this Declaration. The Shares shall not entitle the holder to preference, preemptive, appraisal, conversion or exchange rights, except as the Trustees may specifically determine with respect to any Class or Series.
Every Shareholder by virtue of having become a Shareholder shall be held to have expressly assented and agreed to the terms of this Declaration and the Bylaws and to have become a party hereto and thereto. The death of a Shareholder during the continuance of the Trust shall not operate to terminate the same nor entitle the representative of any deceased Shareholder to an accounting or to take any action in court or elsewhere against the Trust or the Trustees, but only to the rights of said decedent under this Trust.
SECTION 5.4. TRUST ONLY. It is the intention of the Trustees to create only the relationship of Trustee and beneficiary between the Trustees and each Shareholder from time to time. It is not the intention of the Trustees to create a general partnership, limited partnership, joint stock association, corporation, limited liability company, bailment or any form of legal relationship other than a Massachusetts business trust. Nothing in this Declaration shall be construed to make the Shareholders, either by themselves or with the Trustees, partners or members of a joint stock association.
SECTION 5.5. ISSUANCE OF SHARES. The Trustees in their discretion may, from time to time and without any authorization or vote of the Shareholders, issue Shares of any Class or Series, in addition to the then issued and Outstanding Shares, to such party or parties and for such amount and type of consideration, including cash or property, at such time or times and on such terms as the Trustees may deem appropriate or desirable, and may in such manner acquire other assets (including the acquisition of assets subject to, and in connection with the assumption of, liabilities) and businesses. In connection with any issuance of Shares, the Trustees may issue fractional Shares and reissue and resell full and fractional Shares held in the treasury. The Trustees may authorize the issuance of certificates of beneficial interest to evidence the ownership of
Shares. Shares held in the treasury shall not be voted nor shall such Shares be
entitled to any dividends or other distributions declared with respect thereto.
The Trustees in their discretion may also, from time to time and without any
authorization or vote of the Shareholders, issue to the extent consistent with
applicable law securities of the Trust convertible into Shares of the Trust and
warrants to purchase securities of the Trust, in each case pursuant to such
terms and under such conditions as the Trustees may specify in their discretion.
Shares of any Class or Series, in addition to the then issued and outstanding
Shares, and such warrants or convertible securities, may be issued to such party
or parties and for such amount and type of consideration, including cash or
property, at such time or times and on such terms as the Trustees may deem
appropriate or desirable, and may in such manner acquire other assets (including
the acquisition of assets subject to, and in connection with the assumption of,
liabilities) and businesses. The officers of the Trust are severally authorized
to take all such actions as may be necessary or desirable to carry out this
Section 5.5.
ARTICLE VI
SECTION 6.1. REDEMPTIONS AND REPURCHASES OF SHARES. From time to time the Trust may redeem or repurchase its Shares, all upon such terms and conditions as may be determined by the Trustees and subject to any applicable provisions of the 1940 Act. The Trust may require Shareholders to pay a withdrawal charge, a sales charge, or any other form of charge to the Trust, to the underwriter or to any other person designated by the Trustees upon redemption or repurchase of Trust Shares in such amount as shall be determined from time to time by the Trustees. The Trust may also charge a redemption or repurchase fee in such amount as may be determined from time to time by the Trustees.
SECTION 6.2 MANNER OF PAYMENT. Payment of Shares redeemed or repurchased may at the option of the Trustees or such officer or officers as they may duly authorize for the purpose, in their complete discretion, be made in cash, or in kind, or partially in cash and partially in kind. In case of payment in kind the Trustees, or their delegate, shall have absolute discretion as to what security or securities shall be distributed in kind and the amount of the same, and the securities shall be valued for purposes of distribution at the figure at which they were appraised in computing the net asset value of the Shares, provided that any Shareholder who cannot legally acquire securities so distributed in kind by reason of the prohibitions of the 1940 Act shall receive cash.
SECTION 6.3. INVOLUNTARY REDEMPTION. If the Trustees shall, at any time and in good faith, be of the opinion that direct or indirect ownership of Shares of any Class or Series or other securities of the Trust has or may become concentrated in any person to an extent which would disqualify the Trust as a regulated investment company under the Internal Revenue Code, then the Trustees shall have the power by lot or other means deemed equitable by them (i) to call for redemption by any such person a number, or principal amount, of Shares or other securities of the Trust sufficient to maintain or bring the direct or indirect ownership of Shares or other securities of the Trust into conformity with the requirements for such qualification and (ii) to refuse to transfer or issue Shares or other securities of the Trust to any person whose acquisition of the Shares or other securities of the Trust in question would result in such disqualification. The redemption shall be effected upon such terms and conditions as shall be determined by the Trustees.
The holders of Shares or other securities of the Trust shall upon demand disclose to the Trustees in writing such information with respect to direct and indirect ownership of Shares or other securities of the Trust as the Trustees deem necessary to comply with the provisions of the Internal Revenue Code, or to comply with the requirements of any other taxing authority.
ARTICLE VII
SECTION 7.1. NET ASSET VALUE. The net asset value of each outstanding Share of the Trust or of any Class or Series thereof shall be determined on such days and at or as of such time or times as the Trustees may determine. Any reference in this Declaration to the time at which a determination of net asset value is made shall mean the time as of which the determination is made. The power and duty to determine and method of determination of net asset value may be delegated by the Trustees from time to time to the Investment Adviser, the Administrator, the Custodian, the Transfer Agent or such other Person or Persons as the Trustees may determine. The value of the assets of the Trust or any Class or Series thereof shall be determined in a manner authorized by the Trustees. From the total value of said assets, there shall be deducted all indebtedness, interest, taxes, payable or accrued, including estimated taxes on unrealized book profits, expenses and management charges accrued to the appraisal date, and all other items in the nature of liabilities which shall be deemed appropriate by the Trustees, as incurred by or allocated to the Trust or any Class or Series thereof. The resulting amount, which shall represent the total net assets of the Trust or Class or Series thereof, shall be divided by the number of Outstanding Shares of the Trust or Class or Series thereof at that time and the quotient so obtained shall be deemed to be the net asset value of the Shares of the Trust or Class or Series thereof. The Trust may declare a suspension of the determination of net asset value to the extent permitted by the 1940 Act. It shall not be a violation of any provision of this Declaration if Shares are sold, redeemed or repurchased by the Trust at a price other than one based on net asset value if the net asset value is affected by one or more errors inadvertently made in the pricing of portfolio securities or other investments or in accruing or allocating income, expenses, reserves or liabilities. No provision of this Declaration shall be construed to restrict or affect the right or ability of the Trust to employ or authorize the use of pricing services, appraisers or any other means, methods, procedures, or techniques in valuing the assets or calculating the liabilities of the Trust or any Class or Series thereof.
SECTION 7.2. DIVIDENDS AND DISTRIBUTIONS. (a) The Trustees may from time to time distribute ratably among the Shareholders of the Trust or of a Class or Series thereof such portion of the net earnings or profits, surplus (including paid-in surplus), capital (including paid-in capital), or assets of the Trust or such Class or Series held by the Trustees as they may deem appropriate or desirable. Such distributions may be made in cash, additional Shares or property (including without limitation any type of obligations of the Trust or Class or Series or any assets thereof), and the Trustees may distribute ratably among the Shareholders of the Trust or Class or Series thereof additional Shares of the Trust or Class or Series thereof issuable hereunder in such manner, at such times, and on such terms as the Trustees may deem appropriate or desirable. Such distributions may be among the Shareholders of the Trust or Class or Series thereof at the time of declaring a distribution or among the Shareholders of the Trust or Class or Series thereof at such other date or time or dates or times as the Trustees shall determine. The Trustees may always retain from the earnings or profits such amounts as they may deem appropriate or desirable to pay the expenses and liabilities of the Trust or a Class or Series thereof or to meet obligations of the Trust or a Class or Series thereof, together with such amounts as they may deem desirable to use in the conduct of its affairs or to retain for future requirements or extensions of the business or operations of the Trust or such Class or Series. The Trust may adopt and offer to Shareholders such dividend reinvestment plans, cash dividend payout plans or other distribution plans as the Trustees may deem appropriate or desirable. The Trustees may in their discretion determine that an account administration fee or other similar charge may be deducted directly from the income and other distributions paid on Shares to a Shareholder's account in any Class or Series.
(b) The Trustees may prescribe, in their absolute discretion, such bases and times for determining the amounts for the declaration and payment of dividends and distributions as they may deem necessary, appropriate or desirable.
(c) Inasmuch as the computation of net income and gains for federal income tax purposes may vary from the computation thereof on the books of account, the above provisions shall be interpreted to give the Trustees full power and authority in their absolute discretion to distribute for any fiscal year as dividends and as capital gains distributions, respectively, additional amounts sufficient to enable the Trust or a Class or Series thereof to avoid or reduce liability for taxes.
SECTION 7.3. POWER TO MODIFY FOREGOING PROCEDURES. Notwithstanding any provision contained in this Declaration, the Trustees may prescribe, in their absolute discretion, such other means, methods, procedures or techniques for determining the per Share net asset value of a Class or Series thereof or the income of the Class or Series thereof, or for the declaration and payment of dividends and distributions on any Class or Series.
ARTICLE VIII
SECTION 8.1. DURATION. The Trust shall continue without limitation of time but subject to the provisions of this Article VIII. The death, declination, resignation, retirement, removal or incapacity of the Trustees, or any one of them, shall not operate to terminate or annul the Trust or to revoke any existing agency or delegation or authority pursuant to the terms of this Declaration or of the By-Laws.
SECTION 8.2. MERGER OR TERMINATION OF THE TRUST OR A SERIES OR A CLASS. The Trust may merge or consolidate with any other corporation, association, trust or other organization or may sell, lease or exchange all or substantially all of the Trust property, including its good will, upon such terms and conditions and for such consideration when and as authorized at a meeting of Shareholders called for the purpose by the affirmative vote of the holders of two-thirds of each Class and Series of Shares outstanding and entitled to vote (with each such class and series separately voting thereon as a separate Class or Series), or by an instrument or instruments in writing without a meeting, consented to by the holders of two-thirds of each Class and Series of Shares (with each such Class and Series separately consenting thereto as a separate Class or Series); provided, however, that if such merger, consolidation, sale, lease or exchange is recommended by the Trustees, the vote or written consent of the holders of a majority of the Shares outstanding and entitled to vote shall be sufficient authorization; and any such merger, consolidation, sale, lease or exchange shall be deemed for all purposes to have been accomplished under and pursuant to the statutes of the Commonwealth of Massachusetts. Upon making provision for the payment of all outstanding obligations, taxes and other liabilities, (whether accrued or contingent) of the Trust, the Trustees shall distribute the remaining assets of the Trust ratably among the holders of the outstanding Shares, except as may be otherwise provided by the Trustees with respect to any Class or Series of Shares thereof.
