<PAGE> 1
EV TRADITIONAL FLORIDA INSURED TAX FREE FUND
SUPPLEMENT TO PROSPECTUS DATED SEPTEMBER 8, 1994
THE FOLLOWING SENTENCE IS ADDED TO "HOW TO BUY FUND SHARES":
Fund shares may be sold at net asset value 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.
IN ADDITION, THE FOLLOWING CHANGES (1-5) APPLY TO FUND SHARES PURCHASED
ON OR AFTER MARCH 27, 1995:
1. THE SHAREHOLDER TRANSACTION EXPENSES TABLE UNDER "SHAREHOLDER AND
FUND EXPENSES" IS REPLACED BY THE FOLLOWING TABLE:
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(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
</TABLE>
Based on the Shareholder Transaction Expenses shown above and
on the total operation expenses shown in the Prospectus, an investor
would pay expenses $10 less than the expenses for one year and three
years shown in the Example under "Shareholder and Fund Expenses".
2. THE FIRST PARAGRAPH UNDER "THE EATON VANCE EXCHANGE PRIVILEGE" IS
REPLACED BY THE FOLLOWING PARAGRAPH:
Shares of the Fund may currently 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 the 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.
<PAGE> 2
3. THE SALES CHARGE AND DEALER COMMISSION TABLES UNDER "HOW TO BUY
FUND SHARES" ARE REPLACED BY THE FOLLOWING TABLE:
The current sales charges and dealer commissions are:
<TABLE>
<CAPTION>
SALES CHARGE SALES CHARGE DEALER COMMISSION
AS PERCENTAGE OF AS 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%<F1> 0.00%<F1> 0.25%<F2>
<FN>
<F1> Fund shares purchased before March 27, 1995, at net asset value with no initial sales charge by virtue of the purchase having
been in the amount of $1 million or more may be subject to a contingent deferred sales charge upon redemption.
<F2> 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 0.25% of average daily net assets paid quarterly for one year.
</TABLE>
4. IN THE DESCRIPTIONS OF THE STATEMENT OF INTENTION AND THE RIGHT OF
ACCUMULATION UNDER "EATON VANCE SHAREHOLDER SERVICES," THE $100,000 AMOUNTS ARE
REPLACED BY $50,000 AMOUNTS.
5. REFERENCES TO A CONTINGENT DEFERRED SALES CHARGE OR "CDSC" DO NOT
APPLY TO FUND SHARES PURCHASED ON OR AFTER MARCH 27, 1995.
March 27, 1995 T-IFLPS
<PAGE> 3
EV TRADITIONAL FLORIDA INSURED TAX FREE FUND
EV TRADITIONAL FLORIDA INSURED TAX FREE FUND (THE "FUND") IS A MUTUAL
FUND SEEKING TO PROVIDE CURRENT INCOME EXEMPT FROM REGULAR FEDERAL INCOME TAX
IN THE FORM OF AN INVESTMENT EXEMPT FROM FLORIDA INTANGIBLE TAX. THE FUND
INVESTS ITS ASSETS IN FLORIDA INSURED TAX FREE 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 AN HISTORICALLY STRUCTURED MUTUAL FUND. THE
FUND IS A SERIES OF EATON VANCE MUNICIPALS TRUST II (THE "TRUST").
Shares of the Fund are not deposits or obligations of, or guaranteed or
endorsed by, any bank or other 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 September 8, 1994 for the Fund, as
supplemented from time to time, has been filed with the Securities and Exchange
Commission and is incorporated herein by reference. This Statement of
Additional Information is available without charge from the Fund's Principal
Underwriter, Eaton Vance Distributors, Inc., 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 also 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>
TABLE OF CONTENTS
<S> <C>
Shareholder and Fund Expenses........ 2
The Fund's Financial Highlights...... 3
The Fund's Investment Objective...... 4
How the Fund and the Portfolio Invest
their Assets ...................... 4
Organization of the Fund and the
Portfolio.......................... 13
Management of the Fund and the
Portfolio.......................... 15
Service Plan......................... 17
Valuing Fund Shares.................. 18
How to Buy Fund Shares............... 18
How to Redeem Fund Shares............ 21
Reports to Shareholders.............. 22
The Lifetime Investing Account/
Distribution Options............... 22
The Eaton Vance Exchange Privilege... 24
Eaton Vance Shareholder Services..... 25
Distributions and Taxes.............. 26
Performance Information.............. 28
Statement of Intention and Escrow
Agreement.......................... 29
</TABLE>
--------------------------------------------------------------------------------
PROSPECTUS DATED SEPTEMBER 8, 1994
<PAGE> 4
<TABLE>
<CAPTION>
SHAREHOLDER AND FUND EXPENSES (1)
------------------------------------------------------------------------------------------
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases of Shares (as a percentage
of offering price) 4.75%
Sales Charges Imposed on Reinvested Distributions None
Redemptions Fees None
Fees to Exchange Shares None
Contingent Deferred Sales Charges (on purchases of $1 million or
more) Imposed on Redemptions During the First Eighteen Months (as a
percentage of redemption proceeds exclusive of all reinvestments
and capital appreciation in the account)(2) 1.00%
ANNUAL FUND AND ALLOCATED PORTFOLIO OPERATING EXPENSES
(as a percentage of average net assets)
Investment Adviser Fee(3) 0.16%
Rule 12b-1 Service Fees (Service Plan) 0.00
Other Expenses 0.15%
Total Operating Expenses 0.31%
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS
------- ------ -------
<S> <C> <C>
You would pay the following expenses (including initial maximum sales
charge) on a $1,000 investment, assuming (a) 5% annual return and (b)
redemption at the end of each time period: $51 $57
<FN>
Notes:
(1) The purpose of the above table and Example is to summarize the aggregate expenses of
the Fund and the Portfolio and to assist investors in understanding the various costs
and expenses that investors in the Fund will bear directly or indirectly. The Trustees
of the Trust believe that over time the aggregate per share expenses of the Fund and
the Portfolio should be approximately equal to the per share expenses which the Fund
would incur if the Trust retained the services of an investment adviser and the assets
of the Fund were invested directly in the type of securities being held by the
Portfolio. Since the Fund does not yet have a sufficient operating history, the
percentages indicated as Annual Fund and Allocated Portfolio Operating Expenses and
the amounts included in the Example are based on both the Fund's and the Portfolio's
projected fees and expenses for the current fiscal year ending January 31, 1995. The
table and Example should not be considered a representation of future expenses since
future expenses may be greater or less than those shown. For further information
regarding the expenses of both the Fund and the Portfolio see "The Fund's Financial
Highlights", "Organization of the Fund and the Portfolio", "Management of the Fund and
the Portfolio" and "How to Redeem Fund Shares".
