<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 18, 1995
1933 ACT FILE NO. 33-71320
1940 ACT FILE NO. 811-8134
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933 [X]
POST-EFFECTIVE AMENDMENT NO. 2 [X]
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 3 [X]
EATON VANCE MUNICIPALS TRUST II
-----------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
24 FEDERAL STREET, BOSTON, MASSACHUSETTS 02110
---------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
617-482-8260
-------------------------------
(REGISTRANT'S TELEPHONE NUMBER)
H. DAY BRIGHAM, JR., 24 FEDERAL STREET, BOSTON, MASSACHUSETTS 02110
------------------------------------------------
(NAME AND ADDRESS OF AGENT FOR SERVICE)
It is proposed that this Post-Effective Amendment will become effective on
August 1, 1995 pursuant to paragraph (a) of Rule 485.
The Registrant has filed a Declaration pursuant to Rule 24f-2 and on March
17, 1995 filed its "Notice" as required by that Rule for the fiscal year ended
January 31, 1995.
High Yield Municipals Portfolio has also executed this Registration
Statement.
================================================================================
<PAGE>
This Amendment to the registration statement on Form N-1A consists of the
following documents and papers:
Cross Reference Sheet required by Rule 481(a) under the Securities Act of
1933
Part A -- The Prospectus of:
EV Marathon High Yield Municipals Fund
EV Traditional High Yield Municipals Fund
Part B -- The Statement of Additional Information of:
EV Marathon High Yield Municipals Fund
EV Traditional High Yield Municipals Fund
Part C -- Other Information
Signatures
Exhibit Index Required by Rule 483(a) under the Securities Act of 1933
Exhibits
This Amendment is not intended to amend the Prospectuses and Statements of
Additional Information of any other Fund of the Trust not identified above.
<PAGE>
EATON VANCE MUNICIPALS TRUST II
EV MARATHON HIGH YIELD MUNICIPALS FUND
CROSS REFERENCE SHEET
ITEMS REQUIRED BY FORM N-1A
---------------------------
PART A
ITEM NO. ITEM CAPTION PROSPECTUS CAPTION
- ------- ------------ ---------------------------------
1. .......... Cover Page Cover Page
2. .......... Synopsis Shareholder and Fund Expenses
3. .......... Condensed Financial Performance Information
Information
4. .......... General Description of The Fund's Investment Objective;
Registrant How the Fund and the Portfolio
Invest their Assets;
Organization of the Fund and
the Portfolio
5. .......... Management of the Fund Management of the Fund and the
Portfolio
5A. ......... Management's Discussion of Not Applicable
Fund Performance
6. .......... Capital Stock and Other Organization of the Fund and the
Securities Portfolio; The Lifetime
Investing Account/Distribution
Options; Distributions and
Taxes
7. .......... Purchase of Securities Valuing Fund Shares; How to Buy
Being Offered Fund Shares; The Lifetime
Investing Account/Distribution
Options; Distribution Plan; The
Eaton Vance Exchange Privilege;
Eaton Vance Shareholder
Services
8. .......... Redemption or Repurchase How to Redeem Fund Shares
9. .......... Pending Legal Proceedings Not Applicable
PART B STATEMENT OF ADDITIONAL
ITEM NO. ITEM CAPTION INFORMATION CAPTION
- ------- ------------ -----------------------
10. .......... Cover Page Cover Page
11. .......... Table of Contents Table of Contents
12. .......... General Information and Other Information
History
13. .......... Investment Objectives and Additional Information about
Policies Investment Policies; Investment
Restrictions
14. .......... Management of the Fund Trustees and Officers; Fees and
Expenses
15. .......... Control Persons and Control Persons and Principal
Principal Holders of Holders of Securities
Securities
16. .......... Investment Advisory and Investment Adviser and
Other Services Administrator; Distribution
Plan; Custodian; Independent
Certified Public Accountants;
Fees and Expenses
17. .......... Brokerage Allocation and Portfolio Security Transactions;
Other Practices Fees and Expenses
18. .......... Capital Stock and Other Other Information
Securities
19. .......... Purchase, Redemption and Determination of Net Asset Value;
Pricing of Securities Principal Underwriter; Service
Being Offered for Withdrawal; Distribution
Plan; Fees and Expenses
20. .......... Tax Status Taxes; Additional Tax Matters;
Tax Equivalent Yield Table
21. .......... Underwriters Principal Underwriter; Fees and
Expenses
22. .......... Calculations of Performance Investment Performance;
Data Performance Information
23. .......... Financial Statements Financial Statements
<PAGE>
EATON VANCE MUNICIPALS TRUST II
EV TRADITIONAL HIGH YIELD MUNICIPALS FUND
CROSS REFERENCE SHEET
ITEMS REQUIRED BY FORM N-1A
---------------------------
PART A
ITEM NO. ITEM CAPTION PROSPECTUS CAPTION
- -------- ------------ ---------------------------------
1. .......... Cover Page Cover Page
2. .......... Synopsis Shareholder and Fund Expenses
3. .......... Condensed Financial Performance Information
Information
4. .......... General Description of The Fund's Investment Objective;
Registrant How the Fund and the Portfolio
Invest their Assets;
Organization of the Fund and
the Portfolio
5. .......... Management of the Fund Management of the Fund and the
Portfolio
5A. ......... Management's Discussion of Not Applicable
Fund Performance
6. .......... Capital Stock and Other Organization of the Fund and the
Securities Portfolio; The Lifetime
Investing Account/Distribution
Options; Distributions and
Taxes
7. .......... Purchase of Securities Valuing Fund Shares; How to Buy
Being Offered Fund Shares; The Lifetime
Investing Account/Distribution
Options; Service Plan; The
Eaton Vance Exchange Privilege;
Eaton Vance Shareholder
Services
8. .......... Redemption or Repurchase How to Redeem Fund Shares
9. .......... Pending Legal Proceedings Not Applicable
PART B STATEMENT OF ADDITIONAL
ITEM NO. ITEM CAPTION INFORMATION CAPTION
- ------- ------------ -----------------------
10. .......... Cover Page Cover Page
11. .......... Table of Contents Table of Contents
12. .......... General Information and Other Information
History
13. .......... Investment Objectives and Additional Information about
Policies Investment Policies; Investment
Restrictions
14. .......... Management of the Fund Trustees and Officers; Fees and
Expenses
15. .......... Control Persons and Control Persons and Principal
Principal Holders of Holders of Securities
Securities
16. .......... Investment Advisory and Investment Adviser and
Other Services Administrator; Service
Plan; Custodian; Independent
Certified Public Accountants;
Fees and Expenses
17. .......... Brokerage Allocation and Portfolio Security Transactions;
Other Practices Fees and Expenses
18. .......... Capital Stock and Other Other Information
Securities
19. .......... Purchase, Redemption and Determination of Net Asset Value;
Pricing of Securities Principal Underwriter; Service
Being Offered for Withdrawal; Services for
Accumulation; Distribution
Plan; Fees and Expenses
20. .......... Tax Status Taxes; Additional Tax Matters;
Tax Equivalent Yield Table
21. .......... Underwriters Principal Underwriter; Fees and
Expenses
22. .......... Calculations of Performance Investment Performance;
Data Performance Information
23. .......... Financial Statements Financial Statements
<PAGE>
Part A
Information Required in a Prospectus
EV MARATHON HIGH YIELD MUNICIPALS FUND
EV MARATHON HIGH YIELD MUNICIPALS FUND (THE "FUND"), A SERIES OF EATON VANCE
MUNICIPALS TRUST II (THE "TRUST"), IS A MUTUAL FUND SEEKING TO PROVIDE HIGH
CURRENT INCOME EXEMPT FROM REGULAR FEDERAL INCOME TAX. THE FUND INVESTS ITS
ASSETS IN HIGH YIELD MUNICIPALS PORTFOLIO (THE "PORTFOLIO"), A NON-DIVERSIFIED
OPEN-END INVESTMENT COMPANY HAVING THE SAME INVESTMENT OBJECTIVE AS THE FUND,
RATHER THAN BY DIRECTLY INVESTING IN AND MANAGING ITS OWN PORTFOLIO OF
SECURITIES AS WITH HISTORICALLY STRUCTURED MUTUAL FUNDS.
THE PORTFOLIO MAY INVEST UP TO 100% OF ITS ASSETS IN BELOW INVESTMENT GRADE
MUNICIPAL BONDS, COMMONLY KNOWN AS "JUNK BONDS", THAT ENTAIL GREATER RISKS,
INCLUDING DEFAULT, THAN THOSE OF HIGHER-RATED SECURITIES. SEE "HOW THE FUND AND
THE PORTFOLIO INVEST THEIR ASSETS".
Shares of the Fund are not deposits or obligations of, or guaranteed or
endorsed by, any bank or other insured depository institution, and are not
federally insured by the Federal Deposit Insurance Corporation, the Federal
Reserve Board or any other government agency. Shares of the Fund involve
investment risks, including fluctuations in value and the possible loss of some
or all of the principal investment.
This Prospectus is designed to provide you with information you should know
before investing. Please retain this document for future reference. A Statement
of Additional Information dated August 1, 1995 for the Fund, as supplemented
from time to time, has been filed with the Securities and Exchange Commission
and is incorporated herein by reference. The Statement of Additional Information
is available without charge from the Fund's principal underwriter, Eaton Vance
Distributors, Inc. (the "Principal Underwriter"), 24 Federal Street, Boston, MA
02110 (telephone (800) 225-6265). The Portfolio's investment adviser is Boston
Management and Research (the "Investment Adviser"), a wholly-owned subsidiary of
Eaton Vance Management, and Eaton Vance Management is the administrator (the
"Administrator") of the Fund. The offices of the Investment Adviser and the
Administrator are located at 24 Federal Street, Boston, MA 02110.
- ------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE PAGE
<S> <C> <C> <C>
Shareholder and Fund Expenses ......................... 2 How to Redeem Fund Shares ......................... 11
The Fund's Investment Objective ....................... 3 Reports to Shareholders ........................... 12
How the Fund and the Portfolio Invest their Assets .... 3 The Lifetime Investing Account/Distribution Options 13
Organization of the Fund and the Portfolio ............ 6 The Eaton Vance Exchange Privilege ................ 13
Management of the Fund and the Portfolio .............. 8 Eaton Vance Shareholder Services .................. 14
Distribution Plan ..................................... 9 Distributions and Taxes ........................... 15
Valuing Fund Shares ................................... 10 Performance Information ........................... 15
How to Buy Fund Shares ................................ 10 Appendix A ........................................ 17
- --------------------------------------------------------------------------------------------------------------------
PROSPECTUS DATED AUGUST 1, 1995
</TABLE>
<PAGE>
SHAREHOLDER AND FUND EXPENSES
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Sales Charges Imposed on Purchases of Shares None
Sales Charges Imposed on Reinvested Distributions None
Fees to Exchange Shares None
Range of Declining Contingent Deferred Sales Charges Imposed on Redemptions
During the First Seven Years (as a percentage of redemption proceeds exclusive
of all reinvestments and capital appreciation in the account) 5.00%-0%
ANNUAL FUND AND ALLOCATED PORTFOLIO OPERATING EXPENSES
(as a percentage of average daily net assets)
Investment Adviser Fee 0.73%
Rule 12b-1 Distribution (and Service) Fees 0.75
Other Expenses 0.25
Total Operating Expenses 1.73%
====
EXAMPLE: 1 YEAR 3 YEARS
------ -------
An investor would pay the following contingent deferred sales charge and expenses
on a $1,000 investment, assuming (a) 5% annual return and (b) redemption at the
end of each period $68 $94
An investor would pay the following expenses on the same investment, assuming
(a) 5% annual return and (b) no redemptions: $18 $54
</TABLE>
Notes:
The tables and Example are designed to help investors understand the costs
and expenses they will bear, directly or indirectly, by investing in the Fund.
The information set out in the tables and Example is estimated, since the Fund
is only recently organized.
The Fund invests exclusively in the Portfolio. The Trustees believe that,
over time, the aggregate per share expenses of the Fund and the Portfolio should
be approximately equal to, or less than, the per share expenses the Fund would
incur if the Trust were instead to retain the services of an investment adviser
and the Fund's assets were invested directly in the types of securities being
held by the Portfolio.
The Example should not be considered a representation of past or future
expenses, and actual expenses may be greater or less than those shown. Federal
regulations require the Example to assume a 5% annual return, but actual annual
return will vary. A long-term shareholder in the Fund may pay more than the
economic equivalent of the maximum front-end sales charge permitted by the rules
of the National Association of Securities Dealers, Inc.
The Portfolio's monthly advisory fee has two components, a fee based on
daily net assets and a fee based on daily gross income, as set forth in the fee
schedule on page 8. The Fund expects to begin accruing for its service fee
payments during the quarter ending September 30, 1996.
No contingent deferred sales charge is imposed on (a) shares purchased more
than six years prior to redemption, (b) shares acquired through the reinvestment
of distributions or (c) any appreciation in value of other shares in the account
(see "How to Redeem Fund Shares"), and no such charge is imposed on exchanges of
Fund shares for shares of one or more other funds listed under "The Eaton Vance
Exchange Privilege".
Other investment companies and investors with different distribution
arrangements are investing in the Portfolio and others may do so in the future.
See "Organization of the Fund and the Portfolio".
<PAGE>
THE FUND'S INVESTMENT OBJECTIVE
- ------------------------------------------------------------------------------
THE FUND'S INVESTMENT OBJECTIVE IS TO PROVIDE HIGH CURRENT INCOME EXEMPT FROM
REGULAR FEDERAL INCOME TAX. The Fund seeks its objective through investments in
a portfolio of high-yielding, below investment grade securities. The investment
objective and policies of the Fund may be changed by the Trustees without a vote
of shareholders; as a matter of policy, the Trustees would not materially change
the Fund's investment objective without shareholder approval. The Fund may not
be appropriate for investors who cannot assume the greater risk of capital
depreciation or loss inherent in seeking higher tax-exempt yields.
HOW THE FUND AND THE PORTFOLIO INVEST THEIR ASSETS
- ------------------------------------------------------------------------------
THE FUND CURRENTLY SEEKS ITS OBJECTIVE BY INVESTING ITS ASSETS IN HIGH YIELD
MUNICIPALS PORTFOLIO, WHICH IS ITSELF AN OPEN-END INVESTMENT COMPANY. The
Portfolio invests primarily in below investment grade municipal obligations
which the Investment Adviser believes do not entail undue risk.
"Below investment grade" municipal obligations are obligations that are
rated Ba or lower by Moody's Investors Service, Inc. ("Moody's") or BB or lower
by Standard & Poor's Ratings Group ("S&P") or Fitch Investors Service, Inc.
("Fitch") or that are unrated but determined by the Investment Adviser to be of
comparable quality. For a description of the ratings assigned by the rating
agencies, see Appendix A. Below investment grade municipal obligations generally
offer higher current yields than do higher rated securities, but are subject to
greater risks. Securities in the lower-rated categories are considered to be of
poor standing and predominantly speculative. The Portfolio may also invest a
portion of its assets in municipal obligations that are not paying current
income in anticipation of possible future income. For more detailed information
about the risks associated with investing in such securities, see "Risk
Considerations," below.
Although the Portfolio may invest in securities of any maturity, it is
expected that the Portfolio will normally invest a substantial portion of its
assets in securities with maturities of ten years or more. Those securities
generally offer higher yields than securities of shorter maturities, but are
subject to greater fluctuations in value in response to changes in interest
rates. Since the Portfolio's objective is to provide high current income, the
Portfolio will invest in municipal obligations with an emphasis on income and
not on stability of the Portfolio's net asset value. The average maturity of the
Portfolio's holdings may vary (generally between 15 and 30 years) depending on
anticipated market conditions.
The Portfolio will normally invest at least 65% of its assets in investment
grade and below investment grade municipal obligations. As a matter of
fundamental policy, the Portfolio will normally invest at least 80% of its
assets in debt obligations issued by or on behalf of states, territories and
possessions of the United States, and the District of Columbia and their
political subdivisions, agencies or instrumentalities, the interest on which is,
in the opinion of bond counsel, exempt from regular federal income tax. (As a
matter of fundamental policy, the Fund will normally invest either directly, or
indirectly through another investment company, at least 80% of its assets in
such obligations.)
At times, the Portfolio may, for temporary defensive purposes, invest any
portion of its assets in higher-rated municipal obligations or other securities,
the interest on which may not be exempt from regular federal income tax, and may
hold any portion of its assets in cash. It is impossible to predict when, or for
how long, the Portfolio would engage in such strategies.
MUNICIPAL OBLIGATIONS. Municipal obligations include bonds, notes and commercial
paper issued by a municipality for a wide variety of both public and private
purposes, the interest on which is, in the opinion of bond counsel, exempt from
regular federal income tax. Public purpose municipal bonds include general
obligation and revenue bonds. General obligation bonds are backed by the taxing
power of the issuing municipality. Revenue bonds are backed by the revenues of a
project or facility. Municipal notes include bond anticipation, tax
anticipation, revenue anticipation and construction loan notes. Bond, tax and
revenue anticipation notes are short-term obligations that will be retired with
the proceeds of an anticipated bond issue, tax revenue or facility revenue,
respectively. Construction loan notes are short-term obligations that will be
retired with the proceeds of long-term mortgage financing.
INTEREST INCOME FROM CERTAIN TYPES OF MUNICIPAL OBLIGATIONS MAY BE SUBJECT
TO FEDERAL ALTERNATIVE MINIMUM TAX FOR INDIVIDUAL INVESTORS. Such obligations
will not be included in the securities used to determine the Portfolio's
compliance with the 80% test described above. Distributions to corporate
investors of certain interest income may also be subject to the federal
alternative minimum tax.
CONCENTRATION. The Portfolio may invest 25% or more of its assets in municipal
obligations of issuers located in the same state or in municipal obligations of
the same type, including without limitation the following: general obligations
of states and localities; lease rental obligations of state and local
authorities; obligations of state and local housing finance authorities,
municipal utilities systems or public housing authorities; obligations for
hospitals or life care facilities; or industrial development or pollution
control bonds issued for electric utility systems, steel companies, paper
companies or other purposes. This may make the Portfolio more susceptible to
adverse economic, political, or regulatory occurrences affecting a particular
category of issuers. For example, health-care related issuers are susceptible to
medicaid reimbursement policies, and national and state health care legislation.
As the Portfolio's concentration in the securities of a particular category of
issuer increases, so does the potential for fluctuation in the value of the
Fund's shares.
NON-DIVERSIFIED STATUS. The Portfolio's classification under the Investment
Company Act of 1940 (the "1940 Act") as a "non-diversified" investment company
allows it to invest, with respect to 50% of its assets, more than 5% (but not
more than 25%) of its assets in the securities of any issuer. The Portfolio is
likely to invest a greater percentage of its assets in the securities of a
single issuer than would a diversified fund. Therefore, the Portfolio will be
more susceptible to any single adverse economic or political occurrence or other
adverse development affecting certain issuers.
OTHER INVESTMENT PRACTICES
The Portfolio may engage in the following other investment practices, some
of which may be considered "derivative" instruments because they derive their
value from another instrument, security or index.
WHEN-ISSUED SECURITIES. The Portfolio may purchase securities on a "when-
issued" basis, which means that payment and delivery occur on a future
settlement date. The price and yield of such securities are generally fixed on
the date of commitment to purchase. However, the market value of the securities
may fluctuate prior to delivery and upon delivery the securities may be worth
more or less than the Portfolio agreed to pay for them. The Portfolio may also
purchase instruments that give the Portfolio the option to purchase a municipal
obligation when and if issued.
INVERSE FLOATERS. The Portfolio may invest in municipal securities whose
interest rates bear an inverse relationship to the interest rate on another
security or the value of an index ("inverse floaters"). An investment in inverse
floaters may involve greater risk than an investment in a fixed rate bond.
Because changes in the interest rate on the other security or index inversely
affect the residual interest paid on the inverse floater, the value of an
inverse floater is generally more volatile than that of a fixed rate bond.
Inverse floaters have interest rate adjustment formulas which generally reduce
or, in the extreme, eliminate the interest paid to the Portfolio when short-term
interest rates rise, and increase the interest paid to the Portfolio when
short-term interest rates fall. Inverse floaters have varying degrees of
liquidity, and the market for these securities is new and relatively volatile.
These securities tend to underperform the market for fixed rate bonds in a
rising interest rate environment, but tend to outperform the market for fixed
rate bonds when interest rates decline. Shifts in long-term interest rates may
alter this tendency, however. Although volatile, inverse floaters typically
offer the potential for yields exceeding the yields available on fixed rate
bonds with comparable credit quality and maturity. These securities usually
permit the investor to convert the floating rate to a fixed rate (normally
adjusted downward), and this optional conversion feature may provide a partial
hedge against rising rates if exercised at an opportune time. Inverse floaters
are leveraged because they provide two or more dollars of bond market exposure
for every dollar invested.
FUTURES TRANSACTIONS. The Portfolio may purchase and sell various kinds of
financial futures contracts and options thereon to hedge against changes in
interest rates and to enhance total return by using a futures position as a
lower cost substitute for a securities position. The futures contracts may be
based on various debt securities (such as U.S. Government securities),
securities indices (such as the Municipal Bond Index traded on the Chicago Board
of Trade) and other financial instruments and indices. Such transactions involve
a risk of loss or depreciation due to unanticipated adverse changes in
securities prices, which may exceed the Portfolio's initial investment in these
contracts. The Portfolio may not purchase or sell futures contracts or related
options, except for closing purchase or sale transactions, if immediately
thereafter the sum of the amount of margin deposits and premiums paid on the
Portfolio's outstanding positions would exceed 5% of the market value of the
Portfolio's net assets. Nonetheless, at least 80% of the Portfolio's assets will
be invested in municipal obligations. These transactions involve transaction
costs. To the extent that the Portfolio enters into futures contracts and
options thereon traded on an exchange regulated by the Commodity Futures Trading
Commission, in each case that are not for bona fide hedging purposes (as defined
by the CFTC), the aggregate initial margin and premiums required to establish
these positions (excluding the amount by which options are "in-the-money") may
not exceed 5% of the liquidation value of the Portfolio's portfolio, after
taking into account unrealized profits and unrealized losses on any contracts
the Portfolio has entered into. There can be no assurance that the Investment
Adviser's use of futures will be advantageous to the Portfolio. Distributions by
the Fund of any gains realized on the Portfolio's transactions in futures and
options on futures will be taxable.
RISK CONSIDERATIONS
Investors should carefully consider their ability to assume the risks of
owning shares of a mutual fund that invests in below investment grade municipal
obligations (sometimes referred to as "junk bonds") before making an investment
in the Fund. The lower ratings of certain securities held by the Portfolio
reflect a greater possibility that adverse changes in the financial condition of
an issuer, or in general economic conditions, or both, or an unanticipated rise
in interest rates, may impair the ability of the issuer to make payments of
interest and principal. The inability (or perceived inability) of issuers to
make timely payment of interest and principal would likely make the values of
securities held by the Fund more volatile and could limit the Portfolio's
ability to sell its securities at prices approximating the values the Portfolio
has placed on such securities. It is possible that legislation may be adopted in
the future limiting the ability of certain financial institutions to purchase
such securities; such legislation may adversely affect the liquidity of such
securities. In the absence of a liquid trading market for securities held by it,
the Portfolio may be unable at times to establish the fair market value of such
securities. The rating assigned to a security by a rating agency does not
reflect an assessment of the volatility of the security's market value or of the
liquidity of an investment in the securities. Credit ratings are based largely
on the issuer's historical financial condition and the rating agency's
investment analysis at the timing of rating, and the rating assigned to any
particular security is not necessarily a reflection of the issuer's current
financial condition. Credit quality in the high yield, high risk municipal bond
market can change from time to time, and recently issued credit ratings may not
fully reflect the actual risks posed by a particular high yield security.
The net asset value of the Fund will change in response to fluctuations in
prevailing interest rates and changes in the value of the securities held by the
Portfolio. When interest rates decline, the value of securities already held by
the Portfolio can be expected to rise. Conversely, when interest rates rise, the
value of existing portfolio security holdings can be expected to decline.
Changes in the credit quality of issuers of municipal obligations held by the
Portfolio will affect the principal value (and possibly the income earned) on
such obligations. In addition, the values of such securities are affected by
changes in general economic conditions and business conditions affecting the
specific industries of their issuers. Changes by recognized rating services in
their ratings of any fixed-income security and in the ability of an issuer to
make payments of interest and principal may also affect the value of these
investments. The Portfolio will not dispose of a security solely because its
rating is reduced below its rating at the time of purchase, although the
Investment Adviser will monitor the investment to determine whether continued
investment in the security will assist in meeting the Portfolio's investment
objective.
At times, a substantial portion of the Portfolio's assets may be invested in
securities as to which the Portfolio, by itself or together with other accounts
managed by the Investment Adviser and its affiliates, holds a major portion or
all of such securities. Under adverse market or economic conditions or in the
event of adverse changes in the financial condition of the issuer, the Portfolio
could find it more difficult to sell such securities when the Investment Adviser
believes it advisable to do so or may be able to sell such securities only at
prices lower than if such securities were more widely held. Under such
circumstances, it may also be more difficult to determine the fair value of such
securities for purposes of computing the Portfolio's net asset value. Interest
and/or principal payments on securities in default could be in arrears when such
securities are acquired, and the issuer may be in bankruptcy or undergoing a
debt restructuring or reorganization. In order to enforce its rights in the
event of a default under such securities, the Portfolio may be required to take
possession of and manage assets securing the issuer's obligations on such
securities, which may increase the Portfolio's operating expenses and adversely
affect the Portfolio's net asset value. Any income derived from the Portfolio's
ownership or operation of such assets may not be tax-exempt.
The secondary market for such municipal obligations in which the Portfolio
may invest is less liquid than that for many taxable debt obligations or other
more widely traded municipal obligations. The Portfolio will not invest in
illiquid securities if more than 15% of its net assets would be invested in
securities not readily marketable. No established resale market exists for
certain of the municipal obligations in which the Portfolio may invest. As a
result, the Portfolio may be unable to dispose of some of these municipal
obligations at times when it would otherwise wish to do to at the prices at
which they are valued.
Certain securities held by the Portfolio may permit the issuer at its option
to "call", or redeem, its securities. If an issuer were to redeem securities
held by the Portfolio during a time of declining interest rates, the Portfolio
may not be able to reinvest the proceeds in securities providing the same
investment return as the securities redeemed.
Some of the securities in which the Portfolio invests may include so-called
"zero-coupon" bonds, whose values are subject to greater fluctuation in response
to changes in market interest rates than bonds which pay interest currently.
Zero-coupon bonds are issued at a significant discount from face value and pay
interest only at maturity rather than at intervals during the life of the
security. The Portfolio is required to accrue and distribute income from
zero-coupon bonds on a current basis, even though it does not receive that
income currently in cash. Thus, the Portfolio may have to sell other investments
to obtain cash needed to make income distributions.
The Portfolio may invest in municipal leases, and participations in
municipal leases. The obligations of the issuer to meet its obligations under
such leases is often subject to the appropriation by the appropriate legislative
body, on an annual or other basis, to appropriate funds for the payment of the
obligations. Investments in municipal leases are thus subject to the risk that
the legislative body will not make the necessary appropriation and the issuer
will not otherwise be willing or able to meet its obligations.
The Investment Adviser seeks to minimize the risks of investing in below
investment grade securities through professional investment analysis and
attention to current developments in interest rates and economic conditions.
When the Portfolio invests in such municipal obligations, the achievement of the
Portfolio's goals is more dependent on the Investment Adviser's ability than
would be the case if the Portfolio were investing in municipal obligations in
the higher rating categories. The amount of information about the financial
conditions of an issuer of municipal obligations may not be as extensive as that
which is made available by corporations whose securities are publicly traded.
- --------------------------------------------------------------------------------
THE FUND AND THE PORTFOLIO HAVE ADOPTED CERTAIN FUNDAMENTAL INVESTMENT
RESTRICTIONS WHICH ARE ENUMERATED IN DETAIL IN THE STATEMENT OF
ADDITIONAL INFORMATION AND WHICH MAY NOT BE CHANGED UNLESS AUTHORIZED BY
A SHAREHOLDER VOTE AND AN INVESTOR VOTE, RESPECTIVELY. EXCEPT FOR SUCH
ENUMERATED RESTRICTIONS AND AS OTHERWISE INDICATED IN THIS PROSPECTUS,
THE INVESTMENT OBJECTIVE AND POLICIES OF THE FUND AND THE PORTFOLIO ARE
NOT FUNDAMENTAL POLICIES AND ACCORDINGLY MAY BE CHANGED BY THE TRUSTEES
OF THE TRUST AND THE PORTFOLIO WITHOUT OBTAINING THE APPROVAL OF THE
FUND'S SHAREHOLDERS OR THE INVESTORS IN THE PORTFOLIO, AS THE CASE MAY
BE. IF ANY CHANGES WERE MADE IN THE FUND'S INVESTMENT OBJECTIVE, THE FUND
MIGHT HAVE INVESTMENT OBJECTIVES DIFFERENT FROM THE OBJECTIVES WHICH AN
INVESTOR CONSIDERED APPROPRIATE AT THE TIME THE INVESTOR BECAME A
SHAREHOLDER IN THE FUND.
- --------------------------------------------------------------------------------
ORGANIZATION OF THE FUND AND THE PORTFOLIO
- ------------------------------------------------------------------------------
THE FUND IS A SERIES OF EATON VANCE MUNICIPALS TRUST II, A BUSINESS TRUST
ESTABLISHED UNDER MASSACHUSETTS LAW PURSUANT TO A DECLARATION OF TRUST DATED
OCTOBER 25, 1993, AS AMENDED. THE TRUST IS A MUTUAL FUND -- AN OPEN-END
MANAGEMENT INVESTMENT COMPANY. The Trustees of the Trust are responsible for the
overall management and supervision of its affairs. The Trust may issue an
unlimited number of shares of beneficial interest (no par value per share) in
one or more series and because the Trust can offer separate series (such as the
Fund) it is known as a "series company." Each share represents an equal
proportionate beneficial interest in the Fund. When issued and outstanding, the
shares are fully paid and nonassessable by the Trust and redeemable as described
under "How to Redeem Fund Shares". Shareholders are entitled to one vote for
each full share held. Fractional shares may be voted proportionately. Shares
have no preemptive or conversion rights and are freely transferable. In the
event of the liquidation of the Fund, shareholders are entitled to share pro
rata in the net assets of the Fund available for distribution to shareholders.
THE PORTFOLIO IS ORGANIZED AS A TRUST UNDER THE LAWS OF THE STATE OF NEW
YORK AND INTENDS TO BE TREATED AS A PARTNERSHIP FOR FEDERAL TAX PURPOSES. The
Portfolio, as well as the Trust, intends to comply with all applicable federal
and state securities laws. The Portfolio's Declaration of Trust provides that
the Fund and other entities permitted to invest in the Portfolio (e.g., other
U.S. and foreign investment companies, and common and commingled trust funds)
will each be liable for all obligations of the Portfolio. However, the risk of
the Fund incurring financial loss on account of such liability is limited to
circumstances in which both inadequate insurance exists and the Portfolio itself
is unable to meet its obligations. Accordingly, the Trustees of the Trust
believe that neither the Fund nor its shareholders will be adversely affected by
reason of the Fund investing in the Portfolio.
SPECIAL INFORMATION ON THE FUND/PORTFOLIO INVESTMENT STRUCTURE. An investor in
the Fund should be aware that the Fund, unlike mutual funds which directly
acquire and manage their own portfolios of securities, seeks to achieve its
investment objective by investing its assets in an interest in the Portfolio
(although the Fund may temporarily hold a de minimus amount of cash), which is a
separate investment company with an identical investment objective. Therefore,
the Fund's interest in securities owned by the Portfolio is indirect. In
addition to selling an interest to the Fund, the Portfolio may sell interests to
other affiliated and non-affiliated mutual funds or institutional investors.
Such investors will invest in the Portfolio on the same terms and conditions and
will pay a proportionate share of the Portfolio's expenses. However, the other
investors investing in the Portfolio are not required to sell their shares at
the same public offering price as the Fund due to variations in sales
commissions and other operating expenses. Therefore, investors in the Fund
should be aware that these differences may result in differences in returns
experienced by investors in the various funds that invest in the Portfolio. Such
differences in returns are also present in other mutual fund structures,
including funds that have multiple classes of shares. For information regarding
the investment objective, policies and restrictions, see "The Fund's Investment
Objective" and "How the Fund and the Portfolio Invest their Assets". Further
information regarding investment practices may be found in the Statement of
Additional Information.
The Trustees of the Trust have considered the advantages and disadvantages
of investing the assets of the Fund in the Portfolio, as well as the advantages
and disadvantages of the two-tier format. The Trustees believe that the
structure offers opportunities for substantial growth in the assets of the
Portfolio, and affords the potential for economies of scale for the Fund.
The Fund may withdraw (completely redeem) all its assets from the Portfolio
at any time if the Board of Trustees of the Trust determines that it is in the
best interest of the Fund to do so. The investment objective and the
nonfundamental investment policies of the Fund and the Portfolio may be changed
by the Trustees of the Trust and the Portfolio without obtaining the approval of
the shareholders of the Fund or the investors in the Portfolio, as the case may
be. Any such change of the investment objective of the Fund or the Portfolio
will be preceded by thirty days' advance written notice to the shareholders of
the Fund or the investors in the Portfolio, as the case may be. If a shareholder
redeems shares because of a change in the nonfundamental objective or policies
of the Fund, those shares may be subject to a contingent deferred sales charge,
as described in "How to Redeem Fund Shares". In the event the Fund withdraws all
of its assets from the Portfolio, or the Board of Trustees of the Trust
determines that the investment objective of the Portfolio is no longer
consistent with the investment objective of the Fund, the Board of Trustees of
the Trust would consider what action might be taken, including investing the
assets of the Fund in another pooled investment entity or retaining an
investment adviser to manage the Fund's assets in accordance with its investment
objective. The Fund's investment performance may be affected by a withdrawal of
all its assets from the Portfolio.
Information regarding other pooled investment entities or funds which invest
in the Portfolio may be obtained by contacting Eaton Vance Distributors, Inc.
(the "Principal Underwriter" or "EVD"), 24 federal Street, Boston, MA 02110,
(617) 482-8260. Smaller investors in the Portfolio may be adversely affected by
the actions of larger investors in the Portfolio. For example, if a large
investor withdraws from the Portfolio, the remaining investors may experience
higher pro rata operating expenses, thereby producing lower returns.
Additionally, the Portfolio may become less diverse, resulting in increased
portfolio risk, and experience decreasing economies of scale. However, this
possibility exists as well for historically structured funds which have large or
institutional investors.
Until recently, the Administrator sponsored and advised historically
structured funds. Funds which invest all their assets in interests in a separate
investment company are a relatively new development in the mutual fund industry
and, therefore, the Fund may be subject to additional regulations than
historically structured funds.
The Declaration of Trust of the Portfolio provides that the Portfolio will
terminate 120 days after the complete withdrawal of the Fund or any other
investor in the Portfolio, unless either the remaining investors, by unanimous
vote at a meeting of such investors, or a majority of the Trustees of the
Portfolio, by written instrument consented to by all investors, agree to
continue the business of the Portfolio. This provision is consistent with
treatment of the Portfolio as a partnership for federal income tax purposes. See
"Distributions and Taxes" for further information. Whenever the Fund as an
investor in the Portfolio is requested to vote on matters pertaining to the
Portfolio (other than the termination of the Portfolio's business, which may be
determined by the Trustees of the Portfolio without investor approval), the Fund
will hold a meeting of Fund shareholders and will vote its interest in the
Portfolio for or against such matters proportionately to the instructions to
vote for or against such matters received from Fund shareholders. The Fund shall
vote shares for which it receives no voting instructions in the same proportion
as the shares for which it receives voting instructions. Other investors in the
Portfolio may alone or collectively acquire sufficient voting interests in the
Portfolio to control matters relating to the operation of the Portfolio, which
may require the Fund to withdraw its investment in the Portfolio or take other
appropriate action. Any such withdrawal could result in a distribution "in kind"
of portfolio securities (as opposed to a cash distribution from the Portfolio).
If securities are distributed, the Fund could incur brokerage, tax or other
charges in converting the securities to cash. In addition, the distribution in
kind may result in a less diversified portfolio of investments or adversely
affect the liquidity of the Fund. Notwithstanding the above, there are other
means for meeting shareholder redemption requests, such as borrowing.
The Trustees of the Trust, including a majority of the noninterested
Trustees, have approved written procedures designed to identify and address any
potential conflicts of interest arising from the fact that the Trustees of the
Trust and the Trustees of the Portfolio are the same. Such procedures require
each Board to take actions to resolve any conflict of interest between the Fund
and the Portfolio, and it is possible that the creation of separate Boards may
be considered. For further information concerning the Trustees and officers of
the Trust and the Portfolio, see the Statement of Additional Information.
MANAGEMENT OF THE FUND AND THE PORTFOLIO
- ------------------------------------------------------------------------------
THE PORTFOLIO ENGAGES BOSTON MANAGEMENT AND RESEARCH ("BMR"), A WHOLLY-OWNED
SUBSIDIARY OF EATON VANCE MANAGEMENT ("EATON VANCE"), AS ITS INVESTMENT ADVISER.
EATON VANCE, ITS AFFILIATES AND ITS PREDECESSOR COMPANIES HAVE BEEN MANAGING
ASSETS OF INDIVIDUALS AND INSTITUTIONS SINCE 1924 AND MANAGING INVESTMENT
COMPANIES SINCE 1931.
Acting under the general supervision of the Board of Trustees of the
Portfolio, BMR manages the Portfolio's investments and affairs. Under its
investment advisory agreement with the Portfolio, BMR receives a monthly
advisory fee equal to the aggregate of
(a) a daily asset based fee computed by applying the annual asset rate
applicable to that portion of the total daily net assets in each
Category as indicated below, plus
(b) a daily income based fee computed by applying the daily income rate
applicable to that portion of the total daily gross income (which
portion shall bear the same relationship to the total daily gross income
on such day as that portion of the total daily net assets in the same
Category bears to the total daily net assets on such day) in each
Category as indicated below:
<TABLE>
<CAPTION>
ANNUAL DAILY
CATEGORY DAILY NET ASSETS ASSET RATE INCOME RATE
- -------- ---------------- ---------- -----------
<C> <S> <C> <C>
1 up to $500 million ................................................ 0.400% 4.00%
2 $500 million but less than $1 billion ............................. 0.375% 3.75%
3 $1 billion but less than $1.5 billion ............................. 0.350% 3.50%
4 $1.5 billion but less than $2 billion ............................. 0.325% 3.25%
5 $2 billion but less than $3 billion ............................... 0.300% 3.00%
6 $3 billion and over ............................................... 0.275% 2.75%
</TABLE>
BMR also furnishes for the use of the Portfolio office space and all
necessary office facilities, equipment and personnel for servicing the
investments of the Portfolio. Municipal obligations are normally traded on a net
basis (without commission) through broker-dealers and banks acting for their own
account. Such firms attempt to profit from such transactions by buying at the
bid price and selling at the higher asked price of the market, and the
difference is customarily referred to as the spread. In selecting firms which
will execute portfolio transactions BMR judges their professional ability and
quality of service and uses its best efforts to obtain execution at prices which
are advantageous to the Portfolio and at reasonably competitive spreads. Subject
to the foregoing, BMR may consider sales of shares of the Fund or of other
investment companies sponsored by BMR or Eaton Vance as a factor in the
selection of firms to execute portfolio transactions.
Thomas M. Metzold has acted as the portfolio manager of the Portfolio since
it commenced operations. He has been a Vice President of Eaton Vance since 1991
and of BMR since 1992, and an employee of Eaton Vance since 1987.
BMR OR EATON VANCE ACTS AS INVESTMENT ADVISER TO INVESTMENT COMPANIES AND
VARIOUS INDIVIDUAL AND INSTITUTIONAL CLIENTS WITH ASSETS UNDER MANAGEMENT OF
APPROXIMATELY $15 BILLION. Eaton Vance is a wholly-owned subsidiary of Eaton
Vance Corp., a publicly held holding company. Eaton Vance Corp. through its
subsidiaries and affiliates, engages in investment management and marketing
activities, fiduciary and banking services, oil and gas operations, real estate
investment, consulting and management, and development of precious metals
properties.
The Trust has retained the services of Eaton Vance to act as Administrator
of the Fund. The Trust has not retained the services of an investment adviser
since the Trust seeks to achieve the investment objective of the Fund by
investing the Fund's assets in the Portfolio. As Administrator, Eaton Vance
provides the Fund with general office facilities and supervises the overall
administration of the Fund. For these services, Eaton Vance currently receives
no compensation. The Trustees of the Trust may determine, in the future, to
compensate Eaton Vance for such services.
The Portfolio and the Fund, as the case may be, will each be responsible for
all of its respective costs and expenses not expressly stated to be payable by
BMR under the investment advisory agreement, by Eaton Vance under the
administrative services agreement, or by EVD under the distribution agreement.
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
governmental fees; expenses of reporting to shareholders and investors; proxy
statements and other expenses of shareholders' or investors' meetings; insurance
premiums; printing and mailing expenses; interest, taxes and corporate fees;
legal and accounting expenses; compensation and expenses of Trustees not
affiliated with BMR or Eaton Vance; and investment advisory fees and, if any,
administrative services fees. The Portfolio or the Fund, as the case may be,
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 with respect thereto.
DISTRIBUTION PLAN
- --------------------------------------------------------------------------------
THE FUND FINANCES DISTRIBUTION ACTIVITIES AND HAS ADOPTED A DISTRIBUTION PLAN
(THE "PLAN") PURSUANT TO RULE 12B-1 UNDER THE INVESTMENT COMPANY ACT OF 1940.
Rule 12b-1 permits a mutual fund, such as the Fund, to finance distribution
activities and bear expenses associated with the distribution of its shares
provided that any payments made by the Fund are made pursuant to a written plan
adopted in accordance with the Rule. The Plan is subject to, and complies with,
the sales charge rule of the National Association of Securities Dealers, Inc.
(the "NASD Rule"). The Plan is described further in the Statement of Additional
Information, and the following is a description of the salient features of the
Plan. The Plan provides that the Fund, subject to the NASD Rule, will pay sales
commissions and distribution fees to the Principal Underwriter only after and as
a result of the sale of shares of the Fund. On each sale of Fund shares
(excluding reinvestment of distributions) the Fund will pay the Principal
Underwriter amounts representing (i) sales commissions equal to 5% of the amount
received by the Fund for each share sold and (ii) distribution fees calculated
by applying the rate of 1% over the prime rate then reported in The Wall Street
Journal to the outstanding balance of Uncovered Distribution Charges (as
described below) of the Principal Underwriter. The Principal Underwriter
currently expects to pay sales commissions (except on exchange transactions and
reinvestments) to a financial service firm (an "Authorized Firm") at the time of
sale equal to 4% of the purchase price of the shares sold by such Firm. The
Principal Underwriter will use its own funds (which may be borrowed from banks)
to pay such commissions. Because the payment of the sales commissions and
distribution fees to the Principal Underwriter is subject to the NASD Rule
described below, it will take the Principal Underwriter a number of years to
recoup the sales commissions paid by it to Authorized Firms from the payments
received by it from the Fund pursuant to the Plan.
THE NASD RULE REQUIRES THE FUND TO LIMIT ITS ANNUAL PAYMENTS OF SALES
COMMISSIONS AND DISTRIBUTION FEES TO THE PRINCIPAL UNDERWRITER TO AN AMOUNT NOT
EXCEEDING .75% OF THE FUND'S AVERAGE DAILY NET ASSETS FOR EACH FISCAL YEAR.
Under its Plan, the Fund accrues daily an amount at the rate of 1/365 of .75% of
the Fund's net assets, and pays such accrued amounts monthly to the Principal
Underwriter. The Plan requires such accruals to be automatically discontinued
during any period in which there are no outstanding Uncovered Distribution
Charges under the Plan. Uncovered Distribution Charges are calculated daily and,
briefly, are equivalent to all unpaid sales commissions and distribution fees to
which the Principal Underwriter is entitled under the Plan less all contingent
deferred sales charges theretofore paid to the Principal Underwriter. The Eaton
Vance organization may be considered to have realized a profit under the Plan if
at any point in time the aggregate amounts of all payments received by the
Principal Underwriter from the Fund pursuant to the Plan, including any
contingent deferred sales charges, have exceeded the total expenses theretofore
incurred by such organization in distributing shares of the Fund. Total expenses
for this purpose will include an allocable portion of the overhead costs of such
organization and its branch offices.
Because of the NASD Rule limitation on the amount of sales commissions and
distribution fees paid to the Principal Underwriter during any fiscal year, a
high level of sales of Fund shares during the initial years of the Fund's
operations would cause a large portion of the sales commissions attributable to
a sale of Fund shares to be accrued and paid by the Fund to the Principal
Underwriter in fiscal years subsequent to the year in which such shares were
sold. This spreading of sales commissions payments under the Plan over an
extended period would result in the incurrence and payment of increased
distribution fees under the Plan.
THE PLAN ALSO AUTHORIZES THE FUND TO MAKE PAYMENTS OF SERVICE FEES TO THE
PRINCIPAL UNDERWRITER, AUTHORIZED FIRMS AND OTHER PERSONS IN AMOUNTS NOT
EXCEEDING .25% OF THE FUND'S AVERAGE DAILY NET ASSETS FOR EACH FISCAL YEAR. The
Trustees have initially implemented the Plan by authorizing the Fund to make
quarterly payments of service fees to the Principal Underwriter and Authorized
Firms in amounts not expected to exceed .25% of the Fund's average daily net
assets based on the value of Fund shares sold by such persons and remaining
outstanding for at least twelve months. As permitted by the NASD Rule, such
payments are made for personal services and/or the maintenance of shareholder
accounts. Service fees are separate and distinct from the sales commissions and
distribution fees payable by the Fund to the Principal Underwriter, and as such
are not subject to automatic discontinuance when there are no outstanding
Uncovered Distribution Charges of the Principal Underwriter. The Fund expects to
begin accruing for its service fee payments during the quarter ending September
30, 1996.
The Principal Underwriter may, from time to time, at its own expense,
provide additional incentives to Authorized Firms which employ registered
representatives who sell a minimum dollar amount of the Fund's shares and/or
shares of other funds distributed by the Principal Underwriter. In some
instances, such additional incentives may be offered only to certain Authorized
Firms whose representatives are expected to sell significant amounts of shares.
In addition, the Principal Underwriter may from time to time increase or
decrease the sales commissions payable to Authorized Firms.
The Fund may, in its absolute discretion, suspend, discontinue or limit the
offering of its shares at any time. In determining whether any such action
should be taken, the Fund's management intends to consider all relevant factors,
including without limitation the size of the Fund, the investment climate and
market conditions, the volume of sales and redemptions of Fund shares, and the
amount of Uncovered Distribution Charges of the Principal Underwriter. The Plan
may continue in effect and payments may be made under the Plan following any
such suspension, discontinuance or limitation of the offering of Fund shares;
however, the Fund is not contractually obligated to continue the Plan for any
particular period of time. Suspension of the offering of Fund shares would not,
of course, affect a shareholder's ability to redeem shares.
VALUING FUND SHARES
- ------------------------------------------------------------------------------
THE FUND VALUES ITS SHARES ONCE ON EACH DAY THE NEW YORK STOCK EXCHANGE (THE
"EXCHANGE") IS OPEN FOR TRADING, as of the close of regular trading on the
Exchange (normally 4:00 p.m. New York time). The Fund's net asset value per
share is determined by its custodian, Investors Bank & Trust Company ("IBT"),
(as agent for the Fund) in the manner authorized by the Trustees of the Trust.
Net asset value is computed by dividing the value of the Fund's total assets,
less its liabilities, by the number of shares outstanding. Because the Fund
invests its assets in an interest in the Portfolio, the Fund's net asset value
will reflect the value of its interest in the Portfolio (which, in turn,
reflects the underlying value of the Portfolio's assets and liabilities).
Authorized Firms must communicate an investor's order to the Principal
Underwriter prior to the close of the Principal Underwriter's business day to
receive that day's net asset value per Fund share. It is the Authorized Firms'
responsibility to transmit orders promptly to the Principal Underwriter, which
is a wholly-owned subsidiary of Eaton Vance.
The Portfolio's net asset value is also determined as of the close of
regular trading on the Exchange by IBT (as custodian and agent for the
Portfolio) based on market or fair value in the manner authorized by the
Trustees of the Portfolio. Municipal obligations will normally be valued on the
basis of valuations furnished by a pricing service. For further information
regarding the valuation of the Portfolio's assets, see "Determination of Net
Asset Value" in the Statement of Additional Information. Eaton Vance Corp. owns
77.3% of the outstanding stock of IBT, the Fund's and the Portfolio's custodian.
- --------------------------------------------------------------------------------
SHAREHOLDERS MAY DETERMINE THE VALUE OF THEIR INVESTMENT BY MULTIPLYING
THE NUMBER OF FUND SHARES OWNED BY THE CURRENT NET ASSET VALUE PER SHARE.
- --------------------------------------------------------------------------------
HOW TO BUY FUND SHARES
- ------------------------------------------------------------------------------
SHARES OF THE FUND MAY BE PURCHASED FOR CASH OR MAY BE ACQUIRED IN EXCHANGE FOR
SECURITIES. Investors may purchase shares of the Fund through Authorized Firms
at the net asset value per share of the Fund next determined after an order is
effective. The Fund may suspend the offering of shares at any time and may
refuse an order for the purchase of shares.
An initial investment in the Fund must be at least $1,000. Once an account
has been established the investor may send investments of $50 or more at any
time directly to the Fund's Transfer Agent (the "Transfer Agent") as follows:
The Shareholder Services Group, Inc., BOS725, P.O. Box 1559, Boston, MA 02104.
The $1,000 minimum initial investment is waived for Bank Automated Investing
accounts, which may be established with an investment of $50 or more. See "Eaton
Vance Shareholder Services".
ACQUIRING FUND SHARES IN EXCHANGE FOR SECURITIES. IBT, as escrow agent, will
receive securities acceptable to Eaton Vance, as administrator, in exchange for
Fund shares at their net asset value as determined above. The minimum value of
securities (or securities and cash) accepted for deposit is $5,000. Securities
accepted will be sold by IBT as agent for the account of their owner on the day
of their receipt by IBT or as soon thereafter as possible. The number of Fund
shares to be issued in exchange for securities will be the aggregate proceeds
from the sale of such securities, divided by the applicable net asset value per
Fund share on the day such proceeds are received. Eaton Vance will use
reasonable efforts to obtain the then current market price for such securities
but does not guarantee the best available price. Eaton Vance will absorb any
transaction costs, such as commissions, on the sale of the securities.
Securities determined to be acceptable should be transferred via book entry
or physically delivered, in proper form for transfer, through an Authorized
Firm, together with a completed and signed Letter of Transmittal in approved
form (available from Authorized Firms), as follows:
IN THE CASE OF BOOK ENTRY:
Deliver through Depository Trust Co.
Broker #2212
Investors Bank & Trust Company
For A/C EV Marathon High Yield Municipals Fund
IN THE CASE OF PHYSICAL DELIVERY:
Investors Bank & Trust Company
Attention: EV Marathon High Yield Municipals Fund
Physical Securities Processing Settlement Area
89 South Street
Boston, MA 02111
Investors who are contemplating an exchange of securities for shares of the
Fund, or their representatives, must contact Eaton Vance to determine whether
the securities are acceptable before forwarding such securities to IBT. Eaton
Vance reserves the right to reject any securities. Exchanging securities for
Fund shares may create a taxable gain or loss. Each investor should consult his
or her tax adviser with respect to the particular Federal, state and local tax
consequences of exchanging securities for Fund shares.
The Trustees of the Trust may consider terminating sales of Fund shares,
other than to the Fund's existing shareholders, when the Portfolio reaches a
size that becomes difficult to manage, which may be as low as $250,000,000. If
closed, the Board of Trustees may vote to re-open the Fund for sales to new
shareholders at any time.
- --------------------------------------------------------------------------------
IF YOU DON'T HAVE AN AUTHORIZED FIRM, EATON VANCE CAN RECOMMEND ONE.
- --------------------------------------------------------------------------------
HOW TO REDEEM FUND SHARES
- ------------------------------------------------------------------------------
A SHAREHOLDER MAY REDEEM FUND SHARES BY DELIVERING TO THE SHAREHOLDER SERVICES
GROUP, INC., BOS725, P.O. BOX 1559, BOSTON, MASSACHUSETTS 02104, during its
business hours a written request for redemption in good order, plus any share
certificates with executed stock powers. The redemption price will be based on
the net asset value per Fund share next computed after such delivery. Good order
means that all relevant documents must be endorsed by the record owner (s)
exactly as the shares are registered and the signature(s) must be guaranteed by
a member of either the Securities Transfer Association's STAMP program or the
New York Stock Exchange's Medallion Signature Program, or certain banks, savings
and loan institutions, credit unions, securities dealers, securities exchanges,
clearing agencies and registered securities associations as required by a
regulation of the Securities and Exchange Commission and acceptable to The
Shareholder Services Group, Inc. In addition, in some cases, good order may
require the furnishing of additional documents such as where shares are
registered in the name of a corporation, partnership or fiduciary.
Within seven days after receipt of a redemption request in good order by The
Shareholder Services Group, Inc., the Fund will make payment in cash for the net
asset value of the shares as of the date determined above, reduced by the amount
of any applicable contingent deferred sales charge (described below) and any
Federal income tax required to be withheld. Although the Fund normally expects
to make payment in cash for redeemed shares, the Trust, subject to compliance
with applicable regulations, has reserved the right to pay the redemption price
of shares of the Fund, either totally or partially, by a distribution in kind of
readily marketable securities withdrawn by the Fund from the Portfolio. The
securities so distributed would be valued pursuant to the Portfolio's valuation
procedures. If a shareholder received a distribution in kind, the shareholder
could incur brokerage or other charges in converting the securities to cash.
To sell shares at their net asset value through an Authorized Firm (a
repurchase), a shareholder can place a repurchase order with the Authorized
Firm, which may charge a fee. The value of those shares is based upon the net
asset value calculated after EVD, as the Fund's agent, receives the order. It is
the Authorized Firm's responsibility to transmit promptly repurchase orders to
EVD. Throughout this Prospectus, the word "redemption" is generally meant to
include a repurchase.
If shares were recently purchased, the proceeds of redemption (or
repurchase) will not be sent until the check (including a certified or cashier's
check) received for the shares purchased has cleared. Payment for shares
tendered for redemption or repurchase may be delayed up to 15 days from the
purchase date when the purchase check has not yet cleared. Redemptions or
repurchases may result in a taxable gain or loss.
Due to the high cost of maintaining small accounts, the Fund reserves the
right to redeem accounts with balances of less than $1,000. Prior to such a
redemption, shareholders will be given 60 days' written notice to make
additional purchases. Thus, an investor making an initial investment of $1,000
would not be able to redeem shares without being subject to this policy.
However, no such redemption would be required by the Fund if the cause of the
low account balance was a reduction in the net asset value of Fund shares. No
contingent deferred sales charge will be imposed with respect to such
involuntary redemptions.
CONTINGENT DEFERRED SALES CHARGE. Shares redeemed within the first six years of
their purchase (except shares acquired through the reinvestment of
distributions) generally will be subject to a contingent deferred sales charge.
