SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [X]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Medical Research Investment Fund, Inc.
(Name of Registrant as Specified in Its Charter)
Eric G. Woodbury
Eaton Vance Management
24 Federal Street
Boston, MA 02110
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(l)(ii), 14a-6(i)(1), 14a-6(j)(2)
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transactions applies:
3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11:(1)
4) Proposed maximum aggregate value of transaction:
[X] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid: $125.00
2) Form, Schedule or Registration Statement No.: Pre 14A
3) Filing Party:
4) Date Filed: July 23, 1996
(1) Set forth the amount on which the filing fee is calculated and state how it
was determined
MEDICAL RESEARCH INVESTMENT FUND, INC.
August 2, 1996
Dear Stockholders:
On August 29, 1996, a Special Meeting of the Stockholders of Medical
Research Investment Fund, Inc. (the "Fund") will be held to vote on several
important proposals. ADOPTION OF THESE PROPOSALS, WHICH THE FUND'S BOARD OF
DIRECTORS HAS APPROVED AND BELIEVES WILL PROVIDE SIGNIFICANT BENEFITS TO THE
FUND AND ITS STOCKHOLDERS REQUIRES YOUR APPROVAL. As a stockholder, you are
entitled to cast one vote for each share that you own.
VOTING ONLY TAKES A FEW MINUTES -- PLEASE RESPOND PROMPTLY.
YOUR VOTE IS IMPORTANT, NO MATTER HOW MANY SHARES YOU OWN. If the required
votes are not received by August 29, 1996, it will be necessary to send
further mailings to secure it.
The primary purpose of the Meeting is to consider proposals that the Board
of Directors believes will position the Fund to achieve higher returns for
stockholders by realizing certain economies of scale and operating
efficiencies. THE ANTICIPATED EFFECT OF THESE PROPOSALS IS TO ENABLE THE FUND
AND ITS STOCKHOLDERS TO PARTICIPATE IN A MUCH LARGER INVESTMENT PORTFOLIO WITH
A LOWER AGGREGATE EXPENSE RATIO, BROADER DIVERSITY OF SECURITIES HOLDINGS AND
IMPROVED STOCKHOLDER EXCHANGE PRIVILEGES. Current shareholders will not be
required to pay any sales loads on future purchases of shares.
In order to achieve these benefits, the Board of Directors has appointed
Eaton Vance Management as administrator and Eaton Vance Distributors, Inc. as
distributor of the Fund, subject to shareholder approval of the matters
presented at the Meeting. No change is occurring in the investment adviser, or
the underlying portfolio of medical and health sciences equity securities. G/A
CAPITAL MANAGEMENT, INC. WILL CONTINUE AS THE INVESTMENT ADVISER, AND I WILL
REMAIN AS THE PORTFOLIO MANAGER. However, certain changes in the legal
structure of the Fund require stockholder approval.
Eaton Vance, founded in 1924, advises, administers and distributes more
than 150 mutual funds investing in more than 60 different investment
portfolios. Total assets under management exceed $16 billion. The proposals to
be considered at this Meeting will have the effect of adding the Fund to the
56 mutual funds that comprise the Eaton Vance Traditional Family of Funds.
OTHER PROPOSALS YOU ARE VOTING ON.
At the Meeting, stockholders will be asked to elect a new slate of
Directors and to approve auditors. Stockholders also will be asked to amend
the Fund's investment objectives and basic investment policies to clarify the
management focus of the Fund. Finally, stockholders will also be asked to
amend certain fundamental investment restrictions to modernize them consistent
with current industry standards.
THIS IS A VERY IMPORTANT MEETING. IF YOU DO NOT PLAN TO ATTEND IN PERSON,
PLEASE SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD TODAY.
THE MATTERS TO BE PRESENTED TO THE MEETING ARE DESCRIBED IN DETAIL IN THE
ENCLOSED PROXY STATEMENT. THE BOARD OF DIRECTORS BELIEVES THAT ALL OF THE
PROPOSALS ARE IN THE BEST INTERESTS OF THE FUND AND ITS STOCKHOLDERS. The
Board of Directors believes that restructuring the Fund will not expose
stockholders to significant new risks and will enable them to participate in a
larger, more diversified and potentially more attractive investment portfolio
and to achieve cost savings over time.
For the Board of Directors
/s/ Samuel D. Isaly
Samuel D. Isaly, President and Director
- --------------------------------------------------------------------------------
YOUR BOARD OF DIRECTORS URGES YOU TO VOTE IN FAVOR OF ALL PROPOSALS, AND
LOOKS FORWARD TO RECEIVING YOUR PROXY SO YOUR SHARES CAN BE VOTED AT THE
MEETING. FOR YOUR CONVENIENCE AND TO SPEED DELIVERY OF YOUR PROXY,
PLEASE USE THE ENCLOSED POSTAGE-PAID ENVELOPE. YOUR PROMPT RESPONSE IS
APPRECIATED. THANK YOU.
- --------------------------------------------------------------------------------
MEDICAL RESEARCH INVESTMENT FUND, INC.
5847 SAN FELIPE, SUITE 4100, HOUSTON, TX 77057
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 29, 1996
A Special Meeting of Stockholders of Medical Research Investment Fund,
Inc. (the "Fund"), will be held at the offices of Shearman & Sterling, 599
Lexington Avenue, New York, New York on August 29, 1996, commencing at 2:00
P.M. (Eastern time), for the following purposes:
1. To consider and act upon a proposal to adopt a new investment policy
to authorize the Fund to invest its investable assets in a specific
corresponding open-end management investment company (the "Portfolio")
having substantially the same investment objective, policies and
restrictions as the Fund, and to supplement current investment
restrictions to permit such investment.
2. To consider and act upon a proposal to authorize the Fund to vote at a
meeting of holders of interests in the Portfolio to (A) elect a board
of trustees of the Portfolio; and (B) approve the Investment Advisory
Agreement (as set forth in Exhibit A to the accompanying Proxy
Statement) between the Portfolio and its investment adviser,
G/A Capital Management, Inc.
3. To fix the number of Directors at six, and to elect a Board of
Directors until their successors are elected and qualified.
4. To ratify or reject the selection of Tait, Weller & Baker as the
independent certified public accountants to be employed by the Fund to
sign or certify financial statements which may be filed by the Fund
with the Securities and Exchange Commission in respect of all or any
part of its current fiscal year.
5. To consider and act upon a proposal to eliminate, reclassify and amend
the Fund's investment objectives and certain of the Fund's fundamental
investment policies (as set forth in Exhibit B to the accompanying
Proxy Statement).
These items are discussed in greater detail in the following pages.
Shareholders may also consider and act upon any matters incidental to the
foregoing purposes or any of them, and any other matters which may properly
come before said meeting or any adjourned session thereof.
The meeting is called pursuant to the By-Laws of the Fund. The Board of
Directors of the Fund has fixed the close of business on July 24, 1996 as the
record date for the determination of the stockholders of the Fund entitled to
notice of and to vote at the meeting and any adjournments thereof.
/s/ Samuel D. Isaly
SAMUEL D. ISALY
President
August 2, 1996
IMPORTANT -- STOCKHOLDERS CAN HELP THE BOARD OF DIRECTORS OF THE FUND AVOID
THE NECESSITY OF FURTHER SOLICITATIONS TO INSURE A QUORUM BY PROMPTLY
RETURNING THE ENCLOSED PROXY. THE ENCLOSED ADDRESSED ENVELOPE REQUIRES NO
POSTAGE IF MAILED IN THE UNITED STATES AND IS INTENDED FOR YOUR CONVENIENCE.
MEDICAL RESEARCH INVESTMENT FUND, INC.
5847 San Felipe, Suite 4100
Houston, TX 77057
August 2, 1996
PROXY STATEMENT
A proxy is enclosed with the foregoing Notice of a Special Meeting of
Stockholders of Medical Research Investment Fund, Inc. (the "Fund"), to be
held August 29, 1996 for the benefit of stockholders who do not expect to be
present at the meeting. This proxy is solicited on behalf of the Board of
Directors of the Fund, and is revocable by the person giving it prior to
exercise by a signed writing filed with the President of the Fund, or by
executing and delivering a later dated proxy, or by attending the meeting and
voting your shares in person. Each proxy will be voted in accordance with its
instructions; if no instruction is given, an executed proxy will authorize the
persons named as attorneys, or any of them, to vote in favor of each such
matter. This proxy material is being mailed to stockholders on or about August
2, 1996.
The Board of Directors of the Fund has fixed the close of business July
24, 1996, as the record date for the determination of the stockholders
entitled to notice of and to vote at the meeting and any adjournments thereof.
Stockholders at the close of business on the record date will be entitled to
one vote for each share held. As of July 24, 1996, there were 1,730,612 shares
of capital stock of the Fund outstanding. As of such date, Donaldson Lufkin &
Jenrette Securities Corp., c/o Pershing Div. - Transfer Dept., 5th Floor,
Jersey City, NJ 07303-2052 and National Financial Services Corp., For the
Exclusive Benefit of Our Customers, New York, NY 10281, were the recordowners
of approximately 7.77% and 6.12%, respectively, of the outstanding shares,
which were held on behalf of their customers who are the beneficial owners of
such shares and as to which they have voting power under certain limited
circumstances. To the knowledge of the Fund, no other person owns (of record
or beneficially) more than 5% of its outstanding shares.
The Board of Directors of the Fund knows of no business other than that
mentioned in Items 1 through 5 of the Notice of the meeting which will be
presented for consideration. If any other matters are properly presented, as
to such matters, it is the intention of the persons named as attorneys in the
enclosed proxy to vote the proxies in accordance with their judgment.
PROPOSAL 1. TO APPROVE A NEW INVESTMENT POLICY
AND TO SUPPLEMENT INVESTMENT RESTRICTIONS
TO PERMIT A NEW INVESTMENT STRUCTURE
The Board of Directors of the Fund has approved, and is submitting to the
stockholders of the Fund for approval, the adoption of a new investment policy
for the Fund and the addition of a fundamental investment policy to permit the
Fund to invest its "investable assets" (portfolio securities and cash) in a
corresponding open-end management investment company, the Worldwide Health
Sciences Portfolio (the "Portfolio"), having substantially the same investment
objective, policies and restrictions as the Fund. The new investment policy
and addition to the investment restrictions for the Fund are subject to
approval by the Fund's stockholders. If this Proposal is approved, the Board
of Directors will direct that the Fund's investable assets be invested in the
Portfolio, thereby converting the Fund to the Hub and Spoke(R) structure. (Hub
and Spoke(R) is a registered service mark of Signature Financial Group, Inc.)
This will permit the Fund to become a member of the Eaton Vance family of
funds, as discussed in this proxy statement. Proposals 1, 2(A), 2(B) and 3 are
interrelated and will only be implemented if all are adopted.
NEW INVESTMENT POLICY
The Board of Directors recommends that the stockholders of the Fund
approve a new investment policy for the Fund, i.e., to invest its investable
assets in the Portfolio. The Portfolio is a trust which, like the Fund, is
registered as an open-end management company under the Investment Company Act
of 1940 (the "Act"). If shareholders approve Proposal 5, the Fund and
Portfolio will have substantially the same investment objective, policies and
restrictions. G/A Capital Management, Inc. ("G/A") is currently the investment
adviser of the Fund and will be the investment adviser of the Portfolio if
Proposal 2(B) is approved. Accordingly, by investing in the Portfolio, the
Fund would seek its investment objective through its investment in the
Portfolio, rather than through direct investments in securities. The Portfolio
in turn would invest in securities in accordance with its objective, policies
and restrictions.
The Portfolio was organized as a trust under New York law on March 26,
1996. The interests in the Portfolio are not available for purchase by members
of the general public.
By investing the Fund's assets in the Portfolio, the Board of Directors
expects that the Eaton Vance organization ("Eaton Vance"), discussed below,
will be in a position to sponsor other collective investment vehicles that
could invest in the Portfolio. Eaton Vance has employed personnel to develop
such new vehicles. Initially, another domestic and an off-shore fund (each of
which now has nominal assets) will be investing in the Portfolio on or about
the date this Proposal is implemented. To the extent that these strategies are
successful, the new Hub and Spoke structure could enable the Fund to
participate in a larger, more diversified and potentially more attractive
investment portfolio. The Fund would be in a position to benefit, directly or
indirectly, from certain economies of scale, based on the premise that certain
of the expenses of operating an investment portfolio are relatively fixed and
that a larger investment portfolio may eventually achieve a lower ratio of
operating expenses to average net assets. The Board of Directors also believes
that investing in the Portfolio may produce other benefits resulting from such
increased asset size such as the ability to purchase securities in larger
amounts than the Fund currently is able to acquire. See the pro forma expense
tables and the discussion provided below. There can be no assurance that these
anticipated benefits will be realized.
