. , '. 

AC J;GA of 1940
 

sir'c'rION I ì Co.) 

Ul1LB 17C!- 8 " ;~S\~"~,t ~,.": 

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PULIO JUL 2 5 1997
 A VAIL.U~n. ..- Our Ref. No. 97-346-CC 

'!1;';.Mt:r.iJ~l:!.;I:-,: --t!;:¡¡;:;.Kt,i'')~ ' The Eaton Vance Group 

REPONSE OF THE OFFICE OF CIDEF COUNSEL of Investment Companes 

DIVISION OF INVESTMENT MANAGEMENT File No. 132-3 

Your letter dated July 16, 1997 requests our assurance that we would not recommend 

enforcement action to the Commission under Section 17(a) of the Investment Company Act 

of 1940 (the "Act") if The Eaton Vance Group of Investment Companes (the "Funds") 

paricipate in the proposed reorganation trasactions described in your letter in reliance on 

Rule 17a-8 under the Act. 

Background 

The Funds are structured as "master-feeder" funds in which two or three feeder funds 

invest al of their assets in a master fund. Each master fund is registered as an open-end 

investment company under the Act. The feeder funds are series of open-end investment 

companies registered under the Act. Each group of feeder funds investing in a master fund 

has identical investment objectives, policies and restrictions, and each feeer fund difers 

from the other feeder funds in the group only as to distribution arangements. Eaton Vance 

Management (the "Adviser") serves as the investment adviser and adminstrator to each 

master fund, and as the adminstrator and distributor to each feeder fund. 

The Funds propose to enter into a series of reorganation transactions through which 

the shareholders of the feeder funds in each master-feeder group wil become shareholders of 

new classes of a single feeder fund investing in the same master fund. Specifcaly, each 

reorganation wil involve the acquisition by one feeder fund in a group (each an "acquirg 

fund") of al of the assets and liabilties of the other feeder fund(s) in the group (each an 

"acquired fund") in exchange for shares of newly created classes of the acquirg fund. The 

distribution arrangements for each new class of an acquirg fund wil correspond to the 

distribution arangements of each feeder fund prior to the reorganation. 

You state that the declarations of trust of the Funds provide that the reorganations 

may be effected without a vote of the shareholders of the acquirg or acquired funds. You 

represent that the shareholders of the feeder funds wil have the same proportionate interest 

in the same underlying portfolio of securities afer the trasaction as they wil have prior to 

the transaction, and that the reorganations wil be non-taable events for shareholders of the 

feeder funds. You represent that shareholders wil experience no change in the value or cost 1 or in the net asset value of their shares, as a result of the basis of their investments, 


1 You note that some shareholders could receive different distributions of realed 

capital gais following the reorganiations than would be the case if the reorganations did 

not occur. Ths result is due to different alocation methods for unrealed capita gais 

under the multiple class acèounting rules to be followed afer the reorganations, versus the 

partnership accounting rules currently followed under the master-feeder structure. 
reorganations. You also represent that the reorganations wil not materially affect 

shareholders' voting rights. 2 

You represent that the board of trustees of each feeder fund, including al of the 

trustees who are not interested persons of the funds, have determined that it would be in the 

best interests of the funds and their shareholders to paricipate in the reorganations. You 

state that the trustees' determination was based upon a number of factors, includig that the 

shareholders would continue to paricipate in the same portfolio of investment securities with 

the same investment objectives, policies and restrictions. You represent that the 

reorganiations are expected to eliinate or reduce cert costs associated with operating 

master-feeder structures and increase the potential marketabilty of the Funds. You state that 

the costs of effecting the reorganations are not signicant because a proxy solicitation and 

shareholder vote are not required. 

Section 17(a) of the Act generaly prohibits an affilated person, or an affilated 

person of an affilated person, of a registered investment company from knowingly 

purchasing securities or other property from, or sellg securities or other property to, the 

investment company or a company controlled by it. Rule 17a-8 under the Act exempts from 

the prohibitions of Section 17(a) mergers or consolidations of registered investment 

companes that are affilated persons solely by reason of having a common investment 

adviser, common directors and/or common officers, provided that the conditions of the rule 3 are satisfied. 