This contingent deferred sales charge is imposed on any redemption the amount of
which exceeds the aggregate value at the time of redemption of (a) all shares in
the account purchased more than six years prior to the redemption, (b) all
shares in the account acquired through reinvestment of monthly distributions and
capital gains distributions, and (c) the increase, if any, in the value of all
other shares in the account (namely those purchased within the six years
preceding the redemption) over the purchase price of such shares. Redemptions
are processed in a manner to maximize the amount of redemption proceeds which
will not be subject to a contingent deferred sales charge. That is, each
redemption will be assumed to have been made first from the exempt amounts
referred to in clauses (a), (b) and (c) above, and second through liquidation of
those shares in the account referred to in clause (c) on a first-in-first-out
basis. Any contingent deferred sales charge which is required to be imposed on
share redemptions will be made in accordance with the following schedule:
YEAR OF CONTINGENT
REDEMPTION DEFERRED SALES
AFTER PURCHASE CHARGE
-------------- --------------
First ..................................... 5%
Second .................................... 5%
Third ..................................... 4%
Fourth .................................... 3%
Fifth ..................................... 2%
Sixth ..................................... 1%
Seventh and following ..................... 0%
In calculating the contingent deferred sales charge upon the redemption of
Fund shares acquired in an exchange of shares of a fund currently listed under
"The Eaton Vance Exchange Privilege", the contingent deferred sales charge
schedule applicable to the shares at the time of purchase will apply and the
purchase of Fund shares acquired in the exchange is deemed to have occurred at
the time of the original purchase of the exchanged shares. The contingent
deferred sales charge will be waived for shares redeemed (1) pursuant to a
Withdrawal Plan (see "Eaton Vance Shareholder Services"), (2) as part of a
required distribution from a tax-sheltered retirement plan, or (3) following the
death of all beneficial owners of such shares, provided the redemption is
requested within one year of death (a death certificate and other applicable
documents may be required).
No contingent deferred sales charge will be imposed on Fund shares which
have been sold to Eaton Vance or its affiliates, or to their respective
employees or clients. The contingent deferred sales charge will be paid to the
Principal Underwriter or the Fund.
- --------------------------------------------------------------------------------
THE FOLLOWING EXAMPLE ILLUSTRATES THE OPERATION OF THE CONTINGENT
DEFERRED SALES CHARGE. ASSUME THAT AN INVESTOR PURCHASES $10,000 OF THE
FUND'S SHARES AND THAT 16 MONTHS LATER THE VALUE OF THE ACCOUNT HAS GROWN
THROUGH INVESTMENT PERFORMANCE AND REINVESTMENT OF DIVIDENDS TO $12,000.
THE INVESTOR THEN MAY REDEEM UP TO $2,000 OF SHARES WITHOUT INCURRING A
CONTINGENT DEFERRED SALES CHARGE. IF THE INVESTOR SHOULD REDEEM $3,000 OF
SHARES, A CHARGE WOULD BE IMPOSED ON $1,000 OF THE REDEMPTION. THE RATE
WOULD BE 5% BECAUSE THE REDEMPTION WAS MADE IN THE SECOND YEAR AFTER THE
PURCHASE WAS MADE AND THE CHARGE WOULD BE $50.
- --------------------------------------------------------------------------------
REPORTS TO SHAREHOLDERS
- ------------------------------------------------------------------------------
THE FUND WILL ISSUE TO ITS SHAREHOLDERS SEMI-ANNUAL AND ANNUAL REPORTS
CONTAINING FINANCIAL STATEMENTS. Financial statements included in annual reports
are audited by the Fund's independent certified public accountants. Shortly
after the end of each calendar year, the Fund will furnish all shareholders with
information necessary for preparing Federal and state tax returns.
THE LIFETIME INVESTING ACCOUNT/DISTRIBUTION OPTIONS
- ------------------------------------------------------------------------------
AFTER AN INVESTOR MAKES AN INITIAL PURCHASE OF FUND SHARES, THE FUND'S TRANSFER
AGENT, THE SHAREHOLDER SERVICES GROUP, INC., WILL SET UP A LIFETIME INVESTING
ACCOUNT FOR THE INVESTOR ON THE FUND'S RECORDS. This account is a complete
record of all transactions between the investor and the Fund which at all times
shows the balance of shares owned. The Fund will not issue share certificates
except upon request.
At least quarterly, shareholders will receive a statement showing complete
details of any transaction and the current balance in the account. THE LIFETIME
INVESTING ACCOUNT ALSO PERMITS A SHAREHOLDER TO MAKE ADDITIONAL INVESTMENTS IN
SHARES BY SENDING A CHECK FOR $50 OR MORE to The Shareholder Services Group,
Inc.
Any questions concerning a shareholder's account or services available may
be directed by telephone to EATON VANCE SHAREHOLDER SERVICES at 800-225-6265,
extension 2, or in writing to The Shareholder Services Group, Inc., BOS725, P.O.
Box 1559, Boston, MA 02104 (please provide the name of the shareholder, the Fund
and the account number).
THE FOLLOWING DISTRIBUTION OPTIONS WILL BE AVAILABLE TO ALL LIFETIME
INVESTING ACCOUNTS and may be changed as often as desired by written notice to
the Fund's dividend disbursing agent, The Shareholder Services Group, Inc.,
BOS725, P.O. Box 1559, Boston, MA 02104. The currently effective option will
appear on each account statement.
Share Option -- Dividends and capital gains will be reinvested in additional
shares.
Income Option -- Dividends will be paid in cash, and capital gains will be
reinvested in additional shares.
Cash Option -- Dividends and capital gains will be paid in cash.
The Share Option will be assigned if no other option is specified.
Distributions, including those reinvested, will be reduced by any withholding
required under the Federal income tax laws.
If the Income Option or Cash Option has been selected, dividend and/or
capital gains distribution checks which are returned by the United States Postal
Service as not deliverable or which remain uncashed for six months or more will
be reinvested in the account in shares at the then current net asset value.
Furthermore, the distribution option on the account will be automatically
changed to the Share Option until such time as the shareholder selects a
different option.
DISTRIBUTION INVESTMENT OPTION. In addition to the distribution options set
forth above, dividends and/or capital gains may be invested in additional shares
of another Eaton Vance fund. Before selecting this option, a shareholder should
obtain a prospectus of the other Eaton Vance fund and consider its objectives
and policies carefully.
"STREET NAME" ACCOUNTS. If shares of the Fund are held in a "street name"
account with an Authorized Firm, all recordkeeping, transaction processing and
payments of distributions relating to the beneficial owner's account will be
performed by the Authorized Firm, and not by the Fund and its Transfer Agent.
Since the Fund will have no record of the beneficial owner's transactions, a
beneficial owner should contact the Authorized Firm to purchase, redeem or
exchange shares, to make changes in or give instructions concerning the account,
or to obtain information about the account. The transfer of shares in a "street
name" account to an account with another dealer or to an account directly with
the Fund involves special procedures and will require the beneficial owner to
obtain historical purchase information about the shares in the account from the
Authorized Firm. Before establishing a "street name" account with an investment
firm, or transferring the account to another investment firm, an investor
wishing to reinvest distributions should determine whether the firm which will
hold the shares allows reinvestment of distributions in "street name" accounts.
- --------------------------------------------------------------------------------
UNDER A LIFETIME INVESTING ACCOUNT A SHAREHOLDER CAN MAKE ADDITIONAL
INVESTMENTS IN SHARES OF THE FUND BY SENDING A CHECK FOR $50 OR MORE.
- -------------------------------------------------------------------------------
THE EATON VANCE EXCHANGE PRIVILEGE
- ------------------------------------------------------------------------------
Shares of the Fund currently may be exchanged for shares of one or more other
funds in the Eaton Vance Marathon Group of Funds (which includes Eaton Vance
Equity-Income Trust and any EV Marathon fund, except Eaton Vance Prime Rate
Reserves) or Eaton Vance Money Market Fund, which are distributed with a
contingent deferred sales charge, on the basis of the net asset value per share
of each fund at the time of the exchange, provided that such exchange offers are
available only in states where shares of the fund being acquired may be legally
sold.
Each exchange must involve shares which have a net asset value of at least
$1,000. The exchange privilege may be changed or discontinued without penalty.
Shareholders will be given sixty (60) days' notice prior to any termination or
material amendment of the exchange privilege. The Fund does not permit the
exchange privilege to be used for "Market Timing" and may terminate the exchange
privilege for any shareholder account engaged in Market Timing activity. Any
shareholder account for which more than two round-trip exchanges are made within
any twelve month period will be deemed to be engaged in Market Timing.
Furthermore, a group of unrelated accounts for which exchanges are entered
contemporaneously by a financial intermediary will be considered to be engaged
in Market Timing.
The Shareholder Services Group, Inc. makes exchanges at the next determined
net asset value after receiving an exchange request in good order (see "How to
Redeem Fund Shares"). Consult The Shareholder Services Group, Inc. for
additional information concerning the exchange privilege. Applications and
prospectuses of the other funds are available from Authorized Firms or the
Principal Underwriter. The prospectus for each fund describes its investment
objectives and policies, and shareholders should obtain a prospectus and
consider these objectives and policies carefully before requesting an exchange.
No contingent deferred sales charge is imposed on exchanges. For purposes of
calculating the contingent deferred sales charge upon redemption of shares
acquired in an exchange, the contingent deferred sales charge schedule
applicable to the shares at the time of purchase will apply and the purchase of
shares acquired in one or more exchanges is deemed to have occurred at the time
of the original purchase of the exchanged shares. For the contingent deferred
sales charge schedule applicable to the EV Marathon Group of Funds (except EV
Marathon Strategic Income Fund and Class I shares of any EV Marathon Limited
Maturity Fund), see "How to Redeem Fund Shares". The contingent deferred sales
charge schedule applicable to EV Marathon Strategic Income Fund and Class I
shares of any EV Marathon Limited Maturity Fund is 3%, 2.5%, 2% or 1% in the
event of a redemption occurring in the first, second, third or fourth year,
respectively, after the original share purchase.
Shares of other funds in the Eaton Vance Marathon Group of Funds and shares
of Eaton Vance Money Market Fund may be exchanged for Fund shares on the basis
of the net asset value per share of each fund at the time of the exchange, but
subject to any restrictions or qualifications set forth in the current
prospectus of any such fund.
Telephone exchanges are accepted by The Shareholder Services Group, Inc.
provided that the investor has not disclaimed in writing the use of the
privilege. To effect such exchanges, call The Shareholder Services Group, Inc.
at 800-262-1122 or, within Massachusetts, 617-573-9403, Monday through Friday,
9:00 a.m. to 4:00 p.m. (Eastern Standard Time). Shares acquired by telephone
exchange must be registered in the same name(s) and with the same address as the
shares being exchanged. Neither the Fund, the Principal Underwriter nor The
Shareholder Services Group, Inc. will be responsible for the authenticity of
exchange instructions received by telephone, provided that reasonable procedures
to confirm that instructions communicated are genuine have been followed.
Telephone instructions will be tape recorded. In times of drastic economic or
market changes, a telephone exchange may be difficult to implement. An exchange
may result in a taxable gain or loss.
EATON VANCE SHAREHOLDER SERVICES
- ------------------------------------------------------------------------------
THE FUND OFFERS THE FOLLOWING SERVICES WHICH ARE VOLUNTARY, INVOLVE NO EXTRA
CHARGE, AND MAY BE CHANGED OR DISCONTINUED WITHOUT PENALTY AT ANY TIME. Full
information on each of the services described below and an application, where
required, are available from Authorized Firms or the Principal Underwriter. The
cost of administering such services for the benefit of shareholders who
participate in them is borne by the Fund as an expense to all shareholders.
INVEST-BY-MAIL -- FOR PERIODIC SHARE ACCUMULATION: Once the $1,000 minimum
investment has been made, checks of $50 or more payable to the order of EV
Marathon High Yield Municipals Fund may be mailed directly to The Shareholder
Services Group, Inc., BOS725, P.O. Box 1559, Boston, MA 02104 at any time --
whether or not distributions are reinvested. The name of the shareholder, the
Fund and the account number should accompany each investment.
BANK AUTOMATED INVESTING -- FOR REGULAR SHARE ACCUMULATION: Cash investments of
$50 or more may be made automatically each month or quarter from the
shareholder's bank account. The $1,000 minimum initial investment and small
account redemption policy are waived for these accounts.
WITHDRAWAL PLAN: A shareholder may draw on shareholdings systematically with
monthly or quarterly checks in an aggregate amount that does not exceed annually
12% of the account balance at the time the plan is established. Such amount will
not be subject to a contingent deferred sales charge. See "How to Redeem Fund
Shares". A minimum deposit of $5,000 in shares is required.
REINVESTMENT PRIVILEGE: A SHAREHOLDER WHO HAS REPURCHASED OR REDEEMED SHARES MAY
REINVEST, WITH CREDIT FOR ANY CONTINGENT DEFERRED SALES CHARGES PAID ON THE
REPURCHASED OR REDEEMED SHARES, ANY PORTION OR ALL OF THE REPURCHASE OR
REDEMPTION PROCEEDS (PLUS THAT AMOUNT NECESSARY TO ACQUIRE A FRACTIONAL SHARE TO
ROUND OFF THE PURCHASE TO THE NEAREST FULL SHARE) IN SHARES OF THE FUND,
provided that the reinvestment is effected within 30 days after such repurchase
or redemption. Shares are sold to a reinvesting shareholder at the next
determined net asset value following timely receipt of a written purchase order
by the Principal Underwriter or by the Fund (or by the Fund's Transfer Agent).
To the extent that any shares of the Fund are sold at a loss and the proceeds
are reinvested in shares of the Fund (or other shares of the Fund are acquired
within the period beginning 30 days before and ending 30 days after the date of
redemption) some or all of the loss generally will not be allowed as a tax
deduction. Shareholders should consult their tax advisers concerning the tax
consequences of reinvestments.
DISTRIBUTIONS AND TAXES
- ------------------------------------------------------------------------------
THE FUND DECLARES DIVIDENDS DAILY AND ORDINARILY DISTRIBUTES DIVIDENDS MONTHLY
(ON THE FIFTEENTH OR NEXT SUBSEQUENT BUSINESS DAY) FROM ITS NET INVESTMENT
INCOME. The Fund's net investment income consists of net investment income
allocated to the Fund by the Portfolio, less the Fund's direct and allocated
expenses. The Fund will distribute at least annually (usually in December) all
net realized capital gains allocated to the Fund by the Portfolio, if any, after
taking into account any capital loss carryovers. Daily distributions will begin
on the first business day collected funds for the purchase of shares are
available to the Transfer Agent.
The Fund will distribute substantially all of its tax-exempt income,
ordinary income and capital gain net income (if any) on a current basis.
Distributions designated by the Fund as "exempt interest dividends" may be
excluded from shareholders' gross income for federal income tax purposes.
However, exempt interest dividends may affect the taxability of social security
or railroad retirement benefits for shareholders who receive such benefits. In
addition, exempt interest dividends may result in liability under the federal
alternative minimum tax provisions and may be taxable for state and local tax
purposes. Shareholders should consult their tax advisers to determine the effect
of exempt interest dividends on their particular tax situation, including
liability for state and local taxes.
Other distributions from the Fund may be taxable to shareholders as ordinary
income, except that distributions of net long-term capital gains, if any, are
taxable as such regardless of the length of time the shareholder has held the
shares. Distributions of income from original issue discount and market discount
will be taxable to shareholders as ordinary income. Distributions will be
taxable as described whether received in cash or as additional shares through
reinvestment in the Fund.
Early in each year, the Fund will notify its shareholders of the tax status
of the Fund's distributions for the preceding year. Shareholders should consult
their tax advisers about the effect of Fund distributions on their particular
tax situation and any state, local or foreign taxes that may apply.
- --------------------------------------------------------------------------------
AS A REGULATED INVESTMENT COMPANY UNDER THE INTERNAL REVENUE CODE OF
1986, AS AMENDED (THE "CODE"), THE FUND DOES NOT PAY FEDERAL INCOME OR
EXCISE TAXES TO THE EXTENT THAT IT DISTRIBUTES TO SHAREHOLDERS ITS NET
INVESTMENT INCOME AND NET REALIZED CAPITAL GAINS IN ACCORDANCE WITH THE
TIMING REQUIREMENTS IMPOSED BY THE CODE. AS A PARTNERSHIP UNDER THE CODE,
THE PORTFOLIO DOES NOT PAY FEDERAL INCOME OR EXCISE TAXES.
- --------------------------------------------------------------------------------
PERFORMANCE INFORMATION
- ------------------------------------------------------------------------------
FROM TIME TO TIME, THE FUND MAY ADVERTISE ITS YIELD AND/OR AVERAGE ANNUAL TOTAL
RETURN. The Fund's current yield is calculated by dividing the net investment
income per share during a recent 30-day period by the maximum offering price per
share (net asset value) of the Fund on the last day of the period and
annualizing the resulting figure. A taxable-equivalent yield is computed by
using the tax-exempt yield figure and dividing by one minus the tax rate. The
Fund's average annual total return is determined by computing the average annual
percentage change in value of $1,000 invested at the maximum public offering
price (net asset value) for specified periods ending with the most recent
calendar quarter, assuming reinvestment of all distributions. The average annual
total return calculation assumes a complete redemption of the investment and the
deduction of any contingent deferred sales charge at the end of the period. The
Fund may publish annual and cumulative total return figures from time to time.
The Fund may also publish its distribution rate and/or its effective
distribution rate. The Fund's distribution rate is computed by dividing the most
recent monthly distribution per share annualized, by the current maximum public
offering price per share (net asset value). The Fund's effective distribution
rate is computed by dividing the distribution rate by the ratio used to
annualize the most recent monthly distribution and reinvesting the resulting
amount for a full year on the basis of such ratio. The effective distribution
rate will be higher than the distribution rate because of the compounding effect
of the assumed reinvestment. Investors should note that the Fund's yield is
calculated using a standardized formula, the income component of which is
computed from the yields to maturity of all debt obligations held by the
Portfolio based on prescribed methods (with all purchases and sales of
securities during such period included in the income calculation on a settlement
date basis), whereas the distribution rate is based on the Fund's last monthly
distribution which tends to be relatively stable and may be more or less than
the amount of net investment income and short-term capital gain actually earned
by the Fund during the month.
The Fund may also publish total return figures which do not take into
account any contingent deferred sales charge which may be imposed upon
redemptions at the end of the specified period. Any performance figure which
does not take into account the contingent deferred sales charge would be reduced
to the extent such charge is imposed upon a redemption.
Investors should note that the investment results of the Fund will fluctuate
over time, and any presentation of the Fund's yield, total return, distribution
rate or effective distribution rate for any prior period should not be
considered a representation of what an investment may earn or what the Fund's
yield, total return, distribution rate or effective distribution rate may be in
any future period. If the expenses related to the operation of the Fund or the
Portfolio are allocated to Eaton Vance, the Fund's performance will be higher.
<PAGE>
APPENDIX A
DESCRIPTION OF SECURITIES RATINGS+
MOODY'S INVESTORS SERVICE, INC.
MUNICIPAL BONDS
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long term risk appear somewhat larger than the Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa: Bonds which are rated Baa are considered as medium-grade obligations (i.e.,
they are neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during other good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca: Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
STANDARD & POOR'S RATINGS GROUP
INVESTMENT GRADE
AAA: Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the highest rated issues only in small degree.
A: Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB: Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibit adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay interest and repay principal for debt in this
category than in higher rated categories.
SPECULATIVE GRADE
Debt rated BB, B, CCC, CC, and C is regarded as having predominantly speculative
characteristics with respect to capacity to pay interest and repay principal. BB
indicates the least degree of speculation and C the highest. While such debt
will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major exposures to adverse conditions.
- -------------------
+The ratings indicated herein are believed to be the most recent ratings
available at the date of this Prospectus for the securities listed. Ratings are
generally given to securities at the time of issuance. While the rating agencies
may from time to time revise such ratings, they undertake no obligation to do
so, and the ratings indicated do not necessarily represent ratings which would
be given to these securities on the date of the Portfolio's fiscal year end.
<PAGE>
BB: Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB-rating.
B: Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB or BB-
rating.
CCC: Debt rated CCC has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The CCC rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
B or B-rating.
CC: The rating CC is typically applied to debt subordinated to senior debt which
is assigned an actual or implied CCC debt rating.
C: The rating C is typically applied to debt subordinated to senior debt which
is assigned an actual or implied CCC-debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed, but debt service
payments are continued.
C1: The Rating C1 is reserved for income bonds on which no interest is being
paid.
D: Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The D rating also will be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.
PLUS (+) OR MINUS (-): The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
FITCH INVESTORS SERVICE, INC.
INVESTMENT GRADE BOND RATINGS
AAA: Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA: Bonds considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated "AAA". Because bonds rated in the "AAA" and
"AA" categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated "F-1+".
A: Bonds considered to be investment grade and of high credit quality. The
obligors ability to pay interest and repay principal is considered to be strong,
but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB: Bonds considered to be investment grade and of satisfactory credit quality.
The obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however, are
more likely to have adverse impact on these bonds, and therefore, impair timely
payment. The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.
HIGH YIELD BOND RATINGS
BB: Bonds are considered speculative. The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified that could assist the
obligor in satisfying its debt service requirements.
B: Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue.
CCC: Bonds have certain identifiable characteristics which, if not remedied, may
lead to default. The ability to meet obligations requires an advantageous
business and economic environment.
CC: Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C: Bonds are in imminent default in payment of interest or principal.
DDD, DD, AND D: Bonds are in default on interest and/or principal payments. Such
bonds are extremely speculative and should be valued on the basis of their
ultimate recovery value in liquidation or reorganization of the obligor. "DDD"
represents the highest potential for recovery on these bonds, and "D" represents
the lowest potential for recovery.
PLUS (+) OR MINUS (-): The ratings from AA to C may be modified by the addition
of a plus or minus sign to indicate the relative position of a credit within the
rating category.
* * * * * * * *
NOTES: Bonds which are unrated expose the investor to risks with respect to
capacity to pay interest or repay principal which are similar to the risks of
lower-rated speculative bonds. The Portfolio is dependent on the Investment
Adviser's judgment, analysis and experience in the evaluation of such bonds.
<PAGE>
INVESTMENT ADVISER OF
HIGH YIELD MUNICIPALS
PORTFOLIO
Boston Management And Research
24 Federal Street
Boston, MA 02110
ADMINISTRATOR OF EV MARATHON
HIGH YIELD MUNICIPALS FUND
Eaton Vance Management
24 Federal Street
Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc.
24 Federal Street
Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company
24 Federal Street
Boston, MA 02110
TRANSFER AGENT
The Shareholder Services Group, Inc.
BOS725
P.O. Box 1559
Boston, MA 02104
(800) 262-1122
AUDITORS
Deloitte & Touche LLP
125 Summer Street
Boston, MA 02110
EV MARATHON HIGH YIELD
MUNICIPALS FUND
24 FEDERAL STREET
BOSTON, MA 02110
EV MARATHON HIGH
YIELD MUNICIPALS FUND
PROSPECTUS
AUGUST 1, 1995
M-
<PAGE>
Part A
Information Required in a Prospectus
EV TRADITIONAL HIGH YIELD MUNICIPALS FUND
EV TRADITIONAL HIGH YIELD MUNICIPALS FUND (THE "FUND"), A SERIES OF EATON
VANCE MUNICIPALS TRUST II (THE "TRUST"), IS A MUTUAL FUND SEEKING TO PROVIDE
HIGH CURRENT INCOME EXEMPT FROM REGULAR FEDERAL INCOME TAX. THE FUND INVESTS ITS
ASSETS IN HIGH YIELD MUNICIPALS PORTFOLIO (THE "PORTFOLIO"), A NON- DIVERSIFIED
OPEN-END INVESTMENT COMPANY HAVING THE SAME INVESTMENT OBJECTIVE AS THE FUND,
RATHER THAN BY DIRECTLY INVESTING IN AND MANAGING ITS OWN PORTFOLIO OF
SECURITIES AS WITH HISTORICALLY STRUCTURED MUTUAL FUNDS.
THE PORTFOLIO MAY INVEST UP TO 100% OF ITS ASSETS IN BELOW INVESTMENT GRADE
MUNICIPAL BONDS, COMMONLY KNOWN AS "JUNK BONDS", THAT ENTAIL GREATER RISKS,
INCLUDING DEFAULT, THAN THOSE OF HIGHER-RATED SECURITIES. SEE "HOW THE FUND AND
THE PORTFOLIO INVEST THEIR ASSETS".
Shares of the Fund are not deposits or obligations of, or guaranteed or
endorsed by, any bank or other insured depository institution, and are not
federally insured by the Federal Deposit Insurance Corporation, the Federal
Reserve Board or any other government agency. Shares of the Fund involve
investment risks, including fluctuations in value and the possible loss of some
or all of the principal investment.
This Prospectus is designed to provide you with information you should know
before investing. Please retain this document for future reference. A Statement
of Additional Information dated August 1, 1995 for the Fund, as supplemented
from time to time, has been filed with the Securities and Exchange Commission
and is incorporated herein by reference. The Statement of Additional Information
is available without charge from the Fund's principal underwriter, Eaton Vance
Distributors, Inc. (the "Principal Underwriter"), 24 Federal Street, Boston, MA
02110 (telephone (800) 225-6265). The Portfolio's investment adviser is Boston
Management and Research (the "Investment Adviser"), a wholly-owned subsidiary of
Eaton Vance Management, and Eaton Vance Management is the administrator (the
"Administrator") of the Fund. The offices of the Investment Adviser and the
Administrator are located at 24 Federal Street, Boston, MA 02110.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROS- PECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE PAGE
<S> <C>
Shareholder and Fund Expenses ........................ 2 Reports to Shareholders .......................... 11
The Fund's Investment Objective ...................... 3 The Lifetime Investing Account/Distribution
How the Fund and the Portfolio Invest their Assets .... 3 Options ........................................ 12
Organization of the Fund and the Portfolio ........... 6 The Eaton Vance Exchange Privilege ............... 12
Management of the Fund and the Portfolio ............. 7 Eaton Vance Shareholder Services ................. 13
Service Plan ......................................... 9 Distributions and Taxes .......................... 14
Valuing Fund Shares ................................... 9 Performance Information .......................... 14
How to Buy Fund Shares ................................ 9 Statement of Intention and Escrow Agreement ...... 15
How to Redeem Fund Shares ............................ 11 Appendix A ........................................ 16
</TABLE>
- ------------------------------------------------------------------------------
PROSPECTUS DATED AUGUST 1, 1995
<PAGE>
SHAREHOLDER AND FUND EXPENSES
- ------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases of Shares
(as a percentage of offering price) 3.75%
Sales Charges Imposed on Reinvested Distributions None
Redemption Fees None
Fees to Exchange Shares None
Contingent Deferred Sales Charges Imposed on Redemptions None
ANNUAL FUND AND ALLOCATED PORTFOLIO OPERATING EXPENSES
(as a percentage of average daily net assets)
Investment Adviser Fee 0.73%
Rule 12b-1 Fees (Service Plan) 0.00
Other Expenses 0.25
----
Total Operating Expenses 0.98%
====
EXAMPLE: 1 YEAR 3 YEARS
------ -------
An investor would pay the following maximum
initial sales charge and expenses on a $1,000
investment, assuming (a) 5% annual return and
(b) redemption at the end of each time period: $47 $68
Notes:
The tables and Example are designed to help investors understand the costs
and expenses they will bear, directly or indirectly, by investing in the Fund.
The information set out in the tables and Example is estimated, since the Fund
is only recently organized.
The Fund invests exclusively in the Portfolio. The Trustees believe that,
over time, the aggregate per share expenses of the Fund and the Portfolio should
be approximately equal to, or less than, the per share expenses the Fund would
incur if the Trust were instead to retain the services of an investment adviser
and the Fund's assets were invested directly in the types of securities being
held by the Portfolio.
The Example should not be considered a representation of past or future
expenses, and actual expenses may be greater or less than those shown. Federal
regulations require the Example to assume a 5% annual return, but actual annual
return will vary.
The Portfolio's monthly advisory fee has two components, a fee based on
daily net assets and a fee based on daily gross income, as set forth in the fee
schedule on page 8. The Fund expects to begin accruing for its service fee
payments during the quarter ending September 30, 1996.
Other investment companies and investors with different distribution
arrangements are investing in the Portfolio and others may do so in the future.
See "Organization of the Fund and the Portfolio".
THE FUND'S INVESTMENT OBJECTIVE
- ------------------------------------------------------------------------------
THE FUND'S INVESTMENT OBJECTIVE IS TO PROVIDE HIGH CURRENT INCOME EXEMPT FROM
REGULAR FEDERAL INCOME TAX. The Fund seeks its objective through investments in
a portfolio of high-yielding, below investment grade securities. The investment
objective and policies of the Fund may be changed by the Trustees without a vote
of shareholders; as a matter of policy, the Trustees would not materially change
the Fund's investment objective without shareholder approval. The Fund may not
be appropriate for investors who cannot assume the greater risk of capital
depreciation or loss inherent in seeking higher tax-exempt yields.
HOW THE FUND AND THE PORTFOLIO INVEST THEIR ASSETS
- ------------------------------------------------------------------------------
THE FUND CURRENTLY SEEKS ITS OBJECTIVE BY INVESTING ITS ASSETS IN HIGH YIELD
MUNICIPALS PORTFOLIO, WHICH IS ITSELF AN OPEN-END INVESTMENT COMPANY. The
Portfolio invests primarily in below investment grade municipal obligations
which the Investment Adviser believes do not entail undue risk.
"Below investment grade" municipal obligations are obligations that are
rated Ba or lower by Moody's Investors Service, Inc. ("Moody's") or BB or lower
by Standard & Poor's Ratings Group ("S&P") or Fitch Investors Service, Inc.
("Fitch") or that are unrated but determined by the Investment Adviser to be of
comparable quality. For a description of the ratings assigned by the rating
agencies, see Appendix A. Below investment grade municipal obligations generally
offer higher current yields than do higher rated securities, but are subject to
greater risks. Securities in the lower-rated categories are considered to be of
poor standing and predominantly speculative. The Portfolio may also invest a
portion of its assets in municipal obligations that are not paying current
income in anticipation of possible future income. For more detailed information
about the risks associated with investing in such securities, see "Risk
Considerations," below.
Although the Portfolio may invest in securities of any maturity, it is
expected that the Portfolio will normally invest a substantial portion of its
assets in securities with maturities of ten years or more. Those securities
generally offer higher yields than securities of shorter maturities, but are
subject to greater fluctuations in value in response to changes in interest
rates. Since the Portfolio's objective is to provide high current income, the
Portfolio will invest in municipal obligations with an emphasis on income and
not on stability of the Portfolio's net asset value. The average maturity of the
Portfolio's holdings may vary (generally between 15 and 30 years) depending on
anticipated market conditions.
The Portfolio will normally invest at least 65% of its assets in investment
grade and below investment grade municipal obligations. As a matter of
fundamental policy, the Portfolio will normally invest at least 80% of its
assets in debt obligations issued by or on behalf of states, territories and
possessions of the United States, and the District of Columbia and their
political subdivisions, agencies or instrumentalities, the interest on which is,
in the opinion of bond counsel, exempt from regular federal income tax. (As a
matter of fundamental policy, the Fund will normally invest either directly, or
indirectly through another investment company, at least 80% of its assets in
such obligations.)
At times, the Portfolio may, for temporary defensive purposes, invest any
portion of its assets in higher-rated municipal obligations or other securities,
the interest on which may not be exempt from regular federal income tax, and may
hold any portion of its assets in cash. It is impossible to predict when, or for
how long, the Portfolio would engage in such strategies.
MUNICIPAL OBLIGATIONS. Municipal obligations include bonds, notes and commercial
paper issued by a municipality for a wide variety of both public and private
purposes, the interest on which is, in the opinion of bond counsel, exempt from
regular federal income tax. Public purpose municipal bonds include general
obligation and revenue bonds. General obligation bonds are backed by the taxing
power of the issuing municipality. Revenue bonds are backed by the revenues of a
project or facility. Municipal notes include bond anticipation, tax
anticipation, revenue anticipation and construction loan notes. Bond, tax and
revenue anticipation notes are short-term obligations that will be retired with
the proceeds of an anticipated bond issue, tax revenue or facility revenue,
respectively. Construction loan notes are short-term obligations that will be
retired with the proceeds of long-term mortgage financing.
INTEREST INCOME FROM CERTAIN TYPES OF MUNICIPAL OBLIGATIONS MAY BE SUBJECT
TO FEDERAL ALTERNATIVE MINIMUM TAX FOR INDIVIDUAL INVESTORS. Such obligations
will not be included in the securities used to determine the Portfolio's
compliance with the 80% test described above. Distributions to corporate
investors of certain interest income may also be subject to the federal
alternative minimum tax.
CONCENTRATION. The Portfolio may invest 25% or more of its assets in municipal
obligations of issuers located in the same state or in municipal obligations of
the same type, including without limitation the following: general obligations
of states and localities; lease rental obligations of state and local
authorities; obligations of state and local housing finance authorities,
municipal utilities systems or public housing authorities; obligations for
hospitals or life care facilities; or industrial development or pollution
control bonds issued for electric utility systems, steel companies, paper
companies or other purposes. This may make the Portfolio more susceptible to
adverse economic, political, or regulatory occurrences affecting a particular
category of issuers. For example, health-care related issuers are susceptible to
medicaid reimbursement policies, and national and state health care legislation.
As the Portfolio's concentration in the securities of a particular category of
issuer increases, so does the potential for fluctuation in the value of the
Fund's shares.
NON-DIVERSIFIED STATUS. The Portfolio's classification under the Investment
Company Act of 1940 (the "1940 Act") as a "non-diversified" investment company
allows it to invest, with respect to 50% of its assets, more than 5% (but not
more than 25%) of its assets in the securities of any issuer. The Portfolio is
likely to invest a greater percentage of its assets in the securities of a
single issuer than would a diversified fund. Therefore, the Portfolio will be
more susceptible to any single adverse economic or political occurrence or other
adverse development affecting certain issuers.
OTHER INVESTMENT PRACTICES
The Portfolio may engage in the following other investment practices, some
of which may be considered "derivative" instruments because they derive their
value from another instrument, security or index.
WHEN-ISSUED SECURITIES. The Portfolio may purchase securities on a "when-
issued" basis, which means that payment and delivery occur on a future
settlement date. The price and yield of such securities are generally fixed on
the date of commitment to purchase. However, the market value of the securities
may fluctuate prior to delivery and upon delivery the securities may be worth
more or less than the Portfolio agreed to pay for them. The Portfolio may also
purchase instruments that give the Portfolio the option to purchase a municipal
obligation when and if issued.
INVERSE FLOATERS. The Portfolio may invest in municipal securities whose
interest rates bear an inverse relationship to the interest rate on another
security or the value of an index ("inverse floaters"). An investment in inverse
floaters may involve greater risk than an investment in a fixed rate bond.
Because changes in the interest rate on the other security or index inversely
affect the residual interest paid on the inverse floater, the value of an
inverse floater is generally more volatile than that of a fixed rate bond.
Inverse floaters have interest rate adjustment formulas which generally reduce
or, in the extreme, eliminate the interest paid to the Portfolio when short-term
interest rates rise, and increase the interest paid to the Portfolio when
short-term interest rates fall. Inverse floaters have varying degrees of
liquidity, and the market for these securities is new and relatively volatile.
These securities tend to underperform the market for fixed rate bonds in a
rising interest rate environment, but tend to outperform the market for fixed
rate bonds when interest rates decline. Shifts in long-term interest rates may
alter this tendency, however. Although volatile, inverse floaters typically
offer the potential for yields exceeding the yields available on fixed rate
bonds with comparable credit quality and maturity. These securities usually
permit the investor to convert the floating rate to a fixed rate (normally
adjusted downward), and this optional conversion feature may provide a partial
hedge against rising rates if exercised at an opportune time. Inverse floaters
are leveraged because they provide two or more dollars of bond market exposure
for every dollar invested.
FUTURES TRANSACTIONS. The Portfolio may purchase and sell various kinds of
financial futures contracts and options thereon to hedge against changes in
interest rates and to enhance total return by using a futures position as a
lower cost substitute for a securities position. The futures contracts may be
based on various debt securities (such as U.S. Government securities),
securities indices (such as the Municipal Bond Index traded on the Chicago Board
of Trade) and other financial instruments and indices. Such transactions involve
a risk of loss or depreciation due to unanticipated adverse changes in
securities prices, which may exceed the Portfolio's initial investment in these
contracts. The Portfolio may not purchase or sell futures contracts or related
options, except for closing purchase or sale transactions, if immediately
thereafter the sum of the amount of margin deposits and premiums paid on the
Portfolio's outstanding positions would exceed 5% of the market value of the
Portfolio's net assets. Nonetheless, at least 80% of the Portfolio's assets will
be invested in municipal obligations. These transactions involve transaction
costs. To the extent that the Portfolio enters into futures contracts and
options thereon traded on an exchange regulated by the Commodity Futures Trading
Commission, in each case that are not for bona fide hedging purposes (as defined
by the CFTC), the aggregate initial margin and premiums required to establish
these positions (excluding the amount by which options are "in-the-money") may
not exceed 5% of the liquidation value of the Portfolio's portfolio, after
taking into account unrealized profits and unrealized losses on any contracts
the Portfolio has entered into. There can be no assurance that the Investment
Adviser's use of futures will be advantageous to the Portfolio. Distributions by
the Fund of any gains realized on the Portfolio's transactions in futures and
options on futures will be taxable.
RISK CONSIDERATIONS
Investors should carefully consider their ability to assume the risks of
owning shares of a mutual fund that invests in below investment grade municipal
obligations (sometimes referred to as "junk bonds") before making an investment
in the Fund. The lower ratings of certain securities held by the Portfolio
reflect a greater possibility that adverse changes in the financial condition of
an issuer, or in general economic conditions, or both, or an unanticipated rise
in interest rates, may impair the ability of the issuer to make payments of
interest and principal. The inability (or perceived inability) of issuers to
make timely payment of interest and principal would likely make the values of
securities held by the Fund more volatile and could limit the Portfolio's
ability to sell its securities at prices approximating the values the Portfolio
has placed on such securities. It is possible that legislation may be adopted in
the future limiting the ability of certain financial institutions to purchase
such securities; such legislation may adversely affect the liquidity of such
securities. In the absence of a liquid trading market for securities held by it,
the Portfolio may be unable at times to establish the fair market value of such
securities. The rating assigned to a security by a rating agency does not
reflect an assessment of the volatility of the security's market value or of the
liquidity of an investment in the securities. Credit ratings are based largely
on the issuer's historical financial condition and the rating agency's
investment analysis at the timing of rating, and the rating assigned to any
particular security is not necessarily a reflection of the issuer's current
financial condition. Credit quality in the high yield, high risk municipal bond
market can change from time to time, and recently issued credit ratings may not
fully reflect the actual risks posed by a particular high yield security.
The net asset value of the Fund will change in response to fluctuations in
prevailing interest rates and changes in the value of the securities held by the
Portfolio. When interest rates decline, the value of securities already held by
the Portfolio can be expected to rise. Conversely, when interest rates rise, the
value of existing portfolio security holdings can be expected to decline.
Changes in the credit quality of issuers of municipal obligations held by the
Portfolio will affect the principal value (and possibly the income earned) on
such obligations. In addition, the values of such securities are affected by
changes in general economic conditions and business conditions affecting the
specific industries of their issuers. Changes by recognized rating services in
their ratings of any fixed-income security and in the ability of an issuer to
make payments of interest and principal may also affect the value of these
investments. The Portfolio will not dispose of a security solely because its
rating is reduced below its rating at the time of purchase, although the
Investment Adviser will monitor the investment to determine whether continued
investment in the security will assist in meeting the Portfolio's investment
objective.
At times, a substantial portion of the Portfolio's assets may be invested in
securities as to which the Portfolio, by itself or together with other accounts
managed by the Investment Adviser and its affiliates, holds a major portion or
all of such securities. Under adverse market or economic conditions or in the
event of adverse changes in the financial condition of the issuer, the Portfolio
could find it more difficult to sell such securities when the Investment Adviser
believes it advisable to do so or may be able to sell such securities only at
prices lower than if such securities were more widely held. Under such
circumstances, it may also be more difficult to determine the fair value of such
securities for purposes of computing the Portfolio's net asset value. Interest
and/or principal payments on securities in default could be in arrears when such
securities are acquired, and the issuer may be in bankruptcy or undergoing a
debt restructuring or reorganization. In order to enforce its rights in the
event of a default under such securities, the Portfolio may be required to take
possession of and manage assets securing the issuer's obligations on such
securities, which may increase the Portfolio's operating expenses and adversely
affect the Portfolio's net asset value. Any income derived from the Portfolio's
ownership or operation of such assets may not be tax-exempt.
The secondary market for such municipal obligations in which the Portfolio
may invest is less liquid than that for many taxable debt obligations or other
more widely traded municipal obligations. The Portfolio will not invest in
illiquid securities if more than 15% of its net assets would be invested in
securities not readily marketable. No established resale market exists for
certain of the municipal obligations in which the Portfolio may invest. As a
result, the Portfolio may be unable to dispose of some of these municipal
obligations at times when it would otherwise wish to do to at the prices at
which they are valued.
Certain securities held by the Portfolio may permit the issuer at its option
to "call", or redeem, its securities. If an issuer were to redeem securities
held by the Portfolio during a time of declining interest rates, the Portfolio
may not be able to reinvest the proceeds in securities providing the same
investment return as the securities redeemed.
Some of the securities in which the Portfolio invests may include so-called
"zero-coupon" bonds, whose values are subject to greater fluctuation in response
to changes in market interest rates than bonds which pay interest currently.
Zero-coupon bonds are issued at a significant discount from face value and pay
interest only at maturity rather than at intervals during the life of the
security. The Portfolio is required to accrue and distribute income from
zero-coupon bonds on a current basis, even though it does not receive that
income currently in cash. Thus, the Portfolio may have to sell other investments
to obtain cash needed to make income distributions.
The Portfolio may invest in municipal leases, and participations in
municipal leases. The obligations of the issuer to meet its obligations under
such leases is often subject to the appropriation by the appropriate legislative
body, on an annual or other basis, to appropriate funds for the payment of the
obligations. Investments in municipal leases are thus subject to the risk that
the legislative body will not make the necessary appropriation and the issuer
will not otherwise be willing or able to meet its obligations.
The Investment Adviser seeks to minimize the risks of investing in below
investment grade securities through professional investment analysis and
attention to current developments in interest rates and economic conditions.
When the Portfolio invests in such municipal obligations, the achievement of the
Portfolio's goals is more dependent on the Investment Adviser's ability than
would be the case if the Portfolio were investing in municipal obligations in
the higher rating categories. The amount of information about the financial
conditions of an issuer of municipal obligations may not be as extensive as that
which is made available by corporations whose securities are publicly traded.
- -------------------------------------------------------------------------------
THE FUND AND THE PORTFOLIO HAVE ADOPTED CERTAIN FUNDAMENTAL INVESTMENT
RESTRICTIONS WHICH ARE ENUMERATED IN DETAIL IN THE STATEMENT OF ADDITIONAL
INFORMATION AND WHICH MAY NOT BE CHANGED UNLESS AUTHORIZED BY A SHAREHOLDER VOTE
AND AN INVESTOR VOTE, RESPECTIVELY. EXCEPT FOR SUCH ENUMERATED RESTRICTIONS AND
AS OTHERWISE INDICATED IN THIS PROSPECTUS, THE INVESTMENT OBJECTIVE AND POLICIES
OF THE FUND AND THE PORTFOLIO ARE NOT FUNDAMENTAL POLICIES AND ACCORDINGLY MAY
BE CHANGED BY THE TRUSTEES OF THE TRUST AND THE PORTFOLIO WITHOUT OBTAINING THE
APPROVAL OF THE FUND'S SHAREHOLDERS OR THE INVESTORS IN THE PORTFOLIO, AS THE
CASE MAY BE. IF ANY CHANGES WERE MADE IN THE FUND'S INVESTMENT OBJECTIVE, THE
FUND MIGHT HAVE INVESTMENT OBJECTIVES DIFFERENT FROM THE OBJECTIVES WHICH AN
INVESTOR CONSIDERED APPROPRIATE AT THE TIME THE INVESTOR BECAME A SHAREHOLDER IN
THE FUND.
- -------------------------------------------------------------------------------
ORGANIZATION OF THE FUND AND THE PORTFOLIO
- ------------------------------------------------------------------------------
THE FUND IS A SERIES OF EATON VANCE MUNICIPALS TRUST II, A BUSINESS TRUST
ESTABLISHED UNDER MASSACHUSETTS LAW PURSUANT TO A DECLARATION OF TRUST DATED
OCTOBER 25, 1993, AS AMENDED. THE TRUST IS A MUTUAL FUND -- AN OPEN-END
MANAGEMENT INVESTMENT COMPANY. The Trustees of the Trust are responsible for the
overall management and supervision of its affairs. The Trust may issue an
unlimited number of shares of beneficial interest (no par value per share) in
one or more series and because the Trust can offer separate series (such as the
Fund) it is known as a "series company." Each share represents an equal
proportionate beneficial interest in the Fund. When issued and outstanding, the
shares are fully paid and nonassessable by the Trust and redeemable as described
under "How to Redeem Fund Shares". Shareholders are entitled to one vote for
each full share held. Fractional shares may be voted proportionately. Shares
have no preemptive or conversion rights and are freely transferable. In the
event of the liquidation of the Fund, shareholders are entitled to share pro
rata in the net assets of the Fund available for distribution to shareholders.
THE PORTFOLIO IS ORGANIZED AS A TRUST UNDER THE LAWS OF THE STATE OF NEW YORK
AND INTENDS TO BE TREATED AS A PARTNERSHIP FOR FEDERAL TAX PURPOSES. The
Portfolio, as well as the Trust, intends to comply with all applicable Federal
and state securities laws. The Portfolio's Declaration of Trust provides that
the Fund and other entities permitted to invest in the Portfolio (e.g., other
U.S. and foreign investment companies, and common and commingled trust funds)
will each be liable for all obligations of the Portfolio. However, the risk of
the Fund incurring financial loss on account of such liability is limited to
circumstances in which both inadequate insurance exists and the Portfolio itself
is unable to meet its obligations. Accordingly, the Trustees of the Trust
believe that neither the Fund nor its shareholders will be adversely affected by
reason of the Fund investing in the Portfolio.
SPECIAL INFORMATION ON THE FUND/PORTFOLIO INVESTMENT STRUCTURE. An investor in
the Fund should be aware that the Fund, unlike mutual funds which directly
acquire and manage their own portfolios of securities, seeks to achieve its
investment objective by investing its assets in an interest in the Portfolio
(although the Fund may temporarily hold a de minimus amount of cash), which is a
separate investment company with an identical investment objective. Therefore,
the Fund's interest in securities owned by the Portfolio is indirect. In
addition to selling an interest to the Fund, the Portfolio may sell interests to
other affiliated and non-affiliated mutual funds or institutional investors.
Such investors will invest in the Portfolio on the same terms and conditions and
will pay a proportionate share of the Portfolio's expenses. However, the other
investors investing in the Portfolio are not required to sell their shares at
the same public offering price as the Fund due to variations in sales
commissions and other operating expenses. Therefore, investors in the Fund
should be aware that these differences may result in differences in returns
experienced by investors in the various funds that invest in the Portfolio. Such
differences in returns are also present in other mutual fund structures,
including funds that have multiple classes of shares. For information regarding
the investment objective, policies and restrictions, see "The Fund's Investment
Objective" and "How the Fund and the Portfolio Invest their Assets". Further
information regarding investment practices may be found in the Statement of
Additional Information.
The Trustees of the Trust have considered the advantages and disadvantages
of investing the assets of the Fund in the Portfolio, as well as the advantages
and disadvantages of the two-tier format. The Trustees believe that the
structure offers opportunities for substantial growth in the assets of the
Portfolio, and affords the potential for economies of scale for the Fund.
The Fund may withdraw (completely redeem) all its assets from the Portfolio
at any time if the Board of Trustees of the Trust determines that it is in the
best interest of the Fund to do so. The investment objective and the
nonfundamental investment policies of the Fund and the Portfolio may be changed
by the Trustees of the Trust and the Portfolio without obtaining the approval of
the shareholders of the Fund or the investors in the Portfolio, as the case may
be. Any such change of the investment objective of the Fund or the Portfolio
will be preceded by thirty days' advance written notice to the shareholders of
the Fund or the investors in the Portfolio, as the case may be. In the event the
Fund withdraws all of its assets from the Portfolio, or the Board of Trustees of
the Trust determines that the investment objective of the Portfolio is no longer
consistent with the investment objective of the Fund, the Board of Trustees of
the Trust would consider what action might be taken, including investing the
assets of the Fund in another pooled investment entity or retaining an
investment adviser to manage the Fund's assets in accordance with its investment
objective. The Fund's investment performance may be affected by a withdrawal of
all its assets from the Portfolio.
Information regarding other pooled investment entities or funds which invest
in the Portfolio may be obtained by contacting Eaton Vance Distributors, Inc.
(the "Principal Underwriter" or "EVD"), 24 Federal Street, Boston, MA 02110
(617) 482-8260. Smaller investors in the Portfolio may be adversely affected by
the actions of larger investors in the Portfolio. For example, if a large
investor withdraws from the Portfolio, the remaining investors may experience
higher pro rata operating expenses, thereby producing lower returns.
Additionally, the Portfolio may become less diverse, resulting in increased
portfolio risk, and experience decreasing economies of scale. However, this
possibility exists as well for historically structured funds which have large or
institutional investors.
Until recently, the Administrator sponsored and advised historically
structured funds. Funds which invest all their assets in interests in a separate
investment company are a relatively new development in the mutual fund industry
and, therefore, the Fund may be subject to additional regulations than
historically structured funds.
The Declaration of Trust of the Portfolio provides that the Portfolio will
terminate 120 days after the complete withdrawal of the Fund or any other
investor in the Portfolio, unless either the remaining investors, by unanimous
vote at a meeting of such investors, or a majority of the Trustees of the
Portfolio, by written instrument consented to by all investors, agree to
continue the business of the Portfolio. This provision is consistent with
treatment of the Portfolio as a partnership for Federal income tax purposes. See
"Distributions and Taxes" for further information. Whenever the Fund as an
investor in the Portfolio is requested to vote on matters pertaining to the
Portfolio (other than the termination of the Portfolio's business, which may be
determined by the Trustees of the Portfolio without investor approval), the Fund
will hold a meeting of Fund shareholders and will vote its interest in the
Portfolio for or against such matters proportionately to the instructions to
vote for or against such matters received from Fund shareholders. The Fund shall
vote shares for which it receives no voting instructions in the same proportion
as the shares for which it receives voting instructions. Other investors in the
Portfolio may alone or collectively acquire sufficient voting interests in the
Portfolio to control matters relating to the operation of the Portfolio, which
may require the Fund to withdraw its investment in the Portfolio or take other
appropriate action. Any such withdrawal could result in a distribution "in kind"
of portfolio securities (as opposed to a cash distribution from the Portfolio).
If securities are distributed, the Fund could incur brokerage, tax or other
charges in converting the securities to cash. In addition, the distribution in
kind may result in a less diversified portfolio of investments or adversely
affect the liquidity of the Fund. Notwithstanding the above, there are other
means for meeting shareholder redemption requests, such as borrowing.
The Trustees of the Trust, including a majority of the noninterested
Trustees, have approved written procedures designed to identify and address any
potential conflicts of interest arising from the fact that the Trustees of the
Trust and the Trustees of the Portfolio are the same. Such procedures require
each Board to take actions to resolve any conflict of interest between the Fund
and the Portfolio, and it is possible that the creation of separate Boards may
be considered. For further information concerning the Trustees and officers of
the Trust and the Portfolio, see the Statement of Additional Information.
MANAGEMENT OF THE FUND AND THE PORTFOLIO
- ------------------------------------------------------------------------------
THE PORTFOLIO ENGAGES BOSTON MANAGEMENT AND RESEARCH ("BMR"), A WHOLLY-OWNED
SUBSIDIARY OF EATON VANCE MANAGEMENT ("EATON VANCE"), AS ITS INVESTMENT ADVISER.
EATON VANCE, ITS AFFILIATES AND ITS PREDECESSOR COMPANIES HAVE BEEN MANAGING
ASSETS OF INDIVIDUALS AND INSTITUTIONS SINCE 1924 AND MANAGING INVESTMENT
COMPANIES SINCE 1931.
Acting under the general supervision of the Board of Trustees of the
Portfolio, BMR manages the Portfolio's investments and affairs. Under its
investment advisory agreement with the Portfolio, BMR receives a monthly
advisory fee equal to the aggregate of
(a) a daily asset based fee computed by applying the annual asset rate
applicable to that portion of the total daily net assets in each
Category as indicated below, plus
(b) a daily income based fee computed by applying the daily income rate
applicable to that portion of the total daily gross income (which
portion shall bear the same relationship to the total daily gross income
on such day as that portion of the total daily net assets in the same
Category bears to the total daily net assets on such day) in each
Category as indicated below:
ANNUAL DAILY
CATEGORY DAILY NET ASSETS ASSET RATE INCOME RATE
- -------- ---------------- ---------- -----------
1 up to $500 million ..................... 0.400% 4.00%
2 $500 million but less than $1 billion .. 0.375% 3.75%
3 $1 billion but less than $1.5 billion .. 0.350% 3.50%
4 $1.5 billion but less than $2 billion .. 0.325% 3.25%
5 $2 billion but less than $3 billion .... 0.300% 3.00%
6 $3 billion and over .................... 0.275% 2.75%
BMR also furnishes for the use of the Portfolio office space and all
necessary office facilities, equipment and personnel for servicing the
investments of the Portfolio. Municipal obligations are normally traded on a net
basis (without commission) through broker-dealers and banks acting for their own
account. Such firms attempt to profit from such transactions by buying at the
bid price and selling at the higher asked price of the market, and the
difference is customarily referred to as the spread. In selecting firms which
will execute portfolio transactions BMR judges their professional ability and
quality of service and uses its best efforts to obtain execution at prices which
are advantageous to the Portfolio and at reasonably competitive spreads. Subject
to the foregoing, BMR may consider sales of shares of the Fund or of other
investment companies sponsored by BMR or Eaton Vance as a factor in the
selection of firms to execute portfolio transactions.
Thomas M. Metzold has acted as the portfolio manager of the Portfolio since
it commenced operations. He has been a Vice President of Eaton Vance since 1991
and of BMR since 1992 and an employee of Eaton Vance since 1987.
BMR OR EATON VANCE ACTS AS INVESTMENT ADVISER TO INVESTMENT COMPANIES AND
VARIOUS INDIVIDUAL AND INSTITUTIONAL CLIENTS WITH ASSETS UNDER MANAGEMENT OF
APPROXIMATELY $15 BILLION. Eaton Vance is a wholly-owned subsidiary of Eaton
Vance Corp., a publicly held holding company. Eaton Vance Corp., through its
subsidiaries and affiliates, engages in investment management and marketing
activities, fiduciary and banking services, oil and gas operations, real estate
investment, consulting and management, and development of precious metals
properties.
The Trust has retained the services of Eaton Vance to act as Administrator
of the Fund. The Trust has not retained the services of an investment adviser
since the Trust seeks to achieve the investment objective of the Fund by
investing the Fund's assets in the Portfolio. As Administrator, Eaton Vance
provides the Fund with general office facilities and supervises the overall
administration of the Fund. For these services Eaton Vance currently receives no
compensation. The Trustees of the Trust may determine, in the future, to
compensate Eaton Vance for such services.