To the extent that the Fund invests its investable assets in the Portfolio,
the Fund would no longer require investment advisory services. For this reason,
if stockholders of the Fund approve the addition to the investment restrictions
and adopt the new investment policy described in this Proposal, and the Fund
invests its investable assets in the Portfolio, the existing investment advisory
agreement of the Fund with G/A will be terminated. Currently, under the existing
investment advisory agreement, the Fund pays G/A a fee computed daily and
payable monthly at an annual rate of 1.00% of the Fund's average daily net
assets up to $30 million of such assets, 0.90% of the next $20 million of such
assets, and 0.75% on such assets in excess of $50 million.
The Portfolio has an investment advisory agreement with respect to
Portfolio assets pursuant to which G/A will be paid a monthly fee calculated
in the same manner as the fee currently being paid by the Fund, as set forth
above, with two exceptions. First, fee reductions will occur when net assets
reach $500 million (with respect to such assets) as follows:
ANNUAL
AVERAGE DAILY NET ASSETS ASSET RATE
------------------------ ----------
$500 million but less than $1 billion ......... 0.70%
$1 billion but less than $1.5 billion ......... 0.65%
$1.5 billion but less than $2 billion ......... 0.60%
$2 billion but less than $3 billion ........... 0.55%
$3 billion and over ........................... 0.50%
Second, the foregoing fee will be subject to a performance fee adjustment, as
follows:
After 12 months, the basic advisory fee is subject to upward or
downward adjustment depending upon whether, and to what extent, the
investment performance of the Portfolio differs by at least one percentage
point from the record of the Standard & Poor's Index of 500 Common Stocks
over the same period. Each percentage point difference is multiplied by a
performance adjustment rate of 0.025%. The maximum adjustment plus/minus
is 0.25%. One twelfth (1/12) of this adjustment is applied each month to
the average daily net assets of the Portfolio over the entire performance
period. This adjustment shall be based on a rolling period of up to and
including the most recent 36 months. Performance shall be total return as
computed under Rule 482 under the Securities Act of 1933.
The effect of this performance fee adjustment is that after one year the
advisory fee of the Portfolio could be higher or lower than what the advisory
fee of the Fund would have been.
Upon exchange of the investable assets of the Fund for an interest in the
Portfolio, the Fund will retain the services of Eaton Vance Management
("EVM"), 24 Federal Street, Boston, MA 02110 under a management agreement to
act as administrator of the Fund. Capstone Asset Management Company
("Capstone"), 5847 San Felipe, Suite 4100, Houston, Texas 77507, the Fund's
current administrator, has consented to this change. Under this agreement, EVM
would provide the Fund with general office facilities and supervise the
overall administration of the Fund. For these services EVM will receive .25%
of average daily net assets, which fee declines if assets grow to over $500
million. EVM will also receive a fee at the same rate on Portfolio net assets
for administrative services provided to the Portfolio pursuant to an
administration agreement. The administration contract with the Fund's current
administrator, Capstone, will be terminated. Such contract has a fee of .25%
of average daily net assets which does not decline with asset growth. In
addition, Capstone receives $2,000 per month for bookkeeping services for
which Eaton Vance would not be separately compensated.
EVM is a Massachusetts business trust and part of the Eaton Vance
organization. Eaton Vance, its affiliates and its predecessor companies have
been managing assets of individuals and institutions since 1924, and managing
investment companies since 1931. Eaton Vance acts as investment adviser to
investment companies and various individual and institutional clients with
assets under management of over $16 billion. EVM provides administrative and
management services to all of the Eaton Vance funds, as well as The Wright
Managed Income Trust, The Wright Managed Equity Trust, The Wright EquiFund
Equity Trust and The Wright Managed Blue Chip Series Trust. The Wright group
of funds has assets of over $1 billion. EVM is a wholly-owned subsidiary of
Eaton Vance Corp., a publicly held holding company, which through its
subsidiaries and affiliates, is primarily engaged in investment management,
administration, and marketing activities. Eaton Vance has utilized the Hub and
Spoke structure since 1992 and currently sponsors over 60 Hub funds and over
150 Spoke funds. The Fund, therefore, would become part of the Eaton Vance
family of funds with an exchange privilege for existing fund shareholders that
includes 56 different mutual funds. See "Expanded Exchange Privilege Below."
The Board of Directors has also approved the replacement of Capstone Asset
Planning Company with Eaton Vance Distributors, Inc. ("EVD") as distributor of
the Fund. Capstone has consented to this change and the termination of its
distribution agreement with the Fund. EVD intends to sponsor both domestic and
off-shore investment companies which will invest in the Portfolio in the fall
of 1996. EVD, which has over 100 full-time employees, acts as Principal
Underwriter for over 150 investment companies (or series thereof), each of
which makes a continuous offering of shares. EVD has an international
distribution network and substantial financial resources. EVD has dealer
agreements with over 1,800 U.S. registered broker-dealers, banks and other
financial intermediaries.
EVD also acts as the Placement Agent for the Portfolio. The Placement
Agent Agreement is renewable annually by the Portfolio's board of trustees
(including a majority of the independent trustees), may be terminated on sixty
days' notice either by such trustees or by vote of a majority of the
outstanding voting securities of the Portfolio or on six months' notice by the
Placement Agent, and is automatically terminated upon assignment.
The Portfolio and the Fund, as the case may be, will each be responsible
for all respective costs and expenses not expressly stated to be payable by G/
A under the investment advisory agreement with the Portfolio, by EVM under its
administration agreement with the Portfolio, or by EVM under its management
agreement with the Fund. Such costs and expenses to be borne by the Portfolio
and the Fund, as the case may be, include, without limitation: custody and
transfer agency fees and expenses, including those incurred for determining
net asset value and keeping accounting books and records; expenses of pricing
and valuation services; the cost of share certificates; membership dues in
investment company organizations; expenses of acquiring, holding and disposing
of securities and other investments; fees and expenses of registering under
the securities laws and the governmental fees; expenses of reporting to
stockholders and investors; proxy statements and other expenses of
stockholders' or investors' meetings; insurance premiums; printing and mailing
expenses; interest, taxes and corporate fees; legal and accounting expenses;
compensation and expenses of trustees or Directors, as the case may be, not
affiliated with EVM or G/A; and investment advisory fees. The Portfolio and
the Fund will also each bear expenses incurred in connection with litigation
in which the Portfolio or the Fund, as the case may be, is a party and any
legal obligation to indemnify its respective officers and trustees or
Directors, as the case may be, with respect thereto.
The following table shows the actual expenses of the Fund for the six
months ended February 29, 1996, and a pro forma adjustment thereof assuming
the Fund had invested its investable assets in the Portfolio for the entire
period then ended. The pro forma adjustment does not include the estimated
costs of this proxy solicitation because Eaton Vance will bear such costs, but
assumes a waiver of Fund management fees of .15% of average daily net assets.
The pro forma adjustment assumes that: (i) there were no holders of interests
in the Portfolio other than the Fund; and (ii) the average daily net assets of
the Fund and the Portfolio were equal to the actual average daily net assets
of the Fund during the period.
FUND OPERATING EXPENSES FOR THE SIX MONTHS
ENDED FEBRUARY 29, 1996
(ANNUALIZED AS A PERCENT OF AVERAGE DAILY NET ASSETS)
PRO FORMA (ASSUMING THAT THE
AVERAGE DAILY NET ASSETS
INVESTED BY THE FUND IN THE
PORTFOLIO WERE $29,060,000)
---------------------------------
ACTUAL FUND PORTFOLIO TOTAL
------ ---- --------- -----
Annual Fund Operating Expenses
Investment advisory (and administration) fees ........ 1.23% 0.10% 1.23% 1.33%
Rule 12b-1 Fees ...................................... 0.25% 0.25% 0.00% 0.25%
Other expenses ....................................... 0.53% 0.27% 0.15% 0.42%
----- ----- ----- -----
Total Fund Operating Expenses .......................... 2.01% 0.62% 1.38% 2.00%
===== ===== ===== =====
Assuming that the Fund was the only holder of an interest in the Portfolio
and that the Fund was fully invested therein, the net asset value per share,
distributions per share and net investment income per share of the Fund would
have been about the same on a pro forma basis as the actual net asset value,
distributions and net investment income per share of the Fund during the
period indicated. If the Portfolio's assets grew so that average daily net
assets were $150 million, the projected total operating expense ratio would be
reduced to 1.88%. There can be no assurance assets will reach such an amount.
Eaton Vance also has agreed to maintain the expenses of the Fund to ensure
they do not exceed 2.0% of average daily net assets through August 31, 1999
(which includes the Fund's pro rata share of Portfolio expenses). Currently,
Capstone and G/A have agreed to maintain Fund expenses at 2.50% of average
daily net assets. THROUGH AUGUST 31, 1995, THE FUND HISTORICALLY HAS HAD AN
ANNUAL EXPENSE RATIO OF NO LOWER THAN 2.44% SINCE INCEPTION.
In recommending that the stockholders authorize the conversion of the Fund
to the Hub and Spoke structure, the Board of Directors has taken into account
and evaluated, among other things, the possible effects which increased assets
in the Portfolio may have on the expense ratio of the Fund. There is, of
course, no assurance that the net assets of the Portfolio will grow. After
carefully weighing the costs involved against the anticipated benefits of
converting the Fund to the Hub and Spoke structure, the Board of Directors
recommends that the stockholders of the Fund vote to approve Proposal 1.
If Proposal 1 is approved, the Board of Directors expects to implement the
investment policy for the Fund by causing the Fund to exchange its investable
assets (portfolio securities and cash) as well as certain other assets
(including receivables for securities sold from the portfolio and receivables
for interest on portfolio securities) for an interest in the Portfolio. The
proposed transaction will not adversely alter the rights and privileges of
stockholders of the Fund. The value of a stockholder's investment in the Fund
will be the same immediately after the Fund's investment in the Portfolio as
immediately before that investment. Of course, the value of a stockholder's
investment in the Fund may fluctuate thereafter.
The Fund would be able to withdraw its investment in the Portfolio at any
time, if the Directors determine that it is in the best interests of the Fund
to do so. Upon any such withdrawal, the Directors would consider what action
might be taken, including the investment of the investable assets of the Fund
in another pooled investment entity having substantially the same investment
objective as the Fund or the retention of another investment adviser to manage
the Fund's assets in accordance with its investment policies as is presently
the case.
DESCRIPTION OF THE PORTFOLIO
The investment objective of the Portfolio is the same as the objective of
the Fund, assuming Proposal 5 is approved. The Portfolio seeks to achieve its
investment objective through investments limited to the types of securities in
which the Fund is authorized to invest. The investment restrictions and
policies of the Portfolio are such that the Portfolio may not invest in any
security or engage in any transaction which would not be permitted by the
investment restrictions and policies of the Fund if the Fund were to invest
directly in such a security or engage directly in such a transaction, again
assuming Proposal 5 is approved.
If the proposed investment in the Portfolio is implemented, the Fund's
assets would no longer be directly invested in a portfolio of securities but
would rather be invested in the securities of a single issuer, i.e., the
Portfolio, which is a New York trust, and is registered as an open-end
management investment company under the Act. Nevertheless, inasmuch as the
assets of the Portfolio would be directly invested in a portfolio of
securities, the Fund believes there are no material risks of investing in the
Portfolio that are different from those to which stockholders of the Fund are
currently subject.
The approval of the Portfolio's investors (i.e., holders of interests in
the Portfolio, such as the Fund) would be required to change certain of its
investment restrictions; however, any change in nonfundamental investment
policies would not require such approval. For a discussion of when Fund
stockholders would be requested to vote on Portfolio matters, see page 9
below.
Like the Fund, the Portfolio determines its net asset value once on each
day the New York Stock Exchange (the "Exchange") is open for trading, as of
the close of regular trading on the Exchange. The Portfolio's net asset value
is computed by determining the value of the Portfolio's total assets (the
securities it holds plus any cash or other assets, including interest accrued
but not yet received), and subtracting all of the Portfolio's liabilities
(including accrued expenses). The Portfolio will value its assets in the same
manner as the Fund.
To the extent sales prices are available, securities that are traded on a
recognized stock exchange, whether U.S. or foreign, are valued at the last
sale price on that exchange prior to the time when assets are valued or prior
to the close of trading on the Exchange. In the event that there are no sales,
the last available sale price will be used. If a security is traded on more
than one exchange, the latest price on the exchange where the stock is
primarily traded will be used. If there is no sale that day or if the security
is not listed, the security is valued at its last sale quotation. The
calculation of the Portfolio's net asset value may not take place
contemporaneously with the times noted above for determining the prices of
certain portfolio securities, including foreign securities. If events
materially effecting the value of such securities occur between the time when
their prices are determined and the time the Portfolio's net asset value is
calculated, such securities will be valued at fair value as determined in good
faith by the trustees. Also, for any security for which application of the
preceding methods of valuation results in a price for a security that is
deemed not to be representative of the market value of such security, the
security will be valued at fair value under the supervision and responsibility
of the board of trustees.
