<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 25, 1996
1933 ACT FILE NO. 33-71320
1940 ACT FILE NO. 811-8134
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933 [X]
POST-EFFECTIVE AMENDMENT NO. 6 [X]
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 7 [X]
EATON VANCE MUNICIPALS TRUST II
--------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
24 FEDERAL STREET, BOSTON, MASSACHUSETTS 02110
----------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
617-482-8260
-------------------------------------
(REGISTRANT'S TELEPHONE NUMBER)
H. DAY BRIGHAM, JR., 24 FEDERAL STREET, BOSTON, MASSACHUSETTS 02110
-------------------------------------------------------------------
(NAME AND ADDRESS OF AGENT FOR SERVICE)
It is proposed that this filing will become effective pursuant to rule 485
(check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[X] on February 1, 1997 pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2).
If appropriate, check the following box:
[ ] this post effective amendment designates a new effective date for a
previously filed post-effective amendment.
High Yield Municipals Portfolio has also executed this Registration
Statement.
The Registrant has filed a Declaration pursuant to Rule 24f-2 and on March
28, 1996 filed its "Notice" as required by that Rule for the fiscal year ended
January 31, 1996.
================================================================================
<PAGE>
This Amendment to the registration statement on Form N-1A consists of the
following documents and papers:
Cross Reference Sheet required by Rule 481(a) under the Securities Act of
1933
Part A -- The Prospectus of:
EV Traditional High Yield Municipals Fund
Part B -- The Statement of Additional Information of:
EV Traditional High Yield Municipals Fund
Part C -- Other Information
Signatures
Exhibit Index Required by Rule 483(a) under the Securities Act of 1933
Exhibits
This Amendment is not intended to amend the Prospectus and Statement of
Additional Information of any other series of the Registrant not identified
above.
<PAGE>
EATON VANCE MUNICIPALS TRUST II
EV MARATHON HIGH YIELD MUNICIPALS FUND
CROSS REFERENCE SHEET
ITEMS REQUIRED BY FORM N-1A
---------------------------
PART A
ITEM NO. ITEM CAPTION PROSPECTUS CAPTION
- -------- ------------ ----------------------------
1. ............... Cover Page Cover Page
2. ............... Synopsis Shareholder and Fund
Expenses
3. ............... Condensed Financial The Fund's Financial
Information Highlights; Performance
Information
4. ............... General Description of The Fund's Investment
Registrant Objective; Investment
Policies and Risks;
Organization of the Fund
and the Portfolio
5. ............... Management of the Fund Management of the Fund and
the Portfolio
5A. .............. Management's Discussion of Not Applicable
Fund Performance
6. ............... Capital Stock and Other Organization of the Fund and
Securities the Portfolio; Reports to
Shareholders; The Lifetime
Investing Account/
Distribution Options;
Distributions and Taxes
7. ............... Purchase of Securities Valuing Fund Shares; How to
Being Offered Buy Fund Shares; The
Lifetime Investing
Account/Distribution
Options; Distribution
Plan; The Eaton Vance
Exchange Privilege; Eaton
Vance Shareholder Services
8. ............... Redemption or Repurchase How to Redeem Fund Shares
9. ............... Pending Legal Proceedings Not Applicable
PART B STATEMENT OF ADDITIONAL
ITEM NO. ITEM CAPTION INFORMATION CAPTION
- -------- ------------ ----------------------------
10. ............... Cover Page Cover Page
11. ............... Table of Contents Table of Contents
12. ............... General Information and Other Information
History
13. ............... Investment Objectives and Additional Information about
Policies Investment
Policies; Investment
Restrictions
14. ............... Management of the Fund Trustees and Officers; Fees
and Expenses
15. ............... Control Persons and Control Persons and
Principal Holders of Principal Holders of
Securities Securities
16. ............... Investment Advisory and Investment Adviser and
Other Services Administrator;
Distribution Plan;
Custodian; Independent
Certified Public
Accountants; Fees and
Expenses
17. ............... Brokerage Allocation and Portfolio Security
Other Practices Transactions; Fees and
Expenses
18. ............... Capital Stock and Other Other Information
Securities
19. ............... Purchase, Redemption and Determination of Net Asset
Pricing of Securities Value; Principal
Being Offered Underwriter; Service for
Withdrawal; Distribution
Plan; Fees and Expenses
20. ............... Tax Status Taxes; Tax Equivalent Yield
Table
21. ............... Underwriters Principal Underwriter; Fees
and Expenses
22. ............... Calculations of Performance Investment Performance;
Data Performance Information
23. ............... Financial Statements Financial Statements
<PAGE>
PART A
INFORMATION REQUIRED IN A PROSPECTUS
EV TRADITIONAL
HIGH YIELD MUNICIPALS FUND
- ------------------------------------------------------------------------------
EV TRADITIONAL HIGH YIELD MUNICIPALS FUND (THE "FUND") IS A MUTUAL FUND
SEEKING TO PROVIDE HIGH CURRENT INCOME EXEMPT FROM REGULAR FEDERAL INCOME TAX.
THE FUND INVESTS ITS ASSETS IN HIGH YIELD MUNICIPALS PORTFOLIO (THE
"PORTFOLIO"), A NON-DIVERSIFIED OPEN-END INVESTMENT COMPANY HAVING THE SAME
INVESTMENT OBJECTIVE AS THE FUND, RATHER THAN BY DIRECTLY INVESTING IN AND
MANAGING ITS OWN PORTFOLIO OF SECURITIES. THE FUND IS A SERIES OF EATON VANCE
MUNICIPALS TRUST II (THE "TRUST").
THE PORTFOLIO MAY INVEST UP TO 100% OF ITS ASSETS IN BELOW INVESTMENT GRADE
MUNICIPAL BONDS, COMMONLY KNOWN AS "JUNK BONDS", THAT ENTAIL GREATER RISKS,
INCLUDING DEFAULT, THAN THOSE OF HIGHER-RATED SECURITIES.
Shares of the Fund are not deposits or obligations of, or guaranteed or
endorsed by, any bank or other insured depository institution, and are not
federally insured by the Federal Deposit Insurance Corporation, the Federal
Reserve Board or any other government agency. Shares of the Fund involve
investment risks, including fluctuations in value and the possible loss of
some or all of the principal investment.
This Prospectus is designed to provide you with information you should know
before investing. Please retain this document for future reference. A
Statement of Additional Information dated February 1, 1997 for the Fund, as
supplemented from time to time, has been filed with the Securities and
Exchange Commission and is incorporated herein by reference. The Statement of
Additional Information is available without charge from the Fund's principal
underwriter, Eaton Vance Distributors, Inc. (the "Principal Underwriter"), 24
Federal Street, Boston, MA 02110 (telephone (800) 225-6265). The Portfolio's
investment adviser is Boston Management and Research (the "Investment
Adviser"), a wholly-owned subsidiary of Eaton Vance Management, and Eaton
Vance Management is the administrator (the "Administrator") of the Fund. The
offices of the Investment Adviser and the Administrator are located at 24
Federal Street, Boston, MA 02110.
- ------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
PAGE PAGE
<S> <C> <C> <C>
Shareholder and Fund Expenses .......................... 2 How to Redeem Fund Shares .......................... 13
The Fund's Financial Highlights ........................ 3 Reports to Shareholders ............................ 14
The Fund's Investment Objective ........................ 4 The Lifetime Investing Account/Distribution Options 14
Investment Policies and Risks .......................... 4 The Eaton Vance Exchange Privilege ................. 15
Organization of the Fund and the Portfolio ............. 7 Eaton Vance Shareholder Services ................... 16
Management of the Fund and the Portfolio ............... 8 Distributions and Taxes ............................ 16
Service Plan ........................................... 9 Performance Information ............................ 17
Valuing Fund Shares .................................... 10 Appendix A ......................................... 19
How to Buy Fund Shares ................................. 10 Appendix B ......................................... 20
- ------------------------------------------------------------------------------------------------------------------------
PROSPECTUS DATED FEBRUARY 1, 1997
</TABLE>
<PAGE>
SHAREHOLDER AND FUND EXPENSES
- ------------------------------------------------------------------------------
<TABLE>
SHAREHOLDER TRANSACTION EXPENSES
------------------------------------------------------------------------------------------------------------
CLASS A CLASS I
SHARES SHARES
------ ------
<S> <C> <C>
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering 3.75% None
Sales Charges Imposed on Reinvested Distributions None None
Fees to Exchange Shares None None
ANNUAL FUND AND ALLOCATED PORTFOLIO OPERATING EXPENSES (as a percentage of average daily net assets)
-----------------------------------------------------------------------------------------------------
CLASS A CLASS I
SHARES SHARES
------ ------
Investment Advisory Fee (after fee reduction) 0.30% 0.30%
Service Plan Fees 0.05 0.00
Other Fees (after expense allocations) 0.40 0.40
---- ----
Total Operating Expense 0.75% 0.70%
EXAMPLE
An investor would pay the following expenses and, in the case of Class A shares, maximum initial sales
charge on a $1,000 investment, assuming (a) 5% annual return and (b) redemption at the end of each time
period:
CLASS A CLASS I
SHARES SHARES
------ ------
1 Year $ 45 $ 7
3 Years 61 22
5 Years 78 39
10 Years 127 87
</TABLE>
NOTES:
The table and Example summarize the aggregate expenses of each class of shares
of the Fund and the Portfolio and are designed to help investors understand
the costs and expenses they will bear, directly or indirectly, by investing in
the Fund. Information for the Fund is based on its estimated expenses for the
current fiscal year. The Investment Adviser Fee and Other Expenses reflect an
expected fee reduction and expense allocation for the current fiscal year,
absent which the Investment Adviser Fee, Other Expenses and Total Operating
Expenses would be estimated to be 0.59%, 0.54% and 1.13%, respectively.
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES, AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. Federal
regulations require the Example to assume a 5% annual return, but actual
annual return will vary. For further information regarding the expenses of
both the Fund and the Portfolio see "The Fund's Financial Highlights",
"Management of the Fund and the Portfolio" and "Service Plan".
The Fund offers two classes of shares. Class A shares are available to all
investors and are sold subject to a sales charge and a service fee. Class I
shares are offered only through financial intermediaries who charge their
clients a fee for services. See "How to Buy Fund Shares" and "Service Plan."
No sales charge is payable at the time of purchase on investments in Class A
shares of $1 million or more. However, a contingent deferred sales charge of
0.50% will be imposed on such investments in the event of certain redemptions
within 12 months of purchase. See "How to Buy Fund Shares," "How to Redeem
Fund Shares" and "Eaton Vance Shareholder Services."
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 9.
The Fund invests exclusively in the Portfolio. Other investment companies with
different distribution arrangements are investing in the Portfolio and others
may do so in the future. See "Organization of the Fund and the Portfolio".
<PAGE>
THE FUND'S FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------
The following information should be read in conjunction with the audited
financial statements included in the Fund's annual report to shareholders
which is incorporated by reference into the Statement of Additional
Information in reliance upon the report of Deloitte & Touche LLP, independent
certified public accountants, as experts in accounting and auditing. Further
information regarding the performance of the Fund is contained in its annual
report to shareholders which may be obtained without charge by contacting the
Principal Underwriter. The following information relates to Class A shares
only.
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JULY 31 1996 YEAR ENDED
(UNAUDITED) JANUARY 31, 1996*
------------ -----------------
<S> <C> <C>
NET ASSET VALUE, beginning of period $10.700 $10.000
------- -------
INCOME FROM OPERATIONS:
Net investment income $ 0.357 $ 0.340
Net realized and unrealized gain (loss) on investments (0.281) 0.700
------- -------
Total income from operations $ 0.076 $ 1.040
------- -------
LESS DISTRIBUTIONS:
From net investment income $(0.355) $(0.340)
In excess of net realized gain on investments (0.001) --
------- -------
Total distributions $(0.356) $(0.340)
======= =======
NET ASSET VALUE, end of period $10.420 $10.700
======= =======
TOTAL RETURN(2) 0.77% 10.50%
RATIOS/SUPPLEMENTAL DATA**:
Net assets, end of period (000's omitted) $44,066 $30,535
Ratio of net expenses to average daily net assets(1) 0.35%+ 0.09%+
Ratio of net expenses to average daily net assets after custodian fee
reduction(1) 0.33%+ 0.09%+
Ratio of net investment income to average daily net assets 6.87%+ 6.60%+
**For the period indicated, the operating expenses of the Fund and the Portfolio
reflect an assumption of expenses by the Administrator or Investment Adviser.
Had such actions not been taken, net investment income per share and the
ratios would have been as follows:
Net investment income per share $ 0.320 $ 0.291
======= =======
RATIOS/SUPPLEMENTAL DATA:
Expenses(1) 1.08%+ 1.04%+
Expenses after custodian fee reduction(1) 1.06%+ 1.04%+
Net investment income 6.14%+ 5.65%+
- ----------
+Computed on an annualized basis.
*For the period from the start of business, August 7, 1995, to January 31, 1996.
(1)Includes the Fund's share of the Portfolio's allocated expenses.
(2)Total investment return is calculated assuming a purchase at the net asset value on the first
day and a sale at the net asset value on the last day of each period reported. Distributions,
if any, are assumed to be reinvested at the net asset value on the payable date. Total return
is computed on a non-annualized basis.
</TABLE>
<PAGE>
THE FUND'S INVESTMENT OBJECTIVE
- --------------------------------------------------------------------------------
THE FUND'S INVESTMENT OBJECTIVE IS TO PROVIDE HIGH CURRENT INCOME EXEMPT FROM
REGULAR FEDERAL INCOME TAX. The Fund currently seeks to meet its investment
objective by investing its assets in High Yield Municipals Portfolio (the
"Portfolio"), a separate open-end management investment company which has the
same investment objective and policies as the Fund. The investment objective
and nonfundamental policies of the Fund may be changed by the Trustees without
a vote of shareholders. The Fund may not be appropriate for investors who
cannot assume the greater risk of capital depreciation or loss inherent in
seeking higher tax-exempt yields.
INVESTMENT POLICIES AND RISKS
- ------------------------------------------------------------------------------
THE PORTFOLIO SEEKS TO ACHIEVE ITS OBJECTIVE BY INVESTING PRINCIPALLY IN HIGH-
YIELDING, BELOW INVESTMENT GRADE MUNICIPAL OBLIGATIONS. Below investment
grade municipal obligations are obligations that are rated Ba or lower by
Moody's Investors Service, Inc. ("Moody's"), or BB or lower by Standard &
Poor's Ratings Group ("S&P") or Fitch Investors Service, Inc. ("Fitch"), or
that are unrated but determined by the Investment Adviser to be of comparable
quality. For a description of the ratings assigned by the rating agencies, see
Appendix B. Below investment grade municipal obligations, commonly known as
"junk bonds", generally offer higher current yields than higher rated
securities, but are subject to greater risks. Securities in the lower-rated
categories are considered to be of poor standing and predominantly
speculative. The Portfolio may also invest a portion of its assets in
municipal obligations that are not paying current income in anticipation of
possible future income. For more detailed information about the risks
associated with investing in such securities, see "Additional Risk
Considerations" below.
Although the Portfolio may invest in securities of any maturity, it is
expected that the Portfolio will normally invest a substantial portion of its
assets in securities with maturities of ten years or more. Those securities
generally offer higher yields than securities of shorter maturities, but are
subject to greater fluctuations in value in response to changes in interest
rates. Since the Portfolio's objective is to provide high current income, the
Portfolio will invest in municipal obligations with an emphasis on income and
not on stability of the Portfolio's net asset value. The average maturity of
the Portfolio's holdings may vary (generally between 15 and 30 years)
depending on anticipated market conditions.
The Portfolio will normally invest at least 65% of its assets in investment
grade and below investment grade municipal obligations. As a matter of
fundamental policy, the Portfolio will normally invest at least 80% of its
assets in debt obligations issued by or on behalf of states, territories and
possessions of the United States, and the District of Columbia and their
political subdivisions, agencies or instrumentalities, the interest on which
is, in the opinion of bond counsel, exempt from regular federal income tax.
(As a matter of fundamental policy, the Fund will normally invest either
directly, or indirectly through another investment company, at least 80% of
its assets in such obligations.)
At times, the Portfolio may, for temporary defensive purposes, invest any
portion of its assets in higher-rated municipal obligations or other
securities, the interest on which may not be exempt from regular federal
income tax, and may hold any portion of its assets in cash. It is impossible
to predict when, or for how long, the Portfolio would engage in such
strategies.
MUNICIPAL OBLIGATIONS. Municipal obligations include bonds, notes and
commercial paper issued by a municipality for a wide variety of both public
and private purposes, the interest on which is, in the opinion of bond
counsel, exempt from regular federal income tax. Public purpose municipal
bonds include general obligation and revenue bonds. General obligation bonds
are backed by the taxing power of the issuing municipality. Revenue bonds are
backed by the revenues of a project or facility, or from the proceeds of a
specific revenue source. Some revenue bonds are payable solely or partly from
funds which are subject to annual appropriations by a state's legislature and
the availability of monies for such payments. Municipal notes include bond
anticipation, tax anticipation and revenue anticipation notes, which are
short-term obligations that will be retired with the proceeds of an
anticipated bond issue, tax revenue or facility revenue, respectively.
Interest income from certain types of municipal obligations may be subject to
the federal alternative minimum tax (the "AMT") for individual investors.
Distributions to corporate investors of certain interest income may also be
subject to the AMT. The Fund may not be suitable for investors subject to the
AMT.
CONCENTRATION. The Portfolio may invest 25% or more of its assets in municipal
obligations of issuers located in the same state or in municipal obligations
of the same type, including without limitation the following: general
obligations of states and localities; lease rental obligations of state and
local authorities; obligations dependent on annual appropriations by a state's
legislature for payment; obligations of state and local housing finance
authorities, municipal utilities systems or public housing authorities;
obligations of hospitals or life care facilities; or industrial development or
pollution control bonds issued for electric utility systems, steel companies,
paper companies or other purposes. This may make the Portfolio more
susceptible to adverse economic, political, or regulatory occurrences
affecting a particular category of issuers. For example, health-care related
issuers are susceptible to medicaid reimbursement policies, and national and
state health care legislation. In addition, municipal obligations that rely on
an annual appropriation of funds by a state's legislature for payment are
subject to the risk that the legislature will not appropriate the necessary
amounts or take other action needed to permit the issuer of such obligations
to make required payments. As the Portfolio's concentration in the securities
of a particular category of issuer increases, so does the potential for
fluctuation in the value of the Fund's shares.
NON-DIVERSIFIED STATUS. As a "non-diversified" investment company, the
Portfolio may invest, with respect to 50% of its total assets, more than 5%
(but not more than 25%) of its total assets in the securities of any issuer.
The Portfolio is likely to invest a greater percentage of its assets in the
securities of a single issuer than would a diversified fund. Therefore, the
Portfolio is more susceptible to any single adverse economic or political
occurrence or other adverse development affecting certain issuers.
OTHER INVESTMENT PRACTICES
The Portfolio may engage in the following investment practices, some of which
may be considered to involve "derivative" instruments because they derive
their value from another instrument, security or index. In addition, the
Portfolio may also temporarily borrow up to 5% of the value of its total
assets to satisfy redemption requests or settle securities transactions.
WHEN-ISSUED SECURITIES. The Portfolio may purchase securities on a "when-
issued" basis, which means that payment and delivery occur on a future
settlement date. The price and yield of such securities are generally fixed on
the date of commitment to purchase. However, the market value of the
securities may fluctuate prior to delivery and upon delivery the securities
may be worth more or less than the Portfolio agreed to pay for them. The
Portfolio may also purchase instruments that give the Portfolio the option to
purchase a municipal obligation when and if issued.
INVERSE FLOATERS. The Portfolio may invest in municipal securities whose
interest rates bear an inverse relationship to the interest rate on another
security or the value of an index ("inverse floaters"). An investment in
inverse floaters may involve greater risk than an investment in a fixed rate
bond. Because changes in the interest rate on the other security or index
inversely affect the residual interest paid on the inverse floater, the value
of an inverse floater is generally more volatile than that of a fixed rate
bond. Inverse floaters have interest rate adjustment formulas which generally
reduce or, in the extreme, eliminate the interest paid to the Portfolio when
short-term interest rates rise, and increase the interest paid to the
Portfolio when short-term interest rates fall. Inverse floaters have varying
degrees of liquidity, and the market for these securities is new and
relatively volatile. These securities tend to underperform the market for
fixed rate bonds in a rising interest rate environment, but tend to outperform
the market for fixed rate bonds when interest rates decline. Shifts in long-
term interest rates may, however, alter this tendency. Although volatile,
inverse floaters typically offer the potential for yields exceeding the yields
available on fixed rate bonds with comparable credit quality and maturity.
These securities usually permit the investor to convert the floating rate to a
fixed rate (normally adjusted downward), and this optional conversion feature
may provide a partial hedge against rising rates if exercised at an opportune
time. Inverse floaters are leveraged because they provide two or more dollars
of bond market exposure for every dollar invested.
FUTURES TRANSACTIONS. The Portfolio may purchase and sell various kinds of
financial futures contracts and options thereon to hedge against changes in
interest rates. Futures contracts may be based on various debt securities
(such as U.S. Government securities and municipal obligations) and securities
indices (such as the Municipal Bond Index traded on the Chicago Board of
Trade). Such transactions involve a risk of loss or depreciation due to
unanticipated adverse changes in securities prices, which may exceed the
Portfolio's initial investment in these contracts. The Portfolio may not
purchase or sell futures contracts or related options, except for closing
purchase or sale transactions, if immediately thereafter the sum of the amount
of margin deposits and premiums paid on the Portfolio's outstanding positions
would exceed 5% of the market value of the Portfolio's net assets. These
transactions involve transaction costs. There can be no assurance that the
Investment Adviser's use of futures will be advantageous to the Portfolio.
Distributions by the Fund of any gains realized on the Portfolio's
transactions in futures and options on futures will be taxable.
ADDITIONAL RISK CONSIDERATIONS
Investors should carefully consider their ability to assume the risks of
owning shares of a mutual fund that invests in below investment grade
municipal obligations (commonly known as "junk bonds") before making an
investment in the Fund. The lower ratings of certain securities held by the
Portfolio reflect a greater possibility that adverse changes in the financial
condition of an issuer, or in general economic conditions, or both, or an
unanticipated rise in interest rates, may impair the ability of the issuer to
make payments of interest and principal. The inability (or perceived
inability) of issuers to make timely payment of interest and principal would
likely make the values of securities held by the Fund more volatile and could
limit the Portfolio's ability to sell its securities at prices approximating
the values the Portfolio has placed on such securities. It is possible that
legislation may be adopted in the future limiting the ability of certain
financial institutions to purchase such securities; such legislation may
adversely affect the liquidity of such securities. In the absence of a liquid
trading market for securities held by it, the Portfolio may be unable at times
to establish the fair market value of such securities. The rating assigned to
a security by a rating agency does not reflect an assessment of the volatility
of the security's market value or of the liquidity of an investment in the
security. Credit ratings are based largely on the issuer's historical
financial condition and the rating agency's investment analysis at the timing
of rating, and the rating assigned to any particular security is not
necessarily a reflection of the issuer's current financial condition. Credit
quality in the high yield, high risk municipal bond market can change from
time to time, and recently issued credit ratings may not fully reflect the
actual risks posed by a particular high yield security.
The net asset value of shares of the Fund will change in response to
fluctuations in prevailing interest rates and changes in the value of the
securities held by the Portfolio. When interest rates decline, the value of
securities already held by the Portfolio can be expected to rise. Conversely,
when interest rates rise, the value of most portfolio security holdings can be
expected to decline. Changes in the credit quality of issuers of municipal
obligations held by the Portfolio will affect the principal value of (and
possibly the income earned on) such obligations. In addition, the values of
such securities are affected by changes in general economic conditions and
business conditions affecting the specific industries of their issuers.
Changes by recognized rating services in their ratings of a security and in
the ability of an issuer to make payments of principal and interest may also
affect the value of the Portfolio's investments. The Portfolio will not
dispose of a security solely because its rating is reduced below its rating at
the time of purchase, although the Investment Adviser will monitor the
investment to determine whether continued investment in the security will
assist in meeting the Portfolio's investment objective.
At times, a substantial portion of the Portfolio's assets may be invested in
securities as to which the Portfolio, by itself or together with other
accounts managed by the Investment Adviser and its affiliates, holds a major
portion or all of such securities. Under adverse market or economic conditions
or in the event of adverse changes in the financial condition of the issuer,
the Portfolio could find it more difficult to sell such securities when the
Investment Adviser believes it advisable to do so or may be able to sell such
securities only at prices lower than if such securities were more widely held.
Under such circumstances, it may also be more difficult to determine the fair
value of such securities for purposes of computing the Portfolio's net asset
value. Interest and/or principal payments on securities in default could be in
arrears when such securities are acquired, and the issuer may be in bankruptcy
or undergoing a debt restructuring or reorganization. In order to enforce its
rights in the event of a default under such securities, the Portfolio may be
required to take possession of and manage assets securing the issuer's
obligations on such securities, which may increase the Portfolio's operating
expenses and adversely affect the Portfolio's net asset value. Any income
derived from the Portfolio's ownership or operation of such assets may not be
tax-exempt.
The secondary market for such municipal obligations in which the Portfolio may
invest is less liquid than that for many taxable debt obligations or other
more widely traded municipal obligations. The Portfolio will not invest in
illiquid securities if more than 15% of its net assets would be invested in
securities not readily marketable. No established resale market exists for
certain of the municipal obligations in which the Portfolio may invest. The
market for obligations rated below investment grade is also likely to be less
liquid than the market for higher rated obligations. As a result, the
Portfolio may be unable to dispose of these municipal obligations at times
when it would otherwise wish to do so at the prices at which they are valued.
Certain securities held by the Portfolio may permit the issuer at its option
to "call", or redeem, its securities. If an issuer redeems securities held by
the Portfolio during a time of declining interest rates, the Portfolio may not
be able to reinvest the proceeds in securities providing the same investment
return as the securities redeemed.
Some of the securities in which the Portfolio invests may include so-called
"zero-coupon" bonds, whose values are subject to greater fluctuation in
response to changes in market interest rates than bonds which pay interest
currently. Zero-coupon bonds are issued at a significant discount from face
value and pay interest only at maturity rather than at intervals during the
life of the security. The Portfolio is required to accrue income from zero-
coupon bonds on a current basis, even though it does not receive that income
currently in cash and the Fund is required to distribute its share of the
Portfolio's income for each taxable year. Thus, the Portfolio may have to sell
other investments to obtain cash needed to make income distributions.
The Portfolio may invest in municipal leases, and participations in municipal
leases. The obligation of the issuer to meet its obligations under such leases
is often subject to the appropriation by the appropriate legislative body, on
an annual or other basis, of funds for the payment of the obligations.
Investments in municipal leases are thus subject to the risk that the
legislative body will not make the necessary appropriation and the issuer will
not otherwise be willing or able to meet its obligations.
The Investment Adviser seeks to minimize the risks of investing in below
investment grade securities through professional investment analysis and
attention to current developments in interest rates and economic conditions.
When the Portfolio invests in such municipal obligations, the achievement of
the Portfolio's goals is more dependent on the Investment Adviser's ability
than would be the case if the Portfolio were investing in municipal
obligations in the higher rating categories. The amount of information about
the financial conditions of an issuer of municipal obligations may not be as
extensive as that which is made available by corporations whose securities are
publicly traded.
THE FUND AND THE PORTFOLIO HAVE ADOPTED CERTAIN FUNDAMENTAL INVESTMENT
RESTRICTIONS WHICH ARE ENUMERATED IN DETAIL IN THE STATEMENT OF ADDITIONAL
INFORMATION AND WHICH MAY NOT BE CHANGED UNLESS AUTHORIZED BY A
SHAREHOLDER VOTE AND AN INVESTOR VOTE, RESPECTIVELY. EXCEPT FOR SUCH
ENUMERATED RESTRICTIONS AND AS OTHERWISE INDICATED IN THIS PROSPECTUS, THE
INVESTMENT OBJECTIVE AND POLICIES OF THE FUND AND THE PORTFOLIO ARE NOT
FUNDAMENTAL POLICIES AND ACCORDINGLY MAY BE CHANGED BY THE TRUSTEES OF THE
TRUST AND THE PORTFOLIO WITHOUT OBTAINING THE APPROVAL OF THE FUND'S
SHAREHOLDERS OR THE INVESTORS IN THE PORTFOLIO, AS THE CASE MAY BE. IF ANY
CHANGES WERE MADE IN THE FUND'S INVESTMENT OBJECTIVE, THE FUND MIGHT HAVE
INVESTMENT OBJECTIVES DIFFERENT FROM THE OBJECTIVES WHICH AN INVESTOR
CONSIDERED APPROPRIATE AT THE TIME THE INVESTOR BECAME A SHAREHOLDER IN
THE FUND.
ORGANIZATION OF THE FUND AND THE PORTFOLIO
- ------------------------------------------------------------------------------
THE FUND IS A NON-DIVERSIFIED SERIES OF EATON VANCE MUNICIPALS TRUST II, A
BUSINESS TRUST ESTABLISHED UNDER MASSACHUSETTS LAW PURSUANT TO A DECLARATION
OF TRUST DATED OCTOBER 25, 1993, AS AMENDED. THE TRUST IS A MUTUAL FUND -- AN
OPEN-END MANAGEMENT INVESTMENT COMPANY. The Trustees of the Trust are
responsible for the overall management and supervision of its affairs. The
Trust may issue an unlimited number of shares of beneficial interest (no par
value per share) in one or more series (such as the Fund). The Trustees of the
Trust have divided the shares of the Fund into two classes, Class A shares and
Class I shares. Each class represents an interest in the Fund, but is subject
to different expenses, rights and privileges. See "Service Plan" and "How to
Buy Fund Shares." The Trustees have the authority under the Declaration of
Trust to create additional classes of shares with rights and privileges
different from those applicable to the existing classes of shares.
When issued and outstanding, the shares are fully paid and nonassessable by
the Trust and redeemable as described under "How to Redeem Fund Shares".
Shareholders are entitled to one vote for each full share held. Fractional
shares may be voted proportionately. Shares have no preemptive or conversion
rights and are freely transferable. In the event of the liquidation of the
Fund, shareholders of each class are entitled to share pro rata in the net
assets of the Fund attributable to that class available for distribution to
shareholders.
THE PORTFOLIO IS ORGANIZED AS A TRUST UNDER THE LAWS OF THE STATE OF NEW YORK
AND INTENDS TO BE TREATED AS A PARTNERSHIP FOR FEDERAL TAX PURPOSES. The
Portfolio, as well as the Trust, intends to comply with all applicable federal
and state securities laws. The Portfolio's Declaration of Trust provides that
the Fund and other entities permitted to invest in the Portfolio (e.g., other
U.S. and foreign investment companies, and common and commingled trust funds)
will each be liable for all obligations of the Portfolio. However, the risk of
the Fund incurring financial loss on account of such liability is limited to
circumstances in which both inadequate insurance exists and the Portfolio
itself is unable to meet its obligations. Accordingly, the Trustees of the
Trust believe that neither the Fund nor its shareholders will be adversely
affected by reason of the Fund investing in the Portfolio.
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, affords the potential for economies of scale for the Fund (at least
when the assets of the Portfolio exceed $500 million) and may over time result
in lower expenses for a Fund.
In addition to selling an interest to the Fund, the Portfolio may sell
interests to other affiliated and non-affiliated mutual funds or institutional
investors. Such investors will invest in the Portfolio on the same terms and
conditions and will pay a proportionate share of the Portfolio's expenses.
However, the other investors investing in the Portfolio are not required to
sell their shares at the same public offering price as the Fund due to
variations in sales commissions and other operating expenses. Therefore,
investors in the Fund should be aware that these differences may result in
differences in returns experienced by investors in the various funds that
invest in the Portfolio. Such differences in returns are also present in other
mutual fund structures, including funds that have multiple classes of shares.
Information regarding other pooled investment entities or funds which invest
in the Portfolio may be obtained by contacting the Principal Underwriter, 24
Federal Street, Boston, MA 02110, (617) 482-8260.
Whenever the Fund as an investor in the Portfolio is requested to vote on
matters pertaining to the Portfolio (other than the termination of the
Portfolio's business, which may be determined by the Trustees of the Portfolio
without investor approval), the Fund will hold a meeting of Fund shareholders
and will vote its interest in the Portfolio for or against such matters
proportionately to the instructions to vote for or against such matters
received from Fund shareholders. The Fund shall vote shares for which it
receives no voting instructions in the same proportion as the shares for which
it receives voting instructions. Other investors in the Portfolio may alone or
collectively acquire sufficient voting interests in the Portfolio to control
matters relating to the operation of the Portfolio, which may require the Fund
to withdraw its investment in the Portfolio or take other appropriate action.
Any such withdrawal could result in a distribution "in kind" of portfolio
securities (as opposed to a cash distribution from the Portfolio). If
securities are distributed, the Fund could incur brokerage, tax or other
charges in converting the securities to cash. In addition, the distribution in
kind may result in a less diversified portfolio of investments or adversely
affect the liquidity of the Fund. Notwithstanding the above, there are other
means for meeting shareholder redemption requests, such as borrowing.
The 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. 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 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.
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. 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. 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 $500 million 0.350% 3.50%
2 $500 million but less than $1 billion 0.325% 3.25%
3 $1 billion but less than $1.5 billion 0.300% 3.00%
4 $1.5 billion but less than $2 billion 0.275% 2.75%
5 $2 billion but less than $3 billion 0.250% 2.50%
6 $3 billion and over 0.225% 2.25%
</TABLE>
As at January 31, 1996, the Portfolio had net assets of $72,077,467. For the
period from the start of business, August 7, 1995, to January 31, 1996, absent
a fee reduction, the Portfolio would have paid BMR advisory fees equivalent to
0.59% (annualized) of the Portfolio's average daily net assets for such
period. To enhance the net income of the Portfolio, BMR made a reduction in
the full amount of its advisory fee and BMR was allocated expenses related to
the operation of the Portfolio in the amount of $10,465.
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 publicly-held holding company which through its subsidiaries and
affiliates engages primarily in investment management, administration and
marketing activities. The Principal Underwriter is a wholly-owned subsidiary
of Eaton Vance.
Thomas M. Metzold has acted as the portfolio manager of the Portfolio since it
commenced operations. He has been a Vice President of Eaton Vance since 1991
and of BMR since 1992.
