<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 1, 1996
1933 ACT FILE NO. 33-71320
1940 ACT FILE NO. 811-8134
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933 [X]
POST-EFFECTIVE AMENDMENT NO. 4 [X]
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 5 [X]
EATON VANCE MUNICIPALS TRUST II
--------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
24 FEDERAL STREET, BOSTON, MASSACHUSETTS 02110
----------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
617-482-8260
-------------------------------------
(REGISTRANT'S TELEPHONE NUMBER)
H. DAY BRIGHAM, JR., 24 FEDERAL STREET, BOSTON, MASSACHUSETTS 02110
--------------------------------------------------------
(NAME AND ADDRESS OF AGENT FOR SERVICE)
It is proposed that this Post-Effective Amendment will become effective on
May 20, 1996 pursuant to paragraph (a)(1) of Rule 485.
The Registrant has filed a Declaration pursuant to Rule 24f-2 and on March
17, 1995 filed its "Notice" as required by that Rule for the fiscal year ended
January 31, 1995.
Florida Insured Municipals Portfolio, Hawaii Municipals Portfolio, Kansas
Municipals Portfolio and High Yield Municipals Portfolio have each also
executed this Registration Statement.
================================================================================
<PAGE>
This Amendment to the registration statement on Form N-1A consists of the
following documents and papers:
Cross Reference Sheet required by Rule 481(a) under the Securities Act of
1933
Part A -- The Combined Prospectus of:
EV Traditional Municipal Funds:
EV Traditional Florida Insured Municipals Fund
EV Traditional Hawaii Municipals Fund
EV Traditional Kansas Municipals Fund
The Prospectuses of:
EV Marathon High Yield Municipals Fund
EV Traditional High Yield Municipals Fund
Part B -- The Combined Statement of Additional Information of:
EV Traditional Municipal Funds:
EV Traditional Florida Insured Municipals Fund
EV Traditional Hawaii Municipals Fund
EV Traditional Kansas Municipals Fund
The Statements of Additional Information of:
EV Marathon High Yield Municipals Fund
EV Traditional High Yield Municipals Fund
Part C -- Other Information
Signatures
Exhibit Index Required by Rule 483(a) under the Securities Act of 1933
Exhibits
This Amendment is not intended to amend the Prospectus and Statement of
Additional Information of any other series of the Registrant not identified
above.
<PAGE>
EATON VANCE MUNICIPALS TRUST II
EV TRADITIONAL FLORIDA INSURED MUNICIPALS FUND
EV TRADITIONAL HAWAII MUNICIPALS FUND
EV TRADITIONAL KANSAS 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 Funds' Financial
Information Highlights; Performance
Information
4. ............... General Description of The Funds' Investment
Registrant Objectives; How the Funds
and the Portfolios Invest
their Assets; Organization
of the Funds and the
Portfolios
5. ............... Management of the Fund Management of the Funds and
the Portfolios
5A. .............. Management's Discussion of Not Applicable
Fund Performance
6. ............... Capital Stock and Other Organization of the Funds
Securities and the Portfolios;
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; Service Plans;
The Eaton Vance Exchange
Privilege; Eaton Vance
Shareholder Services;
Statement of Intention and
Escrow Agreement
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; Service
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; Services for
Accumulation; Service
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>
EATON VANCE MUNICIPALS TRUST II
EV MARATHON HIGH YIELD MUNICIPALS FUND
CROSS REFERENCE SHEET
ITEMS REQUIRED BY FORM N-1A
---------------------------
PART A
ITEM NO. ITEM CAPTION PROSPECTUS CAPTION
- -------- ------------ ----------------------------
1. ............... Cover Page Cover Page
2. ............... Synopsis Shareholder and Fund
Expenses
3. ............... Condensed Financial Performance Information
Information
4. ............... General Description of The Fund's Investment
Registrant Objective; How the Fund
and the Portfolio Invest
their Assets; Organization
of the Fund and the
Portfolio
5. ............... Management of the Fund Management of the Fund and
the Portfolio
5A. .............. Management's Discussion of Not Applicable
Fund Performance
6. ............... Capital Stock and Other Organization of the Fund and
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>
EATON VANCE MUNICIPALS TRUST II
EV TRADITIONAL HIGH YIELD MUNICIPALS FUND
CROSS REFERENCE SHEET
ITEMS REQUIRED BY FORM N-1A
---------------------------
PART A
ITEM NO. ITEM CAPTION PROSPECTUS CAPTION
- -------- ------------ ----------------------------
1. ............... Cover Page Cover Page
2. ............... Synopsis Shareholder and Fund
Expenses
3. ............... Condensed Financial Performance Information
Information
4. ............... General Description of The Fund's Investment
Registrant Objective; How the Fund
and the Portfolio Invest
their Assets; Organization
of the Fund and the
Portfolio
5. ............... Management of the Fund Management of the Fund and
the Portfolio
5A. .............. Management's Discussion of Not Applicable
Fund Performance
6. ............... Capital Stock and Other Organization of the Fund and
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; Service Plan; The
Eaton Vance Exchange
Privilege; Eaton Vance
Shareholder Services;
Statement of Intention and
Escrow Agreement
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; Service
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; Services for
Accumulation; Service
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
MUNICIPAL FUNDS
- ------------------------------------------------------------------------------
EV TRADITIONAL FLORIDA INSURED MUNICIPALS FUND
EV TRADITIONAL HAWAII MUNICIPALS FUND
EV TRADITIONAL KANSAS MUNICIPALS FUND
THE EV TRADITIONAL MUNICIPAL FUNDS (THE "FUNDS") ARE MUTUAL FUNDS SEEKING TO
PROVIDE CURRENT INCOME EXEMPT FROM REGULAR FEDERAL INCOME TAX AND THEIR
RESPECTIVE STATE TAXES DESCRIBED UNDER "THE FUNDS" INVESTMENT OBJECTIVES" IN
THIS PROSPECTUS. EACH FUND INVESTS ITS ASSETS IN A CORRESPONDING NON-
DIVERSIFIED OPEN-END INVESTMENT COMPANY (A "PORTFOLIO") HAVING THE SAME
INVESTMENT OBJECTIVE AS THE FUND, RATHER THAN BY DIRECTLY INVESTING IN AND
MANAGING ITS OWN PORTFOLIO OF SECURITIES AS WITH HISTORICALLY STRUCTURED MUTUAL
FUNDS. EACH FUND IS A SERIES OF EATON VANCE MUNICIPALS TRUST II (THE "TRUST").
Shares of the Funds 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 Funds involve
investment risks, including fluctuations in value and the possible loss of some
or all of the principal investment.
This combined Prospectus is designed to provide you with information you should
know before investing. Please retain this document for future reference. A
combined Statement of Additional Information dated June 1, 1996 for the Funds,
as supplemented from time to time, has been filed with the Securities and
Exchange Commission and is incorporated herein by reference. This Statement of
Additional Information is available without charge from the Funds' principal
underwriter, Eaton Vance Distributors, Inc. (the "Principal Underwriter"), 24
Federal Street, Boston, MA 02110 (telephone (800) 225-6265). The Portfolios'
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 Funds. The offices of the
Investment Adviser and the Administrator are located at 24 Federal Street,
Boston, MA 02110.
AS OF THE DATE OF THIS COMBINED PROSPECTUS, A FUND MAY NOT BE AVAILABLE FOR
PURCHASE IN CERTAIN STATES. PLEASE CONTACT THE PRINCIPAL UNDERWRITER OR YOUR
BROKER FOR FURTHER INFORMATION.
- ------------------------------------------------------------------------------
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.
- ------------------------------------------------------------------------------
PAGE PAGE
Shareholder and Fund Expenses .. 2 How to Redeem Fund Shares ............. 14
The Funds' Financial Highlights. 3 Reports to Shareholders ............... 15
The Funds' Investment Objectives 4 The Lifetime Investing Account/
How the Funds and the Portfolios Distribution Options ................ 16
Invest their Assets ......... 4 The Eaton Vance Exchange Privilege .... 17
Organization of the Funds and Eaton Vance Shareholder Services ...... 17
the Portfolios .............. 8 Distributions and Taxes ............... 18
Management of the Funds and Performance Information ............... 19
the Portfolios .............. 10 Statement of Intention and
Service Plans ................. 12 Escrow Agreement .................... 20
Valuing Fund Shares ........... 12 Appendix -- State Specific Information 21
How to Buy Fund Shares ........ 13
- ------------------------------------------------------------------------------
PROSPECTUS DATED JUNE 1, 1996
<PAGE>
SHAREHOLDER AND FUND EXPENSES
- ------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES
- ------------------------------------------------------------------------------
<TABLE>
<S> <C>
Maximum Sales Charges Imposed on Purchases (as a percentage of offering price) 3.75%
Sales Charges Imposed on Reinvested Distributions None
Fees to Exchange Shares None
ANNUAL FUND AND ALLOCATED PORTFOLIO OPERATING EXPENSES (as a percentage of average daily net assets)
-------------------------------------------------------------------------------------------------------
FLORIDA HAWAII KANSAS
INSURED FUND FUND FUND
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Adviser Fee (after fee reduction) 0.00% 0.00% 0.00%
Other Expenses (including Service Plan Fees and
after expense reduction) 0.11 0.21 0.15
---- ---- ----
Total Operating Expenses (after reductions) 0.11% 0.21% 0.15%
==== ==== ====
EXAMPLE
-------------------------------------------------------------------------------------------------------
An investor would pay the following maximum initial sales charge and expenses on a $1,000 investment,
assuming (a) 5% annual return and (b) redemption at the end of each period:
FLORIDA HAWAII KANSAS
INSURED FUND FUND FUND
-------------------------------------------------------------------------------------------------------
1 Year $39 $40 $39
3 Years 41 44 42
5 Years 43 49 46
10 Years 51 63 56
</TABLE>
NOTES:
The table and Example summarize the aggregate expenses of the Funds and the
Portfolios and are designed to help investors understand the costs and expenses
they will bear, directly or indirectly, by investing in a Fund. Information for
the Hawaii Fund and the Kansas Fund is based on such Fund's expenses for the
most recent fiscal year, except that Service Plan Fees for such Funds are
estimated for the current fiscal year (assuming the Service Plan in effect for
the such Funds on February 1, 1996). Absent a fee reduction and an expense
allocation, the Investment Adviser Fee, Other Expenses and Total Operating
Expenses would have been: 0.16%, 6.20% and 6.51%, respectively, for the Hawaii
Fund; and 0.16%, 2.57% and 2.88%, respectively, for the Kansas Fund. The
information for the Florida Insured Fund is based on such Fund's estimated
expenses for the current fiscal year. The Investment Adviser Fee and Other
Expenses for the Florida Insured Fund reflect the 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 0.16%, 2.84% and 3.10%, respectively.
Each Fund invests exclusively in its corresponding Portfolio. The Trustees
believe that, over time, the aggregate per share expenses of a Fund and its
corresponding Portfolio should approximate, and over time may be less than, the
per share expenses the Fund would incur if the Fund were instead to retain the
services of an investment adviser and its assets were invested directly in the
type of securities being held by its corresponding Portfolio.
The Example should not be considered a representation of past or future expenses
and actual expenses may be greater or less than those shown. Federal regulations
require the Example to assume a 5% annual return, but actual annual return will
vary. For further information regarding the expenses of the Funds and the
Portfolios see "The Funds" Financial Highlights", "Organization of the Funds and
the Portfolios", "Management of the Funds and the Portfolios", "Service Plans"
and "How to Redeem Fund Shares".
If shares of a Fund are purchased at net asset value with no initial sales
charge by virtue of the purchase having been in the amount of $1 million or more
and are redeemed within 12 months of purchase, a contingent deferred sales
charge of 0.50% will be imposed on such redemption. See "How to Buy Fund
Shares," "How to Redeem Fund Shares" and "Eaton Vance Shareholder Services."
Each 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 11.
Other investment companies with different distribution arrangements and fees
are investing in the Portfolios and others may do so in the future. See
"Organization of the Funds and the Portfolios".
<PAGE>
THE FUNDS' FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
The following information should be read in conjunction with the audited
financial statements included in the Funds' annual report to shareholders which
is incorporated by reference into the Statement of Additional Information in
reliance upon reports of Deloitte & Touche LLP, independent certified public
accountants, as experts in accounting and auditing. Further information
regarding the performance of a Fund is contained in its annual report to
shareholders which may be obtained without charge by contacting the Principal
Underwriter, Eaton Vance Distributors, Inc.
- ------------------------------------------------------------------------------
<TABLE>
FLORIDA INSURED FUND HAWAII FUND KANSAS FUND
--------------------- ---------------------- ----------------------
YEAR ENDED JANUARY 31, YEAR ENDED JANUARY 31, YEAR ENDED JANUARY 31,
---------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
1996 1995* 1996 1995* 1996 1995*
------- ------- ------- ------ ------- -------
NET ASSET VALUE,
beginning of year $10.000 $10.000 $10.000
------- ------- ------- ------- ------- -------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income $ 0.509 $ 0.365 $ 0.379
Net realized and unrealized
loss on investments++ (0.435) (0.880) (0.386)
------- ------- ------- ------- -------- -------
Total income (loss) from
investment operations $ 0.944 $(0.515) $(0.007)
------- ------- ------- ------- -------- -------
LESS DISTRIBUTIONS:
From net investment income $(0.509) $(0.365) $(0.379)
In excess of net investment
income (3) (0.005) (0.080) (0.074)
------- ------- ------- ------- -------- -------
Total distributions $(0.514) $(0.445) $(0.453)
------- ------- ------- ------- -------- -------
NET ASSET VALUE, end of year $10.430 $ 9.040 $ 9.540
======= ======= ======= ======= ======== =======
TOTAL RETURN (1) 9.18% (5.23)% (0.11)%
RATIOS/SUPPLEMENTAL DATA**:
Net assets, end of year
(000's omitted) $ 1,213 $ 257 $ 665
Ratio of net exepnses to
average daily net assets(2) 0.01%+ 1.01%+ 0.95%+
Ratio of net investment income
to average daily net assets 5.37%+ 4.44%+ 4.32%+
**For the periods indicated, the operating expenses of the Funds and the
Portfolios may reflect an allocation of expenses to the Administrator and/or
Investment Adviser. Had such actions not been taken, net investment income
(loss) per share and the ratios would have been as follows:
NET INVESTMENT INCOME (LOSS) PER SHARE $ 0.226 $(0.153) $ 0.139
======= ======= ======= ======= ======== =======
RATIOS (As a percentage of average daily net assets):
Expenses(2) 3.00%+ 7.31%+ 3.68%+
Net investment income (loss) 2.38%+ (1.86)%+ 1.59%+
* For the Florida Insured, Hawaii and Kansas Funds, the Financial Highlights
are for the period from the start of business, March 3, 1994, March 14,
1994, and March 3, 1994, respectively, to January 31, 1995.
+ Computed on an annualized basis.
++ The per share amount is not in accord with the net realized and unrealized
gain for the period because of the timing of sales of Fund shares and the
amount of per share realized and unrealized gains and losses at such time.
(1) Total 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. Dividends and distributions, if any, are assumed to be reinvested
at the net asset value on the payable date. Computed on a non-annualized
basis.
(2) Includes a Fund's share of its corresponding Portfolio's allocated expenses.
(3) The Funds have followed the Statement of Position (SOP) 93-2: Determination,
Disclosure and Financial Statement Presentation of Income, Capital Gain, and
Return of Capital Distributions by Investment Companies. The SOP requires
that differences in the recognition or classification of income between the
financial statements and tax earnings and profits that result in temporary
over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or accumulated net realized
gains.
(4) Prior to February 1, 1996, the Hawaii Fund and the Kansas Fund each made
distribution fee payments pursuant to a Distribution Plan. See "Service
Plans."
</TABLE>
<PAGE>
THE FUNDS' INVESTMENT OBJECTIVES
- ------------------------------------------------------------------------------
The investment objective of each Fund is set forth below. Each Fund currently
seeks to meet its investment objective by investing its assets in a separate
corresponding open-end management investment company (a "Portfolio") which
invests primarily in municipal obligations (as described below). Each Portfolio
has the same investment objective as its corresponding Fund.
EV TRADITIONAL FLORIDA INSURED MUNICIPALS FUND (the "Florida Insured Fund")
seeks to provide current income exempt from regular federal income tax in the
form of an investment exempt from Florida intangibles tax. The Florida Insured
Fund seeks to meet its objective by investing its assets in the Florida Insured
Municipals Portfolio (the "Florida Insured Portfolio"), which invests primarily
in municipal obligations that are rated in the highest rating category by a
major rating agency or, if unrated, determined to be of comparable quality by
the Investment Adviser. Under normal conditions, substantially all of the
Florida Insured Portfolio's assets will be invested in obligations that are
insured as to the timely payment of principal and interest. See "Insured Florida
Obligations." In any event, no less than 80% of the Florida Insured Portfolio's
net assets will be invested in insured obligations.
EV TRADITIONAL HAWAII MUNICIPALS FUND (the "Hawaii Fund") seeks to provide
current income exempt from regular federal income tax and Hawaii State
individual income taxes. The Hawaii Fund seeks to meet its objective by
investing its assets in the Hawaii Municipals Portfolio (the "Hawaii
Portfolio"), which invests primarily in municipal obligations which are rated at
least investment grade by a major rating agency or, if unrated, determined to be
of at least investment grade quality by the Investment Adviser.
EV TRADITIONAL KANSAS MUNICIPALS FUND (the "Kansas Fund") seeks to provide
current income exempt from regular federal income tax and Kansas State personal
income taxes. The Kansas Fund seeks to meet its objective by investing its
assets in the Kansas Municipals Portfolio (the "Kansas Portfolio"), which
invests primarily in municipal obligations which are rated at least investment
grade by a major rating agency or, if unrated, determined to be of at least
investment grade quality by the Investment Adviser.
HOW THE FUNDS AND THE PORTFOLIOS INVEST THEIR ASSETS
- ------------------------------------------------------------------------------
EACH FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY INVESTING EITHER DIRECTLY
OR INDIRECTLY THROUGH ANOTHER OPEN-END MANAGEMENT INVESTMENT COMPANY PRIMARILY
(I.E., AT LEAST 80% OF ITS NET ASSETS DURING PERIODS OF NORMAL MARKET
CONDITIONS) IN MUNICIPAL OBLIGATIONS, THE INTEREST ON WHICH IS EXEMPT FROM
REGULAR FEDERAL INCOME TAX AND FROM THE STATE TAXES WHICH, IN ACCORDANCE WITH
THE FUND'S INVESTMENT OBJECTIVE, THE FUND SEEKS TO AVOID. The foregoing policy
is a fundamental policy of each Fund and its corresponding Portfolio, and may
not be changed unless authorized by a vote of the Fund's shareholders or that
Portfolio's investors, as the case may be.
At least 75% of the Hawaii Portfolio's and the Kansas Portfolio's net assets
will normally be invested in obligations rated at least investment grade at the
time of investment (which are those rated Baa or higher by Moody's Investors
Service, Inc. ("Moody's") or BBB or higher by either Standard & Poor's Ratings
Group ("S&P") or Fitch Investors Service, Inc. ("Fitch")) or, if unrated,
determined by the Investment Adviser to be of at least investment grade quality.
The balance of the Hawaii Portfolio's and the Kansas Portfolio's net assets may
be invested in municipal obligations rated below investment grade (but not lower
than B by Moody's, S&P or Fitch) and unrated municipal obligations considered to
be of comparable quality by the Investment Adviser. At least 80% of the Florida
Insured Portfolio's net assets will normally be invested in obligations rated in
the highest rating category at the time of investment (which is Aaa by Moody's
or AAA by S&P or Fitch) or, if unrated, determined to be of comparable quality
by the Investment Adviser. The Florida Insured Portfolio may invest up to 20% of
its net assets in obligations rated below Aaa or AAA (but not lower than B) and
comparable unrated obligations, provided that no more than 5% of its net assets
will be invested in obligations rated below investment grade and comparable
unrated obligations. Municipal obligations rated Baa or BBB may have speculative
characteristics. Also, changes in economic conditions or other circumstances are
more likely to lead to a weakened capacity to make principal and interest
payments than in the case of higher rated obligations. Securities rated below
Baa or BBB are commonly known as "junk bonds". A Portfolio may retain an
obligation whose rating drops below B after its acquisition if such retention is
considered desirable by the Investment Adviser. See "Additional Risk
Considerations". For a description of municipal obligation ratings, see the
Statement of Additional Information.
MUNICIPAL OBLIGATIONS. Municipal obligations include bonds, notes and commercial
paper issued by a municipality for a wide variety of both public and private
purposes, the interest on which is, in the opinion of bond counsel, exempt from
regular federal income tax. Public purpose municipal bonds include general
obligation and revenue bonds. General obligation bonds are backed by the taxing
power of the issuing municipality. Revenue bonds are backed by the revenues of a
project or facility. Municipal notes include bond anticipation, tax anticipation
and revenue anticipation notes. Bond, tax and revenue anticipation notes are
short-term obligations that will be retired with the proceeds of an anticipated
bond issue, tax revenue or facility revenue, respectively. Under normal market
conditions, a Portfolio will invest at least 65% of its total assets in
obligations issued by its respective State or its political subdivisions.
Interest income from certain types of municipal obligations may be subject to
the federal alternative minimum tax (the "AMT") for individual investors. As at
January 31, 1996, the Portfolios had invested in such obligations as follows (as
a percentage of net assets): Florida Insured Portfolio ( %); Hawaii Portfolio
(%); and Kansas Portfolio ( %). At January 31, 1996, the Portfolios limited
their investment in obligations subject to the AMT to not more than 20% of net
assets. The Portfolios are no longer subject to such limitation. Distributions
to corporate investors of certain interest income may also be subject to the
AMT. The Funds may not be suitable for investors subject to the AMT.
CONCENTRATION. Each Portfolio will concentrate its investments in municipal
obligations issued by its respective State and that State's political
subdivisions. Each Portfolio is, therefore, more susceptible to factors
adversely affecting issuers in one State than mutual funds which do not
concentrate in a specific State. Municipal obligations of issuers in a single
State may be adversely effected by economic developments and by legislation and
other governmental activities in that State. To the extent that a Portfolio's
assets are concentrated in municipal obligations of issuers of a single State,
that Portfolio may be subject to an increased risk of loss. Each Portfolio may
also invest in obligations issued by the governments of Puerto Rico, the U.S.