You state that the Funds may be precluded from relying on Rule 17a-8 because more 

than one feeder fund in each group may own more than five percent of the outstading voting 

securities of its correspondig master fund. Each such feeder fund therefore may be 

affilated with the master fund, and thus each such feeder fund may be affilated with each 

other. In addition, the Adviser manages private accounts through which it holds
 

discretionary voting authority over more than five percent of the outstading shares of five of
 

the feeder funds involved in the proposed transactions. Because of these potential 

2 You note that because the reorganations wil increase the size of the acquirg 

funds, the voting power of individual shareholders wil be diluted with respect to matters on 

which votes are taen on a fund-:wide rather than individual class basis. You represent that 

the only liely matter on which a vote would be taen on a fund-wide basis is the approval of 

auditors. 

3 Generaly, to satisfy the conditions of the rule, the board of directors of each 

affilated registered investment company, including a majority of directors who are not 

interested persons of a registered investment company paricipating in the transaction, must 

determine that paricipation in the transaction is in the best interests 0:( that investment 

company, and that the interests of existing shareholders of the company wil not be diluted as 

a result of effecting the transaction.
 

2 
affilations, you state that the feeder funds may be deemed affilated persons of each other by 

reason other than by sharig a common investment adviser, directors and/or officers. You 

believe, however, that the Funds nevertheless should be permitted to rely on the Rule in 

effecting the reorganation transactions. 

Discussion 

You note that in proposing Rule 17a-8, the Commission stated that when a merger 

involves investment companes which are affilated persons solely because they share a 

common investment adviser, directors and/or officers, no person responsible for evaluating 

the merger on behal of the investment companes would have a signicant personal fmancial 

interest in improperly inuencing the terms of the transaction. The Commission stated the 

Rule should not apply when a person owns five percent or more of the outstadig voting 

securities of the paricipating investment companes because the owner is presumed to have 

the potential abilty to inuence the terms of the transaction.4 You believe that, in the 

instant case, no affilated persons of the paricipating investment companes have a signicant 

personal fmancial interest in the reorganations or the abilty to inuence the terms of the 

transactions, and that the Funds therefore should be able to rely on Rule 17a-8. 

With regard to a feeder fund's ownership of five percent or more of the shares of its 

master fund, you state that this affilation exists solely as a result of the inerent nature of 

the master-feeder fund structure. You state that although a feeder fund may own more than 

five percent of the outstading voting securities of its master fund, the concerns to which 

Section 17(a) and Rule 17a-8 are addressed are not implicated because: (1) the 

reorganations do not involve any shareholder vote; (2) the reorganations do not involve 

the master funds; (3) the feeder funds have no abilty to inuence the terms of the 

reorganations; and (4) the feeer funds have no paricular fmancial interest in the 

reorganations, except that their shareholders may reale a possible reduction in expenses. 

You assert that the Adviser's discretionar voting authority over five percent or more 

of the shares of certn feeder funds is irelevant because the transactions wil be effected
 

without a shareholder vote, and that the Adviser wil be unable to inuence the terms of the 

reorganations on this basis.5 You further note that in Pricipal Preservation Portfolios, 

Inc. (pub. avai. Jan. 11, 1996), the staf stated that it would not recommend enforcement 

action to the Commission under Section 17(a) if a feeer fund undergoing a reorganation 

4 See Investment Company Act Release No. 10886 (Oct. 2, 1979). 

5 Of course, the Adviser may be able to inuence the terms of the reorganations
 

based upon its position as investment adviser to the Funds. You state that this inuence,
 

however, is no greater than the inuence that the Adviser would have as a "common 

adviser" in transactions expressly withi the scope of Rule 1 7a-8. Telephone conversation 

between Phip J. Fina and Brendan C. Fox, July 23, 1997. 