Municipal obligations are normally traded on a net basis (without commission)
through broker-dealers and banks acting for their own account. Such firms
attempt to profit from such transactions by buying at the bid price and
selling at the higher asked price of the market, and the difference is
customarily referred to as the spread. In selecting firms which will execute
portfolio transactions BMR judges their professional ability and quality of
service and uses its best efforts to obtain execution at prices which are
advantageous to the Portfolio and at reasonably competitive spreads. Subject
to the foregoing, BMR may consider sales of shares of the Fund or of other
investment companies sponsored by BMR or Eaton Vance as a factor in the
selection of firms to execute portfolio transactions. The Fund, the Portfolio
and BMR have adopted Codes of Ethics relating to personal securities
transactions. The Codes permit Eaton Vance personnel to invest in securities
(including securities that may be purchased or held by the Portfolio) for
their own accounts, subject to certain pre-clearance, reporting and other
restrictions and procedures contained in such Codes.
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 its 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 the Principal Underwriter under the
distribution agreement.
SERVICE PLAN
- --------------------------------------------------------------------------------
In addition to advisory fees and other expenses, Class A shares of the Fund
pay service fees pursuant to a Service Plan (the "Plan") designed to meet the
service fee requirements of the revised sales charge rule of the National
Association of Securities Dealers, Inc. THE PLAN PROVIDES THAT THE FUND MAY
MAKE SERVICE FEE PAYMENTS FOR PERSONAL SERVICES AND/OR THE MAINTENANCE OF
SHAREHOLDER ACCOUNTS TO THE PRINCIPAL UNDERWRITER, FINANCIAL SERVICE FIRMS
("AUTHORIZED FIRMS") AND OTHER PERSONS IN AMOUNTS NOT EXCEEDING .25% OF THE
AVERAGE DAILY NET ASSETS OF THE FUND ATTRIBUTABLE TO CLASS A SHARES FOR ANY
FISCAL YEAR. The Trustees of the Trust have initially implemented the Plan by
authorizing the Fund to make quarterly service fee payments to the Principal
Underwriter and Authorized Firms in amounts not expected to exceed .25% of the
average daily net assets for any fiscal year which is based on the value of
Class A shares of the Fund sold by such persons and remaining outstanding for
at least twelve months. The Fund began accruing for its service fee payments
during the quarter ended September 30, 1996. The Plan is further described in
the Statement of Additional Information.
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 of each class of shares is computed by dividing the value of
the Fund's total assets attributable to that class, less its liabilities
attributable to that class, by the number of shares of that class outstanding.
Because the Fund invests its assets in an interest in the Portfolio, the
Fund's net asset value will reflect the value of its interest in the Portfolio
(which in turn, reflects the underlying value of the Portfolio's assets and
liabilities).
Authorized Firms must communicate an investor's order to the Principal
Underwriter prior to the close of the Principal Underwriter's business day to
receive that day's net asset value per share and, in the case of Class A
shares, the public offering price based thereon. It is the Authorized Firms'
responsibility to transmit orders promptly to the Principal Underwriter.
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. Net asset value is computed by subtracting the liabilities of the
Portfolio from the value of its total assets. Municipal obligations will
normally be valued on the basis of valuations furnished by a pricing service.
For further information regarding the valuation of the Portfolio's assets, see
"Determination of Net Asset Value" in the Statement of Additional Information.
SHAREHOLDERS MAY DETERMINE THE VALUE OF THEIR INVESTMENT BY MULTIPLYING
THE NUMBER OF FUND SHARES OWNED BY THE CURRENT NET ASSET VALUE PER SHARE.
HOW TO BUY FUND SHARES
- ------------------------------------------------------------------------------
SHARES OF THE FUND MAY BE PURCHASED FOR CASH OR MAY BE ACQUIRED IN EXCHANGE
FOR SECURITIES. Investors may purchase shares of the Fund through Authorized
Firms. An Authorized Firm may charge its customers a fee in connection with
transactions executed by that firm. The Fund may suspend the offering of
shares at any time and may refuse an order for the purchase of shares.
CLASS A SHARES may be purchased 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 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 or Right of Accumulation are
available from Authorized Firms or the Principal Underwriter.
The current sales charges and dealer commissions on purchases of Class A
shares are:
<TABLE>
<CAPTION>
SALES CHARGE AS SALES CHARGE AS DEALER COMMISSION
PERCENTAGE OF PERCENTAGE OF AS PERCENTAGE OF
AMOUNT OF PURCHASE OFFERING PRICE AMOUNT INVESTED OFFERING PRICE
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LESS THAN $50,000 3.75% 3.90% 4.00%
$50,000 BUT LESS THAN $100,000 2.75% 2.83% 3.00%
$100,000 BUT LESS THAN $250,000 2.25% 2.30% 2.50%
$250,000 BUT LESS THAN $500,000 1.75% 1.78% 2.00%
$500,000 BUT LESS THAN $1,000,000 1.25% 1.27% 1.50%
$1,000,000 OR MORE 0.00%* 0.00%* 0.50%
</TABLE>
*NO Sales Charge Is Payable At The Time Of Purchase On Investments Of $1
Million Or More, Or 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. A contingent deferred sales charge
("CDSC") of 0.50% will be imposed on such investments (as described below) in
the event of certain redemptions within 12 months of purchase.
The principal underwriter may at times allow discounts up to the full sales
charge. During periods when the discount includes the full sales charge,
Authorized firms may be deemed to be underwriters as that term is defined in
the Securities Act OF 1933. The Principal Underwriter may, from time to time,
at its own expense, provide additional incentives to authorized firms which
employ registered representatives who sell fund shares and/or shares of other
funds distributed by the Principal Underwriter. In some instances, such
additional incentives may be offered only to certain Authorized Firms whose
representatives sell or are expected to sell significant amounts of shares.
An initial investment in class A shares of the Fund must be at least $1,000.
Once an account has been established the investor may send investments of $50
or more at any time directly to the Fund's transfer agent (the "Transfer
Agent") as follows: First Data Investor Services Group, P.o. Box 5123,
Westborough, MA 01581-5123. The $1,000 minimum initial investment is waived
for Bank Automated Investing accounts, which may be established with an
investment of $50 or more. see "Eaton Vance Shareholder Services".
Class A 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 clients and current and retired officers and employees of Eaton Vance, its
affiliates and other investment advisers of Eaton Vance sponsored funds; to
registered representatives and employees of Authorized Firms; and bank
employees who refer customers to registered representatives of Authorized
Firms; and to such persons' spouses and children under the age of 21 and their
beneficial accounts. Class A shares may also be issued at net asset value (1)
in connection with the merger of an investment company with the Fund, (2) to
investors making an investment as part of a fixed fee program whereby an
entity unaffiliated with the Investment Adviser provides multiple investment
services, such as management, brokerage and custody, and (3) to investment
advisors, financial planners or other intermediaries who place trades for
their own accounts or the accounts of their clients and who charge a
management, consulting or other fee for their services; clients of such
investment advisors, financial planners or other intermediaries who place
trades for their own accounts if the accounts are linked to the master account
of such investment advisor, financial planner or other intermediary on the
books and records of the broker or agent; and retirement and deferred
compensation plans and trusts used to fund those plans, including, but not
limited to, those defined in Section 401(a), 403(b) or 457 of the Internal
Revenue Code of 1986, as amended (the "Code") and "rabbi trusts."
CLASS I SHARES are offered through certain Authorized Firms that charge their
customers transaction or other fees with respect to their customers'
investment in the Fund. Class I shares may also be sold to certain persons and
entities affiliated with Eaton Vance. An initial investment in Class I shares
of the Fund must be at least $250,000 and the minimum subsequent investment is
$10,000. The minimum investment amounts are waived for persons and entities
affiliated with Eaton Vance.
ACQUIRING FUND SHARES IN EXCHANGE FOR SECURITIES. IBT, as escrow agent, will
receive securities acceptable to Eaton Vance, as Administrator, in exchange
for Fund shares at the applicable public offering price as determined above.
The minimum value of securities (or securities and cash) accepted for deposit
is $5,000. Securities accepted will be sold on the day of their receipt or as
soon thereafter as possible. The number of Fund shares to be issued in
exchange for securities will be the aggregate proceeds from the sale of such
securities, divided by the applicable public offering price per Fund share on
the day such proceeds are received. Eaton Vance will use reasonable efforts to
obtain the then current market price for such securities but does not
guarantee the best available price. Eaton Vance will absorb any transaction
costs, such as commissions, on the sale of the securities.
Securities determined to be acceptable should be transferred via book entry or
physically delivered, in proper form for transfer, through an Authorized Firm,
together with a completed and signed Letter of Transmittal in approved form
(available from Authorized Firms), as follows:
IN THE CASE OF BOOK ENTRY:
Deliver through Depository Trust Co.
Broker #2212
Investors Bank & Trust Company
For A/C EV Traditional High Yield Municipals Fund
IN THE CASE OF PHYSICAL DELIVERY:
Investors Bank & Trust Company
Attention: EV Traditional High Yield Municipals Fund
Physical Securities Processing Settlement Area
89 South Street
Boston, MA 02111
Investors who are contemplating an exchange of securities for shares of the
Fund, or their representatives, must contact Eaton Vance to determine whether
the securities are acceptable before forwarding such securities. Eaton Vance
reserves the right to reject any securities. Exchanging securities for Fund
shares may create a taxable gain or loss. Each investor should consult his or
her tax adviser with respect to the particular federal, state and local tax
consequences of exchanging securities for Fund shares.
The Trustees of the Trust may consider terminating sales of Fund shares, other
than to the Fund's existing shareholders, when the Portfolio reaches a size
that becomes difficult to manage, which may be as low as $250,000,000. If
closed, the Board of Trustees may vote to re-open the Fund for sales to new
shareholders at any time.
STATEMENT OF INTENTION AND ESCROW AGREEMENT FOR CLASS A SHARES. If the
investor in Class A shares of the Fund, on an application, makes a Statement
of Intention to invest a specified amount over a thirteen-month period, then
out of the initial purchase (or subsequent purchases if necessary) 5% of the
dollar amount specified on the application shall be held in escrow by the
escrow agent in the form of shares (computed to the nearest full share at the
public offering price applicable to the initial purchase hereunder) registered
in the investor's name. All income dividends and capital 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 investor's account.
If total purchases under this Statement of Intention are less than the amount
specified, the investor will promptly remit to the Principal Underwriter 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 the Principal Underwriter 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.
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 the Principal Underwriter. If at the time of the
recomputation a firm other than the original firm is placing the orders, the
adjustment will be made only on those shares purchased through the firm then
handling the investor's account.
IF YOU DON'T HAVE AN AUTHORIZED FIRM, EATON VANCE CAN RECOMMEND ONE.
HOW TO REDEEM FUND SHARES
- --------------------------------------------------------------------------------
A SHAREHOLDER MAY REDEEM FUND SHARES IN ONE OF THREE WAYS -- BY MAIL, BY
TELEPHONE OR THROUGH AN AUTHORIZED FIRM. The redemption price will be based on
the net asset value per Fund share next computed after a redemption request is
received in the proper form as described below.
REDEMPTION BY MAIL: Shares may be redeemed by delivering to the Transfer Agent,
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123,
during its business hours a written request for redemption in good order, plus
any share certificates with executed stock powers. 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 (the "Commission") and acceptable to the Transfer Agent.
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.
REDEMPTION BY TELEPHONE: Shares may be redeemed by telephone provided the
investor has not disclaimed in writing the use of the privilege. Such
redemptions can be effected by calling the Transfer Agent at 800-262-1122,
Monday through Friday, 9:00 a.m. to 4:00 p.m. (Eastern Standard Time). The
proceeds of a telephone redemption may be no greater than the maximum amount
established by the Principal Underwriter (currently $50,000) and may be mailed
only to the account address of record. Shares held by corporations, trusts or
certain other entities, or subject to fiduciary arrangements, may not be
redeemed by telephone. Neither the Fund, the Principal Underwriter nor the
Transfer Agent will be responsible for the authenticity of redemption
instructions received by telephone, provided that reasonable procedures to
confirm that instructions communicated by telephone are genuine have been
followed. Telephone instructions will be tape recorded. In times of drastic
economic or market changes, a telephone redemption may be difficult to
implement.
REDEMPTION THROUGH AN AUTHORIZED FIRM: To sell shares at their net asset value
through an Authorized Firm (a repurchase), a shareholder can place a repurchase
order with the Authorized Firm, which may charge a fee. The value of such shares
is based upon the net asset value calculated after the Principal Underwriter, as
the Funds' agent, receives the order. It is the Authorized Firm's responsibility
to transmit promptly repurchase orders to the Principal Underwriter. Throughout
this Prospectus, the word "redemption" is generally meant to include a
repurchase.
Within seven days after receipt of a redemption request in good order by the
Transfer Agent, the Fund will make payment in cash for the net asset value of
the shares as of the date determined above, reduced by the amount of any
federal income tax required to be withheld. Although the Fund normally expects
to make payment in cash for redeemed shares, the Trust, subject to compliance
with applicable regulations, has reserved the right to pay the redemption
price of shares of the Fund, either totally or partially, by a distribution in
kind of readily marketable securities withdrawn by the Fund from the
Portfolio. The securities so distributed would be valued pursuant to the
Portfolio's valuation procedures. If a shareholder received a distribution in
kind, the shareholder could incur brokerage or other charges in converting the
securities to cash.
If shares were recently purchased, the proceeds of redemption 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 may result in a taxable gain or loss.
Due to the high cost of maintaining small accounts, the Fund reserves the
right to redeem accounts with balances of less than $750. Prior to such a
redemption, shareholders will be given 60 days' written notice to make
additional purchases. However, no such redemption would be required by the
Fund if the cause of the low account balance was a reduction in the net asset
value of Fund shares.
If Class A 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 12 months of purchase, a CDSC of 0.50% will be
imposed on such redemption. The CDSC will be imposed on an amount equal to the
lesser of the current market value or the original purchase price of the Class
A shares redeemed. Accordingly, no CDSC will be imposed on increases in
account value above the initial purchase price, including any 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 will be paid to the Principal Underwriter.
The CDSC is waived for redemptions involving certain liquidation, merger or
acquisition transactions involving other investment companies. If a
shareholder reinvests redemption proceeds within a 60-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 calendar year, the Fund will furnish all
shareholders with information necessary for preparing federal and state tax
returns. Consistent with applicable law, duplicate mailings of shareholder
reports and certain other Fund information to shareholders residing at the
same address may be eliminated.
THE LIFETIME INVESTING ACCOUNT/DISTRIBUTION OPTIONS
- ------------------------------------------------------------------------------
AFTER AN INVESTOR MAKES AN INITIAL PURCHASE OF FUND SHARES, THE TRANSFER AGENT
WILL SET UP A LIFETIME INVESTING ACCOUNT FOR THE INVESTOR ON THE FUND'S
RECORDS. This account is a complete record of all transactions between the
investor and the Fund which at all times shows the balance of shares owned.
The Fund will not issue share certificates except upon request.
At least quarterly, shareholders will receive a statement showing complete
details of any transaction and the current balance in the account.
Any questions concerning a shareholder's account or services available may be
directed by telephone to EATON VANCE SHAREHOLDER SERVICES at 800-225-6265,
extension 2, or in writing to the Transfer Agent, First Data Investor Services
Group, P.O. Box 5123, Westborough, MA 01581-5123 (please provide the name of
the shareholder, the Fund and the account number).
THE FOLLOWING DISTRIBUTION OPTIONS WILL BE AVAILABLE TO ALL LIFETIME INVESTING
ACCOUNTS and may be changed as often as desired by written notice to the
Fund's dividend disbursing agent, First Data Investor Services Group, P.O. Box
5123, Westborough, MA 01581-5123. The currently effective option will appear
on each account statement.
Share Option -- Dividends and capital gains will be reinvested in additional
shares of the same class.
Income Option -- Dividends will be paid in cash, and capital gains will be
reinvested in additional shares of the same class.
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 federal income tax laws.
If the Income Option or Cash Option has been selected, dividend and/or capital
gains distribution checks which are returned by the United States Postal
Service as not deliverable or which remain uncashed for six months or more
will be reinvested in the account in shares of the same class 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.
THE EATON VANCE EXCHANGE PRIVILEGE
- ------------------------------------------------------------------------------
Shares of the Fund currently may be exchanged for shares of the same class of
any of the following funds: Eaton Vance Cash Management Fund, Eaton Vance
Income Fund of Boston, Eaton Vance Municipal Bond Fund L.P., Eaton Vance Tax
Free Reserves and any fund in the Eaton Vance Traditional Group of Funds on
the basis of net asset value per share of each fund at the time of the
exchange (plus, in the case of an exchange made within six months of the date
of purchase of Class A shares subject to an initial sales charge, 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). In the event the fund to be acquired does not offer Class I shares,
Class I shares of the Fund may be exchanged for the existing class of the fund
to be acquired. Such exchange offers are available only in states where shares
of the fund being acquired may be legally sold.
Each exchange must meet the minimum investment amount required by the Fund to
be acquired. The exchange privilege may be changed or discontinued without
penalty. Shareholders will be given sixty (60) days' notice prior to any
termination or material amendment of the exchange privilege. The Fund does not
permit the exchange privilege to be used for "Market Timing" and may terminate
the exchange privilege for any shareholder account engaged in Market Timing
activity. Any shareholder account for which more than two round-trip exchanges
are made within any twelve month period will be deemed to be engaged in Market
Timing. Furthermore, a group of unrelated accounts for which exchanges are
entered contemporaneously by a financial intermediary will be considered to be
engaged in Market Timing.
Class A 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 Transfer Agent 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 Transfer Agent for additional information concerning the
exchange privilege. Applications and prospectuses of the other funds are
available from Authorized Firms or the Principal Underwriter. The prospectus
for each fund describes its investment objectives and policies, and
shareholders should obtain a prospectus and consider these objectives and
policies carefully before requesting an exchange.
Shares of certain other funds advised or administered by Eaton Vance may be
exchanged for Fund shares on the basis of the net asset value per share of
each fund at the time of the exchange (plus, in the case of an exchange made
within six months of the date of purchase of Class A shares subject to an
initial sales charge, 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). Any such exchange is subject to
any restrictions or qualifications set forth in the current prospectus of any
such fund.
Telephone exchanges are accepted by the Transfer Agent provided that the
investor has not disclaimed in writing the use of the privilege. To effect
such exchanges, call the Transfer Agent at 800-262-1122, 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 Transfer Agent will be responsible for the authenticity of
exchange instructions received by telephone, provided that reasonable
procedures to confirm that instructions communicated are genuine have been
followed. Telephone instructions will be tape recorded. In times of drastic
economic or market changes, a telephone exchange may be difficult to
implement. An exchange may result in a taxable gain or loss.
EATON VANCE SHAREHOLDER SERVICES
- ------------------------------------------------------------------------------
THE FUND OFFERS THE FOLLOWING SERVICES, WHICH ARE VOLUNTARY, INVOLVE NO EXTRA
CHARGE, AND MAY BE CHANGED OR DISCONTINUED WITHOUT PENALTY AT ANY TIME. Full
information on each of the services described below and an application, where
required, are available from Authorized Firms or the Principal Underwriter.
The cost of administering such services for the benefit of shareholders who
participate in them is borne by the Fund as an expense to all shareholders.
INVEST-BY-MAIL -- FOR PERIODIC CLASS A SHARE ACCUMULATION: Once the $1,000
minimum investment in Class A shares has been made, checks of $50 or more
payable to the order of EV Traditional High Yield Municipals Fund may be
mailed directly to the Transfer Agent, First Data Investor Services Group,
P.O. Box 5123, Westborough, MA 01581-5123 at any time -- whether or not
distributions are reinvested. The name of the shareholder, the Fund and the
account number should accompany each investment.
BANK AUTOMATED INVESTING -- FOR REGULAR CLASS A SHARE ACCUMULATION: Cash
investments in Class A shares of $50 or more may be made automatically each
month or quarter from the shareholder's bank account. The $1,000 minimum
initial investment and small account redemption policy are waived for these
accounts.
STATEMENT OF INTENTION: Purchases of $50,000 or more of Class A shares made
over a 13-month period are eligible for reduced sales charges. See "How to Buy
Fund Shares -- Statement of Intention and Escrow Agreement."
RIGHT OF ACCUMULATION: Purchases of Class A shares may qualify for reduced
sales charges when the current market value of holdings (shares at current
offering price), plus new purchases, reaches $50,000 or more. Shares of the
Eaton Vance funds listed under "The Eaton Vance Exchange Privilege" may be
combined under the Statement of Intention and Right of Accumulation.
WITHDRAWAL PLAN: A shareholder may draw on shareholdings systematically with
monthly or quarterly checks in an amount specified by the shareholder. A
minimum deposit of $5,000 in shares is required. The maintenance of a
withdrawal plan concurrently with purchases of additional Class A shares would
be disadvantageous because of the sales charge included in such purchases.
REINVESTMENT PRIVILEGE: A shareholder who has redeemed Class A shares may
reinvest at net asset value any portion or all of the redemption proceeds
(plus that amount necessary to acquire a fractional share to round off the
purchase to the nearest full share) in shares of the Fund, or, provided that
the shares redeemed have been held for at least 60 days, in shares of any of
the other funds offered by the Principal Underwriter subject to an initial
sales charge, provided that the reinvestment is effected within 60 days after
such redemption, and the privilege has not been used more than once in the
prior 12 months. Class A shares are sold to a reinvesting shareholder at the
next determined net asset value following timely receipt of a written purchase
order by the Principal Underwriter or by the fund whose shares are to be
purchased (or by such fund's transfer agent). The privilege is also available
to shareholders of the funds listed under "The Eaton Vance Exchange Privilege"
who wish to reinvest such redemption proceeds in shares of the Fund. If a
shareholder reinvests redemption proceeds within the 60-day period the
shareholder's account will be credited with the amount of any CDSC paid on
such redeemed shares. To the extent that any shares of the Fund are sold at a
loss and the proceeds are reinvested in shares of the Fund (or other shares of
the Fund are acquired) within the period beginning 30 days before and ending
30 days after the date of the redemption some or all of the loss generally
will not be allowed as a tax deduction. Shareholders should consult their tax
advisers concerning the tax consequences of reinvestments.
DISTRIBUTIONS AND TAXES
- ------------------------------------------------------------------------------
THE FUND DECLARES DIVIDENDS DAILY AND ORDINARILY DISTRIBUTES DIVIDENDS MONTHLY
(ON THE LAST DAY OF THE MONTH OR NEXT SUBSEQUENT BUSINESS DAY) FROM ITS NET
INVESTMENT INCOME. The net investment income consists of net investment income
allocated to the Fund by the Portfolio, less the Fund's direct and allocated
expenses (and, with respect to each class, any class expenses). The Fund will
distribute at least annually (usually in December) all net realized capital
gains allocated to the Fund by the Portfolio, if any, after taking into
account any capital loss carryovers. Daily distributions will begin on the
first business day collected funds for the purchase of shares are available to
the Transfer Agent.
The Fund will distribute substantially all of its tax-exempt income, ordinary
income and capital gain net income (if any) on a current basis. Distributions
designated by the Fund as "exempt interest dividends" may be excluded from
shareholders' gross income for federal income tax purposes. However, exempt
interest dividends may affect the taxability of social security or railroad
retirement benefits for shareholders who receive such benefits. In addition,
exempt interest dividends may result in liability under the federal
alternative minimum tax provisions and may be taxable for state and local tax
purposes. Shareholders should consult their tax advisers to determine the
effect of exempt interest dividends on their particular tax situation,
including liability for state and local taxes.
Distributions of interest on certain municipal obligations constitute a tax
preference item under the alternative minimum tax provisions applicable to
individuals and corporations. 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. If shares are puchased
shortly before the record date of such a distribution, the shareholder will
pay the full price for the shares and then receive some portion of the price
back as a taxable distribution. Distributions are taxed in the manner
described above whether paid in cash or reinvested in additional shares of a
Fund. Tax-exempt distributions received from a Fund are includable in the tax
base for determining the taxability of social security and railroad retirement
benefits.
Sales charges paid upon a purchase of Class A shares of the Fund cannot be
taken into account for purposes of determining gain or loss on a redemption or
exchange of the shares before the 91st day after their purchase to the extent
a sales charge is reduced or eliminated in a subsequent acquisition of Class A
shares of the Fund or similar shares of another fund pursuant to the Fund's
reinvestment or exchange privilege. Any disregarded amounts will result in an
adjustment to the shareholder's tax basis in some or all of any other shares
acquired.
The Fund intends to qualify as a regulated investment company under the Code,
and to satisfy all requirements necessary to be relieved of federal taxes on
income and gains it distributes to shareholders. 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.
Early in each year, the Fund will notify its shareholders of the tax status of
the Fund's distributions for the preceding year. Shareholders should consult
their tax advisers about the effect of Fund distributions on their particular
tax situation and any state, local or foreign taxes that may apply.
As a regulated investment company under the Code, the Fund does not pay
federal income or excise taxes to the extent that it distributes to
shareholders its net investment income and net realized capital gains in
accordance with the timing requirements imposed by the Code. As a partnership
under the Code, the Portfolio does not pay federal income or excise taxes.
Shareholders should consult with their tax advisers concerning the
applicability of state, local and other taxes to an investment in the Fund.
PERFORMANCE INFORMATION
- ------------------------------------------------------------------------------
FROM TIME TO TIME, THE FUND MAY ADVERTISE THE YIELD AND/OR AVERAGE ANNUAL
TOTAL RETURN FOR EACH CLASS OF SHARES. Current yield is calculated by dividing
the net investment income per class share earned during a recent 30-day period
by the maximum offering price per share of that class 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 the average
annual percentage change in value of $1,000 invested at the maximum public
offering price (which in the case of Class A shares includes the maximum sales
charge) for specified periods, assuming reinvestment of all distributions. The
Fund may publish annual and cumulative total return figures from time to time.
The Fund may also furnish total return calculations for Class A shares based
on investments at various sales charge levels or at net asset value. Any
performance data which is based on the net asset value per Class A share would
be lower if a sales charge were taken into account. The Fund's performance may
be compared in publications to the performance of various indices and
investments for which reliable data is available, and to averages, performance
rankings, or other information prepared by recognized mutual fund statistical
services.
Investors should note that the investment results of the Fund will fluctuate
over time, and any presentation of the Fund's yield or total return for any
prior period should not be considered a representation of what an investment
may earn or what the Fund's yield or total return may be in any future period.
If the expenses of the Fund or the Portfolio are allocated to Eaton Vance, the
Fund's performance will be higher.
<PAGE>
APPENDIX A
HIGH YIELD MUNICIPALS PORTFOLIO
ASSET COMPOSITION INFORMATION
FOR THE PERIOD FROM THE START OF BUSINESS AUGUST 7, 1995 TO JANUARY 31, 1996
RATINGS OF RATINGS OF
MUNICIPAL BONDS MUNICIPAL BONDS
BY MOODY'S BY S&P
PERCENT OF PERCENT OF
NET ASSETS NET ASSETS
---------- ----------
Aaa ..................... 3.99 AAA ....................... 1.41
Aa2 ..................... 4.93 A+ ........................ 4.93
Baa1 .................... 9.92 A- ........................ 4.20
Baa2 .................... 9.78 BBB ....................... 5.78
Baa3 .................... 7.46 BBB- ...................... 5.80
Ba1 ..................... 3.57 BB+ ....................... 9.87
Ba2 ..................... 1.03 BB ........................ 5.65
Ba3 ..................... 3.15 BB- ....................... 3.15
B1 ...................... 2.36 Unrated ................... 59.21
Unrated ................. 53.81 ------
------ 100.00%
100.00%
The chart above indicates the weighted average composition of the securities
held by the Portfolio for the period from the start of business, August 7, 1995
to January 31, 1996, with the debt securities rated by Moody's and S&P separated
into the indicated categories. The above was calculated on a dollar weighted
basis and was computed as at the end of each month during the period. The chart
does not necessarily indicate what the composition of the securities held by the
Portfolio will be in the current and subsequent fiscal years. Securities that
are rated by one rating agency may be "unrated" by the other.
For a description of Moody's and S&P's securities ratings, see Appendix B to
this Prospectus.
<PAGE>
APPENDIX B
DESCRIPTION OF SECURITIES RATINGS+
MOODY'S INVESTORS SERVICE, INC.
MUNICIPAL BONDS
AAA: Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such issues.
AA: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long term risk appear somewhat larger than the Aaa
securities.
A: Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper-medium-grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may
be present which suggest a susceptibility to impairment sometime in the
future.
BAA: Bonds which are rated Baa are considered as medium-grade obligations
(i.e., they are neither highly protected nor poorly secured). Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
BA: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during other good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
CAA: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
or interest.
CA: Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
- -------------------
+ The ratings indicated herein are believed to be the most recent ratings
available at the date of this Prospectus for the securities listed. Ratings
are generally given to securities at the time of issuance. While the rating
agencies may from time to time revise such ratings, they undertake no
obligation to do so, and the ratings indicated do not necessarily represent
ratings which would be given to these securities on the date of the
Portfolio's fiscal year end.
STANDARD & POOR'S RATINGS GROUP
INVESTMENT GRADE
AAA: Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.
A: Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB: Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
SPECULATIVE GRADE
Debt rated BB, B, CCC, CC, and C is regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and repay
principal. BB indicates the least degree of speculation and C the highest.
While such debt will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or major exposures to adverse
conditions.
BB: Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure
to adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB- rating.
B: Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness
to pay interest and repay principal. The B rating category is also used for
debt subordinated to senior debt that is assigned an actual or implied BB or
BB- rating.
CCC: Debt rated CCC has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to
meet timely payment of interest and repayment of principal. In the event of
adverse business, financial, or economic conditions, it is not likely to have
the capacity to pay interest and repay principal. The CCC rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied B or B- rating.
CC: The rating CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC debt rating.
C: The rating C is typically applied to debt subordinated to senior debt which
is assigned an actual or implied CCC- debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed, but debt service
payments are continued.
C1: The Rating C1 is reserved for income bonds on which no interest is being
paid.
D: Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if
the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period. The D rating also will be used
upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
PLUS (+) OR MINUS (-): The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
FITCH INVESTORS SERVICE, INC.
INVESTMENT GRADE BOND RATINGS
AAA: Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events.
AA: Bonds considered to be investment grade and of very high credit quality.
The obligor's ability to pay interest and repay principal is very strong,
although not quite as strong as bonds rated "AAA". Because bonds rated in the
"AAA" and "AA" categories are not significantly vulnerable to foreseeable
future developments, short-term debt of these issuers is generally rated
"F-1+".
A: Bonds considered to be investment grade and of high credit quality. The
obligors ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions
and circumstances than bonds with higher ratings.
BBB: Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these bonds,
and therefore, impair timely payment. The likelihood that the ratings of these
bonds will fall below investment grade is higher than for bonds with higher
ratings.
HIGH YIELD BOND RATINGS
BB: Bonds are considered speculative. The obligor's ability to pay interest
and repay principal may be affected over time by adverse economic changes.
However, business and financial alternatives can be identified that could
assist the obligor in satisfying its debt service requirements.
B: Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued
timely payment of principal and interest reflects the obligor's limited margin
of safety and the need for reasonable business and economic activity
throughout the life of the issue.
CCC: Bonds have certain identifiable characteristics which, if not remedied,
may lead to default. The ability to meet obligations requires an advantageous
business and economic environment.
CC: Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C: Bonds are in imminent default in payment of interest or principal.
DDD, DD, AND D: Bonds are in default on interest and/or principal payments.
Such bonds are extremely speculative and should be valued on the basis of
their ultimate recovery value in liquidation or reorganization of the obligor.
"DDD" represents the highest potential for recovery on these bonds, and "D"
represents the lowest potential for recovery.
PLUS (+) OR MINUS (-): The ratings from AA to C may be modified by the
addition of a plus or minus sign to indicate the relative position of a credit
within the rating category.
* * * * * * * *
NOTES: Bonds which are unrated expose the investor to risks with respect to
capacity to pay interest or repay principal which are similar to the risks of
lower-rated speculative bonds. The Portfolio is dependent on the Investment
Adviser's judgment, analysis and experience in the evaluation of such bonds.
<PAGE>
EV TRADITIONAL
HIGH YIELD
MUNICIPALS FUND
PROSPECTUS
FEBRUARY 1, 1997
EV TRADITIONAL HIGH YIELD
MUNICIPALS FUND
24 FEDERAL STREET
BOSTON, MA 02110
INVESTMENT ADVISER OF HIGH YIELD MUNICIPALS PORTFOLIO
Boston Management and Research, 24 Federal Street, Boston, MA 02110
ADMINISTRATOR OF EV TRADITIONAL HIGH YIELD MUNICIPALS FUND
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111
TRANSFER AGENT
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123
(800) 262-1122
AUDITORS
Deloitte & Touche LLP, 125 Summer Street, Boston, MA 02110
T-HYP
[LOGO]
EATON VANCE
- --------------------
Mutual Funds
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
February 1, 1997
EV TRADITIONAL HIGH YIELD MUNICIPALS FUND
24 Federal Street
Boston, Massachusetts 02110
(800) 225-6265
This Statement of Additional Information consists of two parts. Part I
provides information about EV Traditional High Yield Municipals Fund (the
"Fund"), High Yield Municipals Portfolio (the "Portfolio") and certain other
series of Eaton Vance Municipals Trust II (the "Trust"). Part II provides
information solely about the Fund. Where appropriate, Part I includes cross-
references to the relevant sections of Part II that provide additional Fund-
specific information. This Statement of Additional Information is sometimes
referred to herein as the "SAI".
TABLE OF CONTENTS
Page
PART I
Additional Information about Investment Policies ........................ 1
Investment Restrictions ................................................. 8
Trustees and Officers ................................................... 9
Investment Adviser and Administrator .................................... 11
Custodian ............................................................... 14
Service for Withdrawal .................................................. 14
Determination of Net Asset Value ........................................ 14
Investment Performance .................................................. 15
Taxes ................................................................... 16
Portfolio Security Transactions ......................................... 19
Other Information ....................................................... 20
Independent Certified Public Accountants ................................ 21
Financial Statements .................................................... 21
Appendix ................................................................ 22
PART II
Fees and Expenses ....................................................... a-1
Additional Officer Information .......................................... a-2
Services for Accumulation ............................................... a-2
Principal Underwriter ................................................... a-3
Service Plan ............................................................ a-3
Performance Information ................................................. a-4
Control Persons and Principal Holders of Securities ..................... a-4
Other Information ....................................................... a-5
Tax Equivalent Yield Table .............................................. a-6
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY THE FUND'S PROSPECTUS DATED FEBRUARY 1, 1997, AS SUPPLEMENTED
FROM TIME TO TIME, WHICH IS INCORPORATED HEREIN BY REFERENCE. THIS STATEMENT
OF ADDITIONAL INFORMATION SHOULD BE READ IN CONJUNCTION WITH SUCH PROSPECTUS,
A COPY OF WHICH MAY BE OBTAINED WITHOUT CHARGE BY CONTACTING EATON VANCE
DISTRIBUTORS, INC. (THE "PRINCIPAL UNDERWRITER") (SEE BACK COVER FOR ADDRESS
AND PHONE NUMBER).