Virgin Islands and Guam. See the Appendix to this Prospectus for a description
of some of the economic and other factors relating to the States and Puerto
Rico.
In addition, each Portfolio may invest 25% or more of its total assets in
municipal obligations of the same type, including, without limitation, the
following: lease rental obligations of State and local authorities; 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 a
Portfolio more susceptible to adverse economic, political, or regulatory
occurrences affecting a particular category of issuer. For example, health
care-related issuers are susceptible to medicaid reimbursement policies, and
national and State health care legislation. As a Portfolio's concentration
increases, so does the potential for fluctuation in the value of the
corresponding Fund's shares.
NON-DIVERSIFIED STATUS. As "non-diversified" investment companies, each
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. A
Portfolio is likely to invest a greater percentage of its assets in the
securities of a single issuer than would a diversified fund. Therefore, a
Portfolio is more susceptible to any single adverse economic or political
occurrence or development affecting issuers of the relevant State's municipal
obligations.
OTHER INVESTMENT PRACTICES
Each 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, each Portfolio
may temporarily borrow up to 5% of the value of its total assets to satisfy
redemption requests or settle securities transactions.
WHEN-ISSUED SECURITIES. Each 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 a Portfolio agreed to pay for them. Each Portfolio may also
purchase instruments that give the Portfolio the option to purchase a municipal
obligation when and if issued.
INVERSE FLOATERS. Each 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 a 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. Each 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 a Portfolio's initial investment
in these contracts. A 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 a Portfolio. Distributions by a Fund of any gains
realized on its corresponding Portfolio's transactions in futures and options on
futures will be taxable.
INSURED FLORIDA OBLIGATIONS. Insured municipal obligations held by the Florida
Insured Portfolio ("Florida obligations") will be insured as to their scheduled
payment of principal and interest under (i) an insurance policy obtained by the
issuer or underwriter of the Florida obligation at the time of its original
issuance ("Issue Insurance"), (ii) an insurance policy obtained by the Florida
Insured Portfolio or a third party subsequent to the Florida obligation's
original issuance ("Secondary Market Insurance") or (iii) a municipal insurance
policy purchased by the Florida Insured Portfolio ("Mutual Fund Insurance").
Each type of insurance insures the timely payment of interest and principal of
the Florida obligation but does not protect the market value of such obligation
or the net asset value of the Florida Insured Portfolio or the Florida Insured
Fund.
Issue Insurance is generally purchased by the issuer or underwriter of the
Florida obligation and is noncancellable and effective as long as the securities
are unpaid and the insurer remains in business. Secondary Market Insurance
allows the Florida Insured Portfolio or a third party to a pay a single premium
to insure a Florida obligation as to principal and interest until maturity and
to transfer the insurance benefit with the underlying security. Secondary Market
Insurance premiums do not result in an expense to the Florida Insured Portfolio,
but are added to the cost basis of the Florida obligation so insured. Mutual
Fund Insurance may be purchased from insurance companies that guarantee the
timely payment of interest and principal when due on certain Florida obligations
that are designated by the insurer as eligible for such insurance. Mutual Fund
Insurance may terminate upon the Florida Insured Portfolio's sale of the
obligation or it may be extended to enhance the marketability of the obligation.
To extend a policy, the Florida Insured Portfolio will pay a single,
predetermined premium payable from the proceeds of the sale of that obligation.
It is expected that the Florida Insured Portfolio will extend a policy only if,
in the opinion of the Investment Adviser, the net proceeds from the sale of the
obligation, as insured, would exceed the proceeds from the sale of that
obligation without insurance. The price of Florida obligations insured by Mutual
Fund Insurance is expected to be more volatile than the price of Florida
obligations insured by Issue or Secondary Market Insurance. To the extent the
Florida Insured Portfolio's obligations are insured by Mutual Fund Insurance,
the value of the Florida Insured Fund's investment in the Florida Insured
Portfolio, and the price of the Florida Insured Fund's shares, will be more
volatile than if such obligations were otherwise insured.
Florida obligations held by the Florida Insured Portfolio will be insured by
insurers having a claims-paying ability rated Aaa by Moody's or AAA by S&P or
Fitch. See the Appendix to the Statement of Additional Information for a brief
description of the claims-paying ability ratings.
The Florida Insured Portfolio anticipates that under normal conditions all or
substantially all of its Florida obligations will be subject to Issue Insurance
or Secondary Market Insurance. If the Florida Insured Portfolio purchases Mutual
Fund Insurance, premiums are paid by the Florida Insured Portfolio. These
premiums are based on the credit quality and principal amount of the Florida
obligation to be insured. If the issuer, underwriter, or other third party
purchases the insurance for the obligation, the value of such insurance is
generally reflected in a higher market value or purchase price for the
obligation. While insurance is intended to reduce financial risk, the cost of
such insurance (from higher purchase prices of securities or the payment of
insurance premiums) will result in lower yields on the Florida obligations so
insured.
The Florida Insured Portfolio may also invest in Florida obligations that are
secured by an escrow or trust account which contains securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities, that are
backed by the full faith and credit of the United States, and sufficient in
amount to ensure the payment of interest on and principal of the secured Florida
obligation ("collateralized obligations"). Collateralized obligations generally
are regarded as having the credit characteristics of the underlying U.S.
Government, agency or instrumentality securities. These obligations will not be
subject to Issue Insurance, Secondary Market Insurance or Mutual Fund Insurance,
but will be considered to be insured Florida obligations for purposes of the
Florida Insured Portfolio's policy of investing at least 80% of its net assets
in insured Florida obligations (but such obligations will not constitute more
than 15% of the insured portion of the Florida Insured Portfolio).
OTHER INSURED OBLIGATIONS. The Hawaii and Kansas Portfolios may purchase
municipal bonds that are additionally secured by insurance, bank credit
agreements, or escrow accounts. The credit quality of companies which provide
such credit enhancements will affect the value of those securities. Although the
insurance feature reduces certain financial risks, the premiums for insurance
and the higher market price paid for insured obligations may reduce a Fund's
current yield. Insurance generally will be obtained from insurers with a
claims-paying ability rated Aaa by Moody's or AAA by S&P or Fitch. The insurance
does not guarantee the market value of the insured obligations or the net asset
value of a Fund's shares.
ADDITIONAL RISK CONSIDERATIONS
Many municipal obligations offering current income are in the lowest investment
grade category (Baa or BBB), lower categories or may be unrated. As indicated
above, each Portfolio may invest in municipal obligations rated below investment
grade (but not lower than B by Moody's, S&P or Fitch) and comparable unrated
obligations. The lowest investment grade, lower rated and comparable unrated
municipal obligations in which a Portfolio may invest will have speculative
characteristics in varying degrees. While such obligations may have some quality
and protective characteristics, these characteristics can be expected to be
offset or outweighed by uncertainties or major risk exposures to adverse
conditions. Lower rated and comparable unrated municipal obligations are subject
to the risk of an issuer's inability to meet principal and interest payments on
the obligations (credit risk) and may also be subject to greater price
volatility due to such factors as interest rate sensitivity, market perception
of the creditworthiness of the issuer and general market liquidity (market
risk). Lower rated or unrated municipal obligations are also more likely to
react to real or perceived developments affecting market and credit risk than
are more highly rated obligations, which react primarily to movements in the
general level of interest rates. The 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 a Portfolio invests in lower rated or unrated
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.
Each Portfolio may retain defaulted obligations in its portfolio when such
retention is considered desirable by the Investment Adviser. In the case of a
defaulted obligation, a Portfolio may incur additional expense seeking recovery
of its investment. Municipal obligations held by a Portfolio which are rated
below investment grade but which, subsequent to the assignment of such rating,
are backed by escrow accounts containing U.S. Government obligations may be
determined by the Investment Adviser to be of investment grade quality for
purposes of the Portfolio's investment policies. A Portfolio may retain in its
portfolio an obligation whose rating drops below B after its acquisition, if
such retention is considered desirable by the Investment Adviser; provided,
however, that holdings of obligations rated below Baa or BBB will be less than
35% of net assets. In the event the rating of an obligation held by a Portfolio
is downgraded, causing the Portfolio to exceed this limitation, the Investment
Adviser will (in an orderly fashion within a reasonable period of time) dispose
of such obligations as it deems necessary in order to comply with the
Portfolio's credit quality limitations.
The net asset value of shares of a Fund will change in response to fluctuations
in prevailing interest rates and changes in the value of the securities held by
its corresponding Portfolio. When interest rates decline, the value of
securities held by a 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 the issuers of municipal
obligations held by a Portfolio will affect the principal value of (and possibly
the income earned on) 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
the issuer to make payments of principal and interest may also affect the value
of a Portfolio's investments. The amount of information about the financial
condition of an issuer of municipal obligations may not be as extensive as that
made available by corporations whose securities are publicly traded. An
investment in shares of a Fund will not constitute a complete investment
program.
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.
The secondary market for some municipal obligations issued within a State
(including issues which are privately placed with a Portfolio) is less liquid
than that for taxable debt obligations or other more widely traded municipal
obligations. No Portfolio will invest in illiquid securities if more than 15% of
its net assets would be invested in securities that are not readily marketable.
No established resale market exists for certain of the municipal obligations in
which a 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, a 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 a 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. Each Portfolio is required to accrue and distribute income from
zero-coupon bonds on a current basis, even though it does not receive that
income currently in cash. Thus, a Portfolio may have to sell other investments
to obtain cash needed to make income distributions.
Each 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 obligation.
EACH FUND AND 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 EACH FUND AND PORTFOLIO ARE NOT FUNDAMENTAL POLICIES
AND ACCORDINGLY MAY BE CHANGED BY THE TRUSTEES OF THE TRUST AND THE PORTFOLIO
WITHOUT OBTAINING THE APPROVAL OF A FUND'S SHAREHOLDERS OR THE INVESTORS IN
THE CORRESPONDING PORTFOLIO, AS THE CASE MAY BE. IF ANY CHANGES WERE MADE IN A
FUND'S INVESTMENT OBJECTIVE, THE FUND MIGHT HAVE INVESTMENT OBJECTIVES
DIFFERENT FROM THE OBJECTIVE WHICH AN INVESTOR CONSIDERED APPROPRIATE AT THE
TIME THE INVESTOR BECAME A SHAREHOLDER IN THE FUND.
ORGANIZATION OF THE FUNDS AND THE PORTFOLIOS
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EACH 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 and because the Trust can offer separate series
(such as the Funds), it is known as a "series company." Each share represents an
equal proportionate beneficial interest in a Fund. When issued and outstanding,
each Fund's 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 a Fund, shareholders of that Fund are entitled
to share pro rata in the net assets available for distribution to shareholders.
EACH 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
Portfolios, as well as the Trust, intend to comply with all applicable federal
and state securities laws. Each Portfolio's Declaration of Trust provides that
its corresponding Fund and other entities permitted to invest in that 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 a 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 Funds nor their shareholders will be
adversely affected by reason of the Funds investing in the Portfolios.
SPECIAL INFORMATION ON THE FUND/PORTFOLIO INVESTMENT STRUCTURE. An investor in a
Fund should be aware that the Fund, unlike mutual funds which directly acquire
and manage their own portfolios of securities, seeks to achieve its investment
objective by investing its assets in an interest in its corresponding Portfolio,
which is a separate investment company with an identical investment objective
(although the Fund may temporarily hold a de minimis amount of cash). Therefore,
a Fund's interest in the securities owned by its corresponding Portfolio is
indirect. In addition to selling an interest to its corresponding Fund, a
Portfolio may sell interests to other affiliated and non-affiliated mutual funds
or institutional investors. Such investors will invest in a Portfolio on the
same terms and conditions and will pay a proportionate share of the Portfolio's
expenses. However, the other investors investing in a Portfolio are not required
to sell their shares at the same public offering price as the corresponding Fund
due to variations in sales commissions and other operating expenses. Therefore,
investors in a Fund should be aware that these differences may result in
differences in returns experienced by investors in the various funds that invest
in its corresponding Portfolio. Such differences in returns are also present in
other mutual fund structures, including funds that have multiple classes of
shares. For information regarding the investment objective, policies and
restrictions of the Portfolios, see "The Funds" Investment Objectives" and "How
the Funds and the Portfolios Invest their Assets". Further information regarding
investment practices may be found in the Statement of Additional Information.
The Trustees of the Trust have considered the advantages and disadvantages of
investing the assets of each Fund in its corresponding 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
Portfolios, and affords the potential for economies of scale for each Fund, at
least when the assets of its corresponding Portfolio exceed $500 million.
A Fund may withdraw (completely redeem) all its assets from its corresponding
Portfolio at any time if the Board of Trustees of the Trust determines that it
is in the best interest of that Fund to do so. The investment objective and the
nonfundamental investment policies of each Fund and Portfolio may be changed by
the Trustees of the Trust and the Portfolio without obtaining the approval of
the shareholders of that Fund or the investors in that Portfolio, as the case
may be. Any such change of an investment objective will be preceded by thirty
days' advance written notice to the shareholders of the Fund or the investors in
the Portfolio, as the case may be. In the event a Fund withdraws all of its
assets from its corresponding Portfolio, or the Board of Trustees of the Trust
determines that the investment objective of such 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 such Fund
in another pooled investment entity or retaining an investment adviser to manage
the Fund's assets in accordance with its investment objective. A Fund's
investment performance may be affected by a withdrawal of all its assets from
its corresponding Portfolio.
Information regarding other pooled investment entities or funds which invest in
a Portfolio may be obtained by contacting Eaton Vance Distributors, Inc. (the
"Principal Underwriter" or "EVD"), 24 Federal Street, Boston, MA 02110, (617)
482-8260. Smaller investors in a Portfolio may be adversely affected by the
actions of a larger investor in the Portfolio. For example, if a large investor
withdraws from a Portfolio, the remaining investors may experience higher pro
rata operating expenses, thereby producing lower returns. Additionally, a
Portfolio may hold fewer securities, resulting in increased portfolio risk, and
experience decreasing economies of scale. However, this possibility exists as
well for historically structured mutual funds which have large or institutional
investors.
Until 1992, the Administrator sponsored and advised historically structured
funds. Funds which invest all their assets in interests in a separate investment
company are a relatively new development in the mutual fund industry and,
therefore, the Funds may be subject to additional regulations than historically
structured funds.
Each Portfolio's Declaration of Trust provides that the Portfolio will terminate
120 days after the complete withdrawal of a 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 Portfolios as
partnerships for federal income tax purposes. See "Distributions and Taxes" for
further information. Whenever a Fund as an investor in a 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. A 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 a 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
corresponding 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, a 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 a Fund. Notwithstanding the above, there are other means
for meeting shareholder redemption requests, such as borrowing.
The Trustees of the Trust, including a majority of the noninterested Trustees,
have approved written procedures designed to identify and address any potential
conflicts of interest arising from the fact that the Trustees of the Trust and
the Trustees of each Portfolio are the same. Such procedures require each Board
to take action to resolve any conflict of interest between a Fund and its
corresponding Portfolio, and it is possible that the creation of separate Boards
may be considered. For further information concerning the Trustees and officers
of the Trust and the Portfolios, see the Statement of Additional Information.
Although each Fund offers only its own shares of beneficial interest, it is
possible that a Fund might become liable for a misstatement or omission in this
Prospectus regarding another Fund because the Funds use this combined
Prospectus. The Trustees of the Trust have considered this factor in approving
the use of a combined Prospectus.
MANAGEMENT OF THE FUNDS AND THE PORTFOLIOS
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EACH 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 each Portfolio,
BMR manages each Portfolio's investments and affairs and furnishes for the use
of each Portfolio office space and all necessary office facilities, equipment
and personnel for servicing the investments of the Portfolios. Under its
investment advisory agreement with a Portfolio, BMR receives a monthly advisory
fee equal to the aggregate of
(a) a daily asset based fee computed by applying the annual asset rate
applicable to that portion of the total daily net assets in each
Category as indicated below, plus
(b) a daily income based fee computed by applying the daily income rate
applicable to that portion of the total daily gross income (which
portion shall bear the same relationship to the total daily gross income
on such day as that portion of the total daily net assets in the same
Category bears to the total daily net assets on such day) in each
Category as indicated below:
ANNUAL DAILY
CATEGORY DAILY NET ASSETS ASSET RATE INCOME RATE
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1 up to $20 million ...................... 0.100% 1.00%
2 $20 million but less than $40 million .. 0.200% 2.00%
3 $40 million but less than $500 million . 0.300% 3.00%
4 $500 million but less than $1 billion .. 0.275% 2.75%
5 $1 billion but less than $1.5 billion .. 0.250% 2.50%
6 $1.5 billion but less than $2 billion .. 0.225% 2.25%
7 $2 billion but less than $3 billion .... 0.200% 2.00%
8 $3 billion and over .................... 0.175% 1.75%
For the fiscal year ended January 31, 1996, each Portfolio, absent a fee
reduction, would have paid advisory fees equivalent to the following annualized
percentage of average daily net assets:
NET ASSETS AS OF
PORTFOLIO JANUARY 31, 1996 ADVISORY FEE
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Florida Insured .................... $ %(1)
Hawaii ............................. %(2)
Kansas ............................. %(3)
(1) To enhance the net income of the Florida Insured Portfolio, BMR made a
reduction of its advisory fee in the full amount of such fee and BMR was
allocated $ of expenses related to the operation of such Portfolio.
(2) To enhance the net income of the Hawaii Portfolio, BMR made a reduction of
its advisory fee in the full amount of such fee and BMR was allocated $ of
expenses related to the operation of such Portfolio.
(3) To enhance the net income of the Kansas Portfolio, BMR made a reduction of
its advisory fee in the full amount of such fee and BMR was allocated $ of
expenses related to the operation of such Portfolio.
BMR OR EATON VANCE ACTS AS INVESTMENT ADVISER TO INVESTMENT COMPANIES AND
VARIOUS INDIVIDUAL AND INSTITUTIONAL CLIENTS WITH ASSETS UNDER MANAGEMENT OF
APPROXIMATELY $16 BILLION. Eaton Vance is a wholly-owned subsidiary of Eaton
Vance Corp., a publicly held holding company. Eaton Vance Corp., through its
subsidiaries and affiliates, engages in investment management and marketing
activities, oil and gas operations, real estate investment, consulting and
management, and development of precious metals properties.
Timothy T. Browse has acted as the portfolio manager of the Florida Insured
Portfolio since December 1, 1995. He has been a Vice President of Eaton Vance
and of BMR since 1993 and an employee of Eaton Vance since 1992. Prior to
joining Eaton Vance, he was a municipal bond trader at Fidelity Management &
Research Company (1987-1992).
Robert B. MacIntosh has acted as the portfolio manager of the Hawaii Portfolio
since it commenced operations. Mr. MacIntosh has been a Vice President of Eaton
Vance since 1991 and of BMR since 1992. Prior to joining Eaton Vance, he was a
portfolio manager at Fidelity Management & Research Company (1986-1991).
Nicole Anderes has acted as the portfolio manager of the Kansas Portfolio since
it commenced operations. She joined Eaton Vance and BMR as a Vice President in
January 1994. Prior to joining Eaton Vance, she was a Vice President and
portfolio manager at Lazard Freres Asset Management (1992-1994) and a Vice
President and Manager -- Municipal Research at Roosevelt & Cross (1987-1992).
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 Portfolios and at reasonably competitive spreads. Subject to the foregoing,
BMR may consider sales of shares of the Funds or of other investment companies
sponsored by BMR or Eaton Vance as a factor in the selection of firms to execute
portfolio transactions.
The Trust has retained the services of Eaton Vance to act as Administrator of
the Funds. The Trust has not retained the services of an investment adviser
since the Trust seeks to achieve the investment objective of each Fund by
investing its assets in its corresponding Portfolio. As Administrator, Eaton
Vance provides the Funds 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 Portfolios and the Funds, as the case may be, will each be responsible for
all of its respective costs and expenses not expressly stated to be payable by
BMR under the investment advisory agreement, by Eaton Vance under the
administrative services agreement, or by EVD under the distribution agreement.
Such costs and expenses to be borne by the Portfolios and the Funds, as the case
may be, include, without limitation; custody and transfer agency fees and
expenses, including those for determining net asset value and keeping accounting
books and records; expenses of pricing and valuation services; the cost of share
certificates; membership dues in investment company organizations; expenses of
acquiring, holding and disposing of securities and other investments; fees and
expenses of registering under the securities laws and the governmental fees;
expenses of reporting to shareholders and investors; proxy statements and other
expenses of shareholders' or investors' meetings; insurance premiums; printing
and mailing expenses; interest, taxes and corporate fees; legal and accounting
expenses; compensation and expenses of Trustees not affiliated with BMR or Eaton
Vance; and investment advisory fees, and, if any, administrative services fees.
The Portfolios and the Funds will also each bear expenses incurred in connection
with litigation in which the Portfolios or the Funds, as the case may be, is a
party and any legal obligation to indemnify its respective officers and Trustees
with respect thereto.
SERVICE PLANS
- -------------------------------------------------------------------------------
In addition to advisory fees and other expenses, each Fund pays service fees
pursuant to a Service Plan (the "Plan") designed to meet the service fee
requirements of the sales charge rule of the National Association of Securities
Dealers, Inc. EACH FUND'S PLAN PROVIDES THAT THE FUND MAY MAKE SERVICE FEE
PAYMENTS FOR PERSONAL SERVICES AND/OR THE MAINTENANCE OF SHAREHOLDER ACCOUNTS TO
THE PRINCIPAL UNDERWRITER, FINANCIAL SERVICE FIRMS ("AUTHORIZED FIRMS") AND
OTHER PERSONS IN AMOUNTS NOT EXCEEDING .25% OF THE FUND'S AVERAGE DAILY NET
ASSETS FOR ANY FISCAL YEAR. The Trustees of the Trust have initially implemented
each Fund's Plan by authorizing the Fund to make service fee payments to the
Principal Underwriter and Authorized Firms in amounts not expected to exceed
.20% of the Fund's average daily net assets for any fiscal year which is based
on the value of Fund shares sold by such persons and remaining outstanding for
at least twelve months. However, each Fund's Plan authorizes the Trustees of the
Trust on behalf of the Fund to increase payments to the Principal Underwriter,
Authorized Firms and other persons from time to time without further action by
shareholders of the Fund, provided that the aggregate amount of payments made to
such persons under the Plan in any fiscal year of the Fund does not exceed .25%
of the Fund's average daily net assets. For the fiscal year ended January 31,
1996, the Florida Insured Fund did not pay any service fees under the Plan. The
Fund began accruing service fee payments during the quarter ended June 30, 1995.