Subject to authorization by the Shareholders as indicated below in this paragraph, the Trust may at any time sell and convert into money all of the assets of the Trust, and, upon making provision for the payment of all outstanding obligations, taxes and other liabilities (whether accrued or contingent) of the Trust, the Trustees shall distribute the remaining assets of the Trust ratably among the holders of the outstanding Shares, except as may be otherwise provided by the Trustees with respect to any Class or Series of Shares. Such action shall first have been authorized at a meeting of Shareholders called for the purpose by the affirmative vote of the holders of two-thirds of each Class and Series of Shares outstanding and entitled to vote (with each such Class and Series separately voting thereon as a separate Class or Series), or by an instrument or instruments in writing without a meeting, consented to by the holders of two-thirds of each Class and Series of Shares
(with each such Class and Series separately consenting thereto as a separate Class or Series); provided, however, that if such action is recommended by the Trustees, the vote or written consent of the holders of a majority of the Shares outstanding and entitled to vote shall be sufficient authorization.
Upon completion of the distribution of the remaining proceeds or the remaining assets as provided in this section, the Trust shall terminate and the Trustees shall be discharged of any and all further liabilities and duties hereunder and the right, title and interest of all parties shall be cancelled and discharged.
SECTION 8.3. AMENDMENTS. The execution of an instrument setting forth the establishment and designation and the relative rights of any Class or Series of Shares in accordance with Section 5.1 hereof shall, without any authorization, consent or vote of the Shareholders, effect an amendment of this Declaration. Except as otherwise provided in this Section, if authorized by a majority of the Trustees and by vote of a majority of the outstanding voting securities of the Trust affected by the amendment (which voting securities shall, unless otherwise provided by the Trustees, vote together on such amendment as a single class), or by any larger vote which may be required by applicable law or this Declaration of Trust in any particular case, the Trustees may amend or otherwise supplement this Declaration. The Trustees may also amend this Declaration without the vote or consent of Shareholders to change the name of the Trust or to make such other changes as do not have a materially adverse effect on the rights or interests of Shareholders hereunder or if they deem it necessary to conform this Declaration to the requirements of applicable Federal laws or regulations or the requirements of the regulated investment company provisions of the Internal Revenue Code, but the Trustees shall not be liable for failing so to do.
No amendment may be made under this Section which shall amend, alter, change or repeal any of the provisions of Article VIII unless the amendment effecting such amendment, alteration, change or repeal shall receive the affirmative vote or consent of the holders of two-thirds of each Class and Series of Shares outstanding and entitled to vote (with each such Class and Series separately voting thereon on consenting thereto as a separate Class or Series). Such affirmative vote or consent shall be in addition to the vote or consent of the holders of Shares otherwise required by law or by any agreement between the Trust and any national securities exchange.
Nothing contained in this Declaration shall permit the amendment of this Declaration to impair the exemption from personal liability of the Shareholders, Trustees, officers, employees and agents of the Trust or to permit assessments upon Shareholders.
Notwithstanding any other provision hereof, until such time as a Registration Statement under the Securities Act of 1933, as amended, covering the first public offering of securities of the Trust shall have become effective, this Declaration may be terminated or amended in any respect by the affirmative vote of a majority of the Trustees or by an instrument signed by a majority of the Trustees.
SECTION 8.4. CERTAIN TRANSACTIONS. (a) Notwithstanding any other provision
of this Declaration and subject to the exceptions provided in sub-section (d) of
this Section 8.4, the types of transactions described in sub-section (c) of this
Section 8.4 shall require the affirmative vote or consent of the holders of
seventy-five percent (75%) of each Class of Shares outstanding (with each such
Class voting separately thereon), when a Principal Shareholder (as defined in
sub-section (b) of this Section 8.4) is determined by the Trustees to be a party
to the transaction. Such affirmative vote or consent shall be in addition to the
vote or consent of the holders of Shares otherwise required by law or by the
terms of any Class or Series, whether now or hereafter authorized, or by any
agreement between the Trust and any national securities exchange.
(b) The term "Principal Shareholder" shall mean any Person which is the beneficial owner, directly or indirectly, of more than five percent (5%) of the Outstanding Shares of the Trust or of any Class and shall include any "affiliate" or "associate", as such terms are defined in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934. For the purpose of this Section 8.4, in addition to the Shares which a Person beneficially owns directly, (a) a Person shall be deemed to be the beneficial owner of any Shares (i) which the Trustees determine it has the right to acquire pursuant to any agreement or upon exercise of conversion rights or warrants, or
otherwise (but excluding Share options granted by the Trust) or (ii) which the Trustees determine are beneficially owned, directly or indirectly (including Shares deemed owned through application of clause (i) above), by any other Person with which it or its "affiliate" or "associate" (as defined above) has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of Shares, or which is its affiliate or associate, and (b) the outstanding Shares shall include Shares deemed owned through application of clauses (i) and (ii) above but shall not include any other Shares which are not at the time issued and outstanding but may be issuable pursuant to any agreement, or upon exercise of conversion rights or warrants, or otherwise.
(c) This Section 8.4 shall apply to the following transactions:
(i) The merger or consolidation of the Trust or any subsidiary of the Trust with or into any Principal Shareholder.
(ii) The issuance of any securities of the Trust to any Principal Shareholder for cash.
(iii) The sale, lease or exchange of all or any substantial part of the assets of the Trust to any Principal Shareholder (except assets determined by the Trustees to have an aggregate fair market value of less than $1,000,000, aggregating for the purpose of such computation all assets sold, leased or exchanged in any series of similar transactions within a twelve-month period or assets sold in the ordinary course of business).
(iv) The sale, lease or exchange to or with the Trust or any subsidiary thereof, in exchange for securities of the Trust, of any assets of any Principal Shareholder (except assets determined by the Trustees to have an aggregate fair market value of less than $1,000,000 aggregating for the purpose of such computation all assets sold, leased or exchanged in any series of similar transactions within a twelve-month period).
For purposes of this sub-section 8.4(c), the term "Principal Shareholder" shall include all subsidiaries, affiliates, associates, or other persons acting in concert with any Principal Shareholder.
(d) The provisions of this Section 8.4 shall not be applicable to (i) any of the transactions described in sub-section (c) of this Section 8.4 if the Trustees shall by resolution have approved a memorandum of understanding with such Principal Shareholder with respect to and substantially consistent with such transaction, or (ii) any such transaction with any Person of which a majority of the outstanding shares of all classes of stock normally entitled to vote in the election of directors is owned of record or beneficially by the Trust and its subsidiaries.
(e) The Trustees shall have the power to determine for the purposes of this
Section 8.4 on the basis of information known to the Trust, whether (i) a Person
beneficially owns more than five percent (5%) of the outstanding Shares or is
otherwise a Principal Shareholder, (ii) a Person is an "affiliate" or
"associate" (as defined above) of another, (iii) the assets being acquired or
leased to or by the Trust or any subsidiary thereof constitute a substantial
part or the assets of the Trust and have an aggregate fair market value of less
than $1,000,000, (iv) the memorandum of understanding referred to in sub-section
(d) hereof is substantially consistent with the transaction covered thereby, and
(v) the provisions of the Section 8.5 otherwise apply to any Person or
transaction. Any such determination shall be conclusive and binding for all
purposes of this Section 8.4.
SECTION 8.5. CONVERSION. Notwithstanding any other provisions of this Declaration, the conversion of the Trust from a "closed-end company" to an "open-end company," as those terms are defined in Section 5(a)(2) and 5(a)(1), respectively, of the 1940 Act shall require the affirmative vote or consent of the holders of two-thirds of each Class outstanding (with each Class separately voting thereon or consenting thereto as a separate Class). Such affirmative vote or consent shall be in addition to the vote or consent of the holders of the Shares otherwise required by law or by the terms of any Class or Series, whether now or hereafter authorized, or by any agreement between the Trust and any national securities exchange. However, if such conversion is recommended by at least 75% of the Trustees then in office, the vote or written consent of the holders of a majority of the outstanding voting securities of the Trust (which voting securities shall vote separately on the matter by class) shall be sufficient to authorize such conversion.
ARTICLE IX
SECTION 9.1. USE OF THE WORDS "EATON VANCE". Eaton Vance Corp. (hereinafter referred to as "EVC"), which owns (either directly or through subsidiaries) all of the capital shares of the Investment Adviser of the Trust (or of the investment adviser of each of the investment companies referred to in the last paragraph of Section 2.9), has consented to the use by the Trust of the identifying words "Eaton Vance" in the name of the Trust. Such consent is conditioned upon the continued employment of EVC or a subsidiary or affiliate of EVC as Investment Adviser of the Trust or as the investment adviser of each of the investment companies referred to in the last paragraph of Section 2.9. As between the Trust and itself, EVC shall control the use of the name of the Trust insofar as such name contains the identifying words "Eaton Vance". EVC may from time to time use the identifying words "Eaton Vance" in other connections and for other purposes, including, without limitation, the names of other investment companies, trusts, corporations or businesses which it may manage, advise, sponsor or own or in which it may have a financial interest. EVC may require the Trust to cease using the identifying words "Eaton Vance" in the name of the Trust if EVC or a subsidiary or affiliate of EVC ceases to act as investment adviser of the Trust or as the investment adviser of each of the investment companies referred to in the last paragraph of Section 2.9.
SECTION 9.2. NOTICES. Notwithstanding any other provision of this Declaration, any and all notices to which any Shareholder may be entitled and any and all communications shall be deemed duly served or given if mailed, postage prepaid, addressed to any Shareholder of record at his last known address as recorded on the register of the Trust. If and to the extent consistent with applicable law, a notice of a meeting, an annual report, and any other communication to Shareholders need not be sent to a Shareholder (i) if an annual report and a proxy statement for two consecutive shareholder meetings have been mailed to such Shareholder's address and have been returned as undeliverable, (ii) if all, and at least two, checks (if sent by first class mail) in payment of distributions on Shares during a twelve-month period have been mailed to such Shareholder's address and have been returned as undeliverable or (iii) in any other case in which a proxy statement concerning a meeting of security holders is not required to be given pursuant to the Commission's proxy rules as from time to time in effect under the Securities Exchange Act of 1934, as amended. However, delivery of such proxy statements, annual reports and other communications shall resume if and when such Shareholder delivers or causes to be delivered to the Trust written notice setting forth such Shareholder's then current address.
SECTION 9.3. FILING OF COPIES, REFERENCES, HEADINGS AND COUNTERPARTS. The original or a copy of this instrument, of any amendment hereto and of each declaration of trust supplemental hereto, shall be kept at the office of the Trust. Anyone dealing with the Trust may rely on a certificate by a Trustee or
an officer of the Trust as to whether or not any such amendments or supplemental declarations of trust have been made and as to any matters in connection with the Trust hereunder, and, with the same effect as if it were the original, may rely on a copy certified by a Trustee or an officer of the Trust to be a copy of this instrument or of any such amendment hereto or supplemental declaration of trust.