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 BMR
under the investment advisory agreement, by Eaton Vance under the administrative
services agreement, or by EVD under the distribution agreement. 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 shareholders and investors; proxy statements and other
expenses of shareholders' or investors' meetings; insurance premiums; printing
and mailing expenses; interest, taxes and corporate fees; legal and accounting
expenses; compensation and expenses of Trustees not affiliated with BMR or Eaton
Vance; and investment advisory fees and, if any, administrative services fees.
The Portfolio or the Fund, as the case may be, 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 with respect thereto.
SERVICE PLAN
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In addition to advisory fees and other expenses, the Fund pays service fees
pursuant to a Service Plan (the "Plan") designed to meet the requirements of
Rule 12b-1 under the Investment Company Act of 1940 and the service fee
requirements of the revised sales charge rule of the National Association of
Securities Dealers, Inc. THE PLAN PROVIDES THAT THE FUND MAY MAKE SERVICE FEE
PAYMENTS FOR PERSONAL SERVICES AND/OR THE MAINTENANCE OF SHAREHOLDER ACCOUNTS TO
THE PRINCIPAL UNDERWRITER, FINANCIAL SERVICE FIRMS ("AUTHORIZED FIRMS") AND
OTHER PERSONS IN AMOUNTS NOT EXCEEDING .25% OF THE FUND'S AVERAGE DAILY NET
ASSETS FOR ANY FISCAL YEAR. The Trustees of the Trust have initially implemented
the Plan by authorizing the Fund to make quarterly service fee payments to the
Principal Underwriter and Authorized Firms in amounts not expected to exceed
.25% of the Fund's average daily net assets for any fiscal year which is based
on the value of Fund shares sold by such persons and remaining outstanding for
at least twelve months. The Fund expects to begin accruing for its service fee
payments during the quarter ending September 30, 1996. The Plan is described
further in the Statement of Additional Information.
VALUING FUND SHARES
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THE FUND VALUES ITS SHARES ONCE ON EACH DAY THE NEW YORK STOCK EXCHANGE (THE
"EXCHANGE") IS OPEN FOR TRADING, as of the close of regular trading on the
Exchange (normally 4:00 p.m. New York time). The Fund's net asset value per
share is determined by its custodian, Investors Bank & Trust Company ("IBT"),
(as agent for the Fund) in the manner authorized by the Trustees of the Trust.
Net asset value is computed by dividing the value of the Fund's total assets,
less its liabilities, by the number of shares outstanding. Because the Fund
invests its assets in an interest in the Portfolio, the Fund's net asset value
will reflect the value of its interest in the Portfolio (which in turn, reflects
the underlying value of the Portfolio's assets and liabilities).
Authorized Firms must communicate an investor's order to the Principal
Underwriter prior to the close of the Principal Underwriter's business day to
receive that day's net asset value per Fund share and the public offering price
based thereon. It is the Authorized Firms' responsibility to transmit orders
promptly to the Principal Underwriter, which is a wholly-owned subsidiary of
Eaton Vance.
The Portfolio's net asset value is also determined as of the close of
regular trading on the Exchange by IBT (as custodian and agent for the
Portfolio) based on market or fair value in the manner authorized by the
Trustees of the Portfolio. Municipal obligations will normally be valued on the
basis of valuations furnished by a pricing service. For further information
regarding the valuation of the Portfolio's assets, see "Determination of Net
Asset Value" in the Statement of Additional Information. Eaton Vance Corp. owns
77.3% of the outstanding stock of IBT, the Fund's and the Portfolio's custodian.
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SHAREHOLDERS MAY DETERMINE THE VALUE OF THEIR INVESTMENT BY MULTIPLYING THE
NUMBER OF FUND SHARES OWNED BY THE CURRENT NET ASSET VALUE PER SHARE.
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HOW TO BUY FUND SHARES
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SHARES OF THE FUND MAY BE PURCHASED FOR CASH OR MAY BE ACQUIRED IN EXCHANGE FOR
SECURITIES. Investors may purchase shares of the Fund through Authorized Firms
at the effective public offering price, which price is based on the effective
net asset value per share plus the applicable sales charge. The Fund receives
the net asset value, while the sales charge is divided between the Authorized
Firm and the Principal Underwriter. The Principal Underwriter will furnish the
names of Authorized Firms to an investor upon request. The Fund may suspend the
offering of shares at any time and may refuse an order for the purchase of
shares.
The sales charge may vary depending on the size of the purchase and the
number of shares of Eaton Vance funds the investor may already own, any
arrangement to purchase additional shares during a 13-month period or special
purchase programs. Complete details of how investors may purchase shares at
reduced sales charges under a Statement of Intention, Right of Accumulation, or
various Employee Benefit Plans are available from Authorized Firms or the
Principal Underwriter.
The current sales charges and dealer commissions are:
<TABLE>
<CAPTION>
SALES CHARGE AS SALES CHARGE AS DEALER COMMISSION
PERCENTAGE OF PERCENTAGE OF AS PERCENTAGE OF
AMOUNT OF PURCHASE OFFERING PRICE AMOUNT INVESTED OFFERING PRICE
------------------ --------------- --------------- -----------------
<S> <C> <C> <C>
Less than $50,000 .......................................... 3.75% 3.90% 4.00%
$50,000 but less than $100,000 ............................. 2.75 2.83 3.00
$100,000 but less than $250,000 ............................ 2.25 2.30 2.50
$250,000 but less than $500,000 ............................ 1.75 1.78 2.00
$500,000 but less than $1,000,000 .......................... 1.25 1.27 1.50
$1,000,000 or more ......................................... 0.00 0.00 0.25<F1>
<FN>
<F1> The Principal Underwriter may pay Authorized Firms that initiate and are responsible for purchases of $1 million or more
a commission at an annual rate of .25% of average daily net assets paid quarterly for one year.
</TABLE>
The Principal Underwriter may at times allow discounts up to the full sales
charge. During periods when the discount includes the full sales charge,
Authorized Firms may be deemed to be underwriters as that term is defined in the
Securities Act of 1933. The Principal Underwriter may, from time to time, at its
own expense, provide additional incentives to Authorized Firms which employ
registered representatives who sell a minimum dollar amount of the Fund's shares
and/or shares of other funds distributed by the Principal Underwriter. In some
instances, such additional incentives may be offered only to certain Authorized
Firms whose representatives are expected to sell significant amounts of shares.
An initial investment in the Fund must be at least $1,000. Once an account
has been established the investor may send investments of $50 or more at any
time directly to the Fund's Transfer Agent (the "Transfer Agent") as follows:
The Shareholder Services Group, Inc., BOS725, P.O. Box 1559, Boston, MA 02104.
The $1,000 minimum initial investment is waived for Bank Automated Investing
accounts, which may be established with an investment of $50 or more. See "Eaton
Vance Shareholder Services".
Shares of the Fund may be sold at net asset value to current and retired
Directors and Trustees of Eaton Vance funds, including the Portfolio; to
officers and employees and clients of Eaton Vance and its affiliates; to
registered representatives and employees of Authorized Firms and bank employees
who refer customers to registered representatives of Authorized Firms; and to
such persons' spouses and children under the age of 21 and their beneficial
accounts. Shares may also be issued at net asset value (1) in connection with
the merger of an investment company with the Fund, (2) to investors making an
investment as part of a fixed fee program whereby an entity unaffiliated with
the investment adviser provides multiple investment services, such as
management, brokerage and custody, and (3) where the amount invested represents
redemption proceeds from a mutual fund unaffiliated with Eaton Vance, if the
redemption occurred no more than 60 days prior to the purchase of Fund shares
and the redeemed shares were subject to a sales charge.
ACQUIRING FUND SHARES IN EXCHANGE FOR SECURITIES. IBT, as escrow agent, will
receive securities acceptable to Eaton Vance, as Administrator, in exchange for
Fund shares at the applicable public offering price as determined above. The
minimum value of securities (or securities and cash) accepted for deposit is
$5,000. Securities accepted will be sold by IBT as agent for the account of
their owner on the day of their receipt by IBT or as soon thereafter as
possible. The number of Fund shares to be issued in exchange for securities will
be the aggregate proceeds from the sale of such securities, divided by the
applicable public offering price per Fund share on the day such proceeds are
received. Eaton Vance will use reasonable efforts to obtain the then current
market price for such securities but does not guarantee the best available
price. Eaton Vance will absorb any transaction costs, such as commissions, on
the sale of the securities.
Securities determined to be acceptable should be transferred via book entry
or physically delivered, in proper form for transfer, through an Authorized
Firm, together with a completed and signed Letter of Transmittal in approved
form (available from Authorized Firms), as follows:
IN THE CASE OF BOOK ENTRY:
Deliver through Depository Fund Co.
Broker #2212
Investors Bank & Trust Company
For A/C EV Traditional High Yield Municipals Fund
IN THE CASE OF PHYSICAL DELIVERY:
Investors Bank & Trust Company
Attention: EV Traditional High Yield Municipals Fund
Physical Securities Processing Settlement Area
89 South Street
Boston, MA 02111
Investors who are contemplating an exchange of securities for shares of the
Fund, or their representatives, must contact Eaton Vance to determine whether
the securities are acceptable before forwarding such securities to IBT. Eaton
Vance reserves the right to reject any securities. Exchanging securities for
Fund shares may create a taxable gain or loss. Each investor should consult his
or her tax adviser with respect to the particular Federal, state and local tax
consequences of exchanging securities for Fund shares.
The Trustees of the Trust may consider terminating sales of Fund shares,
other than to the Fund's existing shareholders, when the Portfolio reaches a
size that becomes difficult to manage, which may be as low as $250,000,000. If
closed, the Board of Trustees may vote to re-open the Fund for sales to new
shareholders at any time.
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IF YOU DON'T HAVE AN AUTHORIZED FIRM, EATON VANCE CAN RECOMMEND ONE.
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HOW TO REDEEM FUND SHARES
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A SHAREHOLDER MAY REDEEM FUND SHARES BY DELIVERING TO THE SHAREHOLDER SERVICES
GROUP, INC., BOS725, P.O. BOX 1559, BOSTON, MASSACHUSETTS 02104, during its
business hours a written request for redemption in good order, plus any share
certificates with executed stock powers. The redemption price will be based on
the net asset value per Fund share next computed after such delivery. Good order
means that relevant documents must be endorsed by the record owner(s) exactly as
the shares are registered and the signature(s) must be guaranteed by a member of
either the Securities Transfer Association's STAMP program or the New York Stock
Exchange's Medallion Signature Program, or certain banks, savings and loan
institutions, credit unions, securities dealers, securities exchanges, clearing
agencies and registered securities associations as required by a regulation of
the Securities and Exchange Commission and acceptable to The Shareholder
Services Group, Inc. In addition, in some cases, good order may require the
furnishing of additional documents such as where shares are registered in the
name of a corporation, partnership or fiduciary.
Within seven days after receipt of a redemption request in good order by The
Shareholder Services Group, Inc., the Fund will make payment in cash for the net
asset value of the shares as of the date determined above, reduced by the amount
of any Federal income tax required to be withheld. Although the Fund normally
expects to make payment in cash for redeemed shares, the Trust, subject to
compliance with applicable regulations, has reserved the right to pay the
redemption price of shares of the Fund, either totally or partially, by a
distribution in kind of readily marketable securities withdrawn by the Fund from
the Portfolio. The securities so distributed would be valued pursuant to the
Portfolio's valuation procedures. If a shareholder received a distribution in
kind, the shareholder could incur brokerage or other charges in converting the
securities to cash.
To sell shares at their net asset value through an Authorized Firm (a
repurchase), a shareholder can place a repurchase order with the Authorized
Firm, which may charge a fee. The value of such shares is based upon the net
asset value calculated after EVD, as the Fund's agent, receives the order. It is
the Authorized Firm's responsibility to transmit promptly repurchase orders to
EVD. Throughout this Prospectus, the word "redemption" is generally meant to
include a repurchase.
If shares were recently purchased, the proceeds of redemption (or
repurchase) will not be sent until the check (including a certified or cashier's
check) received for the shares purchased has cleared. Payment for shares
tendered for redemption or repurchase may be delayed up to 15 days from the
purchase date when the purchase check has not yet cleared. Redemptions or
repurchases may result in a taxable gain or loss.
Due to the high cost of maintaining small accounts, the Fund reserves the
right to redeem accounts with balances of less than $1,000. Prior to such a
redemption, shareholders will be given 60 days' written notice to make
additional purchases. Thus, an investor making an initial investment of $1,000
would not be able to redeem shares without being subject to this policy.
However, no such redemption would be required by the Fund if the cause of the
low account balance was a reduction in the net asset value of Fund shares.
REPORTS TO SHAREHOLDERS
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THE FUND WILL ISSUE TO ITS SHAREHOLDERS SEMI-ANNUAL AND ANNUAL REPORTS
CONTAINING FINANCIAL STATEMENTS. Financial statements included in annual reports
are audited by the Fund's independent certified public accountants. Shortly
after the end of each calendar year, the Fund will furnish all shareholders with
information necessary for preparing Federal and state tax returns.
THE LIFETIME INVESTING ACCOUNT/DISTRIBUTION OPTIONS
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AFTER AN INVESTOR MAKES AN INITIAL PURCHASE OF FUND SHARES, THE FUND'S TRANSFER
AGENT, THE SHAREHOLDER SERVICES GROUP, INC., WILL SET UP A LIFETIME INVESTING
ACCOUNT FOR THE INVESTOR ON THE FUND'S RECORDS. This account is a complete
record of all transactions between the investor and the Fund which at all times
shows the balance of shares owned. The Fund will not issue share certificates
except upon request.
At least quarterly, shareholders will receive a statement showing complete
details of any transaction and the current balance in the account. THE LIFETIME
INVESTING ACCOUNT ALSO PERMITS A SHAREHOLDER TO MAKE ADDITIONAL INVESTMENTS BY
SENDING A CHECK FOR $50 OR MORE to The Shareholder Services Group, Inc.
Any questions concerning a shareholder's account or services available may
also be directed by telephone to EATON VANCE SHAREHOLDER SERVICES at 800-225-
6265, extension 2 or in writing to The Shareholder Services Group, Inc. BOS725,
P.O. Box 1559, Boston, MA 02104 (please provide the name of the shareholder, the
Fund and the account number).
THE FOLLOWING DISTRIBUTION OPTIONS WILL BE AVAILABLE TO ALL LIFETIME INVESTING
ACCOUNTS and may be changed as often as desired by written notice to the Fund's
dividend disbursing agent, The Shareholder Services Group, Inc., BOS725, P.O.
Box 1559, Boston, MA 02104. The currently effective option will appear on each
account statement.
Share Option -- Dividends and capital gains will be reinvested in additional
shares.
Income Option -- Dividends will be paid in cash, and capital gains will be
reinvested in additional shares.
Cash Option -- Dividends and capital gains will be paid in cash.
The Share Option will be assigned if no other option is specified.
Distributions, including those reinvested, will be reduced by any withholding
required under the Federal income tax laws.
If the Income Option or Cash Option has been selected, dividend and/or
capital gains distribution checks which are returned by the United States Postal
Service as not deliverable or which remain uncashed for six months or more will
be reinvested in the account in shares at the then current net asset value.
Furthermore, the distribution option on the account will be automatically
changed to the Share Option until such time as the shareholder selects a
different option.
DISTRIBUTION INVESTMENT OPTION. In addition to the distribution options set
forth above, dividends and/or capital gains may be invested in additional shares
of another Eaton Vance fund. Before selecting this option, a shareholder should
obtain a prospectus of the other Eaton Vance fund and consider its objectives
and policies carefully.
"STREET NAME" ACCOUNTS. If shares of the Fund are held in a "street name"
account with an Authorized Firm, all recordkeeping, transaction processing and
payments of distributions relating to the beneficial owner's account will be
performed by the Authorized Firm, and not by the Fund and its Transfer Agent.
Since the Fund will have no record of the beneficial owner's transactions, a
beneficial owner should contact the Authorized Firm to purchase, redeem or
exchange shares, to make changes in or give instructions concerning the account,
or to obtain information about the account. The transfer of shares in a "street
name" account to an account with another dealer or to an account directly with
the Fund involves special procedures and will require the beneficial owner to
obtain historical purchase information about the shares in the account from the
Authorized Firm. Before establishing a "street name" account with an investment
firm, or transferring the account to another investment firm, an investor
wishing to reinvest distributions should determine whether the firm which will
hold the shares allows reinvestment of distributions in "street name" accounts.
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UNDER A LIFETIME INVESTING ACCOUNT A SHAREHOLDER CAN MAKE ADDITIONAL INVESTMENTS
BY SENDING A CHECK FOR $50 OR MORE.
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THE EATON VANCE EXCHANGE PRIVILEGE
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Shares of the Fund currently may be exchanged for shares of any of the following
funds: Eaton Vance Cash Management Fund, Eaton Vance Income Fund of Boston,
Eaton Vance Municipal Bond Fund L.P., Eaton Vance Tax Free Reserves and any fund
in the Eaton Vance Traditional Group of Funds on the basis of net asset value
per share of each fund at the time of the exchange (plus, in the case of an
exchange made within six months of the date of purchase, an amount equal to the
difference, if any, between the sales charge previously paid on the shares being
exchanged and the sales charge payable on the shares being acquired. Such
exchange offers are available only in states where shares of the fund being
acquired may be legally sold.
Each exchange must involve shares which have a net asset value of at least
$1,000. The exchange privilege may be changed or discontinued without penalty.
Shareholders will be given sixty (60) days' notice prior to any termination or
material amendment of the exchange privilege. The Fund does not permit the
exchange privilege to be used for "Market Timing" and may terminate the exchange
privilege for any shareholder account engaged in Market Timing activity. Any
shareholder account for which more than two round-trip exchanges are made within
any twelve month period will be deemed to be engaged in Market Timing.
Furthermore, a group of unrelated accounts for which exchanges are entered
contemporaneously by a financial intermediary will be considered to be engaged
in Market Timing.
The Shareholder Services Group, Inc. makes exchanges at the next determined
net asset value after receiving an exchange request in good order (see "How to
Redeem Fund Shares"). Consult The Shareholder Services Group, Inc. for
additional information concerning the exchange privilege. Applications and
prospectuses of the other funds are available from Authorized Firms or the
Principal Underwriter. The prospectus for each fund describes its investment
objectives and policies, and shareholders should obtain a prospectus and
consider these objectives and policies carefully before requesting an exchange.
Shares of certain other funds for which Eaton Vance acts as investment
adviser or administrator may be exchanged for Fund shares on the basis of the
net asset value per share of each fund at the time of the exchange, but subject
to any restrictions or qualifications set forth in the current prospectus of any
such fund.
Telephone exchanges are accepted by The Shareholder Services Group, Inc.
provided that the investor has not disclaimed in writing the use of the
privilege. To effect such exchanges, call The Shareholder Services Group, Inc.
at 800-262-1122 or, within Massachusetts, 617-573-9403, Monday through Friday,
9:00 a.m. to 4:00 p.m. (Eastern Standard Time). Shares acquired by telephone
exchange must be registered in the same name(s) and with the same address as the
shares being exchanged. Neither the Fund, the Principal Underwriter nor The
Shareholder Services Group, Inc. will be responsible for the authenticity of
exchange instructions received by telephone, provided that reasonable procedures
to confirm that instructions communicated are genuine have been followed.
Telephone instructions will be tape recorded. In times of drastic economic or
market changes, a telephone exchange may be difficult to implement. An exchange
may result in a taxable gain or loss.
EATON VANCE SHAREHOLDER SERVICES
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THE FUND OFFERS THE FOLLOWING SERVICES, WHICH ARE VOLUNTARY, INVOLVE NO EXTRA
CHARGE, AND MAY BE CHANGED OR DISCONTINUED WITHOUT PENALTY AT ANY TIME. Full
information on each of the services described below and an application, where
required, are available from Authorized Firms or the Principal Underwriter. The
cost of administering such services for the benefit of shareholders who
participate in them is borne by the Fund as an expense to all shareholders.
INVEST-BY-MAIL -- FOR PERIODIC SHARE ACCUMULATION: Once the $1,000 minimum
investment has been made, checks of $50 or more payable to the order of EV
Traditional High Yield Municipals Fund may be mailed directly to The Shareholder
Services Group, Inc., BOS725, P.O. Box 1559, Boston, MA 02104 at any time --
whether or not distributions are reinvested. The name of the shareholder, the
Fund and the account number should accompany each investment.
BANK AUTOMATED INVESTING -- FOR REGULAR SHARE ACCUMULATION: Cash investments of
$50 or more may be made automatically each month or quarter from the
shareholder's bank account. The $1,000 minimum initial investment and small
account redemption policy are waived for these accounts.
STATEMENT OF INTENTION: Purchases of $50,000 or more made over a 13-month period
are eligible for reduced sales charges. See "Statement of Intention and Escrow
Agreement."
RIGHT OF ACCUMULATION: Purchases may qualify for reduced sales charges when the
current market value of holdings (shares at current offering price), plus new
purchases, reaches $50,000 or more. Shares of the Eaton Vance funds listed under
"The Eaton Vance Exchange Privilege" may be combined under the Statement of
Intention and Right of Accumulation.
WITHDRAWAL PLAN: A shareholder may draw on shareholdings systematically with
monthly or quarterly checks in an amount specified by the shareholder. A minimum
deposit of $5,000 in shares is required.
REINVESTMENT PRIVILEGE: A SHAREHOLDER WHO HAS REPURCHASED OR REDEEMED SHARES MAY
REINVEST ANY PORTION OR ALL OF THE REPURCHASE OR REDEMPTION PROCEEDS (PLUS THAT
AMOUNT NECESSARY TO ACQUIRE A FRACTIONAL SHARE TO ROUND OFF THE PURCHASE TO THE
NEAREST FULL SHARE) IN SHARES OF THE FUND, or, provided that the shares
repurchased or redeemed have been held for at least 30 days, in shares of any of
the other funds offered by the Principal Underwriter subject to an initial sales
charge, at net asset value, provided that the reinvestment is effected within 30
days after such repurchase or redemption. Shares are sold to a reinvesting
shareholder at the next determined net asset value following timely receipt of a
written purchase order by the Principal Underwriter or by the fund whose shares
are to be purchased (or by such fund's transfer agent). The privilege is also
available to holders of shares of the other funds offered by the Principal
Underwriter subject to an initial sales charge who wish to reinvest such
redemption or repurchase proceeds in shares of the Fund. To the extent that any
shares of the Fund are sold at a loss and the proceeds are reinvested in shares
of the Fund (or other shares of the Fund are acquired within the period
beginning 30 days before and ending 30 days after the date of the redemption)
some or all of the loss generally will not be allowed as a tax deduction.
Special rules may apply to the computation of gain or loss and to the deduction
of loss on a repurchase or redemption followed by a reinvestment. See
"Distributions and Taxes". Shareholders should consult their tax advisers
concerning the tax consequences of reinvestments.
DISTRIBUTIONS AND TAXES
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THE FUND DECLARES DIVIDENDS DAILY AND ORDINARILY DISTRIBUTES DIVIDENDS MONTHLY
(ON THE FIFTEENTH OR NEXT SUBSEQUENT BUSINESS DAY) FROM ITS NET INVESTMENT
INCOME. The Fund's net investment income consists of net investment income
allocated to the Fund by the Portfolio, less the Fund's direct and allocated
expenses. The Fund will distribute at least annually (usually in December) all
net realized capital gains allocated to the Fund by the Portfolio, if any, after
taking into account any capital loss carryovers. Daily distributions will begin
on the first business day collected funds for the purchase of shares are
available to the Transfer Agent.
The Fund will distribute substantially all of its tax-exempt income,
ordinary income and capital gain net income (if any) on a current basis.
Distributions designated by the Fund as "exempt interest dividends" may be
excluded from shareholders' gross income for federal income tax purposes.
However, exempt interest dividends may affect the taxability of social security
or railroad retirement benefits for shareholders who receive such benefits. In
addition, exempt interest dividends may result in liability under the federal
alternative minimum tax provisions and may be taxable for state and local tax
purposes. Shareholders should consult their tax advisers to determine the effect
of exempt interest dividends on their particular tax situation, including
liability for state and local taxes.
Other distributions from the Fund may be taxable to shareholders as ordinary
income, except that distributions of net long-term capital gains, if any, are
taxable as such regardless of the length of time the shareholder has held the
shares. Distributions of income from original issue discount and market discount
will be taxable to shareholders as ordinary income. Distributions will be
taxable as described whether received in cash or as additional shares through
reinvestment in the Fund.
Sales charges paid upon a purchase of shares of the Fund cannot be taken
into account for purposes of determining gain or loss on a redemption or
exchange of the shares before the 91st day after their purchase to the extent
shares of the Fund or of another fund are subsequently acquired pursuant to the
Fund's reinvestment or exchange privilege. Any disregarded amounts will result
in an adjustment to the shareholder's tax basis in some or all of any other
shares acquired.
Early in each year, the Fund will notify its shareholders of the tax status
of the Fund's distributions for the preceding year. Shareholders should consult
their tax advisers about the effect of Fund distributions on their particular
tax situation and any state, local or foreign taxes that may apply.
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AS A REGULATED INVESTMENT COMPANY UNDER THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED (THE "CODE"), THE FUND DOES NOT PAY FEDERAL INCOME OR EXCISE TAXES TO
THE EXTENT THAT IT DISTRIBUTES TO SHAREHOLDERS ITS NET INVESTMENT INCOME AND NET
REALIZED CAPITAL GAINS IN ACCORDANCE WITH THE TIMING REQUIREMENTS IMPOSED BY THE
CODE. AS A PARTNERSHIP UNDER THE CODE, THE PORTFOLIO DOES NOT PAY FEDERAL INCOME
OR EXCISE TAXES.
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PERFORMANCE INFORMATION
- ------------------------------------------------------------------------------
FROM TIME TO TIME, THE FUND MAY ADVERTISE ITS YIELD AND/OR AVERAGE ANNUAL TOTAL
RETURN. The Fund's current yield is calculated by dividing the net investment
income per share during a recent 30-day period by the maximum offering price per
share of the Fund on the last day of the period and annualizing the resulting
figure. A taxable-equivalent yield is computed by using the tax-exempt yield
figure and dividing by one minus the tax rate. The Fund's average annual total
return is determined by multiplying a hypothetical initial purchase order of
$1,000 by the average annual compounded rate of return (including capital
appreciation/depreciation, and dividends and distributions paid and reinvested)
for the stated period and annualizing the result. The average annual total
return calculation assumes the maximum sales charge is deducted from the initial
$1,000 purchase order and that all distributions are reinvested at net asset
value on the reinvestment dates during the period. The Fund may publish annual
and cumulative total return figures from time to time.
The Fund may also publish its distribution rate and/or its effective
distribution rate. The Fund's distribution rate is computed by dividing the most
recent monthly distribution per share annualized, by the current maximum
offering price per share (including the maximum sales charge). The Fund's
effective distribution rate is computed by dividing the distribution rate by the
ratio used to annualize the most recent monthly distribution and reinvesting the
resulting amount for a full year on the basis of such ratio. The effective
distribution rate will be higher than the distribution rate because of the
compounding effect of the assumed reinvestment. Investors should note that the
Fund's yield is calculated using a standardized formula the income component of
which is computed from the yields to maturity of all debt obligations held by
the Portfolio based on prescribed methods (with all purchases and sales of
securities during such period included in the income calculation on a settlement
date basis), whereas the distribution rate is based on the Fund's last monthly
distribution, which tends to be relatively stable and may be more or less than
the amount of net investment income and short-term capital gain actually earned
by the Fund during the month.
The Fund may also furnish total return calculations based on investments at
various sales charge levels or at net asset value. Any performance data which is
based on the Fund's net asset value per share would be reduced if a sales charge
were taken into account.
Investors should note that the investment results of the Fund will fluctuate
over time, and any presentation of the Fund's yield, total return, distribution
rate or effective distribution rate for any prior period should not be
considered a representation of what an investment may earn or what the Fund's
yield, total return, distribution rate or effective distribution rate may be in
any future period. If the expenses related to the operation of the Fund or the
Portfolio are allocated to Eaton Vance, the Fund's performance will be higher.
STATEMENT OF INTENTION AND ESCROW AGREEMENT
- ------------------------------------------------------------------------------
TERMS OF ESCROW. If the investor, on an application, makes a Statement of
Intention to invest a specified amount over a thirteen-month period, then out of
the initial purchase (or subsequent purchases if necessary) 5% of the dollar
amount specified on the application shall be held in escrow by the escrow agent
in the form of shares (computed to the nearest full share at the public offering
price applicable to the initial purchase hereunder) registered in the investor's
name. All income dividends and capital gains distributions on escrowed shares
will be paid to the investor or to the investor's order.
When the minimum investment so specified is completed, the escrowed shares
will be delivered to the investor. If the investor has an accumulation account
the shares will remain on deposit under the investor's account.
If total purchases under this Statement of Intention are less than the
amount specified, the investor will promptly remit to EVD any difference between
the sales charge on the amount specified and on the amount actually purchased.
If the investor does not within 20 days after written request by EVD or the
Authorized Firm pay such difference in sales charge, the escrow agent will
redeem an appropriate number of the escrowed shares in order to realize such
difference. Full shares remaining after any such redemption together with any
excess cash proceeds of the shares so redeemed will be delivered to the investor
or to the investor's order by the escrow agent.
In signing the application, the investor irrevocably constitutes and
appoints the escrow agent the investor's attorney to surrender for redemption
any or all escrowed shares with full power of substitution in the premises.
PROVISION FOR RETROACTIVE PRICE ADJUSTMENT. If total purchases made under this
Statement are large enough to qualify for a lower sales charge than that
applicable to the amount specified, all transactions will be computed at the
expiration date of this Statement to give effect to the lower charge. Any
difference in sales charge will be refunded to the investor in cash, or applied
to the purchase of additional shares at the lower charge if specified by the
investor. This refund will be made by the Authorized Firm and by EVD. If at the
time of the recomputation a firm other than the original firm is placing the
orders, the adjustment will be made only on those shares purchased through the
firm then handling the investor's account.
<PAGE>
APPENDIX A
DESCRIPTION OF SECURITIES RATINGS+
MOODY'S INVESTORS SERVICE, INC.
MUNICIPAL BONDS
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long term risk appear somewhat larger than the Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa: Bonds which are rated Baa are considered as medium-grade obligations (i.e.,
they are neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during other good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca: Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
STANDARD & POOR'S RATINGS GROUP
INVESTMENT GRADE
AAA: Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the highest rated issues only in small degree.
A: Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB: Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibit adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay interest and repay principal for debt in this
category than in higher rated categories.
SPECULATIVE GRADE
Debt rated BB, B, CCC, CC, and C is regarded as having predominantly speculative
characteristics with respect to capacity to pay interest and repay principal. BB
indicates the least degree of speculation and C the highest. While such debt
will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major exposures to adverse conditions.
BB: Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB- rating.
B: Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB or BB-
rating.
CCC: Debt rated CCC has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The CCC rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
B or B- rating.
CC: The rating CC is typically applied to debt subordinated to senior debt which
is assigned an actual or implied CCC debt rating.
C: The rating C is typically applied to debt subordinated to senior debt which
is assigned an actual or implied CCC- debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed, but debt service
payments are continued.
C1: The Rating C1 is reserved for income bonds on which no interest is being
paid.
D: Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The D rating also will be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.
PLUS (+) OR MINUS (-): The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
FITCH INVESTORS SERVICE, INC.
INVESTMENT GRADE BOND RATINGS
AAA: Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA: Bonds considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated "AAA". Because bonds rated in the "AAA" and
"AA" categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated "F- 1+".
A: Bonds considered to be investment grade and of high credit quality. The
obligors ability to pay interest and repay principal is considered to be strong,
but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB: Bonds considered to be investment grade and of satisfactory credit quality.
The obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however, are
more likely to have adverse impact on these bonds, and therefore, impair timely
payment. The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.
HIGH YIELD BOND RATINGS
BB: Bonds are considered speculative. The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified that could assist the
obligor in satisfying its debt service requirements.
B: Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue.
CCC: Bonds have certain identifiable characteristics which, if not remedied, may
lead to default. The ability to meet obligations requires an advantageous
business and economic environment.
CC: Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C: Bonds are in imminent default in payment of interest or principal.
DDD, DD, AND D: Bonds are in default on interest and/or principal payments. Such
bonds are extremely speculative and should be valued on the basis of their
ultimate recovery value in liquidation or reorganization of the obligor. "DDD"
represents the highest potential for recovery on these bonds, and "D" represents
the lowest potential for recovery.
PLUS (+) OR MINUS (-): The ratings from AA to C may be modified by the addition
of a plus or minus sign to indicate the relative position of a credit within the
rating category.
* * * * * * * *
NOTES: Bonds which are unrated expose the investor to risks with respect to
capacity to pay interest or repay principal which are similar to the risks of
lower-rated speculative bonds. The Portfolio is dependent on the Investment
Adviser's judgment, analysis and experience in the evaluation of such bonds.
- --------------------------------------------------------------------------------
+ The ratings indicated herein are believed to be the most recent ratings
available at the date of this Prospectus for the securities listed. Ratings
are generally given to securities at the time of issuance. While the rating
agencies may from time to time revise such ratings, they undertake no
obligation to do so, and the ratings indicated do not necessarily represent
ratings which would be given to these securities on the date of the
Portfolio's fiscal year end.
<PAGE>
INVESTMENT ADVISER OF
HIGH YIELD MUNICIPALS PORTFOLIO
Boston Management and Research
24 Federal Street
Boston, MA 02110
ADMINISTRATOR OF
EV TRADITIONAL HIGH YIELD
MUNICIPALS FUND
Eaton Vance Management
24 Federal Street
Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc.
24 Federal Street
Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company
24 Federal Street
Boston, MA 02110
TRANSFER AGENT
The Shareholder Services Group, Inc.
BOS725
P.O. Box 1559
Boston, MA 02104
(800) 262-1122
AUDITORS
Deloitte & Touche LLP
125 Summer Street
Boston, MA 02110
EV TRADITIONAL
HIGH YIELD
MUNICIPALS FUND
PROSPECTUS
AUGUST 1, 1995
EV TRADITIONAL HIGH YIELD
MUNICIPALS FUND
24 FEDERAL STREET
BOSTON, MA 02110
T-HMP
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
August 1, 1995
EV MARATHON HIGH YIELD MUNICIPALS FUND
24 Federal Street
Boston, Massachusetts 02110
(800) 225-6265
This Statement of Additional Information consists of two parts. Part I
provides information about EV Marathon High Yield Municipals Fund (the "Fund")
and certain other series of Eaton Vance Municipals Trust II (the "Trust"). Part
II provides information solely about the Fund and its corresponding Portfolio.
As described in the Prospectus, the Fund invests its assets in a separate
registered investment company (the "Portfolio") with the same investment
objective and policies as the Fund. Where appropriate, Part I includes
cross-references to the relevant sections of Part II that provide additional,
Fund-specific information.
TABLE OF CONTENTS
Page
PART I
Additional Information about Investment Policies ..................... 1
Investment Restrictions .............................................. 8
Trustees and Officers ................................................ 9
Investment Adviser and Administrator ................................. 11
Custodian ............................................................ 13
Service for Withdrawal ............................................... 13
Determination of Net Asset Value ..................................... 13
Investment Performance ............................................... 14
Taxes ................................................................ 15
Portfolio Security Transactions ...................................... 17
Other Information .................................................... 19
Independent Certified Public Accountants ............................. 20
Appendix ............................................................. 21
PART II
Fees and Expenses .................................................... a-1
Additional Officer Information ....................................... a-1
Principal Underwriter ................................................ a-2
Distribution Plan .................................................... a-2
Performance Information .............................................. a-4
Additional Tax Matters ............................................... a-5
Control Persons and Principal Holders of Securities .................. a-5
Tax Equivalent Yield Table ........................................... a-6
Financial Statements ................................................. a-7
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY THE FUND'S PROSPECTUS DATED AUGUST 1, 1995, AS SUPPLEMENTED FROM
TIME TO TIME. THIS STATEMENT OF ADDITIONAL INFORMATION SHOULD BE READ IN
CONJUNCTION WITH SUCH PROSPECTUS, A COPY OF WHICH MAY BE OBTAINED WITHOUT CHARGE
BY CONTACTING EATON VANCE DISTRIBUTORS, INC. (THE "PRINCIPAL UNDERWRITER") (SEE
BACK COVER FOR ADDRESS AND PHONE NUMBER).
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
August 1, 1995
EV TRADITIONAL HIGH YIELD MUNICIPALS FUND
24 Federal Street
Boston, Massachusetts 02110
(800) 225-6265
This Statement of Additional Information consists of two parts. Part I
provides information about EV Traditional High Yield Municipals Fund (the
"Fund") and certain other series of Eaton Vance Municipals Trust II (the
"Trust"). Part II provides information solely about the Fund and its
corresponding Portfolio. As described in the Prospectus, the Fund invests its
assets in a separate registered investment company (the "Portfolio") with the
same investment objective and policies as the Fund. Where appropriate, Part I
includes cross-references to the relevant sections of Part II that provide
additional, Fund-specific information.
TABLE OF CONTENTS
Page
PART I
Additional Information about Investment Policies ...................... 1
Investment Restrictions ............................................... 8
Trustees and Officers ................................................. 9
Investment Adviser and Administrator .................................. 11
Custodian ............................................................. 13
Service for Withdrawal ................................................ 13
Determination of Net Asset Value ...................................... 13
Investment Performance ................................................ 14
Taxes ................................................................. 15
Portfolio Security Transactions ....................................... 17
Other Information ..................................................... 19
Independent Certified Public Accountants .............................. 20
Appendix .............................................................. 21
PART II
Fees and Expenses ..................................................... a-1
Additional Officer Information ........................................ a-1
Services for Accumulation ............................................. a-2
Principal Underwriter ................................................. a-2
Service Plan .......................................................... a-3
Performance Information ............................................... a-4
Additional Tax Matters ................................................ a-5
Control Persons and Principal Holders of Securities ................... a-5
Tax Equivalent Yield Table ............................................ a-6
Financial Statements .................................................. a-7
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY THE FUND'S PROSPECTUS DATED AUGUST 1, 1995, AS SUPPLEMENTED FROM
TIME TO TIME. THIS STATEMENT OF ADDITIONAL INFORMATION SHOULD BE READ IN
CONJUNCTION WITH SUCH PROSPECTUS, A COPY OF WHICH MAY BE OBTAINED WITHOUT CHARGE
BY CONTACTING EATON VANCE DISTRIBUTORS, INC. (THE "PRINCIPAL UNDERWRITER") (SEE
BACK COVER FOR ADDRESS AND PHONE NUMBER).
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART I
This Part I provides information about the Fund and certain other series of
the Trust.
ADDITIONAL INFORMATION ABOUT INVESTMENT POLICIES
MUNICIPAL OBLIGATIONS
Municipal obligations are issued to obtain funds for various public and
private purposes. Such obligations include bonds as well as tax-exempt
commercial paper, project notes and municipal notes such as tax, revenue and
bond anticipation notes of short maturity, generally less than three years. In
general, there are three categories of municipal obligations, the interest on
which is also exempt from Federal income tax and is not a tax preferred item for
purposes of the Federal alternative minimum tax: (i) certain "public purpose"
obligations (whenever issued), which include obligations issued directly by
state and local governments or their agencies to fulfill essential governmental
functions; (ii) certain obligations issued before August 8, 1986 for the benefit
of non-governmental persons or entities; and (iii) certain "private activity
bonds" issued after August 7, 1986, which include "qualified Section 501(c)(3)
bonds" or refundings of certain obligations included in the second category. In
assessing the Federal income tax treatment of interest on any municipal
obligation, the Portfolio will generally rely on an opinion of the issuer's
counsel (when available) and will not undertake any independent verification of
the basis for the opinion. The two principal classifications of municipal bonds
are "general obligation" and "revenue" bonds.
Interest on certain "private activity bonds" issued after August 7, 1986 is
exempt from the regular Federal income tax applicable to individuals (and
corporations), but such interest (including a distribution by the Fund derived
from such interest) is treated as a tax preference item which could subject the
recipient to or increase the recipient's liability for the Federal alternative
minimum tax. For corporate shareholders, the Fund's distributions derived from
interest on all municipal obligations (whenever issued) is included in "adjusted
current earnings" for purposes of the Federal alternative minimum tax applicable
to corporations (to the extent not already included in alternative minimum
taxable income as income attributable to private activity bonds).
The Omnibus Budget Reconciliation Act of 1993 changed the Federal income tax
treatment of market discount on long-term tax-exempt municipal obligations
(i.e., obligations with a term of more than one year) purchased in the secondary
market after April 30, 1993 from taxable capital gain to taxable ordinary
income. A long-term debt obligation is generally treated as acquired at a market
discount if the secondary market purchase price is less than (i) the stated
principal amount payable at maturity, in the case of an obligation that does not
have original issue discount or (ii) in the case of an obligation that does have
original issue discount, the sum of the issue price and any original issue
discount that accrued before the obligation was purchased.
Issuers of general obligation bonds include states, counties, cities, towns
and regional districts. The proceeds of these obligations are used to fund a
wide range of public projects including the construction or improvement of
schools, highways and roads, water and sewer systems and a variety of other
public purposes. The basic security of general obligation bonds is the issuer's
pledge of its faith, credit, and taxing power for the payment of principal and
interest. The taxes that can be levied for the payment of debt service may be
limited or unlimited as to rate and amount.
The principal security for a revenue bond is generally the net revenues
derived from a particular facility or group of facilities or, in some cases,
from the proceeds of a special excise or other specific revenue source. Revenue
bonds have been issued to fund a wide variety of capital projects including:
electric, gas, water, sewer and solid waste disposal systems; highways, bridges
and tunnels; port, airport and parking facilities; transportation systems;
housing facilities, colleges and universities and hospitals. Although the
principal security behind these bonds varies widely, many provide additional
security in the form of a debt service reserve fund whose monies may be used to
make principal and interest payments on the issuer's obligations. Housing
finance authorities have a wide range of security including partially or fully
insured, rent subsidized and/or collateralized mortgages, and/or the net
revenues from housing or other public projects. In addition to a debt service
reserve fund, some authorities provide further security in the form of a state's
ability (without legal obligation) to make up deficiencies in the debt service
reserve fund. Lease rental revenue bonds issued by a state or local authority
for capital projects are normally secured by annual lease rental payments from
the state or locality to the authority sufficient to cover debt service on the
authority's obligations. Such payments are usually subject to annual
appropriations by the state or locality.
Industrial development and pollution control bonds, although nominally
issued by municipal authorities, are in most cases revenue bonds and are
generally not secured by the taxing power of the municipality, but are usually
secured by the revenues derived by the authority from payments of the industrial
user or users.
The Portfolio may on occasion acquire revenue bonds which carry warrants or
similar rights covering equity securities. Such warrants or rights may be held
indefinitely, but if exercised, the Portfolio anticipates that it would, under
normal circumstances, dispose of any equity securities so acquired within a
reasonable period of time.
While most municipal bonds pay a fixed rate of interest semi-annually in
cash, there are exceptions. Some bonds pay no periodic cash interest, but rather
make a single payment at maturity representing both principal and interest.
Bonds may be issued or subsequently offered with interest coupons materially
greater or less than those then prevailing, with price adjustments reflecting
such deviation.
The obligations of any person or entity to pay the principal of and interest
on a municipal obligation are subject to the provisions of bankruptcy,
insolvency and other laws affecting the rights and remedies of creditors, such
as the Federal Bankruptcy Act, and laws, if any, which may be enacted by
Congress or state legislatures extending the time for payment of principal or
interest, or both, or imposing other constraints upon enforcement of such
obligations. There is also the possibility that as a result of litigation or
other conditions the power or ability of any person or entity to pay when due
principal of and interest on a municipal obligation may be materially affected.
There have been recent instances of defaults and bankruptcies involving
municipal obligations which were not foreseen by the financial and investment
communities. The Portfolio will take whatever action it considers appropriate in
the event of anticipated financial difficulties, default or bankruptcy of either
the issuer of any municipal obligation or of the underlying source of funds for
debt service. Such action may include retaining the services of various persons
or firms (including affiliates of Boston Management and Research (the
"Investment Adviser")) to evaluate or protect any real estate, facilities or
other assets securing any such obligation or acquired by the Portfolio as a
result of any such event, and the Portfolio may also manage (or engage other
persons to manage) or otherwise deal with any real estate, facilities or other
assets so acquired. The Portfolio anticipates that real estate consulting and
management services may be required with respect to properties securing various
municipal obligations in its portfolio or subsequently acquired by the
Portfolio. The Portfolio will incur additional expenditures in taking protective
action with respect to portfolio obligations in default and assets securing such
obligations.
The yields on municipal obligations will be dependent on a variety of
factors, including purposes of issue and source of funds for repayment, general
money market conditions, general conditions of the municipal bond market, size
of a particular offering, maturity of the obligation and rating of the issue.
The ratings of Moody's Investors Service, Inc. ("Moody's"), Standard & Poor's
Ratings Group ("S&P") and Fitch Investors Service, Inc. ("Fitch") represent
their opinions as to the quality of the municipal obligations which they
undertake to rate. It should be emphasized, however, that ratings are based on
judgment and are not absolute standards of quality. Consequently, municipal
obligations with the same maturity, coupon and rating may have different yields
while obligations of the same maturity and coupon with different ratings may
have the same yield. In addition, the market price of municipal obligations will
normally fluctuate with changes in interest rates, and therefore the net asset
value of the Portfolio will be affected by such changes.
RISKS OF CONCENTRATION
MUNICIPAL OBLIGATIONS. For a discussion of the risks associated with the
Portfolio's policy of concentrating its investments in particular issuers of
municipal obligations, see "Risks of Concentration" in the Fund's Part II of
this Statement of Additional Information.
OBLIGATIONS OF PARTICULAR TYPES OF ISSUERS. The Portfolio may invest 25% or more
of its total assets in municipal obligations whose issuers are located in the
same state or in municipal obligations of the same type. There could be
economic, business or political developments which might affect all municipal
obligations of the same type. In particular, investments in the industrial
revenue bonds listed above might involve without limitation the following risks.
Hospital bond ratings are often based on feasibility studies which contain
projections of expenses, revenues and occupancy levels. Among the influences
affecting a hospital's gross receipts and net income available to service its
debt are demand for hospital services, the ability of the hospital to provide
the services required, management capabilities, economic developments in the
service area, efforts by insurers and government agencies to limit rates and
expenses, confidence in the hospital, service area economic developments,
competition, availability and expense of malpractice insurance, Medicaid and
Medicare funding and possible Federal legislation limiting the rates of increase
of hospital charges.
Electric utilities face problems in financing large construction programs in
an inflationary period, cost increases and delay occasioned by safety and
environmental considerations (particularly with respect to nuclear facilities),
difficulty in obtaining fuel at reasonable prices, and in achieving timely and
adequate rate relief from regulatory commissions, effects of energy conservation
and limitations on the capacity of the capital market to absorb utility debt.
Pollution control and other industrial development bonds are issued by state
or local agencies to finance various projects, including those of domestic steel
producers, and may be backed solely by agreements with such companies. Domestic
steel companies are expected to suffer the consequences of such adverse trends
as high labor costs, high foreign imports encouraged by foreign productivity
increases and a strong U.S. dollar, and other cost pressures such as those
imposed by anti-pollution legislation. Domestic steel capacity is being reduced
currently by large-scale plant closings and this period of rationalization may
not end until further legislative protection is provided through tariff price
supports or mandatory import quotas, such as those recently enacted for certain
specialty steel products.
Life care facilities are an alternative form of long-term housing for the
elderly which offer residents the independence of a condominium life style and,
if needed, the comprehensive care of nursing home services. Bonds to finance
these facilities have been issued by various state industrial development
authorities. Since the bonds are normally secured only by the revenues of each
facility and not by state or local government tax payments, they are subject to
a wide variety of risks. Primarily, the projects must maintain adequate
occupancy levels to be able to provide revenues sufficient to meet debt service
payments. Moreover, since a portion of housing, medical care and other services
may be financed by an initial deposit, it is important that the facility
maintain adequate financial reserves to secure estimated actuarial liabilities.
The ability of management to accurately forecast inflationary cost pressures is
an important factor in this process. The facilities may also be affected
adversely by regulatory cost restrictions applied to health care delivery in
general, particularly state regulations or changes in Medicare and Medicaid
payments or qualifications, or restrictions imposed by medical insurance
companies. They may also face competition from alternative health care or
conventional housing facilities in the private or public sector.
OBLIGATIONS OF PUERTO RICO, U.S. VIRGIN ISLANDS AND GUAM. Subject to a Fund's
investment policies as set forth in its Prospectus, a Portfolio may invest in
the obligations of Puerto Rico, the U.S. Virgin Islands and Guam. Accordingly, a
Portfolio may be adversely affected by local political and economic conditions
and developments within Puerto Rico affecting the issuers of such obligations.
Puerto Rico has a diversified economy dominated by the manufacturing and
service sectors. Manufacturing is the largest sector in terms of gross domestic
product and is more diversified than during earlier phases of Puerto Rico's
industrial development. The three largest sectors of the economy (as a
percentage of employment) are services (47%), government (22%) and manufacturing
(16.4%). These three sectors represent 39%, 11% and 39%, respectively, of the
gross domestic product. The service sector is the fastest growing, while the
government and manufacturing sectors have been stagnant for the past five years.
This decline was broad based among all manufacturing industries. The North
American Free Trade Agreement ("NAFTA"), which became effective January 1, 1994,
could lead to the loss of Puerto Rico's lower salaried or labor intensive jobs
to Mexico. The August, 1994 unemployment rate was 14.5%, down from 18.2% in
August, 1993.
The Commonwealth of Puerto Rico exercises virtually the same control over
its internal affairs as do the fifty states; however, it differs from the states
in its relationship with the Federal government. Most Federal taxes, except
those such as social security taxes that are imposed by mutual consent, are not
levied in Puerto Rico. However, in conjunction with the 1993 U.S. budget plan,
Section 936 of the Internal Revenue Code was amended and provided for two
alternative limitations to the Section 936 credit. The first option will limit
the credit against such income to 40% of the credit allowable under current law,
with a five year phase-in period starting at 60% of the allowable credit. The
second option is a wage and depreciation based credit. The reduction of the tax
benefits to those U.S. companies with operations in Puerto Rico may lead to
slower growth in the future. There can be no assurance that these modifications
will not lead to a weakened economy, a lower rating on Puerto Rico's debt or
lower prices for Puerto Rican bonds that may be held by the Portfolio.
Puerto Rico's financial reporting was first conformed to generally accepted
accounting principles in fiscal 1990. Nonrecurring revenues have been used
frequently to balance recent years' budgets. In November, 1993 Puerto Ricans
voted on whether they wished to retain their Commonwealth status, become a state
or establish an independent nation. The measure was defeated, with 48.5% voting
to remain a Commonwealth, 46% voting for statehood and 4% voting for
independence. Retaining Commonwealth status will leave intact the current
relationship with the Federal government. There can be no assurance that the
statehood issue will not be brought to a vote in the future. A successful
statehood vote in Puerto Rico would then require the U.S. Congress to ratify the
election.
The United States Virgin Islands (USVI) are located approximately 1,100
miles east-southeast of Miami and are made up of St. Croix, St. Thomas and St.
John. Population, after reaching a peak of 110,800 in 1985, declined to 101,809
in 1990. The economy is heavily reliant on the tourism industry, with roughly
43% of non-agricultural employment in tourist-related trade and services. As of
April, 1993, unemployment stood at 2.7%. The tourism industry is economically
sensitive and would likely be adversely affected by a recession in either the
United States or Europe.
An important component of the USVI revenue base is the Federal excise tax on
rum exports. Tax revenues rebated by the Federal government to the USVI provide
the primary security of many outstanding USVI bonds. Since more than 90% of the
rum distilled in the USVI is distilled at one plant, any interruption in its
operations (as occurred after Hurricane Hugo in 1989) would adversely affect
these revenues. Consequently, there can be no assurance that rum exports to the
United States and the rebate of tax revenues to the USVI will continue at their
present levels. The preferential tariff treatment the USVI rum industry
currently enjoys could be reduced under NAFTA. Increased competition from
Mexican rum producers could reduce USVI rum imported to the U.S., decreasing
excise tax revenues generated. The USVI experienced budget deficits in fiscal
years 1989 and 1990: in 1989 due to wage settlements with the unionized
government employees, and in 1990 as a result of Hurricane Hugo. The USVI
recorded a small surplus in fiscal year 1991. At the end of fiscal 1992, the
last year for which results are available, the USVI had an unreserved General
Fund deficit of approximately $8.31 million, or approximately 2.1% of
expenditures. In order to close a forecasted fiscal 1994 revenue gap of $45.6
million, the Department of Finance has proposed several tax increases and fund
transfers. There is currently no rated, unenhanced Virgin Islands debt
outstanding.
Guam, an unincorporated U.S. territory, is located 1,500 miles southeast of
Tokyo. Population, 133,000 in 1990, up 26% from the 1980 census level. The U.S.
military is a key component of Guam's economy. The Federal government directly
comprises more than 10% of the employment base, with a substantial component of
the service sector to support these personnel. Guam is expected to benefit from
the closure of the Subic Bay Naval Base and the Clark Air Force Base in the
Philippines. The Naval Air Station, one of several U.S. military facilities on
the island, has been slated for closure by the Defense Base Closure and
Realignment Committee; however, the administration plans to use these facilities
to expand the Island's commercial airport. Guam is also heavily reliant on
tourists, particularly the Japanese. Unemployment was 3.2% in 1991. The
financial position of Guam has weakened as the General Fund incurred a negative
position for 1992. Lower than expected revenue collection due to the economic
downturn caused the poor performance. The administration has taken steps to
improve its financial position; however, there are no guarantees that an
improvement will be realized. Guam's general obligation debt is rated Baa by
Moody's.
MUNICIPAL LEASES
The Portfolio may invest in municipal leases and participations therein,
which arrangements frequently involve special risks. Municipal leases are
obligations in the form of a lease or installment purchase arrangement which is
issued by state or local governments to acquire equipment and facilities.
Interest income from such obligations is generally exempt from local and state
taxes in the state of issuance. "Participations" in such leases are undivided
interests in a portion of the total obligation. Participations entitle their
holders to receive a pro rata share of all payments under the lease. A trustee
is usually responsible for administering the terms of the participation and
enforcing the participants' rights in the underlying lease. Leases and
installment purchase or conditional sale contracts (which normally provide for
title to the leased equipment without meeting the constitutional and statutory
requirements for the issuance of debt. State debt-issuance limitations are
deemed to be inapplicable to these arrangements because of the inclusion in many
leases or contracts of "non-appropriation" clauses that provide that the
governmental issuer has no obligation to make future payments under the lease or
contract unless money is appropriated for such purpose by the appropriate
legislative body on a yearly or other periodic basis. Such arrangements are,
therefore, subject to the risk that the governmental issuer will not appropriate
funds for lease payments.
Certain municipal lease obligations may be deemed illiquid for the purpose
of the Portfolio's 15% limitation on investments in illiquid securities, unless
determined by the Investment Adviser, pursuant to guidelines adopted by the
Trustees of the Portfolio, to be liquid securities for the purpose of such
limitation. In determining the liquidity of municipal lease obligations, the
Investment Adviser will consider a variety of factors including: (1) the
willingness of dealers to bid for the security; (2) the number of dealers
willing to purchase or sell the obligation and the number of other potential
buyers; (3) the frequency of trades and quotes for the obligation; and (4) the
nature of the marketplace trades. In addition, the Investment Adviser will
consider factors unique to particular lease obligations affecting the
marketability thereof. These include the general creditworthiness of the
municipality, the importance of the property covered by the lease to the
municipality, and the likelihood that the marketability of the obligation will
be maintained throughout the time the obligation is held by the Portfolio. In
the event the Portfolio acquires an unrated municipal lease obligation, the
Investment Adviser will be responsible for determining the credit quality of
such obligation on an on-going basis, including an assessment of the likelihood
that the lease may or may not be cancelled.