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART I
This Part I provides information about the Fund, certain other series of
the Trust and the Portfolio. Capitalized terms used in this SAI and not
otherwise defined have the meanings given them in the Fund's Prospectus. The
Fund is subject to the same investment policies as those of the Portfolio. The
Fund currently seeks to achieve its objective by investing in the Portfolio.
ADDITIONAL INFORMATION ABOUT INVESTMENT POLICIES
MUNICIPAL OBLIGATIONS
Municipal obligations are issued to obtain funds for various public and
private purposes. Such obligations include bonds as well as tax-exempt
commercial paper, project notes and municipal notes such as tax, revenue and
bond anticipation notes of short maturity, generally less than three years. In
general, there are three categories of municipal obligations, the interest on
which is exempt from federal income tax and is not a tax preference item for
purposes of the AMT: (i) certain "public purpose" obligations (whenever
issued), which include obligations issued directly by state and local
governments or their agencies to fulfill essential governmental functions;
(ii) certain obligations issued before August 8, 1986 for the benefit of non-
governmental persons or entities; and (iii) certain "private activity bonds"
issued after August 7, 1986, which include "qualified Section 501(c)(3) bonds"
or refundings of certain obligations included in the second category. In
assessing the federal income tax treatment of interest on any municipal
obligation, the Portfolio will generally rely on an opinion of the issuer's
counsel (when available) and will not undertake any independent verification
of the basis for the opinion. The two principal classifications of municipal
bonds are "general obligation" and "revenue" bonds.
Interest on certain "private activity bonds" issued after August 7, 1986
is exempt from regular federal income tax, but such interest (including a
distribution by the Fund derived from such interest) is treated as a tax
preference item which could subject the recipient to or increase the
recipient's liability for the AMT. 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 AMT as
applied to corporations (to the extent not already included in alternative
minimum taxable income as income attributable to private activity bonds).
Any recognized gain or income attributable to market discount on long-term
tax-exempt municipal obligations (i.e., obligations with a term of more than
one year) purchased after April 30, 1993 other than, in general, at their
original issue is taxable as ordinary income. A long-term debt obligation is
generally treated as acquired at a market discount if purchased after its
original issue at a price less than (i) the stated principal amount payable at
maturity, in the case of an obligation that does not have original issue
discount or (ii) in the case of an obligation that does have original issue
discount, the sum of the issue price and any original issue discount that
accrued before the obligation was purchased, subject to a de minimis
exclusion.
Issuers of general obligation bonds include states, counties, cities,
towns and regional districts. The proceeds of these obligations are used to
fund a wide range of public projects including the construction or improvement
of schools, highways and roads, water and sewer systems and a variety of other
public purposes. The basic security of general obligation bonds is the
issuer's pledge of its faith, credit, and taxing power for the payment of
principal and interest. The taxes that can be levied for the payment of debt
service may be limited or unlimited as to rate and amount.
The principal security for a revenue bond is generally the net revenues
derived from a particular facility or group of facilities or, in some cases,
from the proceeds of a special excise or other specific revenue source.
Revenue bonds have been issued to fund a wide variety of capital projects
including: electric, gas, water, sewer and solid waste disposal systems;
highways, bridges and tunnels; port, airport and parking facilities;
transportation systems; housing facilities, colleges and universities and
hospitals. Although the principal security behind these bonds varies widely,
many provide additional security in the form of a debt service reserve fund
whose monies may be used to make principal and interest payments on the
issuer's obligations. Housing finance authorities have a wide range of
security including partially or fully insured, rent subsidized and/or
collateralized mortgages, and/or the net revenues from housing or other public
projects. In addition to a debt service reserve fund, some authorities provide
further security in the form of a state's ability (without legal obligation)
to make up deficiencies in the debt service reserve fund. Lease rental revenue
bonds issued by a state or local authority for capital projects are normally
secured by annual lease rental payments from the state or locality to the
authority sufficient to cover debt service on the authority's obligations.
Such payments are usually subject to annual appropriations by the state or
locality.
Industrial development and pollution control bonds, although nominally
issued by municipal authorities, are in most cases revenue bonds and are
generally not secured by the taxing power of the municipality, but are usually
secured by the revenues derived by the authority from payments of the
industrial user or users.
The Portfolio may on occasion acquire revenue bonds which carry warrants
or similar rights covering equity securities. Such warrants or rights may be
held indefinitely, but if exercised, the Portfolio anticipates that it would,
under normal circumstances, dispose of any equity securities so acquired
within a reasonable period of time.
While most municipal bonds pay a fixed rate of interest semi-annually in
cash, there are exceptions. Some bonds pay no periodic cash interest, but
rather make a single payment at maturity representing both principal and
interest. Bonds may be issued or subsequently offered with interest coupons
materially greater or less than those then prevailing, with price adjustments
reflecting such deviation.
The obligations of any person or entity to pay the principal of and
interest on a municipal obligation are subject to the provisions of
bankruptcy, insolvency and other laws affecting the rights and remedies of
creditors, such as the Federal Bankruptcy Act, and laws, if any, which may be
enacted by Congress or state legislatures extending the time for payment of
principal or interest, or both, or imposing other constraints upon enforcement
of such obligations. There is also the possibility that as a result of
litigation or other conditions the power or ability of any person or entity to
pay when due principal of and interest on a municipal obligation may be
materially affected. There have been recent instances of defaults and
bankruptcies involving municipal obligations which were not foreseen by the
financial and investment communities. The Portfolio will take whatever action
it considers appropriate in the event of anticipated financial difficulties,
default or bankruptcy of either the issuer of any municipal obligation or of
the underlying source of funds for debt service. Such action may include
retaining the services of various persons or firms (including affiliates of
the Investment Adviser to evaluate or protect any real estate, facilities or
other assets securing any such obligation or acquired by the Portfolio as a
result of any such event, and the Portfolio may also manage (or engage other
persons to manage) or otherwise deal with any real estate, facilities or other
assets so acquired. The Portfolio anticipates that real estate consulting and
management services may be required with respect to properties securing
various municipal obligations in its portfolio or subsequently acquired by the
Portfolio. The Portfolio will incur additional expenditures in taking
protective action with respect to portfolio obligations in default and assets
securing such obligations.
The yields on municipal obligations will be dependent on a variety of
factors, including purposes of issue and source of funds for repayment,
general money market conditions, general conditions of the municipal bond
market, size of a particular offering, maturity of the obligation and rating
of the issue. The ratings of Moody's, S&P and Fitch represent their opinions
as to the quality of the municipal obligations which they undertake to rate.
It should be emphasized, however, that ratings are based on judgment and are
not absolute standards of quality. Consequently, municipal obligations with
the same maturity, coupon and rating may have different yields while
obligations of the same maturity and coupon with different ratings may have
the same yield. In addition, the market price of municipal obligations will
normally fluctuate with changes in interest rates, and therefore the net asset
value of the Portfolio will be affected by such changes.
RISKS OF CONCENTRATION
Municipal Obligations of a Particular State. Where applicable, see "Risks of
Concentration" in the Fund's Part II for a discussion of the risks associated
with the Portfolio's policy of concentrating its investments in particular
state issuers of municipal obligations.
Obligations of Particular Types of Issuers. The Portfolio may invest 25% or
more of its total assets in municipal obligations of the same type. There
could be economic, business or political developments which might affect all
municipal obligations of the same type. In particular, investments in
industrial revenue bonds might involve (without limitation) the following
risks.
Hospital bond ratings are often based on feasibility studies which contain
projections of expenses, revenues and occupancy levels. Among the influences
affecting a hospital's gross receipts and net income available to service its
debt are demand for hospital services, the ability of the hospital to provide
the services required, management capabilities, economic developments in the
service area, efforts by insurers and government agencies to limit rates and
expenses, confidence in the hospital, service area economic developments,
competition, availability and expense of malpractice insurance, Medicaid and
Medicare funding and possible federal legislation limiting the rates of
increase of hospital charges.
Electric utilities face problems in financing large construction programs
in an inflationary period, cost increases and delay occasioned by safety and
environmental considerations (particularly with respect to nuclear
facilities), difficulty in obtaining fuel at reasonable prices, and in
achieving timely and adequate rate relief from regulatory commissions, effects
of energy conservation and limitations on the capacity of the capital market
to absorb utility debt.
Life care facilities are an alternative form of long-term housing for the
elderly which offer residents the independence of a condominium life style
and, if needed, the comprehensive care of nursing home services. Bonds to
finance these facilities have been issued by various state and local
authorities. Since the bonds are normally secured only by the revenues of each
facility and not by state or local government tax payments, they are subject
to a wide variety of risks. Primarily, the projects must maintain adequate
occupancy levels to be able to provide revenues sufficient to meet debt
service payments. Moreover, since a portion of housing, medical care and other
services may be financed by an initial deposit, it is important that the
facility maintain adequate financial reserves to secure estimated actuarial
liabilities. The ability of management to accurately forecast inflationary
cost pressures is an important factor in this process. The facilities may also
be affected adversely by regulatory cost restrictions applied to health care
delivery in general, particularly state regulations or changes in Medicare and
Medicaid payments or qualifications, or restrictions imposed by medical
insurance companies. They may also face competition from alternative health
care or conventional housing facilities in the private or public sector.
Obligations of Puerto Rico, the U.S. Virgin Islands and Guam. Subject to the
Fund's investment policies as set forth in its Prospectus, the Portfolio may
invest in the obligations of Puerto Rico, the U.S. Virgin Islands and Guam.
Accordingly, the Portfolio may be adversely affected by local political and
economic conditions and developments within Puerto Rico, the U.S. Virgin
Islands and Guam affecting the issuers of such obligations.
Puerto Rico has a diversified economy dominated by the manufacturing and
service sectors. Manufacturing is the largest sector in terms of gross
domestic product and is more diversified than during earlier phases of Puerto
Rico's industrial development. The three largest sectors of the economy (as a
percentage of employment) are services (47%), government (22%) and
manufacturing (16.4%). These three sectors represent 39%, 11% and 39%,
respectively, of the gross domestic product. The service sector is the fastest
growing, while the government and manufacturing sectors have been stagnant for
the past five years. This decline was broad based among all manufacturing
industries. The North American Free Trade Agreement (NAFTA), which became
effective January 1, 1994, could lead to the loss of Puerto Rico's lower
salaried or labor intensive jobs to Mexico. The November, 1995 unemployment
rate was 13.4%, down from 16% for 1994.
The Commonwealth of Puerto Rico exercises virtually the same control over
its internal affairs as do the fifty states; however, it differs from the
states in its relationship with the federal government. Most federal taxes,
except those such as social security taxes that are imposed by mutual consent,
are not levied in Puerto Rico. However, in conjunction with the 1993 U.S.
budget plan, Section 936 of the Code was amended and provided for two
alternative limitations to the Section 936 credit. The first option will limit
the credit against such income to 40% of the credit allowable under current
law, with a five year phase-in period starting at 60% of the allowable credit.
The second option is a wage and depreciation based credit. The reduction of
the tax benefits to those U.S. companies with operations in Puerto Rico may
lead to slower growth in the future. Furthermore, federal policymakers have
proposed the total elimination of Section 936, phased out over ten years, as a
budget-balancing measure. There can be no assurance that these modifications
will not lead to a weakened economy, a lower rating on Puerto Rico's debt or
lower prices for Puerto Rican bonds that may be held by the Portfolio.
Puerto Rico's financial reporting was first conformed to generally
accepted accounting principles in fiscal 1990. Nonrecurring revenues have been
used frequently to balance recent years' budgets. In November, 1993 Puerto
Ricans voted on whether they wished to retain their Commonwealth status,
become a state or establish an independent nation. The measure was defeated,
with 48.5% voting to remain a Commonwealth, 46% voting for statehood and 4%
voting for independence. Retaining Commonwealth status will leave intact the
current relationship with the federal government. There can be no assurance
that the statehood issue will not be brought to a vote in the future. A
successful statehood vote in Puerto Rico would then require the U.S. Congress
to ratify the election.
The United States Virgin Islands (USVI) are located approximately 1,100
miles east-southeast of Miami and are made up of St. Croix, St. Thomas and St.
John. Population, after reaching a peak of 110,800 in 1985, declined to
101,809 in 1990. The economy is heavily reliant on the tourism industry, with
roughly 43% of non-agricultural employment in tourist-related trade and
services. As of June 1996, unemployment stood at 4.7%. The tourism industry is
economically sensitive and would likely be adversely affected by a recession
in either the United States or Europe.
An important component of the USVI revenue base is the federal excise tax
on rum exports. Tax revenues rebated by the federal government to the USVI
provide the primary security of many outstanding USVI bonds. Since more than
90% of the rum distilled in the USVI is distilled at one plant, any
interruption in its operations (as occurred after Hurricane Hugo in 1989)
would adversely affect these revenues. Consequently, there can be no assurance
that rum exports to the United States and the rebate of tax revenues to the
USVI will continue at their present levels. The preferential tariff treatment
the USVI rum industry currently enjoys could be reduced under NAFTA. Increased
competition from Mexican rum producers could reduce USVI rum imported to the
U.S., decreasing excise tax revenues generated. The USVI is periodically hit
by hurricanes. During this past hurricane season, several hurricanes caused
extensive damage, which has had a negative impact on revenue collections.
There is currently no rated, unenhanced Virgin Islands debt outstanding
(although there is unrated debt outstanding).
Guam, an unincorporated U.S. territory, is located 1,500 miles southeast
of Tokyo. Population, 133,000 in 1990, is up 26% from the 1980 census level.
The U.S. military is a key component of Guam's economy. The federal government
directly comprises more than 10% of the employment base, with a substantial
component of the service sector to support these personnel. The Naval Air
Station, one of several U.S. military facilities on the island, has been
slated for closure by the Defense Base Closure and Realignment Committee;
however, the administration plans to use these facilities to expand the
island's commercial airport. Guam is also heavily reliant on tourists,
particularly the Japanese. For 1995, the government realized a General Fund
operating surplus. The administration has taken steps to improve its financial
position; however, there are no guarantees that an improvement will be
realized. Guam's general obligation debt is rated BBB by S&P with a negative
outlook.
MUNICIPAL LEASES
The Portfolio may invest in municipal leases and participations therein,
which arrangements frequently involve special risks. Municipal leases are
obligations in the form of a lease or installment purchase arrangement which
is issued by state or local governments to acquire equipment and facilities.
Interest income from such obligations is generally exempt from local and state
taxes in the state of issuance. "Participations" in such leases are undivided
interests in a portion of the total obligation. Participations entitle their
holders to receive a pro rata share of all payments under the lease. A trustee
is usually responsible for administering the terms of the participation and
enforcing the participants' rights in the underlying lease. Leases and
installment purchase or conditional sale contracts (which normally provide for
title to the leased assets to pass eventually to the government issuer) have
evolved as a means of government issuers to acquire property and equipment
without meeting the constitutional and statutory requirements for the issuance
of debt. State debt-issuance limitations are deemed to be inapplicable to
these arrangements because of the inclusion in many leases or contracts of
"non-appropriation" clauses that provide that the governmental issuer has no
obligation to make future payments under the lease or contract unless money is
appropriated for such purpose by the appropriate legislative body on a yearly
or other periodic basis. Such arrangements are, therefore, subject to the risk
that the governmental issuer will not appropriate funds for lease payments.
Certain municipal lease obligations owned by the Portfolio may be deemed
illiquid for the purpose of the Portfolio's 15% limitation on investments in
illiquid securities, unless determined by the Investment Adviser, pursuant to
guidelines adopted by the Trustees of the Portfolio, to be liquid securities
for the purpose of such limitation. In determining the liquidity of municipal
lease obligations, the Investment Adviser will consider a variety of factors
including: (1) the willingness of dealers to bid for the security; (2) the
number of dealers willing to purchase or sell the obligation and the number of
other potential buyers; (3) the frequency of trades and quotes for the
obligation; and (4) the nature of the marketplace trades. In addition, the
Investment Adviser will consider factors unique to particular lease
obligations affecting the marketability thereof. These include the general
creditworthiness of the municipality, the importance of the property covered
by the lease to the municipality, and the likelihood that the marketability of
the obligation will be maintained throughout the time the obligation is held
by the Portfolio. In the event the Portfolio acquires an unrated municipal
lease obligation, the Investment Adviser will be responsible for determining
the credit quality of such obligation on an on-going basis, including an
assessment of the likelihood that the lease may or may not be cancelled.
ZERO COUPON BONDS
Zero coupon bonds are debt obligations which do not require the periodic
payment of interest and are issued at a significant discount from face value.
The discount approximates the total amount of interest the bonds will accrue
and compound over the period until maturity at a rate of interest reflecting
the market rate of the security at the time of issuance. Zero coupon bonds
benefit the issuer by mitigating its need for cash to meet debt service, but
also require a higher rate of return to attract investors who are willing to
defer receipt of such cash.
INSURANCE
Insured municipal obligations held by the Portfolio (if any) will be
insured as to their scheduled payment of principal and interest under either
(i) an insurance policy obtained by the issuer or underwriter of the
obligation at the time of its original issuance or (ii) an insurance policy
obtained by the Portfolio or a third party subsequent to the obligation's
original issuance (which may not be reflected in the obligation's market
value). In either event, such insurance may provide that in the event of non-
payment of interest or principal when due with respect to an insured
obligation, the insurer is not required to make such payment until a specified
time has lapsed (which may be 30 days or more after notice).
CREDIT QUALITY
The Portfolio is dependent on the Investment Adviser's judgment, analysis
and experience in evaluating the quality of municipal obligations. In
evaluating the credit quality of a particular issue, whether rated or unrated,
the Investment Adviser will normally take into consideration, among other
things, the financial resources of the issuer (or, as appropriate, of the
underlying source of funds for debt service), its sensitivity to economic
conditions and trends, any operating history of and the community support for
the facility financed by the issue, the ability of the issuer's management and
regulatory matters. The Investment Adviser will attempt to reduce the risks of
investing in the lowest investment grade, below investment grade and
comparable unrated obligations through active portfolio management, credit
analysis and attention to current developments and trends in the economy and
the financial markets.
See "Portfolio of Investments" in the "Financial Statements" incorporated
by reference into this SAI with respect to any defaulted obligations held by
the Portfolio.
SHORT-TERM TRADING
The Portfolio may sell (and later purchase) securities in anticipation of
a market decline (a rise in interest rates) or purchase (and later sell)
securities in anticipation of a market rise (a decline in interest rates). In
addition, a security may be sold and another purchased at approximately the
same time to take advantage of what the Portfolio believes to be a temporary
disparity in the normal yield relationship between the two securities. Yield
disparities may occur for reasons not directly related to the investment
quality of particular issues or the general movement of interest rates, such
as changes in the overall demand for or supply of various types of municipal
obligations or changes in the investment objectives of investors. Such trading
may be expected to increase the portfolio turnover rate, which may increase
capital gains and the expenses incurred in connection with such trading. The
Portfolio anticipates that its annual portfolio turnover rate will generally
not exceed 100% (excluding turnover of securities having a maturity of one
year or less). A 100% annual turnover rate would occur, for example, if all
the securities held by the Portfolio were replaced once in a period of one
year. A high turnover rate (100% or more) necessarily involves greater
expenses to the Portfolio. The Portfolio engages in portfolio trading
(including short-term trading) if it believes that a transaction including all
costs will help in achieving its investment objective.
WHEN ISSUED SECURITIES
New issues of municipal obligations are sometimes offered on a "when-
issued" basis, that is, delivery and payment for the securities normally take
place within a specified number of days after the date of the Portfolio's
commitment and are subject to certain conditions such as the issuance of
satisfactory legal opinions. The Portfolio may also purchase securities on a
when-issued basis pursuant to refunding contracts in connection with the
refinancing of an issuer's outstanding indebtedness. Refunding contracts
generally require the issuer to sell and the Portfolio to buy such securities
on a settlement date that could be several months or several years in the
future.
The Portfolio will make commitments to purchase when-issued securities
only with the intention of actually acquiring the securities, but may sell
such securities before the settlement date if it is deemed advisable as a
matter of investment strategy. The payment obligation and the interest rate
that will be received on the securities are fixed at the time the Portfolio
enters into the purchase commitment. When the Portfolio commits to purchase a
security on a when-issued basis it records the transaction and reflects the
value of the security in determining its net asset value. Securities purchased
on a when-issued basis and the securities held by the Portfolio are subject to
changes in value based upon the perception of the creditworthiness of the
issuer and changes in the level of interest rates (i.e. appreciation when
interest rates decline and depreciation when interest rates rise). Therefore,
to the extent that the Portfolio remains substantially fully invested at the
same time that it has purchased securities on a when-issued basis, there will
be greater fluctuations in the Portfolio's net asset value than if it solely
set aside cash to pay for when-issued securities.
VARIABLE RATE OBLIGATIONS
The Portfolio may purchase variable rate obligations. Variable rate
instruments provide for adjustments in the interest rate at specified
intervals (weekly, monthly, semi-annually, etc.). The revised rates are
usually set at the issuer's discretion, in which case the investor normally
enjoys the right to "put" the security back to the issuer or his agent. Rate
revisions may alternatively be determined by formula or in some other
contractual fashion. Variable rate obligations normally provide that the
holder can demand payment of the obligation on short notice at par with
accrued interest and are frequently secured by letters of credit or other
credit support arrangements provided by banks. To the extent that such letters
of credit or other arrangements constitute an unconditional guarantee of the
issuer's obligations, a bank may be treated as the issuer of a security for
the purpose of complying with the diversification requirements set forth in
Section 5(b) of the 1940 Act and Rule 5b-2 thereunder. The Portfolio would
anticipate using these obligations as cash equivalents pending longer term
investment of its funds.
REDEMPTION, DEMAND AND PUT FEATURES
Most municipal bonds have a fixed final maturity date. However, it is
commonplace for the issuer to reserve the right to call the bond earlier.
Also, some bonds may have "put" or "demand" features that allow early
redemption by the bondholder. Longer term fixed-rate bonds may give the holder
a right to request redemption at certain times (often annually after the lapse
of an intermediate term). These bonds are more defensive than conventional
long term bonds (protecting to some degree against a rise in interest rates)
while providing greater opportunity than comparable intermediate term bonds,
because the Portfolio may retain the bond if interest rates decline. By
acquiring these kinds of obligations the Portfolio obtains the contractual
right to require the issuer of the security or some other person (other than a
broker or dealer) to purchase the security at an agreed upon price, which
right is contained in the obligation itself rather than in a separate
agreement with the seller or some other person. Since this right is assignable
with the security, which is readily marketable and valued in the customary
manner, the Portfolio will not assign any separate value to such right.
LIQUIDITY AND PROTECTIVE PUT OPTIONS
The Portfolio may also enter into a separate agreement with the seller of
the security or some other person granting the Portfolio the right to put the
security to the seller thereof or the other person at an agreed upon price.
The Portfolio intends to limit this type of transaction to institutions (such
as banks or securities dealers) which the Investment Adviser believes present
minimal credit risks and would engage in this type of transaction to
facilitate portfolio liquidity or (if the seller so agrees) to hedge against
rising interest rates. There is no assurance that this kind of put option will
be available to the Portfolio or that selling institutions will be willing to
permit the Portfolio to exercise a put to hedge against rising interest rates.
A separate put option may not be marketable or otherwise assignable, and sale
of the security to a third party or lapse of time with the put unexercised may
terminate the right to exercise the put. The Portfolio does not expect to
assign any value to any separate put option which may be acquired to
facilitate portfolio liquidity, inasmuch as the value (if any) of the put will
be reflected in the value assigned to the associated security; any put
acquired for hedging purposes would be valued in good faith under methods or
procedures established by the Trustees of the Portfolio after consideration of
all relevant factors, including its expiration date, the price volatility of
the associated security, the difference between the market price of the
associated security and the exercise price of the put, the creditworthiness of
the issuer of the put and the market prices of comparable put options.
Interest income generated by certain bonds having put or demand features may
not qualify as tax-exempt interest.
SECURITIES LENDING
The Portfolio may seek to increase its income by lending portfolio
securities to broker-dealers or other institutional borrowers. 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. Securities lending
involves administration expenses, including finders' fees. 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. The Portfolio has no present intention of
engaging in securities lending.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
A change in the level of interest rates may affect the value of the
securities held by the Portfolio (or of securities that the Portfolio expects
to purchase). To hedge against changes in rates, the Portfolio may enter into
(i) futures contracts for the purchase or sale of debt securities and (ii)
futures contracts on securities indices. All futures contracts entered into by
the Portfolio are traded on exchanges or boards of trade that are licensed and
regulated by the Commodity Futures Trading Commission ("CFTC") and must be
executed through a futures commission merchant or brokerage firm which is a
member of the relevant exchange. The Portfolio may purchase and write call and
put options on futures contracts which are traded on a United States or
foreign exchange or board of trade. The Portfolio will be required, in
connection with transactions in futures contracts and the writing of options
on futures, to make margin deposits, which will be held by the Portfolio's
custodian for the benefit of the futures commission merchant through whom the
Portfolio engages in such futures and options transactions.
Some futures contracts and options thereon may become illiquid under
adverse market conditions. In addition, during periods of market volatility, a
commodity exchange may suspend or limit transactions in an exchange-traded
instrument, which may make the instrument temporarily illiquid and difficult
to price. Commodity exchanges may also establish daily limits on the amount
that the price of a futures contract or futures option can vary from the
previous day's settlement price. Once the daily limit is reached, no trades
may be made that day at a price beyond the limit. This may prevent the
Portfolio from closing out positions and limiting its losses.
The Portfolio will engage in futures and related options transactions only
for bona fide hedging purposes as defined in or permitted by CFTC regulations.
The Portfolio will determine that the price fluctuations in the futures
contracts and options on futures are substantially related to price
fluctuations in securities held by the Portfolio or which it expects to
purchase. The Portfolio's futures transactions will be entered into for
traditional hedging purposes -- that is, futures contracts will be sold to
protect against a decline in the price of securities that the Portfolio owns,
or futures contracts will be purchased to protect the Portfolio against an
increase in the price of securities it intends to purchase. As evidence of
this hedging intent, the Portfolio expects that on 75% or more of the
occasions on which it takes a long futures (or option) position (involving the
purchase of futures contracts), the Portfolio will have purchased, or will be
in the process of purchasing, equivalent amounts of related securities in the
cash market at the time when the futures (or option) position is closed out.
However, in particular cases, when it is economically advantageous for the
Portfolio to do so, a long futures position may be terminated (or an option
may expire) without the corresponding purchase of securities. The Portfolio
will engage in transactions in futures and related options contracts only to
the extent such transactions are consistent with the requirements of the Code
for maintaining qualification of the Fund as a regulated investment company
for federal income tax purposes (see "Taxes").
ASSET COVERAGE REQUIREMENTS
Transactions involving when-issued securities, the lending of Portfolio
securities or futures contracts and options (other than options that the
Portfolio has purchased) expose the Portfolio to an obligation to another
party. The Portfolio will not enter into any such transactions unless it owns
either (1) an offsetting ("covered") position in securities or other options
or futures contracts, or (2) cash or liquid securities with a value sufficient
at all times to cover its potential obligations not covered as provided in (1)
above. The Portfolio will comply with Commission guidelines regarding cover
for these instruments and, if the guidelines so require, set aside cash or
liquid securities in a segregated account with its custodian in the prescribed
amount. The securities in the segregated account will be marked to market
daily.
Assets used as cover or held in a segregated account cannot be sold while
the position requiring coverage or segregation is outstanding unless they are
replaced with other appropriate assets. As a result, the commitment of a large
portion of the Portfolio's assets to segregated accounts or to cover could
impede portfolio management or the Portfolio's ability to meet redemption
requests or other current obligations.
INVESTMENT RESTRICTIONS
The following investment restrictions of the Fund are designated as
fundamental policies and as such cannot be changed without the approval of the
holders of a majority of the Fund's outstanding voting securities, which as
used in this SAI means the lesser of (a) 67% of the shares of the Fund present
or represented by proxy at a meeting if the holders of more than 50% of the
shares are present or represented at the meeting or (b) more than 50% of the
shares of the Fund. Accordingly, the Fund may not:
(1) Borrow money or issue senior securities except as permitted by the
Investment Company Act of 1940;
(2) Purchase securities on margin (but the Fund may obtain such short-term
credits as may be necessary for the clearance of purchases and sales of
securities). The deposit or payment by the Fund of initial or maintenance
margin in connection with futures contracts or related options transactions is
not considered the purchase of a security on margin;
(3) Underwrite or participate in the marketing of securities of others,
except insofar as it may technically be deemed to be an underwriter in selling
a portfolio security under circumstances which may require the registration of
the same under the Securities Act of 1933;
(4) Purchase or sell real estate, although it may purchase and sell
securities which are secured by real estate and securities of companies which
invest or deal in real estate;
(5) Purchase or sell physical commodities or contracts for the purchase or
sale of physical commodities; or
(6) Make loans to any person except by (a) the acquisition of debt
instruments and making portfolio investments, (b) entering into repurchase
agreements and (c) lending portfolio securities.
Notwithstanding the investment policies and restrictions of the Fund, the
Fund may invest all of its investable assets in an open-end management
investment company with substantially the same investment objective, policies
and restrictions as the Fund.
The Portfolio has adopted substantially the same fundamental investment
restrictions as the foregoing investment restrictions adopted by the Fund;
such restrictions cannot be changed without the approval of a "majority of the
outstanding voting securities" of the Portfolio.
The Fund and the Portfolio have adopted the following investment policies
which may be changed by the Trust with respect to the Fund without approval by
the Fund's shareholders or by the Portfolio with respect to the Portfolio
without approval by the Fund or its other investors. As a matter of
nonfundamental policy, the Fund and the Portfolio will not: (a) engage in
options, futures or forward transactions if more than 5% of its net assets, as
measured by the aggregate of the premiums paid by the Fund or the Portfolio,
would be so invested; (b) make short sales of securities or maintain a short
position, unless at all times when a short position is open it owns an equal
amount of such securities or securities convertible into or exchangeable,
without payment of any further consideration, for securities of the same issue
as, and equal in amount to, the securities sold short and unless not more than
25% of the Fund's net assets (taken at current value) is held as collateral
for such sales at any one time. (The Fund and the Portfolio will make such
sales only for the purpose of deferring realization of gain or loss for
federal income tax purposes); (c) invest more than 15% of its net assets in
investments which are not readily marketable, including restricted securities
and repurchase agreements maturing in more than seven days. Restricted
securities for the purposes of this limitation do not include securities
eligible for resale pursuant to Rule 144A under the Securities Act of 1933 and
commercial paper issued pursuant to Section 4(2) of said Act that the Board of
Trustees of the Trust or the Portfolio, or its delegate, determines to be
liquid; or (d) purchase or retain in its portfolio any securities issued by an
issuer any of whose officers, directors, trustees or security holders is an
officer or Trustee of the Trust or the Portfolio or is a member, officer,
director or trustee of any investment adviser of the Trust or the Portfolio,
if after the purchase of the securities of such issuer by the Fund or the
Portfolio one or more of such persons owns beneficially more than 1/2 of 1%
of the shares or securities or both (all taken at market value) of such
issuer and such persons owning more than 1/2 of 1% of such shares or
securities together own beneficially more than 5% of such shares or securities
or both (all taken at market value).
For purposes of the Portfolio's investment restrictions, the determination
of the "issuer" of a municipal obligation which is not a general obligation
bond will be made by the Investment Adviser on the basis of the
characteristics of the obligation and other relevant factors, the most
significant of which is the source of funds committed to meeting interest and
principal payments of such obligations.
Whenever an investment policy or investment restriction set forth in the
Prospectus or this SAI states a maximum percentage of assets that may be
invested in any security or other asset, or describes a policy regarding
quality standards, such percentage limitation or standard shall be determined
immediately after and as a result of the Fund's or the Portfolio's acquisition
of such security or asset. Accordingly, any later increase or decrease
resulting from a change in values, assets or other circumstances, other than a
subsequent rating change below investment grade made by a rating service, will
not compel the Fund or the Portfolio, as the case may be, to dispose of such
security or other asset. Where applicable and notwithstanding the foregoing,
under normal market conditions the Fund and the Portfolio must take actions
necessary to comply with the policy of investing at least 65% of total assets
in a particular state. Moreover, the Fund and Portfolio must always be in
compliance with the borrowing policies set forth above.
TRUSTEES AND OFFICERS
The Trustees and officers of the Trust and the Portfolio are listed below.
Except as indicated, each individual has held the office shown or other
offices in the same company for the last five years. Unless otherwise noted,
the business address of each Trustee and officer is 24 Federal Street, Boston,
Massachusetts 02110, which is also the address of the Portfolio's investment
adviser, Boston Management and Research ("BMR"), a wholly-owned subsidiary of
Eaton Vance Management ("Eaton Vance"); of Eaton Vance's parent, Eaton Vance
Corp. ("EVC"); and of BMR's and Eaton Vance's trustee, Eaton Vance, Inc.
("EV"). Eaton Vance and EV are both wholly-owned subsidiaries of EVC. Those
Trustees who are "interested persons" of the Trust, the Portfolio, BMR, Eaton
Vance, EVC or EV, as defined in the 1940 Act, by virtue of their affiliation
with any one or more of the Trust, the Portfolio, BMR, Eaton Vance, EVC or EV,
are indicated by an asterisk(*).
TRUSTEES OF THE TRUST AND THE PORTFOLIO
DONALD R. DWIGHT (65), Trustee
President of Dwight Partners, Inc. (a corporate relations and communications
company) founded in 1988; Chairman of the Board of Newspapers of New
England, Inc., since 1983. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: Clover Mill Lane, Lyme, New Hampshire 03768
JAMES B. HAWKES (55), Vice President and Trustee*
President and Chief Executive Officer of BMR, Eaton Vance, EVC and EV, and a
Director of EVC and EV. Director, Trustee and officer of various investment
companies managed by Eaton Vance or BMR.