Futures contracts and call options written on portfolio securities will be
priced at the latest sales price on the principal exchange on which such
options are normally traded or, if there have been no sales on such exchange
on that day, at the closing asked price. Short-term investments having a
maturity of 60 days or less are valued on the basis of amortized cost. All
other assets and securities held by the Portfolio (including restricted
securities) are valued at fair value as determined in good faith under the
supervision and responsibility of the board of trustees. Any assets that are
denominated in a foreign currency are translated into U.S. dollars of the last
quoted spot rate of exchange prevailing on each valuation date.
The Fund's net asset value is determined at the same time and on the same
days that the net asset value of the Portfolio is calculated. Net asset value
per share is computed by determining the value of the Fund's assets (its
investment in the Portfolio and other assets), subtracting all of the Fund's
liabilities (including accrued expenses), and dividing the result by the total
number of shares outstanding at such time.
Interests in the Portfolio have no pre-emptive or conversion rights, and
are fully paid and non-assessable. The Portfolio normally will not hold
meetings of holders of such interests except as required under the Act. The
Portfolio would be required to hold a meeting of holders in the event that at
any time less than a majority of the trustees holding office had been elected
by holders. The trustees of the Portfolio continue to hold office until their
successors are elected and have qualified. Holders holding a specified
percentage interest in the Portfolio may call a meeting of holders in the
Portfolio for the purpose of removing any trustee. A trustee of the Portfolio
may be removed upon a majority vote of holders in the Portfolio qualified to
vote in the election. The Declaration of Trust of the Portfolio requires the
Portfolio to assist its holders in calling such a meeting. Upon liquidation of
the Portfolio, holders in the Portfolio would be entitled to share pro rata in
the net assets of the Portfolio available for distribution to holders.
Each holder in the Portfolio is entitled to vote in proportion to its
share of the interests in the Portfolio. Except as described below, whenever
the Fund is requested to vote on matters pertaining to the Portfolio, the Fund
will hold a meeting of its stockholders and will cast its votes
proportionately as instructed by Fund stockholders.
Subject to applicable statutory and regulatory requirements, the Fund
would not request a vote of its stockholders with respect to (a) any proposal
relating to the Portfolio, which proposal, if made with respect to the Fund,
would not require the vote of the stockholders of the Fund, or (b) any
proposal, with respect to the Portfolio that is identical, in all material
respects, to a proposal that has previously been approved by stockholders of
the Fund. Any proposal submitted to holders in the Portfolio, and that is not
required to be voted on by stockholders of the Fund, would nonetheless be
voted on by the Directors of the Fund.
Investments in the Portfolio may not be transferred, but a holder may
withdraw all or any portion of its investment at any time at net asset value.
Each holder in the Portfolio, including the Fund, will be liable for all
obligations of the Portfolio. However, the risk of a holder in the Portfolio
incurring financial loss on account of such liability is limited to
circumstances in which both inadequate insurance exists, and the Portfolio
itself is unable to meet its obligations. Thus, stockholders of the Fund
should not experience losses from the new investment structure itself.
The Portfolio has its own board of trustees, including a majority of
trustees who are not "interested" persons of the Portfolio as defined in the
Act. The present trustees of the Portfolio are identical to the proposed
Directors of the Fund and are listed in Proposal 2A of this Proxy Statement.
TAX CONSIDERATIONS
The Internal Revenue Service has issued private letter rulings to numerous
investment companies, including EVM sponsored funds, to the effect that this
type of transaction will not result in recognition of capital gains. Such
rulings are not binding on the IRS with respect to the Fund. Nevertheless, the
Fund has received an opinion of tax counsel, Brown & Wood LLP, to the effect
that, although there is no judicial authority directly on point, the
contribution of its assets to the Portfolio in exchange for an interest in the
Portfolio will not result in the recognition of gain or loss to the Fund for
federal income tax purposes pursuant to Internal Revenue Code (the "Code")
Section 721 and related authorities. The Fund has not applied for a ruling
from the IRS to the same effect and legal opinions are not binding on the IRS.
If it were determined that the transaction was taxable, the Fund would realize
and recognize gain in an amount equal to the appreciation (undiminished by
losses) in the transferred assets as of the date of the transfer (the "deemed
gain"). If the Fund did not make a distribution to its stockholders equal to
all or a portion of the deemed gain, the Fund could be subject to tax (plus
interest and penalties) on all or a portion of the deemed gain. Alternatively,
if the Fund were to make a distribution to its stockholders in an amount equal
to all or a portion of the deemed gain, then its stockholders at the time of
such distribution would be taxed on the amount distributed and the Fund could
be required to pay penalties and/or interest. Depending on the amount and
nature of the deemed gain and the Fund's previous distributions of gains with
respect to the same taxable year, the Fund might be required to make the
distribution described in the preceding sentence in order to preserve its
qualification under the Code as a regulated investment company.
As of February 29, 1996, the gross unrealized appreciation in the assets
of the Fund on a federal income tax basis was $8,011,579. The amount of gross
unrealized appreciation in the assets of the Fund at the time of transfer of
the Fund's assets to the Portfolio may be more or less than the amount
indicated in the preceding sentence, and no assurance can be given as to the
magnitude of such amount at the time of such transfer.
As a regulated investment company under the Code, the Fund does not pay
federal income or excise taxes to the extent that it distributes to
stockholders its net investment income and net realized capital gains in
accordance with the timing requirements imposed by the Code. As a partnership
under the Code, the Portfolio does not pay federal income or excise taxes.
Provided the Fund qualifies as a regulated investment company for federal
income tax purposes and the Portfolio is treated as a partnership for federal
tax purposes, neither is liable for state income, corporate excise or
franchise tax.
PROPOSED SUPPLEMENT TO INVESTMENT RESTRICTIONS
Certain of the Fund's investment restrictions must be amended, eliminated
or reclassified in order for the Fund to invest its investable assets in the
Portfolio. (See investment restrictions (1), (4), (8), (11), (12), (14), (15)
and (17) in Exhibit B.) The Board of Directors of the Fund has approved,
subject to a stockholder vote, a supplemental provision to be added to the
investment restrictions of the Fund to permit it to invest its investable
assets in the Portfolio.
The Board of Directors proposes that these restrictions and all other
investment restrictions be supplemented with an additional fundamental
investment provision as follows: "(18) Notwithstanding the investment policies
and restrictions of the Fund, the Fund may invest its assets in an open-end
management investment company with substantially the same investment
objective, policies and restrictions as the Fund."
The additional investment provision would also apply to any conflicting
nonfundamental investment policies. (The current investment restrictions would
also be revised if Proposal 5 is approved.)
EXPANDED EXCHANGE PRIVILEGE
Because the Fund would become a member of the Eaton Vance family of funds
if this Proposal is approved, Fund shareholders would be able to freely
exchange into the following mutual funds without payment of a sales charge or
fund exchange fee:
EQUITY FUNDS MUNICIPAL BOND FUNDS -- continued
------------ ---------------------------------
EV Traditional Asian Small Companies EV Traditional Georgia Municipals Fund
Fund EV Traditional Hawaii Municipals Fund
EV Traditional Emerging Markets Fund EV Traditional High Yield Municipals
EV Traditional Information Age Fund Fund
EV Traditional Investors Fund EV Traditional Kansas Municipals Fund
EV Traditional Greater China Growth EV Traditional Kentucky Municipals Fund
Fund EV Traditional Louisiana Municipals
EV Traditional Greater India Fund Fund
EV Traditional Growth Fund EV Traditional Maryland Municipals Fund
EV Traditional Special Equities Fund EV Traditional Massachusetts Municipals
EV Traditional Stock Fund Fund
EV Traditional Tax-Managed Growth Fund EV Traditional Michigan Limited
EV Traditional Total Return Fund Maturity Municipals Fund
EV Traditional Michigan Municipals
INCOME FUNDS Fund
------------ EV Traditional Minnesota Municipals
Eaton Vance Income Fund of Boston Fund
EV Traditional Government Obligations EV Traditional Mississippi
Fund Municipals Fund
EV Traditional Missouri Municipals
MONEY MARKET FUNDS Fund
------------------ EV Traditional National Limited
Eaton Vance Cash Management Fund Maturity Municipals Fund
Eaton Vance Tax Free Reserves EV Traditional National Municipals
Fund
MUNICIPAL BOND FUNDS EV Traditional New Jersey Limited
-------------------- Maturity Municipals Fund
Eaton Vance Municipal Bond Fund L.P. EV Traditional New Jersey Municipals
EV Traditional Alabama Municipals Fund Fund
EV Traditional Arizona Municipals Fund EV Traditional New York Limited
EV Traditional Arkansas Municipals Fund Maturity Municipals Fund
EV Traditional California Municipals EV Traditional New York Municipals
Fund Fund
EV Traditional Colorado Municipals Fund EV Traditional North Carolina
EV Traditional Connecticut Municipals Municipals Fund
Fund EV Traditional Ohio Limited Maturity
EV Traditional California Limited Municipals Fund
Maturity Municipals Fund EV Traditional Ohio Municipals Fund
EV Traditional Connecticut Limited EV Traditional Oregon Municipals Fund
Maturity Municipals Fund EV Traditional Pennsylvania Municipals
EV Traditional Florida Insured Fund
Municipals Fund EV Traditional South Carolina
EV Traditional Florida Limited Municipals Fund
Maturity Municipals Fund EV Traditional Tennessee Municipals
EV Traditional Florida Municipals Fund Fund
Municipals Fund EV Traditional Texas Municipals Fund
EV Traditional Virginia Municipals Fund
EV Traditional West Virginia Municipals
Fund
The Fund can change this exchange privilege upon 60 days notice to
shareholders. The new privilege is substantially broader than the current one
provided by the Capstone family of funds which only includes the following
four funds: Capstone Growth Fund, Inc., Capstone Government Income Fund,
Capstone Nikko Japan Fund and Capstone New Zealand Fund.
Shareholders of record on the date of the conversion will be permitted to
purchase additional shares of the Fund without a sales charge for as long as
they remain Fund shareholders. In addition, such shareholders will not be
subject to the $750 minimum account size policy of the restructured Fund.
FURTHER INFORMATION REGARDING THE RESTRUCTURING
The proposed restructuring of the Fund and related changes described in
this proxy statement are the result of the decision of G/A and Eaton Vance to
work jointly to improve the distribution, performance and shareholder
servicing of the Fund. To date, these organizations have agreed to promote
their relationship in three principal respects. First, Eaton Vance has agreed
to pay G/A on the conversion of the Fund to Hub and Spoke the sum of $2
million for the rights to G/A's tradename. In addition, Eaton Vance has agreed
to pay G/A the sum of $500,000 if the assets of the Portfolio reach $100
million (excluding any G/A affiliated investments) within six months after
implementation of Proposal 1 as the result of the services of G/A personnel in
assisting Eaton Vance to grow the Fund. Lastly, G/A has agreed to pay Eaton
Vance the equivalent of one-third of its Portfolio advisory fee out of its own
resources to be used by Eaton Vance to pay expenses related to its activities
as Placement Agent of the Portfolio. All of these agreements are designed to
enable Eaton Vance to better promote and service the Fund and the Portfolio.
As discussed in Proposal 1, asset growth should be beneficial to shareholders.
It is possible G/A and Eaton Vance may enter into other agreements that
directly or indirectly affect the Fund, but none are currently contemplated.
G/A and Eaton Vance have agreed to make certain payments to Capstone for
services necessary to facilitate the transition of the administration and
distribution functions of the Fund and to provide incentives to Capstone to
sell shares of the Fund. G/A will pay Capstone the sum of $150,000 upon
implementation of Proposal 1 and an amount equal to .05% of the Portfolio's
average daily net assets for two years. (G/A and Eaton Vance will share
equally if such aggregate payments exceed $200,000.) In addition, if the
assets of the Portfolio reach $100 million within six months of the
implementation of Proposal 1 (excluding any G/A affiliated investments), G/A
will pay Capstone $150,000. Eaton Vance has agreed to reimburse Capstone up to
$75,000 for expenses of employment severance that Capstone incurs as a result
of the change in Fund service providers and to pay Capstone $15,000 (plus out-
of-pocket costs) for transition related services. Capstone will become a
dealer firm in the EVD distribution network and, therefore, will receive
distribution fees from EVD pursuant to the Fund's Rule 12b-1 distribution plan
after the restructuring.