ZERO COUPON BONDS
Zero coupon bonds are debt obligations which do not require the periodic
payment of interest and are issued at a significant discount from face value.
The discount approximates the total amount of interest the bonds will accrue and
compound over the period until maturity at a rate of interest reflecting the
market rate of the security at the time of issuance. Zero coupon bonds benefit
the issuer by mitigating its need for cash to meet debt service, but also
require a higher rate of return to attract investors who are willing to defer
receipt of such cash.
INSURANCE
Insured municipal obligations held by the Portfolio (if any) will be insured
as to their scheduled payment of principal and interest under either (i) an
insurance policy obtained by the issuer or underwriter of the obligation at the
time of its original issuance or (ii) an insurance policy obtained by the
Portfolio or a third party subsequent to the obligation's original issuance
(which may not be reflected in the obligation's market value. In either event,
such insurance may provide that in the event of non-payment of interest or
principal when due with respect to an insured obligation, the insurer is not
required to make such payment until a specified time has lapsed (which may be 30
days or more after notice).
CREDIT QUALITY
The Portfolio is dependent on the Investment Adviser's judgment, analysis
and experience in evaluating the quality of municipal obligations. In evaluating
the credit quality of a particular issue, whether rated or unrated, the
Investment Adviser will normally take into consideration, among other things,
the financial resources of the issuer (or, as appropriate, of the underlying
source of funds for debt service), its sensitivity to economic conditions and
trends, any operating history of and the community support for the facility
financed by the issue, the ability of the issuer's management and regulatory
matters. The Investment Adviser will attempt to reduce the risks of investing in
the lowest investment grade, below investment grade and comparable unrated
obligations through active portfolio management, credit analysis and attention
to current developments and trends in the economy and the financial markets.
See "Portfolio of Investments" in the "Financial Statements" included in the
Fund's Part II of this Statement of Additional Information with respect to any
defaulted obligations held by the Portfolio.
SHORT-TERM TRADING
The Portfolio may sell securities in anticipation of a market decline (a
rise in interest rates) or purchase and later sell securities in anticipation of
a market rise (a decline in interest rates). In addition, a security may be sold
and another purchased at approximately the same time to take advantage of what
the Portfolio believes to be a temporary disparity in the normal yield
relationship between the two securities. Yield disparities may occur for reasons
not directly related to the investment quality of particular issues or the
general movement of interest rates, such as changes in the overall demand for or
supply of various types of municipal obligations or changes in the investment
objectives of investors. Such trading may be expected to increase the portfolio
turnover rate, which may increase capital gains and the expenses incurred in
connection with such trading. The Portfolio anticipates that its annual
portfolio turnover rate will generally not exceed 100% (excluding turnover of
securities having a maturity of one year or less).
WHEN ISSUED SECURITIES
New issues of municipal obligations are sometimes offered on a "when-
issued" basis, that is, delivery and payment for the securities normally taking
place within a specified number of days after the date of the Portfolio's
commitment and are subject to certain conditions such as the issuance of
satisfactory legal opinions. The Portfolio may also purchase securities on a
when-issued basis pursuant to refunding contracts in connection with the
refinancing of an issuer's outstanding indebtedness. Refunding contracts
generally require the issuer to sell and the Portfolio to buy such securities on
a settlement date that could be several months or several years in the future.
The Portfolio will make commitments to purchase when-issued securities only
with the intention of actually acquiring the securities, but may sell such
securities before the settlement date if it is deemed advisable as a matter of
investment strategy. The payment obligation and the interest rate that will be
received on the securities are fixed at the time the Portfolio enters into the
purchase commitment. The Portfolio's custodian will segregate cash or high grade
liquid debt securities in a separate account of the Portfolio in an amount at
least equal to the when-issued commitments. If the value of the securities
placed in the separate account declines, additional cash or high grade liquid
debt securities will be placed in the account on a daily basis so that the value
of the account will at least equal the amount of the Portfolio's when-issued
commitments. When the Portfolio commits to purchase a security on a when-issued
basis it records the transaction and reflects the value of the security in
determining its net asset value. Securities purchased on a when-issued basis and
the securities held by the Portfolio are subject to changes in value based upon
the perception of the creditworthiness of the issuer and changes in the level of
interest rates (i.e. appreciation when interest rates decline and depreciation
when interest rates rise). Therefore, to the extent that the Portfolio remains
substantially fully invested at the same time that it has purchased securities
on a when- issued basis, there will be greater fluctuations in the Portfolio's
net asset value than if it solely set aside cash to pay for when-issued
securities.
VARIABLE RATE OBLIGATIONS
The Portfolio may purchase variable rate obligations. Variable rate
instruments provide for adjustments in the interest rate at specified intervals
(weekly, monthly, semi-annually, etc.). The revised rates are usually set at the
issuer's discretion, in which case the investor normally enjoys the right to
"put" the security back to the issuer or his agent. Rate revisions may
alternatively be determined by formula or in some other contractual fashion.
Variable rate obligations normally provide that the holder can demand payment of
the obligation on short notice at par with accrued interest and are frequently
secured by letters of credit or other credit support arrangements provided by
banks. To the extent that such letters of credit or other arrangements
constitute an unconditional guarantee of the issuer's obligations, a bank may be
treated as the issuer of a security for the purpose of complying with the
diversification requirements set forth in Section 5(b) of the Investment Company
Act of 1940 and Rule 5b-2 thereunder. The Portfolio would anticipate using these
obligations as cash equivalents pending longer term investment of its funds.
REDEMPTION, DEMAND AND PUT FEATURES
Most municipal bonds have a fixed final maturity date. However, it is
commonplace for the issuer to reserve the right to call the bond earlier. Also,
some bonds may have "put" or "demand" features that allow early redemption by
the bondholder. Interest income generated by certain bonds having demand
features may not qualify as tax-exempt interest. Longer term fixed-rate bonds
may give the holder a right to request redemption at certain times (often
annually after the lapse of an intermediate term). These bonds are more
defensive than conventional long term bonds (protecting to some degree against a
rise in interest rates) while providing greater opportunity than comparable
intermediate term bonds, because the Portfolio may retain the bond if interest
rates decline. By acquiring these kinds of obligations the Portfolio obtains the
contractual right to require the issuer of the security or some other person
(other than a broker or dealer) to purchase the security at an agreed upon
price, which right is contained in the obligation itself rather than in a
separate agreement with the seller or some other person. Because this right is
assignable with the security, which is readily marketable and valued in the
customary manner, the Portfolio will not assign any separate value to such
right.
LIQUIDITY AND PROTECTIVE PUT OPTIONS
The Portfolio may also enter into a separate agreement with the seller of
the security or some other person granting the Portfolio the right to put the
security to the seller thereof or the other person at an agreed upon price. The
Portfolio intends to limit this type of transaction to institutions (such as
banks or securities dealers) which the Investment Adviser believes present
minimal credit risks and would engage in this type of transaction to facilitate
portfolio liquidity or (if the seller so agrees) to hedge against rising
interest rates. There is no assurance that this kind of put option will be
available to the Portfolio or that selling institutions will be willing to
permit the Portfolio to exercise a put to hedge against rising interest rates. A
separate put option may not be marketable or otherwise assignable, and sale of
the security to a third party or lapse of time with the put unexercised may
terminate the right to exercise the put. The Portfolio does not expect to assign
any value to any separate put option which may be acquired to facilitate
portfolio liquidity, inasmuch as the value (if any) of the put will be reflected
in the value assigned to the associated security; any put acquired for hedging
purposes would be valued in good faith under methods or procedures established
by the Trustees of the Portfolio after consideration of all relevant factors,
including its expiration date, the price volatility of the associated security,
the difference between the market price of the associated security and the
exercise price of the put, the creditworthiness of the issuer of the put and the
market prices of comparable put options. Interest income generated by certain
bonds having put features may not qualify as tax-exempt interest.
SECURITIES LENDING
The Portfolio may seek to increase its income by lending portfolio
securities to broker-dealers or other institutional borrowers. Under present
regulatory policies of the Securities and Exchange Commission (the
"Commission"), such loans are required to be secured continuously by collateral
in cash, cash equivalents or U.S. Government securities held by the Portfolio's
custodian and maintained on a current basis at an amount at least equal to the
market value of the securities loaned, which will be marked to market daily.
Cash equivalents include short-term municipal obligations as well as taxable
certificates of deposit, commercial paper and other short-term money market
instruments. The Portfolio would have the right to call a loan and obtain the
securities loaned at any time on up to five business days' notice. During the
existence of a loan, the Portfolio will continue to receive the equivalent of
the interest paid by the issuer on the securities loaned and will also receive a
fee, or all or a portion of the interest on investment of the collateral, if
any. However, the Portfolio may pay lending fees to such borrowers. The
Portfolio would not have the right to vote any securities having voting rights
during the existence of the loan, but would call the loan in anticipation of an
important vote to be taken among holders of the securities or the giving or
withholding of their consent on a material matter affecting the investment. As
with other extensions of credit there are risks of delay in recovery or even
loss of rights in the securities loaned if the borrower of the securities fails
financially. However, the loans will be made only to organizations deemed by the
Portfolio's management to be of good standing and when, in the judgment of the
Portfolio's management, the consideration which can be earned from securities
loans of this type justifies the attendant risk. Distributions by the Fund of
any income realized by the Portfolio from securities loans will be taxable. If
the management of the Portfolio decides to make securities loans, it is intended
that the value of the securities loaned would not exceed 30% of the Portfolio's
total assets.
FUTURES CONTRACTS
A change in the level of interest rates may affect the value of the
securities held by the Portfolio (or of securities that the Portfolio expects to
purchase). To hedge against changes in rates or for non-hedging purposes, the
Portfolio may enter into (i) futures contracts for the purchase or sale of debt
securities, (ii) futures contracts on securities indices and (iii) futures
contracts on other financial instruments and indices. All futures contracts
entered into by the Portfolio are traded on exchanges or boards of trade that
are licensed and regulated by the Commodity Futures Trading Commission ("CFTC")
and must be executed through a futures commission merchant or brokerage firm
which is a member of the relevant exchange. The Portfolio may purchase and write
call and put options on futures contracts which are traded on a United States or
foreign exchange or board of trade.
The Portfolio will engage in futures and related options transactions only
for bona fide hedging or non-hedging purposes as defined in or permitted by CFTC
regulations. The Portfolio will determine that the price fluctuations in the
futures contracts and options on futures used for hedging purposes are
substantially related to price fluctuations in securities held by the Portfolio
or which it expects to purchase. Except as stated below, the Portfolio's futures
transactions will be entered into for traditional hedging purposes -- that is,
futures contracts will be sold to protect against a decline in the price of
securities that the Portfolio owns, or futures contracts will be purchased to
protect the Portfolio against an increase in the price of securities it intends
to purchase. As evidence of this hedging intent, the Portfolio expects that on
75% or more of the occasions on which it takes a long futures (or option)
position (involving the purchase of futures contracts), the Portfolio will have
purchased, or will be in the process of purchasing, equivalent amounts of
related securities in the cash market at the time when the futures (or option)
position is closed out. However, in particular cases, when it is economically
advantageous for the Portfolio to do so, a long futures position may be
terminated (or an option may expire) without the corresponding purchase of
securities. As an alternative to compliance with the bona fide hedging
definition, a CFTC regulation permits the Portfolio to elect to comply with a
different test, under which the aggregate initial margin and premiums required
to establish non-heding positions in futures contracts and options on futures
will not exceed 5% of the Portfolio's net asset value after taking into account
unrealized profits and losses on such positions and excluding the in-the-money
amount of such options.
The Portfolio will be required, in connection with transactions in futures
contracts and the writing of options on futures to make margin deposits, which
will be held by the Portfolio's custodian for the benefit of the futures
commission merchant through whom the Portfolio engages in such futures and
options transactions. Cash or liquid high grade debt securities required to be
segregated in connection with a "long" futures position taken by the Portfolio
will also be held by the custodian in a segregated account and will be marked to
market daily.
PORTFOLIO TURNOVER
The Portfolio cannot accurately predict its portfolio turnover rate, but it
is anticipated that the annual turnover rate will generally not exceed 100%
(excluding turnover of securities having a maturity of one year or less). A 100%
annual turnover rate would occur, for example, if all the securities held by the
Portfolio were replaced once in a period of one year. A high turnover rate (100%
or more) necessarily involves greater expenses to the Portfolio. The Portfolio
engages in portfolio trading (including short-term trading) if it believes that
a transaction including all costs will help in achieving its investment
objective.
INVESTMENT RESTRICTIONS
The following investment restrictions of the Fund are designated as
fundamental policies and as such cannot be changed without the approval of the
holders of a majority of the Fund's outstanding voting securities, which as used
in this Statement of Additional Information means the lesser of (a) 67% of the
shares of the Fund present or represented by proxy at a meeting if the holders
of more than 50% of the shares are present or represented at the meeting or (b)
more than 50% of the shares of the Fund. Accordingly, the Fund may not:
(1) Borrow money or issue senior securities except as permitted by the
Investment Company Act of 1940;
(2) Purchase securities on margin (but the Fund may obtain such short-term
credits as may be necessary for the clearance of purchases and sales of
securities). The deposit or payment by the Fund of initial or maintenance margin
in connection with futures contracts or related options transactions is not
considered the purchase of a security on margin;
(3) Underwrite or participate in the marketing of securities of others,
except insofar as it may technically be deemed to be an underwriter in selling a
portfolio security under circumstances which may require the registration of the
same under the Securities Act of 1933;
(4) Purchase or sell real estate, although it may purchase and sell
securities which are secured by real estate and securities of companies which
invest or deal in real estate;
(5) Purchase or sell physical commodities or contracts for the purchase or
sale of physical commodities; or
(6) Make loans to any person except by (a) the acquisition of debt
instruments and making portfolio investments, (b) entering into repurchase
agreements and (c) lending portfolio securities.
Notwithstanding the investment policies and restrictions of the Fund, the
Fund may invest all of its investable assets in an open-end management
investment company with substantially the same investment objective, policies
and restrictions as the Fund.
The Portfolio has adopted substantially the same fundamental investment
restrictions as the foregoing investment restrictions adopted by the Fund; such
restrictions cannot be changed without the approval of a "majority of the
outstanding voting securities" of the Portfolio, which as used in this Statement
of Additional Information means the lesser of (a) 67% of the outstanding voting
securities of the Portfolio present or represented by proxy at a meeting if the
holders of more than 50% of the outstanding voting securities of the Portfolio
are present or represented at the meeting or (b) more than 50% of the
outstanding voting securities of the Portfolio. The term "voting securities" as
used in this paragraph has the same meaning as in the Investment Company Act of
1940 (the "1940 Act"). Whenever the Trust is requested to vote on a change in
the fundamental investment restrictions of the Portfolio (or the Portfolio's 80%
investment policy as described in the Fund's current Prospectus), the Trust will
hold a meeting of Fund shareholders and will cast its vote as instructed by the
shareholders.
The Fund and the Portfolio have adopted the following investment policies
which may be changed by the Trust with respect to the Fund without approval by
the Fund's shareholders or by the Portfolio with respect to the Portfolio
without the approval by the Fund or its other investors. As a matter of
nonfundamental policy, the Fund and the Portfolio will not: (a) engage in
options, futures or forward transactions if more than 5% of its net assets, as
measured by the aggregate of the premiums paid by the Fund or the Portfolio,
would be so invested; (b) make short sales of securities or maintain a short
position, unless at all times when a short position is open it owns an equal
amount of such securities or 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; (c) invest more than 15%
of net assets in investments which are not readily marketable, including
restricted securities and repurchase agreements maturing in more than seven
days. 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 that the Board of Trustees of the Trust or the Portfolio, or its delegate,
determines to be liquid, based upon the trading markets for the specific
security; (d) purchase or retain in its portfolio any securities issued by an
issuer any of whose officers, directors, trustees or security holders is an
officer or Trustee of the Trust or the Portfolio or is a member, officer,
director or trustee of any investment adviser of the Trust or the Portfolio, if
after the purchase of the securities of such issuer by the Fund or the Portfolio
one or more of such persons owns beneficially more than 1/2 of 1% of the shares
or securities or both (all taken at market value) of such issuer and such
persons owning more than 1/2 of 1% of such shares or securities together own
beneficially more than 5% of such shares or securities or both (all taken at
market value); or (e) purchase oil, gas or other mineral leases or purchase
partnership interests in oil, gas or other mineral exploration or development
programs.
For purposes of the Portfolio's investment restrictions, the determination
of the "issuer" of a municipal obligation which is not a general obligation bond
will be made by the Portfolio's Investment Adviser on the basis of the
characteristics of the obligation and other relevant factors, the most
significant of which is the source of funds committed to meeting interest and
principal payments of such obligations.
In order to permit the sale of shares of the Fund in certain states, the
Fund may make commitments more restrictive than the policies described above.
Should the Fund determine that any such commitment is no longer in the best
interest of the Fund and its shareholders, it will revoke the commitment by
terminating sales of its shares in the state(s) involved.
TRUSTEES AND OFFICERS
The Trustees and officers of the Trust and the Portfolio are listed below.
Except as indicated, each individual has held the office shown or other offices
in the same company for the last five years. Unless otherwise noted, the
business address of each Trustee and officer is 24 Federal Street, Boston,
Massachusetts 02110, which is also the address of the Portfolio's investment
adviser, Boston Management and Research ("BMR" or the "Investment Adviser"), a
wholly-owned subsidiary of Eaton Vance Management ("Eaton Vance"); of Eaton
Vance's parent, Eaton Vance Corp. ("EVC"); and of BMR's and Eaton Vance's
trustee, Eaton Vance, Inc. ("EV"). Eaton Vance and EV are both wholly-owned
subsidiaries of EVC. Those Trustees who are "interested persons" of the Trust,
the Portfolio, BMR, Eaton Vance, EVC or EV, as defined in the 1940 Act, by
virtue of their affiliation with any one or more of the Trust, the Portfolio,
BMR, Eaton Vance, EVC or EV, are indicated by an asterisk(*).
TRUSTEES OF THE TRUST AND THE PORTFOLIO
DONALD R. DWIGHT (64), TRUSTEE
President of Dwight Partners, Inc. (a corporate relations and communications
company) founded in 1988; Chairman of the Board of Newspapers of New England,
Inc., since 1983. Director or Trustee of various investment companies managed
by Eaton Vance or BMR.
Address: Clover Mill Lane, Lyme, New Hampshire 03768
JAMES B. HAWKES (53), VICE PRESIDENT AND TRUSTEE*
Executive Vice President of BMR, Eaton Vance, EVC and EV, and a Director of EVC
and EV. Director, Trustee and officer of various investment companies managed
by Eaton Vance or BMR.
SAMUEL L. HAYES, III (60), TRUSTEE
Jacob H. Schiff Professor of Investment Banking, Harvard University Graduate
School of Business Administration. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: Harvard University Graduate School of Business Administration,
Soldiers Field Road, Boston, Massachusetts 02163
NORTON H. REAMER (59), TRUSTEE
President and Director, United Asset Management Corporation, a holding company
owning institutional investment management firms. Chairman, President and
Director, The Regis Fund, Inc. (mutual fund). Director or Trustee of various
investment companies managed by Eaton Vance or BMR.
Address: One International Place, Boston, Massachusetts 02110
JOHN L. THORNDIKE (68), TRUSTEE
Director, Fiduciary Company Incorporated, Director or Trustee of various
investment companies managed by Eaton Vance or BMR.
Address: 175 Federal Street, Boston, Massachusetts 02110
JACK L. TREYNOR (65), TRUSTEE
Investment Adviser and Consultant. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: 504 Via Almar, Palos Verdes Estates, California 90274
OFFICERS OF THE TRUST AND THE PORTFOLIO
THOMAS J. FETTER (51), PRESIDENT
Vice President of BMR, Eaton Vance and EV. (Mr. Fetter was elected a Vice
President of the Trust on December 17, 1990 and President of the Trust on
December 13, 1993. President of the Portfolio. Officer of various investment
companies managed by Eaton Vance or BMR.
ROBERT B. MACINTOSH (38), VICE PRESIDENT
Vice President of BMR since August 11, 1992, and of Eaton Vance and EV, and an
employee of Eaton Vance since March 8, 1991. Fidelity Investments -- Portfolio
Manager (1986-1991). Officer of various investment companies managed by Eaton
Vance or BMR. Mr. MacIntosh was elected Vice President of the Trust on March
22, 1993.
JAMES L. O'CONNOR (50), TREASURER
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
THOMAS OTIS (63), SECRETARY
Vice President and Secretary of BMR, Eaton Vance, EVC and EV. Officer of various
investment companies managed by Eaton Vance or BMR.
JANET E. SANDERS (59), ASSISTANT TREASURER AND ASSISTANT SECRETARY
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
A. JOHN MURPHY (32), ASSISTANT SECRETARY
Assistant Vice President of BMR, Eaton Vance and EV since March 1, 1994;
employee of Eaton Vance since March 1993. State Regulations Supervisor, The
Boston Company (1991-1993) and Registration Specialist, Fidelity Management &
Research Co. (1986-1991). Officer of various investment companies managed by
Eaton Vance or BMR. Mr. Murphy was elected Assistant Secretary of the Trust on
March 27, 1995.
Messrs. Thorndike (Chairman), Hayes and Reamer are members of the Special
Committee of the Board of Trustees of the Trust and of the Portfolio. The
Special Committee's functions include a continuous review of the Trust's
contractual relationship with the Administrator on behalf of the Fund and the
Portfolio's contractual relationship with the Investment Adviser, making
recommendations to the Trustees regarding the compensation of those Trustees who
are not members of the Eaton Vance organization, and making recommendations to
the Trustees regarding candidates to fill vacancies, as and when they occur, in
the ranks of those Trustees who are not "interested persons" of the Trust, the
Portfolio, or the Eaton Vance organization.
Messrs. Treynor (Chairman) and Dwight are members of the Audit Committee of
the Board of Trustees of the Trust and of the Portfolio. The Audit Committee's
functions include making recommendations to the Trustees regarding the selection
of the independent certified public accountants, and reviewing with such
accountants and the Treasurer of the Trust and of the Portfolio matters relative
to accounting and auditing practices and procedures, accounting records,
internal accounting controls, and the functions performed by the custodian and
transfer agent of the Fund and of the Portfolio.
Trustees of the Portfolio who are not affiliated with the Investment Adviser
may elect to defer receipt of all or a percentage of their annual fees in
accordance with the terms of a Trustees Deferred Compensation Plan (the "Plan").
Under the Plan, an eligible Trustee may elect to have his deferred fees invested
by the 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 the 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.
The fees and expenses of those Trustees of the Trust and the Portfolio who
are not members of the Eaton Vance organization (the noninterested Trustees) are
paid by the Fund (and the other series of the Trust) and the Portfolio,
respectively. For the compensation received by the noninterested Trustees of the
Trust and the Portfolio, see "Fees and Expenses" in the Fund's Part II of this
Statement of Additional Information.
INVESTMENT ADVISER AND ADMINISTRATOR
The Portfolio engages BMR as investment adviser pursuant to an Investment
Advisory Agreement. BMR or Eaton Vance acts as investment adviser to investment
companies and various individual and institutional clients with combined assets
under management of approximately $15 billion.
Eaton Vance, its affiliates and its predecessor companies have been managing
assets of individuals and institutions since 1924 and managing investment
companies since 1931. They maintain a large staff of experienced fixed-income
and equity investment professionals to service the needs of their clients. The
fixed-income division focuses on all kinds of taxable investment- grade and
high-yield securities, tax-exempt investment-grade and high-yield securities,
and U.S. Government securities. The equity division covers stocks ranging from
blue chip to emerging growth companies.
BMR manages the investments and affairs of the Portfolio subject to the
supervision of the Portfolio's Board of Trustees. BMR furnishes to the Portfolio
investment research, advice and supervision, furnishes an investment program and
determines 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
Investment Advisory Agreement requires BMR to pay the salaries and fees of all
officers and Trustees of the Portfolio who are members of the BMR organization
and all personnel of BMR performing services relating to research and investment
activities. The Portfolio is responsible for all expenses not expressly stated
to be payable by BMR under the Investment Advisory Agreement, including, without
implied limitation, (i) expenses of maintaining the Portfolio and continuing its
existence, (ii) registration of the Portfolio under the 1940 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 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 investors and of meetings of investors 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, investor servicing agents and registrars for all
services to the Portfolio, (xv) expenses for servicing the accounts of
investors, (xvi) any direct charges to investors approved by the Trustees of the
Portfolio, (xvii) compensation and expenses of Trustees of the Portfolio who are
not members of BMR'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 investors with respect thereto.
For a description of the compensation that the Portfolio pays BMR under the
Investment Advisory agreement, see the Fund's current Prospectus. For additional
information about the Investment Advisory Agreement, including the net assets of
the Portfolio and the investment advisory fees that the Portfolio paid BMR under
the Investment Advisory Agreement, see "Fees and Expenses" in the Fund's Part II
of this Statement of Additional Information.
A commitment may be made to a state securities authority that Eaton Vance
will take certain actions, if necessary, so that the Fund's expenses will not
exceed expense limitation requirements of such state. The commitment may be
amended or rescinded by Eaton Vance in response to changes in the requirements
of the state or for other reasons.
The Investment Advisory Agreement with BMR may be continued indefinitely so
long as such continuance is approved at least annually (i) by the vote of a
majority of the Trustees of the Portfolio who are not interested persons of the
Portfolio or of BMR cast in person at a meeting specifically called for the
purpose of voting on such approval and (ii) by the Board of Trustees of the
Portfolio or by vote of a majority of the outstanding voting securities of the
Portfolio. The Agreement may be terminated at any time without penalty on sixty
(60) days' written notice by the Board of Trustees of either party, or by vote
of the majority of the outstanding voting securities of the Portfolio, and the
Agreement will terminate automatically in the event of its assignment. The
Agreement provides that BMR may render services to others and engage in other
business activities and may permit other fund clients and other corporations and
organizations to use the words "Eaton Vance" or "Boston Management and Research"
in their names. The Agreement also provides that BMR shall not be liable for any
loss incurred in connection with the performance of its duties, or action taken
or omitted under that Agreement, in the absence of willful misfeasance, bad
faith, 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
sustained in the acquisition, holding or disposition of any security or other
investment.
As indicated in the Prospectus, Eaton Vance serves as Administrator of the
Fund, but receives no compensation for providing administrative services to the
Fund. Under its Administrative Services Agreement with the Fund, Eaton Vance has
been engaged to administer the Fund's affairs, subject to the supervision of the
Trustees of the Trust, and shall furnish for the use of the Fund office space
and all necessary office facilities, equipment and personnel for administering
the affairs of the Fund. For additional information about the Administrator, see
"Fees and Expenses" in the Fund's Part II of this Statement of Additional
Information.
The Fund pays all of its own expenses including, without limitation, (i)
expenses of maintaining the Fund and continuing its existence, (ii) its pro rata
share of registration of the Trust under the 1940 Act, (iii) commissions, fees
and other expenses connected with the purchase or sale of securities and other
investments, (iv) auditing, accounting and legal expenses, (v) taxes and
interest, (vi) governmental fees, (vii) expenses of issue, sale, repurchase and
redemption of shares, (viii) expenses of registering and qualifying the Fund and
its shares under federal and state securities laws and of preparing and printing
prospectuses for such purposes and for distributing the same to shareholders and
investors, and fees and expenses of registering and maintaining registrations of
the Fund and of the Fund's principal underwriter, if any, as broker-dealer or
agent under state securities laws, (ix) expenses of reports and notices to
shareholders and of meetings of shareholders 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 Fund
(including without limitation safekeeping of funds, securities and other
investments, keeping of books and accounts and determination of net asset
values), (xiv) fees, expenses and disbursements of transfer agents, dividend
disbursing agents, shareholder servicing agents and registrars for all services
to the Fund, (xv) expenses for servicing shareholder accounts, (xvi) any direct
charges to shareholders approved by the Trustees of the Trust, (xvii)
compensation and expenses of Trustees of the Trust who are not members of the
Eaton Vance 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 and officers
with respect thereto.
BMR is a wholly-owned subsidiary of Eaton Vance. Eaton Vance and EV are both
wholly-owned subsidiaries of EVC. BMR and Eaton Vance are both Massachusetts
business trusts, and EV is the trustee of BMR and Eaton Vance. The Directors of
EV are Landon T. Clay, H. Day Brigham, Jr., M. Dozier Gardner, James B. Hawkes
and Benjamin A. Rowland, Jr. The Directors of EVC consist of the same persons
and John G. L. Cabot and Ralph Z. Sorenson. Mr. Clay is chairman and Mr. Gardner
is president and chief executive officer of EVC, BMR, Eaton Vance and EV. All of
the issued and outstanding shares of Eaton Vance and EV are owned by EVC. All of
the issued and outstanding shares of BMR are owned by Eaton Vance. All shares of
the outstanding Voting Common Stock of EVC are deposited in a Voting Trust,
which expires on December 31, 1996, the Voting Trustees of which are Messrs.
Clay, Brigham, Gardner, Hawkes and Rowland. The Voting Trustees have
unrestricted voting rights for the election of Directors of EVC. All of the
outstanding voting trust receipts issued under said Voting Trust are owned by
certain of the officers of BMR and Eaton Vance who are also officers and
Directors of EVC and EV. As of April 30, 1995, Messrs. Clay, Gardner and Hawkes
each owned 24% of such voting trust receipts, and Messrs. Rowland and Brigham
owned 15% and 13%, respectively, of such voting trust receipts. Messrs. Hawkes
and Otis are officers or Trustees of the Trust and the Portfolio and are members
of the EVC, BMR, Eaton Vance and EV organizations. Messrs. Fetter, MacIntosh,
Murphy and O'Connor and Ms. Sanders are officers of the Trust and/or the
Portfolio and are also members of the BMR, Eaton Vance and EV organizations. BMR
will receive the fees paid under the Investment Advisory Agreement.
Eaton Vance owns all of the stock of Energex Corporation, which is engaged
in oil and gas operations. EVC owns all of the stock of Marblehead Energy Corp.
(which is engaged in oil and gas operations) and 77.3% of the stock of Investors
Bank & Trust Company, custodian of the Fund and the Portfolio, which provides
custodial, trustee and other fiduciary services to investors, including
individuals, employee benefit plans, corporations, investment companies, savings
banks and other institutions. In addition, Eaton Vance owns all of the stock of
Northeast Properties, Inc., which is engaged in real estate investment,
consulting and management. EVC owns all of the stock of Fulcrum Management, Inc.
and MinVen Inc., which are engaged in the development of precious metal
properties. EVC, BMR, Eaton Vance and EV may also enter into other businesses.
EVC and its affiliates and their officers and employees from time to time
have transactions with various banks, including the custodian of the Fund and
the Portfolio, Investors Bank & Trust Company. It is Eaton Vance's opinion that
the terms and conditions of such transactions were not and will not be
influenced by existing or potential custodial or other relationships between the
Fund or the Portfolio and such banks.
CUSTODIAN
Investors Bank & Trust Company ("IBT"), 24 Federal Street, Boston,
Massachusetts, (a 77.3% owned subsidiary of EVC) acts as custodian for the Fund
and the Portfolio. IBT has the custody of all cash and securities representing
the Fund's interest in the Portfolio, has custody of all the Portfolio's assets,
maintains the general ledger of the Portfolio and the Fund, and computes the
daily net asset value of interests in the Portfolio and the net asset value of
shares of the Fund. In such capacity it attends to details in connection with
the sale, exchange, substitution, transfer or other dealings with the
Portfolio's investments, receives and disburses all funds and performs various
other ministerial duties upon receipt of proper instructions from the Fund and
the Portfolio. IBT charges fees which are competitive within the industry. A
portion of the fee relates to custody, bookkeeping and valuation services and is
based upon a percentage of Fund and Portfolio net assets and a portion of the
fee relates to activity charges, primarily the number of portfolio transactions.
These fees are then reduced by a credit for cash balances of the particular
investment company at the custodian equal to 75% of the 91-day, U.S. Treasury
Bill auction rate applied to the particular investment company's average daily
collected balances for the week. In view of the ownership of EVC in IBT, the
Portfolio is treated as a self-custodian pursuant to Rule 17f-2 under the 1940
Act, and the Portfolio's investments held by IBT as custodian are thus subject
to the additional examinations by the Portfolio's independent certified public
accountants as called for by such Rule. For the custody fees that the Portfolio
and the Fund paid to IBT, see "Fees and Expenses" in the Fund's Part II of this
Statement of Additional Information.
SERVICE FOR WITHDRAWAL
By a standard agreement, the Trust's Transfer Agent will send to the
shareholder regular monthly or quarterly payments of any permitted amount
designated by the shareholder (see "Eaton Vance Shareholder Services --
Withdrawal Plan" in the Fund's current Prospectus) based upon the value of the
shares held. The checks will be drawn from share redemptions and hence, are a
return of principal. Income dividends and capital gains distributions in
connection with withdrawal accounts will be credited at net asset value as of
the record date for each distribution. Continued withdrawals in excess of
current income will eventually use up principal, particularly in a period of
declining market prices.
To use this service, at least $5,000 in cash or shares at the public
offering price will have to be deposited with the Transfer Agent. The
maintenance of a withdrawal plan concurrently with purchases of additional Fund
shares would be disadvantageous if a sales charge is included in such purchases.
A shareholder may not have a withdrawal plan in effect at the same time he or
she has authorized Bank Automated Investing or is otherwise making regular
purchases of Fund shares. The shareholder, the Transfer Agent or the Principal
Underwriter will be able to terminate the withdrawal plan at any time without
penalty.
DETERMINATION OF NET ASSET VALUE
The net asset value of the shares of the Fund is determined by IBT (as
agent and custodian for the Fund and the Portfolio) in the manner described
under "Valuing Fund Shares" in the Fund's current Prospectus. The Fund and the
Portfolio will be closed for business and will not price their respective shares
or interests on the following business holidays: New Year's Day, Presidents'
Day, Good Friday (a New York Stock Exchange holiday), Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day.
Net asset value of the Portfolio is computed by subtracting the liabilities
of the Portfolio from the value of its total assets. Inasmuch as the market for
municipal obligations is a dealer market with no central trading location or
continuous quotation system, it is not feasible to obtain last transaction
prices for most municipal obligations held by the Portfolio, and such
obligations, including those purchased on a when-issued basis, will normally be
valued on the basis of valuations furnished by a pricing service. The pricing
services uses information with respect to transactions in bonds, quotations from
bond dealers, market transactions in comparable securities, various
relationships between securities, and yield to maturity in determining value.
Taxable obligations for which price quotations are readily available normally
will be valued at the mean between the latest available bid and asked prices.
Open futures positions on debt securities are valued at the most recent
settlement prices, unless such price does not reflect the fair value of the
contract, in which case the positions will be valued by or at the direction of
the Trustees of the Portfolio. Other assets are valued at fair value using
methods determined in good faith by or at the direction of the Trustees of the
Portfolio.
Each investor in the Portfolio, including the Fund, may add to or reduce its
investment in the Portfolio on each day the New York Stock Exchange (the
"Exchange") is open for trading ("Portfolio Business Day") as of the close of
regular trading on the Exchange (the "Portfolio Valuation Time"). The value of
each investor's interest in the Portfolio will be determined by multiplying the
net asset value of the Portfolio by the percentage, determined on the prior
Portfolio Business Day, which represented that investor's share of the aggregate
interests in the Portfolio on such prior day. Any additions or withdrawals for
the current Portfolio Business Day will then be recorded. Each investor's
percentage of the aggregate interest in the Portfolio will then be recomputed as
a percentage equal to a fraction (i) the numerator of which is the value of such
investor's investment in the Portfolio as of the Portfolio Valuation Time on the
prior Portfolio Business Day plus or minus, as the case may be, the amount of
any additions to or withdrawals from the investor's investment in the Portfolio
on the current Portfolio Business Day and (ii) the denominator of which is the
aggregate net asset value of the Portfolio as of the Portfolio Valuation Time on
the prior Portfolio Business Day plus or minus, as the case may be, the amount
of the net additions to or withdrawals from the aggregate investment in the
Portfolio on the current Portfolio Business Day by all investors in the
Portfolio. The percentage so determined will then be applied to determine the
value of the investor's interest in the Portfolio for the current Portfolio
Business Day.
INVESTMENT PERFORMANCE
The average annual total return is determined by multiplying a hypothetical
initial purchase order of $1,000 by the average annual compound rate of return
(including capital appreciation/depreciation, and dividends and distributions
paid and reinvested) for the stated period and annualizing the result. The
calculation assumes that all dividends and distributions are reinvested at net
asset value on the reinvestment dates during the period, and either (i) the
deduction of the maximum sales charge from the initial $1,000 purchase order or
(ii) a complete redemption of the investment and, if applicable, the deduction
of the contingent deferred sales charge at the end of the period. For
information concerning the total return of the Fund, see "Performance
Information" in the Fund's Part II of this Statement of Additional Information.
The Fund's yield is computed pursuant to a standardized formula by dividing
the net investment income per share earned during a recent thirty-day period by
the maximum offering price (including, if applicable, the maximum sales charge)
per share on the last day of the period and annualizing the resulting figure.
Net investment income per share is calculated from the yields to maturity of all
debt obligations held by the Portfolio based on prescribed methods, reduced by
accrued Fund expenses for the period with the resulting number being divided by
the average daily number of Fund shares outstanding and entitled to receive
distributions during the period. The yield figure does not reflect the deduction
of any contingent deferred sales charges which are imposed on certain
redemptions at the rate set forth under "How to Redeem Fund Shares" in the
Fund's current Prospectus. A taxable-equivalent yield is computed by dividing
the tax-exempt yield by 1 minus a stated rate. For the yield and
taxable-equivalent yield of the Fund, see "Performance Information" in the
Fund's Part II of this Statement of Additional Information.
The Fund may also publish the distribution rate and/or the effective
distribution rate. The Fund's distribution rate is computed by dividing the most
recent monthly distribution per share annualized, by the current net asset value
per share. The Fund's effective distribution rate is computed by dividing the
distribution rate by the ratio (the days in a year divided by the accrual days
of the monthly period) used to annualize the most recent monthly distribution
and reinvesting the resulting amount for a full year on the basis of such ratio.
The effective distribution rate will be higher than the distribution rate
because of the compounding effect of the assumed reinvestment. Investor's should
note that the Fund's yield is calculated using a standardized formula, the
income component of which is computed from the yields to maturity of all debt
obligations held by the Portfolio based on prescribed methods (with all
purchases and sales of securities during such period included in the income
calculation on a settlement date basis), whereas the distribution rate is based
on the Fund's last monthly distribution which tends to be relatively stable and
may be more or less than the amount of net investment income and short-term
capital gain actually earned by the Fund during the month. See "Distribution and
Taxes" in the Fund's current Prospectus. For the Fund's distribution rate and
effective distribution rate, see "Performance Information" in the Fund's Part II
of this Statement of Additional Information.
The Fund's total return may be compared to the Consumer Price Index and to
the domestic securities indices of the Bond Buyer 25 Revenue Bond Index and the
Lehman Brothers Municipal Bond Index. The Fund's total return and comparisons
with these indices may be used in advertisements and in information furnished to
present or prospective shareholders. The Fund's performance may differ from that
of other investors in the Portfolio, including other investment companies.
From time to time, evaluations of the Fund's performance made by independent
sources, e.g., Lipper Analytical Services, Inc., CDA/Wiesenberger and
Morningstar, Inc., may be used in advertisements and in information
furnished to present or prospective shareholders.
From time to time, information, charts and illustrations relating to
inflation and the effects of inflation on the dollar may be included in
advertisements and other material furnished to present and prospective
shareholders. For example, after 10 years, the purchasing power of $25,000 would
shrink to $16,621, $14,968, $13,465 and $12,100, if the annual rates of
inflation during such period were 4%, 5%, 6% and 7%, respectively. (To calculate
the purchasing power, the value at the end of each year is reduced by the above
inflation rates for 10 consecutive years.)
From time to time, information about portfolio allocation and holdings of
the Portfolio at a particular date (including ratings assigned by independent
ratings services such as Moody's, S&P and Fitch) may be included in
advertisements and other material furnished to present and prospective
shareholders. Such information may be stated as a percentage of the Portfolio's
bond holdings on such date. For an example of the Portfolio's diversification by
quality ratings, see "Performance Information" in the Fund's Part II of this
Statement of Additional Information.
Comparative information about the yield or distribution rate of the Fund and
about average rates of return on certificates of deposit, bank money market
deposit accounts, money market mutual funds and other short-term investments may
also be included in advertisements, supplemental sales literature or
communications of the Fund. A bank certificate of deposit, unlike the Fund's
shares, pays a fixed rate of interest and entitles the depositor to receive the
face amount of the certificate of deposit at maturity. A bank money market
deposit account is a form of savings account which pays a variable rate of
interest. Unlike the Fund's shares, bank certificates of deposit and bank money
market deposit accounts are insured by the Federal Deposit Insurance
Corporation. A money market mutual fund is designed to maintain a constant value
of $1.00 per share and, thus, a money market fund's shares are subject to less
price fluctuation than the Fund's shares.
The average rates of return of money market mutual funds, certificates of
deposit and bank money market deposit accounts referred to in advertisements,
supplemental sales literature or communications of the Fund will be based on
rates published by the Federal Reserve Bank, Donoghues Money Fund Averages,
RateGram or The Wall Street Journal.
Advertisements and other material furnished to present and prospective
shareholders may also compare the taxable equivalent yield of the Fund to
after-tax yields of certificates of deposits, bank money market deposit accounts
and money market mutual funds over various income tax brackets.
Information used in advertisements and in materials furnished to present and
prospective shareholders may include statements or illustrations relating to the
appropriateness of types of securities and/or mutual funds which may be employed
to meet specific financial goals, such as (1) funding retirement, (2) paying for
children's education, and (3) financially supporting aging parents. These three
financial goals may be referred to in such advertisements or materials as the
"Triple Squeeze."
For additional information, charts and illustrations relating to the Fund's
investment performance, see "Performance Information" in the Fund's Part II of
this Statement of Additional Information.
TAXES
See "Distribution and Taxes" in the Fund's current Prospectus and
"Additional Tax Matters" in the Fund's Part II of this Statement of Additional
Information.
Each series of the Trust is treated as a separate entity for Federal income
tax purposes. The Fund has elected or will elect to be treated and intends to
qualify each year, as a regulated investment company ("RIC") under the Internal
Revenue Code of 1986, as amended (the "Code"). See "Additional Tax Matters" and
Notes to the Financial Statements in the Fund's Part II of this Statement of
Additional Information. Accordingly, the Fund intends to satisfy certain
requirements relating to sources of its income and diversification of its assets
and to distribute its net investment income (including tax-exempt income) and
net realized capital gains (after reduction by any available capital loss
carryforwards) in accordance with the timing requirements imposed by the Code,
so as to avoid any Federal income or excise tax on the Fund. Because the Fund
invests its assets in the Portfolio, the Portfolio normally must satisfy the
applicable source of income and diversification requirements in order for the
Fund to satisfy them. The Portfolio will allocate at least annually among its
investors, including the Fund, the Portfolio's net taxable (if any) and
tax-exempt investment income, net realized capital gains, and any other items of
income, gain, loss, deduction or credit. For purposes of applying the
requirements of the Code regarding qualification as a RIC, the Fund will be
deemed (i) to own its proportionate share of each of the assets of the Portfolio
and (ii) to be entitled to the gross income of the Portfolio attributable to
such share.
In order to avoid Federal excise tax, the Code requires that the Fund
distribute (or be deemed to have distributed) by December 31 of each calendar
year at least 98% of its ordinary income (not including tax-exempt income) for
such year, at least 98% of the excess of its realized capital gains over its
realized capital losses, generally computed on the basis of the one-year period
ending on October 31 of such year, after reduction by any available capital loss
carryforwards, and 100% of any income from the prior year (as previously
computed) that was not paid out during such year and on which the Fund paid no
Federal income tax. Under current law, provided that the Fund qualifies as a RIC
for Federal income tax purposes and the Portfolio is treated as a partnership
for Massachusetts and Federal tax purposes, neither the Fund nor the Portfolio
is liable for any income, corporate excise or franchise tax in the Commonwealth
of Massachusetts.
The Portfolio's investment in zero coupon and certain other securities will
cause it to realize income prior to the receipt of cash payments with respect to
these securities. Such income will be allocated daily to interests in the
Portfolio and, in order to enable the Fund to distribute its proportionate share
of this income and avoid a tax payable by the Fund, the Portfolio may be
required to liquidate portfolio securities that it might otherwise have
continued to hold in order to generate cash that the Fund may withdraw from the
Portfolio for subsequent distribution to Fund shareholders.
Investments in lower-rated or unrated securities may present special tax
issues for the Portfolio and hence for the Fund to the extent actual or
anticipated defaults may be more likely with respect to such securities. Tax
rules are not entirely clear about issues such as when the Portfolio may cease
to accrue interest, original issue discount, or market discount; when and to
what extent deductions may be taken for bad debts or worthless securities; how
payments received on obligations in default should be allocated between
principal and income; and whether exchanges of debt obligations in a workout
context are taxable.
Distributions by the Fund of net tax-exempt interest income that are
properly designated as "exempt-interest dividends" may be treated by
shareholders as interest excludable from gross income under Section 103(a) of
the Code. In order for the Fund to be entitled to pay the tax-exempt interest
income allocated to it by the Portfolio as exempt-interest dividends to its
shareholders, the Fund must and intends to satisfy certain requirements,
including the requirement that, at the close of each quarter of its taxable
year, at least 50% of the value of its total assets consists of obligations the
interest on which is exempt from regular Federal income tax. For purposes of
applying this 50% requirement, the Fund will be deemed to own its proportionate
share of each of the assets of the Portfolio, and the Portfolio currently
intends to invest its assets in a manner such that the Fund can meet this 50%
requirement. Interest on certain municipal obligations is treated as a tax
preference item for purposes of the Federal alternative minimum tax.
Shareholders of the Fund are required to report tax-exempt interest on their
Federal income tax returns.
From time to time proposals have been introduced before Congress for the
purpose of restricting or eliminating the Federal income tax exemption for
interest on certain types of municipal obligations, and it can be expected that
similar proposals may be introduced in the future. Under Federal tax legislation
enacted in 1986, the Federal income tax exemption for interest on certain
municipal obligations was eliminated or restricted. As a result of such
legislation, the availability of municipal obligations for investment by the
Portfolio and the value of the securities held by the Portfolio may be affected.
In the course of managing its investments, the Portfolio may realize some
short-term and long-term capital gains (and/or losses) as a result of market
transactions, including sales of portfolio securities and rights to when- issued
securities and options and futures transactions. The Portfolio may also realize
taxable income from certain short-term taxable obligations, securities loans, a
portion of original issue discount with respect to certain stripped municipal
obligations or their stripped coupons, and certain realized accrued market
discount. Any distributions by the Fund of its share of such capital gains
(after reduction by any capital loss carryforwards) would be taxable to
shareholders of the Fund. However, it is expected that such amounts, if any,
would normally be insubstantial in relation to the tax exempt interest earned by
the Portfolio and allocated to the Fund. Certain distributions of the Fund
declared in October, November or December and paid the following January will be
taxed to shareholders as if received on December 31 of the year in which they
are declared.
The Portfolio's transactions in options and futures contracts will be
subject to special tax rules that may affect the amount, timing and character of
Fund distributions to shareholders. For example, certain positions held by the
Portfolio on the last business day of each taxable year will be marked to market
(i.e., treated as if closed out on such day), and any resulting gain or loss
will generally be treated as 60% long-term and 40% short-term capital gain or
loss. Certain positions held by the Portfolio that substantially diminish the
Portfolio's risk of loss with respect to other positions in its portfolio may
constitute "straddles," which are subject to tax rules that may cause deferral
of Portfolio losses, adjustments in the holding period of Portfolio securities
and conversion of short-term into long-term capital losses. The Portfolio may
have to limit its activities in options and futures contracts in order to enable
the Fund to maintain its qualification as a RIC for Federal income tax purposes.
Any loss realized upon the sale or exchange of shares of the Fund with a tax
holding period of 6 months or less will be treated as a long-term capital loss
to the extent of any distribution of net long-term capital gains with respect to
such shares. Any loss realized on the sale or exchange of shares which have been
held for tax purposes for 6 months or less (or such shorter period as may be
prescribed by Treasury regulations) will be disallowed to the extent the
shareholder has received tax-exempt interest with respect to such shares. In
addition, a loss realized on a redemption of Fund shares will be disallowed to
the extent the shareholder acquired other Fund shares within the period
beginning 30 days before the redemption of the loss shares and ending 30 days
after such date.
Amounts paid by the Fund to individuals and certain other shareholders who
have not provided the Fund with their correct taxpayer identification number and
certain required certifications, as well as shareholders with respect to whom
the Fund has received notification from the Internal Revenue Service or a
broker, may be subject to "backup" withholding of Federal income tax from the
Fund's dividends and distributions and the proceeds of redemptions (including
repurchases and exchanges), at a rate of 31%. An individual's taxpayer
identification number is generally his or her social security number.
Non-resident alien individuals and certain foreign corporations and other
foreign entities generally will be subject to a U.S. withholding tax at a rate
of 30% on the Fund's distributions from its ordinary income and the excess of
its net short-term capital gain over its net long-term capital loss, unless the
tax is reduced or eliminated by an applicable tax treaty. Distributions from the
excess of the Fund's net long-term capital gain over its net short-term capital
loss received by such shareholders and any gain from the sale or other
disposition of shares of the Fund generally will not be subject to U.S. Federal
income taxation, provided that non-resident alien status has been certified by
the shareholder. Different U.S. tax consequences may result if the shareholder
is engaged in a trade or business in the United States, is present in the United
States for a sufficient period of time during a taxable year to be treated as a
U.S. resident, or fails to provide any required certifications regarding status
as a non-resident alien investor. Foreign shareholders should consult their tax
advisers regarding the U.S. and foreign tax consequences of an investment in the
Fund.
The foregoing discussion does not address the special tax rules applicable
to certain classes of investors, such as tax-exempt entities, insurance
companies and financial institutions. Shareholders should consult their own tax
advisers with respect to special tax rules that may apply in their particular
situations, as well as the state, local or foreign tax consequences of investing
in the Fund.
PORTFOLIO SECURITY TRANSACTIONS
Decisions concerning the execution of portfolio security transactions,
including the selection of the market and the executing firm, are made by BMR.
BMR is also responsible for the execution of transactions for all other accounts
managed by it.
BMR places the portfolio security transactions of the Portfolio and of all
other accounts managed by it for execution with many firms. BMR uses its best
efforts to obtain execution of portfolio security transactions at prices which
are advantageous to the Portfolio and at reasonably competitive spreads or (when
a disclosed commission is being charged) at reasonably competitive commission
rates. In seeking such execution, BMR will use its best judgment in evaluating
the terms of a transaction, and will give consideration to various relevant
factors, including without limitation the size and type of the transaction, the
nature and character of the market for the security, the confidentiality, speed
and certainty of effective execution required for the transaction, the general
execution and operational capabilities of the executing firm, the reputation,
reliability, experience and financial condition of the firm, the value and
quality of the services rendered by the firm in this and other transactions, and
the reasonableness of the spread or commission, if any. Municipal obligations,
including State obligations, purchased and sold by the Portfolio are generally
traded in the over-the-counter market on a net basis (i.e., without commission)
through broker-dealers and banks acting for their own account rather than as
brokers, or otherwise involve transactions directly with the issuer of such
obligations. Such firms attempt to profit from such transactions by buying at
the bid price and selling at the higher asked price of the market for such
obligations, and the difference between the bid and asked price is customarily
referred to as the spread. The Portfolio may also purchase municipal obligations
from underwriters, the cost of which may include undisclosed fees and
concessions to the underwriters. While it is anticipated that the Portfolio will
not pay significant brokerage commissions in connection with such portfolio
security transactions, on occasion it may be necessary or appropriate to
purchase or sell a security through a broker on an agency basis, in which case
the Portfolio will incur a brokerage commission. Although spreads or commissions
on portfolio security transactions will, in the judgment of BMR, be reasonable
in relation to the value of the services provided, spreads or commissions
exceeding those which another firm might charge may be paid to firms who were
selected to execute transactions on behalf of the Portfolio and BMR's other
clients for providing brokerage and research services to BMR.
As authorized in Section 28(e) of the Securities Exchange Act of 1934, a
broker or dealer who executes a portfolio transaction on behalf of the Portfolio
may receive a commission which is in excess of the amount of commission another
broker or dealer would have charged for effecting that transaction if BMR
determines in good faith that such commission was reasonable in relation to the
value of the brokerage and research services provided. This determination may be
made on the basis of either that particular transaction or on the basis of
overall responsibilities which BMR and its affiliates have for accounts over
which they exercise investment discretion. In making any such determination, BMR
will not attempt to place a specific dollar value on the brokerage and research
services provided or to determine what portion of the commission should be
related to such services. Brokerage and research services may include advice as
to the value of securities, the advisability of investing in, purchasing, or
selling securities, and the availability of securities or purchasers or sellers
of securities; furnishing analyses and reports concerning issuers, industries,
securities, economic factors and trends, portfolio strategy and the performance
of accounts; effecting securities transactions and performing functions
incidental thereto (such as clearance and settlement); and the "Research
Services" referred to in the next paragraph.
It is a common practice of the investment advisory industry and of the
advisers of investment companies, institutions and other investors to receive
research, statistical and quotation services, data, information and other
services, products and materials which assist such advisers in the performance
of their investment responsibilities ("Research Services") from broker-dealer
firms which execute portfolio transactions for the clients of such advisers and
from third parties with which such broker-dealers have arrangements. Consistent
with this practice, BMR receives Research Services from many broker-dealer firms
with which BMR places the Portfolio transactions and from third parties with
which these broker-dealers have arrangements. These Research Services include
such matters as general economic and market reviews, industry and company
reviews, evaluations of securities and portfolio strategies and transactions and
recommendations as to the purchase and sale of securities and other portfolio
transactions, financial, industry and trade publications, news and information
services, pricing and quotation equipment and services, and research oriented
computer hardware, software, data bases and services. Any particular Research
Service obtained through a broker-dealer may be used by BMR in connection with
client accounts other than those accounts which pay commissions to such
broker-dealer. Any such Research Service may be broadly useful and of value to
BMR in rendering investment advisory services to all or a significant portion of
its clients, or may be relevant and useful for the management of only one
client's account or of a few clients' accounts, or may be useful for the
management of merely a segment of certain clients' accounts, regardless of
whether any such account or accounts paid commissions to the broker-dealer
through which such Research Service was obtained. The advisory fee paid by the
Portfolio is not reduced because BMR receives such Research Services. BMR
evaluates the nature and quality of the various Research Services obtained
through broker-dealer firms and attempts to allocate sufficient commissions to
such firms to ensure the continued receipt of Research Services which BMR
believes are useful or of value to it in rendering investment advisory services
to its clients.