In this instrument or in any such amendment or supplemental declaration of trust, references to this instrument, and all expressions such as "herein", "hereof", and "hereunder", shall be deemed to refer to this instrument as amended or affected by any such supplemental declaration of trust. Headings are placed herein for convenience of reference only and in case of any conflict, the text of this instrument, rather than the headings, shall control. This instrument may be executed in any number of counterparts each of which shall be deemed an original, but such counterparts shall constitute one instrument. A restated Declaration, integrating into a single instrument all of the provisions of the Declaration which are then in effect and operative, may be executed from time to time by a majority of the Trustees then in office and filed with the Massachusetts Secretary of State. A restated Declaration shall, upon execution, be conclusive evidence of all amendments and supplemental declarations contained therein and may thereafter be referred to in lieu of the original Declaration and the various amendments and supplements thereto.
SECTION 9.4. APPLICABLE LAW. The Trust set forth in this instrument is made in The Commonwealth of Massachusetts, and it is created under and is to be governed by and construed and administered according to the laws of said Commonwealth. The Trust shall be of the type commonly called a Massachusetts business trust, and without limiting the provisions hereof, the Trust may exercise all powers which are ordinarily exercised by such a trust.
SECTION 9.5. PROVISIONS IN CONFLICT WITH LAW OR REGULATIONS. (a) The provisions of this Declaration are severable, and if the Trustees shall determine, with the advice of legal counsel, that any of such provisions is in conflict with the 1940 Act, the Internal Revenue Code of 1986 or with other applicable laws and regulations, the conflicting provision shall be construed in such a manner consistent with such law as may most closely reflect the intention of the offending provision; provided, however, that such determination shall not affect any of the remaining provisions of this Declaration or render invalid or improper any action taken or omitted prior to such determination.
(b) If any provision of this Declaration shall be held invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall attach only to such provision in such jurisdiction and shall not in any manner affect such provision in any other jurisdiction or any other provision of this Declaration in any jurisdiction.
IN WITNESS WHEREOF, the undersigned, being all of the current Trustees of the Trust, have executed this instrument this 10th day of July, 2003.
/s/ James B. Hawkes /s/ Alan R. Dynner ---------------------------------- -------------------------------- James B. Hawkes, as Trustee Alan R. Dynner, as Trustee and not Individually and not Individually |
THE COMMONWEALTH OF MASSACHUSETTS
Suffolk, ss. Boston, Massachusetts
Then personally appeared the above named James B. Hawkes and Alan R. Dynner, each of whom acknowledged the foregoing instrument to be his free act and deed.
Before me,
/s/ Lynn W. Ostberg -------------------------------- My commission expires: November 27, 2003 |
The names and addresses of all the Trustees of the Trust are as follows:
James B. Hawkes
11 Quincy Park
Beverly, MA 01915
Alan R. Dynner
227 Beacon Street
Boston, MA 02116
Trust Address:
The Eaton Vance Building
255 State Street
Boston, MA 02109
BY-LAWS
OF
EATON VANCE TAX-ADVANTAGED DIVIDEND INCOME FUND
ARTICLE I
The Trustees
SECTION 1. NUMBER OF TRUSTEES. The number of Trustees shall be fixed by the Trustees, provided, however, that such number shall at no time be less than two or exceed fifteen.
ARTICLE II
Officers and Their Election
SECTION 1. OFFICERS. The officers of the Trust shall be a President, a Treasurer, a Secretary, and such other officers or agents as the Trustees may from time to time elect. It shall not be necessary for any Trustee or other officer to be a holder of shares in the Trust.
SECTION 2. ELECTION OF OFFICERS. The Treasurer and Secretary shall be chosen annually by the Trustees. The President shall be chosen annually by and from the Trustees. Except for the offices of the President and Secretary, two or more offices may be held by a single person. The officers shall hold office until their successors are chosen and qualified.
SECTION 3. RESIGNATIONS AND REMOVALS. Any officer of the Trust may resign by filing a written resignation with the President or with the Trustees or with the Secretary, which shall take effect on being so filed or at such time as may otherwise be specified therein. The Trustees may at any meeting remove an officer.
ARTICLE III
Powers and Duties of Trustees and Officers
SECTION 1. TRUSTEES. The business and affairs of the Trust shall be managed by the Trustees, and they shall have all powers necessary and desirable to carry out that responsibility, so far as such powers are not inconsistent with the laws of the Commonwealth of Massachusetts, the Declaration of Trust, or these By-Laws.
SECTION 2. EXECUTIVE AND OTHER COMMITTEES. The Trustees may elect from their own number an executive committee to consist of not less than three nor more than five members, which shall have the power and duty to conduct the current and ordinary business of the Trust while the Trustees are not in session, and such other powers and duties as the Trustees may from time to time delegate to such committee. The Trustees may also elect from their own number other committees from time to time, the number composing such committees and the powers conferred upon the same to be determined by the Trustees. Without limiting the generality of the foregoing, the Trustees may appoint a committee consisting of less than the whole number of Trustees then in office, which committee may be empowered to
act for and bind the Trustees and the Trust, as if the acts of such committee were the acts of all the Trustees then in office, with respect to the institution, prosecution, dismissal, settlement, review, investigation or other disposition of any dispute, claim, action, suit or proceeding which shall be pending or threatened to be brought before any court, administrative agency or other adjudicatory body.
SECTION 3. CHAIRMAN OF THE TRUSTEES. The Trustees may, but need not, appoint from among their number a Chairman. When present he shall preside at the meetings of the shareholders and of the Trustees. He may call meetings of the Trustees and of any committee thereof whenever he deems it necessary. He shall be an executive officer of this Trust and shall have, with the President, general supervision over the business and policies of this Trust, subject to the limitations imposed upon the President, as provided in Section 4 of this Article III.
SECTION 4. PRESIDENT. In the absence of the Chairman of the Trustees, the President shall preside at all meetings of the shareholders. Subject to the Trustees and to any committees of the Trustees, within their respective spheres, as provided by the Trustees, he shall at all times exercise a general supervision and direction over the affairs of the Trust. He shall have the power to employ attorneys and counsel for the Trust and to employ such subordinate officers, agents, clerks and employees as he may find necessary to transact the business of the Trust. He shall also have the power to grant, issue, execute or sign such powers of attorney, proxies or other documents as may be deemed advisable or necessary in furtherance of the interests of the Trust. The President shall have such other powers and duties as, from time to time, may be conferred upon or assigned to him by the Trustees.
SECTION 5. TREASURER. The Treasurer shall be the principal financial and accounting officer of the Trust. He shall deliver all funds and securities of the Trust which may come into his hands to such bank or trust company as the Trustees shall employ as custodian in accordance with Article III of the Declaration of Trust. He shall make annual reports in writing of the business conditions of the Trust, which reports shall be preserved upon its records, and he shall furnish such other reports regarding the business and condition as the Trustees may from time to time require. The Treasurer shall perform such duties additional to foregoing as the Trustees may from time to time designate.
SECTION 6. SECRETARY. The Secretary shall record in books kept for the purpose all votes and proceedings of the Trustees and the shareholders at their respective meetings. He shall have custody of the seal, if any, of the Trust and shall perform such duties additional to the foregoing as the Trustees may from time to time designate.
SECTION 7. OTHER OFFICERS. Other officers elected by the Trustees shall perform such duties as the Trustees may from time to time designate.
SECTION 8. COMPENSATION. The Trustees and officers of the Trust may receive such reasonable compensation from the Trust for the performance of their duties as the Trustees may from time to time determine.
ARTICLE IV
Meetings of Shareholders
SECTION 1. MEETINGS. Meetings of shareholders, at which the shareholders shall elect Trustees and transact such other business as may properly come before the meeting, shall be held annually so long as required by the American Stock Exchange or such other exchange or trading system on which shares are principally traded. Meetings of the shareholders (or any class or series) may be called at any time by the President, and shall be called by the President or the Secretary at the request, in writing or by resolution, of a majority of the Trustees, or at the written request of the holder or holders of twenty-five percent (25%) or more of the total number of the then issued and outstanding shares of the Trust entitled to vote at such meeting. Any such request shall state the purposes of the proposed meeting.
SECTION 2. PLACE OF MEETINGS. Meetings of the shareholders shall be held at the principal place of business of the Trust in Boston, Massachusetts, unless a different place within the United States is designated by the Trustees and stated as specified in the respective notices or waivers of notice with respect thereto.
SECTION 3. NOTICE OF MEETINGS. Notice of all meetings of the shareholders, stating the time, place and the purposes for which the meetings are called, shall be given by the Secretary to each shareholder entitled to vote thereat, and to each shareholder who under the By-Laws is entitled to such notice, by delivering (by electronic, telephonic, computerized or other alternative means as may be approved by resolutions adopted by the trustees, which authorization is received not more than six months before delivery of such notice) or mailing, postage paid, addressed to such address as it appears upon the books of the Trust, at least ten days no more than ninety days before the time fixed for the meeting, and the person given such notice shall make an affidavit with respect thereto. If any shareholder shall have failed to inform the Trust of his address, no notice need be sent to him. No notice need be given to any shareholder if a written waiver of notice, executed before or after the meeting by the shareholder or his attorney thereunto authorized, is filed with the records of the meeting.
SECTION 4. QUORUM. Except as otherwise provided by law, to constitute a quorum for the transaction of any business at any meeting of shareholders, there must be present, in person or by proxy, holders of a majority of the total number of shares of the then issued and outstanding shares of the Trust entitled to vote at such meeting; provided that if a class (or series) of shares is entitled to vote as a separate class (or series) on any matter, then in the case of that matter a quorum shall consist of the holders of a majority of the total number of shares of the then issued and outstanding shares of that class (or series) entitled to vote at the meeting. Shares owned directly or indirectly by the Trust, if any, shall not be deemed outstanding for this purpose.
If a quorum, as above defined, shall not be present for the purpose of any vote that may properly come before any meeting of shareholders at the time and place of any meeting, the shareholders present in person or by proxy and entitled to vote at such meeting on such matter holding a majority of the shares present and entitled to vote on such matter may by vote adjourn the meeting from time to time to be held at the same place without further notice than by announcement to be given at the meeting until a quorum, as above defined, entitled to vote on such matter, shall be present, whereupon any such matter may be voted upon at the meeting as though held when originally convened.
SECTION 5. VOTING. At each meeting of the shareholders every shareholder of the Trust shall be entitled to one vote in person or by proxy for each of the then issued and outstanding shares of the Trust then having voting power in respect of the matter upon which the vote is to be taken, standing in his name on the books of the Trust at the time of the closing of the transfer books for the meeting, or, if the books be not closed for any meeting, on the record date fixed as provided in Section 4 of Article VI of these By-Laws for determining the shareholders entitled to vote at such meeting, or if the books be not closed and no record date be fixed, at the time of the meeting. The record holder of a fraction of a share shall be entitled in like manner to corresponding fraction of a vote. Notwithstanding the foregoing, the Trustees may, in connection with the establishment of any class (or series) of shares or in proxy materials for any meeting of shareholders or in other solicitation materials or by vote or other action duly taken by them, establish conditions under which the several classes (or series) shall have separate voting rights or no voting rights.
All elections of Trustees shall be conducted in any manner approved at the meeting of the shareholders at which said election is held, and shall be by ballot if so requested by any shareholder entitled to vote thereon. The persons receiving the greatest number of votes shall be deemed and declared elected. Except as otherwise required by law or by the Declaration of Trust or by these By-Laws, all matters shall be decided by a majority of the votes cast, as hereinabove provided, by persons entitled to vote thereon.