(2) If shares of the Fund are purchased at net asset value with no initial sales charge by
virtue of the purchase having been in the amount of $1 million or more and are redeemed
within 18 months after the end of the calendar month in which the purchase was made, a
contingent deferred sales charge of 1% will be imposed on such redemption. See "How to
Buy Fund Shares", "How to Redeem Fund Shares" and "Eaton Vance Shareholder Services".
(3) 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 14.
(4) Other investment companies with different distribution arrangements and fees are
investing in the Portfolio and additional such companies may do so in the future. See
"Organization of the Fund and the Portfolio".
</TABLE>
2
<PAGE> 5
THE FUND'S FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
The following information should be read in conjunction with the financial
statements included in the Statement of Additional Information. Further
information regarding the performance of the Fund will be contained in the
Fund's annual report to shareholders which may be obtained without charge by
contacting the Fund's Principal Underwriter, Eaton Vance Distributors, Inc.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD FROM THE START OF BUSINESS, MARCH 3, 1994, TO JULY 31, 1994
(UNAUDITED):
<S> <C>
NET ASSET VALUE, beginning of period..................................... $10.000
-------
INCOME (LOSS) FROM OPERATIONS:
Net investment income.................................................. $ 0.175
Net realized and unrealized gain (loss) on investments................. 0.715
-------
Total income (loss) from operations................................. $ 0.890
-------
LESS DISTRIBUTIONS:
From net investment income............................................. $(0.175)
In excess of net investment income..................................... (0.005)
-------
Total distributions................................................. $(0.180)
-------
NET ASSET VALUE, end of period........................................... $10.710
=======
TOTAL RETURN............................................................. 8.94%
RATIOS/SUPPLEMENTAL DATA*:
Net assets, end of period (000 omitted)................................ $ 785
Ratio of net expenses to average daily net assets(1)................... 0.00%+
Ratio of net investment income to average daily net assets 4.09%+
*For the period from the start of business, March 3, 1994, to July 31, 1994,
the operating expenses of the Fund and the Portfolio reflect a preliminary
allocation of expenses to the Administrator and Investment Adviser,
respectively. Had such action not been taken, net investment income per
share and the ratios would have been as follows:
NET INVESTMENT INCOME PER SHARE.......................................... $ 0.102
=======
RATIOS (As a percentage of average daily net assets):
Expenses(1)............................................................ 1.70%+
=======
Net investment income.................................................. 2.39%+
=======
<FN>
+ Computed on an annualized basis.
(1) Includes the Fund's share of Florida Insured Tax Free Portfolio's allocated
expenses for the period from March 3, 1994 to July 31, 1994.
</TABLE>
3
<PAGE> 6
THE FUND'S INVESTMENT OBJECTIVE
--------------------------------------------------------------------------------
EV TRADITIONAL FLORIDA INSURED TAX FREE FUND (THE "FUND") IS A NON-DIVERSIFIED
SERIES OF EATON VANCE MUNICIPALS TRUST II (THE "TRUST"). THE FUND'S INVESTMENT
OBJECTIVE IS TO PROVIDE CURRENT INCOME EXEMPT FROM REGULAR FEDERAL INCOME TAX IN
THE FORM OF AN INVESTMENT EXEMPT FROM FLORIDA INTANGIBLES TAX. The Fund seeks to
meet its investment objective by investing its assets in the Florida Insured Tax
Free Portfolio (the "Portfolio"), a separate registered investment company which
invests primarily in Florida obligations as defined below which are rated in the
highest rating category by a major rating agency or, if unrated, are determined
to be of comparable quality by the Portfolio's Investment Adviser. Under normal
conditions, substantially all of the Portfolio's assets will be invested in
Florida obligations which are insured as to the timely payment of principal and
interest. See "Insurance" below. In any event, no less than 80% of the
Portfolio's net assets will be invested in insured Florida obligations.
HOW THE FUND AND THE PORTFOLIO INVEST THEIR ASSETS
--------------------------------------------------------------------------------
THE FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY INVESTING EITHER DIRECTLY
OR INDIRECTLY THROUGH ANOTHER OPEN-END MANAGEMENT INVESTMENT COMPANY PRIMARILY
(I.E., AT LEAST 80% OF ITS NET ASSETS DURING PERIODS OF NORMAL MARKET
CONDITIONS) IN DEBT OBLIGATIONS ISSUED BY OR ON BEHALF OF THE STATE OF FLORIDA
AND ITS POLITICAL SUBDIVISIONS, AND THE GOVERNMENTS OF PUERTO RICO, THE U.S.
VIRGIN ISLANDS AND GUAM, THE INTEREST ON WHICH IS EXEMPT FROM REGULAR FEDERAL
INCOME TAX, IS NOT A TAX PREFERENCE ITEM UNDER THE FEDERAL ALTERNATIVE MINIMUM
TAX AND THE VALUE OF WHICH IS EXEMPT FROM FLORIDA INTANGIBLES TAX ("FLORIDA
TAX-EXEMPT OBLIGATIONS"). The foregoing policy is a fundamental policy of both
the Fund and the Portfolio, which may not be changed unless authorized by a vote
of the shareholders of the Fund or the investors in the Portfolio, as the case
may be.