The Plan is described further in the Statement of Additional Information.
Prior to February 1, 1996, the Hawaii Fund and Kansas Fund made sales commission
and distribution fee payments pursuant to a Distribution Plan. During the fiscal
year ended January 31, 1996, each such Fund paid or accrued sales commissions
under that Distribution Plan equivalent to .75% (annualized) of such Fund's
average daily net assets. Each such Fund also paid or accrued service fees under
that Distribution Plan equivalent to 0.20% (annualized) of such Fund's average
daily net assets for such period.
VALUING FUND SHARES
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EACH 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). Each Fund's net asset value per
share is determined by its custodian, Investors Bank & Trust Company ("IBT"),
(as agent for the Fund) in the manner authorized by the Trustees of the Trust.
Net asset value is computed by dividing the value of a Fund's total assets, less
its liabilities, by the number of shares outstanding. Because each Fund invests
its assets in an interest in its corresponding Portfolio, a Fund's net asset
value will reflect the value of its interest in the Portfolio (which, in turn,
reflects the underlying value of the Portfolio's assets and liabilities).
Authorized Firms must communicate an investor's order to the Principal
Underwriter prior to the close of the Principal Underwriter's business day to
receive that day's net asset value per Fund share and the public offering price
based thereon. It is the Authorized Firms' responsibility to transmit orders
promptly to the Principal Underwriter, which is a wholly-owned subsidiary of
Eaton Vance.
Each 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 a
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 Portfolios' 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
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SHARES OF A FUND MAY BE PURCHASED FOR CASH OR MAY BE ACQUIRED IN EXCHANGE FOR
SECURITIES. Investors may purchase shares of a Fund through Authorized Firms at
the effective public offering price, which price is based on the effective net
asset value per share plus the applicable sales charge. A Fund receives the net
asset value, while the sales charge is divided between the Authorized Firm and
the Principal Underwriter. The Principal Underwriter will furnish the names of
Authorized Firms to an investor upon request. An Authorized Firm may charge its
customers a fee in connection with transactions executed by that Firm. A Fund
may suspend the offering of shares at any time and may refuse an order for the
purchase of shares. Shares of each Fund are offered for sale only in States
where such shares may be legally sold.
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 are:
<TABLE>
SALES CHARGE SALES CHARGE DEALER COMMISSION
AS PERCENTAGE OF AS PERCENTAGE OF AS PERCENTAGE OF
AMOUNT OF PURCHASE OFFERING PRICE AMOUNT INVESTED OFFERING PRICE
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000 3.75% 3.90% 4.00%
$50,000 but less than $100,000 2.75 2.83 3.00
$100,000 but less than $250,000 2.25 2.30 2.50
$250,000 but less than $500,000 1.75 1.78 2.00
$500,000 but less than $1,000,000 1.25 1.27 1.50
$1,000,000 or more 0.00* 0.00* 0.50
</TABLE>
*No sales charge is payable at the time of purchase on investments of $1 million
or more. 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. For the Florida Insured Fund, such purchases made
before March 27, 1995 will be subject to a CDSC of 1% in the event of certain
redemptions within 18 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 a 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 Funds' transfer agent (the "Transfer Agent") as follows: First
Data Investor Services Group, BOS725, P.O. Box 1559, Boston, MA 02104. The
$1,000 minimum initial investment is waived for Bank Automated Investing
accounts, which may be established with an investment of $50 or more. See "Eaton
Vance Shareholder Services".
Shares of a Fund may be sold at net asset value to current and retired Directors
and Trustees of Eaton Vance funds, including the Portfolios; to officers and
employees and clients of Eaton Vance and its affiliates; to registered
representatives and employees of Authorized Firms; and bank employees who refer
customers to registered representatives of Authorized Firms; and to such
persons' spouses and children under the age of 21 and their beneficial accounts.
Shares may also be issued at net asset value (1) in connection with the merger
of an investment company with a 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, (3) where the amount invested represents redemption proceeds from a
mutual fund unaffiliated with Eaton Vance, if the redemption occurred no more
than 60 days' prior to the purchase of Fund shares and the redeemed shares were
subject to a sales charge, and (4) to an investor making an investment through
an investment adviser, financial planner, broker or other intermediary that
charges a fee for its services and has entered into an agreement with a Fund or
its Principal Underwriter.
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 shown 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 [State name] Municipals Fund
IN THE CASE OF PHYSICAL DELIVERY:
Investors Bank & Trust Company
Attention: EV Traditional [State name] Municipals Fund
Physical Securities Processing Settlement Area
89 South Street
Boston, MA 02111
Investors who are contemplating an exchange of securities for shares of a Fund,
or their representatives, must contact Eaton Vance to determine whether the
securities are acceptable before forwarding such securities to IBT. Eaton Vance
reserves the right to reject any securities. Exchanging securities for Fund
shares may create a taxable gain or loss. Each investor should consult his or
her tax adviser with respect to the particular federal, State and local tax
consequences of exchanging securities for Fund shares.
IF YOU DON'T HAVE AN AUTHORIZED FIRM, EATON VANCE CAN RECOMMEND ONE.
HOW TO REDEEM FUND SHARES
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A SHAREHOLDER MAY REDEEM FUND SHARES BY DELIVERING TO FIRST DATA INVESTOR
SERVICES GROUP, BOS725, P.O. BOX 1559, BOSTON, MASSACHUSETTS 02104, during its
business hours a written request for redemption in good order, plus any share
certificates with executed stock powers. The redemption price will be based on
the net asset value per share of the applicable Fund next computed after such
delivery. Good order means that all relevant documents must be endorsed by the
record owner(s) exactly as the shares are registered and the signature(s) must
be guaranteed by a member of either the Securities Transfer Association's STAMP
program or the New York Stock Exchange's Medallion Signature Program, or certain
banks, savings and loan institutions, credit unions, securities dealers,
securities exchanges, clearing agencies and registered securities associations
as required by a regulation of the Securities and Exchange Commission and
acceptable to First Data Investor Services Group. In addition, in some cases,
good order may require the furnishing of additional documents such as where
shares are registered in the name of a corporation, partnership or fiduciary.
Within seven days after receipt of a redemption request in good order by First
Data Investor Services Group, a 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 each 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 a Fund, either totally or partially, by a
distribution in kind of readily marketable securities withdrawn by that Fund
from its corresponding Portfolio. The securities so distributed would be valued
pursuant to the Portfolio's valuation procedures. If a shareholder received a
distribution in kind, the shareholder could incur brokerage or other charges in
converting the securities to cash.
To sell shares at their net asset value through an Authorized Firm (a
repurchase), a shareholder can place a repurchase order with the Authorized
Firm, which may charge a fee. The value of such shares is based upon the net
asset value calculated after EVD, as the Funds' agent, receives the order. It is
the Authorized Firm's responsibility to transmit promptly repurchase orders to
EVD. Throughout this Prospectus, the word "redemption" is generally meant to
include a repurchase.
If shares were recently purchased, the proceeds of redemption (or repurchase)
will not be sent until the check (including a certified or cashier's check)
received for the shares purchased has cleared. Payment for shares tendered for
redemption may be delayed up to 15 days from the purchase date when the purchase
check has not yet cleared. Redemptions or repurchases may result in a taxable
gain or loss.
Due to the high cost of maintaining small accounts, each 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 an additional
purchase. However, no such redemption would be required by a Fund if the cause
of the low account balance was a reduction in the net asset value of Fund
shares.
If 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. For the Florida Insured Fund, such purchases made before March 27,
1995 will be subject to a CDSC of 1% in the event of certain redemptions made
within 18 months of purchase. In addition, certain shares of the Hawaii Fund and
Kansas Fund purchased prior to February 1, 1996 and redeemed within the first
year of their purchase (except shares acquired through the reinvestment of
distributions) generally will be subject to a CDSC equal to 1% of the net asset
value of redeemed shares. The CDSC will be retained by the Principal
Underwriter. The CDSC will be imposed on an amount equal to the lesser of the
current market value or the original purchase price of the shares redeemed.
Accordingly, no CDSC will be imposed on increases in account value above the
initial purchase price, including any distributions that have been reinvested in
additional shares. In determining whether a CDSC is applicable to a redemption,
the calculation will be made in a manner that results in the lowest possible
rate being charged. It will be assumed that redemptions are made first from any
shares in the shareholder's account that are not subject to a CDSC.
The CDSC is waived for redemptions involving certain liquidation, merger or
acquisition transactions involving other investment companies. If a shareholder
reinvests redemption proceeds within 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. In addition, the CDSC applicable to shares of
the Hawaii Fund and Kansas Fund purchased prior to February 1, 1996 will be
waived for shares redeemed (1) pursuant to a Withdrawal Plan (see "Eaton Vance
Shareholder Services"), (2) as part of a distribution from a retirement plan
qualified under Section 401, 403 (b) or 457 of the Internal Revenue Code of
1986, as amended (the "Code"), or (3) as part of a minimum required distribution
from other tax-sheltered retirement plans.
REPORTS TO SHAREHOLDERS
- ------------------------------------------------------------------------------
EACH FUND WILL ISSUE TO ITS SHAREHOLDERS SEMI-ANNUAL AND ANNUAL REPORTS
CONTAINING FINANCIAL STATEMENTS. Financial statements included in annual reports
are audited by the Funds' independent certified public accountants. Shortly
after the end of each calendar year, each Fund will furnish its 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 FUNDS' TRANSFER
AGENT, FIRST DATA INVESTOR SERVICES GROUP, WILL SET UP A LIFETIME INVESTING
ACCOUNT FOR THE INVESTOR ON THE APPLICABLE 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. A Fund will not issue share
certificates except upon request.
At least quarterly, shareholders will receive a statement showing complete
details of any transaction and the current balance in the account. THE LIFETIME
INVESTING ACCOUNT ALSO PERMITS A SHAREHOLDER TO MAKE ADDITIONAL INVESTMENTS IN
SHARES OF A FUND BY SENDING A CHECK FOR $50 OR MORE to First Data Investor
Services Group.
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 First Data Investor Services Group, BOS725, P.O.
Box 1559, Boston, MA, 02104 (please provide the name of the shareholder, the
Fund and the account number).
THE FOLLOWING DISTRIBUTION OPTIONS WILL BE AVAILABLE TO ALL LIFETIME INVESTING
ACCOUNTS and may be changed as often as desired by written notice to the Funds'
dividend disbursing agent, First Data Investor Services Group, BOS725, P.O. Box
1559, Boston, MA 02104. The currently effective option will appear on each
account statement.
Share Option -- Dividends and capital gains will be reinvested in additional
shares.
Income Option -- Dividends will be paid in cash, and capital gains will be
reinvested in additional shares.
Cash Option -- Dividends and capital gains will be paid in cash.
The Share Option will be assigned if no other option is specified.
Distributions, including those reinvested, will be reduced by any withholding
required under federal income tax laws.
If the Income Option or Cash Option has been selected, dividend and/or capital
gains distribution checks which are returned by the United States Postal Service
as not deliverable or which remain uncashed for six months or more will be
reinvested in the account in shares at the then current net asset value.
Furthermore, the distribution option on the account will be automatically
changed to the Share Option until such time as the shareholder selects a
different option.
DISTRIBUTION INVESTMENT OPTION. In addition to the distribution options set
forth above, dividends and/or capital gains may be invested in additional shares
of another Eaton Vance fund. Before selecting this option, a shareholder should
obtain a prospectus of the other Eaton Vance fund and consider its objectives
and policies carefully.
"STREET NAME" ACCOUNTS. If shares of a 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 a 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 a 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 a Fund currently may be exchanged for shares of any of the following
funds: Eaton Vance Cash Management Fund, Eaton Vance Income Fund of Boston,
Eaton Vance Municipal Bond Fund L.P., Eaton Vance Tax Free Reserves and any fund
in the Eaton Vance Traditional Group of Funds on the basis of 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 shares subject to
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). Such exchange offers are available only
in States where shares of the fund being acquired may be legally sold.
Each exchange must involve shares which have a net asset value of at least
$1,000. The exchange privilege may be changed or discontinued without penalty.
Shareholders will be given sixty (60) days' notice prior to any termination or
material amendment of the exchange privilege. The Funds do 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.
Shares of a 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.
First Data Investor Services Group makes exchanges at the next determined net
asset value after receiving an exchange request in good order (see "How to
Redeem Fund Shares"). Consult First Data Investor Services Group for additional
information concerning the exchange privilege. Applications and prospectuses of
other funds are available from Authorized Firms or the Principal Underwriter.
The prospectus for each fund describes its investment objectives and policies,
and shareholders should obtain a prospectus and consider these objectives and
policies carefully before requesting an exchange.
Shares of certain other funds for which Eaton Vance acts as investment adviser
or administrator may be exchanged for Fund shares on the basis of the net asset
value per share of each fund at the time of the exchange, but subject to any
restrictions or qualifications set forth in the current prospectus of any such
fund.
Telephone exchanges are accepted by First Data Investor Services Group provided
that the investor has not disclaimed in writing the use of the privilege. To
effect such exchanges, call First Data Investor Services Group at 800-262-1122
or, within Massachusetts, 617-573-9403, Monday through Friday, 9:00 a.m. to 4:00
p.m. (Eastern Standard Time). Shares acquired by telephone exchange must be
registered in the same name(s) and with the same address as the shares being
exchanged. Neither the Funds, the Principal Underwriter nor First Data Investor
Services Group will be responsible for the authenticity of exchange instructions
received by telephone, provided that reasonable procedures to confirm that
instructions communicated are genuine have been followed. Telephone instructions
will be tape recorded. In times of drastic economic or market changes, a
telephone exchange may be difficult to implement. An exchange may result in a
taxable gain or loss.
EATON VANCE SHAREHOLDER SERVICES
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THE FUNDS OFFER 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 applicable Fund as an expense to all
shareholders.
INVEST-BY-MAIL -- FOR PERIODIC SHARE ACCUMULATION: Once the $1,000 minimum
investment has been made, checks of $50 or more payable to the order of the Fund
being purchased may be mailed directly to First Data Investor Services Group,
BOS725, P.O. Box 1559, Boston, MA 02104 at any time -- whether or not
distributions are reinvested. The name of the shareholder, the Fund and the
account number should accompany each investment.
BANK AUTOMATED INVESTING -- FOR REGULAR SHARE ACCUMULATION: Cash investments of
$50 or more may be made automatically each month or quarter from a shareholder's
bank account. The $1,000 minimum initial investment and small account redemption
policy are waived for these accounts.
STATEMENT OF INTENTION: Purchases of $50,000 or more made over a 13-month
period are eligible for reduced sales charges. See "Statement of Intention and
Escrow Agreement."
RIGHT OF ACCUMULATION: Purchases may qualify for reduced sales charges when the
current market value of holdings (shares at current offering price), plus new
purchases, reaches $50,000 or more. Shares of the Eaton Vance funds listed under
"The Eaton Vance Exchange Privilege" may be combined under the Statement of
Intention and Right of Accumulation.
WITHDRAWAL PLAN: A shareholder may draw on shareholdings systematically with
monthly or quarterly checks in an amount specified by the shareholder. A minimum
deposit of $5,000 in shares is required. The maintenance of a withdrawal plan
concurrently with purchases of additional shares would be disadvantageous
because of the sales charge included in such purchases.
REINVESTMENT PRIVILEGE: A SHAREHOLDER WHO HAS REPURCHASED OR REDEEMED SHARES MAY
REINVEST AT NET ASSET VALUE ANY PORTION OR ALL OF THE REPURCHASE OR REDEMPTION
PROCEEDS (PLUS THAT AMOUNT NECESSARY TO ACQUIRE A FRACTIONAL SHARE TO ROUND OFF
THE PURCHASE TO THE NEAREST FULL SHARE) IN SHARES OF A FUND, or, provided that
the shares repurchased or 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 repurchase or redemption, and the privilege has not been used
more than once in the prior 12 months. 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 the shares of
which are being 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 or repurchase proceeds
in shares of a 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
- ------------------------------------------------------------------------------
SUBSTANTIALLY ALL OF THE INVESTMENT INCOME ALLOCATED TO A FUND BY ITS
CORRESPONDING PORTFOLIO, LESS THE FUND'S DIRECT AND ALLOCATED EXPENSES, WILL BE
DECLARED DAILY AS A DISTRIBUTION TO FUND SHAREHOLDERS OF RECORD AT THE TIME OF
DECLARATION. Such distributions, whether taken in cash or reinvested in
additional shares, will ordinarily be paid on the last day of each month or the
next business day thereafter. Each Fund anticipates that for tax purposes the
entire distribution, whether paid in cash or reinvested in additional shares of
the Fund, will constitute tax-exempt income to shareholders, except for the
proportionate part of the distribution that may be considered taxable income if
the Fund has taxable income during the calendar year. Shareholders reinvesting
the monthly distribution should treat the amount of the entire distribution as
the tax cost basis of the additional shares acquired by reason of such
reinvestment. Daily distribution crediting will commence on the day that
collected funds for the purchase of Fund shares are available at the Transfer
Agent. Shareholders of a Fund will receive timely federal income tax information
as to the tax-exempt or taxable status of all distributions made by the Fund
during the calendar year. A Fund's net realized capital gains, if any, consist
of the net realized capital gains allocated to the Fund by its corresponding
Portfolio for tax purposes, after taking into account any available capital loss
carryovers; a Fund's net realized capital gains, if any, will be distributed at
least once a year, usually in December.
Sales charges paid upon a purchase of Fund shares cannot be taken into account
for purposes of determining gain or loss on a redemption or exchange of the
shares before the 91st day after their purchase to the extent shares of a Fund
or of another fund are subsequently acquired pursuant to a 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.
Each 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, each Fund will treat itself as owning its proportionate share of
each of its corresponding Portfolio's assets and as entitled to the income of
the Portfolio properly attributable to such share.
AS A REGULATED INVESTMENT COMPANY UNDER THE CODE, EACH 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 PARTNERSHIPS
UNDER THE CODE, THE PORTFOLIOS DO NOT PAY FEDERAL INCOME OR EXCISE 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. 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.
Interest on indebtedness incurred or continued by a shareholder to purchase or
carry shares of a Fund is not deductible to the extent it is deemed related to
the Fund's distribution of tax-exempt interest. Further, entities or persons who
are "substantial users" (or persons related to "substantial users") of
facilities financed by industrial development or private activity bonds should
consult their tax advisers before purchasing shares of a Fund. "Substantial
user" is defined in applicable Treasury regulations to include a "non-exempt
person" who regularly uses in trade or business a part of a facility financed
from the proceeds of industrial development bonds and would likely be
interpreted to include private activity bonds issued to finance similar
facilities.
SEE THE APPENDIX TO THIS PROSPECTUS FOR INFORMATION CONCERNING STATE TAXES.
Shareholders should consult their own tax advisers with respect to the State,
local and foreign tax consequences of investing in a Fund.
PERFORMANCE INFORMATION
- ------------------------------------------------------------------------------
FROM TIME TO TIME, EACH FUND MAY ADVERTISE ITS YIELD AND/OR AVERAGE ANNUAL TOTAL
RETURN. Each Fund's current yield is calculated by dividing the net investment
income per share earned during a recent 30-day period by the maximum offering
price per share of the Fund on the last day of the period and annualizing the
resulting figure. A taxable-equivalent yield is computed by using the tax-exempt
yield figure and dividing by one minus the tax rate. Each Fund's average annual
total return is determined by multiplying a hypothetical initial purchase order
of $1,000 by the average annual compounded rate of return (including capital
appreciation/depreciation, and distributions paid and reinvested) for the stated
period and annualizing the result. The average annual total return calculation
assumes that the maximum sales charge is deducted from the initial $1,000
purchase order and that all are distributions reinvested at the net asset value
on the reinvestment dates during the period. The Funds may publish annual and
cumulative total return figures from time to time. Each Fund may also quote
total return for the period prior to commencement of operations which would
reflect the Portfolio's total return (or that of its predecessor) adjusted to
reflect any applicable Fund sales charge.
Each Fund may also furnish total return calculations based on investments at
various sales charge levels or at net asset value. Any performance data which is
based on a Fund's net asset value per share would be reduced 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 a Fund will fluctuate over
time, and any presentation of the Fund's current yield or total return for any
prior period should not be considered a representation of what an investment may
earn or what the Fund's yield or total return may be in any future period. If
the expenses of a Fund or its corresponding Portfolio are allocated to Eaton
Vance, the Fund's performance will be higher.
STATEMENT OF INTENTION AND ESCROW AGREEMENT
- ------------------------------------------------------------------------------
TERMS OF ESCROW. If the investor, on an application, makes a Statement of
Intention to invest a specified amount over a thirteen month period, then out of
the initial purchase (or subsequent purchases if necessary) 5% of the dollar
amount specified on the application shall be held in escrow by the escrow agent
in the form of shares (computed to the nearest full share at the public offering
price applicable to the initial purchase hereunder) registered in the investor's
name. All income dividends and capital gains distributions on escrowed shares
will be paid to the investor or to the investor's order.
When the minimum investment so specified is completed, the escrowed shares will
be delivered to the investor. If the investor has an accumulation account the
shares will remain on deposit under the investor's account.
If total purchases under this Statement of Intention are less than the amount
specified, the investor will promptly remit to EVD any difference between the
sales charge on the amount specified and on the amount actually purchased. If
the investor does not within 20 days after written request by EVD or the
Authorized Firm pay such difference in sales charge, the escrow agent will
redeem an appropriate number of the escrowed shares in order to realize such
difference. Full shares remaining after any such redemption together with any
excess cash proceeds of the shares so redeemed will be delivered to the investor
or to the investor's order by the escrow agent.