SECTION 6. PROXIES. Any shareholder entitled to vote upon any matter at any meeting of the shareholders may so vote by proxy, provided that such proxy to act is authorized to act by (i) a written instrument, dated not more than six months before the meeting and executed either by the shareholder or by his or her duly authorized attorney in fact (who may be so authorized by a writing or by any non-written means permitted by the laws of The Commonwealth of Massachusetts) or (ii) such electronic, telephonic, computerized or other alternative means as may be approved by a resolution adopted by the Trustees, which authorization is received not more than six months before the initial session of the meeting. Proxies shall be delivered to the Secretary of the Trust or other person responsible for recording the proceedings before being voted. A proxy with respect to shares held in the name of two or more persons shall be valid if executed by one of them unless at or prior to exercise of such proxy the Trust receives a specific written notice to the contrary from any one of them. Unless otherwise specifically limited by their terms, proxies shall entitle the holder thereof to vote at any adjournment of a meeting. A proxy purporting to be exercised by or on behalf of a shareholder shall be deemed valid unless challenged at or prior to its exercise and the burden of proving invalidity shall rest on the challenger. At all meetings of the shareholders, unless the voting is conducted by inspectors, all questions relating to the qualifications of voters, the validity of proxies, and the acceptance or rejection of votes shall be decided by the chairman of the meeting.
SECTION 7. CONSENTS. Any action which may be taken by shareholders may be taken without a meeting if a majority of shareholders entitled to vote on the matter (or such larger proportion thereof as shall be required by law, the Declaration or these By-Laws for approval of such matter) consent to the action in writing and the written consents are filed with the records of the meetings of shareholders. Such consents shall be treated for all purposes as a vote taken at a meeting of shareholders.
SECTION 8. NOTICE OF SHAREHOLDER BUSINESS AND NOMINATIONS
(A) ANNUAL MEETINGS OF SHAREHOLDERS. (1) Nominations of persons for election of the Board of Trustees and the proposal of business to be considered by the shareholders may be made at an annual meeting of shareholders (a) pursuant to the notice of meeting described in Section 3 of this Article of these By-laws; (b) by or at the direction of the Board of Trustees; or (c) by any shareholder of the Trust who was a shareholder of record at the time of giving of notice provided for in Section 3 of this Article of these By-Laws, who is entitled to vote at the meeting and who complied with the notice provisions set forth in this Section 8.
(2) For nominations or other business properly to be brought before an
annual meeting by a shareholder pursuant to clause (c) of paragraph (A)(1) of
this Section 8, the shareholder must have given timely notice thereof in writing
to the Secretary of the Trust and such other business must be a proper matter
for shareholder action. To be timely, a shareholder's notice shall be delivered
to the Secretary at the principal executive offices of the Trust not later than
the close of business on the ninetieth day nor earlier than the close of
business on the one hundred-twentieth day prior to the first anniversary of the
preceding year's annual meeting; provided, however, that in the event that the
date of the annual meeting is more than thirty days before or more than sixty
days after such anniversary date, notice by the shareholder to be timely must be
so delivered not earlier than the close of business on the later of the
ninetieth day prior to such annual meeting or the tenth day following the day on
which public announcement of the date of such meeting is first made. In no
event, shall the public announcement of an adjournment of an annual meeting
commence a new time period for the giving of a shareholder's notice as described
above. Such shareholder's notice shall set forth (a) as to each person whom the
shareholder proposes to nominate for election or reelection as a Trustee all
information relating to such person that is required to be disclosed in
solicitations of proxies for election of trustees/directors in an election
contest, or is otherwise required, in each case pursuant to Regulation 14A under
the Securities Exchange Act of 1934, as amended (the "Exchange Act") and Rule
14a-11 thereunder (including such person's written consent to being named in the
proxy statement as a nominee and to serving as a Trustee if elected); (b) as to
any other business that the shareholder proposes to bring before the meeting, a
brief description of the business desired to be brought before the meeting, the
reasons for conducting such business at the meeting and any material interest in
such business of such shareholder and the beneficial owner, if any, on whose
behalf the proposal is made; and (c) as to the shareholder giving the notice and
the beneficial owner, if any, on whose behalf the nomination or proposal is made
(i) the name and address of such shareholder, as they appear on the Trust's
books, and of such beneficial owner and (ii) the class/series and number of
shares of the Trust which are owned beneficially and of record by such
shareholder and such beneficial owner.
(3) Notwithstanding anything in the second sentence of paragraph (A)(2) of this Section 8 to the contrary, in the event that the number of Trustees to be elected to the Board of Trustees is increased and there is no public announcement naming all of the nominees for Trustee or specifying the size of the increased Board of Trustees made by the Trust at least one hundred days prior to the first anniversary of the preceding year's annual meeting, a shareholder's notice required by this Section 8 shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive offices of the Trust not later than the close of business on the tenth day following the day on which such public announcement is first made by the Trust.
(B) SPECIAL MEETINGS OF SHAREHOLDERS. Only such business shall be conducted by a special meeting of shareholders as shall have been brought before the meeting pursuant to the Trust's notice of meeting. Nominations of persons for election to the Board of Trustees may be made at a special meeting of shareholders at which Trustees are to be elected pursuant to the Trust's notice of meeting (1) by or at the direction of the Board of Trustees or (2) by any shareholder of the Trust who is a shareholder of record at the time of giving of notice provided for in this Section 8, who shall be entitled to vote at the meeting and who complies with the notice procedures set forth in this Section 8. In the event the Trust calls a special meeting of shareholders for the purpose of electing one or more Trustees to the Board of Trustees, any such shareholder may nominate a person or persons (as the case may be), for election to such position(s) as specified in the Trust's notice of meeting, if the shareholder's notice required by paragraph (A)(2) of this Section 8 shall be delivered to the Secretary at the principal executive offices of the Trust not earlier than the close of business on the one hundred-twentieth day prior to such special meeting and not later than the close of business on the later of the ninetieth day prior to such special meeting or the tenth day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Trustees to be elected at such meeting. In no event, shall the public announcement or adjournment of a special meeting commence a new time period for the giving of a shareholder's notice as described above.
(C) GENERAL. (1) Only such persons who are nominated in accordance with the procedures set forth in this Section 8 shall be eligible to serve as Trustees and only such business shall be conducted at a meeting of shareholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section 8. Except as otherwise provided by law, the Declaration of Trust or these By-Laws, the Chairman (or such other officer presiding at the meeting) shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made, or proposed, as the case may be, in accordance with the procedures set forth in this Section 8 and, if any proposed nomination or business is not in compliance with this Section 8, to declare that such defective proposal or nomination shall be disregarded.
(2) For purposes of this Section 8, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national news service or in a document publicly filed by the
Trust with the Securities and Exchange Commission (the "Commission") pursuant to
Section 13, 14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this Section 8, a shareholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Section 8. Nothing in this Section 8 shall be deemed to affect any rights of (a) shareholders to request inclusion of proposals in the Trust's proxy statement pursuant to Rule 14a-8 under the Exchange Act or (b) the holders of any class of preferred shares of beneficial interest to elect Trustees under specified circumstances.
ARTICLE V
Trustees Meetings
SECTION 1. MEETINGS. The Trustees may in their discretion provide for regular or stated meetings of the Trustees. Meetings of the Trustees other than regular or stated meetings shall be held whenever called by the Chairman, President or by any other Trustee at the time being in office. Any or all of the Trustees may participate in a meeting by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other at the same time, and participation by such means shall constitute presence in person at a meeting.
SECTION 2. NOTICES. Notice of regular or stated meetings need not be given. Notice of the time and place of each meeting other than regular or stated meeting shall be given by the Secretary or by the Trustee calling the meeting and shall be mailed to each Trustee at least two days before the meeting, or shall be telegraphed, cabled, or wirelessed to each Trustee at his business address or personally delivered to him at least one day before the meeting. Such notice may, however, be waived by all the Trustees. Notice of a meeting need not be given to any Trustee if a written waiver of notice, executed by him before or after the meeting, is filed with the records of the meeting, or to any Trustee who attends the meeting without protesting prior thereto or at its commencement the lack of notice to him. A notice or waiver of notice need not specify the purpose of any special meeting.
SECTION 3. CONSENTS. Any action required or permitted to be taken at any meeting of the Trustees may be taken by the Trustees without a meeting if a written consent thereto is signed by all the Trustees and filed with the records of the Trustees' meetings. A Trustee may deliver his consent to the Trust by facsimile machine or other graphic communication equipment. Such consent shall be treated as a vote at a meeting for all purposes.
SECTION 4. PLACE OF MEETINGS. The Trustees may hold their meetings within or without the Commonwealth of Massachusetts.
SECTION 5. QUORUM AND MANNER OF ACTING. A majority of the Trustees in office shall be present in person at any regular stated or special meeting of the Trustees in order to constitute a quorum for the transaction of business at such meeting and (except as otherwise required by the Declaration of Trust, by these By-Laws or by statute) the act of a majority of the Trustees present at any such meeting, at which a quorum is present, shall be the act of the Trustees. In the event that action is to be taken with respect to the death, declination, resignation, retirement, removal or incapacity of one or more Trustees, a quorum for the transaction of such business and any other business conducted at such meeting and (except as otherwise required by the Declaration of Trust, by these By-Laws or by statute) shall be a majority of the remaining Trustees then in office. In the absence of quorum, a majority of the Trustees present may adjourn the meeting from time to time until a quorum shall be present. Notice of any adjourned meeting need not be given.
ARTICLE VI
Shares of Beneficial Interest
SECTION 1. CERTIFICATES FOR SHARES OF BENEFICIAL INTEREST. Certificates for shares of beneficial interest of any class of shares of the Trust, if issued, shall be in such form as shall be approved by the Trustees. They shall be signed by, or in the name of, the Trust by the President and by the Treasurer and may, but need not be, sealed with seal of the Trust; provided, however, that where such certificate is signed by a transfer agent or a transfer clerk acting on behalf of the Trust or a registrar other than a Trustee, officer or employee of the Trust, the signature of the President or Treasurer and the seal may be facsimile. In case any officer or officers who shall have signed, or whose facsimile signature or signatures shall have been used on any such certificate or certificates, shall cease to be such officer or officers of the Trust whether because of death, resignation or otherwise, before such certificate or certificates shall have been delivered by the Trust, such certificate or certificates may nevertheless be adopted by the Trust and be issued and delivered as though the person or persons who signed such certificate or certificates or whose facsimile signatures shall have been used thereon had not ceased to be such officer or officers of the Trust.
SECTION 2. TRANSFER OF SHARES. Transfers of shares of beneficial interest of any shares of the Trust shall be made only on the books of the Trust by the owner thereof or by his attorney thereunto authorized by a power of attorney duly executed and filed with the Secretary or a transfer agent, and only upon the surrender of any certificate or certificates for such shares. The Trust shall not impose any restrictions upon the transfer of the shares of the Trust, but this requirement shall not prevent the charging of customary transfer agent fees.