At least 80% of the Portfolio's net assets will normally be invested in
obligations rated in the highest rating category (which is Aaa by Moody's
Investors Service, Inc. ("Moody's") or AAA by Standard & Poor's Ratings Group
("S&P") or by Fitch Investors Service, Inc. ("Fitch")) or, if unrated,
determined to be of comparable quality by the Investment Adviser. The Portfolio
may invest up to 20% of its net assets in Florida obligations rated lower than
Aaa or AAA (but not lower than B) and comparable unrated obligations, provided
that no more than 5% of net assets will be invested in securities rated Baa or
lower by Moody's or BBB or lower by S&P or Fitch and comparable unrated
obligations. Florida obligations which are rated Baa or BBB may have speculative
characteristics. Also, changes in economic conditions or other circumstances are
more likely to lead to a weakened capacity to make principal and interest
payments than in the case of higher rated obligations. Securities rated below
Baa or BBB are commonly known as "junk bonds". See "Credit Quality -- Risks."
The Portfolio may retain in its portfolio an obligation whose rating drops below
B after its acquisition, if such retention is considered desirable by the
Investment Adviser; provided, however, that holdings of obligations rated below
Baa or BBB will not exceed 35% of net assets. For a description of municipal
obligation ratings, see the Statement of Additional Information.
FLORIDA OBLIGATIONS. Municipal obligations eligible for the exemption from the
Florida intangibles tax ("Florida obligations") include bonds, notes and
commercial paper issued by a municipality for a wide variety of both public and
private purposes. Public purpose municipal bonds include general obligation and
4
<PAGE> 7
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. Under normal market conditions, the
Portfolio will invest at least 65% of its total assets in obligations issued by
Florida or its political subdivisions. 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.
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 his liability for the Federal alternative minimum tax;
as at July 31, 1994, the Portfolio had 3.1% of its net assets invested in such
private activity bonds. The Portfolio may not invest more than 20% of its assets
in these obligations and obligations that pay interest subject to regular
Federal income tax and/or Florida intangibles tax.
MATURITY. It is expected that the Portfolio will normally contain substantial
amounts of long-term Florida obligations with maturities of ten years or more
because such long-term obligations generally produce higher income than
short-term obligations. Such long-term obligations are more susceptible to
market fluctuations resulting from changes in interest rates than shorter term
obligations. Since the Portfolio's objective is to provide current income, the
Portfolio will invest in Florida 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.
Although the Portfolio will normally attempt to invest substantially all of
its assets in Florida obligations, the Portfolio may, under normal market
conditions, invest up to 20% of its assets in short-term obligations the
interest on which is subject to regular Federal income tax, Federal alternative
minimum tax and/or Florida intangibles tax. Such short-term taxable obligations
may include, but are not limited to, certificates of deposit, commercial paper,
short-term notes and obligations issued or guaranteed by the U.S. Government or
any of its agencies or instrumentalities. During periods of adverse market
conditions, the Portfolio may temporarily invest more than 20% of its assets in
such short-term taxable obligations, which will be rated no lower than
investment grade.
CONCENTRATION. The Portfolio may invest 25% or more of its assets in Florida
obligations of the same type, including, without limitation, the following:
general obligations of the State of Florida and its political subdivisions,
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. As the Portfolio's
concentration in the securities of a particular category of issuer increases,
the potential for fluctuation in the value of the Fund's shares also increases.
5
<PAGE> 8
NON-DIVERSIFIED STATUS. The Portfolio's classification under the Investment
Company Act of 1940 as a "non-diversified" investment company allows it to
invest, with respect to 50% of its assets, more than 5% of its assets in the
securities of any issuer. Because of the small number of issues of Florida
obligations, 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 would be more susceptible to any single adverse
economic or political occurrence or development affecting Florida issuers. The
Portfolio will also be subject to an increased risk of loss if the issuer is
unable to make interest or principal payments or if the market value of such
securities declines. It is also possible that sufficient suitable Florida
tax-exempt obligations will not be available for the Portfolio to achieve its
investment objective.
CONCENTRATION IN FLORIDA OBLIGATIONS -- RISKS. Because the Portfolio will
ordinarily invest at least 65% of its assets in Florida issuers, it is more
susceptible to factors affecting Florida.
Florida's financial operations are considerably different than most other
states because, under the State's constitution, there is no state income tax.
The lack of an income tax exposes total State tax collections to considerably
more volatility than would otherwise be the case and, in the event of an
economic downswing, could effect the State's ability to pay principal and
interest in a timely manner. In April, 1993 the legislature passed the 1993-94
budget which did not contain the $630 million in new taxes proposed by Governor
Chiles to fund schools, jails and public welfare programs. Revenues are
projected to increase 8.4% and expenditures 12%. Unencumbered reserves are
projected to be $276 million, or 2.1% of expenditures for fiscal year 1994. A
$38.6 billion budget was passed for fiscal 1995. Unemployment in the State for
March 1994 was 7.3% compared to the national unemployment rate of 6.5%.
In 1993, the State constitution was amended to limit the annual growth in
the assessed valuation of residential property and which, over time, could
constrain the growth in property taxes, a major revenue source for local
governments. While no immediate ratings implications are expected, the amendment
could have negative impact on the financial performance of local governments
over time and lead to ratings revisions which may have a negative impact on the
prices of affected bonds.
As of the date of this Prospectus, general obligation bonds issued by the
State of Florida are rated Aa/AA/AA by Moody's, S&P and Fitch, respectively. S&P
currently regards the outlook for the State as stable. There can be no assurance
that the economic conditions on which these ratings are based will continue or
that particular bond issues may not be adversely affected by changes in
economic, political or other conditions.