EVALUATION BY THE FUND'S DIRECTORS
The Board of Directors of the Fund has carefully considered this Proposal
and its potential benefits, which will in effect authorize the conversion of
the Fund to the Hub and Spoke structure. In this regard, the Board believes
that the Portfolio will attract other collective investment vehicles which
will have investors who would not otherwise be investors in the Fund.
Investors in the Portfolio may include other established investment companies
sponsored by Eaton Vance with substantially the same investment objectives and
policies as the Fund. By adopting the Hub and Spoke structure the Fund can
participate in a larger, more diversified and potentially more attractive
investment portfolio. By this pooling of assets the Portfolio is likely, over
time, to achieve a variety of operating economies. The larger asset size of
the Portfolio, in the Board's view, can be expected to permit the purchase of
investments in larger amounts than the Fund currently is able to purchase,
which may reduce certain operating expenses indirectly borne by the Fund's
stockholders. In general, to the extent that certain operating costs are
relatively fixed and currently are borne by the Fund alone, these expenses
would instead be borne in whole or in part by the Portfolio and shared by the
Fund's stockholders with other investors in the Portfolio. These portfolio
benefits and economies of scale would be likely only if assets of the
Portfolio were to grow through investments in the Portfolio by entities in
addition to the Fund. There can be no assurance that such benefits will be
realized.
The Board also considered the comparative skill, experience and resources
of Eaton Vance and Capstone in serving as administrator and distributor of the
Fund especially in the proposed revised structure. The Board recognized that
EVM and G/A could benefit from the proposed structure because such structure
could enable them to increase fee bearing assets through the development of
new vehicles to attract investor assets and that G/A and Capstone will receive
the benefits described in "Further Information Regarding the Restructuring"
above.
The Board concluded that no unfair burden would be imposed on the Fund as
a direct or indirect result of the transactions and changes described in this
proxy statement. Among the factors considered by the Board in reaching this
conclusion were that Eaton Vance has agreed to maintain the expenses of the
Fund so they will not exceed 2.0% of the Fund's average daily net assets
through August 31, 1999 and has agreed to use its best efforts to ensure that
for at least three years after implementation of Proposal 1 at least 75% of
the directors of the Fund will not be "interested persons" of the Eaton Vance
or G/A organizations, as such term is defined in the Act.
The Board of Directors of the Fund believes that over time the aggregate
per share expenses of the Fund and the Portfolio should be less than the
expenses that would be incurred by the Fund if it continued to retain the
services of an investment adviser and to invest directly in securities
although there can be no assurance that such expense savings will be realized.
The Board also considered risks associated with an investment in the
Portfolio. The Board of Directors believes that the Portfolio's investment
policies and restrictions involve substantially the same risks as are
associated with the Fund's direct investment in securities.
The Board also considered the expanded exchange privilege which will be
available to shareholders. The number of available funds that could be
exchanged into will increase from 4 to 56. Although the Eaton Vance family of
funds does not have funds with identical investment objectives and policies to
the Capstone funds, the Board believes the available choices are a substantial
improvement.
Based on their consideration, analysis and evaluation of the above factors
and other information deemed by them to be relevant to this Proposal, the
Fund's Board of Directors (including a majority of the Independent Directors)
have concluded that it would be in the best interests of the Fund and its
stockholders to approve a new investment policy and supplement to the
fundamental investment restrictions to enable the Fund to invest its
investable assets in the Portfolio.
VOTE REQUIRED TO APPROVE PROPOSAL 1
Approval by the stockholders of the Fund of the new investment policy and
supplement to its fundamental investment restrictions requires the affirmative
vote of a majority of the outstanding voting securities of the Fund which term
as used in this Proxy Statement means the vote of the lesser of (a) more than
50% of the outstanding shares of the Fund, or (b) 67% of the shares of the
Fund present at the meeting if the holders of more than 50% of the outstanding
shares of the Fund are present or represented by proxy at the meeting.
THE BOARD OF DIRECTORS OF THE FUND RECOMMENDS THAT THE STOCKHOLDERS OF THE
FUND VOTE TO APPROVE THIS PROPOSAL. Implementation of this Proposal is
dependent upon approval of Proposals 2(A), 2(B) and 3. In the event the
stockholders of the Fund fail to approve this Proposal, the Board has retained
G/A as the investment adviser for the Fund to manage the Fund's assets through
direct investments in securities, and the Fund's existing investment advisory
agreement would continue in effect in its current form.
PROPOSAL 2. AUTHORIZATION TO VOTE AT
MEETINGS OF PORTFOLIO INVESTORS
Stockholders of the Fund are being asked to vote on certain matters with
respect to the Portfolio because the Portfolio is expected to call a meeting
of its holders (including the Fund) to vote on such matters. Specifically, it
is expected that the Portfolio will ask its holders to vote at such meeting
to:
(A) Elect a board of trustees of the Portfolio; and
(B) Approve the Investment Advisory Agreement as set forth in Exhibit
A to this Proxy Statement between the Portfolio and its investment
adviser, G/A Capital Management, Inc.
The Fund will cast its votes at the meeting of holders of interests in the
Portfolio on each matter in the same proportion as the votes cast by the
Fund's stockholders. Based on the Fund's current net assets, it is anticipated
that the Fund will hold over 99% of the interests in the Portfolio when the
conversion occurs.
PROPOSAL 2(A). ELECTION OF TRUSTEES
OF THE PORTFOLIO
It is the present intention that, subject to shareholder approval of this
Proposal and Proposals 1, 2(B) and 3, the enclosed proxy will, unless
authority to vote for election of one or more nominees is specifically
withheld by executing the proxy in the manner stated thereon, be used for the
purpose of authorizing the Fund to vote in favor of the election of the
following six nominees indicated below as trustees of the Portfolio, to hold
office until their successors are elected and qualified. PLEASE NOTE THAT EACH
OF THE FOLLOWING NOMINEES IS PROPOSED TO SERVE AS A DIRECTOR OF THE FUND. The
nominee whose name is preceded by an asterisk(*) is an "interested person" (as
defined in the Act), by reason of his affiliation with the Eaton Vance
organization.
NAME AND PRINCIPAL OCCUPATIONS OVER
OTHER INFORMATION PAST FIVE YEARS
----------------- --------------------------
DONALD R. DWIGHT Mr. Dwight is President of Dwight Partners,
Age: 65; has been a Inc. (a corporate relations and communications
trustee since company) founded in 1988; Chairman of the
June 24, 1996. Board of Newspapers of New England, Inc.,
since 1982. He also serves as a Director,
Managing General Partner, Director General
Partner, or Trustee of seventy-nine investment
companies advised or administered by EVM or
its subsidiary, Boston Management and Research
("BMR").
*JAMES B. HAWKES President of the Portfolio and a Trustee since
Age: 54; has been a inception. Executive Vice President of Eaton
trustee since Vance Corp. ("EVC") (the parent of EVM), EVM
March 26, 1996. and EV, Inc. (a sister subsidiary of EVM) and
a Director of EVC and EV, Inc. He also serves
as a Director or Trustee and/or Officer of
seventy-two investment companies advised or
administered by EVM or BMR.
SAMUEL L. HAYES, III Dr. Hayes is the Jacob H. Schiff Professor of
Age: 61; has been a Investment Banking at Harvard Graduate School
trustee since of Business Administration. He also serves as
June 24, 1996. a Director, Managing General Partner, Director
General Partner, or Trustee of eighty-two
investment companies advised or administered
by EVM or BMR.
NORTON H. REAMER President and a Director of United Asset
Age: 60; has been a Management Corporation; Director, Chairman and
trustee since President of The Regis Fund, Inc., an open-end
June 24, 1996. mutual fund. He also serves as a Director,
Managing General Partner, Director General
Partner, or Trustee of seventy-nine investment
companies advised or administered by EVM or
BMR.
JOHN L. THORNDIKE Director of Fiduciary Company Incorporated in
Age: 69; has been a Boston, Massachusetts; a Trustee of the Boston
trustee since Symphony Orchestra. He also serves as a
June 24, 1996. Director, Managing General Partner, Director
General Partner, or Trustee of seventy-nine
investment companies advised or administered
by EVM or BMR.
JACK L. TREYNOR An investment adviser and consultant.
Age: 66; has been a Associate Professor of Finance, Loyola-
trustee since Marymount University, Los Angeles, California
June 24, 1996. (until May 1989). Mr. Treynor is also a member
of the Advisory Board of the Institute for
Quantitative Research in Finance. He also
serves as a Director, Managing General
Partner, Director General Partner, or Trustee
of seventy-seven investment companies advised
or administered by EVM or BMR.
As of July 18, 1996, no current or former trustee or officer of the
Portfolio, individually or as a group, directly or indirectly beneficially
owned more than 1% of the Fund's shares then outstanding.
It is not expected that any of the nominees referred to above will decline
or become unavailable for election, but in case this should happen, the
Portfolio may vote for a substitute nominee or nominees (unless authority to
vote for election of all nominees is specifically withheld by executing the
proxy in the manner stated thereon).
Messrs. Thorndike (Chairman), Hayes and Reamer serve as members of the
Special Committee of the board of trustees of the Portfolio. The purpose of
the Special Committee is to consider, evaluate and make recommendations to the
full Board concerning (i) all contractual arrangements with service providers
to the Portfolio, including advisory, administrative, custodial and fund
accounting services, and (ii) all other matters in which Eaton Vance, G/A or
their affiliates have any actual or potential conflict of interest with the
Portfolio or its interestholders.
The Nominating Committee is, and for at least three years after
implementation of Proposal 1 is expected to be, comprised of four trustees who
are not "interested persons" as that term is defined under the Act. The
Committee has four-year staggered terms, with one member rotating off the
committee to be replaced by another noninterested trustee. Messrs. Hayes
(Chairman), Reamer, Thorndike and Treynor are currently serving on the
committee. The purpose of the Committee is to recommend to the Board nominees
for the position of noninterested trustee and to assure that at least a
majority of the Board of Trustees is independent of G/A, Eaton Vance and their
affiliates. The Board will, when a vacancy exists or is anticipated, consider
any nominee for trustee recommended by a shareholder if such recommendation is
submitted to the board in writing and contains sufficient background
information concerning the individual to enable a proper judgment to be made
as to such individual's qualifications.
Messrs. Treynor (Chairman) and Dwight serve as members of the Audit
Committee of the board of trustees of the Portfolio. The Audit Committee's
functions include making recommendations to the board regarding the selection
of the independent public accountants, and reviewing with such accountants and
the Treasurer of the Portfolio matters relative to trading and brokerage
policies and practices, accounting and auditing practices and procedures,
accounting records, internal accounting controls, and the functions performed
by the custodian, transfer agent and dividend disbursing agent of the
Portfolio.
The fees and expenses of those trustees of the Portfolio who are not
members of the Eaton Vance organization or G/A will be paid by the Portfolio.
For the calendar year ending December 31, 1996, the proposed Directors of the
Fund will have earned the following compensation in their capacities as
trustees of the Portfolio and other funds in the Eaton Vance fund complex:
ESTIMATED RETIREMENT TOTAL
PORTFOLIO BENEFIT ACCRUED COMPENSATION
NAME COMPENSATION FROM COMPLEX FUND COMPLEX(1)
- ---- ------------ ------------ ---------------
Donald R. Dwight $30 $35,000 $135,000
Samuel L. Hayes, III 30 33,750 150,000
Norton H. Reamer 30 -0- 135,000
John L. Thorndike 30 -0- 140,000
Jack L. Treynor 30 -0- 140,000
- ----------
(1) The Eaton Vance fund complex consists of 211 registered investment
companies or series thereof.
Trustees of the Portfolio that are not affiliated with Eaton Vance may
elect to defer receipt of all or a percentage of their annual fees in
accordance with the terms of a Deferred Compensation Plan (the "Plan"). Under
the Plan, an eligible trustee may elect to have his deferred fees invested by
a Portfolio in the shares of one or more funds in the Eaton Vance family of
funds, and the amount paid to the trustees under the Plan will be determined
based upon the performance of such investments. Deferral of trustees' fees in
accordance with the Plan will have a negligible effect on a Portfolio's
assets, liabilities, and net income per share, and will not obligate the
Portfolio to retain the services of any trustee or obligate the Portfolio to
pay any particular level of compensation to the trustee.
It is estimated that the trustees, as a group, will receive approximately
$175 in compensation from the Fund and $450 from the Portfolio in the next
fiscal year of operations. Mr. Hawkes, a trustee of the Portfolio who is
affiliated with EVM, is compensated by EVM and does not and will not receive
fees or remuneration directly from the Fund or the Portfolio.
The Board of Directors of the Fund recommends that the stockholders of the
Fund vote to authorize the Fund to elect each nominee as a trustee of the
Portfolio at the meeting of the holders of interests in the Portfolio.