SECTION 3. TRANSFER AGENT AND REGISTRAR; REGULATIONS. The Trust shall, if and whenever the Trustees shall so determine, maintain one or more transfer offices or agencies, each in the charge of a transfer agent designated by the Trustees, where the shares of beneficial interest of the Trust shall be directly transferable. The Trust shall, if and whenever the Trustees shall so determine, maintain one or more registry offices, each in the charge of a registrar designated by the Trustees, where such shares shall be registered, and no certificate for shares of the Trust in respect of which a transfer agent and/or registrar shall have been designated shall be valid unless countersigned by such transfer agent and/or registered by such registrar. The principal transfer agent may be located within or without the Commonwealth of Massachusetts and shall have charge of the stock transfer books, lists and records, which shall be kept within or without Massachusetts in an office which shall be deemed to be the stock transfer office of the Trust. The Trustees may also make such additional rules and regulations as it may deem expedient concerning the issue, transfer and registration of certificates for shares of the Trust.
SECTION 4. CLOSING OF TRANSFER BOOKS AND FIXING RECORD DATE. The Trustees may fix in advance a time which shall be not more than seventy-five days before the date of any meeting of shareholders, or the date for the payment of any dividend or the making or any distribution to shareholders or the last day on which the consent or dissent of shareholders may be effectively expressed for any purpose, as the record date for determining the shareholders having the right to notice of and to vote at such meeting, and any adjournment thereof, or the right to receive such dividend or distribution or the right to give such consent or dissent, and in such case only shareholders of record on such record date shall have such right, notwithstanding any transfer of shares on the books of the Trust after the record date. The Trustees may, without fixing such record date, close the transfer books for all or any part of such period for any of the foregoing purposes.
SECTION 5. LOST, DESTROYED OR MUTILATED CERTIFICATES. The holder of any shares of the Trust shall immediately notify the Trust of any loss, destruction or mutilation of the certificate therefor, and the Trustees may, in their discretion, cause a new certificate or certificates to be issued to him, in case of mutilation of the certificate, upon the surrender of the mutilated certificate, or, in case of loss or destruction of the certificate, upon satisfactory proof of such loss or destruction and, in any case, if the Trustees shall so determine, upon the delivery of a bond in such form and in such sum and with such surety or sureties as the Trustees may direct, to indemnify the Trust against any claim that may be made against it on account of the alleged loss or destruction of any such certificate.
SECTION 6. RECORD OWNER OF SHARES. The Trust shall be entitled to treat the person in whose name any share of the Trust is registered on the books of the Trust as the owner thereof, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person.
ARTICLE VII
Fiscal Year
SECTION 1. FISCAL YEAR. The fiscal year of the Trust shall end on August 31 of each year, provided, however, that the Trustees may from time to time change the fiscal year.
ARTICLE VIII
Seal
SECTION 1. SEAL. The Trustees may adopt a seal of the Trust which shall be in such form and shall have such inscription thereon as the Trustees may from time to time prescribe.
ARTICLE IX
Inspection of Books
SECTION 1. INSPECTION OF BOOKS. The Trustees shall from time to time determine whether and to what extent, and at what times and places, and under what conditions and regulations the accounts and books of the Trust or any of them shall be open to the inspection of the shareholders; and no shareholder shall have any right to inspect any account or book or document of the Trust except as conferred by law or authorized by the Trustees or by resolution of the shareholders.
ARTICLE X
Principal Custodian and Sub-custodians
SECTION 1. PRINCIPAL CUSTODIAN. The following provisions shall apply to the employment of the principal Custodian pursuant to the Declaration of Trust:
(A) The Trust may employ the principal Custodian:
(1) To hold securities owned by the Trust and deliver the same upon written order or oral order, if confirmed in writing, or by such electro-mechanical or electronic devices as are agreed to by the Trust and such Custodian;
(2) To receive and receipt for any moneys due to the Trust and deposit the same in its own banking department or, as the Trustees may direct, in any bank, trust company or banking institution approved by such Custodian, provided that all such deposits shall be subject only to the draft or order of such Custodian; and
(3) To disburse such funds upon orders or vouchers.
(B) The Trust may also employ such Custodian as its agent:
(1) To keep the books and accounts of the Trust and furnish clerical and accounting services; and
(2) To compute the net asset value per share in the manner approved by the Trust.
(C) All of the foregoing services shall be performed upon such basis of compensation as may be agreed upon between the Trust and the principal Custodian. If so directed by vote of the holders of a majority of the outstanding shares of Trust, the principal Custodian shall deliver and pay over all property of the Trust held by it as specified in such vote.
(D) In case of the resignation, removal or inability to serve of any such Custodian, the Trustees shall promptly appoint another bank or trust company meeting the requirements of the Declaration of Trust as successor principal Custodian. The agreement with the principal Custodian shall provide that the retiring principal Custodian shall, upon receipt of notice of such appointment, deliver the funds and property of the Trust in its possession to and only to such successor, and that pending appointment of a successor principal Custodian, or a vote of the shareholders to function without a principal Custodian, the principal Custodian shall not deliver funds and property of the Trust to the Trustees, but may deliver them to a bank or trust company doing business in Boston, Massachusetts, of its own selection, having an aggregate capital, surplus and undivided profits, as
shown by its last published report, of not less than $2,000,000, as the property of the Trust to be held under terms similar to those on which they were held by the retiring principal Custodian.
SECTION 2. SUB-CUSTODIAN. The Trust may also authorize the principal Custodian to employ one or more sub-custodians from time to time to perform such of the acts and services of the Custodian and upon such terms and conditions as may be agreed upon between the Custodian and sub-custodian.
SECTION 3. SECURITIES DEPOSITORIES, ETC. Subject to such rules, regulations and orders as the Commission may adopt, the Trust may authorize or direct the principal Custodian or any sub-custodian to deposit all or any part of the securities in or with one or more depositories or clearing agencies or systems for the central handling of securities or other book-entry systems approved by the Trust, or in or with such other persons or systems as may be permitted by the Commission, or otherwise in accordance with the Act, pursuant to which all securities of any particular class or series of any issuer deposited within the system are treated as fungible and may be transferred or pledged by bookkeeping entry without physical delivery of such securities, provided that all such deposits shall be subject to withdrawal only upon the order of the Trust or the principal Custodian or the sub-custodian. The Trust may also authorize the deposit in or with one or more eligible foreign custodians (or in or with one or more foreign depositories, clearing agencies or systems for the central handling of securities) of all or part of the Trust's foreign assets, securities, cash and cash equivalents in amounts reasonably necessary to effect the Trust's foreign investment transactions, in accordance with such rules, regulations and orders as the Commission may adopt.
ARTICLE XI
Limitation of Liability and Indemnification
SECTION 1. LIMITATION OF LIABILITY. Provided they have exercised reasonable care and have acted under the reasonable belief that their actions are in the best interest of the Trust, the Trustees shall not be responsible for or liable in any event for neglect or wrongdoing of them or any officer, agent, employee or investment adviser of the Trust, but nothing contained in the Declaration of Trust or herein shall protect any Trustee against any liability to which he would otherwise be subject by reason of wilful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office.
SECTION 2. INDEMNIFICATION OF TRUSTEES AND OFFICERS. The Trust shall indemnify each person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or has been a Trustee, officer, employee or agent of the Trust, or is or has been serving at the request of the Trust as a Trustee, director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding, provided that:
(a) such person acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Trust,
(b) with respect to any criminal action or proceeding, he had no reasonable cause to believe his conduct was unlawful,
(c) unless ordered by a court, indemnification shall be made only as authorized in the specific case upon a determination that indemnification of the Trustee, officer, employee or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in subparagraphs (a) and (b) above and (e) below, such determination to be made based upon a review of readily available facts (as opposed to a full trial-type inquiry) by (i) vote of a majority of the Disinterested Trustees acting on the matter (provided that a majority of the Disinterested Trustees then in office act on the matter) or (ii) by independent legal counsel in a written opinion,
(d) in the case of an action or suit by or in the right of the Trust to procure a judgment in its favor, no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his duty to the Trust unless and only to the extent that the court in which such action or suit is brought, or a court of equity in the county in which the Trust has its principal office, shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, he is fairly and reasonably entitled to indemnify for such expenses which such court shall deem proper, and
(e) no indemnification or other protection shall be made or given to any Trustee or officer of the Trust against any liability to the Trust or to its security holders to which he would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office.
Expenses (including attorneys' fees) incurred with respect to any claim, action, suit or proceeding of the character described in the preceding paragraph shall be paid by the Trust in advance of the final disposition thereof upon receipt of an undertaking by or on behalf of such person to repay such amount unless it shall ultimately be determined that he is entitled to be indemnified by the Trust as authorized by this Article, provided that either:
(1) such undertaking is secured by a surety bond or some other appropriate security provided by the recipient, or the Trust shall be insured against losses arising out of any such advances; or
(2) a majority of the Disinterested Trustees acting on the matter (provided that a majority of the Disinterested Trustees act on the matter) or an independent legal counsel in a written opinion shall determine, based upon a review of readily available facts (as opposed to a full trial-type inquiry), that there is reason to believe that the recipient ultimately will be found entitled to indemnification.
As used in this Section 2, a "Disinterested Trustee" is one who is not (i) an "Interested Person," as defined in the Act, of the Trust (including anyone who has been exempted from being an "Interested Person" by any rule, regulation, or order of the Commission), or (ii) involved in the claim, action, suit or proceeding.
The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Trust, or with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful.
SECTION 3. INDEMNIFICATION OF SHAREHOLDERS. In case any shareholder or former shareholder shall be held to be personally liable solely by reason of his being or having been a shareholder and not because of his acts or omissions or for some other reason, the shareholder or former shareholder (or his heirs, executors, administrators or other legal representatives, or in the case of a corporation or other entity, its corporate or other general successor) shall be entitled out of the Trust estate to be held harmless from and indemnified against all loss and expense arising from such liability. The Trust shall, upon request by the shareholder, assume the defense of any claim made against any shareholder for any act or obligation of the Trust and satisfy any judgment thereon. A holder of shares of a series shall be entitled to indemnification hereunder only out of assets allocated to that series.
ARTICLE XII
Report to Shareholders
SECTION 1. REPORTS TO SHAREHOLDERS. The Trustees shall at least semi-annually transmit by written, electronic, computerized or other alternative means to the shareholders a written financial report of the transactions of the Trust including financial statements which shall at least annually be certified by independent public accountants.
ARTICLE XIII
Amendments
SECTION 1. AMENDMENTS. These By-Laws may be amended at any meeting of the Trustees by a vote of a majority of the Trustees then in office; provided, however, that any provision of Article XI may be amended only by a two-thirds vote.