Florida obligations also include obligations of the governments of Puerto
Rico, the U.S. Virgin Islands and Guam to the extent that the value of these
obligations is exempt from Florida intangibles tax. The Portfolio will not
invest more than 5% of its net assets in the obligations of each of the Virgin
Islands and Guam or more than 35% of its net assets in the obligations of Puerto
Rico. Currently, S&P rates Puerto Rico general obligation debt A, while Moody's
rates it Baa1; these ratings have been in place since 1956 and 1976,
respectively. The Portfolio may be adversely affected by local political and
economic conditions and developments within Puerto Rico affecting the issuers of
such obligations. Reliance on nonrecurring revenues and economic weakness led
S&P to change its outlook from stable to negative. The economy of Puerto Rico is
dominated by the manufacturing and service sectors. Although the economy of
Puerto Rico expanded significantly from fiscal 1984 through fiscal 1990, the
rate of this expansion slowed during fiscal 1991, 1992 and 1993. Growth in
fiscal 1994 will depend on several factors, including the state of the
6
<PAGE> 9
U.S. economy and the relative stability in the price of oil, the exchange rate
of the U.S. dollar and the cost of borrowing. Although the Puerto Rico
unemployment rate has declined substantially since 1985, the seasonally adjusted
unemployment rate for June, 1994 was approximately 14.6%. The North American
Free Trade Agreement ("NAFTA"), which became effective on January 1, 1994, could
lead to the loss of Puerto Rico's lower salaried or labor intensive jobs to
Mexico.
--------------------------------------------------------------------------------
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.
--------------------------------------------------------------------------------
INSURANCE. Insured Florida obligations held by the Portfolio 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 Florida obligation
at the time of its original issuance ("Issue Insurance"), (ii) an insurance
policy obtained by the Portfolio or a third party subsequent to the Florida
obligation's original issuance ("Secondary Market Insurance") or (iii) a
municipal insurance policy purchased by the Portfolio ("Mutual Fund Insurance").
Each type of insurance insures the timely payment of interest and principal of
the Florida obligation but does not protect the market value of such obligation
or the net asset value of the Portfolio or the Fund.
Issue Insurance is generally purchased by the issuer or underwriter of the
Florida obligation and is noncancellable and effective as long as the securities
are unpaid and the insurer remains in business. Secondary Market Insurance
allows the Portfolio or a third party to pay a single premium to insure a
Florida obligation as to principal and interest until maturity and to transfer
the insurance benefit with the underlying security. Secondary Market Insurance
premiums do not result in an expense to the Portfolio, but are added to the cost
basis of the Florida obligation so insured. Mutual Fund Insurance may be
purchased from insurance companies that guarantee the timely payment of interest
and principal when due on certain Florida obligations that are designated by the
insurer as eligible for such insurance. Mutual Fund Insurance may terminate upon
the Portfolio's sale of the obligation or it may be extended to enhance the
marketability of the obligation. To extend a policy, the Portfolio will pay a
single, predetermined premium payable from the proceeds of the sale of that
obligation. It is expected that the Portfolio will extend a policy only if, in
the opinion of the Investment Adviser, the net proceeds from the sale of the
obligation, as insured, would exceed the proceeds from the sale of that
obligation without insurance. The price of Florida obligations insured by Mutual
Fund Insurance is expected to be more volatile than the price of Florida
obligations insured by Issue or Secondary Market Insurance. To the extent the
Portfolio's obligations are insured by Mutual Fund Insurance, the value of the
Fund's investment in the Portfolio, and the price of the Fund's shares, will be
more volatile than if such obligations were otherwise insured.
7
<PAGE> 10
Florida obligations held by the Portfolio will be insured by insurers
having a claims-paying ability rated Aaa by Moody's or AAA by S&P or Fitch. See
the Appendix to the Statement of Additional Information for a brief description
of the claims-paying ability ratings.
The Portfolio anticipates that under normal conditions all or substantially
all of its Florida obligations will be subject to Issue Insurance or Secondary
Market Insurance. If the Portfolio purchases Mutual Fund Insurance, premiums are
paid by the Portfolio. These premiums are based on the credit quality and
principal amount of the Florida obligation to be insured. If the issuer,
underwriter, or other third party purchases the insurance for the obligation,
the value of such insurance is generally reflected in a higher market value or
purchase price for the obligation. While insurance is intended to reduce
financial risk, the cost of such insurance (from higher purchase prices of
securities or the payment of insurance premiums) will result in lower yields on
the Florida obligations so insured.
The Portfolio may also invest in Florida obligations that are secured by an
escrow or trust account which contains securities issued or guaranteed by the
U.S. Government, its agencies or instrumentalities, that are backed by the full
faith and credit of the United States, and sufficient in amount to ensure the
payment of interest on and principal of the secured Florida obligations
("collateralized obligations"). Collateralized obligations generally are
regarded as having the credit characteristics of the underlying U.S. Government,
agency or instrumentality securities. These obligations will not be subject to
Issue Insurance, Secondary Market Insurance or Mutual Fund Insurance, but will
be considered to be insured Florida obligations for purposes of the Portfolio's
policy of investing at least 80% of its net assets in insured Florida
obligations (but such obligations shall not constitute more than 15% of the
insured portion of the Portfolio). The Portfolio may also purchase a variety of
other hybrid and special types of municipal obligations, such as obligations
secured by bank credit agreements or escrow agreements. The credit quality of
companies which provide such credit enhancements will affect the value of such
obligations.
MUNICIPAL LEASES. The Portfolio may invest in municipal leases and
participations therein, which frequently involve special risks. Municipal leases
are obligations in the form of a lease or installment purchase arrangement which
is entered into by a state or local government 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 asset to pass eventually to the governmental issuer) have
evolved as a means for governmental issuers to acquire property and equipment
without meeting the constitutional and statutory requirements for the issuance
of debt. The 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 purposes of
the Portfolio's 15% limitation on investing 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.