PROPOSAL 2(B). APPROVAL OF THE INVESTMENT ADVISORY
AGREEMENT WITH G/A CAPITAL MANAGEMENT, INC.
G/A Capital Management, Inc. ("G/A"), the Adviser of the Fund, will act as
investment adviser to the Portfolio pursuant to an Investment Advisory
Agreement between G/A and the Portfolio dated June 24, 1996 (the "Agreement"),
subject to approval of this Proposal and Proposals 1, 2(A) and 3.
G/A is located at 41 Madison Avenue, 40th Floor, New York, New York
10010-2202. G/A was incorporated in Delaware on February 24, 1989 and is
principally owned by Samuel D. Isaly, who serves as its President. Assuming
Proposal 1 is implemented, the Portfolio would be the only investment company
registered under the Act advised by G/A. Investment decisions for the
Portfolio would be made by Mr. Isaly as the portfolio manager. Mr. Isaly has
been active in international and health care investing throughout his career,
beginning at Chase Manhattan Bank in New York in 1968. He studied
international economics, mathematics and econometrics at Princeton and the
London School of Economics. His company, Gramercy Associates, was the first to
develop an integrated worldwide system of analysis on the 100 leading
worldwide pharmaceutical companies, with investment recommendations conveyed
to 50 leading financial institutions in the United States and Europe beginning
in 1982. Gramercy Associates was absorbed into S.G. Warburg & Company Inc. in
1986, where Mr. Isaly became a Senior Vice President. In July of 1989, Mr.
Isaly joined with Mr. Viren Mehta to found the partnership of Mehta and Isaly.
The operations of the combined effort (including G/A and affiliated entities)
are (1) to provide investment ideas to institutional investors on the subject
of worldwide health care, (2) to undertake cross-border merger and acquisition
projects in the industry and (3) to provide investment management services to
selected investors. G/A is registered with the Securities and Exchange
Commission as an investment adviser.
The Board of Directors of the Fund has reviewed the Agreement and
recommends that the stockholders of the Fund vote to authorize the Fund to
approve the Agreement entered into by the Portfolio at the meeting of holders
of interests in the Portfolio. A copy of the Agreement is attached hereto as
Exhibit A and the discussion of the Agreement herein is qualified in its
entirety by such Agreement.
The Agreement will remain in full force and effect through February 28,
1997, and will continue in full force and effect indefinitely thereafter, but
only so long as such continuance is specifically approved at least annually
(i) by the board of trustees of the Portfolio or by vote of a majority of the
outstanding voting securities (as defined in the Act) of the Portfolio, and
(ii) by the vote of a majority of those trustees of the Portfolio who are not
interested persons (as defined in the Act) of EVM, G/A or the Portfolio cast
in person at a meeting called for the purpose of voting on such approval.
Under the terms of the Agreement, the Portfolio will employ G/A to act as
investment adviser for and to manage the investment and reinvestment of the
assets of the Portfolio, subject to the supervision of its trustees. G/A will
furnish to the Portfolio investment advice and assistance, and investment
advisory, statistical and research facilities, and has arranged for certain
members of the G/A organization to serve without salary as officers of the
Portfolio.
In approving the Agreement for the Portfolio, the trustees of the
Portfolio have taken into account such factors and information as were deemed
by them to be relevant to G/A's investment advisory relationship with the
Portfolio. In their deliberations the trustees have considered: the
requirements and needs of the Portfolio for advisory services and facilities;
the nature, extent and quality of the advisory services and facilities
heretofore provided to the Fund; the ability of G/A's personnel; the fiduciary
duties and risks to be assumed by the G/A organization and its commitment to
provide advisory services and facilities to the Portfolio on a continuing
basis; the compensation and benefits which will be received by the G/A
organization pursuant to the Agreement; the necessity that G/A maintain its
ability to retain and attract capable personnel to service the Portfolio; the
continuance of appropriate incentives to assure that G/A will provide high
quality management and administrative services to the Portfolio; the revenues,
expenses, financial condition, stability and capabilities of G/A; the
investment performance of the Fund since its inception; the various investment
strategies and techniques to be employed by G/A to enhance the Portfolio's
investment performance; current developments and trends in the mutual fund and
financial services industries including the entry of large and highly
capitalized companies which are spending and appear to be prepared to continue
to spend substantial amounts to engage personnel and to provide services for
competing mutual funds; and other information and factors which the trustees
believed relevant to the matter.
Pursuant to the Agreement, G/A will provide the Portfolio with investment
research, advice and supervision, will furnish an investment program and will
determine what securities will be purchased, held or sold by the Portfolio and
what portion, if any, of the Portfolio's assets will be held uninvested. The
Agreement requires G/A to pay the salaries and fees of all officers of the
Portfolio who are members of the G/A organization and all personnel of G/A
performing services relating to research and investment activities. The
Agreement provides that the Portfolio will pay all its expenses other than
those expressly stated to be payable by G/A, which expenses payable by the
Portfolio will include, without implied limitation, (i) expenses of
maintaining the Portfolio and continuing its existence, (ii) registration of
the Portfolio under the Act, (iii) commissions, fees and other expenses
connected with the acquisition, holding and disposition of securities and
other investments, (iv) auditing, accounting and legal expenses, (v) taxes and
interest, (vi) governmental fees, (vii) expenses of issue, sale and redemption
of interests in the Portfolio, (viii) expenses of registering and qualifying
the Portfolio and interests in the Portfolio under federal and state
securities laws and of preparing and printing registration statements or other
offering statements or memoranda for such purposes and for distributing the
same to holders and investors, and fees and expenses of registering and
maintaining registrations of the Portfolio and of the Portfolio's placement
agent as broker-dealer or agent under state securities laws, (ix) expenses of
reports and notices to holders and of meetings of holders and proxy
solicitations therefor, (x) expenses of reports to governmental officers and
commissions, (xi) insurance expenses, (xii) association membership dues,
(xiii) fees, expenses and disbursements of custodians and subcustodians for
all services to the Portfolio (including without limitation safekeeping of
funds, securities and other investments, keeping of books, accounts and
records, and determination of net asset values, book capital account balances
and tax capital account balances), (xiv) fees, expenses and disbursements of
transfer agents, dividend disbursing agents, holder servicing agents and
registrars for all services to the Portfolio, (xv) expenses for servicing the
accounts of holders, (xvi) any direct charges to holders approved by the
trustees of the Portfolio, (xvii) compensation and expenses of trustees of the
Portfolio who are not members of G/A's organization, and (xviii) such non-
recurring items as may arise, including expenses incurred in connection with
litigation, proceedings and claims and the obligation of the Portfolio to
indemnify its trustees, officers and holders with respect thereto.
In consideration of the services, payments and facilities to be furnished
by G/A under the Agreement, the Portfolio will pay G/A a monthly advisory fee
as described under Proposal 1 above. Therefore, there will be no immediate
change in the schedule of advisory fee rates paid as a result of the
conversion of the Fund to the Hub and Spoke structure unless average daily net
assets reach $500 million in which case the fee rate on additional assets will
decline. After one year, however, the effective fee rate may either increase
or decline based upon investment performance relative to the S&P 500 as
described in Proposal 1.
The Agreement provides that it may be terminated at any time without
penalty on sixty days' notice by G/A or by the trustees of the Portfolio or by
vote of a majority of the outstanding voting securities of the Portfolio, and
that it shall automatically terminate in the event of its assignment. The
Agreement provides that G/A may render services to others and engage in other
business activities. The Agreement also provides that G/A shall be liable for
any loss incurred in connection with the performance of its duties, or action
taken or omitted under the Agreement in the absence of willful misfeasance,
bad faith or gross negligence in the performance of its duties or by reason of
its reckless disregard of its obligations and duties thereunder, or for any
losses which may be sustained in the acquisition, holding or disposition of
any security or other investment.
VOTE REQUIRED TO AUTHORIZE THE FUND TO
APPROVE THE INVESTMENT ADVISORY AGREEMENT
Authorization of the Fund to approve the Portfolio's investment advisory
agreement with G/A at the meeting of the holders of interests in the Portfolio
requires the affirmative vote of a majority of the outstanding voting
securities of the Fund as defined in Proposal 1.
THE BOARD OF DIRECTORS OF THE FUND RECOMMENDS THAT THE STOCKHOLDERS OF THE
FUND VOTE TO APPROVE THIS PROPOSAL. In the event that the stockholders of the
Fund fail to approve this Proposal, the Directors of the Fund will consider
what further action should be taken.
PROPOSAL 3. ELECTION OF DIRECTORS
It is the present intention that, subject to shareholder approval of this
Proposal and Proposals 1, 2(A), and 2(B), the enclosed proxy will, unless
authority to vote for election to office is specifically withheld by executing
the proxy in the manner stated thereon, be used for the purpose of voting to
fix the number of Directors for the ensuing year at six, and of voting in
favor of the election of the nominees named below until their successors are
elected and qualified. The nominee whose names is preceded by an asterisk(*)
is an "interested person" (as defined in the Act) by reason of his
affiliations with Eaton Vance. The biographical information as to each nominee
is provided under Proposal 2(A).
NOMINEES FOR DIRECTORS
Donald R. Dwight
*James B. Hawkes
Samuel L. Hayes, III
Norton H. Reamer
John L. Thorndike
Jack L. Treynor
As of July 18, 1996, the proposed Directors of the Fund beneficially owned
shares constituting less than 1% of the outstanding shares of the Fund.
It is not expected that any of the nominees referred to above will decline
or become unavailable for election, but in case this should happen, the
discretionary power given in the proxy may be used to vote for a substitute
nominee or nominees or to vote to fix the number of Directors for the ensuing
year at less than six (unless authority to vote for election of all nominees
is specifically withheld by executing the proxy in the manner stated thereon).
Eaton Vance has undertaken to use its best efforts to ensure that for at least
three years after implementation of Proposal 1 at least 75% of the directors
will not be "interested persons" of the Eaton Vance organization or of G/A.
In recommending a change in the Board, the existing Board of Directors
considered various factors, including the substantial knowledge and experience
the nominees have with the master-feeder structure and the Eaton Vance
organization. The existing Directors have resigned subject to implementation
of Proposals 1, 2A and 2B and the election of their successors. The existing
Directors and executive officers are (with share ownership as of July 18,
1996):
PERCENTAGE
OWNERSHIP
NAME AND OF SHARES PRINCIPAL OCCUPATION
OTHER INFORMATION OUTSTANDING OVER PAST FIVE YEARS
----------------- ----------- --------------------
*SAMUEL D. ISALY 2.48% Chairman of the Board and
Age: 51; director President. President of G/A
since 1989. Capital Management, Inc.
since 1989; formerly Senior
Vice President of S.G.
Warburg & Co., Inc. from
1986 through 1989 and
President of Gramercy
Associates, a health care
industry consulting firm,
from 1983 through 1986.
JOHN J. MAGGIO, D.O. 0.06% Director and Chairman of the
Age: 53; director Department of Obstetrics and
since 1989. Gynecology at St. Clare's
Hospital since 1982;
Clinical Associate Professor
of Surgery at New York
Medical College since 1982;
and Clinical Associate
Professor of Obstetrics and
Gynecology at New York
College of Osteopathic
Medicine since 1986.
PHILIP C. SMITH 0.00% Private investor. Director
Age: 90; director of other Capstone Funds and
since 1989. Lexington Mutual Funds.
EUGENE E. 0.30% Private medical practice
WEISE, M.D., P.C. since 1972; formerly
Age: 57; director Assistant Professor of
since 1989. Ophthalmology at Cornell
University School of
Medicine from 1974 through
1987.
- ------------
*May be deemed to be an "interested person" of the Fund as that term is
defined in the Investment Company Act of 1940 because of his or her
relationship to G/A or Capstone.
*EDWARD L. JAROSKI 0.01% Vice President. Chairman of
Age: 49. the Board and Director of
the Administrator since
1987; President and Director
of the Distributor since
1987; President and Director
of Capstone Financial
Services, Inc. since 1987;
Director/Trustee and Officer
of other Capstone Funds.
*IRIS R. CLAY 0.00% Secretary. Assistant
Age: 44. Secretary of Capstone
Financial Services, Inc.
since 1990; formerly
Compliance Analyst with
Capstone.
*LINDA G. GIUFFRE 0.00% Treasurer. Treasurer of
Age: 34. Capstone Financial Services,
Inc. since 1990; Treasurer
of other Capstone Funds;
formerly Transfer Agent
Manager with Capstone
Financial Services, Inc.
from 1987 through 1990;
Accounting Supervisor with
Tenneco Financial Services,
Inc. from 1984 through 1987.
- ------------
*May be deemed to be an "interested person" of the Fund as that term is
defined in the Investment Company Act of 1940 because of his or her
relationship to G/A or Capstone.