3 
relied on Rule 17a-S where the fund's investment adviser, which held discretionar voting 

authority over more than five percent of the voting securities of the fund, passed this voting 

power through to the shares' beneficial owners. Similarly, in Thomson McKion Global 

Trust (pub. avail. Dec. is, 19S6), the staf stated that it would not recommend enforcement 

action to the Commission under Section 17(a) if cert funds relied on Rule 17a-S where the
 

funds' distributor, which nominaly held more than five percent of the outstading voting
 

securities of the funds, could not vote the shares except at the direction of their beneficial
 

owners. You argue that the Funds simarly should be permitted to rely on Rule 17a-S 

because the Adviser wil exercise no voting authority to approve the proposed
 

reorganiations.
 

You further state that the Adviser has no paricular fmancial interest in the
 

reorganiation of the five feeder funds over which it holds more than five percent of the
 

outstading voting securities. Although the Adviser may benefit from increased advisory fee
 

revenues in the event that reduced fund expenses' and improved marketabilty lead to future 

asset growth, you state that the Adviser's interest in these reorganations is, as apractical 

matter, identical to its interest as a "common adviser," which is expressly permitted by Rule 

1 7a-S. Based upon the forgoing, you believe that the concerns to which Section 17(a) of the 

Act are addressed are not raised in the instat case and that there is no policy reason to 

require the Funds to obta exemptive relief under Section 17 (b) of the Act before permitting 

the proposed transactions to proceed. 

On the basis of the facts and circumstaces described in your letter, and without 

necessary agreeing with your legal analysis, we would not recommend enforcement action 

to the Commission under Section 17(a) of the Act if the Funds proceed with the 

reorganation transactions in reliance on Rule 17a-S under the Act. Ths response expresses 

the Division's position on enforcement action only and does not express any legal 

conclusions on the issues presented. Because this position is based on the facts and 

representations made in your letter, you should note that any different facts or representations 

might require a different conclusion. 

7~~ 

Brendan C. Fox
 

Attorney
 

4
 
KIRKPATRICK & LOCKHART LLP 

ONE INERNATIONAL PLACE
 

BOSTON, MASSACHUSETTS 021 10-2637 

TELEPHONE (617) 261-3100
 

FACSlMILE (617) 261-3175
 

PHIUP J. FINA 

(617) 261.3156 

1940 Act/Section 17(a) and Rule 17a-8 

July 16, 1997 

Securties and Exchange Commission 

Offce of Chief Counsel 

Division of Investment Management 

Judiciar Plaz 

450 Fifth Street, N. W. 

Washington, D.C. 20549 

Attn: Brendan Fox
 

Re: The Eaton Vance Group of Investment Companies
 

Ladies and Gentlemen: 

On behalf of our clients, The Eaton Vance Group of Investment Companies ("Funds"), 

we hereby request the staffs confirmation that it would not "recommend enforcement action
 

against the Funds under Section 17(a) of 
 the Investment Company Act of 1940 ("1940 Act") or 

Rule 17a-8 thereunder if the Funds paricipate in the non-taable reorganizations described
 

herein ("Reorganizations"). If the Reorganzations are consumated, the curent shareholders 

of two or more "feeder" fuds investing in a common "master" fud wil become shareholders of 

two or more corresponding classes of a single feeder investing in the same master fud. 

BO-63856.01 

BOSTON. HARRISBURG. MIAI. NEW YORK. PITTSBURGH. WASHINGTON 
KIRKPATRICK & LOCKHART LLP 

July 16, 1997 

Page 2 

Background 

The Funds are organzed in a "master/feeder" structure consisting of 59 master fuds and 

131 feeder fuds. Each master fud is registered as an open-end management investment
 

company under the 1940 Act. The beneficial interests of each master fud are not registered 

under the Securties Act of 1933 ("1933 Act"). Each master fud offers and sells its beneficial 

interests only in private placement transactions to feeder fuds, or to Eaton Vance Management 

or its affiliates ("Eaton Vance"). The feeder fuds are series of open-end management 

investment companies organized, for the most par, as Massachusetts business trusts and
 

registered under the 1940 Act; their shares are registered under the 1933 Act. 1 Eaton Vance 

serves as the administrator and investment adviser to the master fuds, and as the administrator 

and distnbutor to the feeder fuds. 