PROVISION FOR RETROACTIVE PRICE ADJUSTMENT. If total purchases made under this
Statement are large enough to qualify for a lower sales charge than that
applicable to the amount specified, all transactions will be computed at the
expiration date of this Statement to give effect to the lower charge. Any
difference in sales charge will be refunded to the investor in cash, or applied
to the purchase of additional shares at the lower charge if specified by the
investor. This refund will be made by the Authorized Firm and by EVD. If at the
time of the recomputation a firm other than the original firm is placing the
orders, the adjustment will be made only on those shares purchased through the
firm then handling the investor's account.
<PAGE>
APPENDIX
STATE SPECIFIC INFORMATION
Because each Portfolio will normally invest at least 65% of its assets in the
obligations within its corresponding State, it is susceptible to factors
affecting that State. Each Portfolio may also invest up to 5% of its net assets
in obligations issued by the governments of each of the U.S. Virgin Islands and
Guam and up to 35% of its assets in obligations issued by the government of
Puerto Rico. Set forth below is certain economic and tax information concerning
the States in which the Portfolios invest and Puerto Rico.
The bond ratings provided below are current as of the date of this Prospectus
and are based on economic conditions which may not continue; moreover, there can
be no assurance that particular bond issues may not be adversely affected by
changes in economic, political or other conditions. Unless stated otherwise, the
ratings indicated are for obligations of the State. A State's political
subdivisions may have different ratings which are unrelated to the ratings
assigned to State obligations.
FLORIDA. Florida's financial operations are considerably different than most
other states' because, under the State's constitution, there is no state income
tax on individuals. The lack of an income tax on individuals exposes total State
tax collections to considerably more volatility than would otherwise be the case
and, in the event of an economic downswing, could effect the State's ability to
pay principal and interest in a timely manner. The General Fund budget for
1994-95 includes revenues of $14.6 billion and expenditures of $14.3 billion.
Due to lower than expected revenue collections, revenue estimates have been
reduced by 1.1% for 1994-95. Unencumbered reserves are projected to be $252.6
million, or 1.8% of expenditures for fiscal year 1995. The state's general
revenue fund budget for fiscal year 1995-96 is estimated to include revenues of
$15.0 billion (a 2.7% increase over fiscal year 1994-95) and expenditures of
$14.8 billion (a 3.5% increase over fiscal year 1994-95). Unemployment in the
State for November, 1995 was 5.3%, compared to the national unemployment rate of
5.6%.
In 1993, the State constitution was amended to limit the annual growth in the
assessed valuation of residential property and which, over time, could constrain
the growth in property taxes, a major revenue source for local governments. In
1994, the Florida constitution was amended to limit state revenue collections in
any fiscal year to, subject to exception, that which was allowed in the prior
fiscal year plus a growth factor, to be determined by reference to the average
annual growth rate in Florida personal income over the previous five years.
General obligations of Florida are rated Aa, AA and AA by Moody's, S&P and
Fitch, respectively. S&P presently regards the outlook for the State as stable.
FLORIDA TAXES. The Florida Department of Revenue has issued a ruling that
shareholders of the Florida Insured Fund that are subject to the Florida
intangibles tax will not be required to include the value of their Florida
Insured Fund shares in their taxable intangible property if all of the Florida
Insured Fund's investments on the annual assessment date are obligations that
would be exempt from such tax if held directly by such shareholders, such as
Florida and U.S. Government obligations. The Florida Insured Portfolio will
normally attempt to invest substantially all of its assets in tax-exempt
obligations of Florida, the United States, the Territories or political
subdivisions of the United States or Florida ("Florida obligations"), and it
will ensure that all of its assets held on the annual assessment date are exempt
from the Florida intangibles tax. Accordingly, the value of the Florida Insured
Fund shares held by a shareholder should, under normal circumstances, be exempt
from the Florida intangibles tax.
HAWAII. The Hawaiian economy is concentrated in tourism, agriculture,
construction and military operations. Tourism is Hawaii's largest economic
sector. In 1992, due largely to the recession in the U.S., total visitor
arrivals to the State fell 5.2% from 1991. This trend continued in 1993, with a
drop in total visitor arrivals of 6.1% from 1992 figures. Signs of recovery in
this key economic sector appeared in 1994, however, with four solid quarters of
growth in visitor arrivals. While growth in visitor arrivals slowed some in the
first quarter of 1995, total arrivals increased 3.1% in that quarter. Supply
constraints presented by the airline industry's cutbacks in scheduled air seats
to Hawaii pose an increasingly large risk for the tourism-based economy.
Agriculture, dominated by the Hawaiian pineapple and sugar trade, has faced
increased foreign competition. Agricultural production has become somewhat more
diversified and includes cattle, poultry, vegetables, coffee, flowers and other
nursery products, but the agriculture sector continues to decline.
After six years of rapid expansion in the construction industry, building
activity declined in 1992 and 1993; however, as a result of damage caused by
Hurricane Iniki in September of 1992, construction employment increased in 1993
and the overall decline in construction has lessened. Following the winding down
of Hurricane Iniki-related reconstruction on Kauai, construction commitments in
the State have been stable in recent quarters. Proposed budget cuts in U.S.
military construction spending may, however, adversely impact the State's
construction industry, and in fact government construction contracts began to
taper off in the first quarter of 1995. Construction activity is expected to
decline in 1995. Unemployment in Hawaii fell from a seasonally- adjusted 6.6% in
the third quarter of 1994 to 5.2% in the first quarter of 1995, compared to the
national unemployment rate of approximately 5.5%.
The State's overall debt levels are high due, in part, to the State's assumption
of many local government functions, including local education. Revenue is
derived primarily from general excise taxes and individual and corporate income
tax. After many years of operating either within planned deficits or with ending
fund balances, the State faces a budget shortfall of $250 million or more, much
larger than originally anticipated. This has been aggravated by lower forecasted
tax revenues. The State's historically strong financial position weakened in
1992 as the recession reduced growth in sales and income taxes. Continued
sluggish tax receipts led to a $55 million decline in the State's unreserved
general fund position. Preliminary reports indicate tax revenues increased 4.3%
in 1994, a reflection of a slowly improving economy. Revenues are expected to
continue to grow moderately in 1995. Real gross state product increased by 2.5%
in 1994, and the latest data available suggest similar growth in 1995.
Hawaii general obligation bonds are rated Aa by Moody's and AA by S&P. Fitch
does not currently rate the State's general obligations.
HAWAII TAXES. In the opinion of McCorriston Miho Miller Mukai, special Hawaii
tax counsel to the Hawaii Fund, distributions paid by the Hawaii Fund will
generally be exempt from Hawaii income tax to the extent that they are derived
from interest on obligations of the State of Hawaii or any of its political
subdivisions or authorities or obligations issued by certain other government
authorities (for example, U.S. territories). Distributions derived from the
Hawaii Fund's other investment income and short-term capital gains will be
subject to Hawaii income tax as ordinary income and distributions from net
realized long-term capital gains will be subject to Hawaii income tax as capital
gains.
Capital gains or losses realized from a redemption, sale or exchange of shares
of the Hawaii Fund by a Hawaii resident will be taken into account for Hawaii
individual income tax purposes.
KANSAS. The Kansas economy is primarily farm-based. Recent growth in the trade,
service and manufacturing sectors has, however, decreased the State's dependence
on agriculture. Cuts in military spending will continue to cause firms to
downsize. The Kansas unemployment rate remains below the national average as it
has for the past 3 decades. Unemployment rose to 5% in 1993 from 4% in 1992, as
compared to the national unemployment rate of 6.8% in 1993. The growth of Kansas
personal income in 1994 is estimated to be 5.3% compared with 4.0% in 1993 and
compared with a 1994 U.S. growth rate of 5.8%.
State revenue sources include a 4.9% sales tax, a corporate income tax between
4% and 7.35%, and an individual tax rate between 3.5% and 7.75%. The State sales
tax generates over 20% of the tax revenue. A large portion of local tax revenue
is derived from the general property tax and several taxes imposed in lieu
thereof, principally the motor vehicle tax. Local sales and use taxes accounted
for 5% of tax revenues in 1994, increasing dramatically from $30 million in 1980
to $307.9 million in 1994 as voters in more cities and counties have elected to
impose the tax or to raise the tax rate to the maximum permitted by State law.
The State's 1994 General Fund showed total revenues of $3.2 billion against
total expenditures of $3.2 billion.
Currently the State has no long-term debt; therefore, there is no rating for
Kansas general obligation bonds. Certain certificates of participation issued by
the State of Kansas are rated A by Moody's and A+ by S&P.
KANSAS TAXES. In the opinion of special Kansas tax counsel, Shook, Hardy & Bacon
P.C., individuals, trusts, estates and corporations will not be subject to the
Kansas income tax on the portion of exempt-interest dividends derived from
interest on obligations of Kansas and its political subdivisions issued after
December 31, 1987, and interest on obligations issued before January 1, 1988
where the laws of the State of Kansas authorizing the issuance of such
obligations specifically exempt the interest on such obligations from income tax
under the laws of the State of Kansas. All remaining dividends (except for
dividends, if any, derived from debt obligations issued by the governments of
Puerto Rico, the U.S. Virgin Islands and Guam and which are exempt from Federal
and state income taxes pursuant to federal law), including dividends derived
from capital gains, will be includable in the Kansas taxable income of
individuals, trusts, estates and corporations. Distributions treated as
long-term capital gains for Federal income tax purposes will generally receive
the same characterization under Kansas law. Capital gains or losses realized
from a redemption, sale or exchange of shares of the Kansas Fund by a Kansas
taxpayer will be taken into account for Kansas income tax purposes.
The above exemptions do not apply to the privilege tax imposed on banks, banking
associations, trust companies, savings and loan associations, and insurance
companies, or the franchise tax imposed on corporations. Banks, banking
associations, trust companies, savings and loan associations, insurance
companies and corporations are urged to consult their own tax advisors regarding
the effects of these taxes before investing in the Kansas Fund.
The Kansas Fund has been advised by the Kansas Department of Revenue that gross
earnings derived from the Kansas Fund are not subject to the local intangibles
tax imposed by counties, cities and townships pursuant to existing Kansas law.
The tax discussion set forth above is for general information only. The
foregoing relates to Kansas income taxation as in effect as of the date of this
combined Prospectus. Investors should consult their own tax advisers regarding
the state, local and other tax consequences of an investment in the Kansas Fund,
including the effects of any change, including any proposed change, in the tax
laws.
PUERTO RICO. The economy of Puerto Rico is dominated by the manufacturing and
service sectors. Although the economy of Puerto Rico expanded significantly from
fiscal 1984 through fiscal 1990, the rate of this expansion slowed during fiscal
years 1991, 1992 and 1993. Growth in fiscal 1994 will depend on several factors,
including the state of the U.S. economy and the relative stability in the price
of oil, the exchange rate of the U.S. dollar and the cost of borrowing. Although
the Puerto Rico unemployment rate has declined substantially since 1985, the
seasonally adjusted unemployment rate for November, 1995 was approximately
13.4%. 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 federal budget proposals currently being
considered by the U.S. Congress include the elimination of Section 936, a
federal tax credit program credited with encouraging economic development in
Puerto Rico. The fate of Section 936 cannot be determined at this time. There
can be no assurance that the elimination of the credit available under Section
936 will not have a negative impact on Puerto Rico's economy and the credit
quality (and value) of Puerto Rican bonds.
S&P rates Puerto Rico general obligations debt A, while Moody's rates it Baa1;
these ratings have been in place since 1956 and 1976, respectively. S&P assigned
a stable outlook on Puerto Rico on April 26, 1994.
<PAGE>
[logo]
EV TRADITIONAL
MUNICIPAL FUNDS
PROSPECTUS
JUNE 1, 1996
EV TRADITIONAL FLORIDA INSURED MUNICIPALS FUND
EV TRADITIONAL HAWAII MUNICIPALS FUND
EV TRADITIONAL KANSAS MUNICIPALS FUND
EV TRADITIONAL
MUNICIPAL FUNDS
24 FEDERAL STREET
BOSTON, MA 02110
- -------------------------------------------------------------------------------
PORTFOLIO INVESTMENT ADVISER
Boston Management and Research, 24 Federal Street, Boston, MA 02110
FUND ADMINISTRATOR
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, BOS725, P.O. Box 1559, Boston, MA 02104
(800) 262-1122
AUDITORS
Deloitte & Touche LLP, 125 Summer Street, Boston, MA 02110
T-TFC6/1P
<PAGE>
PART A
INFORMATION REQUIRED IN A PROSPECTUS
EV MARATHON
HIGH YIELD MUNICIPALS FUND
- ------------------------------------------------------------------------------
EV MARATHON 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 AS WITH HISTORICALLY STRUCTURED MUTUAL FUNDS. THE
FUND IS A NON-DIVERSIFIED 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. SEE "HOW THE FUND
AND THE PORTFOLIO INVEST THEIR ASSETS".
Shares of the Fund are not deposits or obligations of, or guaranteed or
endorsed by, any bank or other insured depository institution, and are not
federally insured by the Federal Deposit Insurance Corporation, the Federal
Reserve Board or any other government agency. Shares of the Fund involve
investment risks, including fluctuations in value and the possible loss of
some or all of the principal investment.
This Prospectus is designed to provide you with information you should know
before investing. Please retain this document for future reference. A
Statement of Additional Information dated May 20. 1996 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.
- ------------------------------------------------------------------------------
Page Page
Shareholder and Fund Expenses ....... 2 How to Buy Fund Shares .......... 12
The Fund's Financial Highlights .... 3 How to Redeem Fund Shares ....... 13
The Fund's Investment Objective ..... 4 Reports to Shareholders ......... 14
How the Fund and the Portfolio Invest The Lifetime Investing
their Assets (including "Risk Account/Distribution
Considerations"). .................. 4 Options 14
Organization of the Fund and the The Eaton Vance Exchange
Portfolio .......................... 7 Privilege ..................... 15
Management of the Fund and the Eaton Vance Shareholders
Portfolio .......................... 9 Services ....................... 16
Distribution Plan ................... 10 Distributions and Taxes .......... 17
Valuing Fund Shares ................. 11 Performance Information .......... 17
Appendix A ....................... 19
- --------------------------------------------------------------------------------
PROSPECTUS DATED MAY 20, 1996
<PAGE>
SHAREHOLDER AND FUND EXPENSES
- --------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES
-------------------------------------------------------------------------
Sales Charges Imposed on Purchases of Shares None
Sales Charges Imposed on Reinvested Distributions None
Fees to Exchange Shares None
Range of Declining Contingent Deferred Sales Charges Imposed
on Redemptions During the First Seven Years (as a percentage
of redemption proceeds exclusive of all reinvestments and
capital appreciation in the account) 5.00%-0%
ANNUAL FUND AND ALLOCATED PORTFOLIO OPERATING EXPENSES (as a
percentage of average daily net assets)
-------------------------------------------------------------------------
Investment Adviser Fee 0.59%
Rule 12b-1 Distribution (and Service) Fees 0.75
Other Expenses 0.25
-----
Total Operating Expenses 1.59%
=====
EXAMPLE 1 YEAR 3 YEARS
-------------------------------------------------------------------------
An investor would pay the following contingent
deferred sales charge and expenses on a $1,000
investment, assuming (a) 5% annual return and
(b) redemption at the end of each period: $67 $91
An investor would pay the following expenses on
the same investment, assuming (a) 5% annual return
and (b) no redemptions: $17 $51
NOTES:
The table and Example summarize the aggregate expenses 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. The
Investment Adviser Fee and Other Expenses set out in the table and the
information in the Example is estimated, since the Fund is only recently
organized.
The Fund invests exclusively in the Portfolio. The Trustees believe the
aggregate per share expenses of the Fund and the Portfolio should approximate
and over time may be less than, the per share expenses the Fund would incur if
the Trust retained the services of an investment adviser for the Fund and the
Fund's assets were invested directly in the types of securities being held by
the Portfolio.
The Example should not be considered a representation of past or future
expenses, and actual expenses may be greater or less than those shown. Federal
regulations require the Example to assume a 5% annual return, but actual
annual return will vary. For further information reagarding the expenses of
both the Fund and the Portfolio see "The Fund's Financial Highlights",
"Organization of the Fund and the Portfolio," "Management of the Fund and the
Portfolio" and "How to Redeem Fund Shares". A long-term shareholder in the
Fund may pay more than the economic equivalent of the maximum front-end sales
charge permitted by a rule of the National Association of Securities Dealers,
Inc. See "Distribution Plan".
No contingent deferred sales charge is imposed on (a) shares purchased more
than six years prior to redemption, (b) shares acquired through the
reinvestment of distributions or (c) any appreciation in value of other shares
in the account (see "How to Redeem Fund Shares"), and no such charge is
imposed on exchanges of Fund shares for shares of one or more other funds
listed under "The Eaton Vance Exchange Privilege".
The Portfolio's monthly advisory fee has two components, a fee based on daily
net assets and a fee based on daily gross income, as set forth in the fee
schedule on page 8. The Fund expects to begin accruing for its service fee
payments during the quarter ending September 30, 1996.
Other investment companies and investors with different distribution
arrangements are investing in the Portfolio and others may do so in the
future. See "Organization of the Fund and the Portfolio".
<PAGE>
THE FUND'S FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following information should be read in conjunction with the unaudited
financial statements included in the Statement of Additional Information.
Further information regarding the performance of the Fund will be contained in
the Fund's annual report to shareholders which may be obtained without charge
by contacting the Principal Underwriter, Eaton Vance Distributors, Inc.
- --------------------------------------------------------------------------------
FOR THE PERIOD FROM THE START OF BUSINESS, AUGUST 7, 1995,
TO JANUARY 31, 1996 (UNAUDITED)
NET ASSET VALUE, beginning of period $10.000
-------
INCOME FROM OPERATIONS:
Net investment income $ 0.299
Net realized and unrealized gain (loss) on investments 0.657
-------
Total income (loss) from operations $ 0.956
-------
LESS DISTRIBUTIONS:
From net investment income $(0.299)
In excess of net investment income(1) (0.007)
-------
Total distributions (0.306)
-------
NET ASSET VALUE, end of period $10.650
=======
TOTAL RETURN(2) 9.4%
RATIOS/SUPPLEMENTAL DATA*:
Net assets, end of period (000's omitted) $43,520
Ratio of net expenses to average net assets(3) 0.88%&
Ratio of net investment income to average net assets 5.86%&
*For the period from the start of business, August 7, 1995, to
January 31, 1996, the operating expenses of the Fund 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 $ 0.254
=======
RATIOS/SUPPLEMENTAL DATA:*
Expenses(3) 1.77%&
Net investment income 4.97%&
-------
&Annualized
(1)The Fund has followed the Statement of Position (SOP) 93-2: Determination,
Disclosure and Financial Statement Presentation of Income, Capital Gain,
and Return of Capital Distribution by Investment Companies. The SOP
requires that differences in the recognition or classification of income
between the financial statements and tax earnings and profits that
result in temporary over-distributions for financial statement purposes,
are classified as distributions in excess of net investment income or
accumulated net realized gains.
(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. Dividends and distributions, if any, are assumed to
be reinvested at the net asset value on the payable date. Total return is
calculated on an non-annualized basis.
(3)Includes the Fund's share of High Yield Municipals Portfolio's allocated
expenses.
<PAGE>
THE FUND'S INVESTMENT OBJECTIVE
- --------------------------------------------------------------------------------
THE FUND'S INVESTMENT OBJECTIVE IS TO PROVIDE HIGH CURRENT INCOME EXEMPT FROM
REGULAR FEDERAL INCOME TAX. The Fund seeks its objective through investments
in a portfolio of high-yielding, below investment grade securities. The
investment objective and 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.
HOW THE FUND AND THE PORTFOLIO INVEST THEIR ASSETS
- --------------------------------------------------------------------------------
THE FUND CURRENTLY SEEKS TO ACHIEVE ITS OBJECTIVE BY INVESTING ITS ASSETS IN
HIGH YIELD MUNICIPALS PORTFOLIO (THE "PORTFOLIO"), WHICH IS ITSELF AN OPEN-END
INVESTMENT COMPANY. The Portfolio invests primarily in below investment grade
municipal obligations which are obligations that are rated Ba or lower by
Moody's Investors Service, Inc. ("Moody's") or BB or lower by Standard &
Poor's Ratings Group ("S&P") or Fitch Investors Service, Inc. ("Fitch") or
that are unrated but determined by the Investment Adviser to be of comparable
quality. For a description of the ratings assigned by the rating agencies, see
Appendix A. Below investment grade municipal obligations, commonly known as
"junk bonds", generally offer higher current yields than do higher rated
securities, but are subject to greater risks. Securities in the lower-rated
categories are considered to be of poor standing and predominantly
speculative. The Portfolio may also invest a portion of its assets in
municipal obligations that are not paying current income in anticipation of
possible future income. For more detailed information about the risks
associated with investing in such securities, see "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. 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. Such
obligations will not be included in the securities used to determine the
Portfolio's compliance with the 80% test described above. Distributions to
corporate investors of certain interest income may also be subject to the 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 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. 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 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 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 to at the prices at which they are valued.
Certain securities held by the Portfolio may permit the issuer at its option
to "call", or redeem, its securities. If an issuer 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 and distribute
income from zero-coupon bonds on a current basis, even though it does not
receive that income currently in cash. Thus, the Portfolio may have to sell
other investments to obtain cash needed to make income distributions.
The Portfolio may invest in municipal leases, and participations in municipal
leases. The 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.
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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.
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ORGANIZATION OF THE FUND AND THE PORTFOLIO
- --------------------------------------------------------------------------------
THE FUND IS A NON-DIVERSIFIED SERIES OF EATON VANCE MUNICIPALS TRUST II (THE
"TRUST"), A BUSINESS TRUST ESTABLISHED UNDER MASSACHUSETTS LAW PURSUANT TO A
DECLARATION OF TRUST DATED OCTOBER 25, 1993, AS AMENDED. THE TRUST IS A MUTUAL
FUND -- AN OPEN-END MANAGEMENT INVESTMENT COMPANY. The Trustees of the Trust
are responsible for the overall management and supervision of its affairs. The
Trust may issue an unlimited number of shares of beneficial interest (no par
value per share) in one or more series and because the Trust can offer
separate series (such as the Fund) it is known as a "series company." Each
share represents an equal proportionate beneficial interest in the Fund. When
issued and outstanding, the shares are fully paid and nonassessable by the
Trust and redeemable as described under "How to Redeem Fund Shares".