Each Director not affiliated with G/A is entitled to $250 for each Board
meeting attended, and is paid a $500 annual retainer by the Fund. The
Directors and officers of the Fund are also reimbursed for expenses incurred
in attending meetings of the Board of Directors. For the fiscal year ending
August 31, 1996, the Fund has paid or accrued for the account of its Directors
and officers, as a group for services in all capacities, a total of $4,250.
The following table represents the fees paid or accrued during the fiscal
year ending August 31, 1996 to the directors of the Fund and their total
fiscal year compensation from the Capstone Funds complex.
AGGREGATE TOTAL
COMPENSATION COMPENSATION
NAME ------------ FROM COMPLEX
- ---- FROM FUND ------------
Dr. John J. Maggio $1,500 $1,500
Philip C. Smith 1,500 8,250
Dr. Eugene E. Weise 1,250 1,250
Messrs. Maggio, Smith and Weise serve as members of the audit and nominating
committees. During the current fiscal year, the audit committee had one
meeting and the nominating committee had no meetings. Each Director attended
at least 75% of all Board and committee meetings for the year ended August 31,
1995.
4. RATIFICATION OF SELECTION OF ACCOUNTANTS
OF THE FUND
A majority of the members of each Board of Directors who are not
interested persons of a Fund have selected Tait, Weller & Baker, Two Penn
Center Plaza, Suite 700, Philadelphia, PA 191092-1707, as independent
certified public accountants to sign or certify any financial statements which
may be filed by the Fund with the Securities and Exchange Commission in
respect of all or any part of the Fund's fiscal year ending August 31, 1996,
the employment of such accountants being expressly conditioned upon the right
of the Fund, by vote of a majority of the outstanding capital stock at any
meeting called for the purpose, to terminate such employment forthwith without
any penalty. Such selection was made pursuant to provisions of Section 32(a)
of the Act, and is subject to ratification or rejection by the stockholders at
this meeting. The Fund is informed that no member of Tait, Weller & Baker has
any direct or material indirect interest in the Fund.
The Fund's independent certified public accountants provide customary
professional services in connection with the audit function for a management
investment company such as the Fund, including services leading to the
expression of opinions on the financial statements included in the Fund's
annual report to stockholders, opinions on financial statements and other data
included in the Fund's annual report to the Securities and Exchange
Commission, opinions on financial statements included in amendments to the
Fund's registration statement, and preparation of the Fund's federal tax
returns. The nature and scope of the professional services of the accountants
have been approved by the Fund's Board of Directors, which has considered the
possible effect thereof on the independence of the accountants.
Representatives of Tait, Weller & Baker are not expected to be present at
the meeting but have been given the opportunity to make a statement if they so
desire and will be available should any matter arise requiring their presence.
It is intended that proxies not limited to the contrary will be voted in
favor of ratifying the selection of Tait, Weller & Baker, as the independent
certified public accountants to be employed by the Fund to sign or certify
financial statements required to be signed or certified by independent public
accountants and filed with the Securities and Exchange Commission in respect
of all or part of the fiscal year ending August 31, 1996.
PROPOSAL 5. TO APPROVE THE ELIMINATION,
RECLASSIFICATION AND AMENDMENT OF THE FUND'S
INVESTMENT OBJECTIVES AND CERTAIN FUNDAMENTAL INVESTMENT POLICIES
The Act requires a registered investment company like the Fund to have
certain specific investment policies which can be changed only by a
shareholder vote. Investment companies may also elect to designate other
policies which may be changed only by a shareholder vote. Both types of
policies are often referred to as "fundamental" policies. (In this Proxy
Statement, the word "restriction" is sometimes used to describe a policy.)
Some fundamental policies have been adopted in the past by the Fund to reflect
certain regulatory, business or industry conditions which are no longer in
effect. Accordingly, the Board of Directors has approved the simplification
and modernization of those policies which are required to be fundamental, and
the elimination as fundamental any policies which are not required to be
fundamental under the positions of the staff of the Securities and Exchange
Commission in interpreting the Act, in which case, depending on the
circumstances, the policy would be reclassified as a nonfundamental policy in
the same or a modified form, or eliminated. The revised policies must also be
in conformity with state securities ("Blue Sky") laws. Nonfundamental policies
can be changed by the Directors without stockholder approval. Revision of
fundamental policies have been approved by shareholders of numerous other
funds administered by EVM, and if these revisions are approved then the
uniformity of such policies would serve to facilitate EVM's compliance
efforts.
This Proposal seeks stockholder approval of changes which are intended to
accomplish the foregoing goals. THE PROPOSED CHANGES WILL NOT CAUSE A
RESTRUCTURING OF FUND HOLDINGS OR AFFECT CURRENT MANAGEMENT OF THE FUND'S
PORTFOLIO. The proposed changes to the fundamental policies are discussed in
detail below. The Fund's current policies are set forth in its prospectus and
statement of additional information. Please refer to the changes to the
policies as set forth in Exhibit B (which does not include the additional
fundamental investment provision to be added if Proposal 1 is approved). By
reducing to a minimum those policies which can be changed only by stockholder
vote, the Fund may be able to avoid the costs and delay associated with future
stockholder meetings and the Board of Directors believes that G/A's ability to
manage the Fund's portfolio in a changing regulatory or investment environment
will be enhanced. Accordingly, investment management opportunities will be
increased. The references to the Fund's investment restrictions correspond to
the paragraphs in Exhibit B. If this Proposal is approved, the restrictions
would be reordered.
RECLASSIFICATION AND AMENDMENT OF INVESTMENT OBJECTIVES AND
BASIC INVESTMENT POLICIES
The Fund's present investment objectives and basic investment policies are
as follows: "The Fund's primary objective is long-term growth of capital, a
goal it seeks by investing primarily in common stocks and securities
(including debt and warrants) convertible into common stocks, of domestic and
foreign companies engaged in medical research and the health care industry.
Such companies obtain at least fifty percent of their profits and revenues
from medical research or health care products or services. Current income is a
secondary objective. Except during temporary defensive periods, not less than
65% of the Fund's total assets will be invested in the securities of companies
primarily engaged in medical research and the health care industry, and,
except during temporary defensive periods, the Fund would normally expect at
least 80% of its total assets to be so invested. As a diversified investment
company, at least 75% of the Fund's total assets are required to be invested
in securities limited in respect of any one issuer to not more than 5% of the
Fund's total assets and to not more than 10% of the issuer's voting
securities."
It is proposed that the Fund's investment objectives be modified to
express more explicitly the focus on investing in stocks of health science
companies which in today's market generally pay little or no dividends. The
proposed new objective is: "long-term capital growth by investing in a global
and diversified portfolio of securities of health science companies." This
objective would remain fundamental. Similarly, the 75% diversification
restriction would be retained as fundamental. The remaining policies would
become "nonfundamental" and would be revised to be as follows: "The Fund
invests in a global and diversified portfolio of securities of health science
companies. These companies principally are engaged in the development,
production or distribution of products or services related to scientific
advances in healthcare, including biotechnology, diagnostics, managed
healthcare and medical equipment and supplies, and pharmaceuticals. At the
time the Fund makes an investment, 50% or more of such a company's sales,
earnings or assets will arise from or will be dedicated to the application of
scientific advances related to healthcare. Under normal market conditions, the
Fund will invest as least 65% of its total assets in securities of health
science companies, including common and preferred stocks; equity interests in
partnerships; convertible preferred stocks; and other convertible
instruments". These changes would be made to improve the marketing appeal of
the Fund. THE PROPOSED CHANGES WOULD NOT AFFECT CURRENT PORTFOLIO MANAGEMENT.
Consistent with these changes and the inclusion of the Fund in the Eaton
Vance family of funds, the Board of Directors will change the name of the Fund
to "EV Traditional Worldwide Health Sciences Fund, Inc." effective upon
implementation of Proposal 1.
ELIMINATION OF CERTAIN RESTRICTIONS
The Board of Directors proposes to delete Restriction (4) and most of
Restriction (13) because such restrictions are not required to be fundamental
policies under the Act or state "Blue Sky" laws and/or the practices referred
to therein are otherwise governed by the Act.
Restriction (4) concerning investment in other investment companies
prohibits the Fund from investing in securities of other investment companies
and investment funds. Investment in other investment companies is regulated by
the Act and this restriction does not contain all of the provisions in the Act
regarding such investments.
The latter part of Restriction (13) concerning pledging, mortgaging or
hypothecating the assets of the Fund is being deleted as pledging restrictions
are no longer required by state law. Restriction (6), as revised, contains
limitations on leverage.
RECLASSIFICATION OF CERTAIN RESTRICTIONS
The Board of Directors also proposes that Restrictions (7), (8), (9),
(10), (14), and (17) and part of Restriction (16) be eliminated as
fundamental, but be retained as nonfundamental policies of the Fund (which
could be thereafter changed or eliminated by Director vote). Each of these
restrictions is required under various state "Blue Sky" laws and/or federal
laws, but are not required to be fundamental policies of the Fund.
Restriction (7) concerning investment in affiliated issuers prohibits the
Fund from purchasing a security where individuals affiliated with the Fund
beneficially own more than 5% of that security. The securities laws have
numerous prohibitions on affiliated transactions and the restriction need not
be fundamental.
Restriction (8) concerning investing for control prohibits the Fund from
investing for control or management of other companies. Such investments would
be difficult because of the Act's diversification requirements contained in
Restrictions (10) and (11), and are regulated by the Act's provisions on
affiliated transactions. Because the Fund focuses on health science companies,
amendment of the restriction if reclassified may be advisable in the future.
G/A is considering recommending a change to this restriction if it is made
nonfundamental. Such a change may increase investment risk and is subject to
Board approval.
Restriction (9) concerns investing in options and futures contracts. These
transactions are of increasing use to portfolio management and any future need
to permit greater use of them with appropriate prospectus disclosure, would be
facilitated by making this restriction nonfundamental.
Restriction (10) concerning warrants and the middle part of Restriction
(16) concerning investment in oil, gas and similar programs are not required
to be fundamental investment policies. No amendment is being proposed.
Restriction (14) concerning investment in restricted securities is
consistent (as revised) with the current position of the staff of the
Securities and Exchange Commission. The flexibility afforded to amend this
restriction by making it nonfundamental may be useful for a health science
fund.
Restriction (17) concerns investments in unseasoned issuers with less than
three years continuous operation. This restriction is overly burdensome for a
health science fund and has been amended to permit 5% of total assets to be so
invested.
As a result of this proposed reclassification of certain investment
restrictions as nonfundamental, a future change in any of these restrictions
could be effected by the Directors without stockholder approval if the
Directors determined that such change was appropriate and desirable. The Board
of Directors has no present expectation that the foregoing restrictions which
would be reclassified would be amended or eliminated, although G/A may request
Restriction (8) be revised. The Directors believe, however, that this
reclassification of restrictions will permit the Fund to respond more rapidly
to future changes in the Fund's competitive and regulatory environment.
AMENDMENT OF CERTAIN RESTRICTIONS
The Board of Directors also proposes the amendment of seven fundamental
policies.
Restriction (1) concerning underwriting is being amended to conform the
wording to that of other Eaton Vance administered funds. There is no
substantive change.
Restriction (2) concerning investments in real estate is being amended in
order to expressly permit the Fund to invest in securities secured by real
estate and securities of companies which invest or deal in real estate, both
of which were previously implied.
Restriction (3) concerning lending has been amended to reflect current
regulatory restraints and recent changes to the lending policy of other Eaton
Vance administered funds. The Fund has no current expectation to lend
securities and is constrained by regulation as to the extent it could do so.
The first part of Restriction (5) concerning short sales has been revised
to permit the Fund to engage in such transactions if they are "against the
box." In a short sale, the Fund would sell a borrowed security with a
corresponding obligation to return the same security. The revision would
permit such transactions only if the Fund owns or has the right to acquire the
relevant security. Such transactions are not currently contemplated and would
be engaged in only if the prospectus is revised. The latter part of
Restriction (5) concerning margin transactions has been clarified to permit
expressly ordinary securities settlements practices.
Restrictions (6) and (13) concerning senior securities and borrowing have
been revised by permitting borrowing and the issuance of senior securities
consistent with the Act. The positions of staff of the Securities and Exchange
Commission on borrowings and senior securities have evolved in recent years
with the development of new investment strategies, such as reverse repurchase
agreements and futures transactions. The Fund would like the ability to
consider use of new investment techniques consistent with the Act as
interpretations of the Act are further developed.
Finally, the wording of Restriction (16) with respect to commodities is
being amended to limit the exception to financial futures contracts, which was
previously implied.
VOTE REQUIRED TO APPROVE PROPOSAL 5
Approval of each item in this Proposal requires the affirmative vote of a
majority of the outstanding voting securities of the Fund as defined under
Proposal 1. Implementation of this Proposal is not dependent upon any other
proposal herein.