Under the Funds' current structue, at least two, and sometimes thee, 1940 Act registered 

feeder fuds invest in each master fud. Each group of two (or three) feeder fuds investing in a 

paricular master fud has identical investment objectives, policies and restrictions, and are series 

of a single registered open-end investment company. The sole distinction among the feeder fuds 

in each group is in their distribution structue. Typically, there is one feeder fud (i.e., the 

"Traditional" fund) with a front-end sales load and a service fee up to 25 basis points; a second 

feeder fud (i.e., the "Classic" fund) with a one-year contingent deferred sales charge and a 75 

basis points 12b-1 fee and a service fee of up to 25 basis points; and, in certain cases, a third 

feeder fud (i.e., the "Marathon" fud) with a six year declining contingent deferred sales charge, 

a 75 basis point Rule 12b-1 fee and a service fee of up to 25 basis points. 

Each Reorganization wil be a tax-free transaction, involving (1) the acquisition by one 

feeder fud in a group with common investment objectives and policies ("acquiring fud") of all 

of the assets of the remaining feeder fud( s) in the group ("acquired fud( s )"), with such assets 

consisting of its (or their) interest(s) in the corresponding master fud; and (2) the assumption by 

the acquinng fud of all of the liabilities of the acquired fuds. In exchange, each acquired fud 

will receive shares of a newly-designated class of the acquiring fud. Shareholders of each 

acquired fud would become shareholders of the class of shares of the acquinng fud 

corresponding to the acquired fud's curent distribution strctue, and shareholders of the 

acquiring fud would become shareholders of the class of shares of the acquiring fud 

corresponding to the acquiring fud's distribution structue. For example, shareholders of an 

acquired Traditional fud wil become holders of Class A shares of the acquiring fud. Existing
 

i Certn feeder funds are organized and operated exclusively offshore, and accordingly ar not registered under the 1940 Act, nor are their
 

shars registered under the 1933 Act. The Reorganizatio~s described herein do not involve any of these offshore feeder funds and no-action 

relief is not being requested with respect to these offshore feeder funds. 
KIRKPATRICK & LOCKHART LLP 

July 16, 1997 

Page 3
 

shareholders of both the acquiring and acquired fuds will experience no change in the value or 

cost basis of their investments,2 nor in the net asset value of their shares, as a result of the
 

Reorganzations. The Reorganzations wil not materially affect shareholder voting rights. 


Moreover, unike reorganzations involving fuds that are not in a master/feeder strctue, there 

will be no change in the underlying portfolio securties implicated in each Reorganzation.
 

Shareholders of both the acquiring fund and the acquired fund(s) wil thus effectively have the 

same proportionate interests in the same underlying portfolio of securities afer the 

Reorganzations as they will have had before the Reorganzations. 

Each Reorganization wil be effected in accordance with a plan of reorganization adopted by 

the board of trustees of the investment company of which the acquiring fud and the acquired 

fud(s) are series. Pursuant to the terms of the declarations of trst of each súch investment 

company, each Reorganization wil be effected without a vote of the shareholders of the 

acquiring fud or the acquired fud(s).4 As a practical matter, a Reorganization can only be 

effected on the last day of each fud's fiscal year. Subject to the receipt of this no-action relief, 

the trustees, including all of the non-interested trustees, of each fund have authorized the 

Reorganizations, which would commence with those fuds having July 31 fiscal year ends. 

2 It is pOssible that some shareholders could, following the Reorganizations, receive different distributions of realized capita gains than 

would be the case if the restrcturing did not occur. This result could occur because allocation of a master fund's current unrealized capital
 

gains wil be different under mu1tip1e-class accounting rules than has been the case under the parership accounting followed by the 

master/feeder strcture. The actual realization of capita gains in the future remains uncertin and depends not only on the investment adviser's 

decisions but also on the fluctuating market valuation of specific securities. 

J Because the Reorganizations wil increase the size of the acquiring funds, the voting power of individual shareholders wil be diluted with 

respect to mattrs on which votes ar taken on a fund-wide, rather than on an individual class, basis. The only likely matter on which a vote 

would be taen on a fund wide basis is the approval of auditors, which currently are the same for each group of funds. 