Shareholders are entitled to one vote for each full share held. Fractional
shares may be voted proportionately. Shares have no preemptive or conversion
rights and are freely transferable. In the event of the liquidation of the
Fund, shareholders are entitled to share pro rata in the net assets of the
Fund available for distribution to shareholders.
THE PORTFOLIO IS ORGANIZED AS A TRUST UNDER THE LAWS OF THE STATE OF NEW YORK
AND INTENDS TO BE TREATED AS A PARTNERSHIP FOR FEDERAL TAX PURPOSES. The
Portfolio, as well as the Trust, intends to comply with all applicable federal
and state securities laws. The Portfolio's Declaration of Trust provides that
the Fund and other entities permitted to invest in the Portfolio (e.g., other
U.S. and foreign investment companies, and common and commingled trust funds)
will each be liable for all obligations of the Portfolio. However, the risk of
the Fund incurring financial loss on account of such liability is limited to
circumstances in which both inadequate insurance exists and the Portfolio
itself is unable to meet its obligations. Accordingly, the Trustees of the
Trust believe that neither the Fund nor its shareholders will be adversely
affected by reason of the Fund investing in the Portfolio.
SPECIAL INFORMATION ON THE FUND/PORTFOLIO INVESTMENT STRUCTURE. An investor in
the Fund should be aware that the Fund, unlike mutual funds which directly
acquire and manage their own portfolios of securities, seeks to achieve its
investment objective by investing its assets in an interest in the Portfolio
(although the Fund may temporarily hold a de minimus amount of cash), which is
a separate investment company with an identical investment objective.
Therefore, the Fund's interest in securities owned by the Portfolio is
indirect. In addition to selling an interest to the Fund, the Portfolio may
sell interests to other affiliated and non-affiliated mutual funds or
institutional investors. Such investors will invest in the Portfolio on the
same terms and conditions and will pay a proportionate share of the
Portfolio's expenses. However, the other investors investing in the Portfolio
are not required to sell their shares at the same public offering price as the
Fund due to variations in sales commissions and other operating expenses.
Therefore, investors in the Fund should be aware that these differences may
result in differences in returns experienced by investors in the various funds
that invest in the Portfolio. Such differences in returns are also present in
other mutual fund structures, including funds that have multiple classes of
shares. For information regarding the investment objective, policies and
restrictions of the Portfolio, see "The Fund's Investment Objective" and "How
the Fund and the Portfolio Invest their Assets". Further information
regarding investment practices may be found in the Statement of Additional
Information.
The Trustees of the Trust have considered the advantages and disadvantages of
investing the assets of the Fund in the Portfolio, as well as the advantages
and disadvantages of the two-tier format. The Trustees believe that the
structure offers opportunities for substantial growth in the assets of the
Portfolio, and affords the potential for economies of scale for the Fund, at
least when the assets of the Portfolio exceed $500 million.
The Fund may withdraw (completely redeem) all its assets from the Portfolio at
any time if the Board of Trustees of the Trust determines that it is in the
best interest of the Fund to do so. The investment objective and the
nonfundamental investment policies of the Fund and the Portfolio may be
changed by the Trustees of the Trust and the Portfolio without obtaining the
approval of the shareholders of the Fund or the investors in the Portfolio, as
the case may be. Any such change of the investment objective of the Fund or
the Portfolio will be preceded by thirty days' advance written notice to the
shareholders of the Fund or the investors in the Portfolio, as the case may
be. If a shareholder redeems shares because of a change in the nonfundamental
objective or policies of the Fund, those shares may be subject to a contingent
deferred sales charge, as described in "How to Redeem Fund Shares". In the
event the Fund withdraws all of its assets from the Portfolio, or the Board of
Trustees of the Trust determines that the investment objective of the
Portfolio is no longer consistent with the investment objective of the Fund,
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.
Information regarding other pooled investment entities or funds which invest
in the Portfolio may be obtained by contacting Eaton Vance Distributors, Inc.
(the "Principal Underwriter" or "EVD"), 24 Federal Street, Boston, MA 02110,
(617) 482-8260. Smaller investors in the Portfolio may be adversely affected
by the actions of larger investors in the Portfolio. For example, if a large
investor withdraws from the Portfolio, the remaining investors may experience
higher pro rata operating expenses, thereby producing lower returns.
Additionally, the Portfolio may hold fewer securities, resulting in increased
portfolio risk, and experience decreasing economies of scale. However, this
possibility exists as well for historically structured funds which have large
or institutional investors.
Until 1992, the Administrator sponsored and advised historically structured
funds. Funds which invest all their assets in interests in a separate
investment company are a relatively new development in the mutual fund
industry and, therefore, the Fund may be subject to additional regulations
than historically structured funds.
The Declaration of Trust of the Portfolio provides that the Portfolio will
terminate 120 days after the complete withdrawal of the Fund or any other
investor in the Portfolio, unless either the remaining investors, by unanimous
vote at a meeting of such investors, or a majority of the Trustees of the
Portfolio, by written instrument consented to by all investors, agree to
continue the business of the Portfolio. This provision is consistent with
treatment of the Portfolio as a partnership for federal income tax purposes.
See "Distributions and Taxes" for further information. Whenever the Fund as an
investor in the Portfolio is requested to vote on matters pertaining to the
Portfolio (other than the termination of the Portfolio's business, which may
be determined by the Trustees of the Portfolio without investor approval), the
Fund will hold a meeting of Fund shareholders and will vote its interest in
the Portfolio for or against such matters proportionately to the instructions
to vote for or against such matters received from Fund shareholders. The Fund
shall vote shares for which it receives no voting instructions in the same
proportion as the shares for which it receives voting instructions. Other
investors in the Portfolio may alone or collectively acquire sufficient voting
interests in the Portfolio to control matters relating to the operation of the
Portfolio, which may require the Fund to withdraw its investment in the
Portfolio or take other appropriate action. Any such withdrawal could result
in a distribution "in kind" of portfolio securities (as opposed to a cash
distribution from the Portfolio). If securities are distributed, the Fund
could incur brokerage, tax or other charges in converting the securities to
cash. In addition, the distribution in kind may result in a less diversified
portfolio of investments or adversely affect the liquidity of the Fund.
Notwithstanding the above, there are other means for meeting shareholder
redemption requests, such as borrowing.
The Trustees of the Trust, including a majority of the noninterested Trustees,
have approved written procedures designed to identify and address any
potential conflicts of interest arising from the fact that the Trustees of the
Trust and the Trustees of the Portfolio are the same. Such procedures require
each Board to take actions to resolve any conflict of interest between the
Fund and the Portfolio, and it is possible that the creation of separate
Boards may be considered. For further information concerning the Trustees and
officers of the Trust and the Portfolio, see the Statement of Additional
Information.
MANAGEMENT OF THE FUND AND THE PORTFOLIO
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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 and 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:
ANNUAL DAILY
CATEGORY DAILY NET ASSETS ASSET RATE INCOME RATE
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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%
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
APPROXIMATELY $15 BILLION. Eaton Vance is a wholly-owned subsidiary of Eaton
Vance Corp., a publicly held holding company. Eaton Vance Corp. through its
subsidiaries and affiliates, engages in investment management and marketing
activities, oil and gas operations, real estate investment, consulting and
management, and development of precious metals properties.
Thomas M. Metzold has acted as the portfolio manager of the Portfolio since it
commenced operations. He has been a Vice President of Eaton Vance since 1991
and of BMR since 1992, and an employee of Eaton Vance since 1987.
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 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 EVD under the distribution agreement.
Such costs and expenses to be borne by the Portfolio and the Fund, as the case
may be, include, without limitation: custody and transfer agency fees and
expenses, including those incurred for determining net asset value and keeping
accounting books and records; expenses of pricing and valuation services; the
cost of share certificates; membership dues in investment company
organizations; expenses of acquiring, holding and disposing of securities and
other investments; fees and expenses of registering under the securities laws
and governmental fees; expenses of reporting to shareholders and investors;
proxy statements and other expenses of shareholders' or investors' meetings;
insurance premiums; printing and mailing expenses; interest, taxes and
corporate fees; legal and accounting expenses; compensation and expenses of
Trustees not affiliated with BMR or Eaton Vance; and investment advisory fees
and, if any, administrative services fees. The Portfolio or the Fund, as the
case may be, will also each bear expenses incurred in connection with
litigation in which the Portfolio or the Fund, as the case may be, is a party
and any legal obligation to indemnify its respective officers and Trustees
with respect thereto.
DISTRIBUTION PLAN
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THE FUND FINANCES DISTRIBUTION ACTIVITIES AND HAS ADOPTED A DISTRIBUTION PLAN
(THE "PLAN") PURSUANT TO RULE 12B-1 UNDER THE INVESTMENT COMPANY ACT OF 1940
(THE "1940 ACT"). Rule 12b-1 permits a mutual fund, such as the Fund, to
finance distribution activities and bear expenses associated with the
distribution of its shares provided that any payments made by the Fund are
made pursuant to a written plan adopted in accordance with the Rule. The Plan
is subject to, and complies with, the sales charge rule of the National
Association of Securities Dealers, Inc. (the "NASD Rule"). The Plan is
described further in the Statement of Additional Information, and the
following is a description of the salient features of the Plan. The Plan
provides that the Fund, subject to the NASD Rule, will pay sales commissions
and distribution fees to the Principal Underwriter only after and as a result
of the sale of shares of the Fund. On each sale of Fund shares (excluding
reinvestment of distributions) the Fund will pay the Principal Underwriter
amounts representing (i) sales commissions equal to 5% of the amount received
by the Fund for each share sold and (ii) distribution fees calculated by
applying the rate of 1% over the prime rate then reported in The Wall Street
Journal to the outstanding balance of Uncovered Distribution Charges (as
described below) of the Principal Underwriter. The Principal Underwriter
currently expects to pay sales commissions (except on exchange transactions
and reinvestments) to a financial service firm (an "Authorized Firm") at the
time of sale equal to 4% of the purchase price of the shares sold by such
Firm. The Principal Underwriter will use its own funds (which may be borrowed
from banks) to pay such commissions. Because the payment of the sales
commissions and distribution fees to the Principal Underwriter is subject to
the NASD Rule described below, it will take the Principal Underwriter a number
of years to recoup the sales commissions paid by it to Authorized Firms from
the payments received by it from the Fund pursuant to the Plan.
THE NASD RULE REQUIRES THE FUND TO LIMIT ITS ANNUAL PAYMENTS OF SALES
COMMISSIONS AND DISTRIBUTION FEES TO AN AMOUNT NOT EXCEEDING .75% OF THE
FUND'S AVERAGE DAILY NET ASSETS FOR EACH FISCAL YEAR. Under its Plan, the Fund
accrues daily an amount at the rate of 1/365 of .75% of its net assets, and
pays such accrued amounts monthly to the Principal Underwriter. The Plan
requires such accruals to be automatically discontinued during any period in
which there are no outstanding Uncovered Distribution Charges under the Plan.
Uncovered Distribution Charges are calculated daily and, briefly, are
equivalent to all unpaid sales commissions and distribution fees to which the
Principal Underwriter is entitled under the Plan less all contingent deferred
sales charges theretofore paid to the Principal Underwriter. The Eaton Vance
organization may be considered to have realized a profit under the Plan if at
any point in time the aggregate amounts of all payments received by the
Principal Underwriter from the Fund pursuant to the Plan, including any
contingent deferred sales charges, have exceeded the total expenses
theretofore incurred by such organization in distributing shares of the Fund.
Total expenses for this purpose will include an allocable portion of the
overhead costs of such organization and its branch offices.
Because of the NASD Rule limitation on the amount of sales commissions and
distribution fees paid to the Principal Underwriter during any fiscal year, a
high level of sales of Fund shares during the initial years of the Fund's
operations would cause a large portion of the sales commissions attributable
to a sale of Fund shares to be accrued and paid by the Fund to the Principal
Underwriter in fiscal years subsequent to the year in which such shares were
sold. This spreading of sales commissions payments under the Plan over an
extended period would result in the incurrence and payment of increased
distribution fees under the Plan.
During the period from the start of business, August 7, 1995, to January 31,
1996, the Fund paid sales commissions under the Plan equivalent to 0.75% of
the Fund's average daily net assets for such period. As at January 31, 1996,
the outstanding Uncovered Distribution Charges of the Principal Underwriter
calculated under the Plan amounted to approximately $1,513,000 (which amount
was equivalent to 3.5% of the Fund's net assets on such day).
THE PLAN ALSO AUTHORIZES THE FUND TO MAKE PAYMENTS OF SERVICE FEES TO THE
PRINCIPAL UNDERWRITER, AUTHORIZED FIRMS AND OTHER PERSONS IN AMOUNTS NOT
EXCEEDING .25% OF THE FUND'S AVERAGE DAILY NET ASSETS FOR EACH FISCAL YEAR.
The Trustees of the Trust have initially implemented the Plan by authorizing
the Fund to make quarterly payments of service fees to the Principal
Underwriter and Authorized Firms in amounts not expected to exceed .25% of the
Fund's average daily net assets based on the value of Fund shares sold by such
persons and remaining outstanding for at least twelve months. As permitted by
the NASD Rule, such payments are made for personal services and/or the
maintenance of shareholder accounts. Service fees are separate and distinct
from the sales commissions and distribution fees payable by the Fund to the
Principal Underwriter, and as such are not subject to automatic discontinuance
when there are no outstanding Uncovered Distribution Charges of the Principal
Underwriter. The Fund expects to begin accruing for its service fee payments
during the quarter ending September 30, 1996.
The Principal Underwriter may, from time to time, at its own expense, provide
additional incentives to Authorized Firms which employ registered
representatives who sell the Fund's shares and/or shares of other funds
distributed by the Principal Underwriter. In some instances, such additional
incentives may be offered only to certain Authorized Firms whose
representatives sell or are expected to sell significant amounts of shares. In
addition, the Principal Underwriter may from time to time increase or decrease
the sales commissions payable to Authorized Firms.
The Fund may, in its absolute discretion, suspend, discontinue or limit the
offering of its shares at any time. In determining whether any such action
should be taken, the Fund's management intends to consider all relevant
factors, including without limitation the size of the Fund, the investment
climate and market conditions, the volume of sales and redemptions of Fund
shares, and the amount of Uncovered Distribution Charges of the Principal
Underwriter. The Plan may continue in effect and payments may be made under
the Plan following any such suspension, discontinuance or limitation of the
offering of Fund shares; however, the Fund is not contractually obligated to
continue the Plan for any particular period of time. Suspension of the
offering of Fund shares would not, of course, affect a shareholder's ability
to redeem shares.
VALUING FUND SHARES
- --------------------------------------------------------------------------------
THE FUND VALUES ITS SHARES ONCE ON EACH DAY THE NEW YORK STOCK EXCHANGE (THE
"EXCHANGE") IS OPEN FOR TRADING, as of the close of regular trading on the
Exchange (normally 4:00 p.m. New York time). The Fund's net asset value per
share is determined by its custodian, Investors Bank & Trust Company ("IBT"),
(as agent for the Fund) in the manner authorized by the Trustees of the Trust.
Net asset value is computed by dividing the value of the Fund's total assets,
less its liabilities, by the number of shares outstanding. Because the Fund
invests its assets in an interest in the Portfolio, the Fund's net asset value
will reflect the value of its interest in the Portfolio (which, in turn,
reflects the underlying value of the Portfolio's assets and liabilities).
Authorized Firms must communicate an investor's order to the Principal
Underwriter prior to the close of the Principal Underwriter's business day to
receive that day's net asset value per Fund share. It is the Authorized Firms'
responsibility to transmit orders promptly to the Principal Underwriter, which
is a wholly-owned subsidiary of Eaton Vance.
The Portfolio's net asset value is also determined as of the close of regular
trading on the Exchange by IBT (as custodian and agent for the Portfolio)
based on market or fair value in the manner authorized by the Trustees of the
Portfolio. 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 at the net asset value per share of the Fund next determined after an
order is effective. The Fund may suspend the offering of shares at any time
and may refuse an order for the purchase of shares. An Authorized Firm may
charge its customers a fee in connection with transactions executed by that
Firm.
An initial investment in the Fund must be at least $1,000. Once an account has
been established the investor may send investments of $50 or more at any time
directly to the Fund's transfer agent (the "Transfer Agent") as follows: First
Data Investor Services Group, BOS725, P.O. Box 1559, Boston, MA 02104. The
$1,000 minimum initial investment is waived for Bank Automated Investing
accounts, which may be established with an investment of $50 or more. See
"Eaton Vance Shareholder Services".
ACQUIRING FUND SHARES IN EXCHANGE FOR SECURITIES. IBT, as escrow agent, will
receive securities acceptable to Eaton Vance, as Administrator, in exchange
for Fund shares at their net asset value as determined above. The minimum
value of securities (or securities and cash) accepted for deposit is $5,000.
Securities accepted will be sold 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 net asset value per Fund share on the day such
proceeds are received. Eaton Vance will use reasonable efforts to obtain the
then current market price for such securities but does not guarantee the best
available price. Eaton Vance will absorb any transaction costs, such as
commissions, on the sale of the securities.
Securities determined to be acceptable should be transferred via book entry or
physically delivered, in proper form for transfer, through an Authorized Firm,
together with a completed and signed Letter of Transmittal in approved form
(available from Authorized Firms), as follows:
IN THE CASE OF BOOK ENTRY:
Deliver through Depository Trust Co.
Broker #2212
Investors Bank & Trust Company
For A/C EV Marathon High Yield Municipals Fund
IN THE CASE OF PHYSICAL DELIVERY:
Investors Bank & Trust Company
Attention: EV Marathon High Yield Municipals Fund
Physical Securities Processing Settlement Area
89 South Street
Boston, MA 02111
Investors who are contemplating an exchange of securities for shares of the
Fund, or their representatives, must contact Eaton Vance to determine whether
the securities are acceptable before forwarding such securities to IBT. Eaton
Vance reserves the right to reject any securities. Exchanging securities for
Fund shares may create a taxable gain or loss. Each investor should consult
his or her tax adviser with respect to the particular federal, state and local
tax consequences of exchanging securities for Fund shares.
The Trustees of the Trust may consider terminating sales of Fund shares, other
than to the Fund's existing shareholders, when the Portfolio reaches a size
that becomes difficult to manage, which may be as low as $250,000,000. If
closed, the Board of Trustees may vote to re-open the Fund for sales to new
shareholders at any time.
--------------------------------------------------------------------
IF YOU DON'T HAVE AN AUTHORIZED FIRM, EATON VANCE CAN RECOMMEND ONE.
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HOW TO REDEEM FUND SHARES
- ------------------------------------------------------------------------------
A SHAREHOLDER MAY REDEEM FUND SHARES BY DELIVERING TO FIRST DATA INVESTOR
SERVICES GROUP, BOS725, P.O. BOX 1559, BOSTON, MASSACHUSETTS 02104, during its
business hours a written request for redemption in good order, plus any share
certificates with executed stock powers. The redemption price will be based on
the net asset value per Fund share next computed after such delivery. Good
order means that all relevant documents must be endorsed by the record owner
(s) exactly as the shares are registered and the signature(s) must be
guaranteed by a member of either the Securities Transfer Association's STAMP
program or the New York Stock Exchange's Medallion Signature Program, or
certain banks, savings and loan institutions, credit unions, securities
dealers, securities exchanges, clearing agencies and registered securities
associations as required by a regulation of the Securities and Exchange
Commission and acceptable to First Data Investor Services Group. In addition,
in some cases, good order may require the furnishing of additional documents
such as where shares are registered in the name of a corporation, partnership
or fiduciary.
Within seven days after receipt of a redemption request in good order by First
Data Investor Services Group, the Fund will make payment in cash for the net
asset value of the shares as of the date determined above, reduced by the
amount of any applicable contingent deferred sales charges (described below)
and any federal income tax required to be withheld. Although the Fund normally
expects to make payment in cash for redeemed shares, the Trust, subject to
compliance with applicable regulations, has reserved the right to pay the
redemption price of shares of the Fund, either totally or partially, by a
distribution in kind of readily marketable securities withdrawn by the Fund
from the Portfolio. The securities so distributed would be valued pursuant to
the Portfolio's valuation procedures. If a shareholder received a distribution
in kind, the shareholder could incur brokerage or other charges in converting
the securities to cash.
To sell shares at their net asset value through an Authorized Firm (a
repurchase), a shareholder can place a repurchase order with the Authorized
Firm, which may charge a fee. The value of those shares is based upon the net
asset value calculated after EVD, as the Fund's agent, receives the order. It
is the Authorized Firm's responsibility to transmit promptly repurchase orders
to EVD. Throughout this Prospectus, the word "redemption" is generally meant
to include a repurchase.
If shares were recently purchased, the proceeds of redemption (or repurchase)
will not be sent until the check (including a certified or cashier's check)
received for the shares purchased has cleared. Payment for shares tendered for
redemption may be delayed up to 15 days from the purchase date when the
purchase check has not yet cleared. Redemptions or repurchases may result in a
taxable gain or loss.
Due to the high cost of maintaining small accounts, the Fund reserves the
right to redeem accounts with balances of less than $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. No contingent deferred sales charge will be imposed with
respect to such involuntary redemptions.