Dated: July 10, 2003
AMENDED AND RESTATED
TRANSFER AGENCY AND SERVICES AGREEMENT
The AGREEMENT dated as of December 21, 1998, between each registered
investment company listed on Exhibit 1 hereof (as may be amended from time to
time) (each a "Fund"), each being a voluntary association commonly known as a
"Massachusetts business trust" having its principal place of business at 24
Federal Street, Boston, MA 02110, and PFPC Inc. (formerly, First Data Investor
Services Group, Inc.) (the "Transfer Agent" or "PFPC"), a Massachusetts
corporation with principal offices at 4400 Computer Drive, Westboro,
Massachusetts 01581, as amended (the "Original Agreement"), is hereby amended
and restated by this AMENDED AND RESTATED TRANSFER AGENCY AND SERVICES
AGREEMENT, dated as of June 16, 2003 (the "Agreement").
WHEREAS, the parties hereto desire to enter into this Agreement in order to
(i) amend Schedule B attached to the Original Agreement, and (ii) amend and
restate the Original Agreement in its entirety; and
WHEREAS, each Fund desires to retain PFPC as its transfer agent, dividend disbursing agent and agent in connection with certain other activities, and PFPC desires to provide such services on the terms herein.
NOW, THEREFORE, in consideration of the mutual covenants and promises hereinafter set forth, each Fund and PFPC agree as follows:
1. DEFINITIONS. Whenever used in this Agreement, the following words and phrases, unless the context otherwise requires, shall have the following meanings:
(a) "Articles of Organization" shall mean the Articles of Organization, Declaration of Trust or other charter document of the Fund, as the same may be amended from time to time;
(b) "Authorized Person" shall be deemed to include any person duly authorized to give Oral Instructions or Written Instructions on behalf of the Fund as indicated in writing to PFPC from time to time;
(c) "Commission" shall mean the Securities and Exchange Commission;
(d) "Counsel" shall mean (i) outside legal counsel of the Fund in its capacity as such and (ii) outside legal counsel of PFPC if such counsel has been specifically authorized by an Authorized Person of the Fund to render its opinion on the matter that has arisen;
(e) "Custodian" refers to the custodian and any sub-custodian of all securities and other property which the Fund may from time to time deposit, or cause to be deposited or held under the name or account of such custodian duly engaged by the Fund;
(f) "Trustees" or "Board of Trustees" refers to the duly elected Trustees or Directors of the Fund;
(g) "Oral Instructions" shall mean instructions, other than Written Instructions, actually received by PFPC from a person reasonably believed by PFPC to be an Authorized Person;
(h) "Prospectus" shall mean the Fund's current prospectus and statement of additional information, including any supplements thereto, relating to the registration of the Fund's Shares under the Securities Act of 1933, as amended, and the 1940 Act;
(i) "Shares" refers to the shares of beneficial interest or common stock of the Fund (which may be divided into classes);
(j) "Shareholder" means a record owner of Shares;
(k) "Written Instructions" means any written communication signed by an Authorized Person and actually received by PFPC, and shall include manually executed originals and authorized electronic transmissions of such originals (including telefacsimile); and
(l) The "1940 Act" refers to the Investment Company Act of 1940 and the rules and regulations promulgated thereunder, all as amended from time to time.
2. APPOINTMENT OF PFPC. The Fund hereby appoints PFPC as transfer agent for its Shares and as shareholder servicing agent for the Fund, and PFPC accepts such appointment and agrees to perform the duties hereinafter set forth.
3. DUTIES OF PFPC.
(a) PFPC shall be responsible for administering and/or performing transfer agent functions; for acting as service agent in connection with dividend and distribution functions; and for performing shareholder account and administrative agent functions in connection with the issuance and transfer (including coordination with the Custodian) of Shares. Such duties are described in the written Schedule of Duties of PFPC annexed hereto as Schedule A. PFPC shall also act in accordance with the terms of the Prospectus of the Fund, applicable law and the procedures established from time to time between PFPC and the Fund.
(b) PFPC shall record the issuance of Shares and maintain pursuant to Rule 17Ad-10(e) under the Securities Act of 1934 a record of the total number of Shares of the Fund which are authorized (with due authorization based upon data provided by the Fund), issued and outstanding. PFPC shall provide the Fund on a regular basis with such information but shall have no obligation, when recording the issuance of Shares, to monitor the legality of issuance of Shares or to take cognizance of any laws relating to the proper issue or sale of such Shares, which functions shall be the sole responsibility of the Fund (or its administrator).
(c) PFPC shall serve as agent for Shareholders pursuant to the Fund's dividend reinvestment plan, as amended from time to time.
(d) PFPC acknowledges that the Funds' administrator, Eaton Vance Management ("EVM"), currently employs personnel to provide shareholders with, among other things, information regarding their accounts and transaction procedures of PFPC. PFPC acknowledges that EVM is not responsible for transfer agency services to the Fund. In the event PFPC determines that a particular transaction requested by a shareholder cannot be processed because it is not permitted by law or procedures established hereby but EVM or Fund personnel desire the transaction
to be so processed, then PFPC shall nonetheless process the transaction if EVM provides a standard form indemnification to PFPC. At the request of EVM, PFPC shall provide a written explanation for its decision.
4. RECORDKEEPING, AND OTHER INFORMATION.
(a) PFPC shall create and maintain all records required of it pursuant to its duties hereunder and as set forth in Schedule A in accordance with all applicable laws, rules and regulations, including records required by Section 31(a) of the 1940 Act and the rules thereunder. Where applicable, such records shall be maintained by PFPC for the periods and the places required by Rule 31a-2 under the 1940 Act.
(b) PFPC agrees that all such records prepared or maintained by PFPC relating to the services to be performed by PFPC hereunder are the property of the Fund, and will be surrendered promptly to the Fund on and in accordance with the Fund's request.
(c) In case of any requests or demands for the inspection of Shareholder records of the Fund by third parties, PFPC will endeavor to notify the Fund of such request and secure Written Instructions as to the handling of such request. PFPC reserves the right, however, to exhibit the Shareholder records to any person whenever it is required to do so by law.
5. FUND INSTRUCTIONS - LIMITATIONS OF LIABILITY.
(a) PFPC will have no liability when acting in conformance with Written or Oral Instructions reasonably believed to have been executed or orally communicated by an Authorized Person and will not be held to have any notice of any change of authority of any person until receipt of a Written Instruction thereof from the Fund. PFPC will also have no liability when processing Share certificates which it reasonably believes them to bear the proper manual or facsimile signatures of the Officers of the Fund and the proper countersignature of PFPC.
(b) At any time, PFPC may apply to any Authorized Person of the Fund for Written Instructions and may, after obtaining prior oral or written approval by an Authorized Person, seek advise from Counsel with respect to any matter arising in connection with this Agreement, and it shall not be liable for any action taken or not taken or suffered by it in good faith in accordance with such Written Instructions or in accordance with this opinion of Counsel. Written Instructions requested by PFPC will be provided by the Fund within a reasonable period of time. In addition, PFPC, its Officers, agents or employees, shall accept Oral Instructions or Written Instructions given to them by any person representing or acting on behalf of the Fund only if said representative is known by PFPC, or its Officers, agents or employees, to be an Authorized Person. PFPC shall have no duty or obligation to inquire into, nor shall PFPC be responsible for, the legality of any act done by it upon the request or direction of an Authorized Person.
(c) Notwithstanding any of the foregoing provisions of this Agreement, PFPC shall be under no duty or obligation to inquire into, and shall not be liable for: (i) the legality of the issuance or sale of any Shares or the sufficiency of the amount to be received therefor; (ii) the propriety of the amount per share to be paid on any redemption; (iii) the legality of the declaration of any dividend by the Trustees, or the legality of the issuance of any Shares in payment of any dividend; or (iv) the legality of any recapitalization or readjustment of the Shares.
(d) PFPC will not be liable or responsible for delays or errors by reason of circumstances beyond its control, including acts of civil or military authority, national emergencies, fire, mechanical breakdown beyond its control, flood, acts of God, insurrection, war, riots, and loss of communication or power
supply, provided, however, that PFPC shall have acted in accordance with its Disaster Recovery Plan previously provided to the Eaton Vance Group of Funds, which may be amended from time to time by agreement of the Fund and PFPC.
6. COMPENSATION.
(a) The Fund will compensate PFPC for the performance of its obligations hereunder in accordance with the fees set forth in the written schedule of fees annexed hereto as Schedule B and incorporated herein.
(b) Out-of-pocket disbursements shall mean the items specified in the written schedule of out-of-pocket charges annexed hereto as Schedule C and incorporated herein. Reimbursement by the Fund for such out-of-pocket disbursements incurred by PFPC in any month shall be made as soon as practicable after the receipt of an itemized bill from PFPC. Reimbursement by the Fund for expenses other than those specified in Schedule C shall be upon mutual agreement of the parties as provided in Schedule C.
(c) PFPC will bill the Fund as soon as practicable after the end of each calendar month, and said billings will be detailed in accordance with Schedule B. The Fund will promptly pay to PFPC the amount of such billing.
(d) The parties agree to review at least annually at a Trustees' meeting of the Fund the services provided, cost thereof, and fees and expenses charged, including comparative information regarding the transfer agency industry. The compensation agreed to hereunder may be adjusted from time to time by attaching to this Agreement a revised Schedule, dated and executed by the parties hereto.
7. DOCUMENTS. In connection with the appointment of PFPC, the Fund shall upon request, on or before the date this Agreement goes into effect, but in any case within a reasonable period of time for PFPC to prepare to perform its duties hereunder, furnish PFPC with the following documents:
(a) A certified copy of the Articles of Organization and By-Laws of the Fund, as amended;
(b) A copy of the resolution of the Trustees authorizing the execution and delivery of this Agreement;
(c) If applicable, a specimen of the certificate for Shares of the Fund in the form approved by the Trustees, with a certificate of an Officer of the Fund as to such approval;
(d) All account application forms and other documents relating to Shareholder accounts or to any plan, program or service offered by the Fund; and
(e) With respect to any Fund previously serviced by another transfer agent, to the extent practicable a certified list of Shareholders of the Fund with the name, address and taxpayer identification number of each Shareholder, and the number of shares of the Fund held by each, certificate numbers and denominations (if any certificates have been issued), lists of any accounts against which stop transfer orders have been placed, together with the reasons therefor, and the number of Shares redeemed by the Fund.
8. REPRESENTATIONS AND WARRANTIES.
(a) PFPC represents and warrants to the Fund that:
(i) it is a corporation duly organized, existing and in good standing under the laws of the Commonwealth of Massachusetts;
(ii) it is empowered under applicable laws and by its Articles of Incorporation and By-Laws to enter into and perform this Agreement;
(iii) all requisite corporate proceedings have been taken to authorize it to enter into this Agreement;
(iv) PFPC will maintain its registration as a transfer agent as provided in
Section 17A(c) of the Securities Act of 1934, as amended, (the "1934 Act") and
shall comply with all applicable provisions of Section 17A of the 1934 Act and
the rules promulgated thereunder, as may be amended from time to time, including
rules relating to record retention;
(v) it has and will continue to have access to the necessary facilities, equipment and personnel to perform its duties and obligations under this Agreement;
(vi) to the best of its knowledge, the various procedures and systems which PFPC has implemented or will implement with regard to safeguarding from loss or damage attributable to fire, theft or any other cause (including provision for 24 hours-a-day restricted access) of the Fund's records and other data and PFPC's records, data, equipment, facilities and other property used in the performance of its obligations hereunder are adequate and that it will make such changes therein from time to time as in its judgment are required for the secure performance of its obligations hereunder. The parties shall review such systems and procedures on a periodic basis; and
(vii) it maintains adequate insurance to enable it to continue its operations as described herein. PFPC shall notify the Fund should any of its insurance coverage as set forth in Schedule F attached hereto be changed for any reason. Such notification shall include the date of change and reason or reasons therefor. PFPC shall notify the Fund of any claims against it whether or not they may be covered by insurance and shall notify the Fund from time to time as may be appropriate, and at lest within 30 days following the end of each fiscal year of PFPC, of the total outstanding claims made by PFPC under its insurance coverage.