Subject to the requirement that BMR shall use its best efforts to seek and
execute portfolio security transactions at advantageous prices and at reasonably
competitive spreads or commission rates, BMR is authorized to consider as a
factor in the selection of any firm with whom portfolio orders may be placed the
fact that such firm has sold or is selling shares of the Fund or of other
investment companies sponsored by BMR or Eaton Vance. This policy is not
inconsistent with a rule of the National Association of Securities Dealers,
Inc., which rule provides that no firm which is a member of the Association
shall favor or disfavor the distribution of shares of any particular investment
company or group of investment companies on the basis of brokerage commissions
received or expected by such firm from any source.
Municipal obligations considered as investments for the Portfolio may also
be appropriate for other investment accounts managed by BMR or its affiliates.
BMR will attempt to allocate equitably portfolio security transactions among the
Portfolio and the portfolios of its other investment accounts purchasing
municipal obligations whenever decisions are made to purchase or sell securities
by the Portfolio and one or more of such other accounts simultaneously. In
making such allocations, the main factors to be considered are the respective
investment objectives of the Portfolio and such other accounts, the relative
size of portfolio holdings of the same or comparable securities, the
availability of cash for investment by the Portfolio and such accounts, the size
of investment commitments generally held by the Portfolio and such accounts and
the opinions of the persons responsible for recommending investments to the
Portfolio and such accounts. While this procedure could have a detrimental
effect on the price or amount of the securities available to the Portfolio from
time to time, it is the opinion of the Trustees of the Trust and the Portfolio
that the benefits available from the BMR organization outweigh any disadvantage
that may arise from exposure to simultaneous transactions. For the brokerage
commissions paid by the Portfolio on portfolio transactions, see "Fees and
Expenses" in the Fund's Part II of this Statement of Additional Information.
OTHER INFORMATION
Eaton Vance, pursuant to its agreement with the Trust, controls the use of
the words "Eaton Vance" in the Fund's name and may use the words "Eaton Vance"
in other connections and for other purposes.
As permitted by Massachusetts law, there will normally be no meetings of
shareholders for the purpose of electing Trustees unless and until such time as
less than a majority of the Trustees of the Trust holding office have been
elected by shareholders. In such an event the Trustees then in office will call
a shareholders' meeting for the election of Trustees. Except for the foregoing
circumstances and unless removed by action of the shareholders in accordance
with the Trust's by-laws, the Trustees shall continue to hold office and may
appoint successor Trustees.
The Trust's by-laws provide that no person shall serve as a Trustee if
shareholders holding two-thirds of the outstanding shares have removed him from
that office either by a written declaration filed with the Trust's custodian or
by votes cast at a meeting called for that purpose. The by-laws further provide
that under certain circumstances the shareholders may call a meeting to remove a
Trustee and that the Trust is required to provide assistance in communication
with shareholders about such a meeting.
The Trust's Declaration of Trust may be amended by the Trustees when
authorized by vote of a majority of the outstanding voting securities of the
Trust, the financial interests of which are affected by the amendment. The
Trustees may also amend the Declaration of Trust without the vote or consent of
shareholders to change the name of the Trust or any series or to make such other
changes as do not have a materially adverse effect on the financial interests of
shareholders or if they deem it necessary to conform it to applicable Federal or
state laws or regulations. The Trust or any series or class thereof may be
terminated by: (1) the affirmative vote of the holders of not less than
two-thirds of the shares outstanding and entitled to vote at any meeting of
shareholders of the Trust or the appropriate series or class thereof, or by an
instrument or instruments in writing without a meeting, consented to by the
holders of two-thirds of the shares of the Trust or a series or class thereof,
provided, however, that, if such termination is recommended by the Trustees, the
vote of a majority of the outstanding voting securities of the Trust or a series
or class thereof entitled to vote thereon shall be sufficient authorization; or
(2) by means of an instrument in writing signed by a majority of the Trustees,
to be followed by a written notice to shareholders stating that a majority of
the Trustees has determined that the continuation of the Trust or a series or a
class thereof is not in the best interest of the Trust, such series or class or
of their respective shareholders.
The Declaration of Trust further provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law; but nothing in the
Declaration of Trust protects a Trustee against any liability to which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
office. In addition, the By-Laws of the Trust provide that no natural person
shall serve as a Trustee of the Trust after the holders of record of not less
than two-thirds of the outstanding shares have declared that he be removed from
office either by declaration in writing filed with the custodian of the assets
of the Trust or by votes cast in person or by proxy at a meeting called for the
purpose. The By-Laws also provide that the Trustees shall promptly call a
meeting of shareholders for the purpose of voting upon a question of removal of
a Trustee when requested so to do by the record holders of not less than 10 per
centum of the outstanding shares.
In accordance with the Declaration of Trust of the Portfolio, there will
normally be no meetings of the investors for the purpose of electing Trustees
unless and until such time as less than a majority of the Trustees holding
office have been elected by investors. In such an event the Trustees of the
Portfolio then in office will call an investors' meeting for the election of
Trustees. Except for the foregoing circumstances and unless removed by action of
the investors in accordance with the Portfolio's Declaration of Trust, the
Trustees shall continue to hold office and may appoint successor Trustees.
The Declaration of Trust of the Portfolio provides that no person shall
serve as a Trustee if investors holding two-thirds of the outstanding interest
have removed him from that office either by a written declaration filed with the
Portfolio's custodian or by votes cast at a meeting called for that purpose. The
Declaration of Trust further provides that under certain circumstances the
investors may call a meeting to remove a Trustee and that the Portfolio is
required to provide assistance in communicating with investors about such a
meeting.
The right to redeem shares of the Fund can be suspended and the payment of
the redemption price deferred when the Exchange is closed (other than for
customary weekend and holiday closings), during periods when trading on the
Exchange is restricted as determined by the Commission, or during any emergency
as determined by the Commission which makes it impracticable for the Portfolio
to dispose of its securities or value its assets, or during any other period
permitted by order of the Commission for the protection of investors.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Deloitte & Touche LLP, 125 Summer Street, Boston, Massachusetts, are the
independent certified public accountants of the Fund and the Portfolio,
providing audit services, tax return preparation, and assistance and
consultation with respect to the preparation of filings with the Commission.
For the financial statements of the Fund and its corresponding Portfolio,
see "Financial Statements" in Part II of this Statement of Additional
Information.
<PAGE>
APPENDIX
DESCRIPTION OF SECURITIES RATINGS+
MOODY'S INVESTORS SERVICE, INC.
MUNICIPAL BONDS
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long term risk appear somewhat larger than the Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa: Bonds which are rated Baa are considered as medium-grade obligations (i.e.,
they are neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during other good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
CAA: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca: Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
ABSENCE OF RATING: Where no rating has been assigned or where a rating has been
suspended or withdrawn, it may be for reasons unrelated to the quality of the
issue.
Should no rating be assigned, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities or companies that
are not rated as a matter of policy.
3. There is a lack of essential data pertaining to the issue or issuer.
4. The issue was privately placed, in which case the rating is not
published in Moody's publications.
Suspension or withdrawal may occur if new and material circumstances arise, the
effects of which preclude satisfactory analysis; if there is no longer available
reasonable up-to-date data to permit a judgment to be formed; if a bond is
called for redemption; or for other reasons.
NOTE: Moody's applies numerical modifiers, 1, 2, and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
MUNICIPAL SHORT-TERM OBLIGATIONS
RATINGS: Moody's ratings for state and municipal short-term obligations will be
designated Moody's Investment Grade or (MIG). Such rating recognizes the
differences between short term credit risk and long term risk. Factors effecting
the liquidity of the borrower and short term cyclical elements are critical in
short term ratings, while other factors of major importance in bond risk, long
term secular trends for example, may be less important over the short run.
A short term rating may also be assigned on an issue having a demand feature,
variable rate demand obligation (VRDO). Such ratings will be designated as
VMIG1, SG or if the demand feature is not rated, NR. A short term rating on
issues with demand features are differentiated by the use of the VMIG1 symbol to
reflect such characteristics as payment upon periodic demand rather than fixed
maturity dates and payment relying on external liquidity. Additionally,
investors should be alert to the fact that the source of payment may be limited
to the external liquidity with no or limited legal recourse to the issuer in the
event the demand is not met.
COMMERCIAL PAPER
Moody's commercial paper ratings are opinions of the ability of issuers to repay
punctually promissory obligations not having an original maturity in excess of
365 days.
Issuers (or supporting institutions) rated PRIME-1 (P-1) have a
superior ability for repayment of senior short-term debt obligations. Prime-1 or
P-1 repayment ability will often be evidenced by many of the following
characteristics:
-- Leading market positions in well established industries.
-- High rates of return on funds employed.
-- Conservative capitalization structure with moderate reliance on debt
and ample asset protection.
-- Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
-- Well-established access to a range of financial markets and assured
sources of alternate liquidity.
PRIME-2
Issuers (or supporting institutions) rated PRIME-2 (P-2) have a strong ability
for repayment of senior short-term debt obligations. This will normally be
evidenced by many of the characteristics cited above, but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
PRIME-3
Issuers (or supporting institutions) rated PRIME-3 (P-3) have an acceptable
ability for repayment of senior short-term obligations. The effect of industry
characteristics and market compositions may be more pronounced. Variability in
earnings and profitability may result in changes in the level of debt protection
measurements and may require relatively high financial leverage.
Adequate alternate liquidity is maintained.
STANDARD & POOR'S RATINGS GROUP
INVESTMENT GRADE
AAA: Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the highest rated issues only in small degree.
A: Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB: Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibit adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay interest and repay principal for debt in this
category than in higher rated categories.
SPECULATIVE GRADE
Debt rated BB, B, CCC, CC, and C is regarded as having predominantly speculative
characteristics with respect to capacity to pay interest and repay principal. BB
indicates the least degree of speculation and C the highest. While such debt
will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major exposures to adverse conditions.
BB: Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB- rating.
B: Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB or BB-
rating.
CCC: Debt rated CCC has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The CCC rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
B or B- rating.
CC: The rating CC is typically applied to debt subordinated to senior debt which
is assigned an actual or implied CCC debt rating.
C: The rating C is typically applied to debt subordinated to senior debt which
is assigned an actual or implied CCC- debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed, but debt service
payments are continued.
C1: The Rating C1 is reserved for income bonds on which no interest is being
paid.
D: Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The D rating also will be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.
PLUS (+) OR MINUS (-): The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
p: The letter "p" indicates that the rating is provisional. A provisional rating
assumes the successful completion of the project being financed by the debt
being rated and indicates that payment of debt service requirements is largely
or entirely dependent upon the successful and timely completion of the project.
This rating, however, while addressing credit quality subsequent to completion
of the project, makes no comment on the likelihood of, or the risk of default
upon failure of such completion. The investor should exercise his own judgment
with respect to such likelihood and risk.
L: The letter "L" indicates that the rating pertains to the principal amount of
those bonds to the extent that the underlying deposit collateral is insured by
the Federal Deposit Insurance Corp. and interest is adequately collateralized.
In the case of certificates of deposit, the letter "L" indicates that the
deposit, combined with other deposits being held in the same right and capacity,
will be honored for principal and accrued pre-default interest up to the federal
insurance limits within 30 days after closing of the insured institution or, in
the event that the deposit is assumed by a successor insured institution, upon
maturity.
NR: NR indicates no rating has been requested, that there is insufficient
information on which to base a rating, or that S&P does not rate a particular
type of obligation as a matter of policy.
MUNICIPAL NOTES
S&P note ratings reflect the liquidity concerns and market access risks unique
to notes. Notes due in 3 years or less will likely receive a note rating. Notes
maturing beyond 3 years will most likely receive a long-term debt rating. The
following criteria will be used in making that assessment:
-- Amortization schedule (the larger the final maturity relative to other
maturities the more likely it will be treated as a note).
-- Sources of payment (the more dependent the issue is on the market for its
refinancing, the more likely it will be treated as a note).
Note rating symbols are as follows:
SP-1: Strong capacity to pay principal and interest. Those issues
determined to possess very strong characteristics will be given a plus(+)
designation.
SP-2: Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse financial and economic changes over the term of
the notes.
SP-3: Speculative capacity to pay principal and interest.
COMMERCIAL PAPER
S&P's commercial paper ratings are a current assessments of the likelihood of
timely payment of debts considered short-term in the relevant market.
A: Issues assigned this highest rating are regarded as having the greatest
capacity for timely payment. Issues in this category are delineated with
the numbers 1, 2 and 3 to indicate the relative degree of safety.
A-1: This designation indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus (+) sign designation.
A-2: Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1".
A-3: Issues carrying this designation have adequate capacity for timely
payment. They are, however, more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher designations.
B: Issues rated "B" are regarded as having only speculative capacity for
timely payment.
C: This rating is assigned to short term debt obligations with doubtful
capacity for payment.
D: Debt rated "D" is in payment default. The "D" rating category is used
when interest payments or principal payments are not made on the date due,
even if the applicable grace period had not expired, unless S&P believes
that such payments will be made during such grace period.
FITCH INVESTORS SERVICE, INC.
INVESTMENT GRADE BOND RATINGS
AAA: Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA: Bonds considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated "AAA". Because bonds rated in the "AAA" and
"AA" categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated "F- 1+".
A: Bonds considered to be investment grade and of high credit quality. The
obligors ability to pay interest and repay principal is considered to be strong,
but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB: Bonds considered to be investment grade and of satisfactory credit quality.
The obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however, are
more likely to have adverse impact on these bonds, and therefore, impair timely
payment. The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.
HIGH YIELD BOND RATINGS
BB: Bonds are considered speculative. The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified that could assist the
obligor in satisfying its debt service requirements.
B: Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue.
CCC: Bonds have certain identifiable characteristics which, if not remedied, may
lead to default. The ability to meet obligations requires an advantageous
business and economic environment.
CC: Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C: Bonds are in imminent default in payment of interest or principal.
DDD, DD, AND D: Bonds are in default on interest and/or principal payments. Such
bonds are extremely speculative and should be valued on the basis of their
ultimate recovery value in liquidation or reorganization of the obligor. "DDD"
represents the highest potential for recovery on these bonds, and "D" represents
the lowest potential for recovery.
PLUS (+) OR MINUS (-): The ratings from AA to C may be modified by the addition
of a plus or minus sign to indicate the relative position of a credit within the
rating category.
NR: Indicates that Fitch does not rate the specific issue. CONDITIONAL: A
conditional rating is premised on the successful completion of a project or the
occurrence of a specific event.
INVESTMENT GRADE SHORT-TERM RATINGS
Fitch's short-term ratings apply to debt obligations that are payable on demand
or have original maturities of generally up to three years, including commercial
paper, certificates of deposit, medium-term notes, and municipal and investment
notes.
F-1+: Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1: Very Stong Credit Quality. Issues assigned this rating reflect an assurance
of timely payment only slightly less in degree than issues rated "F- 1+".
F-2: Good Credit Quality. Issues carrying this rating have a satisfactory degree
of assurance for timely payment, but the margin of safety is not as great as the
"F-1+" and "F-1" categories.
F-3: Fair Credit Quality. Issues carrying this rating have characteristics
suggesting that the degree of assurance for timely payment is adequate, however,
near-term adverse change could cause these securities to be rated below
investment grade.
* * * * * * * *
NOTES: Bonds which are unrated expose the investor to risks with respect to
capacity to pay interest or repay principal which are similar to the risks of
lower-rated speculative bonds. The Portfolio is dependent on the Investment
Adviser's judgment, analysis and experience in the evaluation of such bonds.
Investors should note that the assignment of a rating to a bond by a
rating service may not reflect the effect of recent developments on the issuer's
ability to make interest and principal payments.
- -------------------------------------------------------------------------------
+ The ratings indicated herein are believed to be the most recent ratings
available at the date of this Statement of Additional Information for the
securities listed. Ratings are generally given to securities at the time of
issuance. While the rating agencies may from time to time revise such
ratings, they undertake no obligation to do so, and the ratings indicated
do not necessarily represent ratings which would be given to these
securities on the date of the Portfolio's fiscal year end.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EV MARATHON HIGH YIELD MUNICIPALS
FUND. On May 15, 1995, the Fund became a series of the Trust. THE FUND'S
INVESTMENT OBJECTIVE IS TO PROVIDE HIGH CURRENT INCOME EXEMPT FROM REGULAR
FEDERAL INCOME TAX. The Fund currently seeks to meet its investment objective by
investing its assets in High Yield Municipals Portfolio, a separate registered
investment company which invests primarily in below investment grade municipal
obligations. The Fund may not be appropriate for investors who cannot assume the
greater risk of capital depreciation or loss inherent in seeking higher
tax-exempt yields.
FEES AND EXPENSES
INVESTMENT ADVISER
The Portfolio's Investment Advisory Agreement with BMR is dated , 1995 and
remains in effect until February 28, 1996. The Agreement may be continued as
described under "Investment Adviser and Administrator" in Part I of this
Statement of Additional Information. No fees have been paid to the Investment
Adviser to date.
ADMINISTRATOR
As stated in Part I of this Statement of Additional Information, the
Administrator receives no compensation for providing administrative services to
the Fund.
DISTRIBUTION PLAN
No fees paid to date.
PRINCIPAL UNDERWRITER
No fees paid to date.
BROKERAGE
No fees paid to date.
CUSTODIAN
No fees paid to date.
<TABLE>
<CAPTION>
TRUSTEES
The fees and expenses of those Trustees of the Trust and of the Portfolio who are not members of the Eaton Vance organization
(the noninterested Trustees) are paid by the Fund (and the other series of the Trust) and the Portfolio, respectively. (The
Trustees of the Trust and the Portfolio who are members of the Eaton Vance organization receive no compensation from the Fund or
the Portfolio.) For the fiscal year ended January 31, 1996, it is estimated the noninterested Trustees of the Trust and the
Portfolio will receive the following compensation in their capacities as Trustees of the Trust and the Portfolio and, during the
first quarter ended March 31, 1995, earned the following compensation in their capacities as Trustees of the other funds in the
Eaton Vance fund complex<F1>:
AGGREGATE AGGREGATE RETIREMENT TOTAL COMPENSATION
COMPENSATION COMPENSATION BENEFIT ACCRUED FROM TRUST AND
NAME FROM FUND FROM PORTFOLIO FROM FUND COMPLEX FUND COMPLEX
---- ------------ -------------- ----------------- ------------------
<S> <C> <C> <C> <C>
Donald R. Dwight $25 $250<F2> $ 8,750 $33,750
Samuel L. Hayes, III 25 250<F3> 24,885 41,250
Norton H. Reamer 25 250 --0-- 33,750
John L. Thorndike 25 250 --0-- 35,000
Jack L. Treynor 25 250 --0-- 35,000
<FN>
<F1> The Eaton Vance fund complex consists of 201 registered investment companies or series thereof.
<F2> Includes $3 of deferred compensation.
<F3> Includes $3 of deferred compensation.
</TABLE>
ADDITIONAL OFFICER INFORMATION
The Portfolio has the following officer not listed under "Officers of the
Trust and the Portfolio" in the Fund's Part I of this Statement of Additional
Information. THOMAS M. METZOLD ( ), Vice President of the Portfolio, Vice
President of BMR, Eaton Vance and EV.
PRINCIPAL UNDERWRITER
Under the Distribution Agreement the Principal Underwriter acts as principal
in selling shares of the Fund. The expenses of printing copies of prospectuses
used to offer shares to financial service firms or investors and other selling
literature and of advertising is borne by the Principal Underwriter. The fees
and expenses of qualifying and registering and maintaining qualifications and
registrations of the Fund and its shares under Federal and state securities laws
is borne by the Fund. In addition, the Fund makes payments to the Principal
Underwriter pursuant to its Distribution Plan as described in the Fund's current
Prospectus; the provisions of the Fund's Distribution Plan relating to such
payments are included in the Distribution Agreement. The Distribution Agreement
is renewable annually by the Trust's Board of Trustees (including a majority of
its Trustees who are not interested persons of the Trust and who have no direct
or indirect financial interest in the operation of the Fund's Distribution Plan
or the Distribution Agreement), may be terminated on sixty days' notice either
by such Trustees or by vote of a majority of the outstanding voting securities
of the Fund or on six months' notice by the Principal Underwriter and is
automatically terminated upon assignment. The Principal Underwriter distributes
Fund shares on a "best efforts" basis under which it is required to take and pay
for only such shares as may be sold.
The Fund has authorized the Principal Underwriter to act as its agent in
repurchasing shares at the rate of $2.50 for each repurchase transaction handled
by the Principal Underwriter. The Principal Underwriter estimates that the
expenses incurred by it in acting as repurchase agent for the Fund will exceed
the amounts paid therefor by the Fund. For the amount paid by the Fund to the
Principal Underwriter for acting as repurchase agent, see "Fees and Expenses" in
this Part II.
DISTRIBUTION PLAN
The Distribution Plan ("the Plan") is described in the Prospectus and is
designed to meet the requirements of Rule 12b-1 under the 1940 Act and the sales
charge rule of the National Association of Securities Dealers, Inc. (the "NASD
Rule"). The purpose of the Plan is to compensate the Principal Underwriter for
its distribution services and facilities provided to the Fund by paying the
Principal Underwriter sales commissions and a separate distribution fee in
connection with sales of Fund shares. The following supplements the discussion
of the Plan contained in the Fund's Prospectus.
The amount payable by the Fund to the Principal Underwriter pursuant to the
Plan as sales commissions and distribution fees with respect to each day will be
accrued on such day as a liability of the Fund and will accordingly reduce the
Fund's net assets upon such accrual, all in accordance with generally accepted
accounting principles. The amount payable on each day is limited to 1/365 of
.75% of the Fund's net assets on such day. The level of the Fund's net assets
changes each day and depends upon the amount of sales and redemptions of Fund
shares, the changes in the value of the investments held by the Portfolio, the
expenses of the Fund and the Portfolio accrued and allocated to the Fund on such
day, income on portfolio investments of the Portfolio accrued and allocated to
the Fund on such day, and any dividends and distributions declared on Fund
shares. The Fund does not accrue possible future payments as a liability of the
Fund or reduce the Fund's current net assets in respect of unknown amounts which
may become payable under the Plan in the future because the standards for
accrual of a liability under such accounting principles have not been satisfied.
The Plan provides that the Fund will receive all contingent deferred sales
charges and will make no payments to the Principal Underwriter in respect of any
day on which there are no outstanding Uncovered Distribution Charges of the
Principal Underwriter. Contingent deferred sales charges and accrued amounts
will be paid by the Fund to the Principal Underwriter whenever there exist
Uncovered Distribution Charges under the Fund's Plan.
Periods with a high level of sales of Fund shares accompanied by a low level
of early redemptions of Fund shares resulting in the imposition of contingent
deferred sales charges will tend to increase the time during which there will
exist Uncovered Distribution Charges of the Principal Underwriter. Conversely,
periods with a low level of sales of Fund shares accompanied by a high level of
early redemptions of Fund shares resulting in the imposition of contingent
deferred sales charges will tend to reduce the time during which there will
exist Uncovered Distribution Charges of the Principal Underwriter.
In calculating daily the amount of Uncovered Distribution Charges,
distribution charges will include the aggregate amount of sales commissions and
distribution fees theretofore paid plus the aggregate amount of sales
commissions and distribution fees which the Principal Underwriter is entitled to
be paid under the Plan since its inception. Payments theretofore paid or payable
under the Plan by the Fund to the Principal Underwriter and contingent deferred
sales charges theretofore paid or payable to the Principal Underwriter will be
subtracted from such distribution charges; if the result of such subtraction is
positive, a distribution fee (computed at 1% over the prime rate then reported
in The Wall Street Journal) will be computed on such amount and added thereto,
with the resulting sum constituting the amount of outstanding Uncovered
Distribution Charges with respect to such day. The amount of outstanding
Uncovered Distribution Charges of the Principal Underwriter calculated on any
day does not constitute a liability recorded on the financial statements of the
Fund.
The amount of Uncovered Distribution Charges of the Principal Underwriter at
any particular time depends upon various changing factors, including the level
and timing of sales of Fund shares, the nature of such sales (i.e., whether they
result from exchange transactions, reinvestments or from cash sales through
Authorized Firms), the level and timing of redemptions of Fund shares upon which
a contingent deferred sales charge will be imposed, the level and timing of
redemptions of Fund shares upon which no contingent deferred sales charge will
be imposed (including redemptions involving exchanges of Fund shares for shares
of another fund in the Eaton Vance Marathon Group of Funds which result in a
reduction of uncovered distribution charges), changes in the level of the net
assets of the Fund, and changes in the interest rate used in the calculation of
the distribution fee under the Plan.
As currently implemented by the Trustees, the Plan authorizes payments of
sales commissions and distribution fees to the Principal Underwriter and service
fees to the Principal Underwriter and Authorized Firms which may be equivalent,
on an aggregate basis during any fiscal year of the Fund, to 1% of the Fund's
average daily net assets for such year. For the sales commissions and service
fee payments made by the Fund and the outstanding Uncovered Distribution Charges
of the Principal Underwriter, see "Fees and Expenses -- Distribution Plan" in
this Part II. The Fund believes that the combined rate of all these payments may
be higher than the rate of payments made under distribution plans adopted by
other investment companies pursuant to Rule 12b- 1. It is anticipated that the
Eaton Vance organization will profit by reason of the operation of the Plan
through an increase in the Fund's assets (thereby increasing the advisory fee
payable to BMR by the Portfolio) resulting from sale of Fund shares and through
the amounts paid to the Principal Underwriter, including contingent deferred
sales charges, pursuant to the Plan. The Eaton Vance organization may be
considered to have realized a profit under the Plan if at any point in time the
aggregate amounts theretofore received by the Principal Underwriter pursuant to
the Plan and from contingent deferred sales charges have exceeded the total
expenses theretofore incurred by such organization in distributing shares of the
Fund. Total expenses for this purpose will include an allocable portion of the
overhead costs of such organization and its branch offices, which costs will
include without limitation leasing expense, depreciation of building and
equipment, utilities, communication and postage expense, compensation and
benefits of personnel, travel and promotional expense, stationery and supplies,
literature and sales aids, interest expense, data processing fees, consulting
and temporary help costs, insurance, taxes other than income taxes, legal and
auditing expense and other miscellaneous overhead items. Overhead is calculated
and allocated for such purpose by the Eaton Vance organization in a manner
deemed equitable to the Fund.
The Plan continues in effect through and including April 28, 1996, and shall
continue in effect indefinitely thereafter for so long as such continuance is
approved at least annually by the vote of both a majority of (i) the Trustees of
the Trust who are not interested persons of the Trust and who have no direct or
indirect financial interest in the operation of the Plan or any agreements
related to the Plan (the "Rule 12b-1 Trustees") and (ii) all of the Trustees
then in office, and the Distribution Agreement contains a similar provision. The
provisions of the Plan relating to payments of sales commissions and
distribution fees to the Principal Underwriter are also included in the
Distribution Agreement between the Trust on behalf of the Fund and the Principal
Underwriter. Pursuant to Rule 12b-1, the Plan has been approved by the Fund's
initial sole shareholder (Eaton Vance) and by the Board of Trustees of the
Trust, including the Rule 12b-1 Trustees. The Plan and Distribution Agreement
may be terminated at any time by vote of a majority of the Rule 12b-1 Trustees
or by a vote of a majority of the outstanding voting securities of the Fund.
Under the Plan, the President or a Vice President of the Trust shall provide to
the Trustees for their review, and the Trustees shall review at least quarterly,
a written report of the amount expended under the Plan and the purposes for
which such expenditures were made. The Plan may not be amended to increase
materially the payments described therein without approval of the shareholders
of the Fund, and all material amendments of the Plan must also be approved by
the Trustees as required by Rule 12b-1. So long as the Plan is in effect, the
selection and nomination of Trustees who are not interested persons of the Trust
shall be committed to the discretion of the Trustees who are not such interested
persons.
The Trustees believe that the Plan will be a significant factor in the
expected growth of the Fund's assets, and will result in increased investment
flexibility and advantages which will benefit the Fund and its shareholders.
Payments for sales commissions and distribution fees made to the Principal
Underwriter under the Plan will compensate the Principal Underwriter for its
services and expenses in distributing shares of the Fund. Service fee payments
made to the Principal Underwriter and Authorized Firms under the Plan provide
incentives to provide continuing personal services to investors and the
maintenance of shareholder accounts. By providing incentives to the Principal
Underwriter and Authorized Firms, the Plan is expected to result in the
maintenance of, and possible future growth in, the assets of the Fund. Based on
the foregoing and other relevant factors, the Trustees have determined that in
their judgment there is a reasonable likelihood that the Plan will benefit the
Fund and its shareholders.
PERFORMANCE INFORMATION
The following table compares the taxable equivalent yield of an investment
in the Fund yielding a hypothetical 6.5% with the after-tax yield of a
certificate of deposit yielding 3.25%. The tax brackets used are the Federal
income tax brackets applicable for 1995: 15% for single filers with taxable
income up to $23,350 and joint filers up to $39,000; 28% for single filers with
taxable income from $23,351 to $56,550 and joint filers from $39,001 to $94,250,
31% for single filers with taxable income from $56,551 to $117,950 and joint
filers from $94,251 to $143,600, 36% for single filers with taxable income from
$117,951 to $256,500 and joint filers from $143,601 to $256,500 and 39.6% for
single and joint filers with taxable income over $256,500. These brackets do not
take into account the phaseout of personal exemptions and limitation on
deductibility of itemized deductions over certain ranges of income which
increase the effective top Federal tax rate for certain taxpayers. Investors
should consult with their tax advisers for more information.
<TABLE>
<CAPTION>
TAX BRACKET
15% 28% 31% 36% 39.6%
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Tax free yield ................................ 6.50% 6.50% 6.50% 6.50% 6.50%
Taxable equivalent ............................ 7.65 9.03 9.42 10.16 10.76
Certificates of deposit:
Yield ..................................... 3.25 3.25 3.25 3.25 3.25
After-tax yield ........................... 2.76 2.34 2.24 2.08 1.96
</TABLE>
Marathon High Yield Municipals
The Tax Free Yield Advantage
(36% Federal tax bracket)
3.25% Certificate of deposit
3.25% Pretax yield
2.08% After-tax yield
6.50% Tax free investment
10.16% Taxable equivalent yield
6.50% Tax free yield
Example:
Two $100,000 investments ...
3.25% CD 6.50% Tax free
Pretax income: $3,250.00 $6,500.00
Tax: (1,170.00) NONE
After-tax
income: $2,080.00 $6,500.00
The 1995 Federal tax bracket is 36% for single filers with taxable income
from $117,951 to $256,500 and joint filers from $143,601 to $256,500. Actual tax
brackets may be higher due to the phaseout of personal exemptions and
limitations on the deductibility of itemized deductions over certain ranges of
income. Your actual bracket will vary depending on your income, exemptions and
deductions. See your tax adviser. The Chart is based on 3-month bank CDs
(Source: The Wall Street Journal and Eaton Vance Management). Tax free yields
are shown for illustration purposes only and are not meant to imply or predict
actual results of an investment in the Fund. See your financial adviser for the
Fund's current yield and actual CD rates.
ADDITIONAL TAX MATTERS
The Fund intends to qualify as a RIC under the Code for the taxable year
ending January 31, 1996.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of , 1995, Eaton Vance owned one share of the Fund, being the only
share of the Fund outstanding on such date. Eaton Vance is a Massachusetts
business trust and a wholly-owned subsidiary of EVC.
<PAGE>
TAX EQUIVALENT YIELD TABLE
The table shows the approximate taxable bond yields which are equivalent to
tax-exempt bond yields from 4% to 7% under the regular Federal income tax laws
that apply to 1995.
<TABLE>
<CAPTION>
MARGINAL
SINGLE RETURN JOINT RETURN INCOME TAX-EXEMPT YIELD
- ------------------------------------------ TAX -----------------------------------------------------------------------
(TAXABLE INCOME)* BRACKET 4% 4.5% 5% 5.5% 6% 6.5% 7%
- -------------------------------------------------------------------------------------------------------------------------------
Equivalent Taxable Yield
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Up to $ 23,350 Up to $ 39,000 15.00% 4.71% 5.29% 5.88% 6.47% 7.06% 7.65% 8.24%
$ 23,351- 56,550 $ 39,001- 94,250 28.00 5.56 6.25 6.94 7.64 8.33 9.03 9.72
$ 56,551- 117,950 $ 94,251- 143,600 31.00 5.80 6.52 7.25 7.97 8.70 9.42 10.14
$117,951- 256,500 $143,601- 256,500 36.00 6.25 7.03 7.81 8.59 9.38 10.16 10.94
Over $256,500 Over $256,500 39.60 6.62 7.45 8.28 9.11 9.93 10.76 11.59
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Yields shown are for illustration purposes only and are not meant to represent
the Fund's actual yield.
* Net amount subject to Federal personal income tax after deductions and
exemptions.
Note: The above-indicated Federal Income Tax Brackets do not take into account
the effect of a reduction in the deductibility of Itemized Deductions for
taxpayers with Adjusted Gross Income in excess of $114,700, nor the effects of
phaseout of personal exemptions for single and joint filers with Adjusted Gross
Incomes in excess of $114,700 and $172,050, respectively. The effective top
marginal Federal income tax brackets of taxpayers over ranges of income subject
to these reductions or phaseouts will be higher than indicated above.
Of course, no assurance can be given that EV Marathon High Yield Municipals Fund
will achieve any specific tax exempt yield. While it is expected that a
substantial portion of the interest income received by the Portfolio and
allocated to the Fund and subsequently distributed to the Fund's shareholders
will be exempt from the regular Federal income tax, portions of such
distributions from time to time may be subject to such tax. This table does not
take into account state or local taxes, if any, payable on Fund distributions.
It should also be noted that the interest earned on certain "private activity
bonds" issued after August 7, 1986, while exempt from the regular Federal income
tax, is treated as a tax preference item which could subject the recipient to
the Federal alternative minimum tax. The illustrations assume that the Federal
alternative minimum tax is not applicable and do not take into account any tax
credits that may be available.
The information set forth above is as of the date of this Statement of
Additional Information. Subsequent tax law changes could result in prospective
or retroactive changes in the tax brackets, tax rates, and tax equivalent yields
set forth above.
<PAGE>
FINANCIAL STATEMENTS
HIGH YIELD MUNICIPALS PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
MAY 1, 1995
ASSETS:
Cash ........................................................... $100,020
Deferred organization expenses ................................. 22,050
--------
Total assets ............................................... $122,070
LIABILITIES:
Accrued organization expenses .................................. 22,050
--------
NET ASSETS ......................................................... $100,020
========
NOTES:
(1) High Yield Municipals Portfolio (the "Portfolio") was organized as a New
York Trust on May 1, 1995 and has been inactive since that date, except as
to matters relating to its organization and registration as an investment
company under the Investment Company Act of 1940 and the sale of its
interests therein at the purchase price of $100,000 to Boston Management and
Research and the sale of interests therein at the purchase price of $20 to
Eaton Vance Management (the "Initial Interests").
(2) Organization expenses are being deferred and will be amortized on a straight
line basis over a period not exceeding five years, commencing on the
effective date of the Portfolio's initial offering of its interests. The
amount paid by the Portfolio on any withdrawal by the holders of the initial
interests of any of the respective Initial Interests will be reduced by a
portion of any unamortized organization expenses, determined by the
proportion of the amount of the initial interests withdrawn to the Initial
Interest then outstanding.
(3) At 4:00 p.m., New York City time, on each business day of the Portfolio, the
value of an investor's interest in the Portfolio is equal to the product of
(i) the aggregate net asset value of the Portfolio multiplied by (ii) the
percentage representing that investor's share of the aggregate interest in
the Portfolio effective for that day.
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Trustees and Investors of High Yield Municipals Portfolio:
We have audited the accompanying statement of assets and liabilities of High
Yield Municipals Portfolio (a New York Trust) as of May 1, 1995. This financial
statement is the responsibility of the Trust's management. Our responsibility is
to express an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted accounting
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such statement of assets and liabilities presents fairly, in
all material respects, the financial position of High Yield Municipals Portfolio
as of May 1, 1995 in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Boston, Massachusetts
May 3, 1995
<PAGE>
INVESTMENT ADVISER OF
HIGH YIELD MUNICIPALS PORTFOLIO
Boston Management and Research
24 Federal Street
Boston, MA 02110
ADMINISTRATOR OF EV MARATHON
HIGH YIELD MUNICIPALS FUND
Eaton Vance Management
24 Federal Street
Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc.
24 Federal Street
Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company
24 Federal Street
Boston, MA 02110
TRANSFER AGENT
The Shareholder Services Group, Inc.
BOS725
P.O. Box 1559
Boston, MA 02104
(800) 262-1122
AUDITORS
Deloitte & Touche LLP
125 Summer Street
Boston, MA 02110
EV MARATHON
HIGH YIELD
MUNICIPALS
FUND
STATEMENT OF
ADDITIONAL
INFORMATION
AUGUST 1, 1995
EV MARATHON
HIGH YIELD MUNICIPALS FUND
24 FEDERAL STREET
BOSTON, MA 02110
M-
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EV TRADITIONAL HIGH YIELD MUNICIPALS
FUND. On May 15, 1995, the Fund became a series of the Trust. THE FUND'S
INVESTMENT OBJECTIVE IS TO PROVIDE HIGH CURRENT INCOME EXEMPT FROM REGULAR
FEDERAL INCOME TAX. The Fund currently seeks to meet its investment objective by
investing its assets in High Yield Municipals Portfolio, a separate registered
investment company which invests primarily in below investment grade municipal
obligations. The Fund may not be appropriate for investors who cannot assume the
greater risk of capital depreciation or loss inherent in seeking higher
tax-exempt yields.
FEES AND EXPENSES
INVESTMENT ADVISER
The Portfolio's Investment Advisory Agreement with BMR is dated , 1995
and remains in effect until February 28, 1996. The Agreement may be continued as
described under "Investment Adviser and Administrator" in Part I of this
Statement of Additional Information. No fees have been paid to the Investment
Adviser to date.
ADMINISTRATOR
As stated in Part I of this Statement of Additional Information, the
Administrator receives no compensation for providing administrative services to
the Fund.
SERVICE PLAN
No fees paid to date.
PRINCIPAL UNDERWRITER
No fees paid to date.
BROKERAGE
No fees paid to date.
CUSTODIAN
No fees paid to date.
<TABLE>
<CAPTION>
TRUSTEES
The fees and expenses of those Trustees of the Trust and of the Portfolio who are not members of the Eaton Vance organization
(the noninterested Trustees) are paid by the Fund (and the other series of the Trust) and the Portfolio, respectively. (The
Trustees of the Trust and the Portfolio who are members of the Eaton Vance organization receive no compensation from the Fund or
the Portfolio.) For the fiscal year ended January 31, 1996, it is estimated the noninterested Trustees of the Trust and the
Portfolio will receive the following compensation in their capacities as Trustees of the Trust and the Portfolio and, during the
first quarter ended March 31, 1995, earned the following compensation in their capacities as Trustees of the other funds in the
Eaton Vance fund complex<F1>:
AGGREGATE AGGREGATE RETIREMENT TOTAL COMPENSATION
COMPENSATION COMPENSATION BENEFIT ACCRUED FROM TRUST AND
NAME FROM FUND FROM PORTFOLIO FROM FUND COMPLEX FUND COMPLEX
---- ------------ -------------- ----------------- ------------------
<S> <C> <C> <C> <C>
Donald R. Dwight $25 $250<F2> $ 8,750 $33,750
Samuel L. Hayes, III 25 250<F3> 24,885 41,250
Norton H. Reamer 25 250 --0-- 33,750
John L. Thorndike 25 250 --0-- 35,000
Jack L. Treynor 25 250 --0-- 35,000
<FN>
<F1> The Eaton Vance fund complex consists of 201 registered investment companies or series thereof.
<F2> Includes $3 of deferred compensation.
<F3> Includes $3 of deferred compensation.
</TABLE>
ADDITIONAL OFFICER INFORMATION
The Portfolio has the following officer not listed under "Officers of the
Trust and the Portfolio" in the Fund's Part I of this Statement of Additional
Information. THOMAS M. METZOLD ( ), Vice President of the Portfolio, Vice
President of BMR, Eaton Vance and EV.
SERVICES FOR ACCUMULATION
The following services are voluntary, involve no extra charge other than the
sales charge included in the offering price, and may be changed or discontinued
without penalty at any time.
INTENDED QUANTITY INVESTMENT -- STATEMENT OF INTENTION. If it is anticipated
that $50,000 or more of Fund shares and shares of the other continuously offered
open-end funds listed under "The Eaton Vance Exchange Privilege" in the current
Prospectus of the Fund will be purchased within a 13-month period, a Statement
of Intention should be signed so that shares may be obtained at the same reduced
sales charge as though the total quantity were invested in one lump sum. Shares
held under Right of Accumulation (see below) as of the date of the Statement
will be included toward the completion of the Statement. The Statement
authorizes the Transfer Agent to hold in escrow sufficient shares (5% of the
dollar amount specified in the Statement) which can be redeemed to make up any
difference in sales charge on the amount intended to be invested and the amount
actually invested. Execution of a Statement does not obligate the shareholder to
purchase or the Fund to sell the full amount indicated in the Statement, and
should the amount actually purchased during the 13-month period be more or less
than that indicated on the Statement, price adjustments will be made. For sales
charges and other information on quantity purchases, see "How to Buy Fund
Shares" in the Fund's current Prospectus. Any investor considering signing a
Statement of Intention should read it carefully.
RIGHT OF ACCUMULATION -- CUMULATIVE QUANTITY DISCOUNT. The applicable sales
charge level for the purchase of Fund shares is calculated by taking the dollar
amount of the current purchase and adding it to the value (calculated at the
maximum current offering price) of the shares the shareholder owns in his
account(s) in the Fund and in the other continuously offered open-end funds
listed under "The Eaton Vance Exchange Privilege" in the current Prospectus of
the Fund for which Eaton Vance acts as investment adviser or administrator at
the time of purchase. The sales charge on the shares being purchased will then
be at the rate applicable to the aggregate. For example, if the shareholder
owned shares valued at $30,000 in EV Traditional California Municipals Fund, and
purchased an additional $20,000 of Fund shares, the sales charge for the $20,000
purchase would be at the rate of 2.75% of the offering price (2.83% of the net
amount invested) which is the rate applicable to single transactions of $50,000.
For sales charges on quantity purchases, see "How to Buy Fund Shares" in the
Fund's current Prospectus. Shares purchased (i) by an individual, his or her
spouse and their children under the age of twenty-one, and (ii) by a trustee,
guardian or other fiduciary of a single trust estate or a single fiduciary
account, will be combined for the purpose of determining whether a purchase will
qualify for the Right of Accumulation and if qualifying, the applicable sales
charge level.
For any such discount to be made available, at the time of purchase a
purchaser or his or her financial service firm (the "Authorized Firm") must
provide Eaton Vance Distributors, Inc. (the "Principal Underwriter") (in the
case of a purchase made through an Authorized Firm) or the Transfer Agent (in
the case of an investment made by mail) with sufficient information to permit
verification that the purchase order qualifies for the accumulation privilege.
Corfirmation of the order is subject to such verification. The Right of
Accumulation privilege may be amended or terminated at any time as to purchases
occurring thereafter.
PRINCIPAL UNDERWRITER
Shares of the Fund may be continuously purchased at the public offering
price through certain Authorized Firms which have agreements with the Principal
Underwriter. The Principal Underwriter is a wholly-owned subsidiary of Eaton
Vance.
The public offering price is the net asset value next computed after receipt
of the order, plus, where applicable, a variable percentage (sales charge)
depending upon the amount of purchase as indicated by the sales charge table set
forth in the Fund's current Prospectus (see "How to Buy Fund Shares").
Such table is applicable to purchases of the Fund alone or in combination
with purchases of the other funds offered by the Principal Underwriter, made at
a single time by (i) an individual, or an individual, his or her spouse and
their children under the age of twenty-one, purchasing shares for his or their
own account; and (ii) a trustee or other fiduciary purchasing shares for a
single trust estate or a single fiduciary account.
The table is also presently applicable to (1) purchases of Fund shares,
alone or in combination with purchases of any of the other funds offered by the
Principal Underwriter through one dealer aggregating $50,000 or more made by any
of the persons enumerated above within a thirteen-month period starting with
first purchase pursuant to a written Statement of Intention, in the form
provided by the Principal Underwriter, which includes provisions for a price
adjustment depending upon the amount actually purchased within such period (a
purchase not made pursuant to such Statement may be included thereunder if the
Statement is filed within 90 days of such purchase); or (2) purchases of the
Fund pursuant to the Right of Accumulation and declared as such at the time of
purchase.
Subject to the applicable provisions of the 1940 Act, the Fund may issue
shares at net asset value in the event that an investment company (whether a
regulated or private investment company or a personal holding company) is merged
or consolidated with or acquired by the Fund. Normally no sales charges will be
paid in connection with an exchange of Fund shares for the assets of such
investment company.
Shares may be sold at net asset value to any officer, director, trustee,
general partner or employee of the Fund, the Portfolio or any investment company
for which Eaton Vance or BMR acts as investment adviser, any investment
advisory, agency, custodial or trust account managed or administered by Eaton
Vance or by any parent, subsidiary or other affiliate of Eaton Vance, or any
officer, director or employee of any parent, subsidiary or other affiliate of
Eaton Vance. The terms "officer," "director," "trustee," "general partner" or
"employee" as used in this paragraph include any such person's spouse and minor
children, and also retired officers, directors, trustees, general partners and
employees and their spouses and minor children. Shares of the Fund may also be
sold at net asset value to registered representatives and employees of certain
Authorized Firms and to such persons' spouses and children under the age of 21
and their beneficial accounts.
The Trust reserves the right to suspend or limit the offering of shares of
the Fund to the public at any time.
The Principal Underwriter acts as principal in selling shares of the Fund
under the Distribution Agreement with the Trust on behalf of the Fund. The
expenses of printing copies of prospectuses used to offer shares to financial
service firms or investors and other selling literature and of advertising are
borne by the Principal Underwriter. The fees and expenses of qualifying and
registering and maintaining qualifications and registrations of the Fund and its
shares under Federal and state securities laws are borne by the Fund. The
Distribution Agreement is renewable annually by the Board of Trustees of the
Trust (including a majority of its Trustees who are not interested persons of
the Principal Underwriter or the Trust), may be terminated on six months' notice
by either party, and is automatically terminated upon assignment. The Principal
Underwriter distributes Fund shares on a "best efforts" basis under which it is
required to take and pay for only such shares as may be sold. The Fund has
authorized the Principal Underwriter to act as its agent in repurchasing shares
at the rate of $2.50 for each repurchase transaction handled by the Principal
Underwriter. The Principal Underwriter estimates that the expenses incurred by
it in acting as repurchase agent for the Fund will exceed the amounts paid
therefor by the Fund. For the amount paid by the Fund to the Principal
Underwriter for acting as repurchase agent, see "Fees and Expenses" in this Part
II. The Principal Underwriter allows Authorized Firms discounts from the
applicable public offering price which are alike for all Firms. However, the
Principal Underwriter may allow, upon notice to all Authorized Firms with whom
it has agreements, discounts up to the full sales charge during the periods
specified in the notice. During periods when the discount includes the full
sales charge, such Firms may be deemed to be underwriters as that term is
defined in the Securities Act of 1933. For the amount of sales charges for sales
of Fund shares paid to the Principal Underwriter (and Authorized Firms) see
"Fees and Expenses" in this Part II.
See the Statement of Assets and Liabilities in the Fund's Financial
Statements in this Part II for a specimen price make-up sheet showing the
computation of maximum offering price per share of the Fund's most recent fiscal
year end.
SERVICE PLAN
The Trust on behalf of the Fund has adopted a Service Plan (the "Plan")
designed to meet the requirements of Rule 12b-1 (the "Rule") under the 1940 Act
and the service fee requirements of the revised sales charge rule of the
National Association of Securities Dealers, Inc. (Management believes service
fee payments are not distribution expenses governed by the Rule, but has chosen
to have the Plan approved as if the Rule were applicable.) The following
supplements the discussion of the Plan contained in the Fund's Prospectus.
The Plan remains in effect through April 28, 1996, and from year to year
thereafter, provided such continuance is approved by a vote of both a majority
of (i) those Trustees who are not interested persons of the Trust and who have
no direct or indirect financial interest in the operation of the Plan or any
agreements related to it (the "Rule 12b-1 Trustees") and (ii) all of the
Trustees then in office, cast in person at a meeting (or meetings) called for
the purpose of voting on this Plan. The Plan may be terminated any time by vote
of the Rule 12b-1 Trustees or by a vote of a majority of the outstanding voting
securities of the Fund. Pursuant to such Rule, the Plan has been approved by the
Fund's initial sole shareholder (Eaton Vance) and by the Board of Trustees of
the Trust, including the Rule 12b-1 Trustees.
Under the Plan, the President or a Vice President of the Trust shall provide
to the Trustees for their review, and the Trustees shall review at least
quarterly, a written report of the amount expended under the Plan and the
purposes for which such expenditures were made. The Plan may not be amended to
increase materially the payments described herein without approval of the
shareholders of the Fund, and all material amendments of the Plan must also be
approved by the Trustees of the Trust as prescribed by Rule 12b-1. So long as
the Plan is in effect, the selection and nomination of Trustees who are not
interested persons of the Trust shall be committed to the discretion of the
Trustees who are not such interested persons. The Trustees have determined that
in their judgment there is a reasonable likelihood that the Plan will benefit
the Fund and its shareholders. For the service fees paid by the Fund under the
Plan see "Fees and Expenses" in this Part II.
PERFORMANCE INFORMATION
The following table compares the taxable equivalent yield of an investment
in the Fund yielding a hypothetical 6.5% with the after-tax yield of a
certificate of deposit yielding 3.25%. The tax brackets used are the Federal
income tax brackets applicable for 1995: 15% for single filers with taxable
income up to $23,350 and joint filers up to $39,000; 28% for single filers with
taxable income from $23,351 to $56,550 and joint filers from $39,001 to $94,250,
31% for single filers with taxable income from $56,551 to $117,950 and joint
filers from $94,251 to $143,600, 36% for single filers with taxable income from
$117,951 to $256,500 and joint filers from $143,601 to $256,500 and 39.6% for
single and joint filers with taxable income over $256,500. These brackets do not
take into account the phaseout of personal exemptions and limitation on
deductibility of itemized deductions over certain ranges of income which
increase the effective top Federal tax rate for certain taxpayers. Investors
should consult with their tax advisers for more information.
<TABLE>
<CAPTION>
TAX BRACKET
15% 28% 31% 36% 39.6%
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Tax free yield ................................ 6.50% 6.50% 6.50% 6.50% 6.50%
Taxable equivalent ............................ 7.65 9.03 9.42 10.16 10.76
Certificates of deposit:
Yield ..................................... 3.25 3.25 3.25 3.25 3.25
After-tax yield ........................... 2.76 2.34 2.24 2.08 1.96
</TABLE>
Traditional High Yield Municipals
The Tax Free Yield Advantage
(36% Federal tax bracket)
3.25% Certificate of deposit
3.25% Pretax yield
2.08% After-tax yield
6.50% Tax free investment
10.16% Taxable equivalent yield
6.50% Tax free yield
Example:
Two $100,000 investments ...
3.25% CD 6.50% Tax free
Pretax income: $3,250.00 $6,500.00
Tax: (1,170.00) NONE
After-tax
income: $2,080.00 $6,500.00
The 1995 Federal tax bracket is 36% for single filers with taxable income
from $117,951 to $256,500 and joint filers from $143,601 to $256,500. Actual tax
brackets may be higher due to the phaseout of personal exemptions and
limitations on the deductibility of itemized deductions over certain ranges of
income. Your actual bracket will vary depending on your income, exemptions and
deductions. See your tax adviser. The Chart is based on 3-month bank CDs
(Source: The Wall Street Journal and Eaton Vance Management). Tax free yields
are shown for illustration purposes only and are not meant to imply or predict
actual results of an investment in the Fund. See your financial adviser for the
Fund's current yield and actual CD rates.
ADDITIONAL TAX MATTERS
The Fund intends to qualify as a RIC under the Code for the taxable year
ending January 31, 1996.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of , 1995, Eaton Vance owned one share of the Fund, being the only
share of the Fund outstanding on such date. Eaton Vance is a Massachusetts
business trust and a wholly-owned subsidiary of EVC.
<PAGE>
TAX EQUIVALENT YIELD TABLE
The table shows the approximate taxable bond yields which are equivalent to
tax-exempt bond yields from 4% to 7% under the regular Federal income tax laws
that apply to 1995.
<TABLE>
<CAPTION>
MARGINAL
SINGLE RETURN JOINT RETURN INCOME TAX-EXEMPT YIELD
- ------------------------------------------ TAX -----------------------------------------------------------------------
(TAXABLE INCOME)<F1> BRACKET 4% 4.5% 5% 5.5% 6% 6.5% 7%
- -------------------------------------------------------------------------------------------------------------------------------
Equivalent Taxable Yield
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Up to $ 23,350 Up to $ 39,000 15.00% 4.71% 5.29% 5.88% 6.47% 7.06% 7.65% 8.24%
$ 23,351- 56,550 $ 39,001- 94,250 28.00 5.56 6.25 6.94 7.64 8.33 9.03 9.72
$ 56,551- 117,950 $ 94,251- 143,600 31.00 5.80 6.52 7.25 7.97 8.70 9.42 10.14
$117,951- 256,500 $143,601- 256,500 36.00 6.25 7.03 7.81 8.59 9.38 10.16 10.94
Over $256,500 Over $256,500 39.60 6.62 7.45 8.28 9.11 9.93 10.76 11.59
- -------------------------------------------------------------------------------------------------------------------------------
Yields shown are for illustration purposes only and are not meant to represent the Fund's actual yield.
<FN>
<F1> Net amount subject to Federal personal income tax after deductions and exemptions.
</TABLE>
Note: The above-indicated Federal Income Tax Brackets do not take into account
the effect of a reduction in the deductibility of Itemized Deductions for
taxpayers with Adjusted Gross Income in excess of $114,700, nor the effects of
phaseout of personal exemptions for single and joint filers with Adjusted Gross
Incomes in excess of $114,700 and $172,050, respectively. The effective top
marginal Federal income tax brackets of taxpayers over ranges of income subject
to these reductions or phaseouts will be higher than indicated above.
Of course, no assurance can be given that EV Traditional High Yield Municipals
Fund will achieve any specific tax exempt yield. While it is expected that a
substantial portion of the interest income received by the Portfolio and
allocated to the Fund and subsequently distributed to the Fund's shareholders
will be exempt from the regular Federal income tax, portions of such
distributions from time to time may be subject to such tax. This table does not
take into account state or local taxes, if any, payable on Fund distributions.
It should also be noted that the interest earned on certain "private activity
bonds" issued after August 7, 1986, while exempt from the regular Federal income
tax, is treated as a tax preference item which could subject the recipient to
the Federal alternative minimum tax. The illustrations assume that the Federal
alternative minimum tax is not applicable and do not take into account any tax
credits that may be available.
The information set forth above is as of the date of this Statement of
Additional Information. Subsequent tax law changes could result in prospective
or retroactive changes in the tax brackets, tax rates, and tax equivalent yields
set forth above.
<PAGE>
FINANCIAL STATEMENTS
HIGH YIELD MUNICIPALS PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
MAY 1, 1995
ASSETS:
Cash ........................................................... $100,020
Deferred organization expenses ................................. 22,050
--------
Total assets ............................................... $122,070
LIABILITIES:
Accrued organization expenses .................................. 22,050
--------
NET ASSETS ......................................................... $100,020
========
NOTES:
(1) High Yield Municipals Portfolio (the "Portfolio") was organized as a New
York Trust on May 1, 1995 and has been inactive since that date, except as
to matters relating to its organization and registration as an investment
company under the Investment Company Act of 1940 and the sale of its
interests therein at the purchase price of $100,000 to Boston Management and
Research and the sale of interests therein at the purchase price of $20 to
Eaton Vance Management (the "Initial Interests").