4 One feeder fund, EV Traditional Worldwide Health Services Fund, Inc., requires a shareholder vote to reorganize from a Marland 

corporation to a series of Eaton Vance Growt Trust prior to the above described Reorganization. 

3 
KIRKPATRICK & LOCKHART LLP 

July 16, 1997 

Page 4 

The trustees of the feeder fuds, including all of the non-interested trstees, have 

determined that it would be in the best interests of the fuds and their respective shareholders to 

reorganze each such group of two or more feeder fuds into a single feeder fud with multiple 

classes corresponding to the distrbution strctues curently in effect for the separate feeder 

fuds. The trustees' determination was based on a number of factors including: Shareholders of 

the feeder fuds would continue to paricipate in the same investment securities portfolio, with 

the same investment objective(s), policies and restrictions. The Reorganizations are expected to 

eliminate or reduce costs associated with maintaining multiple separate feeder fuds, including 

costs of separate audits, fud accounting expenses, legal expenses, printing costs, and blue sky 

fees.5 The Reorganizations wil be non-taxable transactions for shareholders of the feeder fud. 

The costs of effecting the Reorganzations (which wil be borne by the feeder fuds) are not 

significant, paricularly relative to the anticipated future expense reductions, because a proxy 

solicitation and shareholder vote is not required. The Reorganizations are also expected to 

increase the potential marketability of the feeder fuds' shares by simplifying and clarfying the 

organizational structure of the fuds. 

Applicable Statute and Regulation 

Section 17(a) ofthe 1940 Act generally prohibits an affiliated person, or an affiliated person 

of an affiiated person, of a registered investment company from knowingly purchasing 

securities from, or sellng securities or other property to, the investment company. The 

Reorganizations may be deemed to involve purchases and/or sales of securities or propert 

between two or more fuds and therefore subj ect to the prohibition of Section 17 ( a) if one fud is 

deemed to be an affiliated person, or affiliated person of an affiliated person, of the other.
 

Rule 17a-8 under the 1940 Act exempts from the prohibitions of Section 17(a) mergers, 

consolidations, or purchases or sales of substatially all of the assets involving registered 

investment companes that are afliated persons, or affiliated persons of an affliated person, 

solely by reason of having a common investment advisor, common directors, and/or common 

offcers, provided that the conditions set fort in the rule are met. These conditions requie, as 

here relevant, that the board of directors of each of the affliated registered investment companes 

paricipating in the transaction, including a majority of the directors of each investment company 

who are not interested persons of either of 
 the paricipating registered investment companies, 

determine (1) that paricipation in the transaction is in the best interest of 
 that registered 

investment company; and (2) that the interest of existing shareholders ofthat registered 

investment company wil not be diluted as a result of effecting the transaction. 

s Many of 
 these expenses have been borne by Eaton Vance in the past on a voluntar basis for certain feeder funds. 
KIRKPATRICK & LOCKHART LLP 

July 16, 1997 

Page 5
 

Two aspects of the proposed Reorganzations would arguably preclude the Funds from 

relying upon Rule 17a-8. First, in all cases, at least one feeder fud owns more than 5% of the 

master fud. Where two or more feeder fuds in each group investing in the same master fud 

each own more than 5% of the interests in the corresponding master fud, the feeder fuds may 

be deemed to be affliated persons of affiliated persons each other, other than solely by reason of 

having a common investment adviser, common board of directors or common officers. Second, 

with respect to five feeder fuds, Eaton Vance, by virte of its position as an investment advisor 

to private accounts, has discretionar voting authority over the shares held in those accounts,
 

which accounts hold more than 5% of the outstading shares of these feeder funds. As a result, 

each of these feeder fuds could be deemed to be an affiiated person, or an affiiated person of 

an affiliated person, of other feeder fuds in its group, other than solely by reason of having a 

common investment adviser, common board of directors or common offcers. 

For the reasons set forth below, we believe that under the circumstances here involved, the 

Reorganizations should nevertheless be governed by Rule 17a-8. Providing the relief requested 

herein would, in our view, be consistent with past no-action relief granted by the Staff in this 

area, as discussed below. 