SAMUEL L. HAYES, III (61), Trustee
Jacob H. Schiff Professor of Investment Banking, Harvard University Graduate
School of Business Administration. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: Harvard University Graduate School of Business Administration,
Soldiers Field Road, Boston, Massachusetts 02163
NORTON H. REAMER (61), Trustee
President and Director, United Asset Management Corporation, a holding company
owning institutional investment management firms. Chairman, President and
Director, UAM Funds (mutual funds). Director or Trustee of various
investment companies managed by Eaton Vance or BMR.
Address: One International Place, Boston, Massachusetts 02110
JOHN L. THORNDIKE (70), Trustee
Director, Fiduciary Company Incorporated, Director or Trustee of various
investment companies managed by Eaton Vance or BMR.
Address: 175 Federal Street, Boston, Massachusetts 02110
JACK L. TREYNOR (66), Trustee
Investment Adviser and Consultant. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: 504 Via Almar, Palos Verdes Estates, California 90274
OFFICERS OF THE TRUST AND THE PORTFOLIO
THOMAS J. FETTER (53), President
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR. Mr. Fetter was elected President of
the Trust on December 13, 1993.
ROBERT B. MACINTOSH (40), Vice President of the Trust
Vice President of BMR since August 11, 1992, and of Eaton Vance and EV.
Officer of various investment companies managed by Eaton Vance or BMR. Mr.
MacIntosh was elected Vice President of the Trust on March 22, 1993.
JAMES L. O'CONNOR (51), Treasurer
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
THOMAS OTIS (65), Secretary
Vice President and Secretary of BMR, Eaton Vance, EVC and EV. Officer of
various investment companies managed by Eaton Vance or BMR.
JANET E. SANDERS (61), Assistant Secretary
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
A. JOHN MURPHY (34), Assistant Secretary
Assistant Vice President of BMR, Eaton Vance and EV since March 1, 1994;
employee of Eaton Vance since March 1993. State Regulations Supervisor, The
Boston Company (1991-1993). Officer of various investment companies managed
by Eaton Vance or BMR. Mr. Murphy was elected Assistant Secretary of the
Trust on March 27, 1995.
ERIC G. WOODBURY (39), Assistant Secretary
Vice President of BMR, Eaton Vance and EV since February 1993; formerly,
associate attorney at Dechert, Price & Rhoads and Gaston & Snow. Officer of
various investment companies managed by Eaton Vance or BMR. Mr. Woodbury was
elected Assistant Secretary on June 19, 1995.
For any additional officers of the Portfolio, see "Additional Officer
Information" in the Fund's Part II.
Messrs. Hayes (Chairman), Reamer and Thorndike are members of the Special
Committee of the Board of Trustees of the Trust and of the Portfolio. The
purpose of the Special Committee is to consider, evaluate and make
recommendations to the full Board of Trustees concerning (i) all contractual
arrangements with service providers to the Fund, including administrative
services, transfer agency, custodial and fund accounting and distribution
services, and (ii) all other matters in which Eaton Vance or its affiliates
has any actual or potential conflict of interest with the Fund or its
shareholders.
The Nominating Committee is comprised of four Trustees who are not
"interested persons" as that term is defined under the 1940 Act
("noninterested Trustees"). The Committee has four-year staggered terms, with
one member rotating off the Committee to be replaced by another noninterested
Trustee of the Trust. The purpose of the Committee is to recommend to the
Board nominees for the position of noninterested Trustee and to assure that at
least a majority of the Board of Trustees is independent of Eaton Vance and
its affiliates.
Messrs. Treynor (Chairman) and Dwight are members of the Audit Committee
of the Board of Trustees of the Trust and of the Portfolio. The Audit
Committee's functions include making recommendations to the Trustees regarding
the selection of the independent certified public accountants, and reviewing
with such accountants and the Treasurer of the Trust and of the Portfolio
matters relative to trading and brokerage policies and practices, accounting
and auditing practices and procedures, accounting records, internal accounting
controls, and the functions performed by the custodian and transfer agent of
the Fund and of the Portfolio.
Trustees of the Portfolio who are not affiliated with the Investment
Adviser may elect to defer receipt of all or a percentage of their annual fees
in accordance with the terms of a Trustees Deferred Compensation Plan (the
"Plan"). Under the Plan, an eligible Trustee may elect to have his deferred
fees invested by the Portfolio in the shares of one or more funds in the Eaton
Vance Family of Funds, and the amount paid to the Trustees under the Plan will
be determined based upon the performance of such investments. Deferral of
Trustees' fees in accordance with the Plan will have a negligible effect on
the Portfolio's assets, liabilities, and net income per share, and will not
obligate the Portfolio to retain the services of any Trustee or obligate the
Portfolio to pay any particular level of compensation to the Trustee. Neither
the Portfolio nor the Trust has a retirement plan for its Trustees.
The fees and expenses of those Trustees of the Trust and the Portfolio who
are not members of the Eaton Vance organization (the noninterested Trustees)
are paid by the Fund (and the other series of the Trust) and the Portfolio,
respectively. For the compensation received by the noninterested Trustees of
the Trust and the Portfolio, see "Fees and Expenses" in the Fund's Part II.
INVESTMENT ADVISER AND ADMINISTRATOR
The Portfolio engages BMR as investment adviser pursuant to an Investment
Advisory Agreement. BMR or Eaton Vance acts as investment adviser to
investment companies and various individual and institutional clients with
combined assets under management of over $16 billion.
Eaton Vance, its affiliates and its predecessor companies have been
managing assets of individuals and institutions since 1924 and managing
investment companies since 1931. They maintain a large staff of experienced
fixed-income and equity investment professionals to service the needs of their
clients. The fixed-income division focuses on all kinds of taxable investment-
grade and high-yield securities, tax-exempt investment-grade and high-yield
securities, and U.S. Government securities. The equity division covers stocks
ranging from blue chip to emerging growth companies.
Eaton Vance and its affiliates act as adviser to over 150 mutual funds,
individual and various institutional accounts, including corporations,
hospitals, retirement plans, universities, foundations and trusts. Eaton Vance
mutual funds feature international equities, domestic equities, tax-free
municipal bonds, and U.S. government and corporate bonds. Lloyd George
Management has advised Eaton Vance's international equity funds since 1992.
Founded in 1991, Lloyd George is headquartered in Hong Kong with offices in
London and Mumbai, India. It has established itself as a leader in investment
management in Asian equities and other global markets. Lloyd George features
an experienced team of investment professionals that began working together in
the mid-1980s. Lloyd George analysts cover East Asia, the India subcontinent,
Russia and Eastern Europe, Latin America, Australia and New Zealand from
offices in Hong Kong, London and Bombay. Together Eaton Vance and Lloyd George
manage over $18 billion in assets. Eaton Vance mutual funds are distributed by
Eaton Vance Distributors both within the United States and offshore.
Eaton Vance Distributors believes that an investment professional can
provide valuable services to you to help you reach your investment goals.
Meeting investment goals requires time, objectivity and investment savvy.
Before making an investment recommendation, a representative can help you
carefully consider your short- and long-term financial goals, your tolerance
for investment risk, your investment time frame, and other investments you may
already own. Your professional investment representatives are knowledgeable
about financial markets, as well as the wide range of investment opportunities
available. A representative can provide you with tailored financial advice and
help you decide when to buy, sell or persevere with your investments. A
professional investment representative can provide you with tailored financial
advice.
Eaton Vance offers single-state tax-free portfolios in more states than
any other sponsor of mutual funds. There are 32 long-term state portfolios, 5
national portfolios and 10 limited maturity portfolios, which serve as
investment vehicles for over 100 mutual funds with varying pricing options. A
staff of 32 (including 9 portfolio managers and 9 credit specialists) is
responsible for the day-to-day management of over 3,500 issues in 47 mutual
fund portfolios. Assets managed by the municipal investment group are
currently over $9.1 billion. The investment philosophy of the municipal
investment group is to: seek value by avoiding unnecessary credit risk; build
portfolios one security at a time; and take a long-term approach to managing
market risk. Over the long-term, the group seeks to maximize tax-free income
by keeping portfolios fully invested (rather than trying to "time the market"
for short-term results) and reduce potential capital losses due to poor credit
quality. Diligent and continuing research and analysis are a critical
component of the municipal investment group's investment philosophy and long-
term strategy.
The following persons manage one or more of the Eaton Vance municipal
portfolios. For the identity of the Portfolio's portfolio manager, see the
Fund's current Prospectus.
Nicole Anderes is a Vice President of Eaton Vance and BMR. Ms. Anderes
graduated from Brown University with a B.A. in Women's Studies/Economics. She
has been an active member of MAGNY/National Federation of Municipal Analysts,
the Public Securities Association and the Municipal Forum, and served as the
General Secretary of MAGNY from 1992 to 1993.
Timothy T. Browse is a Vice President of Eaton Vance and BMR. Mr. Browse
graduated from St. Lawrence University in 1981 and received his M.B.A. degree
from Boston University in 1990.
Cynthia J. Clemson is a Vice President of Eaton Vance and BMR. Ms. Clemson
graduated from Mount Holyoke College with a B.A. in 1985 and received her
M.B.A., cum laude, from Boston University in 1990. She is a member of the
Boston Municipal Analysts Forum, the Boston Securities Analyst Society and the
Financial Analysts Federation.
Thomas J. Fetter is a Vice President of Eaton Vance and BMR, and Director
of Municipal Investments. Mr. Fetter graduated with a degree in Business
Administration from Kent State University. He is a Chartered Financial Analyst
and member of the Boston Security Analysts Society. He is also a member of the
Boston Municipal Analysts Forum.
Robert B. MacIntosh is a Vice President of Eaton Vance and BMR and the
portfolio manager of single-state, tax-exempt funds in six states: Hawaii,
Louisiana, Massachusetts, Minnesota, New Jersey and North Carolina. He also
serves as economic spokesman for the Eaton Vance organization.
Thomas M. Metzold is a Vice President of Eaton Vance and BMR. He is a
Chartered Financial Analyst and a member of the Boston Security Analysts
Society, the Association for Investment Management & Research, the Boston
Municipal Analysts Forum, and the National Federation of Municipal Analysts.
BMR manages the investments and affairs of the Portfolio subject to the
supervision of the Portfolio's Board of Trustees. BMR furnishes to the
Portfolio investment research, advice and supervision, furnishes an investment
program and determines what securities will be purchased, held or sold by the
Portfolio and what portion, if any, of the Portfolio's assets will be held
uninvested. The Investment Advisory Agreement requires BMR to pay the salaries
and fees of all officers and Trustees of the Portfolio who are members of the
BMR organization and all personnel of BMR performing services relating to
research and investment activities. The Portfolio is responsible for all
expenses not expressly stated to be payable by BMR under the Investment
Advisory Agreement, including, without implied limitation, (i) expenses of
maintaining the Portfolio and continuing its existence, (ii) registration of
the Portfolio under the 1940 Act, (iii) commissions, fees and other expenses
connected with the acquisition, holding and disposition of securities and
other investments, (iv) auditing, accounting and legal expenses, (v) taxes and
interest, (vi) governmental fees, (vii) expenses of issue, sale and redemption
of interests in the Portfolio, (viii) expenses of registering and qualifying
the Portfolio and interests in the Portfolio under federal and state
securities laws and of preparing and printing registration statements or other
offering statements or memoranda for such purposes and for distributing the
same to investors, and fees and expenses of registering and maintaining
registrations of the Portfolio and of the Portfolio's placement agent as
broker-dealer or agent under state securities laws, (ix) expenses of reports
and notices to investors and of meetings of investors and proxy solicitations
therefor, (x) expenses of reports to governmental officers and commissions,
(xi) insurance expenses, (xii) association membership dues, (xiii) fees,
expenses and disbursements of custodians and subcustodians for all services to
the Portfolio (including without limitation safekeeping of funds, securities
and other investments, keeping of books, accounts and records, and
determination of net asset values, book capital account balances and tax
capital account balances), (xiv) fees, expenses and disbursements of transfer
agents, dividend disbursing agents, investor servicing agents and registrars
for all services to the Portfolio, (xv) expenses for servicing the accounts of
investors, (xvi) any direct charges to investors approved by the Trustees of
the Portfolio, (xvii) compensation and expenses of Trustees of the Portfolio
who are not members of BMR's organization, and (xviii) such non-recurring
items as may arise, including expenses incurred in connection with litigation,
proceedings and claims and any legal obligation of the Portfolio to indemnify
its Trustees, officers and investors with respect thereto, to the extent not
covered by insurance.
For a description of the compensation that the Portfolio pays BMR under
the Investment Advisory Agreement, see the Fund's current Prospectus. For
additional information about the Investment Advisory Agreement, including the
net assets of the Portfolio and the investment advisory fees that the
Portfolio paid BMR under the Investment Advisory Agreement, see "Fees and
Expenses" in the Fund's Part II.
The Investment Advisory Agreement with BMR may be continued indefinitely
so long as such continuance is approved at least annually (i) by the vote of a
majority of the Trustees of the Portfolio who are not interested persons of
the Portfolio or of BMR cast in person at a meeting specifically called for
the purpose of voting on such approval and (ii) by the Board of Trustees of
the Portfolio or by vote of a majority of the outstanding voting securities of
the Portfolio. The Agreement may be terminated at any time without penalty on
sixty (60) days' written notice by the Board of Trustees of either party, or
by vote of the majority of the outstanding voting securities of the Portfolio,
and the Agreement will terminate automatically in the event of its assignment.
The Agreement provides that BMR may render services to others. The Agreement
also provides that BMR shall not be liable for any loss incurred in connection
with the performance of its duties, or action taken or omitted under that
Agreement, in the absence of willful misfeasance, bad faith, gross negligence
in the performance of its duties or by reason of its reckless disregard of its
obligations and duties thereunder, or for any losses sustained in the
acquisition, holding or disposition of any security or other investment.
As indicated in the Prospectus, Eaton Vance serves as Administrator of the
Fund, but currently receives no compensation for providing administrative
services to the Fund. Under its Administrative Services Agreement with the
Fund, Eaton Vance has been engaged to administer the Fund's affairs, subject
to the supervision of the Trustees of the Trust, and shall furnish for the use
of the Fund office space and all necessary office facilities, equipment and
personnel for administering the affairs of the Fund. For additional
information about the Administrator, see "Fees and Expenses" in the Fund's
Part II.
The Fund pays all of its own expenses including, without limitation, (i)
expenses of maintaining the Fund and continuing its existence, (ii) its pro
rata share of registration of the Trust under the 1940 Act, (iii) commissions,
fees and other expenses connected with the purchase or sale of securities and
other investments, (iv) auditing, accounting and legal expenses, (v) taxes and
interest, (vi) governmental fees, (vii) expenses of issue, sale, repurchase
and redemption of shares, (viii) expenses of registering and qualifying the
Fund and its shares under federal and state securities laws and of preparing
and printing prospectuses for such purposes and for distributing the same to
shareholders and investors, and fees and expenses of registering and
maintaining registrations of the Fund and of the Fund's principal underwriter,
if any, as broker-dealer or agent under state securities laws, (ix) expenses
of reports and notices to shareholders and of meetings of shareholders and
proxy solicitations therefor, (x) expenses of reports to governmental officers
and commissions, (xi) insurance expenses, (xii) association membership dues,
(xiii) fees, expenses and disbursements of custodians and subcustodians for
all services to the Fund (including without limitation safekeeping of funds,
securities and other investments, keeping of books and accounts and
determination of net asset values), (xiv) fees, expenses and disbursements of
transfer agents, dividend disbursing agents, shareholder servicing agents and
registrars for all services to the Fund, (xv) expenses for servicing
shareholder accounts, (xvi) any direct charges to shareholders approved by the
Trustees of the Trust, (xvii) compensation and expenses of Trustees of the
Trust who are not members of the Eaton Vance organization, and (xviii) such
non-recurring items as may arise, including expenses incurred in connection
with any litigation, proceedings and claims and the obligation of the Trust to
indemnify its Trustees and officers with respect thereto, to the extent not
covered by insurance.
BMR is a wholly-owned subsidiary of Eaton Vance. Eaton Vance and EV are
both wholly-owned subsidiaries of EVC. BMR and Eaton Vance are both
Massachusetts business trusts, and EV is the trustee of BMR and Eaton Vance.
The Directors of EV are Landon T. Clay, H. Day Brigham, Jr., M. Dozier
Gardner, James B. Hawkes and Benjamin A. Rowland, Jr. The Directors of EVC
consist of the same persons and John G. L. Cabot and Ralph Z. Sorenson. Mr.
Clay is chairman and Mr. Hawkes is president and chief executive officer of
EVC, BMR, Eaton Vance and EV. All of the issued and outstanding shares of
Eaton Vance and EV are owned by EVC. All of the issued and outstanding shares
of BMR are owned by Eaton Vance. All shares of the outstanding Voting Common
Stock of EVC are deposited in a Voting Trust, which expires on December 31,
1996, the Voting Trustees of which are Messrs. Clay, Brigham, Gardner, Hawkes
and Rowland. The Voting Trustees have unrestricted voting rights for the
election of Directors of EVC. All of the outstanding voting trust receipts
issued under said Voting Trust are owned by certain of the officers of BMR and
Eaton Vance who are also officers and Directors of EVC and EV. As of October
31, 1996, Messrs. Clay, Gardner and Hawkes each owned 24% of such voting trust
receipts, and Messrs. Rowland and Brigham owned 15% and 13%, respectively, of
such voting trust receipts. Messrs. Hawkes and Otis are officers or Trustees
of the Trust and the Portfolio and are members of the EVC, BMR, Eaton Vance
and EV organizations. Messrs. Fetter, MacIntosh, Murphy, O'Connor and Woodbury
and Ms. Sanders are officers of the Trust and/or the Portfolio and are also
members of the BMR, Eaton Vance and EV organizations. BMR will receive the
fees paid under the Investment Advisory Agreement.
EVC owns all of the stock of Energex Energy Corporation, which engages in
oil and gas exploration and development. In addition, Eaton Vance owns all of
the stock of Northeast Properties, Inc., which is engaged in real estate
investment. EVC owns all of the stock of Fulcrum Management, Inc. and MinVen
Inc., which are engaged in precious metal mining venture investment and
management. EVC also owns 24% of the Class A shares of Lloyd George Management
(B.V.I.) Limited, a registered investment adviser. EVC, BMR, Eaton Vance and
EV may also enter into other businesses.
EVC and its affiliates and their officers and employees from time to time
have transactions with various banks, including the custodian of the Fund and
the Portfolio, IBT. It is Eaton Vance's opinion that the terms and conditions
of such transactions were not and will not be influenced by existing or
potential custodial or other relationships between the Fund or the Portfolio
and such banks.
CUSTODIAN
IBT, 89 South Street, Boston, Massachusetts, acts as custodian for the
Fund and the Portfolio. IBT has the custody of all cash and securities
representing the Fund's interest in the Portfolio, has custody of all the
Portfolio's assets, maintains the general ledger of the Portfolio and the
Fund, and computes the daily net asset value of interests in the Portfolio and
the net asset value of shares of the Fund. In such capacity it attends to
details in connection with the sale, exchange, substitution, transfer or other
dealings with the Portfolio's investments, receives and disburses all funds
and performs various other ministerial duties upon receipt of proper
instructions from the Fund and the Portfolio. IBT charges fees which are
competitive within the industry. A portion of the fee relates to custody,
bookkeeping and valuation services and is based upon a percentage of Fund and
Portfolio net assets and a portion of the fee relates to activity charges,
primarily the number of portfolio transactions. These fees are then reduced by
a credit for cash balances of the particular investment company at the
custodian equal to 75% of the 91-day, U.S. Treasury Bill auction rate applied
to the particular investment company's average daily collected balances for
the week. Landon T. Clay, a Director of EVC and an officer, Trustee or
Director of other entities in the Eaton Vance organization, owns approximately
13% of the voting stock of Investors Financial Services Corp., the holding
company parent of IBT. Management believes that such ownership does not create
an affiliated person relationship between the Fund or the Portfolio and IBT
under the 1940 Act.
IBT also provides services in connection with the preparation of
shareholder reports and the electronic filing of such reports with the
Commission, for which it receives a separate fee.
SERVICE FOR WITHDRAWAL
The Transfer Agent will send to the shareholder regular monthly or
quarterly payments of any permitted amount designated by the shareholder (see
"Eaton Vance Shareholder Services -- Withdrawal Plan" in the Fund's current
Prospectus) based upon the value of the shares held. The checks will be drawn
from share redemptions and hence, are a return of principal. Income dividends
and capital gains distributions in connection with withdrawal accounts will be
credited at net asset value as of the record date for each distribution.
Continued withdrawals in excess of current income will eventually use up
principal, particularly in a period of declining market prices. A shareholder
may not have a withdrawal plan in effect at the same time he or she has
authorized Bank Automated Investing or is otherwise making regular purchases
of Fund shares. The shareholder, the Transfer Agent or the Principal
Underwriter will be able to terminate the withdrawal plan at any time without
penalty.
DETERMINATION OF NET ASSET VALUE
The net asset value of the shares of the Fund is determined by IBT (as
agent and custodian for the Fund) in the manner described under "Valuing Fund
Shares" in the Fund's current Prospectus. The net asset value of the Portfolio
is also computed by IBT (as agent and custodian for the Portfolio) by
subtracting the liabilities of the Portfolio from the value of its total
assets. Inasmuch as the market for municipal obligations is a dealer market
with no central trading location or continuous quotation system, it is not
feasible to obtain last transaction prices for most municipal obligations held
by the Portfolio, and such obligations, including those purchased on a when-
issued basis, will normally be valued on the basis of valuations furnished by
a pricing service. The pricing services uses information with respect to
transactions in bonds, quotations from bond dealers, market transactions in
comparable securities, various relationships between securities, and yield to
maturity in determining value. Taxable obligations for which price quotations
are readily available normally will be valued at the mean between the latest
available bid and asked prices. Open futures positions on debt securities are
valued at the most recent settlement prices, unless such price does not
reflect the fair value of the contract, in which case the positions will be
valued by or at the direction of the Trustees of the Portfolio. Other assets
are valued at fair value using methods determined in good faith by or at the
direction of the Trustees of the Portfolio. The Fund and the Portfolio will be
closed for business and will not price their respective shares or interests on
the following business holidays: New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Each investor in the Portfolio, including the Fund, may add to or reduce
its investment in the Portfolio on each day the Exchange is open for trading
("Portfolio Business Day") as of the close of regular trading on the Exchange
(the "Portfolio Valuation Time"). The value of each investor's interest in the
Portfolio will be determined by multiplying the net asset value of the
Portfolio by the percentage, determined on the prior Portfolio Business Day,
which represented that investor's share of the aggregate interests in the
Portfolio on such prior day. Any additions or withdrawals for the current
Portfolio Business Day will then be recorded. Each investor's percentage of
the aggregate interest in the Portfolio will then be recomputed as a
percentage equal to a fraction (i) the numerator of which is the value of such
investor's investment in the Portfolio as of the Portfolio Valuation Time on
the prior Portfolio Business Day plus or minus, as the case may be, the amount
of any additions to or withdrawals from the investor's investment in the
Portfolio on the current Portfolio Business Day and (ii) the denominator of
which is the aggregate net asset value of the Portfolio as of the Portfolio
Valuation Time on the prior Portfolio Business Day plus or minus, as the case
may be, the amount of the net additions to or withdrawals from the aggregate
investment in the Portfolio on the current Portfolio Business Day by all
investors in the Portfolio. The percentage so determined will then be applied
to determine the value of the investor's interest in the Portfolio for the
current Portfolio Business Day.
INVESTMENT PERFORMANCE
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 distributions paid and
reinvested) for the stated period and annualizing the result. The calculation
assumes that all distributions are reinvested at net asset value on the
reinvestment dates during the period, and either (i) the deduction of the
maximum sales charge from the initial $1,000 purchase order or (ii) a complete
redemption of the investment and, if applicable, the deduction of the CDSC at
the end of the period. For further information concerning the total return of
the Fund, see "Performance Information" in the Fund's Part II.
Yield is computed pursuant to a standardized formula by dividing the net
investment income per share earned during a recent thirty-day period by the
maximum offering price (including, if applicable, the maximum sales charge) per
share on the last day of the period and annualizing the resulting figure. Net
investment income per share is calculated from the yields to maturity of all
debt obligations held by the Portfolio based on prescribed methods, reduced by
accrued Fund expenses for the period with the resulting number being divided by
the average daily number of Fund shares outstanding and entitled to receive
distributions during the period. The yield figure does not reflect the deduction
of any CDSC which (if applicable) are imposed on certain redemptions at the rate
set forth under "How to Redeem Fund Shares" in the Fund's current Prospectus.
Yield calculations assume the current maximum sales charge (if applicable) set
forth under "How to Buy Fund Shares" in the Fund's current Prospectus. (Actual
yield may be affected by variations in sales charges on investments.) A
taxable-equivalent yield is computed by dividing the tax-exempt yield by 1 minus
a stated rate. For the yield and taxable- equivalent yield of the Fund, see
"Performance Information" in the Fund's Part II.
The Principal Underwriter may publish to Authorized Firms the Fund's
distribution rate and/or the effective distribution rate. The Fund's
distribution rate is computed by dividing the most recent monthly distribution
per share annualized, by the current net asset value per share or, where
applicable, the maximum public offering price per share (which includes the
maximum initial sales charge). The Fund's effective distribution rate is
computed by dividing the distribution rate by the ratio (the days in a year
divided by the accrual days of the monthly period) used to annualize the most
recent monthly distribution and reinvesting the resulting amount for a full
year on the basis of such ratio. The effective distribution rate will be
higher than the distribution rate because of the compounding effect of the
assumed reinvestment. Investor's should note that the Fund's yield is
calculated using a standardized formula, the income component of which is
computed from the yields to maturity of all debt obligations held by the
Portfolio based on prescribed methods (with all purchases and sales of
securities during such period included in the income calculation on a
settlement date basis), whereas the distribution rate is based on the Fund's
last monthly distribution which tends to be relatively stable and may be more
or less than the amount of net investment income and short-term capital gain
actually earned by the Fund during the month.
The Fund's total return may be compared to relevant indices, such as the
Consumer Price Index, the Bond Buyer 25 Revenue Bond Index and the Lehman
Brothers Municipal Bond Index, which may be used in advertisements and in
information furnished to present or prospective shareholders. The Fund's
performance may differ from that of other investors in the Portfolio,
including other investment companies.
The Fund may provide investors with information on municipal bond
investing, which may include comparative performance information, evaluations
of Fund performance, charts and/or illustrations prepared by independent
sources (such as Lipper Analytical Services Inc., CDA/Wiesenberger,
Morningstar, Inc., The Bond Buyer, the Federal Reserve Board or The Wall
Street Journal). The Fund may also refer in investor publications to Tax
Freedom Day, as computed by the Tax Foundation, Washington, DC 20005, to help
illustrate the value of tax free investing, as well as other tax-related
information. Information, charts and illustrations showing the effects of
inflation and taxes (including their effects on the dollar and the return on
various investments) and compounding earnings may also be included in
advertisements and materials furnished to present and prospective investors.
Information about portfolio allocation and holdings of the Portfolio at a
particular date (including ratings assigned by independent ratings services
such as Moody's, S&P and Fitch) may be included in advertisements and other
material furnished to present and prospective shareholders. Such information
may be stated as a percentage of the Portfolio's bond holdings on such date.
Comparative information about the yield or distribution rate of the Fund
and about average rates of return on certificates of deposit, bank money
market deposit accounts, money market mutual funds and other short-term
investments may also be included in advertisements, supplemental sales
literature or communications of the Fund. Such information may also compare
the taxable equivalent yield (or value) of the Fund to the after-tax yield (or
value) of such other investment vehicles. Such information may be in the form
of hypothetical illustrations. A bank certificate of deposit, unlike the
Fund's shares, pays a fixed rate of interest and entitles the depositor to
receive the face amount of the certificate of deposit at maturity. A bank
money market deposit account is a form of savings account which pays a
variable rate of interest. Unlike the Fund's shares, bank certificates of
deposit and bank money market deposit accounts are insured by the Federal
Deposit Insurance Corporation. A money market mutual fund is designed to
maintain a constant value of $1.00 per share and, thus, a money market fund's
shares are subject to less price fluctuation than the Fund's shares.
The average rates of return of money market mutual funds, certificates of
deposit and bank money market deposit accounts referred to in advertisements,
supplemental sales literature or communications of the Fund will be based on
rates published by the Federal Reserve Bank, Donoghues Money Fund Averages,
RateGram or The Wall Street Journal.
Information used in advertisements and materials furnished to present and
prospective investors may include statements or illustrations relating to the
appropriateness of certain types of securities and/or mutual funds to meet
specific financial goals. Such Information may address:
- cost associated with aging parents;
- funding a college education (inclusing its actual and estimated cost);
- health care expenses (including actual and projected expenses);
- long-term disabilities (including the availability of, and coverage
provided by, disability insurance); and
- retirement (including the availability of social security benefits,
the tax treatment of such benefits and statistics and other
information relating to maintaining a particular standard of living
and outliving existing assets).
Such information may also address different methods for saving money and
the results of such methods, as well as the benefits of investing in municipal
bond funds. Such information may describe: The following advantages of
investing in a municipal bond mutual fund versus individual municipal bonds:
regular monthly income; free reinvestment of distributions; potential for
increased income; bond diversification; liquidity; low-cost easy access; and
active management and in depth credit analysis by investment professionals. In
addition, by investing in a municipal bond fund instead of individual bonds,
an investor can avoid dealing with the complexities of the municipal bond
market, while benefitting from the market access and lower transactions costs
enjoyed by municipal bond funds.
The Fund may provide information about Eaton Vance, its affiliates and
other investment advisers to the funds in the Eaton Vance Family of Funds in
sales material or advertisements provided to investors or prospective
investors. Such material or advertisements may also provide information on the
use of investment professionsals by such investors.
TAXES
See "Distribution and Taxes" in the Fund's current Prospectus.
Each series of the Trust is treated as a separate entity for federal
income tax purposes. The Fund has elected or will elect to be treated and
intends to qualify each year, as a regulated investment company ("RIC") under
the Code. Accordingly, the Fund intends to satisfy certain requirements
relating to sources of its income and diversification of its assets. For
purposes of applying the requirements of the Code regarding qualification as a
RIC, the Fund will be deemed (i) to own its proportionate share of each of the
assets of the Portfolio and (ii) to be entitled to the gross income of the
Portfolio attributable to such share. The Portfolio therefore intends to
satisfy the source of income and diversification requirements applicable to
RICs in order for the Fund to satisfy them.
In addition, the Portfolio will allocate at least annually among its
investors, including the Fund, the Portfolio's net taxable (if any) and tax-
exempt investment income, net realized capital gains, and any other items of
income, gain, loss, deduction or credit. In order to qualify for the special
tax treatment accorded RICs and their shareholders, the Fund intends to
distribute the investment income (including tax-exempt income and the excess,
if any, of net short-term capital gains over net long-term capital losses)
allocated to the Fund by the Portfolio, in accordance with certain timing and
percentage requirements imposed by the Code. If these requirements are met,
the Fund will not be subject to any federal income tax on income or gain paid
to shareholders in the form of dividends (including capital gain dividends).
If the Fund failed to qualify as a RIC accorded special tax treatment in
any taxable year, the Fund would be subject to tax on its taxable income at
corporate rates, and all distributions from earnings and profits, including
any distributions of net tax-exempt income and net long-term capital gains,
would be taxable to shareholders as ordinary income. In addition, the Fund
could be required to recognize unrealized gains, pay substantial taxes and
interest and make substantial distributions before requalifying as a RIC that
is accorded special tax treatment.
If the Fund fails to distribute (or to be deemed to have distributed) in
each calendar year at least 98% of its ordinary income (not including tax-
exempt income) for such year, at least 98% of the excess of its realized
capital gains over its realized capital losses (generally computed on the
basis of the one-year period ending on October 31 of such year) after
reduction by any available capital loss carryforwards, and 100% of any
undistributed income (on which the Fund paid no federal income tax) from the
prior year, the Fund will be subject to a 4% excise tax on the undistributed
amounts. A dividend paid to shareholders by the Fund in January of a year
generally is deemed to have been paid by the Fund on December 31 of the
preceding year, if the dividend was declared and payable to shareholders of
record on a date in October, November or December of that preceding year. The
Fund intends generally to make distributions sufficient to avoid imposition of
the 4% excise tax.
Under current law, provided that the Fund qualifies as a RIC for federal
income tax purposes and the Portfolio is treated as a partnership for
Massachusetts and federal tax purposes, neither the Fund nor the Portfolio is
liable for any income, corporate excise or franchise tax in the Commonwealth
of Massachusetts.
The Portfolio's investment in zero coupon and certain other securities
will cause it to realize income prior to the receipt of cash payments with
respect to these securities. In order to generate sufficient cash to enable
the Fund to distribute its proportionate share of this income, the Portfolio
may be required to liquidate portfolio securities that it might otherwise have
continued to hold.
The Portfolio's transactions in options and futures contracts will be
subject to special tax rules that may affect the amount, timing and character
of Fund distributions to shareholders. For example, certain positions held by
the Portfolio on the last business day of each taxable year will be marked to
market (i.e., treated as if closed out on such day), and any resulting gain or
loss will generally be treated as 60% long-term and 40% short-term capital
gain or loss. Certain positions held by the Portfolio that substantially
diminish the Portfolio's risk of loss with respect to other positions in its
portfolio may constitute "straddles," which are subject to tax rules that may
cause deferral of Portfolio losses, adjustments in the holding periods of
Portfolio securities and conversion of short-term into long-term capital
losses. The Portfolio may have to limit its engagement in such activities in
order to enable the Fund to maintain its qualification as a RIC for federal
income tax purposes.
Distributions designated as "exempt-interest dividends" may be treated by
shareholders as interest excludable from gross income under Section 103(a) of
the Code. In order for the Fund to be entitled to pay exempt-interest
dividends to its shareholders, at least 50% of the value of its total assets
at the close of each quarter of its taxable year must consist of obligations
the interest on which is exempt from regular federal income tax under Code
Section 103(a). Because the Fund will be deemed to own its proportionate
share of each of the assets of the Portfolio, the Portfolio currently intends
to invest its assets in a manner such that the Fund can meet this 50%
requirement.