The Board of Directors has considered various factors and believes that
this Proposal will increase investment management flexibility and is in the
best interests of the Fund's stockholders. If the Proposal is not approved,
the Fund's present objectives and fundamental policies and restrictions will
remain in effect and a stockholder vote would be required before the Fund
could engage in activities prohibited by a fundamental restriction. The Board
of Directors recommends that the stockholders vote in favor of the
elimination, reclassification and amendment of the Fund's investment
objectives and restrictions as described above.
NOTICE TO BANKS AND BROKER/DEALERS
The Fund has previously solicited all Nominee and Broker/Dealer accounts
as to the number of additional proxy statements required to supply owners of
shares. Should additional proxy material be required for beneficial owners,
please forward such requests to: Management Information Systems, Inc., 61
Accord Park Drive, Norwell, MA 02061.
ADDITIONAL INFORMATION
The expense of preparing, printing and mailing this Proxy Statement and
enclosures and the cost of soliciting proxies on behalf of the Board of
Directors of the Fund will be borne by Eaton Vance. Proxies will be solicited
by mail and may be solicited in person or by telephone or telegraph by
officers of the Fund, by personnel of G/A, EVM, by broker-dealer firms or by
Management Information Systems, Inc., a professional solicitation
organization. The expenses connected with the solicitation of these proxies
and with any further proxies which may be solicited by the Fund's officers, by
EVM's personnel or by broker-dealer firms, in person, by telephone or by
telegraph will be borne by Eaton Vance. EVM will reimburse banks, broker-
dealer firms, and other persons holding shares registered in their names or in
the names of their nominees, for their expenses incurred in sending proxy
material to and obtaining proxies from the beneficial owners of such shares.
All proxy cards solicited by the Board of Directors that are properly
executed and received by the tabulator prior to the meeting, and which are not
revoked, will be voted at the meeting. Shares represented by such proxies will
be voted in accordance with the instructions thereon. If no specification is
made on the proxy card, it will be voted for the matters specified on the
proxy card. All proxies not voted will not be counted toward establishing a
quorum. Broker non-votes will be counted toward establishing a quorum and for
determining whether sufficient votes have been received for approval of the
Proposal to be acted upon. Stockholders should note that while votes to
abstain will count toward establishing a quorum, passage of any Proposal being
considered at the meeting will occur only if a sufficient number of votes are
cast for the Proposal. Accordingly, votes to abstain, broker non-votes and
votes against will have the same effect in determining whether a Proposal is
approved.
In the event that sufficient votes by the stockholders of the Fund in
favor of any Proposal set forth in the Notice of this meeting are not received
by August 29, 1996, the persons named as attorneys in the enclosed proxy may
propose one or more adjournments of the meeting to permit further solicitation
of proxies. A stockholder vote may be taken on one or more of the Proposals in
this Proxy Statement prior to such adjournment if sufficient votes have been
received and it is otherwise appropriate. Any such adjournment will require
the affirmative vote of the holders of a majority of the shares present in
person or by proxy at the session of the meeting to be adjourned. The persons
named as attorneys in the enclosed proxy will vote in favor of such
adjournment those proxies which they are entitled to vote in favor of the
Proposal for which further solicitation of proxies is to be made. They will
vote against any such adjournment those proxies required to be voted against
such Proposal. The costs of any such additional solicitation and of any
adjourned session will be borne by the Fund.
Consistent with applicable law, the Fund does not hold annual
stockholders' meetings. Stockholders wishing to submit proposals for inclusion
in a proxy statement for a subsequent meeting should send their proposal to
the Secretary of the Fund. Proposals must be received in advance of a proxy
solicitation to be included and the mere submission of a proposal does not
guarantee inclusion in the proxy statement because certain federal securities
law rules must be complied with.
THE FUND WILL FURNISH, WITHOUT CHARGE, A COPY OF THE FUND'S ANNUAL REPORT
AND ITS MOST RECENT SEMI-ANNUAL REPORT SUCCEEDING THE ANNUAL REPORT TO ANY
STOCKHOLDER UPON REQUEST. STOCKHOLDERS DESIRING TO OBTAIN A COPY OF SUCH
REPORTS SHOULD DIRECT ALL WRITTEN REQUESTS TO: CAPSTONE ASSET MANAGEMENT
COMPANY, 5847 SAN FELIPE, SUITE 4100, HOUSTON, TEXAS 77057, OR SHOULD CALL
CAPSTONE AT 1-800-262-6631.
MEDICAL RESEARCH INVESTMENT FUND, INC.
August 2, 1996
EXHIBIT A
WORLDWIDE HEALTH SCIENCES PORTFOLIO
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 24th day of June, 1996, between Worldwide Health
Sciences Portfolio, a New York trust (the "Trust") and G/A Capital Management,
Inc., a Delaware corporation (the "Adviser").
1. Duties of the Adviser. The Trust hereby employs the Adviser to act as
investment adviser for and to manage the investment and reinvestment of the
assets of the Trust, subject to the supervision of the Trustees of the Trust,
for the period and on the terms set forth in this Agreement.
The Adviser hereby accepts such employment and undertakes to afford to the
Trust the advice and assistance of the Adviser's organization in the choice of
investments and in the purchase and sale of securities for the Trust and to
furnish for the use of the Trust office space and all necessary office
facilities, equipment and personnel for servicing the investments of the Trust
and to pay the salaries and fees of all officers and Trustees of the Trust who
are members of the Adviser's organization and all personnel of the Adviser
performing services relating to research and investment activities. The
Adviser shall for all purposes herein be deemed to be independent contractors
and shall, except as otherwise expressly provided or authorized, have no
authority to act for or represent the Trust in any way or otherwise be deemed
an agent of the Trust.
The Adviser shall provide the Trust with such investment management and
supervision as the Trust may from time to time consider necessary for the
proper supervision of the Trust. As investment adviser to the Trust, the
Adviser shall furnish continuously an investment program and shall determine
from time to time what securities and other investments shall be acquired,
disposed of or exchanged and what portion of the Trust's assets shall be held
uninvested, subject always to the applicable restrictions of the Declaration
of Trust, By-Laws and registration statement of the Trust under the Investment
Company Act of 1940, all as from time to time amended. Should the Trustees of
the Trust at any time, however, make any specific determination as to
investment policy for the Trust and notify the Adviser thereof in writing, the
Adviser shall be bound by such determination for the period, if any, specified
in such notice or until similarly notified that such determination has been
revoked. The Adviser shall take, on behalf of the Trust, all actions which
they deem necessary or desirable to implement the investment policies of the
Trust.
The Adviser shall place all orders for the purchase or sale of portfolio
securities for the account of the Trust either directly with the issuer or
with brokers or dealers selected by the Adviser, and to that end the Adviser
is authorized as the agent of the Trust to give instructions to the custodian
of the Trust as to deliveries of securities and payments of cash for the
account of the Trust. In connection with the selection of such brokers or
dealers and the placing of such orders, the Adviser shall use its best efforts
to seek to execute security transactions at prices which are advantageous to
the Trust and (when a disclosed commission is being charged) at reasonably
competitive commission rates. In selecting brokers or dealers qualified to
execute a particular transaction, brokers or dealers may be selected who also
provide brokerage and research services (as those terms are defined in Section
28(e) of the Securities Exchange Act of 1934) to the Adviser and the Adviser
is expressly authorized to pay any broker or dealer who provides such
brokerage and research services a commission for executing a security
transaction 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 amount of commission is reasonable in
relation to the value of the brokerage and research services provided by such
broker or dealer, viewed in terms of either that particular transaction or the
overall responsibilities which the Adviser and its affiliates have with
respect to accounts over which they exercise investment discretion. Subject to
the requirement set forth in the second sentence of this paragraph, the
Adviser is authorized to consider, as a factor in the selection of any broker
or dealer with whom purchase or sale orders may be placed, the fact that such
broker or dealer has sold or is selling shares of any one or more investment
companies sponsored by the Adviser, Eaton Vance Management or their affiliates
or shares of any other investment company investing in the Trust.
The Adviser shall not be responsible for providing certain special
administrative services to the Trust under this Agreement. Eaton Vance
Management, in its capacity as Administrator of the Trust, shall be
responsible for providing such services to the Trust under the Trust's
separate Administration Agreement with the Administrator.
2. Compensation of the Adviser. For the services, payments and
facilities to be furnished hereunder by the Adviser, the Adviser shall be
entitled to receive from the Trust a fee computed daily and payable monthly at
an annual rate of 1.00% of the Trust's average daily net assets up to $30
million of such assets, 0.90% of the next $20 million of such assets, and
0.75% on such assets in excess of $50 million. For assets of $500 million and
more, the advisory fee is as follows:
ANNUAL
AVERAGE DAILY NET ASSETS ASSET RATE
- ------------------------ ----------
$500 million but less than $1 billion ......................... 0.70%
$1 billion but less than $1.5 billion ......................... 0.65%
$1.5 billion but less than $2 billion ......................... 0.60%
$2 billion but less than $3 billion ........................... 0.55%
$3 billion and over ........................................... 0.50%
After 12 months, the basic advisory fee is subject to upward or downward
adjustment depending upon whether, and to what extent, the investment
performance of the Trust differs by at least one percentage point from the
record of the Standard & Poor's Index of 500 Common Stocks over the same
period. Each percentage point difference is multiplied by a performance
adjustment rate of 0.025%. The maximum adjustment plus/minus is 0.25%. One
twelfth (1/12) of this adjustment is applied each month to the average daily
net assets of the Trust over the entire performance period. This adjustment
shall be based on a rolling period of up to and including the most recent 36
months. Trust performance shall be total return as computed under Rule 482
under the Securities Act of 1933.
Such advisory fee shall be paid monthly in arrears on the last business
day of each month. The Trust's net asset value shall be computed in accordance
with the Declaration of Trust of the Trust and any applicable votes and
determinations of the Trustees of the Trust. In case of initiation or
termination of the Agreement during any month, the fee for that month shall be
based on the number of calendar days during which it is in effect.
The Adviser may, from time to time, waive all or a part of the above
compensation to which it is entitled hereunder.
3. Allocation of Charges and Expenses. It is understood that the Trust
will pay all expenses other than those expressly stated to be payable by the
Adviser hereunder, which expenses payable by the Trust shall include, without
implied limitation, (i) expenses of maintaining the Trust and continuing its
existence, (ii) registration of the Trust under the Investment Company Act of
1940, (iii) commissions, fees and other expenses connected with the
acquisition, holding and disposition of securities and other investments, (iv)
auditing, accounting and legal expenses, (v) taxes and interest, (vi)
governmental fees, (vii) expenses of issue, sale, and redemption of Interests
in the Trust, (viii) expenses of registering and qualifying the Trust and
Interests in the Trust under federal and state securities laws and of
preparing and printing registration statements or other offering statements or
memoranda for such purposes and for distributing the same to Holders and
investors, and fees and expenses of registering and maintaining registrations
of the Trust and of the Trust's placement agent as broker-dealer or agent
under state securities laws, (ix) expenses of reports and notices to Holders
and of meetings of Holders and proxy solicitations therefor, (x) expenses of
reports to governmental officers and commissions, (xi) insurance expenses,
(xii) association membership dues, (xiii) fees, expenses and disbursements of
custodians and subcustodians for all services to the Trust (including without
limitation safekeeping of funds, securities and other investments, keeping of
books, accounts and records, and determination of net asset values, book
capital account balances and tax capital account balances), (xiv) fees,
expenses and disbursements of transfer agents, dividend disbursing agents,
Holder servicing agents and registrars for all services to the Trust, (xv)
expenses for servicing the account of Holders, (xvi) any direct charges to
Holders approved by the Trustees of the Trust, (xvii) compensation and
expenses of Trustees of the Trust who are not members of one of the Adviser's
organization, and (xviii) such non-recurring items as may arise, including
expenses incurred in connection with litigation, proceedings and claims and
the obligation of the Trust to indemnify its Trustees, officers and Holders
with respect thereto.
4. Other Interests. It is understood that Trustees and officers of the
Trust and Holders of Interests in the Trust are or may be or become interested
in the Adviser as trustees, shareholders or otherwise and that trustees,
officers and shareholders of the Adviser are or may be or become similarly
interested in the Trust, and that the Adviser may be or become interested in
the Trust as Holder or otherwise. It is also understood that trustees,
officers, employees and shareholders of the Adviser may be or become
interested (as directors, trustees, officers, employees, shareholders or
otherwise) in other companies or entities (including, without limitation,
other investment companies) which the Adviser or Eaton Vance Management may
organize, sponsor or acquire, or with which it may merge or consolidate, and
that the Adviser or its subsidiaries or affiliates may enter into advisory or
management agreements or other contracts or relationships with such other
companies or entities.