(b) The Fund represents and warrants to PFPC that:
(i) it is duly organized, existing and in good standing under the laws of the jurisdiction in which it is organized;
(ii) it is empowered under applicable laws and by its Articles of Incorporation and By-Laws to enter into this Agreement;
(iii) all corporate proceedings required by said Articles of Incorporation, By-Laws and applicable laws have been taken to authorize it to enter into this Agreement;
(iv) a registration statement under the Securities Act of 1933, as amended, and/or the 1940 Act is currently effective and will remain effective, and all
appropriate state securities law filings have been made and will continue to be made, with respect to all Shares of the Fund being offered for sale; and
(v) all outstanding Shares are validly issued, fully paid and non-assessable and when Shares are hereafter issued in accordance with the terms of the Fund's Articles of Incorporation and its Prospectus, such Shares when issued shall be validly issued, fully paid and non-assessable.
9. DUTY OF CARE AND INDEMNIFICATION.
(a) Each party shall fulfill its obligations hereunder by acting with reasonable care and in good faith;
(b) The Fund will indemnify PFPC against and hold it harmless from any and all losses, claims, damages, liabilities or expenses (including reasonable counsel fees and expenses) resulting from any claim, demand, action or suit not resulting from the bad faith or negligence of PFPC, and arising out of, or in connection with, its duties on behalf of the Fund hereunder. In addition, the Fund will indemnify PFPC against and hold it harmless from any and all losses, claims, damages, liabilities or expenses (including reasonable counsel fees and expenses) resulting from any claim, demand, action or suit as a result of : (i) any action taken in accordance with Written or Oral Instructions, or share certificates reasonably believed by PFPC to be genuine and to be signed, countersigned or executed, or orally communicated by an Authorized Person; (ii) any action taken in accordance with written or oral advice reasonably believed by PFPC to have been given by counsel for the Fund; or (iii) any action taken as a result of any error or omission in any record which PFPC had no reasonable basis to believe was inaccurate (including but not limited to magnetic tapes, computer printouts, hard copies and microfilm copies) and was delivered, or caused to be delivered, by the Fund to PFPC in connection with this Agreement;
(c) PFPC will indemnify the Fund against and hold it harmless from any and all losses, claims, damages, liabilities or expenses (including reasonable counsel fees and expenses) resulting from any claim, demand, action or suit not resulting from the bad faith or negligence of the Fund, or arising out of, or in connection with, PFPC's breach of this Agreement;
(d) In any case in which a party may be asked to indemnify or hold the other party harmless, the indemnifying party shall be advised of all pertinent facts concerning the situation in question and the party seeking indemnification shall notify the indemnifying party promptly concerning any situation which presents or appears likely to present a claim for indemnification. The indemnifying party shall have the option to defend against any claim which may be the subject of this indemnification and, in the event that the indemnifying party so elects, such defense shall be conducted by counsel chosen by the indemnifying party, and thereupon the indemnifying party shall take over complete defense of the claim and the party seeking indemnification shall sustain no further legal or other expenses in such situation for which it seeks indemnification. The party seeking indemnification will not confess any claim or make any compromise in any case in which the indemnifying party will be asked to provide indemnification, except with the indemnifying party's prior written consent; and
(e) The obligations of the parties hereto under this Section shall survive the termination of this Agreement.
10. TERMS AND TERMINATION.
(a) Either party may terminate this Agreement without cause on or after June 16, 2004 by giving 180 days written notice to the other party;
(b) Either party may terminate this Agreement if the other party has materially breached the Agreement by giving the defaulting party 30 days written notice and the defaulting party has failed to cure the breach within 60 days thereafter; and
(c) Any written notice of termination shall specify the date of termination. The Fund shall provide notice of the successor transfer agent within 30 days of the termination date. Upon termination, PFPC will deliver to such successor a certified list of shareholders of the Fund (with names, addresses and taxpayer identification of Social Security numbers and such other federal tax information as PFPC may be required to maintain), an historical record of the account of each shareholder and the status thereof, and all other relevant books, records, correspondence, and other data established or maintained by the books, records, correspondence, and other data established or maintained by PFPC under this Agreement in the form reasonably acceptable to the Fund, and will cooperate in the transfer of such duties and responsibilities, including provisions for assistance from PFPC's personnel in the establishment of books, records and other data by such successor or successors. PFPC shall be entitled to its out-of-pocket expenses set forth in Schedule C incurred in the delivery of such records net of the fees owed to PFPC for the last month of service if this Agreement is terminated pursuant to paragraph (b) immediately above.
(d) If a majority of the non-interested trustees of any of the Funds determines, in the exercise of their fiduciary duties and pursuant to their reasonable business judgment after consultation with Eaton Vance Management, that the performance of PFPC has been unsatisfactory or adverse to the interests of shareholders of any Fund or Funds or that the terms of the Agreement are no longer consistent with publicly available industry standards, then the Fund or Funds shall give written notice to PFPC of such determination and PFPC shall have 60 days (or such longer period if the non-interested Trustees so determine) to (1) correct such performance to the satisfaction of the non-interested trustees or (2) renegotiate terms which are satisfactory to the non-interested trustees of the Funds. If the conditions of the preceding sentence are not met then the Fund or Funds may terminate this Agreement on sixty (60) days written notice provided, however, that the provisions of Paragraph 11(c) shall remain outstanding for an additional 30 days if necessary to transfer records to a successor transfer agent.
(e) If the Board of Trustees hereafter establishes and designates a new Fund, PFPC agrees that it will act as transfer agent and shareholder servicing agent for such new Fund in accordance with the terms set forth herein. The Trustees shall cause a written notice to be sent to PFPC to the effect that it has established a new Fund and that it appoints PFPC as transfer agent and shareholder servicing agent for the new Fund. Such written notice must be received by PFPC in a reasonable period of time prior to the commencement of operations of the new Fund to allow PFPC, in the ordinary course of its business, to prepare to perform its duties.
11. CONFIDENTIALITY OF RECORDS.
(a) PFPC agrees to treat all records and other information relative to the Fund and its prior, present or potential Shareholders in confidence except that, after prior notification to and approval in writing by the Fund, which approval shall not be unreasonably withheld and may not be withheld where PFPC may be exposed to civil or criminal contempt proceedings for failure to comply, when requested to divulge such information by duly constituted authorities, or when so requested by the Fund.
(b) PFPC shall make available during regular business hours all records and other data created and maintained pursuant to this Agreement for reasonable audit and inspection by the Fund, or any person retained by the Fund. Upon reasonable notice by the Fund, PFPC shall make available during regular business hours its facilities and premises employed in connection with its performance of this Agreement for reasonable visitation by the Fund, or any person retained by the Fund, to inspect its operating capabilities or for any other reason.
(c) The Fund agrees to keep all records and information of PFPC (including trade secrets) in confidence, unless such is required to be divulged pursuant to law or where the Fund may be exposed to or criminal contempt proceedings for failure to comply. PFPC acknowledges that such records and information may be disclosed to Eaton Vance Management personnel and to Fund auditors consistent with the responsibilities of such parties, and in such cases the Fund shall take reasonable precautions to safeguard the confidentiality of such data to the extent practicable.
12. AMENDMENT, ASSIGNMENT AND SUBCONTRACTING.
(a) This Agreement may not be amended or modified in any manner except by a written agreement executed by both parties.
(b) This Agreement shall extend to and shall be binding upon the parties hereto, and their respective successors and assigns; provided, however, that any assignment of this Agreement (as defined in the 1940 Act) to an entity shall require the written consent of the other party.
(c) The Fund agrees that PFPC may, in its discretion, subcontract for certain of the services described under this Agreement or the Schedules hereto; provided that the appointment of any such Agent shall not relieve PFPC of its responsibilities hereunder.
13. USE OF TRADE NAMES.
(a) PFPC shall approve all reasonable uses of its name which merely refer in accurate terms to its appointment hereunder or which are required by the Commission or a state securities commission. Notwithstanding the foregoing, any reference to PFPC shall include a statement to the effect that it is a wholly owned subsidiary of The PNC Financial Services Group, Inc..
(b) PFPC shall not use the name of the Fund or material relating to the Fund on any documents or forms for other than internal use in a manner not approved prior thereto in writing; provided, that the Fund shall approve all reasonable uses of its name which merely refer in accurate terms to the appointment of PFPC or which are required by the Commission or a state securities commission.
14. NOTICE. Any notice or other instrument authorized or required by this Agreement to be given in writing to the Fund or PFPC, shall be sufficiently given if addressed to that party and received by it at its office set forth below or at such other place as it may from time to time designate in writing.
To the Fund:
The Eaton Vance Building 255 State Street
Boston, MA 02109
Attention: Fund Secretary
To PFPC:
PFPC Inc.
4400 Computer Drive
Westboro, Massachusetts 01581
Attn: President
with a copy to PFPC's General Counsel
15. GOVERNING LAW/VENUE. The laws of the Commonwealth of Massachusetts, excluding the laws on conflicts of laws, shall govern the interpretation, validity, and enforcement of this agreement. All actions arising from or related to this Agreement shall be brought in the state and federal courts sitting in the City of Boston, and the parties hereby submit themselves to the exclusive jurisdiction of those courts.
16. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original; but such counterparts shall, together, constitute only one instrument.
17. CAPTIONS. The captions of this Agreement are included for convenience or reference only and in no way define or delimit any of the provisions hereof or otherwise affect their construction or effect.
18. SEVERABILITY. The parties intend every provision of this Agreement to be severable. If a court of competent jurisdiction determines that any term or provision is illegal or invalid for any reason, the illegality or invalidity shall not affect the validity of the remainder of this Agreement. In such case, the parties shall in good faith modify or substitute such provision consistent with the original intent of the parties. Without limiting the generality of this paragraph, if a court determines that any remedy stated in this Agreement failed of its essential purpose, then all provisions of this Agreement, including the limitations on liability and exclusion of damages, shall remain fully effective.
19. LIABILITY OF TRUSTEES, OFFICERS AND SHAREHOLDERS. The execution and delivery of this Agreement have been authorized by the Trustees of the Fund and signed by an authorized Officer of the Fund, acting as such, and neither such authorization by such Trustees nor such execution and delivery by such Officer shall be deemed to have been made by any of them individually or to impose any liability on any of them personally, and the obligations of this Agreement are not binding upon any of the Trustees or shareholders of the Fund, but bind only the property of the Fund. No class of the Fund shall be liable for the obligations of another class.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective Officers thereunder duly authorized as of the day and year first above written.