Discussion 

Congress adopted Section 17(a) to protect shareholders by prohibiting a purchase or sale 

transaction when a pary to the transaction is an affliated person, or an affiiated person of an 

afliated person, and has both the ability and the pecuniar incentive to influence the actions of 

the investment company. See Investment Company Act Release No. 10886 (October 3, 1979) 

("Release No. 10886") (citing hearngs on S. 3580 before a Subcomm. of 
 the Semi.te Comm. on

Banng and Curency, 76th Cong., 3d. Sess., 17 (1940)). The Commission has frequently taken 

the position that a merger or other consolidation of two registered investment companes with a 

"common" board of directors/trstees and/or a common advisor may involve affiliated persons. 

See Release No, 10886 at p.2. 

Rule 17a-8 is based on the rationale that when a merger, consolidation, or purchase or sale of 

substatially all assets involves investment companes that are affliated persons exclusively by 

virte of sharng common directors, offcers, and/or an investment adviser, no person who is 

responsible for evaluating and approving the terms of the transaction on behalf of the varous 

paricipating investment companes would have a significant financial interest in improperly 

infuencing the terms of the reorganization. See Release No. 10886 at p.2. The rule also 

reinforces the fudamental policy that shareholders of each investment company involved in the 

reorganzation are entitled, as a matter of fudamental fiduciar principles, to have their trustees 

act in the best interests ofthe investment company's shareholders. 
KIRKPATRICK & LOCKHART LLP 

July 16, 1997 

Page 6
 

If paricipating investment companes are affiiated in a maner other than that specified 

in Rule 17a-8, the investment companes may be prohibited from engaging in the transaction 

absent receipt of an order pursuant to Section 17(b). Specifically, in footnote 9 to Release No. 

10886, the Commission stated that when the affiliation among paricipating investment 

companies "is based upon a person owning 5% or more of the outstanding securties (of the 

relevant entities) ..., the owner ... would be presumed to have certain potential abilities to 

infuence the terms of the transaction, in which ... he may have a paricular financial interest." 

(Emphasis added) 

1. Affliation Because of Master/Feeder Structue
 

For puroses of this letter, we are assuming that because of the master/feeder strcture, 

and more specifically because of some feeder fud's ownership of more than 5% of the interests 

of its corresponding master fud, each Reorganization wil involve feeder fuds that are 

affiliates, or affiiates of affiiates, of each other. Rule 17a-8, of course, was adopted prior to the 

development of the master/feeder structure, and Rule 17a-8 therefore does not specifically 

address the affiliations between feeder investment companies that are inherent in a master/feeder 

strcture. As the staff has accepted in Principle (sic) Preservation Portfolios, Inc. (pub. avaiL. 

Jan. 11, 1996), however, affiliations between fuds created by reason of the master/feeder 

strctue should not necessarily preclude feeder fuds from relying on the exemption afforded by 

Rule 17a-8. 

While the Commission has been reluctat to permit use of Rule 17a-8 where an affiliation 

among paricipating investment companies is based on a person owning 5% or more of the 

outstading securties of the relevant entities, the Commission's concern has arsen because 

"the owner ... would be presumed to have certain potential abilties to infuence the terms of the 

transaction, in which ... he may have a paricular financial interest." (Emphasis added) Here, of 

course, the feeder fuds - as the "owners" of 5% interests in the master fuds -- will have no 

abilty, potential or otherwse, to infuence the terms of the Reorganzations (which will, in any 

event, only nominally involve the master fuds "owned" by them). No business combination is 

occurng at the master fud level, and no vote of the feeder fuds is required to establish the 

terms of the Reorganzations or to effect them. Rather, the terms of the Reorganizations wil be 

determined by the trstees of the registered investment companes comprising the feeder fuds. 