Part or all of the interest on indebtedness, if any, incurred or continued
by a shareholder to purchase or carry shares of a Fund paying exempt-interest
dividends is not deductible. The portion of interest that is not deductible
is equal to the total interest paid or accrued on the indebtedness, multiplied
by the percentage of the Fund's total distributions (not including
distributions from net long-term capital gains) paid to the shareholder that
are exempt-interest dividends. Under rules used by the Internal Revenue
Service for determining when borrowed funds are considered used for the
purpose of purchasing or carrying particular assets, the purchase of shares
may be considered to have been made with borrowed funds even though such funds
are not directly traceable to the purchase of shares.
In general, exempt-interest dividends, if any, attributable to interest
received on certain private activity obligations and certain industrial
development bonds will not be tax-exempt to any shareholders who are
"substantial users" of the facilities financed by such obligations or bonds or
who are "related persons" of such substantial users.
The Fund will inform investors of the percentage of its income
distributions designated as tax-exempt. The percentage is applied uniformly
to all distributions made during the year. The percentage of income
designated as tax-exempt for any particular distribution may be substantially
different from the percentage of the Fund's income that was tax-exempt during
the period covered by the distribution.
In the course of managing its investments, the Portfolio may realize some
short-term and long-term capital gains (and/or losses) as a result of market
transactions, including sales of portfolio securities and rights to when-
issued securities and options and futures transactions. Any distributions by
the Fund of its share of such capital gains (after reduction by any capital
loss carryforwards) or taxable income would be taxable to shareholders of the
Fund. The Portfolio may also realize taxable income from certain short-term
taxable obligations, securities loans, a portion of discount with respect to
certain stripped municipal obligations or their stripped coupons, and certain
realized gains or income attributable to accrued market discount. However, it
is expected that such amounts, if any, would normally be insubstantial in
relation to the tax-exempt interest earned by the Portfolio and allocated to
the Fund.
The sale, exchange or redemption of Fund shares may give rise to a gain or
loss. In general, any gain or loss realized upon a taxable disposition of
shares will be treated as long-term capital gain or loss if the shares have
been held for more than 12 months, and otherwise as short-term capital gain or
loss. However, if a shareholder sells shares at a loss within six months of
purchase, any loss will be disallowed for federal income tax purposes to the
extent of any exempt-interest dividends received on such shares. In addition,
any loss (not already disallowed as provided in the preceding sentence)
realized upon a taxable disposition of shares held for six months or less will
be treated as long-term, rather than short-term, to the extent of any long-
term capital gain distributions received by the shareholder with respect to
the shares. All or a portion of any loss realized upon a taxable disposition
of Fund shares will be disallowed if other Fund shares are purchased within 30
days before or after the disposition. In such a case, the basis of the newly
purchased shares will be adjusted to reflect the disallowed loss.
If the Fund makes a distribution to shareholders in excess of its current
and accumulated "earnings and profits" in any taxable year, the excess
distribution will be treated as a return of capital to each shareholder to the
extent of that shareholder's tax basis in the shares, and thereafter as
capital gains. A return of capital is not taxable, but it reduces the tax
basis in the shares, thus reducing any loss or increasing any gain on a
subsequent taxable disposition of such shares.
Amounts paid by the Fund to individuals and certain other shareholders who
have not provided the Fund with their correct taxpayer identification number
and certain certifications required by the Internal Revenue Service (the
"IRS"), as well as shareholders with respect to whom the Fund has received
notification from the IRS or a broker, may be subject to "backup" withholding
of federal income tax from the Fund's taxable dividends and distributions and
the proceeds of redemptions (including repurchases and exchanges), at a rate
of 31%. An individual's taxpayer identification number is generally his or her
social security number.
Non-resident alien individuals, foreign corporations and certain other
foreign entities generally will be subject to a U.S. withholding tax at a rate
of 30% on the Fund's distributions from its ordinary income and the excess of
its net short-term capital gain over its net long-term capital loss, unless
the tax is reduced or eliminated by an applicable tax treaty. Distributions
from the excess of the Fund's net long-term capital gain over its net short-
term capital loss received by such shareholders and any gain from the sale or
other disposition of shares of the Fund generally will not be subject to U.S.
federal income taxation, provided that non-resident alien status has been
certified by the shareholder. Different U.S. tax consequences may result if
the shareholder is engaged in a trade or business in the United States, is
present in the United States for a sufficient period of time during a taxable
year to be treated as a U.S. resident, or fails to provide any required
certifications regarding status as a non-resident alien investor. Foreign
shareholders should consult their tax advisers regarding the U.S. and foreign
tax consequences of an investment in the Fund.
The foregoing discussion does not address the special tax rules applicable
to certain classes of investors, such as tax-exempt entities, insurance
companies and financial institutions. Shareholders should consult their own
tax advisers with respect to special tax rules that may apply in their
particular situations, as well as the state, local or foreign tax consequences
of investing in the Fund.
PORTFOLIO SECURITY TRANSACTIONS
Decisions concerning the execution of portfolio security transactions,
including the selection of the market and the executing firm, are made by BMR.
BMR is also responsible for the execution of transactions for all other
accounts managed by it.
BMR places the portfolio security transactions of the Portfolio and of all
other accounts managed by it for execution with many firms. BMR uses its best
efforts to obtain execution of portfolio security transactions at prices which
are advantageous to the Portfolio and at reasonably competitive spreads or
(when a disclosed commission is being charged) at reasonably competitive
commission rates. In seeking such execution, BMR will use its best judgment in
evaluating the terms of a transaction, and will give consideration to various
relevant factors, including without limitation the size and type of the
transaction, the nature and character of the market for the security, the
confidentiality, speed and certainty of effective execution required for the
transaction, the general execution and operational capabilities of the
executing firm, the reputation, reliability, experience and financial
condition of the firm, the value and quality of the services rendered by the
firm in this and other transactions, and the reasonableness of the spread or
commission, if any. Municipal obligations, including State obligations,
purchased and sold by the Portfolio are generally traded in the over-the-
counter market on a net basis (i.e., without commission) through broker-
dealers and banks acting for their own account rather than as brokers, or
otherwise involve transactions directly with the issuer of such obligations.
Such firms attempt to profit from such transactions by buying at the bid price
and selling at the higher asked price of the market for such obligations, and
the difference between the bid and asked price is customarily referred to as
the spread. The Portfolio may also purchase municipal obligations from
underwriters, the cost of which may include undisclosed fees and concessions
to the underwriters. While it is anticipated that the Portfolio will not pay
significant brokerage commissions in connection with such portfolio security
transactions, on occasion it may be necessary or appropriate to purchase or
sell a security through a broker on an agency basis, in which case the
Portfolio will incur a brokerage commission. Although spreads or commissions
on portfolio security transactions will, in the judgment of BMR, be reasonable
in relation to the value of the services provided, spreads or commissions
exceeding those which another firm might charge may be paid to firms who were
selected to execute transactions on behalf of the Portfolio and BMR's other
clients for providing brokerage and research services to BMR.
As authorized in Section 28(e) of the Securities Exchange Act of 1934, a
broker or dealer who executes a portfolio transaction on behalf of the
Portfolio may receive a commission which is in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction if BMR determines in good faith that such commission was
reasonable in relation to the value of the brokerage and research services
provided. This determination may be made either on the basis of that
particular transaction or on the basis of overall responsibilities which BMR
and its affiliates have for accounts over which they exercise investment
discretion. In making any such determination, BMR will not attempt to place a
specific dollar value on the brokerage and research services provided or to
determine what portion of the commission should be related to such services.
Brokerage and research services may include advice as to the value of
securities, the advisability of investing in, purchasing, or selling
securities, and the availability of securities or purchasers or sellers of
securities; furnishing analyses and reports concerning issuers, industries,
securities, economic factors and trends, portfolio strategy and the
performance of accounts; effecting securities transactions and performing
functions incidental thereto (such as clearance and settlement); and the
"Research Services" referred to in the next paragraph.
It is a common practice of the investment advisory industry and of the
advisers of investment companies, institutions and other investors to receive
research, statistical and quotation services, data, information and other
services, products and materials which assist such advisers in the performance
of their investment responsibilities ("Research Services") from broker-dealer
firms which execute portfolio transactions for the clients of such advisers
and from third parties with which such broker-dealers have arrangements.
Consistent with this practice, BMR receives Research Services from many
broker-dealer firms with which BMR places the Portfolio transactions and from
third parties with which these broker-dealers have arrangements. These
Research Services include such matters as general economic and market reviews,
industry and company reviews, evaluations of securities and portfolio
strategies and transactions and recommendations as to the purchase and sale of
securities and other portfolio transactions, financial, industry and trade
publications, news and information services, pricing and quotation equipment
and services, and research oriented computer hardware, software, data bases
and services. Any particular Research Service obtained through a broker-dealer
may be used by BMR in connection with client accounts other than those
accounts which pay commissions to such broker-dealer. Any such Research
Service may be broadly useful and of value to BMR in rendering investment
advisory services to all or a significant portion of its clients, or may be
relevant and useful for the management of only one client's account or of a
few clients' accounts, or may be useful for the management of merely a segment
of certain clients' accounts, regardless of whether any such account or
accounts paid commissions to the broker-dealer through which such Research
Service was obtained. The advisory fee paid by the Portfolio is not reduced
because BMR receives such Research Services. BMR evaluates the nature and
quality of the various Research Services obtained through broker-dealer firms
and attempts to allocate sufficient commissions to such firms to ensure the
continued receipt of Research Services which BMR believes are useful or of
value to it in rendering investment advisory services to its clients.
Subject to the requirement that BMR shall use its best efforts to seek and
execute portfolio security transactions at advantageous prices and at
reasonably competitive spreads or commission rates, BMR is authorized to
consider as a factor in the selection of any broker-dealer firm with whom
portfolio orders may be placed the fact that such firm has sold or is selling
shares of the Fund or of other investment companies sponsored by BMR or Eaton
Vance. This policy is not inconsistent with a rule of the National Association
of Securities Dealers, Inc., (the "NASD") which rule provides that no firm
which is a member of the NASD shall favor or disfavor the distribution of
shares of any particular investment company or group of investment companies
on the basis of brokerage commissions received or expected by such firm from
any source.
Municipal obligations considered as investments for the Portfolio may also
be appropriate for other investment accounts managed by BMR or its affiliates.
BMR will attempt to allocate in a manner it deems equitable portfolio security
transactions among the Portfolio and the portfolios of its other investment
accounts whenever decisions are made to purchase or sell securities by the
Portfolio and one or more of such other accounts simultaneously. In making
such allocations, the main factors to be considered are the respective
investment objectives of the Portfolio and such other accounts, the relative
size of portfolio holdings of the same or comparable securities, the
availability of cash for investment by the Portfolio and such accounts, the
size of investment commitments generally held by the Portfolio and such
accounts and the opinions of the persons responsible for recommending
investments to the Portfolio and such accounts. However, there may be
instances when the Portfolio will not participate in a securities transaction
that is allocated among other accounts. While these procedures could have a
detrimental effect on the price or amount of the securities available to the
Portfolio from time to time, it is the opinion of the Trustees of the Trust
and the Portfolio that the benefits available from the BMR organization
outweigh any disadvantage that may arise from exposure to simultaneous
transactions. For the brokerage commissions paid by the Portfolio on portfolio
transactions, see "Fees and Expenses" in the Fund's Part II.
OTHER INFORMATION
Eaton Vance, pursuant to its agreement with the Trust, controls the use of
the words "Eaton Vance" and "EV" in the Fund's name and may use the words
"Eaton Vance" or "EV" in other connections and for other purposes.
As permitted by Massachusetts law, there will normally be no meetings of
shareholders for the purpose of electing Trustees unless and until such time
as less than a majority of the Trustees of the Trust holding office have been
elected by shareholders. In such an event, the Trustees then in office will
call a shareholders' meeting for the election of Trustees. Except for the
foregoing circumstances and unless removed by action of the shareholders in
accordance with the Trust's by-laws, the Trustees shall continue to hold
office and may appoint successor Trustees.
The Trust's by-laws provide that no person shall serve as a Trustee if
shareholders holding two-thirds of the outstanding shares have removed him
from that office either by a written declaration filed with the Trust's
custodian or by votes cast at a meeting called for that purpose. The by-laws
further provide that under certain circumstances the shareholders may call a
meeting to remove a Trustee and that the Trust is required to provide
assistance in communication with shareholders about such a meeting.
The Trust's Declaration of Trust may be amended by the Trustees when
authorized by vote of a majority of the outstanding voting securities of the
Trust, the financial interests of which are affected by the amendment. The
Trustees may also amend the Declaration of Trust without the vote or consent
of shareholders to change the name of the Trust or any series or to make such
other changes as do not have a materially adverse effect on the financial
interests of shareholders or if they deem it necessary to conform it to
applicable federal or state laws or regulations. The Trust or any series or
class thereof may be terminated by: (1) the affirmative vote of the holders of
not less than two-thirds of the shares outstanding and entitled to vote at any
meeting of shareholders of the Trust or the appropriate series or class
thereof, or by an instrument or instruments in writing without a meeting,
consented to by the holders of two-thirds of the shares of the Trust or a
series or class thereof, provided, however, that, if such termination is
recommended by the Trustees, the vote of a majority of the outstanding voting
securities of the Trust or a series or class thereof entitled to vote thereon
shall be sufficient authorization; or (2) by means of an instrument in writing
signed by a majority of the Trustees, to be followed by a written notice to
shareholders stating that a majority of the Trustees has determined that the
continuation of the Trust or a series or a class thereof is not in the best
interest of the Trust, such series or class or of their respective
shareholders.
The Declaration of Trust further provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law; but nothing in the
Declaration of Trust protects a Trustee against any liability to which he
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
office.
In accordance with the Declaration of Trust of the Portfolio, there will
normally be no meetings of the investors for the purpose of electing Trustees
unless and until such time as less than a majority of the Trustees holding
office have been elected by investors. In such an event the Trustees of the
Portfolio then in office will call an investors' meeting for the election of
Trustees. Except for the foregoing circumstances and unless removed by action
of the investors in accordance with the Portfolio's Declaration of Trust, the
Trustees shall continue to hold office and may appoint successor Trustees.
The Declaration of Trust of the Portfolio provides that no person shall
serve as a Trustee if investors holding two-thirds of the outstanding interest
have removed him from that office either by a written declaration filed with
the Portfolio's custodian or by votes cast at a meeting called for that
purpose. The Declaration of Trust further provides that under certain
circumstances the investors may call a meeting to remove a Trustee and that
the Portfolio is required to provide assistance in communicating with
investors about such a meeting.
The Portfolio's Declaration of Trust 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.
The right to redeem shares of the Fund can be suspended and the payment of
the redemption price deferred when the Exchange is closed (other than for
customary weekend and holiday closings), during periods when trading on the
Exchange is restricted as determined by the Commission, or during any
emergency as determined by the Commission which makes it impracticable for the
Portfolio to dispose of its securities or value its assets, or during any
other period permitted by order of the Commission for the protection of
investors.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Deloitte & Touche LLP, 125 Summer Street, Boston, Massachusetts, are the
independent certified public accountants of the Fund and the Portfolio,
providing audit services, tax return preparation, and assistance and
consultation with respect to the preparation of filings with the Commission.
FINANCIAL STATEMENTS
The financial statements of the Fund and the Portfolio, which are included
in the Fund's annual report to shareholders, are incorporated by reference
into this SAI and have been so incorporated in reliance on the report of
Deloitte & Touche LLP, independent certified public accountants, as experts in
accounting and auditing. A copy of the Fund's most recent annual report
accompanies this SAI. Such statements relate to Class A shares only.
Registrant incorporates by reference the audited financial information for
the Fund and the Portfolio for the fiscal year ended January 31, 1996
(Accession No. 0000928816-96-000074) and the unaudited financial information
for the Fund and the Portfolio for the six months ended July 31, 1996
(Accession No. 0000928816-96-000295), as previously filed with the Commission.
<PAGE>
APPENDIX
DESCRIPTION OF SECURITIES RATINGS+
MOODY'S INVESTORS SERVICE, INC.
MUNICIPAL BONDS
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long term risk appear somewhat larger than the Aaa
securities.
A: Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper-medium-grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may
be present which suggest a susceptibility to impairment sometime in the
future.
Baa: Bonds which are rated Baa are considered as medium-grade obligations
(i.e., they are neither highly protected nor poorly secured). Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during other good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
or interest.
Ca: Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
ABSENCE OF RATING: Where no rating has been assigned or where a rating has
been suspended or withdrawn, it may be for reasons unrelated to the quality of
the issue.
Should no rating be assigned, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities or companies that
are not rated as a matter of policy.
3. There is a lack of essential data pertaining to the issue or issuer.
4. The issue was privately placed, in which case the rating is not
published in Moody's publications.
Suspension or withdrawal may occur if new and material circumstances arise,
the effects of which preclude satisfactory analysis; if there is no longer
available reasonable up-to-date data to permit a judgment to be formed; if a
bond is called for redemption; or for other reasons.
- -----------------------------------------------------------------------------
+ The ratings indicated herein are believed to be the most recent ratings
available at the date of this SAI for the securities listed. Ratings are
generally given to securities at the time of issuance. While the rating
agencies may from time to time revise such ratings, they undertake no
obligation to do so, and the ratings indicated do not necessarily represent
ratings which would be given to these securities on the date of the
Portfolio's fiscal year end.
NOTE: Moody's applies numerical modifiers, 1, 2, and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the
modifier 3 indicates that the issue ranks in the lower end of its generic
rating category.
MUNICIPAL SHORT-TERM OBLIGATIONS
RATINGS: Moody's ratings for state and municipal short-term obligations will
be designated Moody's Investment Grade or (MIG). Such rating recognizes the
differences between short term credit risk and long term risk. Factors
effecting the liquidity of the borrower and short term cyclical elements are
critical in short term ratings, while other factors of major importance in
bond risk, long term secular trends for example, may be less important over
the short run.
A short term rating may also be assigned on an issue having a demand feature,
variable rate demand obligation (VRDO). Such ratings will be designated as
VMIG1, SG or if the demand feature is not rated, NR. A short term rating on
issues with demand features are differentiated by the use of the VMIG1 symbol
to reflect such characteristics as payment upon periodic demand rather than
fixed maturity dates and payment relying on external liquidity. Additionally,
investors should be alert to the fact that the source of payment may be
limited to the external liquidity with no or limited legal recourse to the
issuer in the event the demand is not met.
STANDARD & POOR'S RATINGS GROUP
INVESTMENT GRADE
AAA: Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.
A: Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB: Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
SPECULATIVE GRADE
Debt rated BB, B, CCC, CC, and C is regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and repay
principal. BB indicates the least degree of speculation and C the highest.
While such debt will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or major exposures to adverse
conditions.
BB: Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure
to adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB- rating.
B: Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness
to pay interest and repay principal. The B rating category is also used for
debt subordinated to senior debt that is assigned an actual or implied BB or
BB- rating.
CCC: Debt rated CCC has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to
meet timely payment of interest and repayment of principal. In the event of
adverse business, financial, or economic conditions, it is not likely to have
the capacity to pay interest and repay principal. The CCC rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied B or B- rating.
CC: The rating CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC debt rating.
C: The rating C is typically applied to debt subordinated to senior debt which
is assigned an actual or implied CCC- debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed, but debt service
payments are continued.
C1: The Rating C1 is reserved for income bonds on which no interest is being
paid.
D: Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if
the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period. The D rating also will be used
upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
PLUS (+) OR MINUS (-): The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
P: The letter "p" indicates that the rating is provisional. A provisional
rating assumes the successful completion of the project being financed by the
debt being rated and indicates that payment of debt service requirements is
largely or entirely dependent upon the successful and timely completion of the
project. This rating, however, while addressing credit quality subsequent to
completion of the project, makes no comment on the likelihood of, or the risk
of default upon failure of such completion. The investor should exercise his
own judgment with respect to such likelihood and risk.
L: The letter "L" indicates that the rating pertains to the principal amount
of those bonds to the extent that the underlying deposit collateral is insured
by the Federal Deposit Insurance Corp. and interest is adequately
collateralized. In the case of certificates of deposit, the letter "L"
indicates that the deposit, combined with other deposits being held in the
same right and capacity, will be honored for principal and accrued pre-default
interest up to the federal insurance limits within 30 days after closing of
the insured institution or, in the event that the deposit is assumed by a
successor insured institution, upon maturity.
NR: NR indicates no rating has been requested, that there is insufficient
information on which to base a rating, or that S&P does not rate a particular
type of obligation as a matter of policy.
MUNICIPAL NOTES
S&P note ratings reflect the liquidity concerns and market access risks unique
to notes. Notes due in 3 years or less will likely receive a note rating.
Notes maturing beyond 3 years will most likely receive a long-term debt
rating. The following criteria will be used in making that assessment:
-- Amortization schedule (the larger the final maturity relative to other
maturities the more likely it will be treated as a note).
-- Sources of payment (the more dependent the issue is on the market for
its refinancing, the more likely it will be treated as a note).
Note rating symbols are as follows:
SP-1: Strong capacity to pay principal and interest. Those issues
determined to possess very strong characteristics will be given a plus(+)
designation.
SP-2: Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse financial and economic changes over the term of
the notes.
SP-3: Speculative capacity to pay principal and interest.
FITCH INVESTORS SERVICE, INC.
INVESTMENT GRADE BOND RATINGS
AAA: Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events.
AA: Bonds considered to be investment grade and of very high credit quality.
The obligor's ability to pay interest and repay principal is very strong,
although not quite as strong as bonds rated "AAA". Because bonds rated in the
"AAA" and "AA" categories are not significantly vulnerable to foreseeable
future developments, short-term debt of these issuers is generally rated
"F-1+".
A: Bonds considered to be investment grade and of high credit quality. The
obligors ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions
and circumstances than bonds with higher ratings.
BBB: Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these bonds,
and therefore, impair timely payment. The likelihood that the ratings of these
bonds will fall below investment grade is higher than for bonds with higher
ratings.
HIGH YIELD BOND RATINGS
AAA: Bonds are considered speculative. The obligor's ability to pay interest
and repay principal may be affected over time by adverse economic changes.
However, business and financial alternatives can be identified that could
assist the obligor in satisfying its debt service requirements.
B: Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued
timely payment of principal and interest reflects the obligor's limited margin
of safety and the need for reasonable business and economic activity
throughout the life of the issue.
CCC: Bonds have certain identifiable characteristics which, if not remedied,
may lead to default. The ability to meet obligations requires an advantageous
business and economic environment.
CC: Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C: Bonds are in imminent default in payment of interest or principal.
DDD, DD, AND D: Bonds are in default on interest and/or principal payments.
Such bonds are extremely speculative and should be valued on the basis of
their ultimate recovery value in liquidation or reorganization of the obligor.
"DDD" represents the highest potential for recovery on these bonds, and "D"
represents the lowest potential for recovery.
PLUS (+) OR MINUS (-): The ratings from AA to C may be modified by the
addition of a plus or minus sign to indicate the relative position of a credit
within the rating category.
NR: Indicates that Fitch does not rate the specific issue.
CONDITIONAL: A conditional rating is premised on the successful completion of
a project or the occurrence of a specific event.
INVESTMENT GRADE SHORT-TERM RATINGS
Fitch's short-term ratings apply to debt obligations that are payable on
demand or have original maturities of generally up to three years, including
commercial paper, certificates of deposit, medium-term notes, and municipal
and investment notes.
F-1+: Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1: Very Stong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated
"F-1+".
F-2: Good Credit Quality. Issues carrying this rating have a satisfactory
degree of assurance for timely payment, but the margin of safety is not as
great as the "F-1+" and "F-1" categories.
F-3: Fair Credit Quality. Issues carrying this rating have characteristics
suggesting that the degree of assurance for timely payment is adequate,
however, near-term adverse change could cause these securities to be rated
below investment grade.
* * * * * * * *
NOTES: Bonds which are unrated expose the investor to risks with respect to
capacity to pay interest or repay principal which are similar to the risks of
lower-rated speculative bonds. The Portfolio is dependent on the Investment
Adviser's judgment, analysis and experience in the evaluation of such bonds.
Investors should note that the assignment of a rating to a bond by a
rating service may not reflect the effect of recent developments on the
issuer's ability to make interest and principal payments.
<PAGE>
DESCRIPTION OF THE INSURANCE CLAIMS-PAYING
ABILITY RATINGS OF
STANDARD & POOR'S CORPORATION AND
MOODY'S INVESTORS SERVICE, INC.
An S&P insurance claims-paying ability rating is an assessment of an
operating insurance company's financial capacity to meet obligations under an
insurance policy in accordance with the terms. An insurer with an insurance
claims-paying ability of AAA has the highest rating assigned by S&P. Capacity
to honor insurance contracts is adjudged by S&P to be extremely strong and
highly likely to remain so over a long period of time. A Moody's insurance
claims-paying ability rating is an opinion of the ability of an insurance
company to repay punctually senior policyholder obligations and claims. An
insurer with an insurance claims-paying ability rating of Aaa is adjudged by
Moody's to be of the best quality. In the opinion of Moody's, the policy
obligations of an insurance company with an insurance claims-paying ability
rating of Aaa carry the smallest degree of credit risk and, while the
financial strength of these companies is likely to change, such changes as can
be visualized are most unlikely to impair the company's fundamentally strong
position.
An insurance claims-paying ability rating by S&P's or Moody's does not
constitute an opinion on any specific contract in that such an opinion can
only be rendered upon the review of the specific insurance contract.
Furthermore, an insurance claims-paying ability rating does not take in
account deductibles, surrender or cancellation penalties or the timeliness of
payment; nor does it address the ability of a company to meet nonpolicy
obligations (i.e., debt contracts).
The assignment of ratings by S&P or Moody's to debt issues that are fully
or partially supported by insurance policies, contracts, or guarantees is a
separate process from the determination of claims-paying ability ratings. The
likelihood of a timely flow of funds from the insurer to the trustee for the
bondholders is a key element in the rating determination of such debt issues.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EV TRADITIONAL HIGH YIELD
MUNICIPALS FUND. The Fund became a series of the Trust on May 15, 1995. The
Fund's investment objective is to provide high current income exempt from
regular federal income tax. The Fund may not be appropriate for investors who
cannot assume the greater risk of capital depreciation or loss inherent in
seeking higher tax-exempt yields.
FEES AND EXPENSES
INVESTMENT ADVISER
As of January 31, 1996, the Portfolio had net assets of $72,077,467. For
the period from the start of business, August 7, 1995, to January 31, 1996,
absent a fee reduction, the Portfolio would have paid BMR advisory fees of
$100,763 (equivalent to 0.59% (annualized) of the Portfolio's average daily
net assets for such period). To enhance the net income of the Portfolio, BMR
made a reduction in the full amount of its advisory fee, and BMR was allocated
expenses related to the operation of the Portfolio in the amount of $10,465.
The Portfolio's Investment Advisory Agreement with BMR is dated August 1, 1995
and may be continued as described under "Investment Adviser and Administrator"
in Part I.
ADMINISTRATOR
As stated under "Investment Adviser and Administrator" Part I, the
Administrator currently receives no compensation for providing administrative
services to the Fund. For the period from the start of business, August 7,
1995, to January 31, 1996, $26,174 of the Fund's operating expenses were
allocated to the Administrator.
SERVICE PLAN
The Fund began accruing for its service fee payments during the quarter
ended September 30, 1996. The Service Plan relates to Class A shares only.
PRINCIPAL UNDERWRITER
The Fund has authorized the Principal Underwriter to act as its agent in
repurchasing shares at the rate of $2.50 for each repurchase transaction
handled by the Principal Underwriter. The Principal Underwriter estimates that
the expenses incurred by it in acting as repurchase agent for the Fund will
exceed the amounts paid therefor by the Fund. For the period from the start of
business, August 7, 1995, to January 31, 1996, the Fund paid the Principal
Underwriter $70 for repurchase transactions handled by the Principal
Underwriter.
The total sales charges for sales of shares of the Fund for the period
from the start of business, August 7, 1995, to January 31, 1996 was $873,727,
of which $337 was received by the Principal Underwriter and $873,390 was
received by Authorized Firms.
BROKERAGE
For the period from the start of business, August 7, 1995, to January 31,
1996, the Portfolio paid no brokerage commissions on portfolio transactions.
TRUSTEES
The fees and expenses of those Trustees of the Trust and of the Portfolio
who are not members of the Eaton Vance organization (the noninterested
Trustees) are paid by the Fund (and the other series of the Trust) and the
Portfolio, respectively. (The Trustees of the Trust and the Portfolio who are
members of the Eaton Vance organization receive no compensation from the Fund
or the Portfolio.) For the fiscal year ending January 31, 1997, it is
estimated that the noninterested Trustees of the Trust and the Portfolio will
receive the following compensation in their capacities as Trustees from the
Fund and the Portfolio and, for the year ended December 31, 1995, earned the
following compensation in their capacities as Trustees of the other funds in
the Eaton Vance fund complex(1):
AGGREGATE AGGREGATE TOTAL COMPENSATION
COMPENSATION COMPENSATION FROM TRUST AND
NAME FROM FUND FROM PORTFOLIO FUND COMPLEX
---- ------------ -------------- ------------------
Donald R. Dwight ......... $89 $399 $135,000(2)
Samuel L. Hayes, III ..... 89 399 150,000(3)
Norton H. Reamer ......... 89 399 135,000
John L. Thorndike ........ 89 399 140,000
Jack L. Treynor .......... 89 399 140,000
(1) The Eaton Vance fund complex consists of 219 registered investment
companies or series thereof.
(2)Includes $35,000 of deferred compensation.
(3) Includes $33,750 of deferred compensation.
ADDITIONAL OFFICER INFORMATION
In addition to the officers of the Portfolio listed under "Officers of the
Trust and the Portfolio" in Part I, Thomas M. Metzold (38), is a Vice
President of the Portfolio, as well as a Vice President of BMR, Eaton Vance
and EV. Mr. Metzold is also an officer of various investment companies managed
by Eaton Vance and BMR.
SERVICES FOR ACCUMULATION
The following services relate to purchases of Class A shares and are
voluntary, involve no extra charge other than the sales charge included in the
offering price, and may be changed or discontinued without penalty at any
time.
Intended Quantity Investment -- Statement of Intention.If it is
anticipated that $50,000 or more of Class A shares and shares of the other
continuously offered open-end funds listed under "The Eaton Vance Exchange
Privilege" in the current Prospectus of the Fund will be purchased within a
13-month period, a Statement of Intention should be signed so that shares may
be obtained at the same reduced sales charge as though the total quantity were
invested in one lump sum. Shares held under Right of Accumulation (see below)
as of the date of the Statement will be included toward the completion of the
Statement. The Statement authorizes the Transfer Agent to hold in escrow
sufficient shares (5% of the dollar amount specified in the Statement) which
can be redeemed to make up any difference in sales charge on the amount
intended to be invested and the amount actually invested. Execution of a
Statement does not obligate the shareholder to purchase or the Fund to sell
the full amount indicated in the Statement, and should the amount actually
purchased during the 13-month period be more or less than that indicated on
the Statement, price adjustments will be made. For sales charges and other
information on quantity purchases, see "How to Buy Fund Shares" in the Fund's
current Prospectus. Any investor considering signing a Statement of Intention
should read it carefully.
Right of Accumulation -- Cumulative Quantity Discount.The applicable sales
charge level for the purchase of Class A shares is calculated by taking the
dollar amount of the current purchase and adding it to the value (calculated
at the maximum current offering price) of the shares the shareholder owns in
his account(s) in the Fund and in the other continuously offered open-end
funds listed under "The Eaton Vance Exchange Privilege" in the current
Prospectus of the Fund. The sales charge on the shares being purchased will
then be at the rate applicable to the aggregate. For example, if the
shareholder owned shares valued at $30,000 and purchased an additional $20,000
of shares, the sales charge for the $20,000 purchase would be at the rate of
2.75% of the offering price (2.83% of the net amount invested) which is the
rate applicable to single transactions of $50,000. For sales charges on
quantity purchases, see "How to Buy Fund Shares" in the Fund's current
Prospectus. Shares purchased (i) by an individual, his or her spouse and their
children under the age of twenty-one, and (ii) by a trustee, guardian or other
fiduciary of a single trust estate or a single fiduciary account, will be
combined for the purpose of determining whether a purchase will qualify for
the Right of Accumulation and if qualifying, the applicable sales charge
level.
For any such discount to be made available, at the time of purchase a
purchaser or his or her Authorized Firm must provide the Principal Underwriter
(in the case of a purchase made through an Authorized Firm) or the Transfer
Agent (in the case of an investment made by mail) with sufficient information
to permit verification that the purchase order qualifies for the accumulation
privilege. Confirmation of the order is subject to such verification. The
Right of Accumulation privilege may be amended or terminated at any time as to
purchases occurring thereafter.
PRINCIPAL UNDERWRITER
Shares of each class of the Fund may be continuously purchased at the
public offering price through Authorized Firms which have agreements with the
Principal Underwriter. The Principal Underwriter is a wholly-owned subsidiary
of Eaton Vance. The public offering price is the net asset value next computed
after receipt of the order, plus, in the case of Class A shares and where
applicable, a variable percentage (sales charge) depending upon the amount of
purchase as indicated by the sales charge table set forth in the Fund's
current Prospectus (see "How to Buy Fund Shares"). Such table is applicable to
purchases of Class A shares alone or in combination with purchases of the
other funds offered by the Principal Underwriter, made at a single time by (i)
an individual, or an individual, his or her spouse and their children under
the age of twenty-one, purchasing shares for his or their own account; and
(ii) a trustee or other fiduciary purchasing shares for a single trust estate
or a single fiduciary account.
The table is also presently applicable to (1) purchases of Class A shares,
alone or in combination with purchases of any of the other funds offered by
the Principal Underwriter through one dealer aggregating $50,000 or more made
by any of the persons enumerated above within a thirteen-month period starting
with first purchase pursuant to a written Statement of Intention, in the form
provided by the Principal Underwriter, which includes provisions for a price
adjustment depending upon the amount actually purchased within such period (a
purchase not made pursuant to such Statement may be included thereunder if the
Statement is filed within 90 days of such purchase); or (2) purchases of Class
A shares pursuant to the Right of Accumulation and declared as such at the
time of purchase.