(2) Organization expenses are being deferred and will be amortized on a straight
line basis over a period not exceeding five years, commencing on the
effective date of the Portfolio's initial offering of its interests. The
amount paid by the Portfolio on any withdrawal by the holders of the initial
interests of any of the respective Initial Interests will be reduced by a
portion of any unamortized organization expenses, determined by the
proportion of the amount of the initial interests withdrawn to the Initial
Interest then outstanding.
(3) At 4:00 p.m., New York City time, on each business day of the Portfolio, the
value of an investor's interest in the Portfolio is equal to the product of
(i) the aggregate net asset value of the Portfolio multiplied by (ii) the
percentage representing that investor's share of the aggregate interest in
the Portfolio effective for that day.
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Trustees and Investors of High Yield Municipals Portfolio:
We have audited the accompanying statement of assets and liabilities of High
Yield Municipals Portfolio (a New York Trust) as of May 1, 1995. This financial
statement is the responsibility of the Trust's management. Our responsibility is
to express an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted accounting
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such statement of assets and liabilities presents fairly, in
all material respects, the financial position of High Yield Municipals Portfolio
as of May 1, 1995 in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Boston, Massachusetts
May 3, 1995
<PAGE>
INVESTMENT ADVISER OF
HIGH YIELD MUNICIPALS PORTFOLIO
Boston Management and Research
24 Federal Street
Boston, MA 02110
ADMINISTRATOR OF
EV TRADITIONAL HIGH YIELD
MUNICIPALS FUND
Eaton Vance Management
24 Federal Street
Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc.
24 Federal Street
Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company
24 Federal Street
Boston, MA 02110
TRANSFER AGENT
The Shareholder Services Group, Inc.
BOS725
P.O. Box 1559
Boston, MA 02104
(800) 262-1122
AUDITORS
Deloitte & Touche LLP
125 Summer Street
Boston, MA 02110
EV TRADITIONAL
HIGH YIELD
MUNICIPALS FUND
STATEMENT OF
ADDITIONAL
INFORMATION
AUGUST 1, 1995
EV TRADITIONAL HIGH YIELD
MUNICIPALS FUND
24 FEDERAL STREET
BOSTON, MA 02110
T-SAI
<PAGE>
PART C
OTHER INFORMATION
ITEM 24: FINANCIAL STATEMENTS AND EXHIBITS
(A) FINANCIAL STATEMENTS
INCLUDED IN PART A:
Not applicable
INCLUDED IN PART B:
FOR EV MARATHON HIGH YIELD MUNICIPALS FUND
EV TRADITIONAL HIGH YIELD MUNICIPALS FUND
Financial Statements for High Yield Municipals Portfolio:
Statement of Assets and Liabilities as of May 1, 1995
Independent Auditors' Report
(B) EXHIBITS:
(1)(a) Declaration of Trust of Eaton Vance Municipals Trust II
dated October 25, 1993 filed herewith.
(b) Amendment and Restatement of Establishment and Designation
of Series of Shares dated May 15, 1995 filed herewith.
(2)(a) By-Laws filed as Exhibit (2) to the original Registration
Statement and incorporated herein by reference.
(b) Amendment to By-Laws of Eaton Vance Municipals Trust II
dated December 13, 1993 filed as Exhibit (2)(b) to
Pre-Effective Amendment No. 1 to the original Registration
Statement and incorporated herein by reference.
(3) Not applicable
(4) Not applicable
(5) Not applicable
(6)(a) (1) Distribution Agreement between EV Classic Florida Insured
Tax Free Fund and Eaton Vance Distributors, Inc. dated
February 25, 1994, with attached schedule pursuant to Rule
8b-31 under the Investment Company Act of 1940, as amended,
regarding other series of Registrant, filed as Exhibit
(6)(a)(1) to Post-Effective Amendment No. 1 and
incorporated herein by reference.
(2) Distribution Agreement between EV Marathon Florida Insured
Tax Free Fund and Eaton Vance Distributors, Inc. dated
February 25, 1994, with attached schedule pursuant to Rule
8b-31 under the Investment Company Act of 1940, as amended,
regarding other series of Registrant, filed as Exhibit
(6)(a)(2) to Post-Effective Amendment No. 1 and
incorporated herein by reference.
(3) Distribution Agreement between EV Traditional Florida
Insured Tax Free Fund and Eaton Vance Distributors, Inc.
dated February 25, 1994, filed as Exhibit (6)(a)(3) to
Post-Effective Amendment No. 1 and incorporated herein by
reference.
(4) Form of Amended Distribution Agreement between Eaton Vance
Municipals Trust II (on behalf of its Marathon series) and
Eaton Vance Distributors, Inc. filed herewith.
(5) Form of Amended Distribution Agreement between Eaton Vance
Municipals Trust II (on behalf of its Traditional series)
and Eaton Vance Distributors, Inc. filed herewith.
(b) Selling Group Agreement between Eaton Vance Distributors,
Inc. and Authorized Dealers filed as Exhibit (6)(b) to
Post-Effective Amendment No. 1 and incorporated herein by
reference.
(c) Schedule of Dealer Discounts and Sales Charges filed as
Exhibit (6)(c) to Post- Effective Amendment No. 1 and
incorporated herein by reference.
(7) Not applicable
(8) Custodian Agreement between Eaton Vance Municipals Trust II
and Investors Bank & Trust Company dated February 25, 1994,
filed as Exhibit (8) to Post-Effective Amendment No. 1 and
incorporated herein by reference.
(9)(a) Administrative Services Agreement between EV Classic
Florida Insured Tax Free Fund and Eaton Vance Management
dated February 25, 1994, with attached schedule pursuant to
Rule 8b-31 under the Investment Company Act of 1940, as
amended, regarding other series of Registrant, filed as
Exhibit (9) to Post-Effective Amendment No.
1 and incorporated herein by reference.
(b) Form of Amended Administrative Services Agreement between
Eaton Vance Municipals Trust II (on behalf of all of its
series) and Eaton Vance Management, filed herewith.
(10) Not applicable
(11) Consent of Independent Certified Public Accountants for EV
Marathon High Yield Municipals Fund and EV Traditional High
Yield Municipals Fund filed herewith.
(12) Not applicable
(13) Letter Agreement with Eaton Vance Management filed as
Exhibit (13) to the original Registration Statement and
incorporated herein by reference.
(14) Not applicable
(15)(a) Distribution Plan pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended, for EV Classic
Florida Insured Tax Free Fund dated February 25, 1994, with
attached schedule pursuant to Rule 8b-31 under the
Investment Company Act of 1940, as amended, regarding other
series of Registrant, filed as Exhibit (15)(a) to
Post-Effective Amendment No. 1 and incorporated herein by
reference.
(b) Distribution Plan pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended, for EV Marathon
Florida Insured Tax Free Fund dated February 25, 1994, with
attached schedule pursuant to Rule 8b-31 under the
Investment Company Act of 1940, as amended, regarding other
series of Registrant, filed as Exhibit (15)(b) to
Post-Effective Amendment No. 1 and incorporated herein by
reference.
(c) Service Plan pursuant to Rule 12b-1 under the Investment
Company Act of 1940, as amended, for EV Traditional Florida
Insured Tax Free Fund dated February 25, 1994, filed as
Exhibit (15)(c) to Post-Effective Amendment No. 1 and
incorporated herein by reference.
(d) Form of Amended Distribution Plan pursuant to Rule 12b-1
under the Investment Company Act of 1940, as amended, for
Eaton Vance Municipals Trust II (on behalf of its Marathon
series), filed herewith.
(e) Form of Amended Service Plan pursuant to Rule 12b-1 under
the Investment Company Act of 1940, as amended, for Eaton
Vance Municipals Trust II (on behalf of its Traditional
series), filed herewith.
(16) Not applicable
(17)(a) Power of Attorney for Eaton Vance Municipals Trust II dated
January 10, 1994 filed as Exhibit (17)(a) to Pre-Effective
Amendment No. 1 to the original Registration Statement and
incorporated herein by reference.
(b) Power of Attorney for Florida Insured Tax Free Portfolio,
Hawaii Tax Free Portfolio and Kansas Tax Free Portfolio
dated January 10, 1994 filed as Exhibit (17)(b) to
Pre-Effective Amendment No. 1 to the original Registration
Statement and incorporated herein by reference.
(c) Power of Attorney for High Yield Municipals Portfolio filed
herewith.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not applicable
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
(1) (2)
TITLE OF CLASS NUMBER OF RECORD HOLDERS
Shares of beneficial interest without par value as of April 30, 1995
EV Classic Florida Insured Tax Free Fund 9
EV Marathon Florida Insured Tax Free Fund 229
EV Traditional Florida Insured Tax Free Fund 24
EV Classic Hawaii Tax Free Fund 16
EV Marathon Hawaii Tax Free Fund 600
EV Classic Kansas Tax Free Fund 49
EV Marathon Kansas Tax Free Fund 242
EV Marathon High Yield Municipals Fund --
EV Traditional High Yield Municipals Fund --
ITEM 27. INDEMNIFICATION
Reference is hereby made to Article V of the Registrant's Declaration of
Trust, filed as Exhibit (1) to the original Registration Statement.
Registrant's Trustees and officers are insured under a standard mutual
fund errors and omissions insurance policy covering incurred by reason of
negligent errors and omissions committed in their capacities as such.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Reference is made to the information set forth under the caption "Investment
Adviser and Administrator" in the Statement of Additional Information which is
incorporated herein by reference.
ITEM 29. PRINCIPAL UNDERWRITER
(a) Registrant's principal underwriter, Eaton Vance Distributors, Inc., a
wholly-owned subsidiary of Eaton Vance Management, is the principal
underwriter for each of the investment companies named below:
<TABLE>
<S> <C>
EV Classic Alabama Tax Free Fund EV Classic Massachusetts Tax Free Fund
EV Classic Arizona Tax Free Fund EV Classic Michigan Limited Maturity
EV Classic Arkansas Tax Free Fund Tax Free Fund
EV Classic California Limited Maturity EV Classic Michigan Tax Free Fund
Tax Free Fund EV Classic Minnesota Tax Free Fund
EV Classic California Municipals Fund EV Classic Mississippi Tax Free Fund
EV Classic Colorado Tax Free Fund EV Classic Missouri Tax Free Fund
EV Classic Connecticut Limited Maturity EV Classic National Limited Maturity Tax Free Fund
Tax Free Fund EV Classic National Municipals Fund
EV Classic Connecticut Tax Free Fund EV Classic New Jersey Limited Maturity
EV Classic Florida Insured Tax Free Fund Tax Free Fund
EV Classic Florida Limited Maturity EV Classic New Jersey Tax Free Fund
Tax Free Fund EV Classic New York Limited Maturity
EV Classic Florida Tax Free Fund Tax Free Fund
EV Classic Georgia Tax Free Fund EV Classic New York Tax Free Fund
EV Classic Government Obligations Fund EV Classic North Carolina Tax Free Fund
EV Classic Greater China Growth Fund EV Classic Ohio Limited Maturity Tax Free Fund
EV Classic Growth Fund EV Classic Ohio Tax Free Fund
EV Classic Hawaii Tax Free Fund EV Classic Oregon Tax Free Fund
EV Classic High Income Fund EV Classic Pennsylvania Limited Maturity
EV Classic Investors Fund Tax Free Fund
EV Classic Kansas Tax Free Fund EV Classic Pennsylvania Tax Free Fund
EV Classic Kentucky Tax Free Fund EV Classic Rhode Island Tax Free Fund
EV Classic Louisiana Tax Free Fund EV Classic Strategic Income Fund
EV Classic Maryland Tax Free Fund EV Classic South Carolina Tax Free Fund
EV Classic Massachusetts Limited Maturity EV Classic Special Equities Fund
Tax Free Fund EV Classic Senior Floating-Rate Fund
EV Classic Stock Fund EV Marathon New York Tax Free Fund
EV Classic Tennessee Tax Free Fund EV Marathon North Carolina Limited Maturity
EV Classic Texas Tax Free Fund Tax Free Fund
EV Classic Total Return Fund EV Marathon North Carolina Tax Free Fund
EV Classic Virginia Tax Free Fund EV Marathon Ohio Limited Maturity Tax Free Fund
EV Classic West Virginia Tax Free Fund EV Marathon Ohio Tax Free Fund
EV Marathon Alabama Tax Free Fund EV Marathon Oregon Tax Free Fund
EV Marathon Arizona Limited Maturity EV Marathon Pennsylvania Limited Maturity
Tax Free Fund Tax Free Fund
EV Marathon Arizona Tax Free Fund EV Marathon Pennsylvania Tax Free Fund
EV Marathon Arkansas Tax Free Fund EV Marathon Rhode Island Tax Free Fund
EV Marathon California Limited Maturity EV Marathon Strategic Income Fund
Tax Free Fund EV Marathon South Carolina Tax Free Fund
EV Marathon California Municipals Fund EV Marathon Special Equities Fund
EV Marathon Colorado Tax Free Fund EV Marathon Stock Fund
EV Marathon Connecticut Limited Maturity EV Marathon Tennessee Tax Free Fund
Tax Free Fund EV Marathon Texas Tax Free Fund
EV Marathon Connecticut Tax Free Fund EV Marathon Total Return Fund
EV Marathon Emerging Markets Fund EV Marathon Virginia Limited Maturity
Eaton Vance Equity - Income Trust Tax Free Fund
EV Marathon Florida Insured Tax Free Fund EV Marathon Virginia Tax Free Fund
EV Marathon Florida Limited Maturity EV Marathon West Virginia Tax Free Fund
Tax Free Fund EV Traditional California Municipals Fund
EV Marathon Florida Tax Free Fund EV Traditional Connecticut Tax Free Fund
EV Marathon Georgia Tax Free Fund EV Traditional Emerging Markets Fund
EV Marathon Gold & Natural Resources Fund EV Traditional Florida Insured Tax Free Fund
EV Marathon Government Obligations Fund EV Traditional Florida Limited Maturity
EV Marathon Greater China Growth Fund Tax Free Fund
EV Marathon Greater India Fund EV Traditional Florida Tax Free Fund
EV Marathon Growth Fund EV Traditional Government Obligations Fund
EV Marathon Hawaii Tax Free Fund EV Traditional Greater China Growth Fund
EV Marathon High Income Fund EV Traditional Greater India Fund
EV Marathon Investors Fund EV Traditional Growth Fund
EV Marathon Kansas Tax Free Fund Eaton Vance Income Fund of Boston
EV Marathon Kentucky Tax Free Fund EV Traditional Investors Fund
EV Marathon Louisiana Tax Free Fund Eaton Vance Municipal Bond Fund L.P.
EV Marathon Maryland Tax Free Fund EV Traditional National Limited Maturity
EV Marathon Massachusetts Limited Maturity Tax Free Fund
Tax Free Fund EV Traditional National Municipals Fund
EV Marathon Massachusetts Tax Free Fund EV Traditional New Jersey Tax Free Fund
EV Marathon Michigan Limited Maturity EV Traditional New York Limited Maturity
Tax Free Fund Tax Free Fund
EV Marathon Michigan Tax Free Fund EV Traditional New York Tax Free Fund
EV Marathon Minnesota Tax Free Fund EV Traditional Pennsylvania Tax Free Fund
EV Marathon Mississippi Tax Free Fund EV Traditional Special Equities Fund
EV Marathon Missouri Tax Free Fund EV Traditional Stock Fund
EV Marathon National Limited Maturity EV Traditional Total Return Fund
Tax Free Fund Eaton Vance Cash Management Fund
EV Marathon National Municipals Fund Eaton Vance Liquid Assets Fund
EV Marathon New Jersey Limited Maturity Eaton Vance Money Market Fund
Tax Free Fund Eaton Vance Prime Rate Reserves
EV Marathon New Jersey Tax Free Fund Eaton Vance Short-Term Treasury Fund
EV Marathon New York Limited Maturity Eaton Vance Tax Free Reserves
Tax Free Fund Massachusetts Municipal Bond Portfolio
</TABLE>
<TABLE>
<CAPTION>
(b)
(1) (2) (3)
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICE
BUSINESS ADDRESS WITH PRINCIPAL UNDERWRITER WITH REGISTRANT
------------------- -------------------------- --------------------
<S> <C> <C>
James B. Hawkes* Vice President and Director Trustee
William M. Steul* Vice President and Director None
Wharton P. Whitaker* President and Director None
Howard D. Barr Vice President None
2750 Royal View Court
Oakland, Michigan
Nancy E. Belza Vice President None
463-1 Buena Vista East
San Francisco, California
Chris Berg Vice President None
45 Windsor Lane
Palm Beach Gardens, Florida
H. Day Brigham, Jr.* Vice President None
Susan W. Bukima Vice President None
106 Princess Street
Alexandria, Virginia
Jeffrey W. Butterfield Vice President None
9378 Mirror Road
Columbus, Indiana
Mark A. Carlson* Vice President None
Jeffrey Chernoff Vice President None
115 Concourse West
Bright Waters, New York
William A. Clemmer* Vice President None
James S. Comforti Vice President None
1859 Crest Drive
Encinitas, California
Mark P. Doman Vice President None
107 Pine Street
Philadelphia, Pennsylvania
Michael A. Foster Vice President None
850 Kelsey Court
Centerville, Ohio
William M. Gillen Vice President None
280 Rea Street
North Andover, Massachusetts
Hugh S. Gilmartin Vice President None
1531-184th Avenue, NE
Bellevue, Washington
Richard E. Houghton* Vice President None
Brian Jacobs* Senior Vice President None
Stephen D. Johnson Vice President None
13340 Providence Lake Drive
Alpharetta, Georgia
Thomas J. Marcello Vice President None
553 Belleville Avenue
Glen Ridge, New Jersey
Timothy D. McCarthy Vice President None
9801 Germantown Pike
Lincoln Woods Apt. 416
Lafayette Hill, Pennsylvania
Morgan C. Mohrman* Senior Vice President None
Gregory B. Norris Vice President None
6 Halidon Court
Palm Beach Gardens, Florida
Thomas Otis* Secretary and Clerk Secretary
George D. Owen Vice President None
1911 Wildwood Court
Blue Springs, Missouri
F. Anthony Robinson Vice President None
510 Gravely Hill Road
Wakefield, Rhode Island
Benjamin A. Rowland, Jr.* Vice President, None
Treasurer and Director
John P. Rynne* Vice President None
George V.F. Schwab, Jr. Vice President None
9501 Hampton Oaks Lane
Charlotte, North Carolina
Cornelius J. Sullivan* Vice President None
Maureen C. Tallon Vice President None
518 Armistead Drive
Nashville, Tennessee
David M. Thill Vice President None
126 Albert Drive
Lancaster, New York
William T. Toner Vice President None
747 Lilac Drive
Santa Barbara, California
Chris Volf Vice President None
6517 Thoroughbred Loop
Odessa, Florida
Donald E. Webber* Senior Vice President None
Sue Wilder Vice President None
141 East 89th Street
New York, New York
- ---------
*Address is 24 Federal Street, Boston, MA 02110
</TABLE>
(c) Not applicable
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All applicable accounts, books and documents required to be maintained by
the Registrant by Section 31(a) of the Investment Company Act of 1940 and the
Rules promulgated thereunder are in the possession and custody of the
Registrant's custodian, Investors Bank & Trust Company, 24 Federal Street,
Boston, MA 02110 and 89 South Street, Boston, MA 02111, and its transfer agent,
The Shareholder Services Group, Inc., 53 State Street, Boston, MA 02104, with
the exception of certain corporate documents and portfolio trading documents
which are in the possession and custody of Eaton Vance Management, 24 Federal
Street, Boston, MA 02110. The Registrant is informed that all applicable
accounts, books and documents required to be maintained by registered investment
advisers are in the custody and possession of Eaton Vance Management.
ITEM 31. MANAGEMENT SERVICES
Not applicable
ITEM 32. UNDERTAKINGS
The Registrant undertakes to file a Post-Effective Amendment, using
financial statements which need not be certified, within four to six months from
the effective date of this post-effective amendment.
The Registrant undertakes to furnish to each person to whom a prospectus is
delivered a copy of the latest annual report to shareholders, upon request and
without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Amendment to
its Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized in the City of Boston and the Commonwealth of
Massachusetts on the 15th day of May, 1995.
EATON VANCE MUNICIPALS TRUST II
By /s/ THOMAS J. FETTER
--------------------------------
THOMAS J. FETTER, President
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment to Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
President (Chief Executive
/s/ THOMAS J. FETTER Officer) May 15, 1995
- ------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and Accounting
/s/ JAMES L. O'CONNOR Officer May 15, 1995
- ------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee May 15, 1995
- ------------------------------
DONALD R. DWIGHT
/s/ JAMES B. HAWKES Trustee May 15, 1995
- ------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee May 15, 1995
- ------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee May 15, 1995
- ------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee May 15, 1995
- ------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee May 15, 1995
- ------------------------------
JACK L. TREYNOR
*By: /s/ H. DAY BRIGHAM, JR.
---------------------
As attorney-in-fact
<PAGE>
SIGNATURES
High Yield Municipals Portfolio has duly caused this Amendment to the
Registration Statement on Form N-1A of Eaton Vance Municipals Trust II to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Boston and the Commonwealth of Massachusetts on the 15th day of May, 1995.
HIGH YIELD MUNICIPALS PORTFOLIO
By /s/ THOMAS J. FETTER
------------------------
THOMAS J. FETTER, President
This Amendment to the Registration Statement on Form N-1A of Eaton Vance
Municipals Trust II has been signed below by the following persons in the
capacities on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
President (Chief Executive
/s/ THOMAS J. FETTER Officer) May 15, 1995
- ------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and Accounting
/s/ JAMES L. O'CONNOR Officer May 15, 1995
- ------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee May 15, 1995
- ------------------------------
DONALD R. DWIGHT
/s/ JAMES B. HAWKES Trustee May 15, 1995
- ------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee May 15, 1995
- ------------------------------
SAMUEL L. HAYES, III
Trustee May 15, 1995
- ------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee May 15, 1995
- ------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee May 15, 1995
- ------------------------------
JACK L. TREYNOR
*By: /s/ H. DAY BRIGHAM, JR.
---------------------
As attorney-in-fact
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ---------- -----------
(1)(a) Declaration of Trust of Eaton Vance Municipals Trust II dated
October 25, 1993.
(1)(b) Amendement and Restatement of Establishment and Designation of
Series of Shares dated May 15, 1995.
(6)(a)(4) Form of Amended Distribution Agreement between Eaton Vance
Municipals Trust II (on behalf of its Marathon series) and Eaton
Vance Distributors, Inc.
(6)(a)(5) Form of Amended Distribution Agreement between Eaton Vance
Municipals Trust II (on behalf of its Traditional series) and Eaton
Vance Distributors, Inc.
(9)(b) Form of Amended Administrative Services Agreemenet between Eaton
Vance Municipals Trust II (on behalf of all of its series) and
Eaton Vance Management.
(11) Consent of Independent Certified Public Acccountants for EV
Marathon High Yield Municipals Fund and EV Traditional High Yield
Municipals Fund.
(15)(d) Form of Amended Distribution Plan pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended, for Eaton Vance
Municipals Trust II (on behalf of its Marathon series).
(15)(e) Form of Amended Service Plan pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended, for Eaton Vance
Municipals Trust II (on behalf of its Traditional series).
(17)(c) Power of Attorney for High Yield Municipals Portfolio dated May 1,
1995.
Exhibit 99.(1)(a)
DECLARATION OF TRUST
OF
EATON VANCE MUNICIPALS TRUST II
DATED: OCTOBER 25, 1993
DECLARATION OF TRUST, made October 25, 1993 by the Trustees (together with
all other persons from time to time duly elected, qualified and serving as
Trustees in accordance with this Declaration of Trust the "Trustees").
WHEREAS, the Trustees desire to establish a trust under a Declaration of
Trust pursuant to the provision hereof for the investment and reinvestment of
funds contributed hereto;
NOW, THEREFORE, the Trustees declare that all money and property
contributed to the trust established hereunder shall be held and managed under
this Declaration of Trust as so amended and restated for the benefit of the
holders, from time to time, of the shares of beneficial interest issued
hereunder and subject to the provisions set forth below.
ARTICLE I
NAME AND DEFINITIONS
Section 1.1. Name. The name of the trust created hereby is Eaton Vance
Municipals Trust II (the "Trust").
Section 1.2. Definitions. Wherever they are used herein, the following
terms have the following respective meanings:
(a) "Administrator" means the party, other than the Trust, to a contract
described in Section 3.3 hereof.
(b) "By-Laws" means the By-Laws referred to in Section 2.5 hereof, as
from time to time amended.
(c) "Class" means any division or Class of Shares within a Series or
Fund, which Class is or has been established within such Series or Fund in
accordance with the provisions of Article V.
(d) The term "Commission" has the meaning given it in the 1940 Act.
(e) "Custodian" means any Person other than the Trust who has custody of
any Trust Property as required by Section 17(f) of the 1940 Act, but does
not include a system for the central handling of securities described in
said Section 17(f).
(f) "Declaration" means this Declaration of Trust as amended from time
to time. Reference in this Declaration of Trust to "Declaration," "hereof,"
"herein," and "hereunder" shall be deemed to refer to this Declaration
rather than exclusively to the article or section in which such words
appear.
(g) "Fund" or "Funds," individually or collectively, means the separate
Series of Shares of the Trust, together with the assets and liabilities
belonging and allocated thereto.
(h) "His" shall include the feminine and neuter, as well as the
masculine, genders.
(i) The term "Interested Person" has the meaning specified in the 1940
Act subject, however, to such exceptions and exemptions as may be granted
by the Commission in any rule, regulation or order.
(j) "Investment Adviser" means the party, other than the Trust, to an
agreement described in Section 3.2 hereof.
(k) The "1940 Act" means the Investment Company Act of 1940 and the
Rules and Regulations thereunder, as amended from time to time.
(l) "Person" means and includes individuals, corporations, partnerships,
trusts, associations, firms, joint ventures and other entities, whether or
not legal entities, as well as governments, instrumentalities, and agencies
and political subdivisions thereof, and quasi-governmental agencies and
instrumentalities.
(m) "Principal Underwriter" means the party, other than the Trust, to a
contract described in Section 3.1 hereof.
(n) "Prospectus" means the Prospectus and Statement of Additional
Information included in the Registration Statement of the Trust under the
Securities Act of 1933 as such Prospectus and Statement of Additional
Information may be amended or supplemented and filed with the Commission
from time to time.
(o) "Series" individually or collectively means the separately managed
component(s) or Fund(s) of the Trust (or, if the Trust shall have only one
such component or Fund, then that one) as may be established and designated
from time to time by the Trustees pursuant to Section 5.5 hereof.
(p) "Shareholder" means a record owner of Outstanding Shares. A
Shareholder of Shares of a Series shall be deemed to own a proportionate
undivided beneficial interest in such Series equal to the number of Shares
of such Series of which he is the record owner divided by the total number
of Outstanding Shares of such Series. A Shareholder of Shares of a Class
within a Series shall be deemed to own a proportionate undivided beneficial
interest in such Class equal to the number of Shares of such Class of which
he is the record owner divided by the total number of Outstanding Shares of
such Class. As used herein the term "Shareholder" shall, when applicable to
one or more Series or Funds or to one or more Classes thereof, refer to the
record owners of Outstanding Shares of such Series, Fund or Funds or of
such Class or Classes of Shares.
(q) "Shares" means the equal proportionate units of interest into which
the beneficial interest in the Trust shall be divided from time to time,
including the Shares of any and all Series or of any Class within any
Series (as the context may require) which may be established by the
Trustees, and includes fractions of Shares as well as whole Shares.
"Outstanding Shares" means those Shares shown from time to time on the
books of the Trust or its Transfer Agent as then issued and outstanding,
but shall not include Shares which have been redeemed or repurchased by the
Trust and which are at the time held in the treasury of the Trust.
(r) "Transfer Agent" means any Person other than the Trust who maintains
the Shareholder records of the Trust, such as the list of Shareholders, the
number of Shares credited to each account, and the like.
(s) "Trust" means Eaton Vance Municipals Trust II. As used herein the
term Trust shall, when applicable to one or more Series or Funds, refer to
such Series or Funds.
(t) The "Trustees" means the persons who have signed this Declaration,
so long as they shall continue in office in accordance with the terms
hereof, and all other persons who now serve or may from time to time be
duly elected, qualified and serving as Trustees in accordance with the
provisions of Article II hereof and the By-Laws of the Trust, and reference
herein to a Trustee or the Trustees shall refer to such person or persons
in this capacity or their capacities as trustees hereunder.
(u) "Trust Property" means any and all property, real or personal,
tangible or intangible, which is owned or held by or for the account of the
Trust or the Trustees, including any and all assets of or allocated to any
Series or Class, as the context may require.
(v) Except as such term may be otherwise defined by the Trustees in
connection with any meeting or other action of Shareholders or in
conjunction with the establishment of any Series or Class of Shares, the
term "vote" when used in connection with an action of Shareholders shall
include a vote taken at a meeting of Shareholders or the consent or
consents of Shareholders taken without such a meeting. Except as such term
may be otherwise defined by the Trustees in connection with any meeting or
other action of Shareholders or in conjunction with the establishment of
any Series or Class of Shares, the term "vote of a majority of the
outstanding voting securities" as used in Sections 8.2 and 8.4 shall have
the same meaning as is assigned to that term in the 1940 Act.
ARTICLE II
TRUSTEES
Section 2.1. Management of the Trust. The business and affairs of the Trust
shall be managed by the Trustees and they shall have all powers and authority
necessary, appropriate or desirable to perform that function. The number, term
of office, manner of election, resignation, filling of vacancies and procedures
with respect to meetings and actions of the Trustees shall be as prescribed in
the By-Laws of the Trust.
Section 2.2. General Powers. The Trustees in all instances shall act as
principals for and on behalf of the Trust and the applicable Series thereof, and
their acts shall bind the Trust and the applicable Series. The Trustees shall
have full power and authority to do any and all acts and to make and execute any
and all contracts and instruments that they may consider necessary, appropriate
or desirable in connection with the management of the Trust. The Trustees shall
not be bound or limited in any way by present or future laws, practices or
customs in regard to trust investments or to other investments which may be made
by fiduciaries, but shall have full authority and power to make any and all
investments which they, in their uncontrolled discretion, shall deem proper to
promote, implement or accomplish the various objectives and interests of the
Trust and of its Series of Shares. The Trustees shall have full power and
authority to adopt such accounting and tax accounting practices as they consider
appropriate for the Trust and for any Series or Class of Shares. The Trustees
shall have exclusive and absolute control over the Trust Property and over the
business of the Trust to the same extent as if the Trustees were the sole owners
of the Trust Property and business in their own right, and with such full powers
of delegation as the Trustees may exercise from time to time. The Trustees shall
have power to conduct the business of the Trust and carry on its operations in
any and all of its branches and maintain offices both within and without the
Commonwealth of Massachusetts, in any and all states of the United States of
America, in the District of Columbia, and in any and all commonwealths,
territories, dependencies, colonies, possessions, agencies of instrumentalities
of the United States of America and of foreign governments, and to do all such
other things as they deem necessary, appropriate or desirable in order to
promote or implement the interests of the Trust or of any Series or Class of
Shares although such things are not herein specifically mentioned. Any
determination as to what is in the interests of the Trust or of any Series or
Class of Shares made by the Trustees in good faith shall be conclusive and
binding upon all Shareholders. In construing the provisions of this Declaration,
the presumption shall be in favor of a grant of plenary power and authority to
the Trustees.
The enumeration of any specific power in this Declaration shall not be
construed as limiting the aforesaid general and plenary powers.
Section 2.3. Investments. The Trustees shall have full power and authority:
(a) To operate as and carry on the business of an investment company,
and exercise all the powers necessary and appropriate to the conduct of
such operations.
(b) To acquire or buy, and invest Trust Property in, own, hold for
investment or otherwise, and to sell or otherwise dispose of, all types and
kinds of securities including, but not limited to, stocks, profit- sharing
interests or participations and all other contracts for or evidences of
equity interests, bonds, debentures, warrants and rights to purchase
securities, certificates of beneficial interest, bills, notes and all other
contracts for or evidences of indebtedness, money market instruments
including bank certificates of deposit, finance paper, commercial paper,
bankers' acceptances and other obligations, and all other negotiable and
non-negotiable securities and instruments, however named or described,
issued by corporations, trusts, associations or any other Persons, domestic
or foreign, or issued or guaranteed by the United States of America or any
agency or instrumentality thereof, by the government of any foreign
country, by any State, territory or possession of the United States, by any
political subdivision or agency or instrumentality of any State or foreign
country, or by any other government or other governmental or
quasi-governmental agency or instrumentality, domestic or foreign; to
acquire and dispose of interests in domestic or foreign loans made by banks
and other financial institutions; to deposit any assets of the Trust in any
bank, trust company or banking institution or retain any such assets in
domestic or foreign cash or currency; to purchase and sell gold and silver
bullion, precious or strategic metals, coins and currency of all countries;
to engage in "when issued" and delayed delivery transactions; to enter into
repurchase agreements, reverse repurchase agreements and firm commitment
agreements; to employ all types and kinds of hedging techniques and
investment management strategies; and to change the investments of the
Trust and of each Series.
(c) To acquire (by purchase, subscription or otherwise), to hold, to
trade in and deal in, to acquire any rights or options to purchase or sell,
to sell or otherwise dispose of, to lend and to pledge any Trust Property
or any of the foregoing securities, instruments or investments; to purchase
and sell (or write) options on securities, currency, precious metals and
other commodities, indices, futures contracts and other financial
instruments and assets and enter into closing and other transactions in
connection therewith; to enter into all types of commodities contracts,
including without limitation the purchase and sale of futures contracts on
securities, currency, precious metals and other commodities, indices and
other financial instruments and assets; to enter into forward foreign
currency exchange contracts and other foreign exchange and currency
transactions of all types and kinds; to enter into interest rate, currency
and other swap transactions; and to engage in all types and kinds of
hedging and risk management transactions.
(d) To exercise all rights, powers and privileges of ownership or
interest in all securities and other assets included in the Trust Property,
including without limitation the right to vote thereon and otherwise act
with respect thereto; and to do all acts and things for the preservation,
protection, improvement and enhancement in value of all such securities and
assets.
(e) To acquire (by purchase, lease or otherwise) and to hold, use,
maintain, lease, develop and dispose of (by sale or otherwise) any type or
kind of property, real or personal, including domestic or foreign currency,
and any right or interest therein.
(f) To borrow money and in this connection issue notes, commercial paper
or other evidence of indebtedness; to secure borrowings by mortgaging,
pledging or otherwise subjecting as security all or any part of the Trust
Property; to endorse, guarantee, or undertake the performance of any
obligation or engagement of any other Person; and to lend all or any part
of the Trust Property to other Persons.
(g) To aid, support or assist by further investment or other action any
Person, any obligation of or interest in which is included in the Trust
Property or in the affairs of which the Trust or any Series has any direct
or indirect interest; to do all acts and things designed to protect,
preserve, improve or enhance the value of such obligation or interest; and
to guarantee or become surety on any or all of the contracts, securities
and other obligations of any such Person.
(h) To carry on any other business in connection with or incidental to
any of the foregoing powers referred to in this Declaration, to do
everything necessary, appropriate or desirable for the accomplishment of
any purpose or the attainment of any object or the furtherance of any power
referred to in this Declaration, either alone or in association with
others, and to do every other act or thing incidental or appurtenant to or
arising out of or connected with such business or purposes, objects or
powers.
The foregoing clauses shall be construed both as objects and powers, and
shall not be held to limit or restrict in any manner the general and plenary
powers of the Trustees.
Notwithstanding any other provision herein, the Trustees shall have full
power in their discretion, without any requirement of approval by Shareholders,
to invest part or all of the Trust Property (or part or all of the assets of any
Fund), or to dispose of part or all of the Trust Property (or part or all of the
assets of any Fund) and invest the proceeds of such disposition, in securities
issued by one or more other investment companies registered under the 1940 Act.
Any such other investment company may (but need not) be a trust (formed under
the laws of the State of New York or of any other state) which is classified as
a partnership for federal income tax purposes.
Section 2.4. Legal Title. Legal title to all the Trust Property shall be
vested in the Trustees who from time to time shall be in office. The Trustees
may hold any security or other Trust Property in a form not indicating any
trust, whether in bearer, unregistered or other negotiable form, and may cause
legal title to any security or other Trust Property to be held by or in the name
of one or more of the Trustees, or in the name of the Trust or any Series, or in
the name of a custodian, subcustodian, agent, securities depository, clearing
agency, system for the central handling of securities or other book-entry
system, or in the name of a nominee or nominees of the Trust or a Series, or in
the name of a nominee or nominees of a custodian, subcustodian, agent,
securities depository, clearing agent, system for the central handling of
securities or other book-entry system, or in the name of any other Person as
nominee. The right, title and interest of the Trustees in the Trust Property
shall vest automatically in each Person who may hereafter become a Trustee. Upon
the termination of the term of office, resignation, removal or death of a
Trustee he shall automatically cease to have any right, title or interest in any
of the Trust Property, and the right, title and interest of such Trustee in the
Trust Property shall vest automatically in the remaining Trustees.
Section 2.5. By-Laws. The Trustees shall have full power and authority to
adopt By-Laws providing for the conduct of the business of the Trust and
containing such other provisions as they deem necessary, appropriate or
desirable, and to amend and repeal such By-Laws. Unless the By-Laws specifically
require that Shareholders authorize or approve the amendment or repeal of a
particular provision of the By-Laws, any provision of the By-Laws may be amended
or repealed by the Trustees without Shareholder authorization or approval.
Section 2.6. Distribution and Repurchase of Shares. The Trustees shall have
full power and authority to issue, sell, repurchase, redeem, retire, cancel,
acquire, hold, resell, reissue, dispose of, transfer, and otherwise deal in
Shares. Shares may be sold for cash or property or other consideration whenever
and in such amounts and manner as the Trustees deem desirable. The Trustees
shall have full power to provide for the distribution of Shares either through
one or more principal underwriters or by the Trust itself, or both. The Trustees
shall have full power and authority to cause the Trust and any Series and Class
of Shares to finance distribution activities in the manner described in Section
3.7, and to authorize the Trust, on behalf of one or more Series or Classes of
Shares, to adopt or enter into one or more plans or arrangements whereby
multiple Series and Classes of Shares may be issued and sold to various types of
investors.
Section 2.7. Delegation. The Trustees shall have full power and authority
to delegate from time to time to such of their number or to officers, employees
or agents of the Trust or to other Persons the doing of such things and the
execution of such agreements or other instruments either in the name of the
Trust or any Series of the Trust or the names of the Trustees or otherwise as
the Trustees may deem desirable or expedient.
Section 2.8. Collection and Payment. The Trustees shall have full power and
authority to collect all property due to the Trust; to pay all claims, including
taxes, against the Trust or Trust Property; to prosecute, defend, compromise,
settle or abandon any claims relating to the Trust or Trust Property; to
foreclose any security interest securing any obligations, by virtue of which any
property is owed to the Trust; and to enter into releases, agreements and other
instruments.
Section 2.9. Expenses. The Trustees shall have full power and authority to
incur on behalf of the Trust or any Series or Class of Shares and pay any costs
or expenses which the Trustees deem necessary, appropriate, desirable or
incidental to carry out, implement or enhance the business or operations of the
Trust or any Series thereof, and to pay compensation from the funds of the Trust
to themselves as Trustees. The Trustees shall determine the compensation of all
officers, employees and Trustees of the Trust. The Trustees shall have full
power and authority to cause the Trust to charge all or any part of any cost,
expense or expenditure (including without limitation any expense of selling or
distributing Shares) or tax against the principal or capital of the Trust or any
Series or Class of Shares, and to credit all or any part of the profit, income
or receipt (including without limitation any deferred sales charge or fee,
whether contingent or otherwise, paid or payable to the Trust or any Series or
Class of Shares on any redemption or repurchase of Shares) to the principal or
capital of the Trust or any Series or Class of Shares.
Section 2.10. Manner of Acting. Except as otherwise provided herein or in
the By-Laws, the Trustees and committees of the Trustees shall have full power
and authority to act in any manner which they deem necessary, appropriate or
desirable to carry out, implement or enhance the business or operations of the
Trust or any Series thereof.
Section 2.11. Miscellaneous Powers. The Trustees shall have full power and
authority to: (a) distribute to Shareholders all or any part of the earnings or
profits, surplus (including paid-in surplus), capital (including paid-in
capital) or assets of the Trust or of any Series or Class of Shares, the amount
of such distributions and the manner of payment thereof to be solely at the
discretion of the Trustees; (b) employ, engage or contract with such Persons as
the Trustees may deem desirable for the transaction of the business or
operations of the Trust or any Series thereof; (c) enter into or cause the Trust
or any Series thereof to enter into joint ventures, partnerships (whether as
general partner, limited partner or otherwise) and any other combinations or
associations; (d) remove Trustees or fill vacancies in or add to their number,
elect and remove such officers and appoint and terminate such agents or
employees or other Persons as they consider appropriate, and appoint from their
own number, and terminate, any one or more committees which may exercise some or
all of the power and authority of the Trustees as the Trustees may determine;
(e) purchase, and pay for out of Trust Property, insurance policies which may
insure such of the Shareholders, Trustees, officers, employees, agents,
investment advisers, administrators, principal underwriters, distributors or
independent contractors of the Trust as the Trustees deem appropriate against
loss or liability arising by reason of holding any such position or by reason of
any action taken or omitted by any such Person in such capacity, whether or not
constituting negligence, or whether or not the Trust would have the power to
indemnify such Person against such loss or liability; (f) establish pension,
profit-sharing, share purchase, and other retirement, incentive and benefit
plans for any Trustees, officers, employees and agents of the Trust; (g)
indemnify or reimburse any Person with whom the Trust or any Series thereof has
dealings, including without limitation the Investment Adviser, Administrator,
Principal Underwriter, Transfer Agent and financial service firms, to such
extent as the Trustees shall determine; (h) guarantee the indebtedness or
contractual obligations of other Persons; (i) determine and change the fiscal
year of the Trust or any Series thereof and the methods by which its and their
books, accounts and records shall be kept; and (j) adopt a seal for the Trust,
but the absence of such seal shall not impair the validity of any instrument
executed on behalf of the Trust or any Series thereof.
Section 2.12. Litigation. The Trustees shall have full power and authority,
in the name and on behalf of the Trust, to engage in and to prosecute, defend,
compromise, settle, abandon, or adjust by arbitration or otherwise, any actions,
suits, proceedings, disputes, claims and demands relating to the Trust, and out
of the assets of the Trust or any Series thereof to pay or to satisfy any
liabilities, losses, debts, claims or expenses (including without limitation
attorneys' fees) incurred in connection therewith, including those of
litigation, and such power shall include without limitation the power of the
Trustees or any committee thereof, in the exercise of their or its good faith
business judgment, to dismiss or terminate any action, suit, proceeding,
dispute, claim or demand, derivative or otherwise, brought by any Person,
including a Shareholder in his own name or in the name of the Trust or any
Series thereof, whether or not the Trust or any Series thereof or any of the
Trustees may be named individually therein or the subject matter arises by
reason of business for or on behalf of the Trust or any Series thereof.
ARTICLE III
CONTRACTS
Section 3.1. Principal Underwriter. The Trustees may in their discretion
from time to time authorize the Trust to enter into one or more contracts
providing for the sale of the Shares. Pursuant to any such contract the Trust
may either agree to sell the Shares to the other party to the contract or
appoint such other party its sales agent for such Shares. In either case, any
such contract shall be on such terms and conditions as the Trustees may in their
discretion determine; and any such contract may also provide for the repurchase
or sale of Shares by such other party as principal or as agent of the Trust.
Section 3.2. Investment Adviser. The Trustees may in their discretion from
time to time authorize the Trust to enter into one or more investment advisory
agreements, or, if the Trustees establish multiple Series, separate investment
advisory agreements, with respect to one or more Series whereby the other party
or parties to any such agreements shall undertake to furnish the Trust or such
Series investment advisory and research facilities and services and such other
facilities and services, if any, as the Trustees shall consider desirable and
all upon such terms and conditions as the Trustees may in their discretion
determine. Notwithstanding any provisions of this Declaration, the Trustees may
authorize the Investment Adviser, in its discretion and without any prior
consultation with the Trust, to buy, sell, lend and otherwise trade and deal in
any and all securities, commodity contracts and other investments and assets of
the Trust and of each Series and to engage in and employ all types of
transactions and strategies in connection therewith. Any such action taken
pursuant to such agreement shall be deemed to have been authorized by all of the
Trustees.
The Trustees may also authorize the Trust to employ, or authorize the
Investment Adviser to employ, one or more sub-investment advisers from time to
time to perform such of the acts and services of the Investment Adviser and upon
such terms and conditions as may be agreed upon between the Investment Adviser
and such sub-investment adviser and approved by the Trustees.
Section 3.3. Administrator. The Trustees may in their discretion from time
to time authorize the Trust to enter into an administration agreement or, if the
Trustees establish multiple Series or Classes, separate administration
agreements with respect to one or more Series or Classes, whereby the other
party to such agreement shall undertake to furnish to the Trust or a Series or a
Class thereof with such administrative facilities and services and such other
facilities and services, if any, as the Trustees consider desirable and all upon
such terms and conditions as the Trustees may in their discretion determine.
Section 3.4. Other Service Providers. The Trustees may in their discretion
from time to time authorize the Trust to enter into one or more agreements with
respect to one or more Series or Classes of Shares whereby the other party or
parties to any such agreements will undertake to provide to the Trust or Series
or Class or Shareholders or beneficial owners of Shares such services as the
Trustees consider desirable and all upon such terms and conditions as the
Trustees in their discretion may determine.
Section 3.5. Transfer Agents. The Trustees may in their discretion from
time to time appoint one or more transfer agents for the Trust or any Series
thereof. Any contract with a transfer agent shall be on such terms and
conditions as the Trustees may in their discretion determine.
Section 3.6. Custodian. The Trustees may appoint a bank or trust company
having an aggregate capital, surplus and undivided profits (as shown in its last
published report) of at least $2,000,000 as the principal custodian of the Trust
(the "Custodian") with authority as its agent to hold cash and securities owned
by the Trust and to release and deliver the same upon such terms and conditions
as may be agreed upon between the Trust and the Custodian.
Section 3.7. Plans of Distribution. The Trustees may in their discretion
authorize the Trust, on behalf of one or more Series or Classes of Shares, to
adopt or enter into a plan or plans of distribution and any related agreements
whereby the Trust or Series or Class may finance directly or indirectly any
activity which is primarily intended to result in sales of Shares or any
distribution activity within the meaning of Rule 12b-1 (or successor rule) under
the 1940 Act. Such plan or plans of distribution and any related agreements may
contain such terms and conditions as the Trustees may in their discretion
determine, subject to the requirements of the 1940 Act and any other applicable
rules and regulations.
Section 3.8. Affiliations. The fact that:
(i) any of the Shareholders, Trustees or officers of the Trust is a
shareholder, creditor, director, officer, partner, trustee or employee of
or has any interest in any Person or any parent or affiliate of any such
Person, with which a contract or agreement of the character described in
Sections 3.1, 3.2, 3.3, 3.4, 3.5 or 3.6 above has been or will be made or
to which payments have been or will be made pursuant to a plan or related
agreement described in Section 3.7 above, or that any such Person, or any
parent or affiliate thereof, is a Shareholder of or has an interest in the
Trust, or that
(ii) any such Person also has similar contracts, agreements or plans
with other investment companies (including, without limitation, the
investment companies referred to in the last paragraph of Section 2.3) or
organizations, or has other business activities or interests, shall not
affect in any way the validity of any such contract, agreement or plan or
disqualify any Shareholder, Trustee or officer of the Trust from
authorizing, voting upon or executing the same or create any liability or
accountability to the Trust or its Shareholders.
ARTICLE IV
LIMITATIONS OF LIABILITY OF SHAREHOLDERS, TRUSTEES AND OTHERS
Section 4.1. No Personal Liability of Shareholders, Trustees, Officers and
Employees. No Shareholder shall be subject to any personal liability whatsoever
to any Person in connection with Trust Property or the acts, obligations or
affairs of the Trust or any Series thereof. All Persons dealing or contracting
with the Trustees as such or with the Trust or any Series thereof shall have
recourse only to the Trust or such Series for the payment of their claims or for
the payment or satisfaction of claims, obligations or liabilities arising out of
such dealings or contracts. No Trustee, officer or employee of the Trust,
whether past, present or future, shall be subject to any personal liability
whatsoever to any such Person, and all such Persons shall look solely to the
Trust Property, or to the assets of one or more specific Series of the Trust if
the claim arises from the act, omission or other conduct of such Trustee,
officer or employee with respect to only such Series, for satisfaction of claims
of any nature arising in connection with the affairs of the Trust or such
Series. If any Shareholder, Trustee, officer or employee, as such, of the Trust
or any Series thereof, is made a party to any suit or proceeding to enforce any
such liability of the Trust or any Series thereof, he shall not, on account
thereof, be held to any personal liability.
Section 4.2. Trustee's Good Faith Action; Advice of Others; No Bond or
Surety. The exercise by the Trustees of their powers and discretions hereunder
shall be binding upon everyone interested. A Trustee shall not be liable for
errors of judgment or mistakes of fact or law. The Trustees shall not be
responsible or liable in any event for any neglect or wrongdoing of any officer,
agent, employee, consultant, investment adviser or other adviser, administrator,
distributor or principal underwriter, custodian or transfer, dividend
disbursing, shareholder servicing or accounting agent of the Trust, nor shall
any Trustee be responsible for the act or omission of any other Trustee. The
Trustees may take advice of counsel or other experts with respect to the meaning
and operation of this Declaration and their duties as Trustees, and shall be
under no liability for any act or omission in accordance with such advice or for
failing to follow such advice. In discharging their duties, the Trustees, when
acting in good faith, shall be entitled to rely upon the records, books and
accounts of the Trust and upon reports made to the Trustees by any officer,
employee, agent, consultant, accountant, attorney, investment adviser or other
adviser, principal underwriter, expert, professional firm or independent
contractor. The Trustees as such shall not be required to give any bond or
surety or any other security for the performance of their duties. No provision
of this Declaration shall protect any Trustee or officer of the Trust against
any liability to the Trust or its Shareholders to which he would otherwise be
subject by reason of his own willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office.
Section 4.3. Indemnification. The Trustees may provide, whether in the
By-Laws or by contract, vote or other action, for the indemnification by the
Trust or by any Series thereof of the Shareholders, Trustees, officers and
employees of the Trust and of such other Persons as the Trustees in the exercise
of their discretion may deem appropriate or desirable. Any such indemnification
may be mandatory or permissive, and may be insured against by policies
maintained by the Trust.
Section 4.4. No Duty of Investigation. No purchaser, lender or other Person
dealing with the Trustees or any officer, employee or agent of the Trust or a
Series thereof shall be bound to make any inquiry concerning the validity of any
transaction purporting to be made by the Trustees or by said officer, employee
or agent or be liable for the application of money or property paid, loaned, or
delivered to or on the order of the Trustees or of said officer, employee or
agent. Every obligation, contract, instrument, certificate, Share, other
security of the Trust or a Series thereof or undertaking, and every other act or
thing whatsoever executed in connection with the Trust shall be conclusively
presumed to have been executed or done by the executors thereof only in their
capacity as Trustees under this Declaration or in their capacity as officers,
employees or agents of the Trust or a Series thereof. Every written obligation,
contract, instrument, certificate, Share, other security of the Trust or a
Series thereof or undertaking made or issued by the Trustees may recite that the
same is executed or made by them not individually, but as Trustees under the
Declaration, and that the obligations of the Trust or a Series thereof under any
such instrument are not binding upon any of the Trustees or Shareholders
individually, but bind only the Trust Property or the Trust Property of the
applicable Series, and may contain any further recital which they may deem
appropriate, but the omission of any such recital shall not operate to bind the
Trustees or Shareholders individually.
Section 4.5. Reliance on Records and Experts. Each Trustee, officer or
employee of the Trust or a Series thereof shall, in the performance of his
duties, be fully and completely justified and protected with regard to any act
or any failure to act resulting from reliance in good faith upon the records,
books and accounts of the Trust or a Series thereof, upon an opinion or other
advice of legal counsel, or upon reports made or advice given to the Trust or a
Series thereof by any Trustee or any of its officers or employees or by the
Investment Adviser, the Administrator, the Custodian, the Principal Underwriter,
Transfer Agent, accountants, appraisers or other experts, advisers, consultants
or professionals selected with reasonable care by the Trustees or officers of
the Trust, regardless of whether the person rendering such report or advice may
also be a Trustee, officer or employee of the Trust.
ARTICLE V
SHARES OF BENEFICIAL INTEREST
Section 5.1. Beneficial Interest. The interest of the beneficiaries
hereunder shall be divided into transferable Shares of beneficial interest
without par value. The number of such Shares of beneficial interest authorized
hereunder is unlimited, and the number of Shares of each Series or Class thereof
that may be issued hereunder is unlimited. The Trustees shall have the exclusive
authority without the requirement of Shareholder authorization or approval to
establish and designate one or more Series of Shares and one or more Classes
thereof as the Trustees deem necessary, appropriate or desirable. Each Share of
any Series shall represent a beneficial interest only in the assets of that
Series. Subject to the provisions of Section 5.5 hereof, the Trustees may also
authorize the creation of additional Series of Shares (the proceeds of which may
be invested in separate and independent investment portfolios) and additional
Classes of Shares within any Series. All Shares issued hereunder including,
without limitation, Shares issued in connection with a dividend or distribution
in Shares or a split in Shares, shall be fully paid and nonassessable.
Section 5.2. Rights of Shareholders. The ownership of the Trust Property of
every description and the right to conduct any business of the Trust are vested
exclusively in the Trustees, and the Shareholders shall have no interest therein
other than the beneficial interest conferred by their Shares, and they shall
have no right to call for any partition or division of any property, profits,
rights or interests of the Trust or of any Fund nor can they be called upon to
share or assume any losses of the Trust or of any Fund or suffer an assessment
of any kind by virtue of their ownership of Shares. The Shares shall be personal
property giving only the rights specifically set forth in this Declaration. The
Shares shall not entitle the holder to preference, preemptive, appraisal,
conversion or exchange rights, except as the Trustees may specifically determine
with respect to any Series or Class of Shares.
Section 5.3. Trust Only. It is the intention of the Trustees to create only
the relationship of Trustee and beneficiary between the Trustees and each
Shareholder from time to time. It is not the intention of the Trustees to create
a general partnership, limited partnership, joint stock association,
corporation, bailment or any form of legal relationship other than a
Massachusetts business trust. Nothing in this Declaration shall be construed to
make the Shareholders, either by themselves or with the Trustees, partners or
members of a joint stock association.