8
<PAGE> 11
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 ongoing basis,
including an assessment of the likelihood that the lease may or may not be
cancelled.
ZERO COUPON BONDS. The Portfolio may invest in zero coupon bonds, which are
debt obligations that do not require the periodic payment of interest and are
issued at a significant discount from face value. Such bonds experience greater
volatility in market value due to changes in interest rates than debt
obligations that provide for regular payments of interest. The Portfolio will
accrue income on such bonds for tax and accounting purposes, in accordance with
applicable law, the Fund's proportionate share of which income is distributable
to shareholders. Because no cash is received at the time such income is accrued,
the Portfolio may be required to liquidate other portfolio securities to
generate cash that the Fund may withdraw from the Portfolio to satisfy the
Fund's distribution obligations.
INVERSE FLOATERS. The Portfolio may invest in various types of derivative
municipal securities whose interest rates bear an inverse relationship to the
interest rate on another security or the value of an index ("inverse floaters").
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.
CREDIT QUALITY RISKS. Many Florida obligations offering the current income are
in the lowest investment grade category (Baa or BBB), lower categories or may be
unrated. The Portfolio may not invest more than 5% of its net assets in
municipal obligations rated below investment grade (but not lower than B by
Moody's, S&P or Fitch) and comparable unrated obligations. The lowest investment
grade, lower rated and comparable unrated municipal obligations in which the
Portfolio may invest will have speculative characteristics in varying degrees.
While such obligations may have some quality and protective characteristics,
these characteristics can be expected to be offset or outweighed by
uncertainties or major risk exposures to adverse conditions. Lower rated and
comparable unrated municipal obligations are subject to the risk of an issuer's
inability to meet principal and interest payments on the obligations (credit
risk) and may also be subject to price volatility due to such factors as
interest rate sensitivity, market perception of the creditworthiness of the
issuer and general market liquidity (market risk). Lower rated or unrated
municipal obligations are more likely to react to real or perceived developments
affecting market and credit risk than are more highly rated obligations, which
react primarily to movements in the general level of interest rates. The
Portfolio may retain defaulted obligations in its portfolio when such retention
is considered desirable
9
<PAGE> 12
by the Investment Adviser. In the case of a defaulted obligation, the Portfolio
may incur additional expenses seeking recovery of its investment. For a
description of municipal obligation ratings, see the Statement of Additional
Information.
MARKET CONDITIONS. The management of the Portfolio believes that, in general,
the secondary market for Florida obligations is less liquid than that for
taxable debt obligations or for large issues of municipal obligations that trade
in a national market. No established resale market exists for certain of the
Florida obligations in which the Portfolio may invest. These considerations may
have the effect of restricting the availability of such obligations, may affect
the choice of securities sold to meet redemption requests and may have the
effect of limiting the Portfolio's ability to sell or dispose of such
securities. Also, valuation of such obligations may be more difficult. The
Securities and Exchange Commission (the "Commission") has proposed a rule
effectively requiring issuers of municipal obligations to provide financial
information on an ongoing basis. If adopted, this rule may reduce the liquidity
and value of some of the obligations held by the Portfolio to the extent the
issuers of such obligations fail to comply with the rule.
NET ASSET VALUE FLUCTUATION. 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 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. Therefore, an investment in shares of the Fund will not
constitute a complete investment program.
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 Florida obligations or changes in the
investment objectives of investors. Such trading may be expected to increase the
portfolio turnover rate 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. 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 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 will not accrue
income in respect of a when-issued security prior to its stated delivery date.
The Portfolio will maintain in a segregated account sufficient assets to cover
its purchase obligations so long as such obligations continue.
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 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
10
<PAGE> 13
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 AND OPTIONS TRANSACTIONS. To hedge against changes in interest rates,
the Portfolio may purchase and sell various kinds of futures contracts, and
purchase and write call and put options on futures contracts; it may also enter
into closing purchase and sale transactions with respect to such contracts and
options. The futures contracts may be based on various debt securities (such as
U.S. Government securities), securities indices and other financial instruments
and indices. The Portfolio would engage in futures and related options
transactions for bona fide hedging or non-hedging purposes as defined in
regulations of the Commodity Futures Trading Commission. The Portfolio will
engage in such transactions for non-hedging purposes only in order to enhance
total return by using a futures position as a lower cost substitute for a
securities position that the Portfolio is otherwise authorized to enter into.
The Portfolio may not purchase or sell futures contracts or purchase or
sell related options, except for closing purchase or sale transactions, if
immediately thereafter the sum of the amount of margin deposits on the
Portfolio's outstanding positions in futures and related options and the amount
of premiums paid for outstanding positions in options on futures would exceed 5%
of the market value of the Portfolio's net assets. There are currently no other
percentage limitations on the Portfolio's transactions in futures contracts or
options on futures, except that at least 80% of the Portfolio's net assets will
be invested in Florida tax-exempt obligations. These transactions involve
brokerage costs, require margin deposits and, in the case of contracts and
options requiring the Portfolio to purchase securities, require the Portfolio to
segregate liquid high grade debt securities in an amount equal to the underlying
value of such contracts and options. In addition, while transactions in futures
contracts and options on futures may reduce certain risks, such transactions
themselves involve (1) liquidity risk that contractual positions cannot be
easily closed out in the event of market changes, (2) correlation risk that
changes in the value of hedging positions may not match the market fluctuations
intended to be hedged (especially given that the only futures contracts
currently available to hedge Florida obligations are futures on various U.S.
Government securities and on municipal securities indices), (3) market risk that
an incorrect prediction by the Investment Adviser of interest rates may cause
the Portfolio to perform less well than if such positions had not been entered
into, and (4) skills different from those needed to select portfolio securities.
Distribution by the Fund from any net income or gains realized on the
Portfolio's transactions in futures and options on futures will be taxable.