Subject to the applicable provisions of the 1940 Act, the Fund may issue
Class A shares at net asset value in the event that an investment company
(whether a regulated or private investment company or a personal holding
company) is merged or consolidated with or acquired by the Fund. Normally no
sales charges will be paid in connection with an exchange of Class A shares
for the assets of such investment company.
Class A shares may be sold at net asset value to any officer, director,
trustee, general partner or employee of the Fund, the Portfolio or any
investment company for which Eaton Vance or BMR acts as investment adviser,
any investment advisory, agency, custodial or trust account managed or
administered by Eaton Vance or by any parent, subsidiary or other affiliate of
Eaton Vance, or any officer, director or employee of any parent, subsidiary or
other affiliate of Eaton Vance. The terms "officer," "director," "trustee,"
"general partner" or "employee" as used in this paragraph include any such
person's spouse and minor children, and also retired officers, directors,
trustees, general partners and employees and their spouses and minor children.
Class A shares of the Fund may also be sold at net asset value to registered
representatives and employees of certain Authorized Firms and to such persons'
spouses and children under the age of 21 and their beneficial accounts.
The Trust reserves the right to suspend or limit the offering of shares of
the Fund to the public at any time.
The Principal Underwriter acts as principal in selling shares of the Fund
under the Distribution Agreement with the Trust on behalf of the Fund. The
expenses of printing copies of prospectuses used to offer shares to Authorized
Firms or investors and other selling literature and of advertising are borne
by the Principal Underwriter. The fees and expenses of qualifying and
registering and maintaining qualifications and registrations of the Fund and
its shares under federal and state securities laws are borne by the Fund. The
Distribution Agreement is renewable annually by the Board of Trustees of the
Trust (including a majority of its Trustees who are not interested persons of
the Principal Underwriter or the Trust), may be terminated on six months'
notice by either party, and is automatically terminated upon assignment. The
Principal Underwriter distributes Fund shares on a "best efforts" basis under
which it is required to take and pay for only such shares as may be sold. In
connection with the sale of Class A shares, the Principal Underwriter allows
Authorized Firms discounts from the applicable public offering price which are
alike for all Authorized Firms. See "How to Buy Fund Shares" in the Fund's
current Prospectus for the discount allowed to Authorized Firms. The Principal
Underwriter may allow, upon notice to all Authorized Firms with whom it has
agreements, discounts up to the full sales charge during the periods specified
in the notice. During periods when the discount includes the full sales
charge, such Authorized Firms may be deemed to be underwriters as that term is
defined in the Securities Act of 1933. For the amount of sales charges for
sales of Fund shares paid to the Principal Underwriter (and Authorized Firms)
see "Fees and Expenses" in this Part II.
SERVICE PLAN
The Trust on behalf of the Fund has adopted a Service Plan (the "Plan")
with respect to Class A shares designed to meet the service fee requirements
of the revised sales charge rule of the National Association of Securities
Dealers, Inc. (the "NASD") (Management believes service fee payments are not
distribution expenses governed by Rule 12b-1 under the 1940 Act, but has
chosen to have the Plan approved as if that Rule were applicable.) The
following supplements the discussion of the Plan contained in the Fund's
Prospectus.
The Plan remains in effect through April 28, 1997, and from year to year
thereafter, provided such continuance is approved by a vote of both a majority
of (i) those Trustees who are not interested persons of the Trust and who have
no direct or indirect financial interest in the operation of the Plan or any
agreements related to it (the "Noninterested Trustees") and (ii) all of the
Trustees then in office, cast in person at a meeting (or meetings) called for
the purpose of voting on this Plan. The Plan may be terminated any time by
vote of the Noninterested Trustees or by a vote of a majority of the
outstanding Class A voting securities of the Fund. Pursuant to such Rule, the
Plan has been approved by the Fund's initial sole shareholder (Eaton Vance)
and by the Board of Trustees of the Trust, including the Noninterested
Trustees.
Under the Plan, the President or a Vice President of the Trust shall
provide to the Trustees for their review, and the Trustees shall review at
least quarterly, a written report of the amount expended under the Plan and
the purposes for which such expenditures were made. The Plan may not be
amended to increase materially the payments described herein without approval
of the Class A shareholders of the Fund, and all material amendments of the
Plan must also be approved by the Trustees of the Trust as prescribed by the
Rule. So long as the Plan is in effect, the selection and nomination of
Trustees who are not interested persons of the Trust shall be committed to the
discretion of the Trustees who are not such interested persons. The Trustees
have determined that in their judgment there is a reasonable likelihood that
the Plan will benefit the Fund and its shareholders. For the service fees paid
under the Plan see "Fees and Expenses" in this Part II.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return
on a hypothetical investment of $1,000 in Class A shares of the Fund from
commencement of operations on August 7, 1995 through July 31, 1996.
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT
TOTAL RETURN EXCLUDING TOTAL RETURN INCLUDING
VALUE OF VALUE OF MAXIMUM SALES CHARGE MAXIMUM SALES CHARGE
INVESTMENT INVESTMENT INITIAL INVESTMENT ------------------------------ ------------------------------
PERIOD DATE INVESTMENT* ON 7/31/96 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
Life of the Fund** 8/7/95 $962.46 $1,071.67 11.34% -- 7.17% --
</TABLE>
Past performance is not indicative of future results. Investment return
and principal value will fluctuate; shares, when redeemed, may be worth more
or less than their original cost.
- ----------
*Initial investment less the current maximum sales charge of 3.75%.
**If a portion of the Portfolio's and/or the Fund's expenses had not been
subsidized, the Fund would have had lower returns.
For the thirty-day period ended July 31, 1996, the yield of the Fund was
6.82%. The yield required of a taxable security that would produce an after-
tax yield equivalent to that earned by the Fund of 6.82% would be 9.88%,
assuming a federal tax rate of 31%. If a portion of the Portfolio's and the
Fund's expenses had not been allocated to the Investment Adviser and the
Administrator, the Fund would have had a lower yield.
An investment in the Fund offers shareholders the opportunity to: receive
high monthly tax-free income; retain more of their earnings; gain investment
advantages over purchasing individual bonds (such as professional management,
monthly income and portfolio diversification); and enlist a research-based
investment strategy to find municipal bonds with potential for high current
income and improving fundamentals.
See the Tax Equivalent Yield Table in this Part II for information
concerning applicable tax rates and income brackets.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As at October 31, 1996, the Trustees and officers of the Trust, as a
group, owned in the aggregate less than 1% of the outstanding shares of the
Fund. As of October 31, 1996, Merrill Lynch, Pierce, Fenner & Smith, Inc.,
Jacksonville, FL, was the record owner of approximately 9.8% of the
outstanding shares, which were held on behalf of its customers who are the
beneficial owners of such shares, and as to which it had voting power under
certain limited circumstances. In addition, as of such date, the following
shareholder owned of record the percentage of outstanding shares of the
Fund indicated after its name: Mars & Co., c/o Investors Bank & Trust Co.,
Boston, MA (5.5%). To the knowledge of the Trust, no other person owned of
record or beneficially 5% or more of the Fund's outstanding shares as of such
date.
OTHER INFORMATION
Effective February 1, 1997, the Fund began offering two classes of shares.
Prior thereto, all shares of the Fund were offered in the same manner as the
existing Class A shares of the Fund. Each Class may pay a different share of
other expenses (not including advisory or custodial fees or other expenses
related to the management of the Fund's assets) that are actually incurred in
a different amount by that Class or if the Class receives services of a
different kind or to a different degree than another Class. Such expenses
include, but are not limited to, the following (a) transfer agency costs
(including entities performing account maintenance, dividend disbursing or
subaccounting activities and administration of dividend reinvestment,
systematic investment and withdrawal plans) attributable to a Class, (b) the
cost of preparing, printing and mailing materials such as shareholder reports,
prospectuses and proxy materials to current shareholders of a Class, (c) any
registration fees of the Commission and state securities agencies, (d) the
expense of administrative personnel and services required to support the
shareholders of a Class, (e) Trustees' fees or expenses incurred as a result
of issues or matters relating to a Class or (f) legal, auditing and accounting
expenses relating to a Class.
<PAGE>
TAX EQUIVALENT YIELD TABLE
The table shows the approximate taxable bond yields which are equivalent
to tax-exempt bond yields from 4% to 7% under the regular federal income tax
laws that apply to 1996.
<TABLE>
<CAPTION>
MARGINAL
SINGLE RETURN JOINT RETURN INCOME TAX-EXEMPT YIELD
- --------------------- ------------------- TAX --------------------------------------------------------------------------
(TAXABLE INCOME)* BRACKET 4% 4.5% 5% 5.5% 6% 6.5% 7%
- ------------------------------------------ ----------- --------------------------------------------------------------------------
EQUIVALENT TAXABLE YIELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Up to $ 24,000 Up to $ 41,000 15.00% 4.71% 5.29% 5.88% 6.47% 7.06% 7.65% 8.24%
$ 24,001-$ 58,150 $ 41,001-$ 96,900 28.00 5.56 6.25 6.94 7.64 8.33 9.03 9.72
$ 58,151-$121,300 $ 96,901-$147,700 31.00 5.80 6.52 7.25 7.97 8.70 9.42 10.14
$121,301-$263,750 $147,701-$263,750 36.00 6.25 7.03 7.81 8.59 9.38 10.16 10.94
Over $263,750 Over $263,750 39.60 6.62 7.45 8.28 9.11 9.93 10.76 11.59
- ------------------------------------------ ----------- --------------------------------------------------------------------------
* Net amount subject to federal personal income tax after deductions and exemptions.
</TABLE>
Note: The above-indicated federal income tax brackets do not take into
account the effect of a reduction in the deductibility of itemized deductions
for taxpayers with adjusted gross income in excess of $117,950, nor the
effects of phaseout of personal exemptions for single and joint filers with
adjusted gross incomes in excess of $117,950 and $176,950, respectively. The
effective top marginal federal income tax brackets of taxpayers over ranges
of income subject to these reductions or phaseouts will be higher than
indicated above.
Yields shown are for illustration purposes only and are not meant to represent
the Fund's actual yield. Of course, no assurance can be given that the Fund
will achieve any specific tax exempt yield. While it is expected that a
substantial portion of the interest income received by the Portfolio and
allocated to the Fund and subsequently distributed to the Fund's shareholders
will be exempt from the regular federal income tax, portions of such
distributions from time to time may be subject to such tax. This table does
not take into account state or local taxes, if any, payable on Fund
distributions. It should also be noted that the interest earned on certain
"private activity bonds" issued after August 7, 1986, while exempt from the
regular federal income tax, is treated as a tax preference item which could
subject the recipient to the federal alternative minimum tax. The
illustrations assume that the federal alternative minimum tax is not
applicable and do not take into account any tax credits that may be available.
The information set forth above is as of the date of this SAI. Subsequent tax
law changes could result in prospective or retroactive changes in the tax
brackets, tax rates, and tax equivalent yields set forth above. Investors
should consult their tax adviser for additional information.
<PAGE>
[logo]
EV TRADITIONAL
HIGH YIELD
MUNICIPALS FUND
STATEMENT OF
ADDITIONAL INFORMATION
FEBRUARY 1, 1997
EV TRADITIONAL HIGH YIELD
MUNICIPALS FUND
24 FEDERAL STREET
BOSTON, MA 02110
- ------------------------------------------------------------------------------
INVESTMENT ADVISER OF HIGH YIELD MUNICIPALS PORTFOLIO
Boston Management and Research, 24 Federal Street, Boston, MA 02110
ADMINISTRATOR OF EV TRADITIONAL HIGH YIELD MUNICIPALS FUND
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111
TRANSFER AGENT
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123
(800) 262-1122
AUDITORS
Deloitte & Touche LLP, 125 Summer Street Boston, MA 02110
T-HYSAI
<PAGE>
PART C
OTHER INFORMATION
ITEM 24: FINANCIAL STATEMENTS AND EXHIBITS
(A) FINANCIAL STATEMENTS
INCLUDED IN PART A ARE THE FINANCIAL HIGHLIGHTS OF THE FOLLOWING FUND
FOR THE PERIOD(S) INDICATED:
EV Traditional High Yield Municipals Fund (from the start of
business, August 7, 1995, to January 31, 1996) and for the six
months ended July 31, 1996 (Unaudited)
INCORPORATED BY REFERENCE INTO PART B ARE THE FINANCIAL STATEMENTS
CONTAINED IN THE ANNUAL REPORT FOR THE FOLLOWING FUND, DATED JANUARY
31, 1996, FILED ELECTRONICALLY PURSUANT TO SECTION 30(B)(2) OF THE
INVESTMENT COMPANY ACT OF 1940:
EV Traditional High Yield Municipals Fund (Accession No.
0000928816-96-000074)
THE FINANCIAL STATEMENTS CONTAINED IN THE FUND'S ANNUAL REPORT ARE
AS FOLLOWS:
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Financial Highlights
Notes to Financial Statements
Report of Independent Accountants
INCORPORATED BY REFERENCE INTO PART B ARE THE FINANCIAL STATEMENTS
CONTAINED IN THE SEMI-ANNUAL REPORT FOR THE FOLLOWING FUND, DATED
JULY 31, 1996, FILED ELECTRONICALLY PURSUANT TO SECTION 30(B)(2) OF
THE INVESTMENT COMPANY ACT OF 1940:
EV Traditional High Yield Municipals Fund (Accession No.
0000928816-96-000295)
THE FINANCIAL STATEMENTS CONTAINED IN THE FUND'S SEMI-ANNUAL
REPORT ARE AS FOLLOWS:
Statement of Assets and Liabilities (Unaudited)
Statement of Operations (Unaudited)
Statement of Changes in Net Assets (Unaudited)
Financial Highlights (Unaudited)
Notes to Financial Statements (Unaudited)
ALSO INCORPORATED BY REFERENCE INTO PART B ARE THE FOLLOWING
FINANCIAL STATEMENTS OF THE HIGH YIELD MUNICIPALS PORTFOLIO
WHICH ARE CONTAINED IN THE ANNUAL REPORT DATED JANUARY 31, 1996
OF THE CORRESPONDING FUND:
Portfolio of Investments
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Supplementary Data
Notes to Financial Statements
Report of Independent Accountants
ALSO INCORPORATED BY REFERENCE INTO PART B ARE THE FOLLOWING
FINANCIAL STATEMENTS OF THE HIGH YIELD MUNICIPALS PORTFOLIO
WHICH ARE CONTAINED IN THE SEMI-ANNUAL REPORT DATED JULY 31,
1996 OF THE CORRESPONDING FUND:
Portfolio of Investments (Unaudited)
Statement of Assets and Liabilities (Unaudited)
Statement of Operations (Unaudited)
Statement of Changes in Net Assets (Unaudited)
Supplementary Data (Unaudited)
Notes to Financial Statements (Unaudited)
(B) EXHIBITS:
<TABLE>
<S> <S>
(1)(a) Declaration of Trust of Eaton Vance Municipals Trust II dated October 25, 1993 filed as
Exhibit (1)(a) to Post-Effective Amendment No. 4 and incorporated herein by reference.
(b) Amendment and Restatement of Establishment and Designation of Series of Shares dated
October 18, 1996 filed herewith.
(c) Establishment and Designation of Classes dated November 18, 1996 filed herewith.
(2)(a) By-Laws dated October 25, 1993, filed as Exhibit (2)(a) to Post-Effective Amendment No.
4
and incorporated herein by reference.
(b) Amendment to By-Laws of Eaton Vance Municipals Trust II dated December 13, 1993 filed
as Exhibit (2)(b) to Post-Effective Amendment No. 4 and incorporated herein by
reference.
(3) Not applicable
(4) Not applicable
(5) Not applicable
(6)(a)(1) Distribution Agreement between Eaton Vance Municipals Trust II (on behalf of its
Marathon Series) and Eaton Vance Distributors, Inc. effective November 1, 1996 (with
attached Schedule A effective November 1, 1996) filed herewith.
(2) Distribution Agreement between Eaton Vance Municipals Trust II (on behalf of its
Traditional Series) and Eaton Vance Distributors, Inc. effective November 1, 1996 (with
attached Schedule A effective November 1, 1996) filed herewith.
(b) Selling Group Agreement between Eaton Vance Distributors, Inc. and Authorized Dealers
filed as Exhibit (6)(b) to Post-Effective Amendment No. 59 to the Registration
Statement of Eaton Vance Growth Trust (File Nos. 2-22019, 811-1241) and incorporated
herein by reference.
(c) Schedule of Dealer Discounts and Sales Charges filed as Exhibit (6)(c) to Post-
Effective Amendment No. 59 to the Registration Statement of Eaton Vance Growth Trust
(File Nos. 2-22019, 811-1241) and incorporated herein by reference.
(7) The Securities and Exchange Commission has granted the Registrant an exemptive order
that permits the Registrant to enter into deferred compensation arrangements with its
independent Trustees. See in the Matter of Capital Exchange Fund, Inc., Release No.
IC-20671 (November 1, 1994).
(8)(a) Custodian Agreement between Eaton Vance Municipals Trust II and Investors Bank & Trust
Company dated February 25, 1994, filed as Exhibit (8)(a) to Post-Effective Amendment
No. 4
and incorporated herein by reference.
(b) Amendment to Custodian Agreement with Investors Bank & Trust Company dated October 23,
1995 filed as Exhibit (8)(b) to Post-Effective Amendment No. 4 and incorporated herein
by reference.
(9)(a) Administrative Services Agreement between EV Classic Florida Insured Tax Free Fund and
Eaton Vance Management dated February 25, 1994, with attached schedule pursuant to Rule
8b-31 under the Investment Company Act of 1940, as amended, regarding other series of
Registrant, filed as Exhibit (9) to Post-Effective Amendment No. 1 and incorporated
herein by reference.
(b) Amended Administrative Services Agreement between Eaton Vance Municipals Trust II (on
behalf of all of its series), with attached schedule, and Eaton Vance Management, filed
as Exhibit (9)(b) to Post-Effective Amendment No. 4 and incorporated herein by
reference.
(10) Not applicable
(11) Consent of Independent Certified Public Accountants of Eaton Vance Municipals Trust II
on behalf of EV Traditional High Yield Municipals Fund filed herewith.
(12) Not applicable
(13) Not applicable
(14) Not applicable
(15)(a) Amended Distribution Plan pursuant to Rule 12b-1 under the Investment Company Act of
1940, as amended, for Eaton Vance Municipals Trust II (on behalf of its Marathon
series) dated June 19, 1995, with attached schedule, filed as Exhibit (15)(d) to Post-
Effective Amendment No. 4 and incorporated herein by reference.
(b) Amendment to Amended Distribution Plan for Eaton Vance Municipals Trust II (on behalf
of its Marathon Series) adopted June 24, 1996 filed herewith.
(c) Amended Service Plan pursuant to Rule 12b-1 under the Investment Company Act of 1940,
as amended, for Eaton Vance Municipals Trust II (on behalf of its Traditional series)
dated June 19, 1995, with attached schedules (including Amended Schedule A dated
February 1, 1996) filed as Exhibit (15)(e) to Post-Effective Amendment No. 4 and
incorporated herein by reference.
(d) Amendment to Amended Service Plan for Eaton Vance Municipals Trust II (on behalf of its
Traditional Series) adopted June 24, 1996 filed herewith.
(16) Schedules for Computation of Performance Quotations filed herewith.
(17)(a) Power of Attorney for Eaton Vance Municipals Trust II dated January 10, 1994 filed as
Exhibit (17)(a) to Post-Effective Amendment No. 4 and incorporated herein by reference.
(b) Power of Attorney for Florida Insured Tax Free Portfolio, Hawaii Tax Free Portfolio and
Kansas Tax Free Portfolio dated January 10, 1994 filed as Exhibit (17)(b) to Post-
Effective Amendment No. 4 and incorporated herein by reference.
(c) Power of Attorney for High Yield Municipals Portfolio filed as Exhibit 17(c) to Post-
Effective Amendment No. 2 and incorporated herein by reference.
(18) Multiple Class Plan for Institutional Shares dated November 18, 1996 filed herewith.
</TABLE>
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not applicable.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
(1) (2)
TITLE OF CLASS NUMBER OF RECORD HOLDERS
Shares of beneficial interest without par value as of October 31, 1996
EV Classic Florida Insured Municipals Fund 12
EV Marathon Florida Insured Municipals Fund 291
EV Traditional Florida Insured Municipals Fund 41
EV Marathon Hawaii Municipals Fund 599
EV Traditional Hawaii Municipals Fund 18
EV Marathon Kansas Municipals Fund 265
EV Traditional Kansas Municipals Fund 48
EV Marathon High Yield Municipals Fund 2,010
EV Traditional High Yield Municipals Fund 1,255
ITEM 27. INDEMNIFICATION
Article IV of the Trust's Declaration of Trust, dated October 25, 1993,
permits Trustee and officer indemnification by By-law, contract and vote.
Article XI of the By-laws contains indemnification provisions. Registrant's
Trustees and officers are insured under a standard mutual fund errors and
omissions insurance policy covering insured by reason of negligent errors and
omissions committed in their capacities as such.
The distribution agreements of the Trust also provide for reciprocal
indemnity of the principal underwriter, on the one hand, and the Trustees and
officers, on the other.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Reference is made to the information set forth under the caption
"Investment Adviser and Administrator" in the SAI which is incorporated herein
by reference.
ITEM 29. PRINCIPAL UNDERWRITERS
(A) Registrant's principal underwriter, Eaton Vance Distributors, Inc., a
wholly-owned subsidiary of Eaton Vance Management, is the principal
underwriter for each of the investment companies named below:
EV Classic California Municipals Fund
EV Classic Connecticut Municipals Fund
EV Classic Florida Insured Municipals Fund
EV Classic Florida Limited Maturity Municipals Fund
EV Classic Florida Municipals Fund
EV Classic Government Obligations Fund
EV Classic Greater China Growth Fund
EV Classic Growth Fund
EV Classic High Income Fund
EV Classic Information Age Fund
EV Classic Investors Fund
EV Classic Massachusetts Limited Maturity Municipals Fund
EV Classic National Limited Maturity Municipals Fund
EV Classic National Municipals Fund
EV Classic New Jersey Municipals Fund
EV Classic New York Limited Maturity Municipals Fund
EV Classic New York Municipals Fund
EV Classic Pennsylvania Municipals Fund
EV Classic Rhode Island Municipals Fund
EV Classic Senior Floating-Rate Fund
EV Classic Strategic Income Fund
EV Classic Special Equities Fund
EV Classic Stock Fund
EV Classic Total Return Fund
EV Marathon Alabama Municipals Fund
EV Marathon Arizona Municipals Fund
EV Marathon Arkansas Municipals Fund
EV Marathon Asian Small Companies Fund
EV Marathon California Limited Maturity Municipals Fund
EV Marathon California Municipals Fund
EV Marathon Colorado Municipals Fund
EV Marathon Connecticut Limited Maturity Municipals Fund
EV Marathon Connecticut Municipals Fund
EV Marathon Emerging Markets Fund
EV Marathon Florida Insured Municipals Fund
EV Marathon Florida Limited Maturity Municipals Fund
EV Marathon Florida Municipals Fund
EV Marathon Georgia Municipals Fund
EV Marathon Gold & Natural Resources Fund
EV Marathon Government Obligations Fund
EV Marathon Greater China Growth Fund
EV Marathon Greater India Fund
EV Marathon Growth Fund
EV Marathon Hawaii Municipals Fund
EV Marathon High Income Fund
EV Marathon High Yield Municipals Fund
EV Marathon Information Age Fund
EV Marathon Investors Fund
EV Marathon Kansas Municipals Fund
EV Marathon Kentucky Municipals Fund
EV Marathon Louisiana Municipals Fund
EV Marathon Maryland Municipals Fund
EV Marathon Massachusetts Limited Maturity Municipals Fund
EV Marathon Massachusetts Municipals Fund
EV Marathon Michigan Limited Maturity Municipals Fund
EV Marathon Michigan Municipals Fund
EV Marathon Minnesota Municipals Fund
EV Marathon Mississippi Municipals Fund
EV Marathon Missouri Municipals Fund
EV Marathon National Limited Maturity Municipals Fund
EV Marathon National Municipals Fund
EV Marathon New Jersey Limited Maturity Municipals Fund
EV Marathon New Jersey Municipals Fund
EV Marathon New York Limited Maturity Municipals Fund
EV Marathon New York Municipals Fund
EV Marathon North Carolina Municipals Fund
EV Marathon Ohio Limited Maturity Municipals Fund
EV Marathon Ohio Municipals Fund
EV Marathon Oregon Municipals Fund
EV Marathon Pennsylvania Limited Maturity Municipals Fund
EV Marathon Pennsylvania Municipals Fund
EV Marathon Rhode Island Municipals Fund
EV Marathon Strategic Income Fund
EV Marathon South Carolina Municipals Fund
EV Marathon Special Equities Fund
EV Marathon Stock Fund
EV Marathon Tax-Managed Growth Fund
EV Marathon Tennessee Municipals Fund
EV Marathon Texas Municipals Fund
EV Marathon Total Return Fund
EV Marathon Virginia Municipals Fund
EV Marathon West Virginia Municipals Fund
EV Marathon Worldwide Health Sciences Fund
EV Traditional Alabama Municipals Fund
EV Traditional Arizona Municipals Fund
EV Traditional Arkansas Municipals Fund
EV Traditional Asian Small Companies Fund
EV Traditional California Limited Maturity Municipals Fund
EV Traditional California Municipals Fund
EV Traditional Colorado Municipals Fund
EV Traditional Connecticut Limited Maturity Municipals Fund
EV Traditional Connecticut Municipals Fund
EV Traditional Emerging Markets Fund
EV Traditional Florida Insured Municipals Fund
EV Traditional Florida Limited Maturity Municipals Fund
EV Traditional Florida Municipals Fund
EV Traditional Georgia Municipals Fund
EV Traditional Government Obligations Fund
EV Traditional Greater China Growth Fund
EV Traditional Greater India Fund
EV Traditional Growth Fund
EV Traditional Hawaii Municipals Fund
EV Traditional High Yield Municipals Fund
Eaton Vance Income Fund of Boston
EV Traditional Information Age Fund
EV Traditional Investors Fund
EV Traditional Kansas Municipals Fund
EV Traditional Kentucky Municipals Fund
EV Traditional Louisiana Municipals Fund
EV Traditional Maryland Municipals Fund
EV Traditional Massachusetts Municipals Fund
EV Traditional Michigan Limited Maturity Municipals Fund
EV Traditional Michigan Municipals Fund
EV Traditional Minnesota Municipals Fund
EV Traditional Mississippi Municipals Fund
EV Traditional Missouri Municipals Fund
Eaton Vance Municipal Bond Fund L.P.
EV Traditional National Limited Maturity Municipals Fund
EV Traditional National Municipals Fund
EV Traditional New Jersey Limited Maturity Municipals Fund
EV Traditional New Jersey Municipals Fund
EV Traditional New York Limited Maturity Municipals Fund
EV Traditional New York Municipals Fund
EV Traditional North Carolina Municipals Fund
EV Traditional Ohio Limited Maturity Municipals Fund
EV Traditional Ohio Municipals Fund
EV Traditional Oregon Municipals Fund
EV Traditional Pennsylvania Municipals Fund
EV Traditional South Carolina Municipals Fund
EV Traditional Special Equities Fund
EV Traditional Stock Fund
EV Traditional Tax-Managed Growth Fund
EV Traditional Tennessee Municipals Fund
EV Traditional Texas Municipals Fund
EV Traditional Total Return Fund
EV Traditional Virginia Municipals Fund
EV Traditional West Virginia Municipals Fund
EV Traditional Worldwide Health Sciences Fund, Inc.
Eaton Vance Cash Management Fund
Eaton Vance Liquid Assets Fund
Eaton Vance Money Market Fund
Eaton Vance Prime Rate Reserves
Eaton Vance Short-Term Treasury Fund
Eaton Vance Tax Free Reserves
Massachusetts Municipal Bond Portfolio
(B)
<TABLE>
<CAPTION>
(1) (2) (3)
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICE
BUSINESS ADDRESS WITH PRINCIPAL UNDERWRITER WITH REGISTRANT
------------------ -------------------------- ---------------------
<S> <C> <C>
James B. Hawkes* Vice President and Director Vice President and Trustee
William M. Steul* Vice President and Director None
Wharton P. Whitaker* President and Director None
Chris Berg* Vice President None
Kate B. Bradshaw* Vice President None
H. Day Brigham, Jr.* Vice President None
Susan W. Bukima* Vice President None
Jeffrey W. Butterfield* Vice President None
David B. Carle* Vice President None
James S. Comforti* Vice President None
Raymond Cox* Vice President None
Mark P. Doman* Vice President None
James Foley* Vice President None
Michael A. Foster* Vice President None
William M. Gillen* Vice President None
Hugh S. Gilmartin* Vice President None
Perry D. Hooker* Vice President None
Brian Jacobs* Senior Vice President None
Thomas P. Luka* Vice President None
Thomas J. Marcello* Vice President None
Timothy D. McCarthy* Vice President None
Joseph T. McMenamin* Vice President None
Morgan C. Mohrman* Senior Vice President None
James A. Naughton* Vice President None
Mark D. Nelson* Vice President None
Linda D. Newkirk* Vice President None
James L. O'Connor* Vice President Treasurer
Thomas Otis* Secretary and Clerk Secretary
George D. Owen II* Vice President None
F. Anthony Robinson* Vice President None
Jay S. Rosoff* Vice President None
Benjamin A. Rowland, Jr.* Vice President, None
Treasurer and Director
John P. Rynne* Vice President None
Kevin Schrader* Vice President None
George V.F. Schwab, Jr.* Vice President None
Cornelius J. Sullivan* Vice President None
David M. Thill* Vice President None
Chris Volf* Vice President None
Sue Wilder* Vice President None
<FN>
- ----------
*Address is 24 Federal Street, Boston, MA 02110
</TABLE>
(c) Not applicable
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All applicable accounts, books and documents required to be maintained by
the Registrant by Section 31(a) of the Investment Company Act of 1940 and the
Rules promulgated thereunder are in the possession and custody of the
Registrant's custodian, Investors Bank & Trust Company, 89 South Street,
Boston, MA 02111, and its transfer agent, First Data Investor Services Group,
4400 Computer Drive, Westborough, MA 01581-5123, with the exception of certain
corporate documents and portfolio trading documents which are in the
possession and custody of Eaton Vance Management, 24 Federal Street, Boston,
MA 02110. The Registrant is informed that all applicable accounts, books and
documents required to be maintained by registered investment advisers are in
the custody and possession of Eaton Vance Management and Boston Management and
Research.
ITEM 31. MANAGEMENT SERVICES
Not applicable
ITEM 32. UNDERTAKINGS
The Registrant undertakes to furnish to each person to whom a prospectus
is delivered a copy of the latest annual report to shareholders, upon request
and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Amendment
to its Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized in the City of Boston and the Commonwealth of
Massachusetts on the 20th day of November, 1996.
EATON VANCE MUNICIPALS TRUST II
By /s/ THOMAS J. FETTER
-------------------------------------
THOMAS J. FETTER, President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed below by the following persons
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
President (Chief Executive
/s/ THOMAS J. FETTER Officer) November 20, 1996
- ------------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and Accounting
/s/ JAMES L. O'CONNOR Officer November 20, 1996
- ------------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee November 20, 1996
- ------------------------------------
DONALD R. DWIGHT
/s/ JAMES B. HAWKES Vice President and Trustee November 20, 1996
- ------------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee November 20, 1996
- ------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee November 20, 1996
- ------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee November 20, 1996
- ------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee November 20, 1996
- ------------------------------------
JACK L. TREYNOR
*By: /s/ H. DAY BRIGHAM, JR.
- -----------------------------
As attorney-in-fact
</TABLE>
<PAGE>
SIGNATURES
High Yield Municipals Portfolio has duly caused this Amendment to the
Registration Statement on Form N-1A of Eaton Vance Municipals Trust II to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Boston and the Commonwealth of Massachusetts on the 20th day of
November, 1996.
HIGH YIELD MUNICIPALS PORTFOLIO
By /s/ THOMAS J. FETTER
--------------------------------------
THOMAS J. FETTER, President
This Amendment to the Registration Statement on Form N-1A of Eaton Vance
Municipals Trust II has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- -----
<S> <C> <C>
President (Chief Executive
/s/ THOMAS J. FETTER Officer) November 20, 1996
- ------------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and Accounting
/s/ JAMES L. O'CONNOR Officer November 20, 1996
- ------------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee November 20, 1996
- ------------------------------------
DONALD R. DWIGHT
/s/ JAMES B. HAWKES Trustee November 20, 1996
- ------------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee November 20, 1996
- ------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee November 20, 1996
- ------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee November 20, 1996
- ------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee November 20, 1996
- ------------------------------------
JACK L. TREYNOR
*By: /s/ H. DAY BRIGHAM, JR.
- ------------------------------------
As attorney-in-fact
</TABLE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
(1)(b) Amendment and Restatement of Establishment and Designation of Series of Shares dated
October 18, 1996.
(1)(c) Establishment and Designation of Classes dated November 18, 1996.
(6)(a)(1) Distribution Agreement between Eaton Vance Municipals Trust (on behalf of its Marathon
Series) and Eaton Vance Distributors, Inc. effective November 1, 1996.
(6)(a)(2) Distribution Agreement between Eaton Vance Municipals Trust (on behalf of its Traditional
Series) and Eaton Vance Distributors, Inc. effective November 1, 1996.
(11) Consent of Independent Certified Public Accountants of Eaton Vance Municipals Trust II on
behalf of EV Traditional High Yield Municipals Fund.
(15)(b) Amendment to Amended Distribution Plan for Eaton Vance Municipals Trust II (on behalf of
its Marathon Series) adopted June 24, 1996.
(15)(d) Amendment to Amended Service Plan for Eaton Vance Municipals Trust II (on behalf of its
Traditional Series) adopted June 24, 1996.
(16) Schedules for Computation of Performance Quotations.
(18) Multiple Class Plan for Institutional Shares dated November 18, 1996.