Moreover, the feeder fuds wil have no paricular financial interest in the Reorganizations. None 

of the feeder fuds involved in the Reorganizations expects to receive any direct pecunar 

benefit vis-a-vis any of the other feeder funds as a result of the Reorganzations. Rather, as 

described above, the Reorganizations are expected to benefit feeder fud shareholders by 
6 

KIRKPATRICK & LOCKHART LLP 

July 16, 1997 

Page 7
 

eliminating or reducing costs associated with maintaining multiple series, including costs of 

separate audits, fud accounting expenses, legal expenses, printing costs, and blue sky fees. 


As noted above, Rule 17a-8 is based on the rationale that when the only affiliations 

present are the affliations described in the rule, it is unecessar to require investment 

companies to incur the delay and expense of obtaining a Section 17(b) order prior to effecting 

transactions of the types specified, because no person who is responsible for evaluating and 

approving the terms of the transaction on behalf of the varous paricipating investment
 

companes would have a significant financial interest in improperly infuencing the terms of the 

reorganzation. Where an additional level of affliation among the paricipating investment 

companies is created solely by the inherent nature of the master/feeder strctue, there is no
 

policy reason that the exemption afforded by Rule 17a-8 should not continue to be 'available, at 

least where, as here, (1) the shareholders of the paricipating investment companes wil, in 

effect, have the same proportionate interests in the same underlying portfolio of securities after 

the transaction as they will have had before the transaction, (2) shareholders of the paricipating 

investment companies wil experience no change in the value or cost basis of their investments, 

nor in the net asset value of their shares, as a result of the transaction, and (3) no vote by the 

paricipating investment companies is requested or required. Under these circumstances, the 

concerns at which Section 17(a) and Rule 17a-8 are directed are not implicated, and permitting 

the transaction to proceed without 
 prior Section 17(b) relief is consistent with the policies

underlying the section and the rule. 

2. Affliation Because of 
 Voting Authority Through Investment Advisory Accounts

As noted above, Eaton Vance, by virtue of its position as an investment advisor to private 

accounts, has discretionar voting authority over more than 5% of the outstanding shares7 with
 

respect to only five of 
 the 131 feeder fuds involved in the Reorganzations.s As a result, each of 

these five feeder fuds could be deemed to be an affliated person, or an afliated person of an 

affliated person, of other feeder fuds in its group, other than solely by reason of having a 

6 In recent year Eaton Vance has assumed a portion of certin feeder funds' expenses. Eaton Vance has provided such subsidies purely on a
 

volunta basis, and there is no obligation on the par of Eaton Vance to continue any such subsidies in the future, regardless of whether the 

Reorganizations are effected. 

7 Section 2(a)(3) of the 1940 Act provides that an "afliated person" of another person means "(A) any person. . . contrllng or holding with
 

power to vote, 5 per centum or more of the outstading voting securities of such other person; (8) any person 5 per centum or more of whose 

outstading voting securities are. . . controlled or held with power to vote, by such other person. . . . ."


8 The five afected feeder funds range in size from approximately 4.7 millon to $120.2 milion assets. The combined assets of these five
 

funds tota less than approximately $210 millon, out ofa tota of approximately $1 \. billon in assets in the 131 feeder funds involved in the
 

Reorganizations. 
KIRKPATRICK & LOCKHART LLP 

July 16, 1997 

Page 8
 

common investment adviser, common board of directors or common offcers. The policy 

"concern" would be that Eaton Vance would use its authority to vote the shares to infuence or 

direct the effecting of the Reorganzations. 

Here, pursuant to the terms of the declarations of trust of the investment companes 

involved in the Reorganzations, no vote of shareholders is required to effect the 

Reorganzations. Thus, the fact that Eaton Vance may nominally hold with the power to vote 5% 

or more of the outstanding voting securities of certain of the paricipating feeder fuds will not
 

place Eaton Vance in a position, in its capacity as "owner," to infuence the terms of the 

Reorganzations because there is simply no voting authority for it to exercise with respect to the 

Reorganzations. Because a shareholder vote on the Reorganzations is not required and will not 

be obtained, Eaton Vance's voting authority over 5% or more of the shares of five of the feeder 

fuds is completely irrelevant to effecting the Reorganizations. 