CONTINGENT DEFERRED SALES CHARGE. Shares redeemed within the first six years
of their purchase (except shares acquired through the reinvestment of
distributions) generally will be subject to a contingent deferred sales
charge. This contingent deferred sales charge is imposed on any redemption the
amount of which exceeds the aggregate value at the time of redemption of (a)
all shares in the account purchased more than six years prior to the
redemption, (b) all shares in the account acquired through reinvestment of
distributions, and (c) the increase, if any, in the value of all other shares
in the account (namely those purchased within the six years preceding the
redemption) over the purchase price of such shares. Redemptions are processed
in a manner to maximize the amount of redemption proceeds which will not be
subject to a contingent deferred sales charge. That is, each redemption will
be assumed to have been made first from the exempt amounts referred to in
clauses (a), (b) and (c) above, and second through liquidation of those shares
in the account referred to in clause (c) on a first-in-first-out basis. Any
contingent deferred sales charge which is required to be imposed on share
redemptions will be made in accordance with the following schedule:
YEAR OF REDEMPTION CONTINGENT
AFTER PURCHASE DEFERRED
SALES CHARGE
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First or Second ...................................... 5%
Third ................................................ 4%
Fourth ............................................... 3%
Fifth ................................................ 2%
Sixth ................................................ 1%
Seventh and following ................................ 0%
In calculating the contingent deferred sales charge upon the redemption of
Fund shares acquired in an exchange of shares of a fund in the Eaton Vance
Marathon Group of Funds (see "The Eaton Vance Exchange Privilege"), the
contingent deferred sales charge schedule applicable to the shares at the time
of purchase will apply and the purchase of Fund shares acquired in the
exchange is deemed to have occurred at the time of the original purchase of
the exchanged shares.
No contingent deferred sales charge will be imposed on Fund shares which have
been sold to Eaton Vance or its affiliates, or to their respective employees
or clients. The contingent deferred sales charge will be waived for shares
redeemed (1) pursuant to a Withdrawal Plan (see "Eaton Vance Shareholder
Services"), (2) as part of a required distribution from a tax-sheltered
retirement plan, or (3) following the death of all beneficial owners of such
shares, provided the redemption is requested within one year of death (a death
certificate and other applicable documents may be required). The contingent
deferred sales charge will be paid to the Principal Underwriter or the Fund.
When paid to the Principal Underwriter it will reduce the amount of Uncovered
Distribution Charges calculated under the Fund's Distribution Plan. See
"Distribution Plan."
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THE FOLLOWING EXAMPLE ILLUSTRATES THE OPERATION OF THE CONTINGENT DEFERRED
SALES CHARGE. ASSUME THAT AN INVESTOR PURCHASES $10,000 OF THE FUND'S
SHARES AND THAT 16 MONTHS LATER THE VALUE OF THE ACCOUNT HAS GROWN THROUGH
INVESTMENT PERFORMANCE AND REINVESTMENT OF DIVIDENDS TO $12,000. THE
INVESTOR THEN MAY REDEEM UP TO $2,000 OF SHARES WITHOUT INCURRING A
CONTINGENT DEFERRED SALES CHARGE. IF THE INVESTOR SHOULD REDEEM $3,000 OF
SHARES, A CHARGE WOULD BE IMPOSED ON $1,000 OF THE REDEMPTION. THE RATE
WOULD BE 5% BECAUSE THE REDEMPTION WAS MADE IN THE SECOND YEAR AFTER THE
PURCHASE WAS MADE AND THE CHARGE WOULD BE $50.
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REPORTS TO SHAREHOLDERS
- --------------------------------------------------------------------------------
THE FUND WILL ISSUE TO ITS SHAREHOLDERS SEMI-ANNUAL AND ANNUAL REPORTS
CONTAINING FINANCIAL STATEMENTS. Financial statements included in annual
reports are audited by the Fund's independent certified public accountants.
Shortly after the end of each calendar year, the Fund will furnish all
shareholders with information necessary for preparing federal and state tax
returns.
THE LIFETIME INVESTING ACCOUNT/DISTRIBUTION OPTIONS
- --------------------------------------------------------------------------------
AFTER AN INVESTOR MAKES AN INITIAL PURCHASE OF FUND SHARES, THE FUND'S
TRANSFER AGENT, FIRST DATA INVESTOR SERVICES GROUP, WILL SET UP A LIFETIME
INVESTING ACCOUNT FOR THE INVESTOR ON THE FUND'S RECORDS. This account is a
complete record of all transactions between the investor and the Fund which at
all times shows the balance of shares owned. The Fund will not issue share
certificates except upon request.
At least quarterly, shareholders will receive a statement showing complete
details of any transaction and the current balance in the account. THE
LIFETIME INVESTING ACCOUNT ALSO PERMITS A SHAREHOLDER TO MAKE ADDITIONAL
INVESTMENTS IN SHARES BY SENDING A CHECK FOR $50 OR MORE to First Data
Investor Services Group.
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 First Data Investor Services Group, BOS725, P.O.
Box 1559, Boston, MA 02104 (please provide the name of the shareholder, the
Fund and the account number).
THE FOLLOWING DISTRIBUTION OPTIONS WILL BE AVAILABLE TO ALL LIFETIME INVESTING
ACCOUNTS and may be changed as often as desired by written notice to the
Fund's dividend disbursing agent, First Data Investor Services Group, BOS725,
P.O. Box 1559, Boston, MA 02104. The currently effective option will appear on
each account statement.
Share Option -- Dividends and capital gains will be reinvested in additional
shares.
Income Option -- Dividends will be paid in cash, and capital gains will be
reinvested in additional shares.
Cash Option -- Dividends and capital gains will be paid in cash.
The Share Option will be assigned if no other option is specified.
Distributions, including those reinvested, will be reduced by any withholding
required under federal income tax laws.
If the Income Option or Cash Option has been selected, dividend and/or capital
gains distribution checks which are returned by the United States Postal
Service as not deliverable or which remain uncashed for six months or more
will be reinvested in the account in shares at the then current net asset
value. Furthermore, the distribution option on the account will be
automatically changed to the Share Option until such time as the shareholder
selects a different option.
DISTRIBUTION INVESTMENT OPTION. In addition to the distribution options set
forth above, dividends and/or capital gains may be invested in additional
shares of another Eaton Vance fund. Before selecting this option, a
shareholder should obtain a prospectus of the other Eaton Vance fund and
consider its objectives and policies carefully.
"STREET NAME" ACCOUNTS. If shares of the Fund are held in a "street name"
account with an Authorized Firm, all recordkeeping, transaction processing and
payments of distributions relating to the beneficial owner's account will be
performed by the Authorized Firm, and not by the Fund and its Transfer Agent.
Since the Fund will have no record of the beneficial owner's transactions, a
beneficial owner should contact the Authorized Firm to purchase, redeem or
exchange shares, to make changes in or give instructions concerning the
account, or to obtain information about the account. The transfer of shares in
a "street name" account to an account with another dealer or to an account
directly with the Fund involves special procedures and will require the
beneficial owner to obtain historical purchase information about the shares in
the account from the Authorized Firm. Before establishing a "street name"
account with an investment firm, or transferring the account to another
investment firm, an investor wishing to reinvest distributions should
determine whether the firm which will hold the shares allows reinvestment of
distributions in "street name" accounts.
THE EATON VANCE EXCHANGE PRIVILEGE
- ------------------------------------------------------------------------------
Shares of the Fund currently may be exchanged for shares of one or more other
funds in the Eaton Vance Marathon Group of Funds (except Eaton Vance Prime
Rate Reserves) or Eaton Vance Money Market Fund, which are distributed with a
contingent deferred sales charge, on the basis of the net asset value per
share of each fund at the time of the exchange, provided that such exchange
offers are available only in states where shares of the fund being acquired
may be legally sold.
Each exchange must involve shares which have a net asset value of at least
$1,000. The exchange privilege may be changed or discontinued without penalty.
Shareholders will be given sixty (60) days' notice prior to any termination or
material amendment of the exchange privilege. The Fund does not permit the
exchange privilege to be used for "Market Timing" and may terminate the
exchange privilege for any shareholder account engaged in Market Timing
activity. Any shareholder account for which more than two round-trip exchanges
are made within any twelve month period will be deemed to be engaged in Market
Timing. Furthermore, a group of unrelated accounts for which exchanges are
entered contemporaneously by a financial intermediary will be considered to be
engaged in Market Timing.
First Data Investor Services Group makes exchanges at the next determined net
asset value after receiving an exchange request in good order (see "How to
Redeem Fund Shares"). Consult First Data Investor Services Group for
additional information concerning the exchange privilege. Applications and
prospectuses of the other funds are available from Authorized Firms or the
Principal Underwriter. The prospectus for each fund describes its investment
objectives and policies, and shareholders should obtain a prospectus and
consider these objectives and policies carefully before requesting an
exchange.
No contingent deferred sales charge is imposed on exchanges. For purposes of
calculating the contingent deferred sales charge upon redemption of shares
acquired in an exchange, the contingent deferred sales charge schedule
applicable to the shares at the time of purchase will apply and the purchase
of shares acquired in one or more exchanges is deemed to have occurred at the
time of the original purchase of the exchanged shares. For the contingent
deferred sales charge schedule applicable to the EV Marathon Group of Funds
(except EV Marathon Strategic Income Fund and Class I shares of any EV
Marathon Limited Maturity Fund), see "How to Redeem Fund Shares". The
contingent deferred sales charge schedule applicable to EV Marathon Strategic
Income Fund and Class I shares of any EV Marathon Limited Maturity Fund is 3%,
2.5%, 2% or 1% in the event of a redemption occurring in the first, second,
third or fourth year, respectively, after the original share purchase.
Shares of other funds in the Eaton Vance Marathon Group of Funds and shares of
Eaton Vance Money Market Fund may be exchanged for Fund shares on the basis of
the net asset value per share of each fund at the time of the exchange, but
subject to any restrictions or qualifications set forth in the current
prospectus of any such fund.
Telephone exchanges are accepted by First Data Investor Services Group
provided that the investor has not disclaimed in writing the use of the
privilege. To effect such exchanges, call First Data Investor Services Group
at 800-262-1122 or, within Massachusetts, 617-573-9403, Monday through Friday,
9:00 a.m. to 4:00 p.m. (Eastern Standard Time). Shares acquired by telephone
exchange must be registered in the same name(s) and with the same address as
the shares being exchanged. Neither the Fund, the Principal Underwriter nor
First Data Investor Services Group will be responsible for the authenticity of
exchange instructions received by telephone, provided that reasonable
procedures to confirm that instructions communicated are genuine have been
followed. Telephone instructions will be tape recorded. In times of drastic
economic or market changes, a telephone exchange may be difficult to
implement. An exchange may result in a taxable gain or loss.
EATON VANCE SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
THE FUND OFFERS THE FOLLOWING SERVICES WHICH ARE VOLUNTARY, INVOLVE NO EXTRA
CHARGE, AND MAY BE CHANGED OR DISCONTINUED WITHOUT PENALTY AT ANY TIME. Full
information on each of the services described below and an application, where
required, are available from Authorized Firms or the Principal Underwriter.
The cost of administering such services for the benefit of shareholders who
participate in them is borne by the Fund as an expense to all shareholders.
INVEST-BY-MAIL -- FOR PERIODIC SHARE ACCUMULATION: Once the $1,000 minimum
investment has been made, checks of $50 or more payable to the order of EV
Marathon High Yield Municipals Fund may be mailed directly to First Data
Investor Services Group, BOS725, P.O. Box 1559, Boston, MA 02104 at any time
- -- whether or not distributions are reinvested. The name of the shareholder,
the Fund and the account number should accompany each investment.
BANK AUTOMATED INVESTING -- FOR REGULAR SHARE ACCUMULATION: Cash investments
of $50 or more may be made automatically each month or quarter from the
shareholder's bank account. The $1,000 minimum initial investment and small
account redemption policy are waived for these accounts.
WITHDRAWAL PLAN: A shareholder may draw on shareholdings systematically with
monthly or quarterly checks in an aggregate amount that does not exceed
annually 12% of the account balance at the time the plan is established. Such
amount will not be subject to a contingent deferred sales charge. See "How to
Redeem Fund Shares". A minimum deposit of $5,000 in shares is required.
REINVESTMENT PRIVILEGE: A SHAREHOLDER WHO HAS REPURCHASED OR REDEEMED SHARES
MAY REINVEST, WITH CREDIT FOR ANY CONTINGENT DEFERRED SALES CHARGES PAID ON
THE REPURCHASED OR REDEEMED SHARES, ANY PORTION OR ALL OF THE REPURCHASE OR
REDEMPTION PROCEEDS (PLUS THAT AMOUNT NECESSARY TO ACQUIRE A FRACTIONAL SHARE
TO ROUND OFF THE PURCHASE TO THE NEAREST FULL SHARE) IN SHARES OF THE FUND,
provided that the reinvestment is effected within 60 days after such
repurchase or redemption, and the privilege has not been used more than once
in the prior 12 months. Shares are sold to a reinvesting shareholder at the
next determined net asset value following timely receipt of a written purchase
order by the Principal Underwriter or by the Fund (or by the Fund's Transfer
Agent). To the extent that any shares of the Fund are sold at a loss and the
proceeds are reinvested in shares of the Fund (or other shares of the Fund are
acquired within the period beginning 30 days before and ending 30 days after
the date of redemption) some or all of the loss generally will not be allowed
as a tax deduction. Shareholders should consult their tax advisers concerning
the tax consequences of reinvestments.
DISTRIBUTIONS AND TAXES
- ------------------------------------------------------------------------------
THE FUND DECLARES DIVIDENDS DAILY AND ORDINARILY DISTRIBUTES DIVIDENDS MONTHLY
(ON THE FIFTEENTH OR NEXT SUBSEQUENT BUSINESS DAY) FROM ITS NET INVESTMENT
INCOME. The Fund's net investment income consists of net investment income
allocated to the Fund by the Portfolio, less the Fund's direct and allocated
expenses. The Fund will distribute at least annually (usually in December) all
net realized capital gains allocated to the Fund by the Portfolio, if any,
after taking into account any capital loss carryovers. Daily distributions
will begin on the first business day collected funds for the purchase of
shares are available to the Transfer Agent.
The Fund will distribute substantially all of its tax-exempt income, ordinary
income and capital gain net income (if any) on a current basis. Distributions
designated by the Fund as "exempt interest dividends" may be excluded from
shareholders' gross income for federal income tax purposes. However, exempt
interest dividends may affect the taxability of social security or railroad
retirement benefits for shareholders who receive such benefits. In addition,
exempt interest dividends may result in liability under the federal
alternative minimum tax provisions and may be taxable for state and local tax
purposes. Shareholders should consult their tax advisers to determine the
effect of exempt interest dividends on their particular tax situation,
including liability for state and local taxes.
Other distributions from the Fund may be taxable to shareholders as ordinary
income, except that distributions of net long-term capital gains, if any, are
taxable as such regardless of the length of time the shareholder has held the
shares. Distributions of income from original issue discount and market
discount will be taxable to shareholders as ordinary income. Distributions
will be taxable as described whether received in cash or as additional shares
through reinvestment in the Fund.
The Fund intends to qualify as a regulated investment company under the
Internal Revenue Code of 1986, as amended, (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.
------------------------------------------------------------------------
PERFORMANCE INFORMATION
- ------------------------------------------------------------------------------
FROM TIME TO TIME, THE FUND MAY ADVERTISE ITS YIELD AND/OR AVERAGE ANNUAL
TOTAL RETURN. The Fund's current yield is calculated by dividing the net
investment income per share earned during a recent 30-day period by the
maximum offering price per share (net asset value) of the Fund on the last day
of the period and annualizing the resulting figure. A taxable-equivalent yield
is computed by using the tax-exempt yield figure and dividing by one minus the
tax rate. The Fund's average annual total return is determined by computing
the average annual percentage change in value of $1,000 invested at the
maximum public offering price (net asset value) for specified periods ending
with the most recent calendar quarter, assuming reinvestment of all
distributions. The average annual total return calculation assumes a complete
redemption of the investment and the deduction of any applicable contingent
deferred sales charge at the end of the period. The Fund may publish annual
and cumulative total return figures from time to time.
The Fund may also publish total return figures which do not take into account
any contingent deferred sales charge which may be imposed upon redemptions at
the end of the specified period. Any performance figure which does not take
into account the contingent deferred sales charge would be reduced to the
extent such charge is imposed upon a redemption.
Investors should note that the investment results of the Fund will fluctuate
over time, and any presentation of the Fund's yield 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 related to the operation of the Fund or the Portfolio are
allocated to Eaton Vance, the Fund's performance will be higher.
<PAGE>
APPENDIX A
DESCRIPTION OF SECURITIES RATINGS+
MOODY'S INVESTORS SERVICE, INC.
MUNICIPAL BONDS
AAA: Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such issues.
AA: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long term risk appear somewhat larger than the Aaa
securities.
A: Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper-medium-grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may
be present which suggest a susceptibility to impairment sometime in the
future.
BAA: Bonds which are rated Baa are considered as medium-grade obligations
(i.e., they are neither highly protected nor poorly secured). Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
BA: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during other good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
CAA: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
or interest.
CA: Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
STANDARD & POOR'S RATINGS GROUP
INVESTMENT GRADE
AAA: Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.
A: Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
- ------------
+The ratings indicated herein are believed to be the most recent ratings
available at the date of this Prospectus for the securities listed. Ratings
are generally given to securities at the time of issuance. While the rating
agencies may from time to time revise such ratings, they undertake no
obligation to do so, and the ratings indicated do not necessarily represent
ratings which would be given to these securities on the date of the Portfolio's
fiscal year end.
<PAGE>
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>
[LOGO]
EV MARATHON
HIGH YIELD
MUNICIPALS FUND
PROSPECTUS
MAY 20, 1996
EV MARATHON 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 MARATHON HIGH YIELD MUNICIPALS FUND
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111
TRANSFER AGENT
First Data Investor Services Group, BOS725, P.O. Box 1559, Boston, MA 02104
(800) 262-1122
AUDITORS
Deloitte & Touche LLP, 125 Summer Street, Boston, MA 02110
M-HYP
<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 AS WITH HISTORICALLY STRUCTURED
MUTUAL FUNDS. THE FUND IS A NON-DIVERSIFIED 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. SEE "HOW THE FUND
AND THE PORTFOLIO INVEST THEIR ASSETS".
Shares of the Fund are not deposits or obligations of, or guaranteed or
endorsed by, any bank or other insured depository institution, and are not
federally insured by the Federal Deposit Insurance Corporation, the Federal
Reserve Board or any other government agency. Shares of the Fund involve
investment risks, including fluctuations in value and the possible loss of
some or all of the principal investment.
This Prospectus is designed to provide you with information you should know
before investing. Please retain this document for future reference. A
Statement of Additional Information dated May 20, 1996 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.
- ------------------------------------------------------------------------------
Page Page
Shareholder and Fund Expenses ....... 2 How to Redeem Fund Shares ....... 12
The Fund's Financial Highlights .... 3 Reports to Shareholders ......... 13
The Fund's Investment Objective ..... 4 The Lifetime Investing
How the Fund and the Portfolio Invest Account/Distribution Options ... 14
their Assets (including "Risk The Eaton Vance Exchange
Considerations") ................... 4 Privilege ...................... 14
Organization of the Fund and the Eaton Vance Shareholder
Portfolio .......................... 7 Services ....................... 15
Management of the Fund and the Distributions and Taxes ......... 16
Portfolio .......................... 9 Performance Information ......... 17
Service Plan ........................ 10 Statement of Intention and Escrow
Valuing Fund Shares ................. 10 Agreement ....................... 17
How to Buy Fund Shares .............. 11 Appendix A ...................... 19
- --------------------------------------------------------------------------------
PROSPECTUS DATED MAY 20, 1996
<PAGE>
SHAREHOLDER AND FUND EXPENSES
- --------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES
---------------------------------------------------------------------
Maximum Sales Charge Imposed on Purchases of Shares
(as a percentage of offering price) 3.75%
Sales Charges Imposed on Reinvested Distributions None
Fees to Exchange Shares None
ANNUAL FUND AND ALLOCATED PORTFOLIO OPERATING EXPENSES (as a
percentage of average daily net assets)
---------------------------------------------------------------------
Investment Adviser Fee 0.59%
Other Expenses (including Service Plan Fees) 0.25
-----
Total Operating Expenses 0.84%
=====
EXAMPLE 1 YEAR 3 YEARS
------------------------------------------------------------------------------
An investor would pay the following maximum
initial sales charge and expenses on a $1,000
investment, assuming (a) 5% annual return and
(b) redemption at the end of each period: $46 $65
NOTES:
The table and Example summarize the aggregate expenses 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. The
Investment Adviser Fee and Other Expenses set out in the table and the
information in the Example is estimated, since the Fund is only recently
organized.
The Fund invests exclusively in the Portfolio. The Trustees believe the
aggregate per share expenses of the Fund and the Portfolio should approximate
and over time may be less than, the per share expenses the Fund would incur if
the Trust retained the services of an investment adviser for the Fund and the
Fund's assets were invested directly in the types of securities being held by
the Portfolio.
The Example should not be considered a representation of past or future
expenses, and actual expenses may be greater or less than those shown. Federal
regulations require the Example to assume a 5% annual return, but actual
annual return will vary. For further information regarding the expenses of
both the Fund and the Portfolio see "The Fund's Financial Highlights",
"Organization of the Fund and the Portfolio" and "Management of the Fund and
the Portfolio".
If shares of a Fund are purchased at net asset value with no initial sales
charge by virtue of the purchase having been in the amount of $1 million or
more and are redeemed within 12 months of purchase, a contingent deferred
sales charge of 0.50% will be imposed on such redemption. 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 8. The Fund expects to begin accruing for its service fee
payments during the quarter ending September 30, 1996.
Other investment companies and investors with different distribution
arrangements are investing in the Portfolio and others may do so in the
future. See "Organization of the Fund and the Portfolio".
<PAGE>
THE FUND'S FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following information should be read in conjunction with the unaudited
financial statements included in the Statement of Additional Information.
Further information regarding the performance of the Fund will be contained in
the Fund's annual report to shareholders which may be obtained without charge
by contacting the Principal Underwriter, Eaton Vance Distributors, Inc.