</TABLE>
EXHIBIT 99.(1)(B)
EATON VANCE MUNICIPALS TRUST II
Amendment and Restatement of
Establishment and Designation of Series of Shares
of Beneficial Interest, Without Par Value
(as amended and restated October 18, 1996)
WHEREAS, the Trustees of Eaton Vance Municipals Trust II, a
Massachusetts business trust (the "Trust"), have previously designated separate
series (or "Funds"); and
WHEREAS, the Trustees now desire to further redesignate the Funds
effective November 30, 1996 and to terminate one Fund, i.e. EV Classic Florida
Insured Municipals Fund, pursuant to Section 5.1 of Article V of the Trust's
Declaration of Trust dated October 25, 1993 (the "Declaration of Trust");
NOW, THEREFORE, the undersigned, being at least a majority of the duly
elected and qualified Trustees presently in office of the Trust, hereby divide
the shares of beneficial interest of the Trust into eight separate series
("Funds"), each Fund to have the following special and relative rights:
1. The Funds shall be redesignated as follows:
EV Marathon Florida Insured Municipals Fund
EV Traditional Florida Insured Municipals Fund
EV Marathon Hawaii Municipals Fund
EV Traditional Hawaii Municipals Fund
EV Marathon Kansas Municipals Fund
EV Traditional Kansas Municipals Fund
EV Marathon High Yield Municipals Fund
EV Traditional High Yield Municipals Fund
2. Each Fund shall be authorized to invest in cash, securities,
instruments and other property as from time to time described in the Trust's
then currently effective registration statements under the Securities Act of
1933 and the Investment Company Act of 1940. Each share of beneficial interest
of each Fund ("share") shall be redeemable, shall be entitled to one vote (or
fraction thereof in respect of a fractional share) on matters on which shares of
that Fund shall be entitled to vote and shall represent a pro rata beneficial
interest in the assets allocated to that Fund, all as provided in the
Declaration of Trust. The proceeds of sales of shares of each Fund, together
with any income and gain thereon, less any diminution or expenses thereof, shall
irrevocably belong to such Fund, unless otherwise required by law. Each share of
a Fund shall be entitled to receive its pro rata share of net assets of that
Fund upon liquidation of that Fund.
3. Shareholders of each Fund shall vote separately as a class to the
extent provided in Rule 18f-2, as from time to time in effect, under the
Investment Company Act of 1940.
4. The assets and liabilities of the Trust shall be allocated among the
above-referenced Funds as set forth in Section 5.5 of Article V of the
Declaration of Trust, except as provided below.
(a) Costs incurred by each Fund in connection with its organization and
start-up, including Federal and state registration and qualification fees and
expenses of the initial public offering of such Fund's shares, shall be borne by
such Fund and deferred and amortized over the five year period beginning on the
date that such Fund commences operations.
(b) Reimbursement required under any expense limitation applicable to
the Trust shall be allocated among those Funds whose expense ratios exceed such
limitation on the basis of the relative expense ratios of such Funds.
(c) The liabilities, expenses, costs, charges and reserves of the Trust
(other than the management and investment advisory fees or the organizational
expenses paid by the Trust) which are not readily identifiable as belonging to
any particular Fund shall be allocated among the Funds on an equitable basis as
determined by the Trustees.
5. The Trustees (including any successor Trustees) shall have the right
at any time and from time to time to reallocate assets and expenses or to change
the designation of any Fund now or hereafter created, or to otherwise change the
special and relative rights of any such Fund, and to terminate any Fund or add
additional Funds as provided in the Declaration of Trust.
6. Any Fund may merge or consolidate with any other corporation,
association, trust or other organization or may sell, lease or exchange all or
substantially all of its property, including its good will, upon such terms and
conditions and for such consideration when and as authorized by the Trustees;
and any such merger, consolidation, sale, lease or exchange shall be deemed for
all purposes to have been accomplished under and pursuant to the statutes of the
Commonwealth of Massachusetts. The Trustees may also at any time sell and
convert into money all the assets of any Fund. Upon making provision for the
payment of all outstanding obligations, taxes and other liabilities, accrued or
contingent, of such Fund, the Trustees shall distribute the remaining assets of
such Fund ratably among the holders of the outstanding shares. Upon completion
of the distribution of the remaining proceeds or the remaining assets as
provided in this paragraph 6, the Fund shall terminate and the Trustees shall be
discharged of any and all further liabilities and duties hereunder with respect
to such Fund and the right, title and interest of all parties with respect to
such Fund shall be cancelled and discharged.
7. The Declaration of Trust authorizes the Trustees to divide each Fund
and any other series of shares into two or more classes and to fix and determine
the relative rights and preferences as between, and all provisions applicable
to, each of the different classes so established and designated by the Trustees.
The establishment and designation of any class of any Fund or other series of
shares shall be effective upon the execution by a majority of the then Trustees
of an instrument setting forth such establishment and designation and the
relative rights and preferences, and provisions applicable to, such class, or as
otherwise provided in such instrument.
Dated: October 18, 1996
/s/ Donald R. Dwight /s/ Norton H. Reamer
- -------------------------- -----------------------
Donald R. Dwight Norton H. Reamer
/s/ James B. Hawkes /s/ John L. Thorndike
- -------------------------- -----------------------
James B. Hawkes John L. Thorndike
/s/ Samuel L. Hayes, III /s/ Jack L. Treynor
- -------------------------- -----------------------
Samuel L. Hayes, III Jack L. Treynor
EXHIBIT 99.(1)(C)
EATON VANCE MUNICIPALS TRUST II
Establishment and Designation of Classes of Shares
of Beneficial Interest, Without Par Value
WHEREAS, the Trustees of Eaton Vance Municipals Trust II, a
Massachusetts business trust (the "Trust"), have previously designated a series
known as EV Traditional High Yield Municipals Fund (the "Fund"); and
WHEREAS, the Trustees now desire to designate Classes of the Fund
pursuant to Section 5.1 of Article V of the Trust's Amended and Restated
Declaration of Trust dated October 25, 1993 (the "Declaration of Trust");
NOW, THEREFORE, the undersigned, being at least a majority of the duly
elected and qualified Trustees presently in office of the Trust, hereby
establish two Classes of shares of the Fund, each Class to have the following
special and relative rights:
1. The Classes shall be designated as "Class A" and "Class I". Each
existing share of beneficial interest of the Fund shall be designated as a Class
A share of the Fund.
2. In addition to the provisions of Section 5.5 of Article V of the
Declaration of Trust, each Class shall be subject to the terms and conditions
set forth in the Multiple Class Plan for Institutional Shares adopted by the
Board of Trustees of the Trust, as amended from time to time.
Dated: November 18, 1996
/s/ Donald R. Dwight /s/ Norton H. Reamer
- -------------------------- -----------------------
Donald R. Dwight Norton H. Reamer
/s/ James B. Hawkes /s/ John L. Thorndike
- -------------------------- -----------------------
James B. Hawkes John L. Thorndike
/s/ Samuel L. Hayes, III /s/ Jack L. Treynor
- -------------------------- -----------------------
Samuel L. Hayes, III Jack L. Treynor
EXHIBIT 99.(6)(a)(1)
EATON VANCE MUNICIPALS TRUST II
DISTRIBUTION AGREEMENT
(MARATHON FUNDS)
AGREEMENT effective November 1, 1996 between EATON VANCE MUNICIPALS
TRUST II, a Massachusetts business trust having its principal place of business
in Boston in the Commonwealth of Massachusetts, hereinafter called the "Trust,"
on behalf of each of its series listed on Schedule A (the "Funds") and EATON
VANCE DISTRIBUTORS, INC., a Massachusetts corporation having its principal place
of business in said Boston and formerly named EV Distributors, Inc., hereinafter
sometimes called the "Principal Underwriter."
IN CONSIDERATION of the mutual promises and undertakings herein
contained, the parties hereto agree with respect to each Fund:
1. The Trust grants to the Principal Underwriter the right to purchase
shares of the Fund upon the terms hereinbelow set forth during the term of this
Agreement. While this Agreement is in force, the Principal Underwriter agrees to
use its best efforts to find purchasers for shares of the Fund.
The Principal Underwriter shall have the right to buy from the Fund the
shares needed, but not more than the shares needed (except for clerical errors
and errors of transmission) to fill unconditional orders for shares of the Fund
placed with the Principal Underwriter by financial service firms or investors as
set forth in the current Prospectus relating to shares of the Fund. The price
which the Principal Underwriter shall pay for the shares so purchased shall be
equal to the price paid by investors upon purchasing such shares. The Principal
Underwriter shall notify Investors Bank & Trust Company, Custodian of the Fund
("IBT") and First Data Investor Services Group, Transfer Agent of the Fund
("First Data"), or a successor transfer agent, at the end of each business day,
or as soon thereafter as the orders placed with it have been compiled, of the
number of shares and the prices thereof which the Principal Underwriter is to
purchase as principal for resale. The Principal Underwriter shall take down and
pay for shares ordered from the Fund on or before the eleventh business day
(excluding Saturdays) after the shares have been so ordered.
The right granted to the Principal Underwriter to buy shares from the
Fund shall be exclusive, except that said exclusive right shall not apply to
shares issued in connection with the merger or consolidation of any other
investment company or personal holding company with the Fund or the acquisition
by purchase or otherwise of all (or substantially all) the assets or the
outstanding shares of any such company, by the Fund; nor shall it apply to
shares, if any, issued by the Fund in distribution of income or realized capital
gains of the Fund payable in shares or in cash at the option of the shareholder.
2. The shares may be resold by the Principal Underwriter to or through
financial service firms having agreements with the Principal Underwriter, and to
investors, upon the following terms and conditions.
The public offering price, i.e., the price per share at which the
Principal Underwriter or financial service firm purchasing shares from the
Principal Underwriter may sell shares to the public, shall be equal to the net
asset value at which the Principal Underwriter is to purchase the shares.
The net asset value of shares of the Fund shall be determined by the
Trust or IBT, as the agent of the Fund, as of the close of regular trading on
the New York Stock Exchange on each business day on which said Exchange is open,
or as of such other time on each such business day as may be determined by the
Trustees of the Trust, in accordance with the methodology and procedures for
calculating such net asset value authorized by the Trustees. The Trust may also
cause the net asset value to be determined in substantially the same manner or
estimated in such manner and as of such other time or times as may from time to
time be agreed upon by the Trust and Principal Underwriter. The Trust will
notify the Principal Underwriter each time the net asset value of the Fund's
shares is determined and when such value is so determined it shall be applicable
to transactions as set forth in the current Prospectus and Statement of
Additional Information (hereafter the "Prospectus") relating to the Fund's
shares.
No shares of the Fund shall be sold by the Fund during any period when
the determination of net asset value is suspended pursuant to the Declaration of
Trust, except to the Principal Underwriter, in the manner and upon the terms
above set forth to cover contracts of sale made by the Principal Underwriter
with its customers prior to any such suspension, and except as provided in the
last paragraph of paragraph 1 hereof. The Trust shall also have the right to
suspend the sale of the Fund's shares if in the judgment of the Trust conditions
obtaining at any time render such action advisable. The Principal Underwriter
shall have the right to suspend sales at any time, to refuse to accept or
confirm any order from an investor or financial service firm, or to accept or
confirm any such order in part only, if in the judgment of the Principal
Underwriter such action is in the best interests of the Fund.
3. The Trust agrees that it will, from time to time, but subject to the
necessary approval of the Fund's shareholders, take such steps as may be
necessary to register the Fund's shares under the federal Securities Act of
1933, as amended from time to time (the "1933 Act"), to the end that there will
be available for sale such number of shares as the Principal Underwriter may
reasonably be expected to sell. The Trust agrees to indemnify and hold harmless
the Principal Underwriter and each person, if any, who controls the Principal
Underwriter within the meaning of Section 15 of the 1933 Act against any loss,
liability, claim, damages or expense (including the reasonable cost of
investigating or defending any alleged loss, liability, claim, damages or
expense and reasonable counsel fees incurred in connection therewith), arising
by reason of any person acquiring any shares of the Fund, which may be based
upon the 1933 Act or on any other statute or at common law, on the ground that
the Registration Statement or Prospectus, as from time to time amended and
supplemented, includes an untrue statement of a material fact or omits to state
a material fact required to be stated therein or necessary in order to make the
statements therein not misleading, unless such statement or omission was made in
reliance upon, and in conformity with, information furnished in writing to the
Trust in connection therewith by or on behalf of the Principal Underwriter;
provided, however, that in no case (i) is the indemnity of the Trust in favor of
the Principal Underwriter and any such controlling person to be deemed to
protect such Principal Underwriter or any such controlling person against any
liability to the Trust or the Fund or its security holders to which such
Principal Underwriter or any such controlling person would otherwise be subject
by reason of willful misfeasance, bad faith, or gross negligence in the
performance of its duties or by reason of its reckless disregard of its
obligations and duties under this Agreement, or (ii) is the Trust or the Fund to
be liable under its indemnity agreement contained in this paragraph with respect
to any claim made against the Principal Underwriter or any such controlling
person unless the Principal Underwriter or any such controlling person, as the
case may be, shall have notified the Trust in writing within a reasonable time
after the summons or other first legal process giving information of the nature
of the claim shall have been served upon the Principal Underwriter or such
controlling person (or after such Principal Underwriter or such controlling
person shall have received notice of such service on any designated agent), but
failure to notify the Trust of any such claim shall not relieve it from any
liability which the Fund may have to the person against whom such action is
brought otherwise than on account of its indemnity agreement contained in this
paragraph. The Trust shall be entitled to participate, at the expense of the
Fund, in the defense, or, if the Trust so elects, to assume the defense of any
suit brought to enforce any such liability, but if the Trust elects to assume
the defense, such defense shall be conducted by counsel chosen by it and
satisfactory to the Principal Underwriter or controlling person or persons,
defendant or defendants in the suit. In the event the Trust elects to assume the
defense of any such suit and retains such counsel, the Principal Underwriter or
controlling person or persons, defendant or defendants in the suit, shall bear
the fees and expenses of any additional counsel retained by them, but, in case
the Trust does not elect to assume the defense of any such suit, the Fund shall
reimburse the Principal Underwriter or controlling person or persons, defendant
or defendants in the suit, for the reasonable fees and expenses of any counsel
retained by them. The Trust agrees promptly to notify the Principal Underwriter
of the commencement of any litigation or proceedings against it or any of its
officers or Trustees in connection with the issuance or sale of any of the
Fund's shares.
4. The Principal Underwriter covenants and agrees that, in selling the
shares of the Fund, it will use its best efforts in all respects duly to conform
with the requirements of all state and federal laws relating to the sale of such
shares, and will indemnify and hold harmless the Trust and each of its Trustees
and officers and each person, if any, who controls the Trust within the meaning
of Section 15 of the 1933 Act, against any loss, liability, damages, claim or
expense (including the reasonable cost of investigating or defending any alleged
loss, liability, damages, claim or expense and reasonable counsel fees incurred
in connection therewith), arising by reason of any person acquiring any shares
of the Fund, which may be based upon the 1933 Act or any other statute or at
common law, on account of any wrongful act of the Principal Underwriter or any
of its employees (including any failure to conform with any requirement of any
state or federal law relating to the sale of such shares) or on the ground that
the registration statement or Prospectus, as from time to time amended and
supplemented, includes an untrue statement of a material fact or omits to state
a material fact required to be stated therein or necessary in order to make the
statements therein not misleading, insofar as any such statement or omission was
made in reliance upon, and in conformity with information furnished in writing
to the Fund in connection therewith by or on behalf of the Principal
Underwriter, provided, however, that in no case (i) is the indemnity of the
Principal Underwriter in favor of any person indemnified to be deemed to protect
the Fund or any such person against any liability to which the Fund or any such
person would otherwise be subject by reason of willful misfeasance, bad faith,
or gross negligence in the performance of its or his duties or by reason of its
or his reckless disregard of its obligations and duties under this Agreement, or
(ii) is the Principal Underwriter to be liable under its indemnity agreement
contained in this paragraph with respect to any claim made against the Fund or
any person indemnified unless the Trust or such person, as the case may be,
shall have notified the Principal Underwriter in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon the Trust, the Fund or upon such
person (or after the Trust, the Fund or such person shall have received notice
of such service on any designated agent), but failure to notify the Principal
Underwriter of any such claim shall not relieve it from any liability which it
may have to the Fund or any person against whom such action is brought otherwise
than on account of its indemnity agreement contained in this paragraph. The
Principal Underwriter shall be entitled to participate, at its own expense, in
the defense, or, if it so elects, to assume the defense of any suit brought to
enforce any such liability, but if the Principal Underwriter elects to assume
the defense, such defense shall be conducted by counsel chosen by it and
satisfactory to the Trust, or to its officers or Trustees, or to any controlling
person or persons, defendant or defendants in the suit. In the event that the
Principal Underwriter elects to assume the defense of any such suit and retains
such counsel, the Fund or such officers or Trustees or controlling person or
persons, defendant or defendants in the suit, shall bear the fees and expenses
of any additional counsel retained by them or the Trust, but, in case the
Principal Underwriter does not elect to assume the defense of any such suit, it
shall reimburse the Fund, any such officers and Trustees or controlling person
or persons, defendant or defendants in such suit, for the reasonable fees and
expenses of any counsel retained by them or the Trust. The Principal Underwriter
agrees promptly to notify the Trust of the commencement of any litigation or
proceedings against it in connection with the issue and sale of any of the
Fund's shares.
Neither the Principal Underwriter nor any financial service firm nor
any other person is authorized by the Trust to give any information or to make
any representations, other than those contained in the Registration Statement or
Prospectus filed with the Securities and Exchange Commission (the "Commission")
under the 1933 Act, (as said Registration Statement and Prospectus may be
amended or supplemented from time to time), covering the shares of the Fund.
Neither the Principal Underwriter nor any financial service firm nor any other
person is authorized to act as agent for the Trust or the Fund in connection
with the offering or sale of shares of the Fund to the public or otherwise. All
such sales made by the Principal Underwriter shall be made by it as principal,
for its own account. The Principal Underwriter may, however, act as agent in
connection with the repurchase of shares as provided in paragraph 6 below, or in
connection with "exchanges" between investment companies for which the Principal
Underwriter acts as Principal Underwriter or for which an affiliate of the
Principal Underwriter acts as investment adviser.
5(a). The Fund will pay, or cause to be paid -
(i) all the costs and expenses of the Fund, including fees and
disbursements of its counsel, in connection with the preparation and filing of
any required Registration Statement and/or Prospectus under the 1933 Act, or the
Investment Company Act of 1940, as amended from time to time (the "1940 Act"),
covering its shares and all amendments and supplements thereto, and preparing
and mailing periodic reports to shareholders (including the expense of setting
up in type any such Registration Statement, Prospectus or periodic report);
(ii) the cost of preparing temporary and permanent share
certificates (if any) for shares of the Fund;
(iii) the cost and expenses of delivering to the Principal
Underwriter at its office in Boston, Massachusetts, all shares of the Fund
purchased by it as principal hereunder; and
(iv) all the federal and state (if any) issue and/or transfer
taxes payable upon the issue by or (in the case of treasury shares) transfer
from the Fund to the Principal Underwriter of any and all shares of the Fund
purchased by the Principal Underwriter hereunder.
(b) The Principal Underwriter agrees that, after the Prospectus and
periodic reports have been set up in type, it will bear the expense of printing
and distributing any copies thereof which are to be used in connection with the
offering of shares of the Fund to financial service firms or investors. The
Principal Underwriter further agrees that it will bear the expenses of
preparing, printing and distributing any other literature used by the Principal
Underwriter or furnished by it for use by financial service firms in connection
with the offering of the shares of the Fund for sale to the public and any
expenses of advertising in connection with such offering. The Fund agrees to pay
the expenses of registration and maintaining registration of its shares for sale
under federal and state securities laws, and, if necessary or advisable in
connection therewith, of qualifying the Trust or the Fund as a dealer or broker,
in such states as shall be selected by the Principal Underwriter and the fees
payable to each such state for continuing the qualification therein until the
Principal Underwriter notifies the Trust that it does not wish such
qualification continued.
(c) In addition, the Trust agrees, in accordance with the Fund's
Distribution Plan (the "Plan"), adopted pursuant to Rule 12b-1 under the 1940
Act with respect to shares, to make certain payments as follows. The Principal
Underwriter shall be entitled to be paid by the Fund a sales commission equal to
an amount not exceeding 5% of the price received by the Fund for each sale of
shares (excluding reinvestment of dividends and distributions), such payment to
be made in the manner set forth in this paragraph 5. The Principal Underwriter
shall also be entitled to be paid by the Fund a separate distribution fee
(calculated in accordance with paragraph 5(d)), such payment to be made in the
manner set forth and subject to the terms of this paragraph 5.
(d) The sales commissions and distribution fees referred to in
paragraph 5(c) shall be accrued and paid by the Fund in the following manner.
The Fund shall accrue daily an amount calculated at the rate of .75% per annum
of the daily net assets of the Fund, which net assets shall be computed as
described in paragraph 2. The daily amounts so accrued throughout the month
shall be paid to the Principal Underwriter on the last day of each month. The
amount of such daily accrual, as so calculated, shall first be applied and
charged to all unpaid sales commissions, and the balance, if any, shall then be
applied and charged to all unpaid distribution fees. No amount shall be accrued
with respect to any day on which there exist no outstanding uncovered
distribution charges of the Principal Underwriter. The amount of such uncovered
distribution charges shall be calculated daily. For purposes of this
calculation, distribution charges of the Principal Underwriter shall include (a)
the aggregate of all sales commissions which the Principal Underwriter (and
Prior Principal Underwriter) has been paid pursuant to this paragraph (d) (and
pursuant to paragraph (d) of the Prior Agreements) plus all sales commissions
which it is entitled to be paid pursuant to paragraph 5(c) (and pursuant to
paragraph (d) of the Prior Agreements) since inception of the Prior Agreements
through and including the day next preceding the date of calculation, and (b) an
amount equal to the aggregate of all distribution fees referred to below which
the Principal Underwriter (and Prior Principal Underwriter) has been paid
pursuant to this paragraph (d) (and pursuant to paragraph (d) of the Prior
Agreements) plus all such fees which it is entitled to be paid pursuant to
paragraph 5(c) (and pursuant to paragraph 5(c) of the Prior Agreements) since
inception of the Prior Agreements through and including the day next preceding
the date of calculation. From this sum (distribution charges) there shall be
subtracted (i) the aggregate amount paid or payable to the Principal Underwriter
(and Prior Principal Underwriter) pursuant to this paragraph (d) (and pursuant
to paragraph (d) of the Prior Agreements) since inception of the Prior
Agreements through and including the day next preceding the date of calculation
and (ii) the aggregate amount of all contingent deferred sales charges paid or
payable to the Principal Underwriter (and Prior Principal Underwriter) since
inception of the Prior Agreements through and including the day next preceding
the date of calculation. If the result of such subtraction is a positive amount,
a distribution fee [computed at the rate of 1% per annum above the prime rate
(being the base rate on corporate loans posted by at least 75% of the nation's
30 largest banks) then being reported in the Eastern Edition of The Wall Street
Journal or if such prime rate is not so reported such other rate as may be
designated from time to time by vote or other action of a majority of (i) those
Trustees of the Trust who are not "interested persons" of the Trust (as defined
in the 1940 Act) and have no direct or indirect financial interest in the
operation of the Plan or any agreements related to it (the "Rule 12b-1
Trustees") and (ii) all of the Trustees then in office] shall be computed on
such amount and added to such amount, with the resulting sum constituting the
amount of outstanding uncovered distribution charges of the Principal
Underwriter with respect to such day for all purposes of this Agreement. If the
result of such subtraction is a negative amount, there shall exist no
outstanding uncovered distribution charges of the Principal Underwriter with
respect to such day and no amount shall be accrued or paid to the Principal
Underwriter with respect to such day. The aggregate amounts accrued and paid
pursuant to this paragraph (d) during any fiscal year of the Fund shall not
exceed .75% of the average daily net assets of the Fund for such year.
(e) The Principal Underwriter shall be entitled to receive all
contingent deferred sales charges paid or payable with respect to any day on
which there exist outstanding uncovered distribution charges of the Principal
Underwriter. The Fund shall be entitled to receive all remaining contingent
deferred sales charges paid or payable by shareholders with respect to any day
on which there exist no outstanding uncovered distribution charges of the
Principal Underwriter, provided that no such sales charge which would cause the
Fund to exceed the maximum applicable cap imposed thereon by paragraph (2) of
subsection (d) of Section 26 of Article III of the Rules of Fair Practice of the
National Association of Securities Dealers, Inc. shall be imposed.
(f) The persons authorized to direct the disposition of monies paid or
payable on behalf of the Fund pursuant to the Plan or this Agreement shall be
the President or any Vice President of the Trust. Such persons shall provide to
the Trust's Trustees and the Trustees shall review, at least quarterly, a
written report of the amounts so expended and the purposes for which such
expenditures were made.
(g) In addition to the payments to the Principal Underwriter provided
for in paragraph 5(d), the Fund may make payments of service fees to the
Principal Underwriter, Authorized Firms and other persons. The aggregate of such
payments during any fiscal year of the Fund shall not exceed .25% of the Fund's
average daily net assets for such year.
6. The Trust hereby authorizes the Principal Underwriter to repurchase,
upon the terms and conditions set forth in written instructions given by the
Trust to the Principal Underwriter from time to time, as agent of the Fund and
for its account, such shares of the Fund as may be offered for sale to the Fund
from time to time.
(a) The Principal Underwriter shall notify in writing IBT and First
Data, at the end of each business day, or as soon thereafter as the repurchases
in each pricing period have been compiled, of the number of shares repurchased
for the account of the Fund since the last previous report, together with the
prices at which such repurchases were made, and upon the request of any officer
or Trustee of the Trust shall furnish similar information with respect to all
repurchases made up to the time of the request on any day.
(b) The Trust reserves the right to suspend or revoke the foregoing
authorization at any time; unless otherwise stated, any such suspension or
revocation shall be effective forthwith upon receipt of notice thereof by an
officer of the Principal Underwriter, by telegraph or by written instrument from
an officer of the Trust duly authorized by its Trustees. In the event that the
authorization of the Principal Underwriter is, by the terms of such notice,
suspended for more than twenty-four hours or until further notice, the
authorization given by this paragraph 6 shall not be revived except by action of
a majority of the Trustees of the Trust.
(c) The Principal Underwriter shall have the right to terminate the
operation of this paragraph 6 upon giving to the Trust thirty (30) days' written
notice thereof.
(d) The Trust agrees to authorize and direct IBT to pay, for the
account of the Fund, the purchase price of any shares so repurchased against
delivery of the certificates in proper form for transfer to the Fund or for
cancellation by the Fund.
(e) The Principal Underwriter shall receive no commission in respect of
any repurchase of shares under the foregoing authorization and appointment as
agent, except for any sales commission, distribution fee or contingent deferred
sales charges payable under paragraph 5.
(f) The Trust agrees that the Fund will reimburse the Principal
Underwriter, from time to time on demand, for any reasonable expenses incurred
in connection with the repurchase of shares of the Fund pursuant to this
paragraph 6.
7. If, at any time during the existence of this Agreement, the Trust
shall deem it necessary or advisable in the best interests of the Fund that any
amendment of this Agreement be made in order to comply with the recommendations
or requirements of the Commission or other governmental authority or to obtain
any advantage under Massachusetts or federal tax laws, and shall notify the
Principal Underwriter of the form of amendment which it deems necessary or
advisable and the reasons therefor, and, if the Principal Underwriter declines
to assent to such amendment, the Trust may terminate this Agreement forthwith by
written notice to the Principal Underwriter. If, at any time during the
existence of its agreement upon request by the Principal Underwriter, the Trust
fails (after a reasonable time) to make any changes in its Declaration of Trust,
as amended, or in its methods of doing business which are necessary in order to
comply with any requirement of federal law or regulations of the Commission or
of a national securities association of which the Principal Underwriter is or
may be a member, relating to the sale of the shares of the Fund, the Principal
Underwriter may terminate this Agreement forthwith by written notice to the
Trust.
8. The term "net asset value" as used in this Agreement with reference
to the shares of the Fund shall have the same meaning as used in the Declaration
of Trust, as amended, and calculated in the manner referred to in paragraph 2
above.
9(a). The Principal Underwriter is a corporation in the United States
organized under the laws of Massachusetts and holding membership in the National
Association of Securities Dealers, Inc., a securities association registered
under Section 15A of the Securities Exchange Act of 1934, as amended from time
to time, and during the life of this Agreement will continue to be so resident
in the United States, so organized and a member in good standing of said
Association. The Principal Underwriter will comply with the Trust's Declaration
of Trust and By-Laws, and the 1940 Act and the rules promulgated thereunder,
insofar as they are applicable to the Principal Underwriter.
(b) The Principal Underwriter shall maintain in the United States and
preserve therein for such period or periods as the Commission shall prescribe by
rules and regulations applicable to it as Principal Underwriter of an open-end
investment company registered under the 1940 Act such accounts, books and other
documents as are necessary or appropriate to record its transactions with the
Fund. Such accounts, books and other documents shall be subject at any time and
from time to time to such reasonable periodic, special and other examinations by
the Commission or any member or representative thereof as the Commission may
prescribe. The Principal Underwriter shall furnish to the Commission within such
reasonable time as the Commission may prescribe copies of or extracts from such
records which may be prepared without effort, expense or delay as the Commission
may by order require.
10. This Agreement shall continue in force indefinitely until
terminated as in this Agreement above provided, except that:
(a) this Agreement shall continue in effect through and including April
28, 1997 (or, if applicable, the next April 28 which follows the day on which
the Fund has become a party hereto by amendment of Schedule A subsequent to
April 28, 1997) and shall continue in full force and effect indefinitely
thereafter, but only so long as such continuance is specifically approved at
least annually (i) by the vote of a majority of the Rule 12b-1 Trustees cast in
person at a meeting called for the purpose of voting on such approval, and (ii)
by the Trustees of the Trust or by vote of a majority of the outstanding voting
securities of the Fund;
(b) this Agreement may be terminated at any time by vote of a majority
of the Rule 12b-1 Trustees or by vote of a majority of the outstanding voting
securities of the Fund on not more than sixty (60) days' notice to the Principal
Underwriter. The Principal Underwriter shall be entitled to receive all
contingent deferred sales charges paid or payable with respect to any day
subsequent to the termination of this Agreement;
(c) the Principal Underwriter shall have the right to terminate this
Agreement on six (6) months' written notice thereof given in writing to the
Fund;
(d) the Trust shall have the right to terminate this Agreement
forthwith in the event that it shall have been established by a court of
competent jurisdiction that the Principal Underwriter or any director or officer
of the Principal Underwriter has taken any action which results in a breach of
the covenants set out in paragraph 9 hereof; and
(e) additional series of the Trust will become parties hereto upon
approval by the Trustees of the Trust and amendment of Schedule A.
11. In the event of the assignment of this Agreement by the Principal
Underwriter, this Agreement shall automatically terminate.
12. Any notice under this Agreement shall be in writing, addressed and
delivered, or mailed postage paid, to the other party, at such address as such
other party may designate for the receipt of such notices. Until further notice
to the other party, it is agreed that the record address of the Trust and that
of the Principal Underwriter, shall be 24 Federal Street, Boston, Massachusetts
02110.
13. The services of the Principal Underwriter to the Fund hereunder are
not to be deemed to be exclusive, the Principal Underwriter being free to (a)
render similar service to, and to act as principal underwriter in connection
with the distribution of shares of, other series of the Trust or other
investment companies, and (b) engage in other business and activities from time
to time.
14. The terms "vote of a majority of the outstanding voting
securities," "assignment" and "interested persons," when used herein, shall have
the respective meanings specified in the 1940 Act, subject, however, to such
exemptions as may be granted by the Commission by any rule, regulation or order.
15. The Principal Underwriter expressly acknowledges the provision in
the Trust's Declaration of Trust limiting the personal liability of the
shareholders of the Fund or the Trustees of the Trust. The Principal Underwriter
hereby agrees that it shall have recourse to the Trust or the Fund for payment
of claims or obligations as between the Trust or the Fund and the Principal
Underwriter arising out of this Agreement and shall not seek satisfaction from
the shareholders or any shareholder of the Trust or from the Trustees or any
Trustee of the Trust. The Fund shall not be responsible for obligations of any
other series of the Trust.
16. The term "Prior Principal Underwriter" means Eaton Vance
Distributors, Inc., a separate Massachusetts corporation that has served as
principal underwriter prior to the effective date of this Agreement. All
references in this Agreement to the "Prior Agreements" shall mean the
distribution agreements referenced on Schedule A hereto between the Trust on
behalf of the Fund and the Prior Principal Underwriter. Such references shall
not be applicable to any additional series of the Trust which becomes a Fund
hereunder by amendment of Schedule A hereafter.
17. This Agreement shall amend, replace and be substituted for the
Prior Agreements as of the opening of business on November 1, 1996, and this
Agreement shall be effective as of such time. The outstanding uncovered
distribution charges of the Prior Principal Underwriter calculated under the
Prior Agreements as of the close of business on October 31, 1996 shall be
outstanding uncovered distribution charges of the Principal Underwriter
calculated under this Agreement as of the opening of business on November 1,
1996.
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement
on the 18th day of October, 1996.
EATON VANCE MUNICIPALS TRUST II
By /s/Thomas J. Fetter
---------------------------
President
EATON VANCE DISTRIBUTORS, INC.
By /s/ H. Day Brigham, Jr.
---------------------------
Vice President
<PAGE>
SCHEDULE A
EATON VANCE MUNICIPALS TRUST II
DISTRIBUTION AGREEMENT
(MARATHON FUNDS)
DATED NOVEMBER 1, 1996
Name of Fund Inception Date of Prior Agreements
- ------------ ----------------------------------
EV Marathon Florida Insured Municipals Fund February 25, 1994/June 19, 1995
EV Marathon Hawaii Municipals Fund February 25, 1994/June 19, 1995
EV Marathon High Yield Municipals Fund June 19, 1995
EV Marathon Kansas Municipals Fund February 25, 1994/June 19, 1995
EXHIBIT 99.(6)(a)(2)
EATON VANCE MUNICIPALS TRUST II
DISTRIBUTION AGREEMENT
(TRADITIONAL FUNDS)
AGREEMENT effective November 1, 1996 between EATON VANCE MUNICIPALS
TRUST II, hereinafter called the "Trust," a Massachusetts business trust having
its principal place of business in Boston in the Commonwealth of Massachusetts,
on behalf of each of its series listed on Schedule A (the "Funds") and EATON
VANCE DISTRIBUTORS, INC., a Massachusetts corporation having its principal place
of business in said Boston and formerly named EV Distributors, Inc., hereinafter
sometimes called the "Principal Underwriter."