11
<PAGE> 14
ORGANIZATION OF THE FUND AND THE PORTFOLIO
--------------------------------------------------------------------------------
EV TRADITIONAL FLORIDA INSURED TAX FREE FUND IS A SERIES OF EATON VANCE
MUNICIPALS TRUST II (THE "TRUST"), 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. Upon liquidation of the Fund,
shareholders are entitled to share pro rata in the net assets of the Fund
available for distribution to shareholders.
FLORIDA INSURED TAX FREE PORTFOLIO (THE "PORTFOLIO") IS ORGANIZED AS A
TRUST UNDER THE LAWS OF THE STATE OF NEW YORK AND IS 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
existed and the Portfolio itself were 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,
which is a separate investment company with an identical investment objective.
Therefore, the Fund's interest in the 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 different 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 of the Portfolio, see"The
Fund's Investment Objective" and "How the Fund and the Portfolio Invest their
Assets". Further information regarding the investment practices of the Portfolio
may also 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
12
<PAGE> 15
affords the potential for economies of scale for the Fund, at least when the
assets of the Portfolio exceed $500 million.
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. 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, such Trustees would consider what action might
be taken, including investing all 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 funds investing in the Portfolio may be adversely
affected by the actions of larger funds investing in the Portfolio. For example,
if a large fund withdraws from the Portfolio, the remaining funds 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
13
<PAGE> 16
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 disinterested 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 each
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
-------- ---------------- ---------- -----------
<S> <C> <C> <C>
1 up to $20 million................................................. 0.100% 1.00%
2 $20 million but less than $40 million............................. 0.200% 2.00%
3 $40 million but less than $500 million............................ 0.300% 3.00%
4 $500 million but less than $1 billion............................. 0.275% 2.75%
5 $1 billion but less than $1.5 billion............................. 0.250% 2.50%
6 $1.5 billion but less than $2 billion............................. 0.225% 2.25%
7 $2 billion but less than $3 billion............................... 0.200% 2.00%
8 $3 billion and over............................................... 0.175% 1.75%
</TABLE>
As at July 31, 1994, the Portfolio had net assets of $4,691,405. For the
period from the start of business, March 3, 1994, to the period ended July 31,
1994, the Portfolio, absent a fee reduction, would have paid
14
<PAGE> 17
BMR advisory fees equivalent to 0.14% (annualized) of the Portfolio's average
daily net assets for such period. To enhance the net income of the Portfolio,
BMR made a preliminary reduction of its advisory fee in the full amount of such
fee and BMR was allocated, on a preliminary basis, $1,542 of expenses related to
the operation of the Portfolio.
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. The Portfolio is responsible for the payment of
all expenses other than those expressly stated to be payable by BMR under the
investment advisory agreement.
Thomas J. Fetter has acted as the portfolio manager since the Portfolio
commenced operations. He is President of the Portfolio and has been a Vice
President of Eaton Vance since 1987 and of BMR since its inception.
Municipal obligations, including Florida 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.
BMR OR EATON VANCE ACTS AS INVESTMENT ADVISER TO INVESTMENT COMPANIES AND
VARIOUS INDIVIDUAL AND INSTITUTIONAL CLIENTS WITH ASSETS UNDER MANAGEMENT OF
OVER $16 BILLION. Eaton Vance is a wholly-owned subsidiary of Eaton Vance
Corp., a 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 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
15
<PAGE> 18
affiliated with BMR or Eaton Vance; and investment advisory fees, and, if any,
administrative services fees. The Portfolio and the Fund will also each bear
expenses incurred in connection with litigation in which the Portfolio or the
Fund, as the case may be, is a party and any legal obligation to indemnify its
respective officers and Trustees with respect thereto.
SERVICE PLAN
--------------------------------------------------------------------------------
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 is further described 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 MAY MAKE SERVICE FEE PAYMENTS FOR PERSONAL
SERVICES AND/OR THE MAINTENANCE OF SHAREHOLDER ACCOUNTS TO THE PRINCIPAL
UNDERWRITER, 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
service fee payments to the Principal Underwriter and Authorized Firms in
amounts not expected to exceed .20% 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. However, the Plan
authorizes the Trustees of the Trust on behalf of the Fund to increase payments
to the Principal Underwriter, Authorized Firms and other persons from time to
time without further action by shareholders of the Fund, provided that the
aggregate amount of payments made to such persons under the Plan in any fiscal
year of the Fund does not exceed .25% of the Fund's average daily net assets.
Service fees will commence accruing during the quarter ending March 31, 1995.
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 substantially all of 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).
Financial service firms ("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 share. It
is the Authorized Firms' responsibility to transmit orders promptly to the
Principal Underwriter, which is a wholly-owned subsidiary of Eaton Vance.
16
<PAGE> 19
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. Florida 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.
-------------------------------------------------------------------------------
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 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 from the
Principal Underwriter.
The current sales charges are:
<TABLE>
<CAPTION>
SALES CHARGE SALES CHARGE
AS PERCENTAGE OF AS PERCENTAGE OF
AMOUNT OF PURCHASE OFFERING PRICE AMOUNT INVESTED
------------------ ---------------- ----------------
<S> <C> <C>
Under $100,000..................................................... 4.75% 4.99%
$100,000 but less than $250,000.................................... 3.75 3.90
$250,000 but less than $500,000.................................... 2.75 2.83
$500,000 but less than $1,000,000.................................. 2.00 2.04
$1,000,000 or more................................................. 0* 0*
<FN>
*No sales charge is payable at the time of purchase on investments of $1 million
or more. A contingent deferred sales charge ("CDSC") of 1% will be imposed on
such investments, as described below, in the event of certain redemption
transactions within 18 months of purchase.