- --------------------------------------------------------------------------------
FOR THE PERIOD FROM THE START OF BUSINESS, AUGUST 7, 1995,
TO JANUARY 31, 1996 UNAUDITED):
NET ASSET VALUE, beginning of period $10.000
-------
INCOME FROM OPERATIONS:
Net investment income $ 0.340
Net realized and unrealized gain on investments 0.700
-------
Total income from operations $ 1.040
-------
LESS DISTRIBUTIONS:
From net investment income $(0.340)
-------
Total distributions $(0.340)
-------
NET ASSET VALUE, end of period $10.700
=======
TOTAL RETURN\1/ 10.50%
RATIOS/SUPPLEMENTAL DATA*:
Net assets, end of period (000's omitted) $30,535
Ratio of net expenses to average net assets\2/ 0.09%+
Ratio of net investment income to average net assets 6.60%+
*The operating expenses of the Fund and the Portfolio reflect an
allocation of expenses to the Administrator and a reduction of fees
by the Investment Adviser. Had such action not been taken, net investment
income per share and the ratios would have been as follows:
NET INVESTMENT INCOME PER SHARE $ 0.291
=======
RATIOS/SUPPLEMENTAL DATA:
Expenses\2/ 1.04%+
=======
Net investment income 5.65%+
=======
+ Computed on an annualized basis.
\1/ 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. Dividends and 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.
\2/ Includes the Fund's share of High Yield Municipals Portfolio's allocated
expenses.
<PAGE>
THE FUND'S INVESTMENT OBJECTIVE
- --------------------------------------------------------------------------------
THE FUND'S INVESTMENT OBJECTIVE IS TO PROVIDE HIGH CURRENT INCOME EXEMPT FROM
REGULAR FEDERAL INCOME TAX. The Fund seeks its objective through investments
in a portfolio of high-yielding, below investment grade securities. The
investment objective and 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.
HOW THE FUND AND THE PORTFOLIO INVEST THEIR ASSETS
- --------------------------------------------------------------------------------
THE FUND CURRENTLY SEEKS TO ACHIEVE ITS OBJECTIVE BY INVESTING ITS ASSETS IN
HIGH YIELD MUNICIPALS PORTFOLIO (THE "PORTFOLIO"), WHICH IS ITSELF AN OPEN-END
INVESTMENT COMPANY. The Portfolio invests primarily in below investment grade
municipal obligations which are obligations that are rated Ba or lower by
Moody's Investors Service, Inc. ("Moody's") or BB or lower by Standard &
Poor's Ratings Group ("S&P") or Fitch Investors Service, Inc. ("Fitch") or
that are unrated but determined by the Investment Adviser to be of comparable
quality. For a description of the ratings assigned by the rating agencies, see
Appendix A. Below investment grade municipal obligations, commonly known as
"junk bonds", generally offer higher current yields than do higher rated
securities, but are subject to greater risks. Securities in the lower-rated
categories are considered to be of poor standing and predominantly
speculative. The Portfolio may also invest a portion of its assets in
municipal obligations that are not paying current income in anticipation of
possible future income. For more detailed information about the risks
associated with investing in such securities, see "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. 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. Such
obligations will not be included in the securities used to determine the
Portfolio's compliance with the 80% test described above. Distributions to
corporate investors of certain interest income may also be subject to the 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 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. 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 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), 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 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 to at the prices at which they are valued.
Certain securities held by the Portfolio may permit the issuer at its option
to "call", or redeem, its securities. If an issuer 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 and distribute
income from zero-coupon bonds on a current basis, even though it does not
receive that income currently in cash. Thus, the Portfolio may have to sell
other investments to obtain cash needed to make income distributions.
The Portfolio may invest in municipal leases, and participations in municipal
leases. The 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.
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ORGANIZATION OF THE FUND AND THE PORTFOLIO
- --------------------------------------------------------------------------------
THE FUND IS A NON-DIVERSIFIED SERIES OF EATON VANCE MUNICIPALS TRUST II (THE
"TRUST"), A BUSINESS TRUST ESTABLISHED UNDER MASSACHUSETTS LAW PURSUANT TO A
DECLARATION OF TRUST DATED OCTOBER 25, 1993, AS AMENDED. THE TRUST IS A MUTUAL
FUND -- AN OPEN-END MANAGEMENT INVESTMENT COMPANY. The Trustees of the Trust
are responsible for the overall management and supervision of its affairs. The
Trust may issue an unlimited number of shares of beneficial interest (no par
value per share) in one or more series and because the Trust can offer
separate series (such as the Fund) it is known as a "series company." Each
share represents an equal proportionate beneficial interest in the Fund. When
issued and outstanding, the shares are fully paid and nonassessable by the
Trust and redeemable as described under "How to Redeem Fund Shares".
Shareholders are entitled to one vote for each full share held. Fractional
shares may be voted proportionately. Shares have no preemptive or conversion
rights and are freely transferable. In the event of the liquidation of the
Fund, shareholders are entitled to share pro rata in the net assets of the
Fund available for distribution to shareholders.
THE PORTFOLIO IS ORGANIZED AS A TRUST UNDER THE LAWS OF THE STATE OF NEW YORK
AND INTENDS TO BE TREATED AS A PARTNERSHIP FOR FEDERAL TAX PURPOSES. The
Portfolio, as well as the Trust, intends to comply with all applicable federal
and state securities laws. The Portfolio's Declaration of Trust provides that
the Fund and other entities permitted to invest in the Portfolio (e.g., other
U.S. and foreign investment companies, and common and commingled trust funds)
will each be liable for all obligations of the Portfolio. However, the risk of
the Fund incurring financial loss on account of such liability is limited to
circumstances in which both inadequate insurance exists and the Portfolio
itself is unable to meet its obligations. Accordingly, the Trustees of the
Trust believe that neither the Fund nor its shareholders will be adversely
affected by reason of the Fund investing in the Portfolio.
SPECIAL INFORMATION ON THE FUND/PORTFOLIO INVESTMENT STRUCTURE. An investor
in the Fund should be aware that the Fund, unlike mutual funds which directly
acquire and manage their own portfolios of securities, seeks to achieve its
investment objective by investing its assets in an interest in the Portfolio
(although the Fund may temporarily hold a de minimus amount of cash), which is
a separate investment company with an identical investment objective.
Therefore, the Fund's interest in securities owned by the Portfolio is
indirect. In addition to selling an interest to the Fund, the Portfolio may
sell interests to other affiliated and non-affiliated mutual funds or
institutional investors. Such investors will invest in the Portfolio on the
same terms and conditions and will pay a proportionate share of the
Portfolio's expenses. However, the other investors investing in the Portfolio
are not required to sell their shares at the same public offering price as the
Fund due to variations in sales commissions and other operating expenses.
Therefore, investors in the Fund should be aware that these differences may
result in differences in returns experienced by investors in the various funds
that invest in the Portfolio. Such differences in returns are also present in
other mutual fund structures, including funds that have multiple classes of
shares. For information regarding the investment objective, policies and
restrictions of the Portfolio, see "The Fund's Investment Objective" and "How
the Fund and the Portfolio Invest their Assets". Further information
regarding investment practices may be found in the Statement of Additional
Information.
The Trustees of the Trust have considered the advantages and disadvantages of
investing the assets of the Fund in the Portfolio, as well as the advantages
and disadvantages of the two-tier format. The Trustees believe that the
structure offers opportunities for substantial growth in the assets of the
Portfolio, and affords the potential for economies of scale for the Fund, at
least when the assets of the Portfolio exceed $500 million.
The Fund may withdraw (completely redeem) all its assets from the Portfolio at
any time if the Board of Trustees of the Trust determines that it is in the
best interest of the Fund to do so. The investment objective and the
nonfundamental investment policies of the Fund and the Portfolio may be
changed by the Trustees of the Trust and the Portfolio without obtaining the
approval of the shareholders of the Fund or the investors in the Portfolio, as
the case may be. Any such change of the investment objective of the Fund or
the Portfolio will be preceded by thirty days' advance written notice to the
shareholders of the Fund or the investors in the Portfolio, as the case may
be. In the event the Fund withdraws all of its assets from the Portfolio, or
the Board of Trustees of the Trust determines that the investment objective of
the Portfolio is no longer consistent with the investment objective of the
Fund, 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.
Information regarding other pooled investment entities or funds which invest
in the Portfolio may be obtained by contacting Eaton Vance Distributors, Inc.
(the "Principal Underwriter" or "EVD"), 24 Federal Street, Boston, MA 02110,
(617) 482-8260. Smaller investors in the Portfolio may be adversely affected
by the actions of larger investors in the Portfolio. For example, if a large
investor withdraws from the Portfolio, the remaining investors may experience
higher pro rata operating expenses, thereby producing lower returns.
Additionally, the Portfolio may hold fewer securities, resulting in increased
portfolio risk, and experience decreasing economies of scale. However, this
possibility exists as well for historically structured funds which have large
or institutional investors.
Until 1992, the Administrator sponsored and advised historically structured
funds. Funds which invest all their assets in interests in a separate
investment company are a relatively new development in the mutual fund
industry and, therefore, the Fund may be subject to additional regulations
than historically structured funds.
The Declaration of Trust of the Portfolio provides that the Portfolio will
terminate 120 days after the complete withdrawal of the Fund or any other
investor in the Portfolio, unless either the remaining investors, by unanimous
vote at a meeting of such investors, or a majority of the Trustees of the
Portfolio, by written instrument consented to by all investors, agree to
continue the business of the Portfolio. This provision is consistent with
treatment of the Portfolio as a partnership for federal income tax purposes.
See "Distributions and Taxes" for further information. Whenever the Fund as an
investor in the Portfolio is requested to vote on matters pertaining to the
Portfolio (other than the termination of the Portfolio's business, which may
be determined by the Trustees of the Portfolio without investor approval), the
Fund will hold a meeting of Fund shareholders and will vote its interest in
the Portfolio for or against such matters proportionately to the instructions
to vote for or against such matters received from Fund shareholders. The Fund
shall vote shares for which it receives no voting instructions in the same
proportion as the shares for which it receives voting instructions. Other
investors in the Portfolio may alone or collectively acquire sufficient voting
interests in the Portfolio to control matters relating to the operation of the
Portfolio, which may require the Fund to withdraw its investment in the
Portfolio or take other appropriate action. Any such withdrawal could result
in a distribution "in kind" of portfolio securities (as opposed to a cash
distribution from the Portfolio). If securities are distributed, the Fund
could incur brokerage, tax or other charges in converting the securities to
cash. In addition, the distribution in kind may result in a less diversified
portfolio of investments or adversely affect the liquidity of the Fund.
Notwithstanding the above, there are other means for meeting shareholder
redemption requests, such as borrowing.
The Trustees of the Trust, including a majority of the noninterested Trustees,
have approved written procedures designed to identify and address any
potential conflicts of interest arising from the fact that the Trustees of the
Trust and the Trustees of the Portfolio are the same. Such procedures require
each Board to take actions to resolve any conflict of interest between the
Fund and the Portfolio, and it is possible that the creation of separate
Boards may be considered. For further information concerning the Trustees and
officers of the Trust and the Portfolio, see the Statement of Additional
Information.
MANAGEMENT OF THE FUND AND THE PORTFOLIO
- --------------------------------------------------------------------------------
THE PORTFOLIO ENGAGES BOSTON MANAGEMENT AND RESEARCH ("BMR"), A WHOLLY-OWNED
SUBSIDIARY OF EATON VANCE MANAGEMENT ("EATON VANCE"), AS ITS INVESTMENT
ADVISER. EATON VANCE, ITS AFFILIATES AND ITS PREDECESSOR COMPANIES HAVE BEEN
MANAGING ASSETS OF INDIVIDUALS AND INSTITUTIONS SINCE 1924 AND MANAGING
INVESTMENT COMPANIES SINCE 1931.
Acting under the general supervision of the Board of Trustees of the
Portfolio, BMR manages the Portfolio's investments and affairs and 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:
ANNUAL DAILY
CATEGORY DAILY NET ASSETS ASSET RATE INCOME RATE
----------------------------------------------------------------------------
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%
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
APPROXIMATELY $15 BILLION. Eaton Vance is a wholly-owned subsidiary of Eaton
Vance Corp., a publicly held holding company. Eaton Vance Corp., through its
subsidiaries and affiliates, engages in investment management and marketing
activities, oil and gas operations, real estate investment, consulting and
management, and development of precious metals properties.
Thomas M. Metzold has acted as the portfolio manager of the Portfolio since it
commenced operations. He has been a Vice President of Eaton Vance since 1991
and of BMR since 1992 and an employee of Eaton Vance since 1987.
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 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 EVD under the distribution agreement.
Such costs and expenses to be borne by the Portfolio and the Fund, as the case
may be, include, without limitation: custody and transfer agency fees and
expenses, including those incurred for determining net asset value and keeping
accounting books and records; expenses of pricing and valuation services; the
cost of share certificates; membership dues in investment company
organizations; expenses of acquiring, holding and disposing of securities and
other investments; fees and expenses of registering under the securities laws
and the governmental fees; expenses of reporting to shareholders and
investors; proxy statements and other expenses of shareholders' or investors'
meetings; insurance premiums; printing and mailing expenses; interest, taxes
and corporate fees; legal and accounting expenses; compensation and expenses
of Trustees not affiliated with BMR or Eaton Vance; and investment advisory
fees and, if any, administrative services fees. The Portfolio or the Fund, as
the case may be, will also each bear expenses incurred in connection with
litigation in which the Portfolio or the Fund, as the case may be, is a party
and any legal obligation to indemnify its respective officers and Trustees
with respect thereto.
SERVICE PLAN
- --------------------------------------------------------------------------------
In addition to advisory fees and other expenses, the Fund pays 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 FUND'S AVERAGE DAILY NET
ASSETS FOR ANY FISCAL YEAR. The Trustees of the Trust have initially
implemented the Plan by authorizing the Fund to make quarterly service fee
payments to the Principal Underwriter and Authorized Firms in amounts not
expected to exceed .25% of the Fund's average daily net assets for any fiscal
year which is based on the value of Fund shares sold by such persons and
remaining outstanding for at least twelve months. The Fund expects to begin
accruing for its service fee payments during the quarter ending September 30,
1996. The Plan is 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 is computed by dividing the value of the Fund's total assets,
less its liabilities, by the number of shares outstanding. Because the Fund
invests its assets in an interest in the Portfolio, the Fund's net asset value
will reflect the value of its interest in the Portfolio (which in turn,
reflects the underlying value of the Portfolio's assets and liabilities).
Authorized Firms must communicate an investor's order to the Principal
Underwriter prior to the close of the Principal Underwriter's business day to
receive that day's net asset value per share and the public offering price
based thereon. It is the Authorized Firms' responsibility to transmit orders
promptly to the Principal Underwriter, which is a wholly-owned subsidiary of
Eaton Vance.
The Portfolio's net asset value is also determined as of the close of regular
trading on the Exchange by IBT (as custodian and agent for the Portfolio)
based on market or fair value in the manner authorized by the Trustees of the
Portfolio. 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 at the effective public offering price, which price is based on the
effective net asset value per share plus the applicable sales charge. The Fund
receives the net asset value, while the sales charge is divided between the
Authorized Firm and the Principal Underwriter. The Principal Underwriter will
furnish the names of Authorized Firms to an investor upon request. 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.
The sales charge may vary depending on the size of the purchase and the number
of shares of Eaton Vance funds the investor may already own, any arrangement
to purchase additional shares during a 13-month period or special purchase
programs. Complete details of how investors may purchase shares at reduced
sales charges under a Statement of Intention, Right of Accumulation, or
various Employee Benefit Plans are available from Authorized Firms or the
Principal Underwriter.
The current sales charges and dealer commissions are:
<TABLE>
<CAPTION>
SALES CHARGE 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. 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. Such purchases made before March
27, 1995 will be subject to a CDSC of 1% in the event of certain redemptions
within 18 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 are expected to sell significant amounts of shares.
An initial investment in the Fund must be at least $1,000. Once an account has
been established the investor may send investments of $50 or more at any time
directly to the Fund's transfer agent (the "Transfer Agent") as follows: First
Data Investor Services Group, BOS725, P.O. Box 1559, Boston, MA 02104. The
$1,000 minimum initial investment is waived for Bank Automated Investing
accounts, which may be established with an investment of $50 or more. See
"Eaton Vance Shareholder Services".
Shares of the Fund may be sold at net asset value to current and retired
Directors and Trustees of Eaton Vance funds, including the Portfolio; to
officers and employees and clients of Eaton Vance and its affiliates; to
registered representatives and employees of Authorized Firms; bank employees
who refer customers to registered representatives of Authorized Firms; and to
such persons' spouses and children under the age of 21 and their beneficial
accounts. Shares may also be issued at net asset value (1) in connection with
the merger of an investment company with the Fund, (2) to investors making an
investment as part of a fixed fee program whereby an entity unaffiliated with
the investment adviser provides multiple investment services, such as
management, brokerage and custody, and (3) where the amount invested
represents redemption proceeds from a mutual fund unaffiliated with Eaton
Vance, if the redemption occurred no more than 60 days prior to the purchase
of Fund shares and the redeemed shares were subject to a sales charge and (4)
to an investor making an investment through an investment adviser, financial
planner, broker or other intermediary that charges a fee for its services and
has entered into an agreement with the Fund or its Principal Underwriter.
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 to IBT. Eaton
Vance reserves the right to reject any securities. Exchanging securities for
Fund shares may create a taxable gain or loss. Each investor should consult
his or her tax adviser with respect to the particular federal, state and local
tax consequences of exchanging securities for Fund shares.
The Trustees of the Trust may consider terminating sales of Fund shares, other
than to the Fund's existing shareholders, when the Portfolio reaches a size
that becomes difficult to manage, which may be as low as $250,000,000. If
closed, the Board of Trustees may vote to re-open the Fund for sales to new
shareholders at any time.
--------------------------------------------------------------------
IF YOU DON'T HAVE AN AUTHORIZED FIRM, EATON VANCE CAN RECOMMEND ONE.
--------------------------------------------------------------------
HOW TO REDEEM FUND SHARES
- --------------------------------------------------------------------------------
A SHAREHOLDER MAY REDEEM FUND SHARES BY DELIVERING TO FIRST DATA INVESTOR
SERVICES GROUP, BOS725, P.O. BOX 1559, BOSTON, MASSACHUSETTS 02104, during its
business hours a written request for redemption in good order, plus any share
certificates with executed stock powers. The redemption price will be based on
the net asset value per Fund share next computed after such delivery. Good
order means that relevant documents must be endorsed by the record owner(s)
exactly as the shares are registered and the signature(s) must be guaranteed
by a member of either the Securities Transfer Association's STAMP program or
the New York Stock Exchange's Medallion Signature Program, or certain banks,
savings and loan institutions, credit unions, securities dealers, securities
exchanges, clearing agencies and registered securities associations as
required by a regulation of the Securities and Exchange Commission and
acceptable to First Data Investor Services Group. In addition, in some cases,
good order may require the furnishing of additional documents such as where
shares are registered in the name of a corporation, partnership or fiduciary.
Within seven days after receipt of a redemption request in good order by First
Data Investor Services Group, the Fund will make payment in cash for the net
asset value of the shares as of the date determined above, reduced by the
amount of any federal income tax required to be withheld. Although the Fund
normally expects to make payment in cash for redeemed shares, the Trust,
subject to compliance with applicable regulations, has reserved the right to
pay the redemption price of shares of the Fund, either totally or partially,
by a distribution in kind of readily marketable securities withdrawn by the
Fund from the Portfolio. The securities so distributed would be valued
pursuant to the Portfolio's valuation procedures. If a shareholder received a
distribution in kind, the shareholder could incur brokerage or other charges
in converting the securities to cash.
To sell shares at their net asset value through an Authorized Firm (a
repurchase), a shareholder can place a repurchase order with the Authorized
Firm, which may charge a fee. The value of such shares is based upon the net
asset value calculated after EVD, as the Fund's agent, receives the order. It
is the Authorized Firm's responsibility to transmit promptly repurchase orders
to EVD. Throughout this Prospectus, the word "redemption" is generally meant
to include a repurchase.
If shares were recently purchased, the proceeds of redemption (or repurchase)
will not be sent until the check (including a certified or cashier's check)
received for the shares purchased has cleared. Payment for shares tendered for
redemption may be delayed up to 15 days from the purchase date when the
purchase check has not yet cleared. Redemptions or repurchases may result in a
taxable gain or loss.
Due to the high cost of maintaining small accounts, the Fund reserves the
right to redeem accounts with balances of less than $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 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. (Such purchases made before March 27, 1995 will be subject to
a CDSC of 1% in the event of certain redemptions made within 18 months of
purchase.) The CDSC will be retained by the Principal Underwriter.
The CDSC will be imposed on an amount equal to the lesser of the current
market value or the original purchase price of the shares redeemed.
Accordingly, no CDSC will be imposed on increases in account value above the
initial purchase price, including any distributions that have been reinvested
in additional shares. In determining whether a CDSC is applicable to a
redemption, the calculation will be made in a manner that results in the
lowest possible rate being charged. It will be assumed that redemptions are
made first from any shares in the shareholder's account that are not subject
to a CDSC.
The CDSC is waived for redemptions involving certain liquidation, merger or
acquisition transactions involving other investment companies. If a
shareholder reinvests redemption proceeds within 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 FUND'S
TRANSFER AGENT, FIRST DATA INVESTOR SERVICES GROUP, WILL SET UP A LIFETIME
INVESTING ACCOUNT FOR THE INVESTOR ON THE FUND'S RECORDS. This account is a
complete record of all transactions between the investor and the Fund which at
all times shows the balance of shares owned. The Fund will not issue share
certificates except upon request.
At least quarterly, shareholders will receive a statement showing complete
details of any transaction and the current balance in the account. THE
LIFETIME INVESTING ACCOUNT ALSO PERMITS A SHAREHOLDER TO MAKE ADDITIONAL
INVESTMENTS IN SHARES BY SENDING A CHECK FOR $50 OR MORE to First Data
Investor Services Group.
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 First Data Investor Services Group, BOS725, P.O.
Box 1559, Boston, MA 02104 (please provide the name of the shareholder, the
Fund and the account number).
THE FOLLOWING DISTRIBUTION OPTIONS WILL BE AVAILABLE TO ALL LIFETIME INVESTING
ACCOUNTS and may be changed as often as desired by written notice to the
Fund's dividend disbursing agent, First Data Investor Services Group, BOS725,
P.O. Box 1559, Boston, MA 02104. The currently effective option will appear on
each account statement.
SHARE OPTION -- Dividends and capital gains will be reinvested in additional
shares.
INCOME OPTION -- Dividends will be paid in cash, and capital gains will be
reinvested in additional shares.
CASH OPTION -- Dividends and capital gains will be paid in cash.