5. Limitation of Liability of the Adviser. The services of the Adviser
to the Trust are not to be deemed to be exclusive, the Adviser being free to
render services to others and engage in other business activities. In the
absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of obligations or duties hereunder on the part of the Adviser, the
Adviser shall not be subject to liability to the Trust or to any Holder of
Interests in the Trust for any act or omission in the course of, or connected
with, rendering services hereunder or for any losses which may be sustained in
the acquisition, holding or disposition of any security or other investment.
6. Sub-Investment Adviser. The Adviser may employ one or more sub-
investment advisers from time to time to perform such of the acts and services
of the Adviser, including the selection of brokers or dealers to execute the
Trust's portfolio security transactions, and upon such terms and conditions as
may be agreed upon between the Adviser and such investment adviser and
approved by the Trustees of the Trust, all as permitted by the Investment
Company Act of 1940.
7. Duration and Termination of this Agreement. This Agreement shall
become effective upon the date of its execution, and, unless terminated as
herein provided, shall remain in full force and effect through and including
February 28, 1997 and shall continue in full force and effect indefinitely
thereafter, but only so long as such continuance after February 28, 1997 is
specifically approved at least annually (i) by the Board of Trustees of the
Trust or by vote of a majority of the outstanding voting securities of the
Trust and (ii) by the vote of a majority of those Trustees of the Trust who
are not interested persons of the Adviser or the Trust cast in person at a
meeting called for the purpose of voting on such approval.
Any party hereto may, at any time on sixty (60) days' prior written notice
to the others, terminate that party's obligations hereunder, or, in the case
of the Trust, terminate this Agreement in its entirety, without the payment of
any penalty, by action of Trustees of the Trust or the trustees or directors
of the Adviser, as the case may be, and the Trust may, at any time upon such
written notice to the Adviser, terminate this Agreement with respect to the
Adviser by vote of a majority of the outstanding voting securities of the
Trust. This Agreement shall terminate automatically in the event of its
assignment.
8. Amendments of the Agreement. This Agreement may be amended by a
writing signed by all parties hereto, provided that no amendment to this
Agreement shall be effective until approved (i) by the vote of a majority of
those Trustees of the Trust who are not interested persons of an Adviser or
the Trust cast in person at a meeting called for the purpose of voting on such
approval, and (ii) by vote of a majority of the outstanding voting securities
of the Trust.
9. Limitation of Liability. The Adviser expressly acknowledges the
provision in the Declaration of Trust of the Trust (Section 5.2 and 5.6)
limiting the personal liability of the Trustees and officers of the Trust, and
the Adviser hereby agrees that it shall have recourse to the Trust for payment
of claims or obligations as between the Trust and the Adviser arising out of
this Agreement and shall not seek satisfaction from any Trustee or officer of
the Trust.
10. Certain Definitions. The terms "assignment" and "interested persons"
when used herein shall have the respective meanings specified in the
Investment Company Act of 1940 as now in effect or as hereafter amended
subject, however, to such exemptions as may be granted by the Securities and
Exchange Commission by any rule, regulation or order. The term "vote of a
majority of the outstanding voting securities" shall mean the vote, at a
meeting of Holders, of the lesser of (a) 67 per centum or more of the
Interests in the Trust present or represented by proxy at the meeting if the
Holders of more than 50 per centum of the outstanding Interests in the Trust
are present or represented by proxy at the meeting, or (b) more than 50 per
centum of the outstanding Interests in the Trust. The terms "Holders" and
"Interests" when used herein shall have the respective meanings specified in
the Declaration of Trust of the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the day and year first above written.
WORLDWIDE HEALTH SCIENCES PORTFOLIO
By: /s/ James B. Hawkes
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President
G/A CAPITAL MANAGEMENT, INC.
By: /s/ Samuel D. Isaly
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President
EXHIBIT B
INVESTMENT RESTRICTIONS
[Proposed Additions in Italics and Proposed Deletions in Brackets]
As a matter of fundamental policy, the Fund may not:
1. [Act as an underwriter of] Underwrite securities of other issuers
[within the meaning of the Securities Act of 1933 except insofar
as it might be deemed to be an underwriter upon disposition of
certain portfolio securities acquired within the limitation on
purchases of restricted securities];
2. [Engage] Invest in [the purchase or sale of interests in] real
estate including interests in real estate limited partnerships
(although it may purchase and sell securities which are secured by
real estate and securities of companies which invest or deal in
real estate) [or real estate mortgage loans];
3. Make loans to any person, except by (a) [that the Fund may
purchases or hold] the acquisition of debt securities and making
portfolio investments [instruments in accordance with its
investment objectives and policies, and may enter] (b) entering
into repurchase agreements and (c) lending portfolio securities;
4. [Acquire securities of other investment companies registered under
the Investment Company Act of 1940, except in connection with a
merger, consolidation, reorganization or acquisition of assets];
5. Sell securities short unless at all times when a short position is
open the Fund either owns an equal amount of such securities or
owns securities convertible into or exchangeable, without payment
of any further consideration, for securities of the same issue as,
and equal in amount to, the securities sold short, or purchase any
securities on margin except that the Fund may obtain such short-
term credits as may be necessary for the clearance of purchases
and sales of securities [may enter into futures contracts and
related options];
6. Issue any senior securities except as permitted by the Investment
Company Act of 1940 [that the Fund may enter into futures
contracts and related options];
7. *Purchase or retain the securities of any issuer if to the
knowledge of the Fund any officer or director of the Fund or of
its investment adviser own beneficially more than 1/2 of 1% of
the outstanding securities of such issuer and together they own
beneficially more than 5% of the securities of such issuer;
8. *Invest in companies for the purpose of exercising control or
management;
9. *Invest in or sell put options, call options, straddles, spreads
or any combination thereof, except that the Fund may write covered
call options or enter into closing purchase transactions and
except that the Fund may enter into futures contracts and related
options; or
10. *Invest in warrants if as a result more than 2% of the value of
the Fund's total assets would be invested in warrants which are
not listed on a recognized stock exchange, or more than 5% of the
Fund's total assets would be invested in warrants regardless of
whether listed on such an exchange;
11. With respect to 75% of its total assets, invest more than 5% of
its assets in the securities of any one issuer (except securities
issued or guaranteed by the U.S. Government, its agencies and
instrumentalities);
12. With respect to 75% of its total assets, invest in the securities
of any issuer if as a result the Fund holds more than 10% of the
outstanding securities of such issuer;
13. Borrow money except as permitted by the Investment Company Act of
1940 [or pledge, mortgage or hypothecate its assets except to
facilitate redemption requests which might otherwise require
untimely disposition of portfolio securities and then only from
banks and in amounts not exceeding the lessor of 10% of its total
assets valued at cost or 5% of its total asset valued at market at
the time of such borrowing, pledge, mortgage or hypothecation and
except that the Fund may enter into futures contracts and related
options];
14. *Invest more than [10% of the value] 15% of its net assets in
[illiquid] securities which are not readily marketable, including
repurchase agreements with remaining maturities in excess of seven
days and securities and [other] restricted securities [for which
market quotations are not readily available.] Restricted
securities for the purposes of this limitation do not include
securities eligible for resale pursuant to Rule 144A under the
Securities Act of 1933 and commercial paper issued pursuant to
Section 4(2) of said Act that the Board of Directors of the Fund,
or their delegate, determines to be liquid.
15. Invest in the securities of any one industry, except the medical
research and health care industry (and except securities issued or
guaranteed by the U.S. Government, its agencies and
instrumentalities) if as a result more than 25% of the Fund's
total assets would be invested in the securities of such industry;
16. *Purchase or sell commodities or commodity contracts with respect
to physical commodities, or invest in oil, gas or mineral
exploration or development programs [except that the Fund may
enter into futures contracts and related options]; and
17. *Invest in the securities of any issuer (including predecessors)
which has not been in continuous operation for at least three
years if more than 5% of the Fund's total assets would be invested
in such securities.
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*This restriction would become nonfundamental if Proposal 5 is approved.
MEDICAL RESEARCH INVESTMENT FUND, INC. THIS PROXY IS SOLICITED ON BEHALF OF
PROXY THE BOARD OF DIRECTORS OF THE FUND
KNOW ALL MEN BY THESE PRESENTS: That the undersigned, revoking previous proxies
for such stock, hereby appoints Samuel D. Isaly and James B. Hawkes, or any of
them, attorneys of the undersigned, with full power of substitution, to vote all
stock of Medical Research Investment Fund, Inc., which the undersigned is
entitled to vote at the Special Meeting of the Stockholders of said Fund to be
held on August 29, 1996 at the offices of Shearman & Sterling, 599 Lexington
Avenue, New York, New York, at 2:00 P.M. (Eastern time), and at any and all
adjournments thereof. Receipt of the Notice of and Proxy Statement for said
Meeting is acknowledged.
The shares represented by this proxy will be voted on the following matters as
specified below and on the reverse side by the undersigned. If no specification
is made, this proxy will be voted in favor of all such matters. Note: This proxy
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must be returned in order for your shares to be voted.
- ----
1. To approve a new investment policy and to FOR [] AGAINST [] ABSTAIN [] 1
supplement investment restrictions to
permit a new investment structure
as described in the Proxy Statement.
2.A. To authorize the Fund to vote at a meeting FOR [] WITHHOLD [] 2A
of holders of interests in the Portfolio the nominees AUTHORITY
to elect six trustees of the Portfolio. except those to vote for any
whose names of the nominees.
Trustees -- D.R. Dwight, J.B. Hawkes, are inserted
S.L. Hayes, III, N.H. Reamer, on the line
J.L. Thorndike, J.L. Treynor below.
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2.B. To authorize the Fund to vote at a FOR [] AGAINST [] ABSTAIN [] 2B
meeting of holders of interests in
the Portfolio to approve the Investment
Advisory Agreement between the Portfolio
and G/A Capital Management, Inc. as set
forth in Exhibit A to the Proxy Statement.
3. To fix the number of Directors at six, FOR [] WITHHOLD [] 3
and to elect Directors. the nominees AUTHORITY
except those to vote for any
Directors - D.R. Dwight, J.B. Hawkes, whose names of the nominees.
S.L. Hayes, III, N.H. Reamer, J.L. are inserted
Thorndike, J.L. Treynor on the line
below.
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4. To ratify the selection of Tait, Weller FOR [] AGAINST [] ABSTAIN [] 4
& Baker as independent public accountants
of the Fund for the current fiscal year.
5. To approve the revision of the Fund's investment objective and certain
of the Fund's investment policies as set forth in Exhibit B to the
Proxy Statement as follows:
5.A. Reclassification and Amendment of the FOR [] AGAINST [] ABSTAIN [] 5A
investment objective and basic policies.
5.B. Eliminate the restriction concerning FOR [] AGAINST [] ABSTAIN [] 5B
investment in other investment companies.
5.C. Eliminate the restriction concerning FOR [] AGAINST [] ABSTAIN [] 5C
pledging.
5.D. Reclassify the restriction concerning FOR [] AGAINST [] ABSTAIN [] 5D
investing in affiliated issuers.
5.E. Reclassify the restriction concerning FOR [] AGAINST [] ABSTAIN [] 5E
investing for control.
5.F. Reclassify the restriction concerning FOR [] AGAINST [] ABSTAIN [] 5F
options and futures.
5.G. Reclassify the restriction concerning FOR [] AGAINST [] ABSTAIN [] 5G
warrants.
5.H. Reclassify the restriction concerning FOR [] AGAINST [] ABSTAIN [] 5H
exploration programs.
5.I. Reclassify and amend the restriction FOR [] AGAINST [] ABSTAIN [] 5I
concerning illiquid securities.
5.J. Reclassify and amend the restriction FOR [] AGAINST [] ABSTAIN [] 5J
concerning unseasoned issuers.
5.K. Amend the restriction concerning FOR [] AGAINST [] ABSTAIN [] 5K
underwriting.
5.L. Amend the restriction concerning FOR [] AGAINST [] ABSTAIN [] 5L
real estate.
5.M. Amend the restriction concerning FOR [] AGAINST [] ABSTAIN [] 5M
lending.
5.N. Amend the restriction concerning FOR [] AGAINST [] ABSTAIN [] 5N
short sales.
5.O. Amend the restriction concerning senior FOR [] AGAINST [] ABSTAIN [] 5O
securities.
5.P. Amend the restriction concerning FOR [] AGAINST [] ABSTAIN [] 5P
borrowing.
5.Q. Amend the restriction concerning FOR [] AGAINST [] ABSTAIN [] 5Q
commodities.
As to any other matter, or if any of the nominees named in the Proxy Statement
are not available for election, said attorneys shall vote in accordance with
their judgment.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
IN FAVOR OF ALL MATTERS
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Please sign exactly as your name or names appear at left.
Dated: , 1996
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