Section 5.4. Issuance of Shares. The Trustees in their discretion may, from
time to time and without any authorization or vote of the Shareholders, issue
Shares, in addition to the then issued and outstanding Shares and Shares held in
the treasury, to such party or parties and for such amount and type of
consideration, including cash or property, at such time or times and on such
terms as the Trustees may deem appropriate or desirable, except that only Shares
previously contracted to be sold may be issued during any period when the right
of redemption is suspended pursuant to Section 6.9 hereof, and may in such
manner acquire other assets (including the acquisition of assets subject to, and
in connection with the assumption of, liabilities) and businesses. In connection
with any issuance of Shares, the Trustees may issue fractional Shares and
reissue and resell full and fractional Shares held in the treasury. The Trustees
may from time to time divide or combine the Shares of the Trust or, if the
Shares be divided into Series or Classes, of any Series or any Class thereof of
the Trust, into a greater or lesser number without thereby changing the
proportionate beneficial interests in the Trust or in the Trust Property
allocated or belonging to such Series or Class. Contributions to the Trust or
Series thereof may be accepted for, and Shares shall be redeemed as, whole
Shares and/or fractional Shares as the Trustees may in their discretion
determine. The Trustees may authorize the issuance of certificates of beneficial
interest to evidence the ownership of Shares. Shares held in the treasury shall
not be voted nor shall such Shares be entitled to any dividends or other
distributions declared with respect thereto.
Section 5.5. Series and Class Designations. Without limiting the exclusive
authority of the Trustees set forth in Section 5.1 to establish and designate
any further Series, it is hereby confirmed that the Trust consists of no
outstanding Series and no distinct Classes of Shares of any Series.The Shares of
any Series and Classes thereof that may from time to time be established and
designated by the Trustees shall be established and designated, and the
variations in the relative rights and preferences as between the different
Series and Classes shall be fixed and determined, by the Trustees (unless the
Trustees otherwise determine with respect to Series or Classes at the time of
establishing and designating the same); provided, that all Shares shall be
identical except that there may be variations so fixed and determined between
different Series or Classes thereof as to investment objective, policies and
restrictions, sales charges, purchase prices, determination of net asset value,
assets, liabilities, expenses, costs, charges and reserves belonging or
allocated thereto, the price, terms and manner of redemption or repurchase,
special and relative rights as to dividends and distributions and on
liquidation, conversion rights, exchange rights, and voting rights. All
references to Shares in this Declaration shall be deemed to be Shares of any or
all Series or Classes as the context may require. As to any division of Shares
of the Trust into Series or Classes, the following provisions shall be
applicable:
(i) The number of authorized Shares and the number of Shares of each
Series or Class thereof that may be issued shall be unlimited. The Trustees
may classify or reclassify any unissued Shares or any Shares previously
issued and reacquired of any Series or Class into one or more other Series
or one or more other Classes that may be established and designated from
time to time. The Trustees may hold as treasury shares (of the same or some
other Series or Class), reissue for such consideration and on such terms as
they may determine, or cancel any Shares of any Series or Class reacquired
by the Trust at their discretion from time to time.
(ii) All consideration received by the Trust for the issue or sale of
Shares of a particular Series, together with all assets in which such
consideration is invested or reinvested, all income, earnings, profits, and
proceeds thereof, including any proceeds derived from the sale, exchange or
liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall
irrevocably belong to that Series for all purposes, subject only to the
rights of creditors of such Series and except as may otherwise be required
by applicable tax laws, and shall be so recorded upon the books of account
of the Trust. In the event that there are any assets, income, earnings,
profits, and proceeds thereof, funds, or payments which are not readily
identifiable as belonging to any particular Series, the Trustees or their
delegate shall allocate them among any one or more of the Series
established and designated from time to time in such manner and on such
basis as the Trustees in their sole discretion deem fair and equitable.
Each such allocation by the Trustees or their delegate shall be conclusive
and binding upon the Shareholders of all Series for all purposes. No holder
of Shares of any Series shall have any claim on or right to any assets
allocated or belonging to any other Series.
(iii) Any general liabilities, expenses, costs, charges or reserves of
the Trust which are not readily identifiable as belonging to any particular
Series shall be allocated and charged by the Trustees or their delegate to
and among any one or more of the Series established and designated from
time to time in such manner and on such basis as the Trustees in their sole
discretion deem fair and equitable. The assets belonging to each particular
Series shall be charged with the liabilities, expenses, costs, charges and
reserves of the Trust so allocated to that Series and all liabilities,
expenses, costs, charges and reserves attributable to that Series which are
not readily identifiable as belonging to any particular Class thereof. Each
allocation of liabilities, expenses, costs, charges and reserves by the
Trustees or their delegate shall be conclusive and binding upon the
Shareholders of all Series and Classes for all purposes. The Trustees shall
have full discretion to determine which items are capital; and each such
determination shall be conclusive and binding upon the Shareholders. The
assets of a particular Series of the Trust shall, under no circumstances,
be charged with liabilities, expenses, costs, charges and reserves
attributable to any other Series or Class thereof of the Trust. All Persons
extending credit to, or contracting with or having any claim against a
particular Series of the Trust shall look only to the assets of that
particular Series for payment of such credit, contract or claim.
(iv) Dividends and distributions on Shares of a particular Series or
Class may be paid or credited in such manner and with such frequency as the
Trustees may determine, to the holders of Shares of that Series or Class,
from such of the earnings or profits, surplus (including paid-in surplus),
capital (including paid-in capital) or assets belonging to that Series, as
the Trustees may deem appropriate or desirable, after providing for actual
and accrued liabilities, expenses, costs, charges and reserves belonging
and allocated to that Series or Class. Such dividends and distributions may
be paid daily or otherwise pursuant to the offering prospectus relating to
the Shares or pursuant to a standing vote or votes of the Trustees adopted
only once or from time to time or pursuant to other authorization or
instruction of the Trustees. All dividends and distributions on Shares of a
particular Series or Class shall be distributed pro rata to the
Shareholders of that Series or Class in proportion to the number of Shares
of that Series or Class held by such Shareholders at the time of record
established for the payment or crediting of such dividends or
distributions.
(v) Each Share of a Series of the Trust shall represent a beneficial
interest in the net assets of such Series. Each holder of Shares of a
Series or Class thereof shall be entitled to receive his pro rata share of
distributions of income and capital gains made with respect to such Series
or Class net of liabilities, expenses, costs, charges and reserves
belonging and allocated to such Series or Class. Upon redemption of his
Shares or indemnification for liabilities incurred by reason of his being
or having been a Shareholder of a Series or Class, such Shareholder shall
be paid solely out of the funds and property of such Series of the Trust.
Upon liquidation or termination of a Series or Class thereof of the Trust,
a Shareholder of such Series or Class thereof shall be entitled to receive
a pro rata share of the net assets of such Series based on the net asset
value of his Shares. A Shareholder of a particular Series of the Trust
shall not be entitled to commence or participate in a derivative or class
action on behalf of any other Series or the Shareholders of any other
Series of the Trust.
(vi) On any matter submitted to a vote of Shareholders, the Shares
entitled to vote thereon and the manner in which such Shares shall be voted
shall be as set forth in the By-Laws or proxy materials for the meeting or
other solicitation materials or as otherwise determined by the Trustees,
subject to any applicable requirements of the 1940 Act. The Trustees shall
have full power and authority to call meetings of the Shareholders of a
particular Class or Classes of Shares or of one or more particular Series
of Shares, or otherwise call for the action of such Shareholders on any
particular matter.
(vii) Except as otherwise provided in this Article V, the Trustees shall
have full power and authority to determine the designations, preferences,
privileges, sales charges, purchase prices, assets, liabilities, expenses,
costs, charges and reserves belonging or allocated thereto, limitations and
rights, including without limitation voting, dividend, distribution and
liquidation rights, of each Class and Series of Shares. Subject to any
applicable requirements of the 1940 Act, the Trustees shall have the
authority to provide that Shares of one Class shall be automatically
converted into Shares of another Class of the same Series or that the
holders of Shares of any Series or Class shall have the right to convert or
exchange such Shares into Shares of one or more other Series or Classes of
Shares, all in accordance with such requirements, conditions and procedures
as may be established by the Trustees.
(viii) The establishment and designation of any Series or Class of
Shares shall be effective upon the execution by a majority of the then
Trustees of an instrument setting forth such establishment and designation
and the relative rights and preferences of such Series or Class, or as
otherwise provided in such instrument. The Trustees may by an instrument
subsequently executed by a majority of their number amend, restate or
rescind any prior instrument relating to the establishment and designation
of any such Series or Class. Each instrument referred to in this paragraph
shall have the status of an amendment to this Declaration in accordance
with Section 8.4 hereof, and a copy of each such instrument shall be filed
in accordance with Section 10.2 hereof.
Section 5.6. Assent to Declaration of Trust and By-Laws. Every Shareholder,
by virtue of having become a Shareholder, shall be held to have expressly
assented and agreed to all the terms and provisions of this Declaration and of
the By-Laws of the Trust.
ARTICLE VI
REDEMPTION AND REPURCHASE OF SHARES
Section 6.1. Redemption of Shares. (a) Shares of the Trust shall be
redeemable, at such times and in such manner as may be permitted by the Trustees
from time to time. The Trustees shall have full power and authority to vary and
change the right of redemption applicable to the various Series and Classes of
Shares established by the Trustees. Redeemed or repurchased Shares may be resold
by the Trust. The Trust may require any Shareholder to pay a sales charge to the
Trust, the Principal Underwriter or any other Person designated by the Trustees
upon redemption or repurchase of Shares in such amount and upon such conditions
as shall be determined from time to time by the Trustees.
(b) The Trust shall redeem the Shares of the Trust or any Series or Class
thereof at the price determined as hereinafter set forth, upon the appropriately
verified written application of the record holder thereof (or upon such other
form of request as the Trust may use for the purpose) deposited at such office
or agency as may be designated from time to time for that purpose by the
Trustees. The Trust may from time to time establish additional requirements,
terms, conditions and procedures, not inconsistent with the 1940 Act, relating
to the redemption of Shares.
Section 6.2. Price. Shares shall be redeemed at a price based on their net
asset value determined as set forth in Section 7.1 hereof as of such time as the
Trustees shall prescribe. The amount of any sales charge or redemption fee
payable upon redemption of Shares may be deducted from the proceeds of such
redemption.
Section 6.3. Payment. Payment of the redemption price of Shares thereof
shall be made in cash or in property to the Shareholder at such time and in the
manner, not inconsistent with the 1940 Act, as may be specified from time to
time in the then effective prospectus relating to such Shares, subject to the
provisions of Sections 6.4 and 6.9 hereof. Notwithstanding the foregoing, the
Trust or its agent may withhold from such redemption proceeds any amount arising
(i) from a liability of the redeeming Shareholder to the Trust or (ii) in
connection with any federal or state tax withholding requirements.
Section 6.4. Effect of Suspension of Determination of Net Asset Value. If,
pursuant to Section 7.1 hereof, the Trust shall declare a suspension of the
determination of net asset value with respect to Shares of the Trust or of any
Series or Class thereof, the rights of Shareholders (including those who shall
have applied for redemption pursuant to Section 6.1 hereof but who shall not yet
have received payment) to have Shares redeemed and paid for by the Trust or a
Series shall be suspended until the termination of such suspension is declared.
Any record holder who shall have his redemption right so suspended may, during
the period of such suspension, by appropriate written notice at the office or
agency where his application or request for redemption was made, withdraw his
application or request and withdraw any Share certificates on deposit.
Section 6.5. Repurchase by Agreement. The Trust may repurchase Shares
directly, or through the Principal Underwriter or another agent designated for
the purpose, by agreement with the owner thereof at a price not exceeding the
net asset value per share determined as of such time as the Trustees shall
prescribe. The Trust may from time to time establish the requirements, terms,
conditions and procedures relating to such repurchases, and the amount of any
sales charge or repurchase fee payable on any repurchase of Shares may be
deducted from the proceeds of such repurchase.
Section 6.6. Redemption of Shareholder's Interest. The Trustees, in their
sole discretion, may cause the Trust to redeem all of the Shares of one or more
Series or Class thereof held by any Shareholder if the value of such Shares held
by such Shareholder is less than the minimum amount established from time to
time by the Trustees.
Section 6.7. Redemption of Shares in Order to Qualify as Regulated
Investment Company; Disclosure of Holding. (a) If the Trustees shall, at any
time and in good faith, be of the opinion that direct or indirect ownership of
Shares or other securities of the Trust has or may become concentrated in any
Person to an extent which would disqualify the Trust or any Series of the Trust
as a regulated investment company under the Internal Revenue Code of 1986, then
the Trustees shall have the power by lot or other means deemed equitable by them
(i) to call for redemption by any such Person a number, or principal amount, of
Shares or other securities of the Trust or any Series of the Trust sufficient to
maintain or bring the direct or indirect ownership of Shares or other securities
of the Trust or any Series of the Trust into conformity with the requirements
for such qualification and (ii) to refuse to transfer or issue Shares or other
securities of the Trust or any Series of the Trust to any Person whose
acquisition of the Shares or other securities of the Trust or any Series of the
Trust in question would result in such disqualification. The redemption shall be
effected in the manner provided in Section 6.1 and at the redemption price
referred to in Section 6.2.
(b) The holders of Shares or other securities of the Trust shall upon
demand disclose to the Trustees in writing such information with respect to
direct and indirect ownership of Shares or other securities of the Trust as the
Trustees deem necessary to comply with the provisions of the Internal Revenue
Code of 1986, or to comply with the requirements of any other taxing authority.
Section 6.8. Reductions in Number of Outstanding Shares Pursuant to Net
Asset Value Formula. The Trust may also reduce the number of outstanding Shares
of the Trust or of any Series or Class thereof pursuant to the provisions of
Section 7.3.
Section 6.9. Suspension of Right of Redemption. The Trust may declare a
suspension of the right of redemption or postpone the date of payment or
redemption for the whole or any part of any period (i) during which the New York
Stock Exchange is closed other than customary weekend and holiday closings, (ii)
during which trading on the New York Stock Exchange is restricted, (iii) during
which an emergency exists as a result of which disposal by the Trust or a Fund
of securities owned by it is not reasonably practicable or it is not reasonably
practicable for the Trust or a Fund fairly to determine the value of its net
assets, or (iv) as the Commission may by order permit for the protection of
security holders of the Trust. Such suspension shall take effect at such time as
the Trust shall specify but not later than the close of business on the business
day next following the declaration of suspension, and thereafter there shall be
no right of redemption or payment on redemption until the Trust shall declare
the suspension at an end, except that the suspension shall terminate in any
event on the first day on which said stock exchange shall have reopened or the
period specified in (ii) or (iii) shall have expired (as to which in the absence
of an official ruling by the Commission, the determination of the Trust shall be
conclusive). In the case of a suspension of the right of redemption, a
Shareholder may either withdraw his application or request for redemption or
receive payment based on the net asset value existing after the termination of
the suspension.
ARTICLE VII
DETERMINATION OF NET ASSET VALUE, NET INCOME
AND DISTRIBUTIONS
Section 7.1. Net Asset Value. The net asset value of each outstanding Share
of the Trust or of each Series or Class thereof shall be determined on such days
and at or as of such time or times as the Trustees may determine. Any reference
in this Declaration to the time at which a determination of net asset value is
made shall mean the time as of which the determination is made. The power and
duty to determine net asset value may be delegated by the Trustees from time to
time to the Investment Adviser, the Administrator, the Custodian, the Transfer
Agent or such other Person or Persons as the Trustees may determine. The value
of the assets of the Trust or any Series thereof shall be determined in a manner
authorized by the Trustees. From the total value of said assets, there shall be
deducted all indebtedness, interest, taxes, payable or accrued, including
estimated taxes on unrealized book profits, expenses and management charges
accrued to the appraisal date, amounts determined and declared as a dividend or
distribution and all other items in the nature of liabilities which shall be
deemed appropriate, as incurred by or allocated to the Trust or any Series or
Class thereof. The resulting amount, which shall represent the total net assets
of the Trust or Series or Class thereof, shall be divided by the number of
Shares of the Trust or Series or Class thereof outstanding at the time and the
quotient so obtained shall be deemed to be the net asset value of the Shares of
the Trust or Series or Class thereof. The Trust may declare a suspension of the
determination of net asset value to the extent permitted by the 1940 Act. It
shall not be a violation of any provision of this Declaration if Shares are
sold, redeemed or repurchased by the Trust at a price other than one based on
net asset value if the net asset value is affected by one or more errors
inadvertently made in the pricing of portfolio securities or other investments
or in accruing or allocating income, expenses, reserves or liabilities. No
provision of this Declaration shall be construed to restrict or affect the right
or ability of the Trust to employ or authorize the use of pricing services,
appraisers or any other means, methods, procedures, or techniques in valuing the
assets or calculating the liabilities of the Trust or any Series or Class
thereof.
Section 7.2. Dividends and Distributions. (a) The Trustees may from time to
time distribute ratably among the Shareholders of the Trust or of a Series or
Class thereof such proportion of the net earnings or profits, surplus (including
paid-in surplus), capital (including paid-in capital), or assets of the Trust or
such Series held by the Trustees as they may deem appropriate or desirable. Such
distributions may be made in cash, additional Shares or property (including
without limitation any type of obligations of the Trust or Series or Class or
any assets thereof), and the Trustees may distribute ratably among the
Shareholders of the Trust or Series or Class thereof additional Shares of the
Trust or Series or Class thereof issuable hereunder in such manner, at such
times, and on such terms as the Trustees may deem appropriate or desirable. Such
distributions may be among the Shareholders of the Trust or Series or Class
thereof at the time of declaring a distribution or among the Shareholders of the
Trust or Series or Class thereof at such other date or time or dates or times as
the Trustees shall determine. The Trustees may in their discretion determine
that, solely for the purposes of such distributions, Outstanding Shares shall
exclude Shares for which orders have been placed subsequent to a specified time.
The Trustees may always retain from the earnings or profits such amounts as they
may deem appropriate or desirable to pay the expenses and liabilities of the
Trust or a Series or Class thereof or to meet obligations of the Trust or a
Series or Class thereof, together with such amounts as they may deem desirable
to use in the conduct of its affairs or to retain for future requirements or
extensions of the business or operations of the Trust or such Series. The Trust
may adopt and offer to Shareholders such dividend reinvestment plans, cash
dividend payout plans or other distribution plans as the Trustees may deem
appropriate or desirable. The Trustees may in their discretion determine that an
account administration fee or other similar charge may be deducted directly from
the income and other distributions paid on Shares to a Shareholder's account in
any Series or Class.
(b) The Trustees may prescribe, in their absolute discretion, such bases
and times for determining the amounts for the declaration and payment of
dividends and distributions as they may deem necessary, appropriate or
desirable.
(c) Inasmuch as the computation of net income and gains for federal income
tax purposes may vary from the computation thereof on the books of account, the
above provisions shall be interpreted to give the Trustees full power and
authority in their absolute discretion to distribute for any fiscal year as
dividends and as capital gains distributions, respectively, additional amounts
sufficient to enable the Trust or a Series thereof to avoid or reduce liability
for taxes.
Section 7.3. Constant Net Asset Value; Reduction of Outstanding Shares. The
Trustees may determine to maintain the net asset value per Share of any Series
or Class at a designated constant amount and in connection therewith may adopt
procedures not inconsistent with the 1940 Act for the continuing declarations of
income attributable to that Series or Class as dividends payable in additional
Shares of that Series or Class or in cash or in any combination thereof and for
the handling of any losses attributable to that Series or Class. Such procedures
may provide that, if, for any reason, the income of any such Series or Class
determined at any time is a negative amount, the Trust may with respect to such
Series or Class (i) offset each Shareholder's pro rata share of such negative
amount from the accrued dividend account of such Shareholder, or (ii) reduce the
number of Outstanding Shares of such Series or Class by reducing the number of
Shares in the account of such Shareholder by that number of full and fractional
Shares which represents the amount of such excess negative income, or (iii)
cause to be recorded on the books of the Trust an asset account in the amount of
such negative income, which account may be reduced by the amount, provided that
the same shall thereupon become the property of the Trust with respect to such
Series or Class and shall not be paid to any Shareholder, of dividends declared
thereafter upon the Outstanding Shares of such Series or Class on the day such
negative income is experienced, until such asset account is reduced to zero, or
(iv) combine the methods described in clauses (i), (ii) and (iii) of this
sentence, in order to cause the net asset value per Share of such Series or
Class to remain at a constant amount per Outstanding Share immediately after
such determination and declaration. The Trust may also fail to declare a
dividend out of income for the purpose of causing the net asset value of any
such Share to be increased. The Trustees shall have full discretion to determine
whether any cash or property received shall be treated as income or as principal
and whether any item of expense shall be charged to the income or the principal
account, and their determination made in good faith shall be conclusive upon all
Shareholders. In the case of stock dividends or similar distributions received,
the Trustees shall have full discretion to determine, in the light of the
particular circumstances, how much if any of the value thereof shall be treated
as income, the balance, if any, to be treated as principal.
Section 7.4. Power to Modify Foregoing Procedures. Notwithstanding any
provision contained in this Declaration, the Trustees may prescribe, in their
absolute discretion, such other means, methods, procedures or techniques for
determining the per Share net asset value of a Series or Class thereof or the
income of the Series or Class thereof, or for the declaration and payment of
dividends and distributions on any Series or Class of Shares.
ARTICLE VIII
DURATION; TERMINATION OF TRUST OR A
SERIES OR CLASS; MERGERS; AMENDMENTS
Section 8.1. Duration. The Trust shall continue without limitation of time
but subject to the provisions of this Article VIII. The death, declination,
resignation, retirement, removal or incapacity of the Trustees, or any one of
them, shall not operate to terminate or annul the Trust or to revoke any
existing agency or delegation of authority pursuant to the terms of this
Declaration or of the By-Laws.
Section 8.2. Termination of the Trust or a Series or a Class. (a) The Trust
or any Series or Class thereof may be terminated by: (1) the affirmative vote of
the holders of not less than two-thirds of the Shares outstanding and entitled
to vote at any meeting of Shareholders of the Trust or the appropriate Series or
Class thereof, or by an instrument or instruments in writing without a meeting,
consented to by the holders of two-thirds of the Shares of the Trust or a Series
or Class thereof, provided, however, that, if such termination is recommended by
the Trustees, the vote of a majority of the outstanding voting securities of the
Trust or a Series or Class thereof entitled to vote thereon shall be sufficient
authorization; or (2) by means of an instrument in writing signed by a majority
of the Trustees, to be followed by a written notice to Shareholders stating that
a majority of the Trustees has determined that the continuation of the Trust or
a Series or a Class thereof is not in the best interest of the Trust, such
Series or Class or of their respective Shareholders. Such determination may (but
need not) be based on factors or events adversely affecting the ability of the
Trust, such Series or Class to conduct its business and operations in an
economically viable manner. Such factors and events may include (but are not
limited to) the inability of a Series or Class or the Trust to maintain its
assets at an appropriate size, changes in laws or regulations governing the
Series or Class or the Trust or affecting assets of the type in which such
Series or Class or the Trust invests, or political, social, legal or economic
developments or trends having an adverse impact on the business or operations of
such Series or Class or the Trust. Upon the termination of the Trust or the
Series or Class,
(i) The Trust, Series or Class shall carry on no business except for the
purpose of winding up its affairs.
(ii) The Trustees shall proceed to wind up the affairs of the Trust,
Series or Class and all of the powers of the Trustees under this
Declaration shall continue until the affairs of the Trust, Series or Class
shall have been wound up, including the power to fulfill or discharge the
contracts of the Trust, Series or Class, collect its assets, sell, convey,
assign, exchange, transfer or otherwise dispose of all or any part of the
remaining Trust Property or assets allocated or belonging to such Series or
Class to one or more persons at public or private sale for consideration
which may consist in whole or in part of cash, securities or other property
of any kind, discharge or pay its liabilities, and do all other acts
appropriate to liquidate its business.
(iii) After paying or adequately providing for the payment of all
liabilities, and upon receipt of such releases, indemnities and refunding
agreements as they deem necessary for their protection, the Trustees may
distribute the remaining Trust Property or the remaining property of the
terminated Series or Class, in cash or in kind or in any combination
thereof, among the Shareholders of the Trust or the Series or Class
according to their respective rights.
(b) After termination of the Trust, Series or Class and distribution to the
Shareholders as herein provided, a majority of the Trustees shall execute and
lodge among the records of the Trust and file with the Massachusetts Secretary
of State an instrument in writing setting forth the fact of such termination,
and the Trustees shall thereupon be discharged from all further liabilities and
duties with respect to the Trust or the terminated Series or Class, and the
rights and interests of all Shareholders of the Trust or the terminated Series
or Class shall thereupon cease.
Section 8.3. Merger, Consolidation or Sale of Assets of a Series. A
particular Series may merge or consolidate with any other corporation,
association, trust or other organization or may sell, lease or exchange all or
substantially all of its property, including its good will, upon such terms and
conditions and for such consideration when and as authorized by the Trustees and
without any authorization, vote or consent of the Shareholders; and any such
merger, consolidation, sale, lease or exchange shall be deemed for all purposes
to have been accomplished under and pursuant to the statutes of the Commonwealth
of Massachusetts. The Trustees may also at any time sell and convert into money
all the assets of a particular Series. Upon making provision for the payment of
all outstanding obligations, taxes, and other liabilities, accrued or
contingent, of the particular Series, the Trustees shall distribute the
remaining assets of such Series among the Shareholders of such Series according
to their respective rights. Upon completion of the distribution of the remaining
proceeds or the remaining assets, the Series shall terminate and the Trustees
shall take the action provided in Section 8.2(b) hereof and they shall thereupon
be discharged from all further liabilities and duties with respect to such
Series, and the rights and interests of all Shareholders of the terminated
Series shall thereupon cease.
Section 8.4. Amendments. The execution of an instrument setting forth the
establishment and designation and the relative rights and preferences of any
Series or Class of Shares (or amending, restating or rescinding any such prior
instrument) in accordance with Section 5.5 hereof shall, without any
authorization, consent or vote of the Shareholders, effect an amendment of this
Declaration. Except as otherwise provided in this Section 8.4, if authorized by
vote of a majority of the outstanding voting securities of the Trust the
financial interests of which are affected by the amendment and which are
entitled to vote thereon (which securities shall, unless otherwise provided by
the Trustees, vote together on such amendment as a single class), the Trustees
may amend this Declaration by an instrument signed by a majority of the Trustees
then in office. No Shareholder not so affected by any such amendment shall be
entitled to vote thereon. The Trustees may (by such an instrument) also amend or
otherwise supplement this Declaration of Trust, without any authorization,
consent or vote of the Shareholders, to change the name of the Trust or any Fund
or to make such other changes as do not have a materially adverse effect on the
financial interests of Shareholders hereunder or if they deem it necessary or
desirable to conform this Declaration to the requirements of applicable federal
or state laws or regulations or the requirements of the Internal Revenue Code of
1986, but the Trustees shall not be liable for failing to do so. Any such
amendment or supplemental Declaration of Trust shall be effective as provided in
the instrument containing its terms or, if there is no provision therein with
respect to effectiveness, upon the signing of such instrument by a majority of
the Trustees then in office. Copies of any amendment or of any supplemental
Declaration of Trust shall be filed as specified in Section 9.2 hereof. Nothing
contained in this Declaration shall permit the amendment of this Declaration to
impair the exemption from personal liability of the Shareholders, Trustees,
officers, employees and agents of the Trust or to permit assessments upon
Shareholders.
Notwithstanding any other provision hereof, until such time as Shares are
issued and sold, this Declaration may be terminated or amended in any respect by
an instrument signed by a majority of the Trustees then in office.
ARTICLE IX
MISCELLANEOUS
Section 9.1. Use of the Words "Eaton Vance". Eaton Vance Corp. (hereinafter
referred to as "EVC"), which owns (either directly or through subsidiaries) all
of the capital shares of the Investment Adviser of the Trust and the Funds (or
of the investment adviser of each of the investment companies referred to in the
last paragraph of Section 2.3), has consented to the use by the Trust and the
Funds of the identifying words "Eaton Vance" in the name of the Trust and in the
name of each Fund. Such consent is conditioned upon the continued employment of
EVC or a subsidiary or affiliate of EVC as Investment Adviser of the Trust and
of each such Fund or as the investment adviser of each of the investment
companies referred to in the last paragraph of Section 2.3. As between the Trust
and itself, EVC shall control the use of the name of the Trust and the name of
any Fund insofar as such name contains the identifying words "Eaton Vance". EVC
may from time to time use the identifying words "Eaton Vance" in other
connections and for other purposes, including, without limitation, in the names
of other investment companies, trusts, corporations or businesses which it may
manage, advise, sponsor or own or in which it may have a financial interest. EVC
may require the Trust to cease using the identifying words "Eaton Vance" in the
name of the Trust or any Fund if EVC or a subsidiary or affiliate of EVC ceases
to act as investment adviser of the Trust or such Fund or as the investment
adviser of each of the investment companies referred to in the last paragraph of
Section 2.3.
Section 9.2. Filing of Copies, References, Headings and Counterparts. The
original or a copy of this instrument, of any amendment hereto and of each
declaration of trust supplemental hereto, shall be kept at the office of the
Trust. A copy of this instrument, of any amendment hereto, and of each
supplemental declaration of trust shall be filed with the Massachusetts
Secretary of State and with any other governmental office where such filing may
from time to time be required. Anyone dealing with the Trust may rely on a
certificate by a Trustee or an officer of the Trust as to whether or not any
such amendments or supplemental declarations of trust have been made and as to
any matters in connection with the Trust hereunder, and with the same effect as
if it were the original, may rely on a copy certified by a Trustee or an officer
of the Trust to be a copy of this instrument or of any such amendment hereto or
supplemental declaration of trust.
In this instrument or in any such amendment or supplemental declaration of
trust, references to this instrument, and all expressions such as "herein",
"hereof", and "hereunder", shall be deemed to refer to this instrument as
amended or affected by any such supplemental declaration of trust. Headings are
placed herein for convenience of reference only and in case of any conflict, the
text of this instrument, rather than the headings, shall control. This
instrument may be executed in any number of counterparts each of which shall be
deemed an original, but such counterparts shall constitute one instrument. A
restated Declaration, integrating into a single instrument all of the provisions
of the Declaration which are then in effect and operative, may be executed from
time to time by a majority of the Trustees then in office and filed with the
Massachusetts Secretary of State. A restated Declaration shall, upon execution,
be conclusive evidence of all amendments and supplemental declarations contained
therein and may hereafter be referred to in lieu of the original Declaration and
the various amendments and supplements thereto.
Section 9.3. Applicable Law. The Trust set forth in this instrument is made
in the Commonwealth of Massachusetts, and it is created under and is to be
governed by and construed and administered according to the laws of said
Commonwealth. The Trust shall be of the type commonly called a Massachusetts
business trust, and without limiting the provisions hereof, the Trust may
exercise all powers which are ordinarily exercised by such a trust.
Section 9.4. Provisions in Conflict with Law or Regulations. (a) The
provisions of this Declaration are severable, and if the Trustees shall
determine, with the advice of legal counsel, that any of such provisions is in
conflict with the 1940 Act, the Internal Revenue Code of 1986 or with other
applicable laws and regulations, the conflicting provision shall be deemed never
to have constituted a part of this Declaration; provided, however, that such
determination shall not affect any of the remaining provisions of this
Declaration or render invalid or improper any action taken or omitted prior to
such determination.
(b) If any provision of this Declaration shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
attach only to such provision in such jurisdiction and shall not in any manner
affect such provisions in any other jurisdiction or any other provision of this
Declaration in any jurisdiction.
IN WITNESS WHEREOF, the undersigned, being a majority of the current
Trustees of the Trust, have executed this instrument this 25th day of October,
1993.
/s/ Donald R. Dwight
------------------------------
Donald R. Dwight
/s/ James B. Hawkes
------------------------------
James B. Hawkes
/s/ Samuel L. Hayes, III
------------------------------
Samuel L. Hayes, III
/s/ Norton H. Reamer
------------------------------
Norton H. Reamer
/s/ John L. Thorndike
------------------------------
John L. Thorndike
/s/ Jack L. Treynor
------------------------------
Jack L. Treynor
Exhibit 99.(1)(b)
EATON VANCE MUNICIPALS TRUST II
Amendment and Restatement of
Establishment and Designation of Series of Shares
of Beneficial Interest, Without Par Value
(as amended and restated May 15, 1995)
WHEREAS, pursuant to an Establishment and Designation of Series of
Shares of Beneficial Interest, Without Par Value, dated October 25, 1993 the
Trustees of Eaton Vance Municipals Trust II, a Massachusetts business trust (the
"Trust"), designated seven separate series (or "Funds"); and
WHEREAS, the Trustees now desire to further redesignate the series or
Funds pursuant to Section 5.1 of Article V of the Trust's Declaration of Trust
dated October 25, 1993 (the "Declaration of Trust");
NOW, THEREFORE, the undersigned, being at least a majority of the duly
elected and qualified Trustees presently in office of the Trust, hereby divide
the shares of beneficial interest of the Trust into nine separate series
("Funds"), each Fund to have the following special and relative rights:
1. The Funds shall be designated as follows:
EV Traditional Florida Insured Tax Free Fund
EV Marathon Florida Insured Tax Free Fund
EV Classic Florida Insured Tax Free Fund
EV Marathon Hawaii Tax Free Fund
EV Classic Hawaii Tax Free Fund
EV Marathon Kansas Tax Free Fund
EV Classic Kansas Tax Free Fund
EV Marathon High Yield Municipals Fund
EV Traditional High Yield Municipals Fund
2. Each Fund shall be authorized to invest in cash, securities,
instruments and other property as from time to time described in the Trust's
then currently effective registration statements under the Securities Act of
1933 and the Investment Company Act of 1940. Each share of beneficial interest
of each Fund ("share") shall be redeemable, shall be entitled to one vote (or
fraction thereof in respect of a fractional share) on matters on which shares of
that Fund shall be entitled to vote and shall represent a pro rata beneficial
interest in the assets allocated to that Fund, all as provided in the
Declaration of Trust. The proceeds of sales of shares of each Fund, together
with any income and gain thereon, less any diminution or expenses thereof, shall
irrevocably belong to such Fund, unless otherwise required by law. Each share of
a Fund shall be entitled to receive its pro rata share of net assets of that
Fund upon liquidation of that Fund.
3. Shareholders of each Fund shall vote separately as a class to the
extent provided in Rule 18f-2, as from time to time in effect, under the
Investment Company Act of 1940.
4. The assets and liabilities of the Trust shall be allocated among the
above-referenced Funds as set forth in Section 5.5 of Article V of the
Declaration of Trust, except as provided below.
(a) Costs incurred by each Fund in connection with its organization and
start-up, including Federal and state registration and qualification fees and
expenses of the initial public offering of such Fund's shares, shall be borne by
such Fund and deferred and amortized over the five year period beginning on the
date that such Fund commences operations.
(b) Reimbursement required under any expense limitation applicable to
the Trust shall be allocated among those Funds whose expense ratios exceed such
limitation on the basis of the relative expense ratios of such Funds.
(c) The liabilities, expenses, costs, charges and reserves of the Trust
(other than the management and investment advisory fees or the organizational
expenses paid by the Trust) which are not readily identifiable as belonging to
any particular Fund shall be allocated among the Funds on an equitable basis as
determined by the Trustees.
5. The Trustees (including any successor Trustees) shall have the right
at any time and from time to time to reallocate assets and expenses or to change
the designation of any Fund now or hereafter created, or to otherwise change the
special and relative rights of any such Fund, and to terminate any Fund or add
additional Funds as provided in the Declaration of Trust.
6. Any Fund may merge or consolidate with any other corporation,
association, trust or other organization or may sell, lease or exchange all or
substantially all of its property, including its good will, upon such terms and
conditions and for such consideration when and as authorized by the Trustees;
and any such merger, consolidation, sale, lease or exchange shall be deemed for
all purposes to have been accomplished under and pursuant to the statutes of the
Commonwealth of Massachusetts. The Trustees may also at any time sell and
convert into money all the assets of any Fund. Upon making provision for the
payment of all outstanding obligations, taxes and other liabilities, accrued or
contingent, of such Fund, the Trustees shall distribute the remaining assets of
such Fund ratably among the holders of the outstanding shares. Upon completion
of the distribution of the remaining proceeds or the remaining assets as
provided in this paragraph 6, the Fund shall terminate and the Trustees shall be
discharged of any and all further liabilities and duties hereunder with respect
to such Fund and the right, title and interest of all parties with respect to
such Fund shall be cancelled and discharged.
7. The Declaration of Trust authorizes the Trustees to divide each Fund
and any other series of shares into two or more classes and to fix and determine
the relative rights and preferences as between, and all provisions applicable
to, each of the different classes so established and designated by the Trustees.
The establishment and designation of any class of any Fund or other series of
shares shall be effective upon the execution by a majority of the then Trustees
of an instrument setting forth such establishment and designation and the
relative rights and preferences, and provisions applicable to, such class, or as
otherwise provided in such instrument.
Dated: May 15, 1995
<PAGE>
/s/ Donald R. Dwight
- ------------------------
Donald R. Dwight
/s/ James B. Hawkes
- ------------------------
James B. Hawkes
/s/ Samuel L. Hayes, III
- ------------------------
Samuel L. Hayes, III
/s/ Norton H. Reamer
- ------------------------
Norton H. Reamer
/s/ John L. Thorndike
- ------------------------
John L. Thorndike
/s/ Jack L. Treynor
- ------------------------
Jack L. Treynor
Exhibit 99.(6)(a)(4)
FORM OF
EATON VANCE MUNICIPALS TRUST II
AMENDED DISTRIBUTION AGREEMENT
(Marathon Series)
AGREEMENT effective as of , 1995 between EATON VANCE MUNICIPALS
TRUST II, a Massachusetts business trust having its principal place of business
in Boston in the Commonwealth of Massachusetts, hereinafter called the "Trust",
on behalf of each of its series listed on Schedule A (the "Funds") and EATON
VANCE DISTRIBUTORS, INC., a Massachusetts corporation having its principal place
of business in said Boston, hereinafter sometimes called the "Principal
Underwriter".
IN CONSIDERATION of the mutual promises and undertakings herein
contained, the parties hereto agree with respect to each Fund:
1. The Trust grants to the Principal Underwriter the right to purchase
shares of the Fund upon the terms hereinbelow set forth during the term of this
Agreement. While this Agreement is in force, the Principal Underwriter agrees to
use its best efforts to find purchasers for shares of the Fund.
The Principal Underwriter shall have the right to buy from the Fund the
shares needed, but not more than the shares needed (except for clerical errors
and errors of transmission) to fill unconditional orders for shares of the Fund
placed with the Principal Underwriter by financial service firms or investors as
set forth in the current Prospectus relating to shares of the Fund. The price
which the Principal Underwriter shall pay for the shares so purchased shall be
equal to the price paid by investors upon purchasing such shares. The Principal
Underwriter shall notify Investors Bank & Trust Company, Custodian of the Fund
("IBT") and The Shareholder Services Group, Inc., Transfer Agent of the Fund
("TSSG"), or a successor transfer agent, at the end of each business day, or as
soon thereafter as the orders placed with it have been compiled, of the number
of shares and the prices thereof which the Principal Underwriter is to purchase
as principal for resale. The Principal Underwriter shall take down and pay for
shares ordered from the Fund on or before the eleventh business day (excluding
Saturdays) after the shares have been so ordered.
The right granted to the Principal Underwriter to buy shares from the
Fund shall be exclusive, except that said exclusive right shall not apply to
shares issued in connection with the merger or consolidation of any other
investment company or personal holding company with the Fund or the acquisition
by purchase or otherwise of all (or substantially all) the assets or the
outstanding shares of any such company, by the Fund; nor shall it apply to
shares, if any, issued by the Fund in distribution of income or realized capital
gains of the Fund payable in shares or in cash at the option of the shareholder.
2. The shares may be resold by the Principal Underwriter to or through
financial service firms having agreements with the Principal Underwriter, and to
investors, upon the following terms and conditions.
The public offering price, i.e., the price per share at which the
Principal Underwriter or financial service firm purchasing shares from the
Principal Underwriter may sell shares to the public, shall be equal to the net
asset value at which the Principal Underwriter is to purchase the shares.
The net asset value of shares of the Fund shall be determined by the
Trust or IBT, as the agent of the Fund, as of the close of regular trading on
the New York Stock Exchange on each business day on which said Exchange is open,
or as of such other time on each such business day as may be determined by the
Trustees of the Trust, in accordance with the methodology and procedures for
calculating such net asset value authorized by the Trustees. The Trust may also
cause the net asset value to be determined in substantially the same manner or
estimated in such manner and as of such other time or times as may from time to
time be agreed upon by the Trust and Principal Underwriter. The Trust will
notify the Principal Underwriter each time the net asset value of the Fund's
shares is determined and when such value is so determined it shall be applicable
to transactions as set forth in the current Prospectus and Statement of
Additional Information (hereafter the "Prospectus") relating to the Fund's
shares.
No shares of the Fund shall be sold by the Fund during any period when
the determination of net asset value is suspended pursuant to the Declaration of
Trust, except to the Principal Underwriter, in the manner and upon the terms
above set forth to cover contracts of sale made by the Principal Underwriter
with its customers prior to any such suspension, and except as provided in the
last paragraph of paragraph 1 hereof. The Trust shall also have the right to
suspend the sale of the Fund's shares if in the judgment of the Trust conditions
obtaining at any time render such action advisable. The Principal Underwriter
shall have the right to suspend sales at any time, to refuse to accept or
confirm any order from an investor or financial service firm, or to accept or
confirm any such order in part only, if in the judgment of the Principal
Underwriter such action is in the best interests of the Fund.
3. The Trust agrees that it will, from time to time, but subject to the
necessary approval of the Fund's shareholders, take such steps as may be
necessary to register the Fund's shares under the federal Securities Act of
1933, as amended from time to time, (the "1933 Act"), to the end that there will
be available for sale such number of shares as the Principal Underwriter may
reasonably be expected to sell. The Trust agrees to indemnify and hold harmless
the Principal Underwriter and each person, if any, who controls the Principal
Underwriter within the meaning of Section 15 of the 1933 Act against any loss,
liability, claim, damages or expense (including the reasonable cost of
investigating or defending any alleged loss, liability, claim, damages or
expense and reasonable counsel fees incurred in connection therewith), arising
by reason of any person acquiring any shares of the Fund, which may be based
upon the 1933 Act or on any other statute or at common law, on the ground that
the Registration Statement or Prospectus, as from time to time amended and
supplemented, includes an untrue statement of a material fact or omits to state
a material fact required to be stated therein or necessary in order to make the
statements therein not misleading, unless such statement or omission was made in
reliance upon, and in conformity with, information furnished in writing to the
Trust in connection therewith by or on behalf of the Principal Underwriter;
provided, however, that in no case (i) is the indemnity of the Trust in favor of
the Principal Underwriter and any such controlling person to be deemed to
protect such Principal Underwriter or any such controlling person against any
liability to the Trust or the Fund or its security holders to which such
Principal Underwriter or any such controlling person would otherwise be subject
by reason 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 under this Agreement, or (ii) is the Trust or the Fund to
be liable under its indemnity agreement contained in this paragraph with respect
to any claim made against the Principal Underwriter or any such controlling
person unless the Principal Underwriter or any such controlling person, as the
case may be, shall have notified the Trust in writing within a reasonable time
after the summons or other first legal process giving information of the nature
of the claim shall have been served upon the Principal Underwriter or such
controlling person (or after such Principal Underwriter or such controlling
person shall have received notice of such service on any designated agent), but
failure to notify the Trust of any such claim shall not relieve it from any
liability which the Fund may have to the person against whom such action is
brought otherwise than on account of its indemnity agreement contained in this
paragraph. The Trust shall be entitled to participate, at the expense of the
Fund, in the defense, or, if the Trust so elects, to assume the defense of any
suit brought to enforce any such liability, but if the Trust elects to assume
the defense, such defense shall be conducted by counsel chosen by it and
satisfactory to the Principal Underwriter or controlling person or persons,
defendant or defendants in the suit. In the event the Trust elects to assume the
defense of any such suit and retains such counsel, the Principal Underwriter or
controlling person or persons, defendant or defendants in the suit, shall bear
the fees and expenses of any additional counsel retained by them, but, in case
the Trust does not elect to assume the defense of any such suit, the Fund shall
reimburse the Principal Underwriter or controlling person or persons, defendant
or defendants in the suit, for the reasonable fees and expenses of any counsel
retained by them. The Trust agrees promptly to notify the Principal Underwriter
of the commencement of any litigation or proceedings against it or any of its
officers or Trustees in connection with the issuance or sale of any of the
Fund's shares.
4. The Principal Underwriter covenants and agrees that, in selling the
shares of the Fund, it will use its best efforts in all respects duly to conform
with the requirements of all state and federal laws relating to the sale of such
shares, and will indemnify and hold harmless the Trust and each of its Trustees
and officers and each person, if any, who controls the Trust within the meaning
of Section 15 of the 1933 Act, against any loss, liability, damages, claim or
expense (including the reasonable cost of investigating or defending any alleged
loss, liability, damages, claim or expense and reasonable counsel fees incurred
in connection therewith), arising by reason of any person acquiring any shares
of the Fund, which may be based upon the 1933 Act or any other statute or at
common law, on account of any wrongful act of the Principal Underwriter or any
of its employees (including any failure to conform with any requirement of any
state or federal law relating to the sale of such shares) or on the ground that
the registration statement or Prospectus, as from time to time amended and
supplemented, includes an untrue statement of a material fact or omits to state
a material fact required to be stated therein or necessary in order to make the
statements therein not misleading, insofar as any such statement or omission was
made in reliance upon, and in conformity with information furnished in writing
to the Fund in connection therewith by or on behalf of the Principal
Underwriter, provided, however, that in no case (i) is the indemnity of the
Principal Underwriter in favor of any person indemnified to be deemed to protect
the Fund or any such person against any liability to which the Fund or any such
person would otherwise be subject by reason of willful misfeasance, bad faith,
or gross negligence in the performance of its or his duties or by reason of its
or his reckless disregard of its obligations and duties under this Agreement, or
(ii) is the Principal Underwriter to be liable under its indemnity agreement
contained in this paragraph with respect to any claim made against the Fund or
any person indemnified unless the Trust or such person, as the case may be,
shall have notified the Principal Underwriter in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon the Trust, the Fund or upon such
person (or after the Trust or such person shall have received notice of such
service on any designated agent), but failure to notify the Principal
Underwriter of any such claim shall not relieve it from any liability which it
may have to the Fund or any person against whom such action is brought otherwise
than on account of its indemnity agreement contained in this paragraph. The
Principal Underwriter shall be entitled to participate, at its own expense, in
the defense, or, if it so elects, to assume the defense of any suit brought to
enforce any such liability, but if the Principal Underwriter elects to assume
the defense, such defense shall be conducted by counsel chosen by it and
satisfactory to the Trust, or to its officers or Trustees, or to any controlling
person or persons, defendant or defendants in the suit. In the event that the
Principal Underwriter elects to assume the defense of any such suit and retains
such counsel, the Fund or such officers or Trustees or controlling person or
persons, defendant or defendants in the suit, shall bear the fees and expenses
of any additional counsel retained by them or the Trust, but, in case the
Principal Underwriter does not elect to assume the defense of any such suit, it
shall reimburse the Fund, any such officers and Trustees or controlling person
or persons, defendant or defendants in such suit, for the reasonable fees and
expenses of any counsel retained by them or the Trust. The Principal Underwriter
agrees promptly to notify the Trust of the commencement of any litigation or
proceedings against it in connection with the issue and sale of any of the
Fund's shares.
Neither the Principal Underwriter nor any financial service firm nor
any other person is authorized by the Trust to give any information or to make
any representations, other than those contained in the Registration Statement or
Prospectus filed with the Securities and Exchange Commission (the "Commission")
under the 1933 Act, (as said Registration Statement and Prospectus may be
amended or supplemented from time to time), covering the shares of the Fund.
Neither the Principal Underwriter nor any financial service firm nor any other
person is authorized to act as agent for the Trust or the Fund in connection
with the offering or sale of shares of the Fund to the public or otherwise. All
such sales made by the Principal Underwriter shall be made by it as principal,
for its own account. The Principal Underwriter may, however, act as agent in
connection with the repurchase of shares as provided in paragraph 6 below, or in
connection with "exchanges" between investment companies for which the Principal
Underwriter acts as Principal Underwriter or for which an affiliate of the
Principal Underwriter acts as investment adviser.
5(a). The Fund will pay, or cause to be paid -
(i) all the costs and expenses of the Fund, including fees and
disbursements of its counsel, in connection with the preparation and filing of
any required Registration Statement and/or Prospectus under the 1933 Act, or the
Investment Company Act of 1940, as amended from time to time, (the "1940 Act"),
covering its shares and all amendments and supplements thereto, and preparing
and mailing periodic reports to shareholders (including the expense of setting
up in type any such Registration Statement, Prospectus or periodic report);
(ii) the cost of preparing temporary and permanent share
certificates (if any) for shares of the Fund;
(iii) the cost and expenses of delivering to the Principal
Underwriter at its office in Boston, Massachusetts, all shares of the Fund
purchased by it as principal hereunder; and
(iv) all the federal and state (if any) issue and/or transfer
taxes payable upon the issue by or (in the case of treasury shares) transfer
from the Fund to the Principal Underwriter of any and all shares of the Fund
purchased by the Principal Underwriter hereunder.
(b) The Principal Underwriter agrees that, after the Prospectus and
periodic reports have been set up in type, it will bear the expense of printing
and distributing any copies thereof which are to be used in connection with the
offering of shares of the Fund to financial service firms or investors. The
Principal Underwriter further agrees that it will bear the expenses of
preparing, printing and distributing any other literature used by the Principal
Underwriter or furnished by it for use by financial service firms in connection
with the offering of the shares of the Fund for sale to the public and any
expenses of advertising in connection with such offering. The Fund agrees to pay
the expenses of registration and maintaining registration of its shares for sale
under federal and state securities laws, and, if necessary or advisable in
connection therewith, of qualifying the Trust or the Fund as a dealer or broker,
in such states as shall be selected by the Principal Underwriter and the fees
payable to each such state for continuing the qualification therein until the
Principal Underwriter notifies the Trust that it does not wish such
qualification continued.
(c) In addition, the Trust agrees, in accordance with the Fund's
Distribution Plan (the "Plan"), adopted pursuant to Rule 12b-1 under the 1940
Act with respect to shares, to make certain payments as follows. The Principal
Underwriter shall be entitled to be paid by the Fund a sales commission equal to
an amount not exceeding 5% of the price received by the Fund for each sale of
shares (excluding reinvestment of dividends and distributions), such payment to
be made in the manner set forth in this paragraph 5. The Principal Underwriter
shall also be entitled to be paid by the Fund a separate distribution fee
(calculated in accordance with paragraph 5(d)), such payment to be made in the
manner set forth and subject to the terms of this paragraph 5.
(d) The sales commissions and distribution fees referred to in
paragraph 5(c) shall be accrued and paid by the Fund in the following manner.
The Fund shall accrue daily an amount calculated at the rate of .75% per annum
of the daily net assets of the Fund, which net assets shall be computed in
accordance with the governing documents of the Fund and applicable votes and
determinations of the Trustees of the Trust. The daily amounts so accrued
throughout the month shall be paid to the Principal Underwriter on the last day
of each month. The amount of such daily accrual, as so calculated, shall first
be applied and charged to all unpaid sales commissions, and the balance, if any,
shall then be applied and charged to all unpaid distribution fees. No amount
shall be accrued with respect to any day on which there exist no outstanding
uncovered distribution charges of the Principal Underwriter. The amount of such
uncovered distribution charges shall be calculated daily. For purposes of this
calculation, distribution charges of the Principal Underwriter shall include (a)
the aggregate of all sales commissions which the Principal Underwriter has been
paid pursuant to this paragraph (d) (and pursuant to paragraph (d) of the
Original Agreement) plus all sales commissions which it is entitled to be paid
pursuant to paragraph 5(c) (and pursuant to paragraph (d) of the Original
Agreement) since inception of the Original Agreement through and including the
day next preceding the date of calculation, and (b) an amount equal to the
aggregate of all distribution fees referred to below which the Principal
Underwriter has been paid pursuant to this paragraph (d) (and pursuant to
paragraph (d) of the Original Agreement) plus all such fees which it is entitled
to be paid pursuant to paragraph 5(c) (and pursuant to paragraph 5(c) of the
Original Agreement) since inception of the Original Agreement through and
including the day next preceding the date of calculation. From this sum
(distribution charges) there shall be subtracted (i) the aggregate amount paid
or payable to the Principal Underwriter pursuant to this paragraph (d) (and
pursuant to paragraph (d) of the Original Agreement) since inception of the
Original Agreement through and including the day next preceding the date of
calculation and (ii) the aggregate amount of all contingent deferred sales
charges paid or payable to the Principal Underwriter since inception of the
Original Agreement through and including the day next preceding the date of
calculation. If the result of such subtraction is a positive amount, a
distribution fee [computed at the rate of 1% per annum above the prime rate
(being the base rate on corporate loans posted by at least 75% of the nation's
30 largest banks) then being reported in the Eastern Edition of The Wall Street
Journal or if such prime rate is not so reported such other rate as may be
designated from time to time by vote or other action of a majority of (i) those
Trustees of the Trust who are not "interested persons" of the Trust (as defined
in the 1940 Act) and have no direct or indirect financial interest in the
operation of the Plan or any agreements related to it and (ii) all of the
Trustees then in office] shall be computed on such amount and added to such
amount, with the resulting sum constituting the amount of outstanding uncovered
distribution charges of the Principal Underwriter with respect to such day for
all purposes of this Agreement. If the result of such subtraction is a negative
amount, there shall exist no outstanding uncovered distribution charges of the
Principal Underwriter with respect to such day and no amount shall be accrued or
paid to the Principal Underwriter with respect to such day. The aggregate
amounts accrued and paid pursuant to this paragraph (d) during any fiscal year
of the Fund shall not exceed .75% of the average daily net assets of the Fund
for such year.
(e) The Principal Underwriter shall be entitled to receive all
contingent deferred sales charges paid or payable with respect to any day on
which there exist outstanding uncovered distribution charges of the Principal
Underwriter. The Fund shall be entitled to receive all remaining contingent
deferred sales charges paid or payable by shareholders with respect to any day
on which there exist no outstanding uncovered distribution charges of the
Principal Underwriter, provided that no such sales charge which would cause the
Fund to exceed the maximum applicable cap imposed thereon by paragraph (2) of
subsection (d) of Section 26 of Article III of the Rules of Fair Practice of the
National Association of Securities Dealers, Inc. shall be imposed.
(f) The persons authorized to direct the disposition of monies paid or
payable on behalf of the Fund pursuant to the Plan or this Agreement shall be
the President or any Vice President of the Trust. Such persons shall provide to
the Trust's Trustees and the Trustees shall review, at least quarterly, a
written report of the amounts so expended and the purposes for which such
expenditures were made.
(g) In addition to the payments to the Principal Underwriter provided
for in paragraph 5(d), the Fund may make payments of service fees to the
Principal Underwriter, Authorized Firms and other persons. The aggregate of such
payments during any fiscal year of the Fund shall not exceed .25% of the Fund's
average daily net assets for such year.
6. The Trust hereby authorizes the Principal Underwriter to repurchase,
upon the terms and conditions set forth in written instructions given by the
Trust to the Principal Underwriter from time to time, as agent of the Fund and
for its account, such shares of the Fund as may be offered for sale to the Fund
from time to time.
(a) The Principal Underwriter shall notify in writing IBT and TSSG, at
the end of each business day, or as soon thereafter as the repurchases in each
pricing period have been compiled, of the number of shares repurchased for the
account of the Fund since the last previous report, together with the prices at
which such repurchases were made, and upon the request of any officer or Trustee
of the Trust shall furnish similar information with respect to all repurchases
made up to the time of the request on any day.