PFPC Inc. Each of the Funds listed on Exhibit 1, severally and not jointly
By: /s/ Michael G. McCarthy By: /s/ James L. O'Connor
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Name: Michael G. McCarthy Name: James L. O'Connor
Title: Senior Vice President and Title: Treasurer
General Manager
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DUTIES OF PFPC
1. SHAREHOLDER INFORMATION. PFPC shall maintain a record of the number of Shares held by each Shareholder of record which shall include name, address, taxpayer identification and which shall indicate whether such Shares are held in certificates or uncertificated form.
2. SHAREHOLDER SERVICES. PFPC will investigate all shareholder inquiries relating to Shareholder accounts and will answer all communications from Shareholders and others with respect to its duties hereunder. PFPC shall keep records of all Shareholder correspondence and replies thereto, and of lapse of time between the receipt of such correspondence and the mailing of such replies.
3. SHARE CERTIFICATES.
(a) At the expense of the Fund, the Fund shall supply PFPC with an adequate supply of blank share certificates to meet PFPC requirements therefor. Such Share certificates shall be properly signed by facsimile. The Fund agrees that, notwithstanding the death, resignation, or removal of any officer of the Fund whose signature appears on such certificates, PFPC or its agent may continue to countersign certificates which bear such signatures until otherwise directed by Written Instructions.
(b) PFPC shall issue replacement Share certificates in lieu of certificates which have been lost, stolen or destroyed, upon receipt by PFPC of properly executed affidavits and lost certificate bonds, in form satisfactory to PFPC, with the Fund and PFPC as obligees under the bond.
(c) PFPC shall also maintain a record of each certificate issued, the number of Shares represented thereby and the Shareholder of record. With respect to Shares held in open accounts or uncertificated form (i.e., no certificate being issued with respect thereto) PFPC shall maintain comparable records of the Shareholders thereof, including their names, addresses and taxpayer identification numbers. PFPC shall further maintain a stop transfer record on lost and/or replaced certificates.
4. MAILING COMMUNICATIONS TO SHAREHOLDERS; PROXY MATERIALS. PFPC will address and mail to Shareholders of the Fund, all reports to Shareholders, dividend and distribution notices and proxy material for the Fund's meetings of Shareholders, and such other communications as the Fund may authorize. In connection with meetings of Shareholders, PFPC will prepare Shareholder lists, mail and certify as to the mailing of proxy materials, process and tabulate returned proxy cards, report on proxies voted prior to meetings, act as inspector of election at meetings and certify Shares voted at meetings.
5. TRANSFER OF SHARES.
(a) PFPC shall process all requests to transfer Shares in accordance with the transfer procedures set forth in the Fund's Prospectus.
(b) PFPC will transfer Shares upon receipt of Written Instructions or otherwise pursuant to the Prospectus and Share certificates, if any, properly endorsed for transfer, accompanied by such documents as PFPC reasonably may deem necessary.
(c) PFPC reserves the right to refuse to transfer Shares until it is satisfied that the endorsement on the instructions is valid and genuine. PFPC also reserves the right to refuse to transfer Shares until it is satisfied that the requested transfer is legally authorized, and it shall incur no liability
for the refusal, in good faith, to make transfers which PFPC in its good judgment, deems improper or unauthorized, or until it is reasonably satisfied that there is no basis to any claims adverse to such transfer.
7. DIVIDENDS.
(a) Upon the declaration of each dividend and each capital gains distribution by the Board of Directors of the Fund with respect to Shares of the Fund, the Fund shall furnish or cause to be furnished to PFPC Written Instructions setting forth the date of the declaration of such dividend or distribution, the ex-dividend date, the date of payment thereof, the record date as of which Shareholders entitled to payment shall be determined, the amount payable per Share to the Shareholders of record as of that date, the total amount payable on the payment date and whether such dividend or distribution is to be paid in Shares at net asset value.
(b) On or before the payment date specified in such resolution of the Board of Directors, the Fund will provide PFPC with sufficient cash to make payment to the Shareholders of record as of such payment date.
(c) If PFPC does not receive sufficient cash from the Fund to make total dividend and/or distribution payments to all Shareholders of the Fund as of the record date, PFPC will, upon notifying the Fund, withhold payment to all Shareholders of record as of the record date until sufficient cash is provided to PFPC.
8. MISCELLANEOUS.
In addition to and neither in lieu nor in contravention of the services set forth above, PFPC shall perform all the customary services of a transfer agent registrar dividend disbursing agent and agent of the dividend reinvestment plan as described herein consistent with those requirements in effect as at the date of this Agreement. The detailed definition, frequency, limitations and associated costs (if any) set out in the attached fee schedule, include but are not limited to: maintaining all Shareholder accounts, preparing Shareholder meeting lists, mailing proxies, tabulating proxies, mailing Shareholder reports to current Shareholders, withholding taxes on U.S. resident and non-resident alien accounts where applicable, preparing and filing U.S. Treasury Department Forms 1099 and other appropriate forms required with respect to dividends and distributions by federal authorities for all registered Shareholders.
FEE SCHEDULE
1. INITIAL PUBLIC OFFERING FEES:
IPO Project Administration Fee: $3,000 per Fund
IPO Project Administration Fee covers:
Issuance of up to 1,000 certificates - Issuance of certificates in excess of 1,000 to be billed at $2.00 per certificate
Administration coordination with IPO client, underwriter and legal representatives
Attendance at closing (out of pocket expenses associated with such attendance will be billed as incurred)
Set-up, testing and implementation of electronic settlement and delivery of shares through The Depository Trust Company
2. OVER-ALLOTMENT FEE: $1,000 per Fund
Applies in the event that the underwriters elect to exercise an over-allotment option which requires a second closing
3. STANDARD SERVICE FEE:
(a) The following standard service fees shall apply with respect to the shares offered by:
Eaton Vance Insured Municipal Bond Fund; Eaton Vance Insured California Municipal Bond Fund; Eaton Vance Insured New York Municipal Bond Fund; and Eaton Vance Limited Duration Income Fund.
Annual Service Fee: $15.00 Per Account
Monthly Minimum Fee: $5,000.00
(b) The following standard service fees shall apply with respect to the shares offered by:
Eaton Vance Municipal Income Trust; Eaton Vance California Municipal Income Trust; Eaton Vance Florida Municipal Income Trust; Eaton Vance Massachusetts Municipal Income Trust; Eaton Vance Michigan Municipal Income Trust; Eaton Vance New Jersey Municipal Income Trust; Eaton Vance New York Municipal Income Trust; Eaton Vance Ohio Municipal Income Trust; and Eaton Vance Pennsylvania Municipal Income Trust.
Each Fund shall pay 9 basis points annually on the average daily net assets, paid monthly, in arrears, with respect to the shares offered by the Fund.
(c) The following standard service fees shall apply with respect to the shares offered by:
Eaton Vance Insured Municipal Bond Fund II; Eaton Vance Insured California Municipal Bond Fund II; Eaton Vance Insured Florida Municipal Bond Fund; Eaton Vance Insured Massachusetts Municipal Bond Fund; Eaton Vance Insured Michigan Municipal Bond Fund; Eaton Vance Insured New Jersey Municipal Bond Fund; Eaton Vance Insured New York Municipal Bond Fund II; Eaton Vance Insured Ohio Municipal Bond Fund; and Eaton Vance Insured Pennsylvania Municipal Bond Fund.
Each Fund shall pay 7.5 basis points annually on the average daily net assets, paid monthly, in arrears, with respect to the shares offered by the Fund.
After the one year anniversary of the effective date of this Agreement, PFPC may adjust the above fees once per calendar year, upon thirty (30) days prior written notice in an amount not to exceed the cumulative percentage increase in the Consumer Price Index for All Urban Consumers (CPI-U) U.S. City Average, All items (unadjusted) - (1982-84=100), published by the U.S. Department of Labor since the last such adjustment in the Fund's monthly fees (or the Effective Date absent a prior such adjustment).
OUT-OF-POCKET EXPENSES
The Fund shall reimburse PFPC monthly for applicable out-of-pocket expenses, including, but not limited to the following items:
- Microfiche/microfilm production
- Magnetic media tapes and freight
- Printing costs, including certificates, envelopes, checks and
stationery
- Postage (bulk, pre-sort, ZIP+4, barcoding, first class) direct
pass through to the Fund
- Due diligence mailings
- Telephone and telecommunication costs, including all lease,
maintenance and line costs
- Ad hoc reports
- Proxy solicitations, mailings and tabulations
- Daily & Distribution advice mailings
- Shipping, Certified and Overnight mail and insurance
- Year-end form production and mailings
- Terminals, communication lines, printers and other equipment and
any expenses incurred in connection with such terminals and lines
- Duplicating services
- Courier services
- Incoming and outgoing wire charges
- Federal Reserve charges for check clearance
- Overtime, as approved by the Fund
- Temporary staff, as approved by the Fund
- Travel and entertainment, as approved by the Fund
- Record retention, retrieval and destruction costs, including, but
not limited to exit fees charged by third party record keeping
vendors
- Third party audit reviews
- Ad hoc SQL time
Insurance
- Such other miscellaneous expenses reasonably incurred by PFPC in
performing its duties and responsibilities under this Agreement.
The Fund agrees that postage and mailing expenses will be paid on the day of or prior to mailing as agreed with PFPC. In addition, the Fund will promptly reimburse PFPC for any other unscheduled expenses incurred by PFPC whenever the Fund and PFPC mutually agree that such expenses are not otherwise properly borne by PFPC as part of its duties and obligations under the Agreement.
Exhibit 1
LIST OF FUNDS
Eaton Vance Municipal Income Trust Eaton Vance California Municipal Income Trust Eaton Vance Florida Municipal Income Trust Eaton Vance Massachusetts Municipal Income Trust Eaton Vance Michigan Municipal Income Trust Eaton Vance New Jersey Municipal Income Trust Eaton Vance New York Municipal Income Trust Eaton Vance Ohio Municipal Income Trust Eaton Vance Pennsylvania Municipal Income Trust
Eaton Vance Insured Municipal Bond Fund Eaton Vance Insured California Municipal Bond Fund Eaton Vance Insured New York Municipal Bond Fund
Eaton Vance Insured Municipal Bond Fund II Eaton Vance Insured California Municipal Bond Fund II Eaton Vance Insured Florida Municipal Bond Fund Eaton Vance Insured Massachusetts Municipal Bond Fund Eaton Vance Insured Michigan Municipal Bond Fund Eaton Vance Insured New Jersey Municipal Bond Fund Eaton Vance Insured New York Municipal Bond Fund II Eaton Vance Insured Ohio Municipal Bond Fund Eaton Vance Insured Pennsylvania Municipal Bond Fund Eaton Vance Limited Duration Income Fund
Dated: June 16, 2003