</TABLE>
17
<PAGE> 20
The current dealer commission is:
<TABLE>
<CAPTION>
DEALER COMMISSION
AS PERCENTAGE OF
AMOUNT OF PURCHASE OFFERING PRICE
------------------------------------------------------------ -----------------
<S> <C>
Under $100,000.............................................. 5.00%
$100,000 but less than $250,000............................. 4.00
$250,000 but less than $500,000............................. 3.00
$500,000 but less than $1,000,000........................... 2.25
$1,000,000 or more.......................................... 0**
<FN
**The Principal Underwriter may pay a commission to Authorized Firms who
initiate and are responsible for purchases of $1 million or more as follows:
1.00% on sales up to $2 million, plus 0.80% on the next $1 million, 0.20% on
the next $2 million and 0.08% on the excess over $5 million.
</TABLE>
The Principal Underwriter may allow, upon notice to all Authorized Firms,
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.
The Principal Underwriter may, from time to time, at its own expense,
provide additional incentives to financial service 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 financial
service 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, 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 Draft 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; 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 in connection with the merger of an
investment company with the Fund and 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.
18
<PAGE> 21
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 shown 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 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 Traditional Florida Insured Tax Free Fund
In the case of physical delivery:
Investors Bank & Trust Company
Attention: EV Traditional Florida Insured Tax Free 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, are advised to 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.
-------------------------------------------------------------------------------
IF YOU DON'T HAVE AN AUTHORIZED FIRM, EATON VANCE CAN RECOMMEND ONE.
-------------------------------------------------------------------------------
19
<PAGE> 22
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 share of the Fund 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 by The Shareholder
Services Group, Inc. in "good order," the Portfolio will make payment in cash
for the net asset value of the redeemed 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 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 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 Fund accounts with balances of less than $1,000. Prior to such a
redemption, shareholders will be given 60 days written notice to make an
additional purchase. 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 if the cause of the low account
balance was a reduction in the net asset value of Fund shares.
If the shares have been purchased at net asset value with no initial sales
charge by virtue of the purchase having been in the amount of $1 million or more
and are redeemed within 18 months after the end of the calendar month in which
the purchase was made, a CDSC of 1% will be imposed on such redemption.
20
<PAGE> 23
The CDSC will be retained by the Principal Underwriter. The CDSC will be imposed
on an amount equal to the lesser of the current market value or the original
purchase price of the shares redeemed. Accordingly, no CDSC will be imposed on
increases in account value above the initial purchase price, including any
dividends or distributions that have been reinvested in additional shares. In
determining whether a CDSC is applicable to a redemption, the calculation will
be made in a manner that results in the lowest possible rate being charged. It
will be assumed that redemptions are made first from any shares in the
shareholder's account that are not subject to a CDSC.
The CDSC is waived for redemptions involving certain liquidation, merger or
acquisition transactions involving other investment companies. If a shareholder
reinvests redemption proceeds within the 30-day period and in accordance with
the conditions set forth under "Eaton Vance Shareholder Services -- Reinvestment
Privilege," the shareholder's account will be credited with the amount of any
CDSC paid on such redeemed shares.
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 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 share balance in the account. THE
LIFETIME INVESTING ACCOUNT ALSO PERMITS A SHAREHOLDER TO MAKE ADDITIONAL
INVESTMENTS BY SENDING A CHECK FOR $50 OR MORE in writing 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 your name and
account number).
21
<PAGE> 24
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 confirmation 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 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
BY SENDING A CHECK FOR $50 OR MORE.
-------------------------------------------------------------------------------
22
<PAGE> 25
THE EATON VANCE EXCHANGE PRIVILEGE
--------------------------------------------------------------------------------
Shares of the Fund may currently 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 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 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.
Shares of the Fund which are subject to a CDSC may be exchanged into any of
the above funds without incurring the CDSC. The shares acquired in an exchange
may be subject to a CDSC upon redemption. For purposes of computing the CDSC
payable upon redemption of shares acquired in an exchange, the holding period of
the original shares is added to the holding period of the shares acquired in the
exchange.
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 your financial service firm
or from 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 open-end funds for which Eaton Vance acts as
investment adviser or administrator may be exchanged for Fund shares at their
respective net asset value per share, 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 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.
23
<PAGE> 26
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, is available from Authorized Firms or from 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 the 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 dividends are reinvested.
The name of the shareholder and the account number should accompany each
investment.
BANK DRAFT INVESTING -- FOR REGULAR SHARE ACCUMULATION: Cash investments of $50
or more may be made through the shareholder's checking account via bank draft
each month or quarter. The $1,000 minimum initial investment and small account
redemption policy are waived for these accounts.
STATEMENT OF INTENTION: Purchases of $100,000 or more made over a 13-month
period are eligible for reduced sales charges.
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 $100,000 or more. Shares of the Eaton Vance funds mentioned
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 HIS REPURCHASE OR REDEMPTION PROCEEDS (PLUS
THAT AMOUNT NECESSARY TO ACQUIRE A FRACTIONAL SHARE TO ROUND OFF HIS 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 with 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 net asset value next determined 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 with an initial sales
charge by the Principal Underwriter who wish to reinvest such redemption or
repurchase proceeds in shares of the Fund. If a shareholder reinvests redemption
proceeds within the 30 day period the shareholder's account will be credited
with the amount of any CDSC paid on such redeemed shares. A reinvesting
shareholder may realize a gain or loss for Federal tax purposes as a result of
such repurchase or redemption. 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.
24
<PAGE> 27
DISTRIBUTIONS AND TAXES
--------------------------------------------------------------------------------
SUBSTANTIALLY ALL OF THE INVESTMENT INCOME ALLOCATED TO THE FUND BY THE
PORTFOLIO, LESS THE FUND'S DIRECT AND ALLOCATED EXPENSES, WILL BE DECLARED DAILY
AS A DISTRIBUTION TO FUND SHAREHOLDERS OF RECORD AT THE TIME OF DECLARATION.