(b) The Trust reserves the right to suspend or revoke the foregoing
authorization at any time; unless otherwise stated, any such suspension or
revocation shall be effective forthwith upon receipt of notice thereof by an
officer of the Principal Underwriter, by telegraph or by written instrument from
an officer of the Trust duly authorized by its Trustees. In the event that the
authorization of the Principal Underwriter is, by the terms of such notice,
suspended for more than twenty-four hours or until further notice, the
authorization given by this paragraph 6 shall not be revived except by action of
a majority of the Trustees of the Trust.
(c) The Principal Underwriter shall have the right to terminate the
operation of this paragraph 6 upon giving to the Trust thirty (30) days' written
notice thereof.
(d) The Trust agrees to authorize and direct TSSG to pay, for the
account of the Fund, the purchase price of any shares so repurchased against
delivery of the certificates in proper form for transfer to the Fund or for
cancellation by the Fund.
(e) The Principal Underwriter shall receive no commission in respect of
any repurchase of shares under the foregoing authorization and appointment as
agent, except for any sales commission, distribution fee or contingent deferred
sales charges payable under paragraph 5.
(f) The Trust agrees that the Fund will reimburse the Principal
Underwriter, from time to time on demand, for any reasonable expenses incurred
in connection with the repurchase of shares of the Fund pursuant to this
paragraph 6.
7. If, at any time during the existence of this Agreement, the Trust
shall deem it necessary or advisable in the best interests of the Fund that any
amendment of this Agreement be made in order to comply with the recommendations
or requirements of the Commission or other governmental authority or to obtain
any advantage under Massachusetts or federal tax laws, and shall notify the
Principal Underwriter of the form of amendment which it deems necessary or
advisable and the reasons therefor, and, if the Principal Underwriter declines
to assent to such amendment, the Trust may terminate this Agreement forthwith by
written notice to the Principal Underwriter. If, at any time during the
existence of its agreement upon request by the Principal Underwriter, the Trust
fails (after a reasonable time) to make any changes in its Declaration of Trust,
as amended, or in its methods of doing business which are necessary in order to
comply with any requirement of federal law or regulations of the Commission or
of a national securities association of which the Principal Underwriter is or
may be a member, relating to the sale of the shares of the Fund, the Principal
Underwriter may terminate this Agreement forthwith by written notice to the
Trust.
8. The term "net asset value" as used in this Agreement with reference
to the shares of the Fund shall have the same meaning as used in the Declaration
of Trust, as amended, and calculated in the manner referred to in paragraph 2
above.
9(a). The Principal Underwriter is a corporation in the United States
organized under the laws of Massachusetts and holding membership in the National
Association of Securities Dealers, Inc., a securities association registered
under Section 15A of the Securities Exchange Act of 1934, as amended from time
to time, and during the life of this Agreement will continue to be so resident
in the United States, so organized and a member in good standing of said
Association. The Principal Underwriter will comply with the Trust's Declaration
of Trust and By-Laws, and the 1940 Act and the rules promulgated thereunder,
insofar as they are applicable to the Principal Underwriter.
(b) The Principal Underwriter shall maintain in the United States and
preserve therein for such period or periods as the Commission shall prescribe by
rules and regulations applicable to it as Principal Underwriter of an open-end
investment company registered under the 1940 Act such accounts, books and other
documents as are necessary or appropriate to record its transactions with the
Fund. Such accounts, books and other documents shall be subject at any time and
from time to time to such reasonable periodic, special and other examinations by
the Commission or any member or representative thereof as the Commission may
prescribe. The Principal Underwriter shall furnish to the Commission within such
reasonable time as the Commission may prescribe copies of or extracts from such
records which may be prepared without effort, expense or delay as the Commission
may by order require.
10. This Agreement shall continue in force indefinitely until
terminated as in this Agreement above provided, except that:
(a) this Agreement shall continue in effect through and including April
28, 1996 (or, if applicable, the next April 28 which follows the day on which
the Fund has become a party hereto by amendment of Schedule A subsequent to
April 28, 1996) only so long as such continuance is specifically approved at
least annually (i) by the vote of a majority of the Trustees of the Trust who
are not "interested persons" (as defined in Section 2(a)(19) of the 1940 Act) of
the Trust and who have no direct or indirect interest in the operation of the
Plan or this Agreement (the "Rule 12b-1 Trustees") cast in person at a meeting
called for the purpose of voting on such approval, and (ii) by the Trustees of
the Trust or by vote of a majority of the outstanding voting securities (as
defined in Section 2(a)(42) of the 1940 Act) of the Fund;
(b) this Agreement may be terminated at any time by vote of a majority
of the Rule 12b-1 Trustees or by vote of a majority of the outstanding voting
securities of the Fund on not more than sixty days' notice to the Principal
Underwriter. The Principal Underwriter shall be entitled to receive all
contingent deferred sales charges paid or payable with respect to any day
subsequent to the termination of this Agreement;
(c) the Principal Underwriter shall have the right to terminate this
Agreement on six (6) months' written notice thereof given in writing to the
Fund;
(d) the Trust shall have the right to terminate this Agreement
forthwith in the event that it shall have been established by a court of
competent jurisdiction that the Principal Underwriter or any director or officer
of the Principal Underwriter has taken any action which results in a breach of
the covenants set out in paragraph 9 hereof; and
(e) additional series of the Trust will become parties hereto upon
approval by the Trustees of the Trust and amendment of Schedule A.
11. In the event of the assignment (as defined in Section 2(a)(4) of
the 1940 Act) of this Agreement by the Principal Underwriter, this Agreement
shall automatically terminate.
12. Any notice under this Agreement shall be in writing, addressed and
delivered, or mailed postage paid, to the other party, at such address as such
other party may designate for the receipt of such notices. Until further notice
to the other party, it is agreed that the record address of the Trust and that
of the Principal Underwriter, shall be 24 Federal Street, Boston, Massachusetts
02110.
13. The services of the Principal Underwriter to the Fund hereunder are
not to be deemed to be exclusive, the Principal Underwriter being free to (a)
render similar service to, and to act as principal underwriter in connection
with the distribution of shares of, other series of the Trust or other
investment companies, and (b) engage in other business and activities from time
to time.
14. The terms "vote of a majority of the outstanding voting
securities," "assignment" and "interested persons," when used herein, shall have
the respective meanings specified in the 1940 Act, subject, however, to such
exemptions as may be granted by the Commission by any rule, regulation or order.
15. The Principal Underwriter expressly acknowledges the provision in
the Trust's Declaration of Trust limiting the personal liability of the
shareholders of the Fund or the Trustees of the Trust. The Principal Underwriter
hereby agrees that it shall have recourse to the Trust or the Fund for payment
of claims or obligations as between the Trust or the Fund and the Principal
Underwriter arising out of this Agreement and shall not seek satisfaction from
the shareholders or any shareholder of the Trust or from the Trustees or any
Trustee of the Trust. The Fund shall not be responsible for obligations of any
other series of the Trust.
16. All references in this Agreement to the "Original Agreement" shall
mean the Distribution Agreement referenced on Schedule A hereto between the
Trust on behalf of the Fund and the Principal Underwriter.
17. This Agreement shall amend, replace and be substituted for the
Original Agreement as of the opening of business on _____________, 1995, and
this Agreement shall be effective as of such time. The outstanding uncovered
distribution charges of the Principal Underwriter calculated under the Original
Agreement as of the close of business on _____________, 1995 shall be
outstanding uncovered distribution charges of the Principal Underwriter
calculated under this Agreement as of the opening of business on
________________, 1995.
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement on
the day of , 1995.
EATON VANCE MUNICIPALS
TRUST II
By
---------------------
President
EATON VANCE DISTRIBUTORS INC.
By
---------------------
Vice President
<PAGE>
SCHEDULE A
Eaton Vance Municipals Trust II
Inception Date of
Name of Fund Original Agreement
------------ ------------------
EV Marathon Florida Insured Tax Free Fund February 25, 1994
EV Marathon Hawaii Tax Free Fund February 25, 1994
EV Marathon High Yield Municipals Fund N/A
EV Marathon Kansas Tax Free Fund February 25, 1994
Exhibit 99.(6)(a)(5)
FORM OF
EATON VANCE MUNICIPALS TRUST II
AMENDED DISTRIBUTION AGREEMENT
(Traditional Series)
AGREEMENT effective as of , 1995 between EATON VANCE MUNICIPALS
TRUST II, hereinafter called the "Trust", a Massachusetts business trust having
its principal place of business in Boston in the Commonwealth of Massachusetts,
on behalf of each of its series listed on Schedule A (the "Funds") and EATON
VANCE DISTRIBUTORS, INC., a Massachusetts corporation having its principal place
of business in said Boston, hereinafter sometimes called the "Principal
Underwriter".
IN CONSIDERATION of the mutual promises and undertakings herein
contained, the parties hereto agree with respect to each Fund:
1. The Trust grants to the Principal Underwriter the right to purchase
shares of the Fund upon the terms hereinbelow set forth during the term of this
Agreement. While this Agreement is in force, the Principal Underwriter agrees to
use its best efforts to find purchasers for shares of the Fund.
The Principal Underwriter shall have the right to buy from the Fund the
shares needed, but not more than the shares needed (except for clerical errors
and errors of transmission) to fill unconditional orders for shares of the Fund
placed with the Principal Underwriter by financial service firms or investors as
set forth in the current Prospectus relating to shares of the Fund. The price
which the Principal Underwriter shall pay for the shares so purchased shall be
the net asset value used in determining the public offering price on which such
orders were based. The Principal Underwriter shall notify Investors Bank & Trust
Company, Custodian of the Fund ("IBT"), and The Shareholder Services Group,
Inc., Transfer Agent of the Fund, or a successor transfer agent, ("TSSG"), at
the end of each business day, or as soon thereafter as the orders placed with it
have been compiled, of the number of shares and the prices thereof which the
Principal Underwriter is to purchase as principal for resale. The Principal
Underwriter shall take down and pay for shares ordered from the Fund on or
before the eleventh business day (excluding Saturdays) after the shares have
been so ordered.
The right granted to the Principal Underwriter to buy shares from the
Fund shall be exclusive, except that said exclusive right shall not apply to
shares issued in connection with the merger or consolidation of any other
investment company or personal holding company with the Fund or the acquisition
by purchase or otherwise of all (or substantially all) the assets or the
outstanding shares of any such company, by the Fund; nor shall it apply to
shares, if any, issued by the Fund in distribution of income or realized capital
gains of the Fund payable in shares or in cash at the option of the shareholder.
2. The shares may be resold by the Principal Underwriter to or through
financial service firms having agreements with the Principal Underwriter, and to
investors, upon the following terms and conditions.
The public offering price, i.e., the price per share at which the
Principal Underwriter or financial service firm purchasing shares from the
Principal Underwriter may sell shares to the public, shall be the public
offering price as set forth in the current Prospectus relating to said shares,
but not to exceed the net asset value at which the Principal Underwriter is to
purchase the shares, plus a sales charge not to exceed 7.25% of the public
offering price (the net asset value divided by .9275). If the resulting public
offering price does not come out to an even cent, the public offering price
shall be adjusted to the nearer cent.
The Principal Underwriter may also sell shares at the net asset value
at which the Principal Underwriter is to purchase such shares, provided such
sales are not inconsistent with the provisions of Section 22(d) of the
Investment Company Act of 1940, as amended from time to time (the "1940 Act"),
and the rules thereunder, including any applicable exemptive orders or
administrative interpretations or "no-action" positions with respect thereto.
The net asset value of shares of the Fund shall be determined by the
Trust or IBT, as the agent of the Fund, as of the close of regular trading on
the New York Stock Exchange on each business day on which said Exchange is open,
or as of such other time on each such business day as may be determined by the
Trustees of the Trust, in accordance with the methodology and procedures for
calculating such net asset value authorized by the Trustees. The Trust may also
cause the net asset value to be determined in substantially the same manner or
estimated in such manner and as of such other time or times as may from time to
time be agreed upon by the Trust and Principal Underwriter. The Trust will
notify the Principal Underwriter each time the net asset value of the Fund's
shares is determined and when such value is so determined it shall be applicable
to transactions as set forth in the current Prospectus and Statement of
Additional Information (hereafter the "Prospectus") relating to the Fund's
shares.
No shares of the Fund shall be sold by the Fund during any period when
the determination of net asset value is suspended pursuant to the Declaration of
Trust, except to the Principal Underwriter, in the manner and upon the terms
above set forth to cover contracts of sale made by the Principal Underwriter
with its customers prior to any such suspension, and except as provided in the
last paragraph of paragraph 1 hereof. The Trust shall also have the right to
suspend the sale of the Fund's shares if in the judgment of the Trust conditions
obtaining at any time render such action advisable. The Principal Underwriter
shall have the right to suspend sales at any time, to refuse to accept or
confirm any order from an investor or financial service firm, or to accept or
confirm any such order in part only, if in the judgment of the Principal
Underwriter such action is in the best interests of the Fund.
3. The Trust covenants and agrees that it will, from time to time, but
subject to the necessary approval of the Fund's shareholders, take such steps as
may be necessary to register the Fund's shares under the federal Securities Act
of 1933, as amended from time to time (the "1933 Act"), to the end that there
will be available for sale such number of shares as the Principal Underwriter
may reasonably be expected to sell. The Trust covenants and agrees to indemnify
and hold harmless the Principal Underwriter and each person, if any, who
controls the Principal Underwriter within the meaning of Section 15 of the 1933
Act against any loss, liability, claim, damages or expense (including the
reasonable cost of investigating or defending any alleged loss, liability,
claim, damages or expense and reasonable counsel fees incurred in connection
therewith), arising by reason of any person acquiring any shares of the Fund,
which may be based upon the 1933 Act or on any other statute or at common law,
on the ground that the Registration Statement or Prospectus, as from time to
time amended and supplemented, includes an untrue statement of a material fact
or omits to state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading, unless such statement or
omission was made in reliance upon, and in conformity with, information
furnished in writing to the Trust in connection therewith by or on behalf of the
Principal Underwriter; provided, however, that in no case (i) is the indemnity
of the Trust in favor of the Principal Underwriter and any such controlling
person to be deemed to protect such Principal Underwriter or any such
controlling person against any liability to the Trust or the Fund or its
security holders to which such Principal Underwriter or any such controlling
person would otherwise be subject by reason 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 under this Agreement, or (ii)
is the Trust or the Fund to be liable under its indemnity agreement contained in
this paragraph with respect to any claim made against the Principal Underwriter
or any such controlling person unless the Principal Underwriter or any such
controlling person, as the case may be, shall have notified the Trust in writing
within a reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon the Principal
Underwriter or such controlling person (or after such Principal Underwriter or
such controlling person shall have received notice of such service on any
designated agent), but failure to notify the Trust of any such claim shall not
relieve it from any liability which the Fund may have to the person against whom
such action is brought otherwise than on account of its indemnity agreement
contained in this paragraph. The Trust shall be entitled to participate, at the
expense of the Fund, in the defense, or, if the Trust so elects, to assume the
defense of any suit brought to enforce any such liability, but if the Trust
elects to assume the defense, such defense shall be conducted by counsel chosen
by it and satisfactory to the Principal Underwriter or controlling person or
persons, defendant or defendants in the suit. In the event the Trust elects to
assume the defense of any such suit and retains such counsel, the Principal
Underwriter or controlling person or persons, defendant or defendants in the
suit, shall bear the fees and expenses of any additional counsel retained by
them, but, in case the Trust does not elect to assume the defense of any such
suit, the Fund shall reimburse the Principal Underwriter or controlling person
or persons, defendant or defendants in the suit, for the reasonable fees and
expenses of any counsel retained by them. The Trust agrees promptly to notify
the Principal Underwriter of the commencement of any litigation or proceedings
against it or any of its officers or Trustees in connection with the issuance or
sale of any of the Fund's shares.
4. The Principal Underwriter covenants and agrees that, in selling the
shares of the Fund, it will use its best efforts in all respects duly to conform
with the requirements of all state and federal laws relating to the sale of such
shares, and will indemnify and hold harmless the Trust and each of its Trustees
and officers and each person, if any, who controls the Trust within the meaning
of Section 15 of the 1933 Act, against any loss, liability, damages, claim or
expense (including the reasonable cost of investigating or defending any alleged
loss, liability, damages, claim or expense and reasonable counsel fees incurred
in connection therewith), arising by reason of any person acquiring any shares
of the Fund, which may be based upon the 1933 Act or any other statute or at
common law, on account of any wrongful act of the Principal Underwriter or any
of its employees (including any failure to conform with any requirement of any
state or federal law relating to the sale of such shares) or on the ground that
the registration statement or Prospectus, as from time to time amended and
supplemented, includes an untrue statement of a material fact or omits to state
a material fact required to be stated therein or necessary in order to make the
statements therein not misleading, insofar as any such statement or omission was
made in reliance upon, and in conformity with information furnished in writing
to the Trust in connection therewith by or on behalf of the Principal
Underwriter, provided, however, that in no case (i) is the indemnity of the
Principal Underwriter in favor of any person indemnified to be deemed to protect
the Fund or any such person against any liability to which the Fund or any such
person would otherwise be subject by reason of willful misfeasance, bad faith,
or gross negligence in the performance of its or his duties or by reason of its
or his reckless disregard of its obligations and duties under this Agreement, or
(ii) is the Principal Underwriter to be liable under its indemnity agreement
contained in this paragraph with respect to any claim made against the Fund or
any person indemnified unless the Trust or such person, as the case may be,
shall have notified the Principal Underwriter in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon the Trust, the Fund or upon such
person (or after the Trust, the Fund or such person shall have received notice
of such service on any designated agent), but failure to notify the Principal
Underwriter of any such claim shall not relieve it from any liability which it
may have to the Fund or any person against whom such action is brought otherwise
than on account of its indemnity agreement contained in this paragraph. The
Principal Underwriter shall be entitled to participate, at its own expense, in
the defense, or, if it so elects, to assume the defense of any suit brought to
enforce any such liability, but if the Principal Underwriter elects to assume
the defense, such defense shall be conducted by counsel chosen by it and
satisfactory to the Trust, or to its officers or Trustees, or to any controlling
person or persons, defendant or defendants in the suit. In the event that the
Principal Underwriter elects to assume the defense of any such suit and retains
such counsel, the Fund or such officers or Trustees or controlling person or
persons, defendant or defendants in the suit, shall bear the fees and expenses
of any additional counsel retained by them or the Trust, but, in case the
Principal Underwriter does not elect to assume the defense of any such suit, it
shall reimburse the Fund, any such officers and Trustees or controlling person
or persons, defendant or defendants in such suit, for the reasonable fees and
expenses of any counsel retained by them or the Trust. The Principal Underwriter
agrees promptly to notify the Trust of the commencement of any litigation or
proceedings against it in connection with the issue and sale of any of the
Fund's shares.
Neither the Principal Underwriter nor any financial service firm nor
any other person is authorized by the Trust to give any information or to make
any representations, other than those contained in the Registration Statement or
Prospectus filed with the Securities and Exchange Commission (the "Commission")
under the 1933 Act (as said Registration Statement and Prospectus may be amended
or supplemented from time to time), covering the shares of the Fund. Neither the
Principal Underwriter nor any financial service firm nor any other person is
authorized to act as agent for the Trust or the Fund in connection with the
offering or sale of shares of the Fund to the public or otherwise. All such
sales made by the Principal Underwriter shall be made by it as principal, for
its own account. The Principal Underwriter may, however, act as agent in
connection with the repurchase of shares as provided in paragraph 6 below, or in
connection with "exchanges" between investment companies for which the Principal
Underwriter (or an affiliate thereof) acts as principal underwriter or
investment adviser.
5(a). The Fund will pay, or cause to be paid -
(i) all the costs and expenses of the Fund, including fees and
disbursements of its counsel, in connection with the preparation and filing of
any required Registration Statement and/or Prospectus under the 1933 Act, or the
1940 Act, covering its shares and all amendments and supplements thereto, and
preparing and distributing periodic reports to shareholders (including the
expense of setting up in type any such Registration Statement, Prospectus or
periodic report);
(ii) the cost of preparing temporary and permanent share
certificates (if any) for shares of the Fund;
(iii) the cost and expenses of delivering to the Principal
Underwriter at its office in Boston, Massachusetts, all shares of the Fund
purchased by it as principal hereunder;
(iv) all the federal and state (if any) issue and/or transfer
taxes payable upon the issue by or (in the case of treasury shares) transfer
from the Fund to the Principal Underwriter of any and all shares of the Fund
purchased by the Principal Underwriter hereunder;
(v) the fees, costs and expenses of the registration or
qualification of shares of the Fund for sale in the various states, territories
or other jurisdictions (including without limitation the registering or
qualifying the Fund as a broker or dealer or any officer of the Fund as agent or
salesman in any state, territory or other jurisdiction); and
(vi) all payments to be made by the Fund pursuant to any
written plan approved in accordance with Rule 12b-1 under the 1940 Act.
(b) The Principal Underwriter agrees that, after the Prospectus (other
than to existing shareholders of the Fund) and periodic reports have been set up
in type, it will bear the expense of printing and distributing any copies
thereof which are to be used in connection with the offering of shares of the
Fund to financial service firms or investors. The Principal Underwriter further
agrees that it will bear the expenses of preparing, printing and distributing
any other literature used by the Principal Underwriter or furnished by it for
use by financial service firms in connection with the offering of the shares of
the Fund for sale to the public and any expenses of advertising in connection
with such offering.
(c) The Principal Underwriter shall be entitled to receive all
contingent deferred sales charges imposed in accordance with the Prospectus on
early redemptions of Fund shares.
6. The Trust hereby authorizes the Principal Underwriter to
repurchase, upon the terms and conditions set forth in written instructions
given by the Trust to the Principal Underwriter from time to time, as agent of
the Fund and for its account, such shares of the Fund as may be offered for sale
to the Fund from time to time.
(a) The Principal Underwriter shall notify in writing IBT and TSSG, at
the end of each business day, or as soon thereafter as the repurchases in each
pricing period have been compiled, of the number of shares repurchased for the
account of the Fund since the last previous report, together with the prices at
which such repurchases were made, and upon the request of any officer or Trustee
of the Trust shall furnish similar information with respect to all repurchases
made up to the time of the request on any day.
(b) The Trust reserves the right to suspend or revoke the foregoing
authorization at any time; unless otherwise stated, any such suspension or
revocation shall be effective forthwith upon receipt of notice thereof by an
officer of the Principal Underwriter, by telegraph or by written instrument from
an officer of the Trust duly authorized by its Trustees. In the event that the
authorization of the Principal Underwriter is, by the terms of such notice,
suspended for more than twenty-four hours or until further notice, the
authorization given by this paragraph 6 shall not be revived except by action of
a majority of the Trustees of the Trust.
(c) The Principal Underwriter shall have the right to terminate the
operation of this paragraph 6 upon giving to the Trust thirty (30) days' written
notice thereof.
(d) The Trust agrees to authorize and direct TSSG, to pay, for the
account of the Fund, the purchase price of any shares so repurchased against
delivery of the certificates in proper form for transfer to the Fund or for
cancellation by the Fund.
(e) The Principal Underwriter shall receive no commission in respect of
any repurchase of shares under the foregoing authorization and appointment as
agent.
(f) The Trust agrees that the Fund will reimburse the Principal
Underwriter, from time to time on demand, for any reasonable expenses incurred
in connection with the repurchase of shares of the Fund pursuant to this
paragraph 6.
7. If, at any time during the existence of this Agreement, the Trust
shall deem it necessary or advisable in the best interests of the Fund that any
amendment of this Agreement be made in order to comply with the recommendations
or requirements of the Commission or other governmental authority or to obtain
any advantage under Massachusetts or federal tax laws, and shall notify the
Principal Underwriter of the form of amendment which it deems necessary or
advisable and the reasons therefor, and, if the Principal Underwriter declines
to assent to such amendment, the Trust may terminate this Agreement forthwith by
written notice to the Principal Underwriter. If, at any time during the
existence of this Agreement upon request by the Principal Underwriter, the Trust
fails (after a reasonable time) to make any changes in its Declaration of Trust,
as amended, or in its methods of doing business which are necessary in order to
comply with any requirement of federal law or regulations of the Commission or
of a national securities association of which the Principal Underwriter is or
may be a member, relating to the sale of the shares of the Fund, the Principal
Underwriter may terminate this Agreement forthwith by written notice to the
Trust.
8(a). The Principal Underwriter is a corporation in the United States
organized under the laws of Massachusetts and holding membership in the National
Association of Securities Dealers, Inc., a securities association registered
under Section 15A of the Securities Exchange Act of 1934, as amended from time
to time, and during the life of this Agreement will continue to be so resident
in the United States, so organized and a member in good standing of said
Association. The Principal Underwriter covenants that it and its officers and
directors will comply with the Trust's Declaration of Trust and By-Laws, and the
1940 Act and the rules promulgated thereunder, insofar as they are applicable to
the Principal Underwriter.
(b) The Principal Underwriter shall maintain in the United States and
preserve therein for such period or periods as the Commission shall prescribe by
rules and regulations applicable to it as Principal Underwriter of an open-end
investment company registered under the 1940 Act such accounts, books and other
documents as are necessary or appropriate to record its transactions with the
Fund. Such accounts, books and other documents shall be subject at any time and
from time to time to such reasonable periodic, special and other examinations by
the Commission or any member or representative thereof as the Commission may
prescribe. The Principal Underwriter shall furnish to the Commission within such
reasonable time as the Commission may prescribe copies of or extracts from such
records which may be prepared without effort, expense or delay as the Commission
may by order require.
9. This Agreement shall continue in force indefinitely until terminated
as in this Agreement above provided, except that:
(a) this Agreement shall continue in effect through and including April
28, 1996 (or, if applicable, the next April 28 which follows the day on which
the Fund has become a party hereto by amendment of Schedule A subsequent to
April 28, 1996) and shall continue in full force and effect indefinitely
thereafter, but only so long as such continuance is specifically approved at
least annually (i) by the vote of a majority of the Trustees of the Trust who
are not interested persons of the Trust or of the Principal Underwriter cast in
person at a meeting called for the purpose of voting on such approval, and (ii)
by the Trustees of the Trust or by vote of a majority of the outstanding voting
securities of the Fund;
(b) that either party shall have the right to terminate this Agreement
on six (6) months' written notice thereof given in writing to the other; and
(c) additional series of the Trust will become parties hereto upon
approval by the Trustees of the Trust and amendment of Schedule A.
10. In the event of the assignment of this Agreement by the Principal
Underwriter, this Agreement shall automatically terminate.
11. Any notice under this Agreement shall be in writing, addressed and
delivered, or mailed postage paid, to the other party, at such address as such
other party may designate for the receipt of such notices. Until further notice
to the other party, it is agreed that the record address of the Trust and that
of the Principal Underwriter, shall be 24 Federal Street, Boston, Massachusetts
02110.
12. The services of the Principal Underwriter to the Fund hereunder are
not to be deemed to be exclusive, the Principal Underwriter being free to (a)
render similar services to, and to act as principal underwriter in connection
with the distribution of shares of, other series of the Trust or other
investment companies, and (b) engage in other business and activities from time
to time.
13. The terms "vote of a majority of the outstanding voting
securities," "assignment" and "interested persons," when used herein, shall have
the respective meanings specified in the 1940 Act, subject, however, to such
exemptions as may be granted by the Commission by any rule, regulation or order.
14. The Principal Underwriter expressly acknowledges the provision in
the Trust's Declaration of Trust limiting the personal liability of the
shareholders of the Fund or the Trustees of the Trust. The Principal Underwriter
hereby agrees that it shall have recourse only to the assets of the Fund for
payment of claims or obligations as between the Trust on behalf of the Fund, and
the Principal Underwriter arising out of this Agreement and shall not seek
satisfaction from any shareholders of the Trust or from the Trustees or any
Trustee of the Trust. The Fund shall not be responsible for obligations of any
other series of the Trust.
15. All references in this Agreement to the "Original Agreement" shall
mean the Distribution Agreement referenced on Schedule A hereto between the
Trust on behalf of the Fund and the Principal Underwriter.
16. This Agreement shall amend, replace and be substituted for the
Original Agreement as of the opening of business on _____________, 1995, and
this Agreement shall be effective as of such time.
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement the
day of , 1995.
EATON VANCE MUNICIPALS TRUST II
By
-----------------------------
President
EATON VANCE DISTRIBUTORS INC.
By
-----------------------------
Vice President
<PAGE>
SCHEDULE A
Eaton Vance Municipals Trust II
Inception Date of
Name of Fund Original Agreement
- ------------- -------------------
EV Traditional Florida Insured Tax Free Fund February 25, 1994
EV Traditional High Yield Municipals Fund N/A
Exhibit 99.(9)(b)
FORM OF
EATON VANCE MUNICIPALS TRUST II
AMENDED ADMINISTRATIVE SERVICES AGREEMENT
AGREEMENT made this day of , 1995, between Eaton Vance
Municipals Trust II, a Massachusetts business trust (the "Trust") on behalf of
each of its series listed on Schedule A (the "Funds") and Eaton Vance
Management, a Massachusetts business Trust, (the "Administrator").
IN CONSIDERATION of the mutual promises and undertakings herein
contained, the parties hereto agree with respect to each Fund:
1. Duties of the Administrator. The Trust hereby employs the
Administrator to act as administrator of the Fund and to administer its affairs,
subject to the supervision of the Trustees of the Trust, for the period and on
the terms set forth in this Agreement.
The Administrator hereby accepts such employment, and undertakes to
afford to the Trust the advice and assistance of the Administrator's
organization in the administration of the Fund and to furnish for the use of the
Fund office space and all necessary office facilities, equipment and personnel
for administering the affairs of the Fund and to pay the salaries and fees of
all officers and Trustees of the Trust who are members of the Administrator's
organization and all personnel of the Administrator performing services relating
to administrative activities. The Administrator shall for all purposes herein be
deemed to be an independent contractor 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.
Notwithstanding the foregoing, the Administrator shall not be deemed to
have assumed any duties with respect to, and shall not be responsible for, the
management of the Fund's assets or the rendering of investment advice and
supervision with respect thereto or the distribution of shares of the Fund, nor
shall the Administrator be deemed to have assumed or have any responsibility
with respect to functions specifically assumed by any transfer agent, custodian
or shareholder servicing agent of the Trust or the Fund. It is intended that the
assets of the Fund will be invested in an interest in a registered open-end
investment company having substantially the same investment objective, policies
and restrictions as the Fund (the "Portfolio"). Boston Management and Research
("BMR"), an affiliate of the Administrator, currently acts as investment adviser
to the Portfolio under an Investment Advisory Agreement between the Portfolio
and BMR.
2. Allocation of Charges and Expenses. The Administrator shall pay the
entire salaries and fees of all of the Trust's Trustees and officers who devote
part or all of their time to the affairs of the Administrator, and the salaries
and fees of such persons shall not be deemed to be expenses incurred by the
Trust for purposes of this Section 2. Except as provided in the foregoing
sentence, the Administrator shall not pay any expenses relating to the Trust or
the Fund including, without implied limitation, (i) expenses of maintaining the
Fund 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, disposition and valuation of securities and
other investments, (iv) auditing, accounting and legal expenses, (v) taxes and
interest, (vi) governmental fees, (vii) expenses of issue, sale, repurchase and
redemption of shares, (viii) expenses of registering and qualifying the Trust,
the Fund and its shares under federal and state securities laws and of preparing
and printing prospectuses for such purposes and for distributing the same to
shareholders and investors, and fees and expenses of registering and maintaining
registrations of the Fund and of the Fund's principal underwriter, if any, as
broker-dealer or agent under state securities laws, (ix) expenses of reports and
notices to shareholders and of meetings of shareholders 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 Fund
(including without limitation safekeeping of funds, securities and other
investments, keeping of books and accounts and determination of net asset
values), (xiv) fees, expenses and disbursements of transfer agents, dividend
disbursing agents, shareholder servicing agents and registrars for all services
to the Fund, (xv) expenses for servicing shareholder accounts, (xvi) any direct
charges to shareholders approved by the Trustees of the Trust, (xvii)
compensation and expenses of Trustees of the Trust who are not members 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 and officers
with respect thereto.
3. Compensation of Administrator. The Board of Trustees of the Trust
have currently determined that, based on the current level of compensation
payable to BMR by the Portfolio under the Portfolio's present Investment
Advisory Agreement with BMR, the Administrator shall receive no compensation
from the Trust or the Fund in respect of the services to be rendered and the
facilities to be provided by the Administrator under this Agreement. If the
Trustees determine that the Trust or Fund, should compensate the Administrator
for such services and facilities, such compensation shall be set forth in a new
agreement or in an amendment to this Agreement to be entered into by the parties
hereto.
4. Other Interests. It is understood that Trustees and officers of the
Trust and shareholders of the Fund are or may be or become interested in the
Administrator as trustees, officers, employees, shareholders or otherwise and
that trustees, officers, employees and shareholders of the Administrator are or
may be or become similarly interested in the Fund, and that the Administrator
may be or become interested in the Fund as shareholder or otherwise. It is also
understood that trustees, officers, employees and shareholders of the
Administrator may be or become interested (as directors, trustees, officers,
employees, stockholders or otherwise) in other companies or entities (including,
without limitation, other investment companies) which the Administrator may
organize, sponsor or acquire, or with which it may merge or consolidate, and
which may include the words "Eaton Vance" or "Eaton & Howard" or "Vance Sanders"
or any combination thereof as part of their name, and that the Administrator or
its subsidiaries or affiliates may enter into advisory or management or
administration agreements or other contracts or relationships with such other
companies or entities.
5. Limitation of Liability of the Administrator. The services of the
Administrator to the Trust and the Fund are not to be deemed to be exclusive,
the Administrator 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 Administrator, the Administrator shall not be subject to liability to the
Trust or the Fund or to any shareholder of the Fund 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-Administrators. The Administrator may employ one or more
sub-administrators from time to time to perform such of the acts and services of
the Administrator and upon such terms and conditions as may be agreed upon
between the Administrator and such sub-administrators and approved by the
Trustees of the Trust.
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, 1996 and shall continue in full force and effect indefinitely
thereafter, but only so long as such continuance after February 28, 1996 is
specifically approved at least annually (i) by the Board of Trustees of the
Trust and (ii) by the vote of a majority of those Trustees of the Trust who are
not interested persons of the Administrator or the Trust.
Either party hereto may, at any time on sixty (60) days' prior written
notice to the other, terminate this Agreement without the payment of any
penalty, by action of Trustees of the Trust or the trustee of the Administrator,
as the case may be, and the Trust may, at any time upon such written notice to
the Administrator, terminate this Agreement by vote of a majority of the
outstanding voting securities of the Fund. 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 both 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 the Administrator
or the Trust, and (ii) by vote of the Board of Trustees of the Trust. Additional
series of the Trust, however, will become a Fund hereunder upon approval by the
Trustees of the Trust and amendment of Schedule A.
9. Limitation of Liability. The Fund shall not be responsible for the
obligations of any other series of the Trust. The Administrator expressly
acknowledges the provision in the Declaration of Trust of the Trust limiting the
personal liability of shareholders of the Fund and of the officers and Trustees
of the Trust, and the Administrator hereby agrees that it shall have recourse to
the Trust or the Fund for payment of claims or obligations as between the Trust
or the Fund and the Administrator arising out of this Agreement and shall not
seek satisfaction from the shareholders or any shareholder of the Fund or from
the officers or Trustees of the Trust.
10. Use of the Name "Eaton Vance." The Administrator hereby consents to
the use by the Fund of the name "Eaton Vance" as part of the Fund's name;
provided, however, that such consent shall be conditioned upon the employment of
the Administrator or one of its affiliates as the administrator of the Fund. The
name "Eaton Vance" or any variation thereof may be used from time to time in
other connections and for other purposes by the Administrator and its affiliates
and other investment companies that have obtained consent to the use of the name
"Eaton Vance." The Administrator shall have the right to require the Fund to
cease using the name "Eaton Vance" as part of the Fund's name if the Fund
ceases, for any reason, to employ the Administrator or one of its affiliates as
the Fund's administrator. Future names adopted by the Fund for itself, insofar
as such names include identifying words requiring the consent of the
Administrator, shall be the property of the Administrator and shall be subject
to the same terms and conditions.
11. 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 of the lesser of (a) 67 per
centum or more of the shares of the Fund present or represented by proxy at the
meeting if the holders of more than 50 per centum of the outstanding shares of
the Fund are present or represented by proxy at the meeting, or (b) more than 50
per centum of the outstanding shares of the Fund.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the day and year first above written.
EATON VANCE MUNICIPALS TRUST II EATON VANCE MANAGEMENT
By By
----------------------------- -----------------------------------
President Vice President and not individually
<PAGE>
SCHEDULE A
Eaton Vance Municipals Trust II
AMENDED ADMINISTRATIVE SERVICES AGREEMENT
Dated __________, 1995
EV Classic Florida Insured Tax Free Fund
EV Classic Hawaii Tax Free Fund
EV Classic Kansas Tax Free Fund
EV Marathon Florida Insured Tax Free Fund
EV Marathon Hawaii Tax Free Fund
EV Marathon High Yield Municipals Fund
EV Marathon Kansas Tax Free Fund
EV Traditional Florida Insured Tax Free Fund
EV Traditional High Yield Municipals Fund
EXHIBIT 99.11
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 2 to the
Registration Statement (1933 Act File No. 33-71320) of Eaton Vance Municipals
Trust II on behalf of EV Marathon High Yield Municipals Fund and EV Traditional
High Yield Municipals Fund of our report dated May 3, 1995, relating to High
Yield Municipals Portfolio, appearing in the Statement of Additional
Information, which is part of such Registration Statement.
DELOITTE & TOUCHE LLP
May 15, 1995
Boston, Massachusetts
Exhibit 99.(15)(d)
FORM OF
EATON VANCE MUNICIPALS TRUST II
AMENDED DISTRIBUTION PLAN
(Marathon Series)
WHEREAS, Eaton Vance Municipals Trust II (the "Trust") engages in
business as an open-end investment company with multiple series and is
registered as such under the Investment Company Act of 1940, as amended (the
"Act");
WHEREAS, the Trust adopted a separate Distribution Plan (the "Original
Plan") on behalf of each of its series listed on Schedule A (the "Funds"),
pursuant to which each Fund has made payments in connection with the
distribution of shares of the Fund;
WHEREAS, the Trust employs Eaton Vance Distributors, Inc. to act as
Principal Underwriter (as defined in the Act) of shares of each Fund, but does
not intend to remunerate the Principal Underwriter unless and until the
Principal Underwriter sells shares of the Fund;
WHEREAS, each Fund will pay the Principal Underwriter sales commissions
and distribution fees only in connection with the sale of shares of the Fund;
WHEREAS, each Fund intends to pay service fees as contemplated in
subsections (b) and (d) of Section 26 of Article III of the Rules of Fair
Practice of the National Association of Securities Dealers, Inc. (the "NASD
Rules");
WHEREAS, the Trustees of the Trust have determined that it is desirable
to amend and replace the Original Plan with this Amended Distribution Plan on
behalf of the Funds listed on Schedule A; and
WHEREAS, the Trustees of the Trust have determined that there is a
reasonable likelihood that adoption of this Amended Distribution Plan will
benefit each Fund and its shareholders.
NOW, THEREFORE, the Trust hereby adopts this Distribution Plan (this
"Plan") on behalf of each Fund in accordance with Rule 12b-1 under the Act and
containing the following terms and conditions:
1. The Fund will pay sales commissions and distribution fees to the
Principal Underwriter only after and as a result of the sales of shares of the
Fund. The Principal Underwriter will provide the Fund with such distribution
services and facilities as the Trust may from time to time consider necessary to
accomplish the sale of shares of the Fund. It is understood that the Principal
Underwriter may pay such sales commissions and make such other payments to
Authorized Firms and other persons as it considers appropriate to encourage
distribution of such shares.
2. On each sale of Fund shares (excluding reinvestment of dividends and
distributions), the Fund shall pay the Principal Underwriter a sales commission
in an amount not exceeding 5% of the price received by the Fund therefor, such
payment to be made in the manner set forth and subject to the terms of this
Plan. The amount of the sales commission shall be established from time to time
by vote or other action of a majority of (i) those Trustees of the Trust who are
not "interested persons" (as defined in the Act) of the Trust and have no direct
or indirect financial interest in the operation of this Plan or any agreements
related to it (the "Rule 12b-1 Trustees") and (ii) all of the Trustees then in
office. The Fund shall also pay the Principal Underwriter a separate
distribution fee (calculated in accordance with Section 3), such payment to be
made in the manner set forth and subject to the terms of this Plan.
3. The sales commissions and distribution fees referred to in Section 2
shall be accrued and paid by the Fund in the following manner. The Fund shall
accrue daily an amount calculated at the rate of .75% per annum of the daily net
assets of the Fund, which net assets shall be computed in accordance with the
governing documents of the Trust and applicable votes and determinations of the
Trustees of the Trust. The daily amounts so accrued throughout the month shall
be paid to the Principal Underwriter on the last day of each month. The amount
of such daily accrual, as so calculated, shall first be applied and charged to
all unpaid sales commissions, and the balance, if any, shall then be applied and
charged to all unpaid distribution fees. No amount shall be accrued with respect
to any day on which there exist no outstanding uncovered distribution charges of
the Principal Underwriter. The amount of such uncovered distribution charges
shall be calculated daily. For purposes of this calculation, distribution
charges of the Principal Underwriter shall include (a) the aggregate of all
sales commissions which the Principal Underwriter has been paid pursuant to this
Section 3 (and pursuant to Section 3 of the Original Plan) plus all sales
commissions which it is entitled to be paid pursuant to Section 2 (and pursuant
to Section 2 of the Original Plan) since inception of the Original Plan through
and including the day next preceding the date of calculation, and (b) an amount
equal to the aggregate of all distribution fees referred to below which the
Principal Underwriter has been paid pursuant to this Section 3 (and pursuant to
Section 3 of the Original Plan) plus all such fees which it is entitled to be
paid pursuant to Section 2 (and pursuant to Section 2 of the Original Plan)
since inception of the Original Plan through and including the day next
preceding the date of calculation. From this sum (distribution charges) there
shall be subtracted (i) the aggregate amount paid or payable to the Principal
Underwriter pursuant to this Section 3 (and pursuant to Section 3 of the
Original Plan) since inception of the Original Plan through and including the
day next preceding the date of calculation and (ii) the aggregate amount of all
contingent deferred sales charges paid or payable to the Principal Underwriter
since inception of the Original Plan through and including the day next
preceding the date of calculation. If the result of such subtraction is a
positive amount, a distribution fee [computed at the rate of 1% per annum above
the prime rate (being the base rate on corporate loans posted by at least 75% of
the nation's 30 largest banks) then being reported in the Eastern Edition of The
Wall Street Journal or if such prime rate is not so reported such other rate as
may be designated from time to time by vote or other action of a majority of (i)
the Rule 12b-1 Trustees and (ii) all of the Trustees then in office] shall be
computed on such amount and added to such amount, with the resulting sum
constituting the amount of outstanding uncovered distribution charges of the
Principal Underwriter with respect to such day for all purposes of this Plan. If
the result of such subtraction is a negative amount, there shall exist no
outstanding uncovered distribution charges of the Principal Underwriter with
respect to such day and no amount shall be accrued or paid to the Principal
Underwriter with respect to such day. The aggregate amounts accrued and paid
pursuant to this Section 3 during any fiscal year of the Fund shall not exceed
.75% of the average daily net assets of the Fund for such year.
4. The Principal Underwriter shall be entitled to receive all
contingent deferred sales charges paid or payable with respect to any day on
which there exist outstanding uncovered distribution charges of the Principal
Underwriter. The Fund shall be entitled to receive all remaining contingent
deferred sales charges paid or payable by shareholders with respect to any day
on which there exist no outstanding uncovered distribution charges of the
Principal Underwriter, provided that no such sales charge which would cause the
Fund to exceed the maximum applicable cap imposed thereon by paragraph (2) of
subsection (d) of Section 26 of Article III of the NASD Rules shall be imposed.
5. The Fund may make payments of service fees to the Principal
Underwriter, Authorized Firms and other persons. The aggregate of such payments
during any fiscal year of the Fund shall not exceed .25% of the Fund's average
daily net assets for such year. Appropriate adjustment of service fee payments
shall be made whenever necessary to ensure that no such payment shall cause the
Fund to exceed the applicable maximum cap imposed thereon by paragraph (5) of
subsection (d) of Section 26 of Article III of the NASD Rules.
6. This Plan shall not take effect until after it has been approved by
both a majority of (i) the Rule 12b-1 Trustees and (ii) all of the Trustees then
in office, cast in person at a meeting (or meetings) called for the purpose of
voting on this Plan.
7. Any agreements between the Trust on behalf of the Fund and any
person relating to this Plan shall be in writing and shall not take effect until
approved in the manner provided for Trustee approval of this Plan in Section 6.
8. This Plan shall continue in effect through and including April 28,
1996 (or, if applicable, the next April 28 which follows the day on which the
Fund has become a Fund hereunder by amendment of Schedule A subsequent to April
28, 1996), and shall continue in effect indefinitely thereafter, but only for so
long as such continuance after April 28, 1996 (or, if applicable, said next
April 28) is specifically approved at least annually in the manner provided for
Trustee approval of this Plan in Section 6.
9. The persons authorized to direct the disposition of monies paid or
payable by the Fund pursuant to this Plan or any related agreement made on
behalf of the Fund shall be the President or any Vice President of the Trust.
Such persons shall provide to the Trustees of the Trust and the Trustees shall
review, at least quarterly, a written report of the amounts so expended and the
purposes for which such expenditures were made.
10. This Plan may be terminated at any time by vote of a majority of
the Rule 12b-1 Trustees, or by vote of a majority of the outstanding voting
securities of the Fund. The Principal Underwriter shall also be entitled to
receive all contingent deferred sales charges paid or payable with respect to
any day subsequent to termination of this Plan on which there exist outstanding
uncovered distribution charges of the Principal Underwriter.
11. This Plan may not be amended to increase materially the payments to
be made by the Fund as provided in Sections 2, 3 and 5 unless such amendment is
approved by a vote of at least a majority of the outstanding voting securities
of the Fund. In addition, all material amendments to this Plan shall be approved
in the manner provided for Trustee approval of this Plan in Section 6.
Additional series of the Trust will be governed hereby upon approval by the
Trustees of the Trust and amendment of Schedule A. With respect to such series,
this Plan shall, prior to the initial accrual or payment of any amount
hereunder, be approved by a vote of at least a majority of the outstanding
voting securities of the Fund.
12. While this Plan is in effect, the selection and nomination of the
Rule 12b-1 Trustees shall be committed to the discretion of the Rule 12b-1
Trustees.
13. The Trust shall preserve copies of this Plan and any related
agreements made by the Trust on behalf of the Fund and all reports made pursuant
to Section 9, for a period of not less than six years from the date of this
Plan, or of the agreements or of such report, as the case may be, the first two
years in an easily accessible place.
14. Consistent with the limitation of shareholder, officer and Trustee
liability as set forth in the Trust's Declaration of Trust, any obligations
assumed by the Fund pursuant to this Plan shall be limited in all cases to the
assets of the Fund and no person shall seek satisfaction thereof from the
shareholders of the Trust, officers or Trustees of the Trust or any other series
of the Trust.
15. When used in this Plan, the term "service fees" shall have the same
meaning as such term has in subsections (b) and (d) of Section 26 of Article III
of the NASD Rules. When used in this Plan, the term "vote of a majority of the
outstanding voting securities of the Fund" shall mean the vote of the lesser of
(a) 67 per centum or more of the shares of the Fund present or represented by
proxy at the meeting if the holders of more than 50 per centum of the
outstanding shares of the Fund are present or represented by proxy at the
meeting, or (b) more than 50 per centum of the outstanding shares of the Fund.
16. If any provision of this Plan shall be held or made invalid by a
court decision, statute, rule or regulation of the Securities and Exchange
Commission or otherwise, the remainder of this Plan shall not be affected
thereby.
17. This Plan shall amend, replace and be substituted for the Original
Plan as of the opening of business on _______________, 1995 and this Plan shall
be effective as of such time. The outstanding uncovered distribution charges of
the Principal Underwriter calculated under the Original Plan as of the close of
business on ___________, 1995 shall be the outstanding uncovered distribution
charges of the Principal Underwriter calculated under this Plan as of the
opening of business on ____________, 1995.
ADOPTED ____________, 1995
* * *
<PAGE>
SCHEDULE A
Eaton Vance Municipals Trust II
AMENDED SERVICE PLAN
DATED _____________, 1995
EV Marathon Florida Insured Tax Free Fund
EV Marathon Hawaii Tax Free Fund
EV Marathon Kansas Tax Free Fund
EV Marathon High Yield Municipals Fund
Exhibit 99.(15)(e)
FORM OF
EATON VANCE MUNICIPALS TRUST II
AMENDED SERVICE PLAN
(Traditional Series)
WHEREAS, Eaton Vance Municipals Trust II (the "Trust") engages in
business as an open-end management investment company with multiple series and
is registered as such under the Investment Company Act of 1940, as amended (the
"Act");
WHEREAS, the Trust adopted a Service Plan (the "Original Plan") on
behalf of its original series and desires to adopt a Service Plan on behalf of
its new series, all listed on Schedule A (the "Funds"), pursuant to which each
Fund has paid, or intends to pay, service fees as contemplated in subsections
(b) and (d) of Section 26 of Article III of the Rules of Fair Practice of the
National Association of Securities Dealers, Inc. (the "NASD Rules");
WHEREAS, the Trust employs Eaton Vance Distributors, Inc. to act as
Principal Underwriter (as defined in the Act) of Fund shares;
WHEREAS, the Trustees of the Trust have determined that it is desirable
to amend and replace the Original Plan with this Amended Service Plan on behalf
of the Funds listed on Schedule A; and
WHEREAS, the Trustees of the Trust have determined that there is a
reasonable likelihood that adoption of this Amended Service Plan will benefit
each Fund and its shareholders.
NOW, THEREFORE, the Trust hereby adopts this Amended Service Plan (the
"Plan") on behalf of each Fund in accordance with Rule 12b-1 under the Act and
containing the following terms and conditions:
1. The Fund may make payments of service fees to the Principal
Underwriter, Authorized Firms and other persons. The aggregate of such payments
during any fiscal year of the Fund shall not exceed .25% of the Fund's average
daily net assets for such year. Appropriate adjustment of service fee payments
shall be made whenever necessary to ensure that no such payment shall cause the
Fund to exceed the applicable maximum cap imposed thereon by paragraph (5) of
subsection (d) of Section 26 of Article III of the NASD Rules.
2. This Plan shall not take effect until after it has been approved by
both a majority of (i) those Trustees of the Trust who are not "interested
persons" of the Trust (as defined in the Act) and have no direct or indirect
financial interest in the operations of this Plan or any agreements related to
it (the "Rule 12b-1 Trustees"), and (ii) all of the Trustees then in office,
cast in person at a meeting (or meetings) called for the purpose of voting on
this Plan.
3. Any agreements between the Trust on behalf of the Fund and any
person relating to this Plan shall be in writing and shall not take effect until
approved in the manner provided for Trustee approval of this Plan in Section 2.
4. This Plan shall continue in effect for so long as such continuance
is specifically approved at least annually in the manner provided for Trustee
approval of this Plan in Section 2.
5. The persons authorized to direct the disposition of monies paid or
payable by the Fund pursuant to this Plan or any related agreement made on
behalf of the Fund shall be the President or any Vice President of the Trust.
One or more of such persons shall provide to the Trustees of the Trust and the
Trustees shall review, at least quarterly, a written report of the amounts so
expended and the purposes for which such expenditures were made.
6. This Plan may be terminated at any time by vote of a majority of the
Rule 12b-1 Trustees, or by vote of a majority of the outstanding voting
securities of the Fund.
7. This Plan may not be amended to increase materially the payments to
be made by the Fund as provided in Section 1 unless such amendment, if required
by law, is approved by a vote of at least a majority of the outstanding voting
securities of the Fund. In addition, all material amendments to this Plan shall
be approved in the manner provided for in Section 2. Additional series of the
Trust will become a Fund hereunder upon approval by the Trustees of the Trust
and amendment of Schedule A with respect to such series.
8. While this Plan is in effect, the selection and nomination of the
Rule 12b-1 Trustees shall be committed to the discretion of the Rule 12b-1
Trustees.
9. The Trust shall preserve copies of this Plan and any related
agreements made by the Trust on behalf of the Fund and all reports made pursuant
to Section 5, for a period of not less than six years from the date of this
Plan, or of the agreements or of such report, as the case may be, the first two
years in an easily accessible place.
10. Consistent with the limitation of shareholder, officer and Trustee
liability as set forth in the Trust's Declaration of Trust, any obligations
assumed by the Fund pursuant to this Plan shall be limited in all cases to the
assets of the Fund and no person shall seek satisfaction thereof from the
shareholders of the Trust, officers or Trustees of the Trust or any other series
of the Trust.
11. When used in this Plan, the term "service fees" shall have the same
meaning as such term has in subsections (b) and (d) of Section 26 of Article III
of the NASD Rules. When used in this Plan, the term "vote of a majority of the
outstanding voting securities" shall mean the vote of the lesser of (a) 67 per
centum or more of the shares of the Fund present or represented by proxy at the
meeting if the holders of more than 50 per centum of the outstanding shares of
the Fund are present or represented by proxy at the meeting, or (b) more than 50
per centum of the outstanding shares of the Fund.
12. If any provision of this Plan shall be held or made invalid by a
court decision, statute, rule or regulation of the Securities and Exchange
Commission or otherwise, the remainder of this Plan shall not be affected
thereby.
ADOPTED ______________, 1995
* * *
<PAGE>
SCHEDULE A
Eaton Vance Municipals Trust II
AMENDED SERVICE PLAN
DATED ____________, 1995
EV Traditional Florida Insured Tax Free Fund
EV Traditional High Yield Municipals Fund
Exhibit 99.(17)(c)
POWER OF ATTORNEY
We, the undersigned officers and Trustees of High Yield Municipals
Portfolio, a New York trust, do hereby severally constitute and appoint H. Day
Brigham, Jr., James B. Hawkes and Thomas Otis, or any of them, to be true,
sufficient and lawful attorneys, or attorney for each of us, to sign for each of
us, in the name of each of us in the capacities indicated below, any and all
amendments (including post- effective amendments) to the Registration Statement
on Form N-1A filed by Eaton Vance Municipals Trust II with the Securities and
Exchange Commission in respect of shares of beneficial interest and other
documents and papers relating thereto.
IN WITNESS WHEREOF we have hereunto set our hands on the dates set
opposite our respective signatures.
Signature Title Date
- --------- ----- ----
/s/ James B. Hawkes President and Trustee May 1, 1995
- --------------------------
James B. Hawkes
/s/ Donald R. Dwight Trustee May 1, 1995
- --------------------------
Donald R. Dwight
/s/ Samuel L. Hayes, III Trustee May 1, 1995
- --------------------------
Samuel L. Hayes, III
Trustee May 1, 1995
- --------------------------
Norton H. Reamer
/s/ John L. Thorndike Trustee May 1, 1995
- --------------------------
John L. Thorndike
/s/ Jack L. Treynor Trustee May 1, 1995
- --------------------------
Jack L. Treynor
/s/ James L. O'connor Treasurer and May 1, 1995
- -------------------------- Principal Financial
James L. O'Connor and Accounting
Officer