IN CONSIDERATION of the mutual promises and undertakings herein
contained, the parties hereto agree with respect to each Fund:
1. The Trust grants to the Principal Underwriter the right to purchase
shares of the Fund upon the terms hereinbelow set forth during the term of this
Agreement. While this Agreement is in force, the Principal Underwriter agrees to
use its best efforts to find purchasers for shares of the Fund.
The Principal Underwriter shall have the right to buy from the Fund the
shares needed, but not more than the shares needed (except for clerical errors
and errors of transmission) to fill unconditional orders for shares of the Fund
placed with the Principal Underwriter by financial service firms or investors as
set forth in the current Prospectus relating to shares of the Fund. The price
which the Principal Underwriter shall pay for the shares so purchased shall be
the net asset value used in determining the public offering price on which such
orders were based. The Principal Underwriter shall notify Investors Bank & Trust
Company, Custodian of the Fund ("IBT"), and First Data Investor Services Group,
Transfer Agent of the Fund ("First Data"), or a successor transfer agent, at the
end of each business day, or as soon thereafter as the orders placed with it
have been compiled, of the number of shares and the prices thereof which the
Principal Underwriter is to purchase as principal for resale. The Principal
Underwriter shall take down and pay for shares ordered from the Fund on or
before the eleventh business day (excluding Saturdays) after the shares have
been so ordered.
The right granted to the Principal Underwriter to buy shares from the
Fund shall be exclusive, except that said exclusive right shall not apply to
shares issued in connection with the merger or consolidation of any other
investment company or personal holding company with the Fund or the acquisition
by purchase or otherwise of all (or substantially all) the assets or the
outstanding shares of any such company, by the Fund; nor shall it apply to
shares, if any, issued by the Fund in distribution of income or realized capital
gains of the Fund payable in shares or in cash at the option of the shareholder.
2. The shares may be resold by the Principal Underwriter to or through
financial service firms having agreements with the Principal Underwriter, and to
investors, upon the following terms and conditions.
The public offering price, i.e., the price per share at which the
Principal Underwriter or financial service firm purchasing shares from the
Principal Underwriter may sell shares to the public, shall be the public
offering price as set forth in the current Prospectus relating to said shares,
but not to exceed the net asset value at which the Principal Underwriter is to
purchase the shares, plus a sales charge not to exceed 7.25% of the public
offering price (the net asset value divided by .9275). If the resulting public
offering price does not come out to an even cent, the public offering price
shall be adjusted to the nearer cent.
The Principal Underwriter may also sell shares at the net asset value
at which the Principal Underwriter is to purchase such shares, provided such
sales are not inconsistent with the provisions of Section 22(d) of the
Investment Company Act of 1940, as amended from time to time (the "1940 Act"),
and the rules thereunder, including any applicable exemptive orders or
administrative interpretations or "no-action" positions with respect thereto.
The net asset value of shares of the Fund shall be determined by the
Trust or IBT, as the agent of the Fund, as of the close of regular trading on
the New York Stock Exchange on each business day on which said Exchange is open,
or as of such other time on each such business day as may be determined by the
Trustees of the Trust, in accordance with the methodology and procedures for
calculating such net asset value authorized by the Trustees. The Trust may also
cause the net asset value to be determined in substantially the same manner or
estimated in such manner and as of such other time or times as may from time to
time be agreed upon by the Trust and Principal Underwriter. The Trust will
notify the Principal Underwriter each time the net asset value of the Fund's
shares is determined and when such value is so determined it shall be applicable
to transactions as set forth in the current Prospectus and Statement of
Additional Information (hereafter the "Prospectus") relating to the Fund's
shares.
No shares of the Fund shall be sold by the Fund during any period when
the determination of net asset value is suspended pursuant to the Declaration of
Trust, except to the Principal Underwriter, in the manner and upon the terms
above set forth to cover contracts of sale made by the Principal Underwriter
with its customers prior to any such suspension, and except as provided in the
last paragraph of paragraph 1 hereof. The Trust shall also have the right to
suspend the sale of the Fund's shares if in the judgment of the Trust conditions
obtaining at any time render such action advisable. The Principal Underwriter
shall have the right to suspend sales at any time, to refuse to accept or
confirm any order from an investor or financial service firm, or to accept or
confirm any such order in part only, if in the judgment of the Principal
Underwriter such action is in the best interests of the Fund.
3. The Trust covenants and agrees that it will, from time to time, but
subject to the necessary approval of the Fund's shareholders, take such steps as
may be necessary to register the Fund's shares under the federal Securities Act
of 1933, as amended from time to time (the "1933 Act"), to the end that there
will be available for sale such number of shares as the Principal Underwriter
may reasonably be expected to sell. The Trust covenants and agrees to indemnify
and hold harmless the Principal Underwriter and each person, if any, who
controls the Principal Underwriter within the meaning of Section 15 of the 1933
Act against any loss, liability, claim, damages or expense (including the
reasonable cost of investigating or defending any alleged loss, liability,
claim, damages or expense and reasonable counsel fees incurred in connection
therewith), arising by reason of any person acquiring any shares of the Fund,
which may be based upon the 1933 Act or on any other statute or at common law,
on the ground that the Registration Statement or Prospectus, as from time to
time amended and supplemented, includes an untrue statement of a material fact
or omits to state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading, unless such statement or
omission was made in reliance upon, and in conformity with, information
furnished in writing to the Trust in connection therewith by or on behalf of the
Principal Underwriter; provided, however, that in no case (i) is the indemnity
of the Trust in favor of the Principal Underwriter and any such controlling
person to be deemed to protect such Principal Underwriter or any such
controlling person against any liability to the Trust or the Fund or its
security holders to which such Principal Underwriter or any such controlling
person would otherwise be subject by reason of willful misfeasance, bad faith,
or gross negligence in the performance of its duties or by reason of its
reckless disregard of its obligations and duties under this Agreement, or (ii)
is the Trust or the Fund to be liable under its indemnity agreement contained in
this paragraph with respect to any claim made against the Principal Underwriter
or any such controlling person unless the Principal Underwriter or any such
controlling person, as the case may be, shall have notified the Trust in writing
within a reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon the Principal
Underwriter or such controlling person (or after such Principal Underwriter or
such controlling person shall have received notice of such service on any
designated agent), but failure to notify the Trust of any such claim shall not
relieve it from any liability which the Fund may have to the person against whom
such action is brought otherwise than on account of its indemnity agreement
contained in this paragraph. The Trust shall be entitled to participate, at the
expense of the Fund, in the defense, or, if the Trust so elects, to assume the
defense of any suit brought to enforce any such liability, but if the Trust
elects to assume the defense, such defense shall be conducted by counsel chosen
by it and satisfactory to the Principal Underwriter or controlling person or
persons, defendant or defendants in the suit. In the event the Trust elects to
assume the defense of any such suit and retains such counsel, the Principal
Underwriter or controlling person or persons, defendant or defendants in the
suit, shall bear the fees and expenses of any additional counsel retained by
them, but, in case the Trust does not elect to assume the defense of any such
suit, the Fund shall reimburse the Principal Underwriter or controlling person
or persons, defendant or defendants in the suit, for the reasonable fees and
expenses of any counsel retained by them. The Trust agrees promptly to notify
the Principal Underwriter of the commencement of any litigation or proceedings
against it or any of its officers or Trustees in connection with the issuance or
sale of any of the Fund's shares.
4. The Principal Underwriter covenants and agrees that, in selling the
shares of the Fund, it will use its best efforts in all respects duly to conform
with the requirements of all state and federal laws relating to the sale of such
shares, and will indemnify and hold harmless the Trust and each of its Trustees
and officers and each person, if any, who controls the Trust within the meaning
of Section 15 of the 1933 Act, against any loss, liability, damages, claim or
expense (including the reasonable cost of investigating or defending any alleged
loss, liability, damages, claim or expense and reasonable counsel fees incurred
in connection therewith), arising by reason of any person acquiring any shares
of the Fund, which may be based upon the 1933 Act or any other statute or at
common law, on account of any wrongful act of the Principal Underwriter or any
of its employees (including any failure to conform with any requirement of any
state or federal law relating to the sale of such shares) or on the ground that
the registration statement or Prospectus, as from time to time amended and
supplemented, includes an untrue statement of a material fact or omits to state
a material fact required to be stated therein or necessary in order to make the
statements therein not misleading, insofar as any such statement or omission was
made in reliance upon, and in conformity with information furnished in writing
to the Trust in connection therewith by or on behalf of the Principal
Underwriter, provided, however, that in no case (i) is the indemnity of the
Principal Underwriter in favor of any person indemnified to be deemed to protect
the Fund or any such person against any liability to which the Fund or any such
person would otherwise be subject by reason of willful misfeasance, bad faith,
or gross negligence in the performance of its or his duties or by reason of its
or his reckless disregard of its obligations and duties under this Agreement, or
(ii) is the Principal Underwriter to be liable under its indemnity agreement
contained in this paragraph with respect to any claim made against the Fund or
any person indemnified unless the Trust or such person, as the case may be,
shall have notified the Principal Underwriter in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon the Trust, the Fund or upon such
person (or after the Trust, the Fund or such person shall have received notice
of such service on any designated agent), but failure to notify the Principal
Underwriter of any such claim shall not relieve it from any liability which it
may have to the Fund or any person against whom such action is brought otherwise
than on account of its indemnity agreement contained in this paragraph. The
Principal Underwriter shall be entitled to participate, at its own expense, in
the defense, or, if it so elects, to assume the defense of any suit brought to
enforce any such liability, but if the Principal Underwriter elects to assume
the defense, such defense shall be conducted by counsel chosen by it and
satisfactory to the Trust, or to its officers or Trustees, or to any controlling
person or persons, defendant or defendants in the suit. In the event that the
Principal Underwriter elects to assume the defense of any such suit and retains
such counsel, the Fund or such officers or Trustees or controlling person or
persons, defendant or defendants in the suit, shall bear the fees and expenses
of any additional counsel retained by them or the Trust, but, in case the
Principal Underwriter does not elect to assume the defense of any such suit, it
shall reimburse the Fund, any such officers and Trustees or controlling person
or persons, defendant or defendants in such suit, for the reasonable fees and
expenses of any counsel retained by them or the Trust. The Principal Underwriter
agrees promptly to notify the Trust of the commencement of any litigation or
proceedings against it in connection with the issue and sale of any of the
Fund's shares.
Neither the Principal Underwriter nor any financial service firm nor
any other person is authorized by the Trust to give any information or to make
any representations, other than those contained in the Registration Statement or
Prospectus filed with the Securities and Exchange Commission (the "Commission")
under the 1933 Act (as said Registration Statement and Prospectus may be amended
or supplemented from time to time), covering the shares of the Fund. Neither the
Principal Underwriter nor any financial service firm nor any other person is
authorized to act as agent for the Trust or the Fund in connection with the
offering or sale of shares of the Fund to the public or otherwise. All such
sales made by the Principal Underwriter shall be made by it as principal, for
its own account. The Principal Underwriter may, however, act as agent in
connection with the repurchase of shares as provided in paragraph 6 below, or in
connection with "exchanges" between investment companies for which the Principal
Underwriter (or an affiliate thereof) acts as principal underwriter or
investment adviser.
5(a). The Fund will pay, or cause to be paid -
(i) all the costs and expenses of the Fund, including fees and
disbursements of its counsel, in connection with the preparation and filing of
any required Registration Statement and/or Prospectus under the 1933 Act, or the
1940 Act, covering its shares and all amendments and supplements thereto, and
preparing and distributing periodic reports to shareholders (including the
expense of setting up in type any such Registration Statement, Prospectus or
periodic report);
(ii) the cost of preparing temporary and permanent share
certificates (if any) for shares of the Fund;
(iii) the cost and expenses of delivering to the Principal
Underwriter at its office in Boston, Massachusetts, all shares of the Fund
purchased by it as principal hereunder;
(iv) all the federal and state (if any) issue and/or transfer
taxes payable upon the issue by or (in the case of treasury shares) transfer
from the Fund to the Principal Underwriter of any and all shares of the Fund
purchased by the Principal Underwriter hereunder;
(v) the fees, costs and expenses of the registration or
qualification of shares of the Fund for sale in the various states, territories
or other jurisdictions (including without limitation the registering or
qualifying the Fund as a broker or dealer or any officer of the Fund as agent or
salesman in any state, territory or other jurisdiction); and
(vi) all payments to be made by the Fund pursuant to any
written plan approved in accordance with Rule 12b-1 under the 1940 Act or any
written service plan.
(b) The Principal Underwriter agrees that, after the Prospectus (other
than to existing shareholders of the Fund) and periodic reports have been set up
in type, it will bear the expense of printing and distributing any copies
thereof which are to be used in connection with the offering of shares of the
Fund to financial service firms or investors. The Principal Underwriter further
agrees that it will bear the expenses of preparing, printing and distributing
any other literature used by the Principal Underwriter or furnished by it for
use by financial service firms in connection with the offering of the shares of
the Fund for sale to the public and any expenses of advertising in connection
with such offering.
(c) The Principal Underwriter shall be entitled to receive all
contingent deferred sales charges imposed in accordance with the Prospectus on
early redemptions of Fund shares.
6. The Trust hereby authorizes the Principal Underwriter to
repurchase, upon the terms and conditions set forth in written instructions
given by the Trust to the Principal Underwriter from time to time, as agent of
the Fund and for its account, such shares of the Fund as may be offered for sale
to the Fund from time to time.
(a) The Principal Underwriter shall notify in writing IBT and First
Data, at the end of each business day, or as soon thereafter as the repurchases
in each pricing period have been compiled, of the number of shares repurchased
for the account of the Fund since the last previous report, together with the
prices at which such repurchases were made, and upon the request of any officer
or Trustee of the Trust shall furnish similar information with respect to all
repurchases made up to the time of the request on any day.
(b) The Trust reserves the right to suspend or revoke the foregoing
authorization at any time; unless otherwise stated, any such suspension or
revocation shall be effective forthwith upon receipt of notice thereof by an
officer of the Principal Underwriter, by telegraph or by written instrument from
an officer of the Trust duly authorized by its Trustees. In the event that the
authorization of the Principal Underwriter is, by the terms of such notice,
suspended for more than twenty-four hours or until further notice, the
authorization given by this paragraph 6 shall not be revived except by action of
a majority of the Trustees of the Trust.
(c) The Principal Underwriter shall have the right to terminate the
operation of this paragraph 6 upon giving to the Trust thirty (30) days' written
notice thereof.
(d) The Trust agrees to authorize and direct IBT, to pay, for the
account of the Fund, the purchase price of any shares so repurchased against
delivery of the certificates in proper form for transfer to the Fund or for
cancellation by the Fund.
(e) The Principal Underwriter shall receive no commission in respect of
any repurchase of shares under the foregoing authorization and appointment as
agent, except contingent deferred sales charges.
(f) The Trust agrees that the Fund will reimburse the Principal
Underwriter, from time to time on demand, for any reasonable expenses incurred
in connection with the repurchase of shares of the Fund pursuant to this
paragraph 6.
7. If, at any time during the existence of this Agreement, the Trust
shall deem it necessary or advisable in the best interests of the Fund that any
amendment of this Agreement be made in order to comply with the recommendations
or requirements of the Commission or other governmental authority or to obtain
any advantage under Massachusetts or federal tax laws, and shall notify the
Principal Underwriter of the form of amendment which it deems necessary or
advisable and the reasons therefor, and, if the Principal Underwriter declines
to assent to such amendment, the Trust may terminate this Agreement forthwith by
written notice to the Principal Underwriter. If, at any time during the
existence of this Agreement upon request by the Principal Underwriter, the Trust
fails (after a reasonable time) to make any changes in its Declaration of Trust,
as amended, or in its methods of doing business which are necessary in order to
comply with any requirement of federal law or regulations of the Commission or
of a national securities association of which the Principal Underwriter is or
may be a member, relating to the sale of the shares of the Fund, the Principal
Underwriter may terminate this Agreement forthwith by written notice to the
Trust.
8(a). The Principal Underwriter is a corporation in the United States
organized under the laws of Massachusetts and holding membership in the National
Association of Securities Dealers, Inc., a securities association registered
under Section 15A of the Securities Exchange Act of 1934, as amended from time
to time, and during the life of this Agreement will continue to be so resident
in the United States, so organized and a member in good standing of said
Association. The Principal Underwriter covenants that it and its officers and
directors will comply with the Trust's Declaration of Trust and By-Laws, and the
1940 Act and the rules promulgated thereunder, insofar as they are applicable to
the Principal Underwriter.
(b) The Principal Underwriter shall maintain in the United States and
preserve therein for such period or periods as the Commission shall prescribe by
rules and regulations applicable to it as Principal Underwriter of an open-end
investment company registered under the 1940 Act such accounts, books and other
documents as are necessary or appropriate to record its transactions with the
Fund. Such accounts, books and other documents shall be subject at any time and
from time to time to such reasonable periodic, special and other examinations by
the Commission or any member or representative thereof as the Commission may
prescribe. The Principal Underwriter shall furnish to the Commission within such
reasonable time as the Commission may prescribe copies of or extracts from such
records which may be prepared without effort, expense or delay as the Commission
may by order require.
9. This Agreement shall continue in force indefinitely until terminated
as in this Agreement above provided, except that:
(a) this Agreement shall continue in effect through and including April
28, 1997 (or, if applicable, the next April 28 which follows the day on which
the Fund has become a party hereto by amendment of Schedule A subsequent to
April 28, 1997) and shall continue in full force and effect indefinitely
thereafter, but only so long as such continuance is specifically approved at
least annually (i) by the vote of a majority of the Trustees of the Trust who
are not interested persons of the Trust or of the Principal Underwriter cast in
person at a meeting called for the purpose of voting on such approval, and (ii)
by the Trustees of the Trust or by vote of a majority of the outstanding voting
securities of the Fund;
(b) that either party shall have the right to terminate this Agreement
on six (6) months' written notice thereof given in writing to the other; and
(c) additional series of the Trust will become parties hereto upon
approval by the Trustees of the Trust and amendment of Schedule A.
10. In the event of the assignment of this Agreement by the Principal
Underwriter, this Agreement shall automatically terminate.
11. Any notice under this Agreement shall be in writing, addressed and
delivered, or mailed postage paid, to the other party, at such address as such
other party may designate for the receipt of such notices. Until further notice
to the other party, it is agreed that the record address of the Trust and that
of the Principal Underwriter, shall be 24 Federal Street, Boston, Massachusetts
02110.
12. The services of the Principal Underwriter to the Fund hereunder are
not to be deemed to be exclusive, the Principal Underwriter being free to (a)
render similar services to, and to act as principal underwriter in connection
with the distribution of shares of, other series of the Trust or other
investment companies, and (b) engage in other business and activities from time
to time.
13. The terms "vote of a majority of the outstanding voting
securities," "assignment" and "interested persons," when used herein, shall have
the respective meanings specified in the 1940 Act, subject, however, to such
exemptions as may be granted by the Commission by any rule, regulation or order.
14. The Principal Underwriter expressly acknowledges the provision in
the Trust's Declaration of Trust limiting the personal liability of the
shareholders of the Fund or the Trustees of the Trust. The Principal Underwriter
hereby agrees that it shall have recourse only to the assets of the Fund for
payment of claims or obligations as between the Trust on behalf of the Fund, and
the Principal Underwriter arising out of this Agreement and shall not seek
satisfaction from any shareholders of the Trust or from the Trustees or any
Trustee of the Trust. The Fund shall not be responsible for obligations of any
other series of the Trust.
15. All references in this Agreement to the "Prior Agreements" shall
mean the distribution agreements referenced on Schedule A hereto between the
Trust on behalf of the Fund and the Prior Principal Underwriter, Eaton Vance
Distributors, Inc., a separate Massachusetts corporation that has served as
principal underwriter prior to the effective date of this Agreement. Such
references shall not be applicable to any additional series of the Trust which
becomes a Fund hereunder by amendment of Schedule A hereafter.
16. This Agreement shall amend, replace and be substituted for the
Prior Agreements as of the opening of business on November 1, 1996, and this
Agreement shall be effective as of such time.
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement
the 18th day of October, 1996.
EATON VANCE MUNICIPALS TRUST II
By /s/ Thomas J. Fetter
-----------------------------
President
EATON VANCE DISTRIBUTORS, INC.
By /s/ H. Day Brigham, Jr.
-----------------------------
Vice President
<PAGE>
SCHEDULE A
EATON VANCE MUNICIPALS TRUST II
DISTRIBUTION AGREEMENT
(TRADITIONAL FUNDS)
DATED NOVEMBER 1, 1996
Name of Fund Inception Date of Prior Agreements
- ------------ ----------------------------------
EV Traditional Florida Insured Municipals
Fund February 25, 1994/June 19, 1995
EV Traditional Hawaii Municipals Fund* February 25, 1994/January 27, 1995
EV Traditional High Yield Municipals Fund June 19, 1995
EV Traditional Kansas Municipals Fund* February 25, 1994/January 27, 1995
- --------
*This fund formerly was a classic series of the Trust.
<PAGE>
EXHIBIT 99.11
CONSENT OF INDEPENDENT AUDITORS
We consent to the use in Post-Effective Amendment No. 6 to the
Registration Statement on Form N-1A of Eaton Vance Municipals Trust II (1933 Act
File Number 33-71320) on behalf of EV Traditional High Yield Municipals Fund
(the "Fund") of our report dated March 1, 1996 on our audit of the financial
statements and financial highlights of the Fund and of our report on our audit
of the financial statements and supplementary data of High Yield Municipals
Portfolio dated March 1, 1996, which reports are included in the Fund's Annual
Report to Shareholders for the year ended January 31, 1996, which is
incorporated by reference in this Registration Statement.
We also consent to the reference to our Firm under the caption "The Fund's
Financial Highlights" in the Fund's Prospectus and under the captions
"Independent Certified Public Accountants" and "Financial Statements" in the
Fund's Statement of Additional Information of the Registration Statement.
/s/ DELOITTE & TOUCHE LLP
---------------------------------
DELOITTE & TOUCHE LLP
Boston, Massachusetts
November 21, 1996
<PAGE>
EXHIBIT 99.(15)(b)
EATON VANCE MUNICIPALS TRUST II
(MARATHON SERIES)
AMENDMENT TO
AMENDED DISTRIBUTION PLAN
Whereas Eaton Vance Distributors, Inc. (the "prior principal underwriter")
has served as the Principal Underwriter of Trust shares with multiple series as
listed on Amended Schedule A of the Trust's Amended Distribution Plan, prior to
the effective date of this Amendment, and whereas Eaton Vance Distributors, Inc.
(currently named EV Distributors, Inc.) a separate Massachusetts corporation
(the "successor principal underwriter") is succeeding to the business of the
prior principal underwriter on November 1, 1996, the Trust hereby amends its
Amended Distribution Plan of the above funds, by substituting the successor
principal underwriter for the prior principal underwriter in the Plan effective
November 1, 1996. The uncovered distribution charges as of the close of business
on October 31, 1996 shall be the uncovered distribution charges of the successor
principal underwriter as of the opening of business on November 1, 1996.
ADOPTED: June 24, 1996
<PAGE>
EXHIBIT 99.(15)(d)
EATON VANCE MUNICIPALS TRUST II
(TRADITIONAL SERIES)
AMENDMENT TO
AMENDED SERVICE PLAN
Whereas Eaton Vance Distributors, Inc. (the "prior principal underwriter")
has served as the Principal Underwriter of Trust shares with multiple series as
listed on Amended Schedule A of the Trust's Amended Distribution Plan, prior to
the effective date of this Amendment, and whereas Eaton Vance Distributors, Inc.
(currently named EV Distributors, Inc.) a separate Massachusetts corporation
(the "successor principal underwriter") is succeeding to the business of the
prior principal underwriter on November 1, 1996, the Trust hereby amends its
Amended Service Plan of the above funds, by substituting the successor principal
underwriter for the prior principal underwriter in the Plan effective November
1, 1996.
ADOPTED: June 24, 1996
EXHIBIT 99.(16)
EV TRADITIONAL HIGH-YIELD MUNICIPALS FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 7/31/96:
Interest Income Earned: $266,773
Plus Dividend Income Earned:
---------
Equal Gross Income: $266,773
Minus Expenses: $18,443
---------
Equal Net Investment Income: $248,330
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 4,092,501
---------
Equal Net Investment Income Earned Per Share: $0.0607
Net Asset Value Per Share 7/31/96: $10.83
30 Day Yield*: 6.82%
Divided by One minus the Tax Rate of 31%: 0.69
---------
Equal Tax Equivalent Yield **: 9.88%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0607/$10.83)+1)-1]
** Assuming a tax rate of 31%
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EV TRADITIONAL HIGH YIELD MUNICIPALS FUND
The table below indicates the total return (capital changes plus reinvestment of all distributions) on a hypothetical investment of
$1,000 in the Fund covering the period from August 7, 1995 through July 31, 1996.
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT INITIAL INVESTMENT EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
PERIOD DATE INVESTMENT* ON 07/31/96 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------- ---------- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 08/07/95 $962.46 $1,071.67 11.34% NA 7.17% NA
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000 **
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period
Cumulative total return is calculated using the following formula:
T = (ERV/P) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period
P = an initial investment of $1,000 ***
* Initial investment less the current maximum sales charge of 3.75%.
** The average annual total return including the sales charge is calculated based on an initial investment of $1,000 less the
maximum initial sales charge of 3.75%.
*** The cumulative total return including the sales charge is calculated based on an initial investment of $1,000 less
maximum initial sales charge of 3.75%.
</TABLE>
EXHIBIT 99.(18)
MULTIPLE CLASS PLAN FOR INSTITUTIONAL SHARES
Dated November 18, 1996
WHEREAS, each trust or corporation (each a "Trust") listed on Schedule
A engages in business as an open-end investment company and is registered as
such under the Investment Company Act of 1940, as amended (the "Act");
WHEREAS, the Trustees or Directors (hereafter the "Trustees") of each
Trust have established two classes of shares of the series of the Trust (each a
"Fund") which are listed on Schedule A hereto or, in the case of EV Traditional
Worldwide Health Sciences Fund, Inc., have established two classes of the Trust
(the term "Fund" as used herein shall also refer to EV Traditional Worldwide
Health Sciences Fund, Inc.); such classes having been designated Class A and
Class I (the "Classes");
WHEREAS, each Fund is established in accordance with Section 18(f)(2)
of the Act (except for EV Traditional Worldwide Health Sciences Fund, Inc.), its
shares are registered on Form N-1A under the Securities Act of 1933, and it is
entitled to have a multiple class plan adopted on its behalf by the Trust
pursuant to Rule 18f-3 under the Act;
WHEREAS, the Trustees of the Trust desire to set forth herein the
separate arrangements, expense allocations, and any related conversion features
or exchange privileges of the Classes; and
WHEREAS, the Trustees of the Trust (including a majority of those
Trustees who are not interested persons of the Trust) have determined that
adoption of this Multiple Class Plan, including the expense allocations set
forth herein, is in the best interests of each Class individually and each Fund
as a whole.
NOW, THEREFORE, the Trust hereby adopts this Multiple Class Plan for
Institutional Shares (the "Plan") on behalf each Fund in accordance with Rule
18f-3 under the Act and containing the following terms and conditions:
1. Pursuant to the Fund's Service Plan and pursuant to various actions
taken by the Trustees, Class A and Class I shares are subject to different
distribution arrangements and accordingly are subject to different expenses
related thereto, including shareholder service expenses. As set forth in the
Fund's prospectus, Class A shares are offered subject to a sales charge and are
subject to service fee payments in amounts not exceeding .25% of the average
daily net assets attributable to such Class for each fiscal year of the Fund.
Class I shares are offered at net asset value to the types of investors
described in the prospectus and are not subject to service fee payments.
2. At the discretion of the Treasurer of the Trust, each Class may pay
a different share of other expenses (not including advisory or custodial fees or
other expenses related to the management of the Fund's assets) that are actually
incurred in a different amount by that Class or if the Class receives services
of a different kind or to a different degree than another Class. Such expenses
include, but are not limited to, the following (a) transfer agency costs
(including entities performing account maintenance, dividend disbursing or
subaccounting activities and administration of dividend reinvestment, systematic
investment and withdrawal plans) attributable to a Class, (b) the cost of
preparing, printing and mailing materials such as shareholder reports,
prospectuses and proxy materials to current shareholders of a Class, (c) any
registration fees of the Securities and Exchange Commission and state securities
agencies, (d) the expense of administrative personnel and services required to
support the shareholders of a Class, (e) Trustees' fees or expenses incurred as
a result of issues or matters relating to a Class, or (f) legal, auditing and
accounting expenses relating to a Class. Such expense allocation is subject to
the continuing availability of a revenue procedure of the Internal Revenue
Service or an opinion of counsel to the effect that the payments made under a
Fund's Service Plan or Distribution Plan and other Class specific expenses with
respect to a Class of shares do not result in such Fund's dividends or
distributions constituting "preferential dividends" under the Internal Revenue
Code.
3. Income, realized and unrealized capital gains and losses, and
expenses of the Fund not allocated to a particular Class pursuant to the
foregoing shall be allocated to each Class on the basis of the net asset value
of that Class in relation to the net asset value of the Fund.
4. Class A and Class I shares may be exchanged for shares of other
funds in the Eaton Vance Traditional family of funds, which may change from time
to time, subject to terms, conditions and limitations set forth in the relevant
prospectus.
5. This Plan shall not take effect until after it has been approved by
both a majority of Trustees and a majority of those Trustees who are not
interested persons of the Trust.
6. This Plan shall continue indefinitely, unless terminated or amended.
All material amendments to this Plan shall be approved in the manner provided
for Trustee approval of this Plan in Section 6. Additional series of a Trust
with Classes of shares may become subject to this Plan upon Trustee approval as
provided for in Section 6 and amendment of Schedule A hereto.
* * *
<PAGE>
Schedule A
Eaton Vance Mutual Funds Trust
EV Traditional Tax-Managed Growth Fund
Eaton Vance Municipals Trust
EV Traditional National Municipals Fund
Eaton Vance Municipals Trust II
EV Traditional High Yield Municipals Fund
EV Traditional Worldwide Health Sciences Fund, Inc.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000914529
<NAME> EATON VANCE MUNICIPALS TRUST II
<SERIES>
<NUMBER> 8
<NAME> EV TRADITIONAL HIGH YIELD MUNICIPALS FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-END> JAN-31-1996
<INVESTMENTS-AT-COST> 29087
<INVESTMENTS-AT-VALUE> 29890
<RECEIVABLES> 733
<ASSETS-OTHER> 46
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 30669
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 134
<TOTAL-LIABILITIES> 134
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 29727
<SHARES-COMMON-STOCK> 2855
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 4
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 804
<NET-ASSETS> 20535
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 537
<EXPENSES-NET> 3
<NET-INVESTMENT-INCOME> 534
<REALIZED-GAINS-CURRENT> 4
<APPREC-INCREASE-CURRENT> 804
<NET-CHANGE-FROM-OPS> 1342
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (535)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2907
<NUMBER-OF-SHARES-REDEEMED> 69
<SHARES-REINVESTED> 16
<NET-CHANGE-IN-ASSETS> 30535
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 29
<AVERAGE-NET-ASSETS> 16608
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> .34
<PER-SHARE-GAIN-APPREC> .70
<PER-SHARE-DIVIDEND> (.34)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.70
<EXPENSE-RATIO> .09
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 8
<NAME> EV TRADITIONAL HIGH YIELD MUNICIPALS FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-END> JUL-31-1996
<INVESTMENTS-AT-COST> 43537
<INVESTMENTS-AT-VALUE> 43772
<RECEIVABLES> 548
<ASSETS-OTHER> 36
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 44356
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 290
<TOTAL-LIABILITIES> 290
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 43971
<SHARES-COMMON-STOCK> 4228
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 235
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (150)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 10
<NET-ASSETS> 44066
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 1336
<EXPENSES-NET> 46
<NET-INVESTMENT-INCOME> 1290
<REALIZED-GAINS-CURRENT> (150)
<APPREC-INCREASE-CURRENT> (569)
<NET-CHANGE-FROM-OPS> 571
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1280)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (4)
<NUMBER-OF-SHARES-SOLD> 1655
<NUMBER-OF-SHARES-REDEEMED> 315
<SHARES-REINVESTED> 33
<NET-CHANGE-IN-ASSETS> 13531
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 70
<AVERAGE-NET-ASSETS> 37774
<PER-SHARE-NAV-BEGIN> 10.70
<PER-SHARE-NII> .357
<PER-SHARE-GAIN-APPREC> (.281)
<PER-SHARE-DIVIDEND> (.355)
<PER-SHARE-DISTRIBUTIONS> (.001)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.42
<EXPENSE-RATIO> .33
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<NAME> HIGH YIELD MUNICIPALS PORTFOLIO
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-END> JAN-31-1996
<INVESTMENTS-AT-COST> 70056
<INVESTMENTS-AT-VALUE> 71708
<RECEIVABLES> 874
<ASSETS-OTHER> 20
<OTHER-ITEMS-ASSETS> 472
<TOTAL-ASSETS> 73074
<PAYABLE-FOR-SECURITIES> 980
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 16
<TOTAL-LIABILITIES> 996
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 70426
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1652
<NET-ASSETS> 72078
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1197
<OTHER-INCOME> 0
<EXPENSES-NET> 10
<NET-INVESTMENT-INCOME> 1187
<REALIZED-GAINS-CURRENT> 10
<APPREC-INCREASE-CURRENT> 1652
<NET-CHANGE-FROM-OPS> 2849
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 71977
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 101
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 122
<AVERAGE-NET-ASSETS> 34980
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-END> JUL-31-1996
<INVESTMENTS-AT-COST> 127211
<INVESTMENTS-AT-VALUE> 127654
<RECEIVABLES> 2658
<ASSETS-OTHER> 10
<OTHER-ITEMS-ASSETS> 60
<TOTAL-ASSETS> 130382
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3316
<TOTAL-LIABILITIES> 3316
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 126624
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 442
<NET-ASSETS> 127066
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3662
<OTHER-INCOME> 0
<EXPENSES-NET> 44
<NET-INVESTMENT-INCOME> 3618
<REALIZED-GAINS-CURRENT> (406)
<APPREC-INCREASE-CURRENT> (1209)
<NET-CHANGE-FROM-OPS> 2003
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 54989
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 304
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 358
<AVERAGE-NET-ASSETS> 101409
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