Such distributions, whether taken in cash or reinvested in additional shares,
will ordinarily be paid on the last day of each month or the next business day
thereafter. The Fund anticipates that for tax purposes the entire distribution,
whether taken in cash or reinvested in additional shares, will constitute
tax-exempt income to the shareholders for Federal income tax purposes, except
for the proportionate part of the distribution that may be considered taxable
income if the Fund has taxable income during the calendar year. Shareholders
reinvesting the monthly distribution should continue to treat the amount of the
entire distribution as the tax cost basis of the additional shares acquired by
reason of such reinvestment. Daily distribution crediting will commence on the
day that collected funds for the purchase of Fund shares are available at the
Transfer Agent. The Fund's net realized capital gains, if any, consist of the
net realized capital gains allocated to the Fund by the Portfolio for tax
purposes, after taking into account any available capital loss carryovers; the
Fund's net realized capital gains, if any, will be distributed at least once a
year, usually in December.
Sales charges paid upon a purchase of Fund shares 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. In addition, losses realized on a redemption
of Fund shares may be disallowed under certain "wash sale" rules if within a
period beginning 30 days before and ending 30 days after the date of redemption
other shares of the Fund are acquired. Any disregarded or disallowed amounts
will result in an adjustment to the shareholder's tax basis in some or all of
any other shares acquired.
Shareholders will receive annually tax information and Forms 1099 to assist
in the preparation of their Federal and state tax returns for the prior calendar
year's distributions, proceeds from the redemption or exchange of Fund shares,
and Federal income tax (if any) withheld by the Fund's Transfer Agent.
In order to qualify as a regulated investment company under the Internal
Revenue Code (the "Code"), the Fund must satisfy certain requirements relating
to the sources of its income, the distribution of its income and the
diversification of its assets. In satisfying these requirements, the Fund will
treat itself as owning its proportionate share of each of the Portfolio's assets
and as entitled to the income of the Portfolio properly attributable to such
share.
-------------------------------------------------------------------------------
AS A REGULATED INVESTMENT COMPANY UNDER THE CODE, THE FUND DOES NOT PAY FEDERAL
INCOME OR EXCISE TAXES TO THE EXTENT THAT IT DISTRIBUTES TO 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
ALSO DOES NOT PAY FEDERAL INCOME OR EXCISE TAXES.
-------------------------------------------------------------------------------
25
<PAGE> 28
Distributions of interest on certain municipal obligations constitute a tax
preference item under the alternative minimum tax provisions applicable to
individuals and corporations (see page 5). Distributions of taxable income
(including a portion of any original issue discount with respect to certain
stripped municipal obligations and stripped coupons and accretion of certain
market discount) and net short-term capital gains will be taxable to
shareholders as ordinary income. Distributions of long-term capital gains are
taxable to shareholders as such for Federal income tax purposes, regardless of
the length of time Fund shares have been owned by the shareholder. Distributions
are taxed in the manner described above whether paid in cash or reinvested in
additional shares of the Fund.
Tax-exempt distributions received from the Fund are includable in the tax
base for determining the taxability of social security and railroad retirement
benefits.
Interest on indebtedness incurred or continued by a shareholder to purchase
or carry shares of the Fund is not deductible. Further, entities or persons who
are "substantial users" (or persons related to "substantial users") of
facilities financed by industrial development or private activity bonds should
consult their tax advisers before purchasing shares of the Fund. "Substantial
user" is defined in applicable Treasury regulations to include a "non-exempt
person" who regularly uses in trade or business a part of a facility financed
from the proceeds of industrial development bonds.
FLORIDA TAXES. Based on an opinion of tax counsel, management believes
shareholders of the Fund that are subject to the Florida intangibles tax will
not be required to include the value of their Fund shares in their taxable
intangible property if all of the Fund's investments on the annual assessment
date are obligations that would be exempt from such tax if held directly by such
shareholders, such as Florida and U.S. Government obligations. A ruling
confirming this tax treatment is being requested from the Florida Department of
Revenue. As described above, the Portfolio will normally attempt to invest
substantially all of its assets in Florida obligations, and it will ensure that
all of its assets held on the annual assessment date are exempt from the Florida
intangibles tax. Accordingly, the value of the Fund shares held by a shareholder
should under normal circumstances be exempt from the Florida intangibles tax.
Shareholders should consult their own tax advisors with respect to the
state, local and foreign tax consequences of investing in the Fund.
26
<PAGE> 29
PERFORMANCE INFORMATION
--------------------------------------------------------------------------------
FROM TIME TO TIME, THE FUND MAY ADVERTISE ITS YIELD AND/OR AVERAGE ANNUAL TOTAL
RETURN. The current yield for the Fund will be 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 1 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 compound 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 dividends and
distributions are reinvested at the net asset value on the reinvestment dates
during the period. The Fund may also publish annual and cumulative total return
figures from time to time.
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.
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. 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 (see "Distributions
and Taxes").
Investors should note that the investment results of the Fund will
fluctuate over time, and any presentation of the Fund's current yield or total
return for any prior period should not be considered a representation of what an
investment may earn or what an investor's yield or total return may be in any
future period.
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
27
<PAGE> 30
purchase hereunder) registered in the investor's name. All income dividends and
capital gain 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 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 as 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 account.
28
<PAGE> 31
INVESTMENT ADVISER OF
FLORIDA INSURED TAX FREE PORTFOLIO EV TRADITIONAL [LOGO]
Boston Management and Research
24 Federal Street FLORIDA INSURED
Boston, MA 02110
TAX FREE FUND
ADMINISTRATOR OF EV TRADITIONAL
FLORIDA INSURED TAX FREE 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 PROSPECTUS
Investors Bank & Trust Company
24 Federal Street SEPTEMBER 8, 1994
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
FLORIDA INSURED TAX FREE FUND
24 FEDERAL STREET
BOSTON, MA 02110
T-IFLP