The staff has accepted in Principle Preservation Portfolios, Inc. and Thomson McKinnon 

Global Trust (pub. avaiL. Dec. 18, 1986) that this type of affiiation between funds need not 

necessarly preclude them from relying on the exemption afforded by Rule 17a-8. In granting noaction relief in Principle Preservation Portfolios, Inc. the staff appears to have been infuenced by 

the fact that notwithstanding that the affiiate at issue (an adviser) held discretionar voting 

authority over more than 5% of the shares of the affected investment companies involved in the 

transaction at issue (i.e., a "despoking" and "dehubbing" transaction), that voting power with 

respect to such shares was being "passed through" to the account owners and would not be 

exercised by the adviser. There, the adviser could vote such shares only at, and in accordance 

with, instructions received from the account owners. In the case of the Eaton Vance feeder fuds 

no voting power will be exercised in the Reorganizations. Similarly, in granting no-action relief 

in Thomson McKinnon Global Trust, the sta appears to have been infuenced by the fact that 

the affliate at issue (a distributor) was only the "nominal" owner of more than 5% of the shares 

of the affected investment companes involved in the transaction at issue (i.e., the reorganzation 

of a Massachusetts business trust as a new series of an existing business trust), and that the 

afliate could vote those shares only in accordance with the instrctions of the beneficial owners.
 

In both Thomson McKinnon Global Trust and Principle Preservation Portfolios, Inc., the staf 

has taen a no action position where the affliates were unable to influence 
 the terms of the

KIRKPATRICK & LOCKHART LLP 

July 16, 1997 

Page 9
 

transactions in their capacities as nominal "owners" of 5% positions because they would not be 

exercising their voting authority. 9
 

Moreover, under the circumstaces here presented, it can not be said that Eaton Vance 

has any "paricular financial interest" in the five Reorganizations involving the five feeder fuds 

at issue distinct from its interest as a "common adviser" which is expressly permitted - indeed, 

the reason for -- Rule 17a-8. As noted, these five Reorganzations involve total feeder fud 

assets of $210 milion, comprising less than 2% of the total assets of the 131 feeder fuds 

involved in the Reorganizations as a whole. Thus, the natue of Eaton Vance's "interest" in 

effectuating these five Reorganzations is, as a practical matter, identical to the natue of its 

"interest" in effectuating the remaining Reorganizations - i.e., to reduce feeder fud costs and to 

develop a more focused marketing message that should, over time, make the feeder fuds more 

competitive and more attactive to investors. Whle futue asset growt would increase advisory 

fees eared by Eaton Vance, it would also increase efficiencies and create economies of scale 

that potentially would enhance yield and shareholder return. As in Principle Preservation 

Portfolios, Inc., we do not believe that these anticipated mutual benefits create any conficts of 

interest between Eaton Vance and the feeder fuds that raise concerns that the legislatue sought 

to address in adopting Section 17(a). 

* * *
 

In sumar, we believe that the proposed Reorganizations are consistent with the 

policies underlying Rule 17a-8. We therefore ask that the staff confirm that it will not 

recommend enforcement action under Section 17 (a) of the 1940 Section or Rule 17 a-8 

thereunder if the Reorganizations are implemented as described above. 

9 By contrast, the sta has been more reluctat to grant no action relief where an afliate's 5% share ownership included a direct economic
 

component. ~ £: New England Mutual Life Insurance Co. (pub. avaiL. June 3, 1987) (afliate directly owned approximately 14% of the 

assets of the liquidating fund, consisting of the afliate's seed money plus market appreciation); Locust Street Fund (pub. avail. May 14, 1991) 

(although affliate would pass through voting authority to beneficial owners, afliate owned more than 6% of shares at the time the merger was 

negotited). 
KIRKPATRICK & LOCKHART LLP 

July 16, 1997 

Page 10
 

Than you in advance for your consideration of this request. If you have any questions or 

would like any additional information or documents, please call ,the undersigned at (617) 261­

3156. 

Sincerely yours, 

P-/~ 0 ~ 

Phi¡i;-' J~a 

cc: Alan R. Dynner, Esq.
 

Eric G. Woodbur, Esq~
 

Eaton Vance Management