The SHARE OPTION will be assigned if no other option is specified.
Distributions, including those reinvested, will be reduced by any withholding
required under federal income tax laws.
If the INCOME OPTION or CASH OPTION has been selected, dividend and/or capital
gains distribution checks which are returned by the United States Postal
Service as not deliverable or which remain uncashed for six months or more
will be reinvested in the account in shares at the then current net asset
value. Furthermore, the distribution option on the account will be
automatically changed to the SHARE OPTION until such time as the shareholder
selects a different option.
DISTRIBUTION INVESTMENT OPTION. In addition to the distribution options set
forth above, dividends and/or capital gains may be invested in additional
shares of another Eaton Vance fund. Before selecting this option, a
shareholder should obtain a prospectus of the other Eaton Vance fund and
consider its objectives and policies carefully.
"STREET NAME" ACCOUNTS. If shares of the Fund are held in a "street name"
account with an Authorized Firm, all recordkeeping, transaction processing and
payments of distributions relating to the beneficial owner's account will be
performed by the Authorized Firm, and not by the Fund and its Transfer Agent.
Since the Fund will have no record of the beneficial owner's transactions, a
beneficial owner should contact the Authorized Firm to purchase, redeem or
exchange shares, to make changes in or give instructions concerning the account,
or to obtain information about the account. The transfer of shares in a "street
name" account to an account with another dealer or to an account directly with
the Fund involves special procedures and will require the beneficial owner to
obtain historical purchase information about the shares in the account from the
Authorized Firm. Before establishing a "street name" account with an investment
firm, or transferring the account to another investment firm, an investor
wishing to reinvest distributions should determine whether the firm which will
hold the shares allows reinvestment of distributions in "street name" accounts.
THE EATON VANCE EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
Shares of the Fund currently may be exchanged for shares of any of the
following funds: Eaton Vance Cash Management Fund, Eaton Vance Income Fund of
Boston, Eaton Vance Municipal Bond Fund L.P., Eaton Vance Tax Free Reserves
and any fund in the Eaton Vance Traditional Group of Funds on the basis of net
asset value per share of each fund at the time of the exchange (plus, in the
case of an exchange made within six months of the date of purchase of 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). Such exchange offers are
available only in states where shares of the fund being acquired may be
legally sold.
Each exchange must involve shares which have a net asset value of at least
$1,000. The exchange privilege may be changed or discontinued without penalty.
Shareholders will be given sixty (60) days' notice prior to any termination or
material amendment of the exchange privilege. The Fund does not permit the
exchange privilege to be used for "Market Timing" and may terminate the
exchange privilege for any shareholder account engaged in Market Timing
activity. Any shareholder account for which more than two round-trip exchanges
are made within any twelve month period will be deemed to be engaged in Market
Timing. Furthermore, a group of unrelated accounts for which exchanges are
entered contemporaneously by a financial intermediary will be considered to be
engaged in Market Timing.
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.
First Data Investor Services Group makes exchanges at the next determined net
asset value after receiving an exchange request in good order (see "How to
Redeem Fund Shares"). Consult First Data Investor Services Group for
additional information concerning the exchange privilege. Applications and
prospectuses of the other funds are available from Authorized Firms or the
Principal Underwriter. The prospectus for each fund describes its investment
objectives and policies, and shareholders should obtain a prospectus and
consider these objectives and policies carefully before requesting an
exchange.
Shares of certain other funds for which Eaton Vance acts as investment adviser
or administrator may be exchanged for Fund shares on the basis of the net
asset value per share of each fund at the time of the exchange (plus, in the
case of an exchange made within six months of the date of purchase, an amount
equal to the difference, if any, between the sales charge previously paid on
the shares being exchanged and the sales charge payable on the Fund 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 First Data Investor Services Group
provided that the investor has not disclaimed in writing the use of the
privilege. To effect such exchanges, call First Data Investor Services Group at
800-262-1122 or, within Massachusetts, 617-573-9403, Monday through Friday, 9:00
a.m. to 4:00 p.m. (Eastern Standard Time). Shares acquired by telephone exchange
must be registered in the same name(s) and with the same address as the shares
being exchanged. Neither the Fund, the Principal Underwriter nor First Data
Investor Services Group will be responsible for the authenticity of exchange
instructions received by telephone, provided that reasonable procedures to
confirm that instructions communicated are genuine have been followed. Telephone
instructions will be tape recorded. In times of drastic economic or market
changes, a telephone exchange may be difficult to implement. An exchange may
result in a taxable gain or loss.
EATON VANCE SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
THE FUND OFFERS THE FOLLOWING SERVICES, WHICH ARE VOLUNTARY, INVOLVE NO EXTRA
CHARGE, AND MAY BE CHANGED OR DISCONTINUED WITHOUT PENALTY AT ANY TIME. Full
information on each of the services described below and an application, where
required, are available from Authorized Firms or the Principal Underwriter.
The cost of administering such services for the benefit of shareholders who
participate in them is borne by the Fund as an expense to all shareholders.
INVEST-BY-MAIL -- FOR PERIODIC SHARE ACCUMULATION: Once the $1,000 minimum
investment has been made, checks of $50 or more payable to the order of EV
Traditional High Yield Municipals Fund may be mailed directly to First Data
Investor Services Group, BOS725, P.O. Box 1559, Boston, MA 02104 at any time
- -- whether or not distributions are reinvested. The name of the shareholder,
the Fund and the account number should accompany each investment.
BANK AUTOMATED INVESTING -- FOR REGULAR SHARE ACCUMULATION: Cash investments
of $50 or more may be made automatically each month or quarter from the
shareholder's bank account. The $1,000 minimum initial investment and small
account redemption policy are waived for these accounts.
STATEMENT OF INTENTION: Purchases of $50,000 or more made over a 13-month
period are eligible for reduced sales charges. See "Statement of Intention and
Escrow Agreement."
RIGHT OF ACCUMULATION: Purchases may qualify for reduced sales charges when
the current market value of holdings (shares at current offering price), plus
new purchases, reaches $50,000 or more. Shares of the Eaton Vance funds listed
under "The Eaton Vance Exchange Privilege" may be combined under the Statement
of Intention and Right of Accumulation.
WITHDRAWAL PLAN: A shareholder may draw on shareholdings systematically with
monthly or quarterly checks in an amount specified by the shareholder. A
minimum deposit of $5,000 in shares is required. The maintenance of a
withdrawal plan concurrently with purchases of additional shares would be
disadvantageous because of the sales charge included in such purchases.
REINVESTMENT PRIVILEGE: A SHAREHOLDER WHO HAS REPURCHASED OR REDEEMED SHARES
MAY REINVEST AT NET ASSET VALUE ANY PORTION OR ALL OF THE REPURCHASE OR
REDEMPTION PROCEEDS (PLUS THAT AMOUNT NECESSARY TO ACQUIRE A FRACTIONAL SHARE
TO ROUND OFF THE PURCHASE TO THE NEAREST FULL SHARE) IN SHARES OF THE FUND,
or, provided that the shares repurchased or redeemed have been held for at
least 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 repurchase or redemption, and the
privilege has not been used more than once in the prior 12 months. 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 or repurchase 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 Fund's net investment income consists of net investment
income allocated to the Fund by the Portfolio, less the Fund's direct and
allocated expenses. The Fund will distribute at least annually (usually in
December) all net realized capital gains allocated to the Fund by the
Portfolio, if any, after taking into account any capital loss carryovers.
Daily distributions will begin on the first business day collected funds for
the purchase of shares are available to the Transfer Agent.
The Fund will distribute substantially all of its tax-exempt income, ordinary
income and capital gain net income (if any) on a current basis. Distributions
designated by the Fund as "exempt interest dividends" may be excluded from
shareholders' gross income for federal income tax purposes. However, exempt
interest dividends may affect the taxability of social security or railroad
retirement benefits for shareholders who receive such benefits. In addition,
exempt interest dividends may result in liability under the federal
alternative minimum tax provisions and may be taxable for state and local tax
purposes. Shareholders should consult their tax advisers to determine the
effect of exempt interest dividends on their particular tax situation,
including liability for state and local taxes.
Other distributions from the Fund may be taxable to shareholders as ordinary
income, except that distributions of net long-term capital gains, if any, are
taxable as such regardless of the length of time the shareholder has held the
shares. Distributions of income from original issue discount and market
discount will be taxable to shareholders as ordinary income. Distributions
will be taxable as described whether received in cash or as additional shares
through reinvestment in the Fund.
Sales charges paid upon a purchase of Fund shares cannot be taken into account
for purposes of determining gain or loss on a redemption or exchange of the
shares before the 91st day after their purchase to the extent shares of the
Fund or of another fund are subsequently acquired pursuant to the Fund's
reinvestment or exchange privilege. 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
Internal Revenue Code of 1986, as amended, (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.
------------------------------------------------------------------------
PERFORMANCE INFORMATION
- ------------------------------------------------------------------------------
FROM TIME TO TIME, THE FUND MAY ADVERTISE ITS YIELD AND/OR AVERAGE ANNUAL
TOTAL RETURN. The Fund's current yield is calculated by dividing the net
investment income per share earned during a recent 30-day period by the
maximum offering price per share (net asset value) of the Fund on the last day
of the period and annualizing the resulting figure. A taxable-equivalent yield
is computed by using the tax-exempt yield figure and dividing by one minus the
tax rate. The Fund's average annual total return is determined by multiplying
a hypothetical initial purchase order of $1,000 by the average annual
compounded rate of return (including capital appreciation/depreciation and
distributions paid and reinvested) for the stated period and annualizing the
result. The average annual total return calculation assumes the maximum sales
charge is deducted from the initial $1,000 purchase order and that all
distributions are reinvested at net asset value on the reinvestment dates
during the period. The Fund may publish annual and cumulative total return
figures from time to time.
The Fund may also furnish total return calculations based on investments at
various sales charge levels or at net asset value. Any performance data which
is based on the Fund's net asset value per share would be reduced if a sales
charge were taken into account. The Fund'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 related to the operation of the Fund or the Portfolio are
allocated to Eaton Vance, the Fund's performance will be higher.
STATEMENT OF INTENTION AND ESCROW AGREEMENT
- --------------------------------------------------------------------------------
TERMS OF ESCROW. If the investor, on an application, makes a Statement of
Intention to invest a specified amount over a thirteen-month period, then out
of the initial purchase (or subsequent purchases if necessary) 5% of the
dollar amount specified on the application shall be held in escrow by the
escrow agent in the form of shares (computed to the nearest full share at the
public offering price applicable to the initial purchase hereunder) registered
in the investor's name. All income dividends and capital gains distributions
on escrowed shares will be paid to the investor or to the investor's order.
When the minimum investment so specified is completed, the escrowed shares
will be delivered to the investor. If the investor has an accumulation account
the shares will remain on deposit under the investor's account.
If total purchases under this Statement of Intention are less than the amount
specified, the investor will promptly remit to EVD any difference between the
sales charge on the amount specified and on the amount actually purchased. If
the investor does not within 20 days after written request by EVD or the
Authorized Firm pay such difference in sales charge, the escrow agent will
redeem an appropriate number of the escrowed shares in order to realize such
difference. Full shares remaining after any such redemption together with any
excess cash proceeds of the shares so redeemed will be delivered to the
investor or to the investor's order by the escrow agent.
PROVISION FOR RETROACTIVE PRICE ADJUSTMENT. If total purchases made under this
Statement are large enough to qualify for a lower sales charge than that
applicable to the amount specified, all transactions will be computed at the
expiration date of this Statement to give effect to the lower charge. Any
difference in sales charge will be refunded to the investor in cash, or
applied to the purchase of additional shares at the lower charge if specified
by the investor. This refund will be made by the Authorized Firm and by EVD.
If at the time of the recomputation a firm other than the original firm is
placing the orders, the adjustment will be made only on those shares purchased
through the firm then handling the investor's account.
<PAGE>
APPENDIX A
DESCRIPTION OF SECURITIES RATINGS+
MOODY'S INVESTORS SERVICE, INC.
MUNICIPAL BONDS
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long term risk appear somewhat larger than the Aaa
securities.
A: Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper-medium-grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may
be present which suggest a susceptibility to impairment sometime in the
future.
Baa: Bonds which are rated Baa are considered as medium-grade obligations
(i.e., they are neither highly protected nor poorly secured). Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during other good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
or interest.
Ca: Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
STANDARD & POOR'S RATINGS GROUP
INVESTMENT GRADE
AAA: Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.
A: Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB: Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
- -----------
+The ratings indicated herein are believed to be the most recent ratings
available at the date of this Prospectus for the securities listed.
Ratings are generally given to securities at the time of issuance. While the
rating agencies may from time to time revise such ratings, they undertake no
obligation to do so, and the ratings indicated do not necessarily represent
ratings which would be given to these securities on the date of the Portfolio's
fiscal year end.
<PAGE>
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>
[logo]
EV TRADITIONAL
HIGH YIELD
MUNICIPALS FUND
PROSPECTUS
MAY 20, 1996
EV TRADITIONAL HIGH YIELD
MUNICIPALS FUND
24 FEDERAL STREET
BOSTON, MA 02110
- ----------------------------------------------------------------------------
INVESTMENT ADVISER OF HIGH YIELD PORTFOLIO
Boston Management and Research, 24 Federal Street, Boston, MA 02110
ADMINISTRATOR OF EV TRADITIONAL HIGH YIELD 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, BOS725, P.O. Box 1559, Boston, MA 02104
(800) 262-1122
AUDITORS
Deloitte & Touche LLP, 125 Summer Street, Boston, MA 02110
T-HYP
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
June 1, 1996
EV TRADITIONAL MUNICIPAL FUNDS
EV TRADITIONAL FLORIDA INSURED MUNICIPALS FUND
EV TRADITIONAL HAWAII MUNICIPALS FUND
EV TRADITIONAL KANSAS MUNICIPALS FUND
24 Federal Street
Boston, Massachusetts 02110
(800) 225-6265
This Statement of Additional Information consists of two parts. Part I
provides general information about the Funds listed above (each a "Fund") and
certain other series of Eaton Vance Municipals Trust II (the "Trust"). As
described in the Prospectus, each Fund invests its assets in a separate
registered investment company (a "Portfolio") with the same investment objective
and policies as the Fund. Each Fund's Part II (a "Part II") provides information
solely about a Fund and its corresponding Portfolio. Where appropriate, Part I
includes cross-references to the relevant sections of Part II.
TABLE OF CONTENTS Page
PART I
Additional Information about Investment Policies .................. 1
Investment Restrictions ........................................... 8
Trustees and Officers ............................................. 9
Investment Adviser and Administrator .............................. 10
Custodian ......................................................... 13
Service for Withdrawal ............................................ 13
Determination of Net Asset Value .................................. 14
Investment Performance ............................................ 14
Taxes ............................................................. 16
Portfolio Security Transactions ................................... 18
Other Information ................................................. 19
Independent Certified Public Accountants .......................... 20
Appendix .......................................................... 21
PART II
EV Traditional Florida Insured Municipals Fund .................... a-1
EV Traditional Hawaii Municipals Fund ............................. b-1
EV Traditional Kansas Municipals Fund ............................. c-1
Although each Fund offers only its shares of beneficial interest, it is
possible that a Fund might become liable for a misstatement or omission in this
Statement of Additional Information regarding another Fund because the Funds use
this combined Statement of Additional Information. The Trustees of the Trust
have considered this factor in approving the use of a combined Statement of
Additional Information. This Statement of Additional Information is sometimes
referred to as the "SAI".
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 JUNE 1, 1996, AS SUPPLEMENTED FROM
TIME TO TIME. THIS STATEMENT OF ADDITIONAL INFORMATION SHOULD BE READ IN
CONJUNCTION WITH SUCH PROSPECTUS, A COPY OF WHICH MAY BE OBTAINED WITHOUT CHARGE
BY CONTACTING EATON VANCE DISTRIBUTORS, INC. (THE "PRINCIPAL UNDERWRITER") (SEE
BACK COVER FOR ADDRESS AND PHONE NUMBER).
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STATEMENT OF ADDITIONAL INFORMATION
PART I
The following information relates generally to 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 federal alternative minimum tax: (i) certain "public purpose"
obligations (whenever issued), which include obligations issued directly by
state and local governments or their agencies to fulfill essential governmental
functions; (ii) certain obligations issued before August 8, 1986 for the benefit
of non-governmental persons or entities; and (iii) certain "private activity
bonds" issued after August 7, 1986, which include "qualified Section 501(c)(3)
bonds" or refundings of certain obligations included in the second category. In
assessing the federal income tax treatment of interest on any municipal
obligation, the Portfolio will generally rely on an opinion of the issuer's
counsel (when available) and will not undertake any independent verification of
the basis for the opinion. The two principal classifications of municipal bonds
are "general obligation" and "revenue" bonds.
Interest on certain "private activity bonds" issued after August 7, 1986 is
exempt from 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 federal alternative minimum tax. For corporate shareholders,
the Fund's distributions derived from interest on all municipal obligations
(whenever issued) is included in "adjusted current earnings" for purposes of the
federal alternative minimum tax as applied to corporations (to the extent not
already included in alternative minimum taxable income as income attributable to
private activity bonds).
Market discount on long-term tax-exempt municipal obligations (i.e.,
obligations with a term of more than one year) purchased in the secondary market
after April 30, 1993 is taxable as ordinary income. A long-term debt obligation
is generally treated as acquired at a market discount if the secondary market
purchase price is less than (i) the stated principal amount payable at maturity,
in the case of an obligation that does not have original issue discount or (ii)
in the case of an obligation that does have original issue discount, the sum of
the issue price and any original issue discount that accrued before the
obligation was purchased, subject to a de minimus 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 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. For a discussion of the risks
associated with the Portfolio's policy of concentrating its investments in
particular state issuers of municipal obligations, see "Risks of Concentration"
in the Fund's Part II.
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 industrial
development authorities. Since the bonds are normally secured only by the
revenues of each facility and not by state or local government tax payments,
they are subject to a wide variety of risks. Primarily, the projects must
maintain adequate occupancy levels to be able to provide revenues sufficient
to meet debt service payments. Moreover, since a portion of housing, medical
care and other services may be financed by an initial deposit, it is important
that the facility maintain adequate financial reserves to secure estimated
actuarial liabilities. The ability of management to accurately forecast
inflationary cost pressures is an important factor in this process. The
facilities may also be affected adversely by regulatory cost restrictions
applied to health care delivery in general, particularly state regulations or
changes in Medicare and Medicaid payments or qualifications, or restrictions
imposed by medical insurance companies. They may also face competition from
alternative health care or conventional housing facilities in the private or
public sector.
Obligations of Puerto Rico, U.S. Virgin Islands and Guam. Subject to 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
(the "Territories"). Accordingly, the Portfolio may be adversely affected by
local political and economic conditions and developments within the
Territories ffecting the issuers of such obligations.
Puerto Rico has a diversified economy dominated by the manufacturing and
service sectors. 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. 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%.
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. A reduction of the tax benefits to those U.S.
companies with operations in Puerto Rico may lead to slower growth in the
future. There can be no assurance that changes in tax treatment of Puerto Rico
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 to retain their Commonwealth status, become a state or
establish an independent nation. Puerto Ricans voted to retain Commonwealth
status, leaving 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 ratification by the U.S. Congress.
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. The economy is heavily reliant on the tourism industry, with roughly 43%
of non-agricultural employment in tourist-related trade and services. The
tourism industry is economically sensitive and would likely be adversely
affected by a recession in either the United States or Europe. In September
1995, St. Thomas and St. John were hit by a hurricane and sustained extensive
damage. The longer term impact on the tourism industry is not yet known. There
can be no assurances that the market for USVI bonds will not be affected. In
general, hurricanes and civil unrest have and will continue to have an adverse
affect on the tourism industry.
An important component of the USVI revenue base is the federal excise tax
on rum exports. Tax revenues rebated by the federal government to the USVI
provide the primary security of many outstanding USVI bonds. Since more than
90% of the rum distilled in the USVI is distilled at one plant, any
interruption in its operations (as occurred after Hurricane Hugo in 1989)
would adversely affect these revenues. Consequently, there can be no assurance
that rum exports to the United States and the rebate of tax revenues to the
USVI will continue at their present levels. The preferential tariff treatment
the USVI rum industry currently enjoys could be reduced under NAFTA. Increased
competition from Mexican rum producers could reduce USVI rum imported to the
U.S., decreasing excise tax revenues generated. The USVI experienced budget
deficits in fiscal years 1989 and 1990: in 1989 due to wage settlements with
the unionized government employees, and in 1990 as a result of Hurricane Hugo.
The USVI recorded a small surplus in fiscal year 1991. At the end of fiscal
1992, the last year for which results are available, the USVI had an
unreserved General Fund deficit of approximately $8.31 million, or
approximately 2.1% of expenditures. In order to close a forecasted fiscal 1994
revenue gap of $45.6 million, the Department of Finance has proposed several
tax increases and fund transfers. There is currently no rated, unenhanced
Virgin Islands debt outstanding (although there is unrated debt outstanding).
Guam, an unincorporated U.S. territory, is located 1,500 miles southeast
of Tokyo. The U.S. military is a key component of Guam's economy. The federal
government directly comprises more than 10% of the employment base, with a
substantial component of the service sector to support these personnel. Guam
is expected to benefit from the closure of the Subic Bay Naval Base and the
Clark Air Force Base in the Philippines. The Naval Air Station, one of several
U.S. military facilities on the island, has been slated for closure by the
Defense Base Closure and Realignment Committee; however, the administration
plans to use these facilities to expand the island's commercial airport. Guam
is also heavily reliant on tourists, particularly the Japanese. For 1994, the
financial position of Guam has weakened as it incurred an unaudited General
Fund operating deficit. The administration has taken steps to improve its
financial position; however, there are no guarantees that an improvement will
be realized. Guam's general obligation debt is rated Baa by Moody's.
MUNICIPAL LEASES
The Portfolio may invest in municipal leases and participations therein,
which arrangements frequently involve special risks. Municipal leases are
obligations in the form of a lease or installment purchase arrangement which
is issued by state or local governments to acquire equipment and facilities.
Interest income from such obligations is generally exempt from local and state
taxes in the state of issuance. "Participations" in such leases are undivided
interests in a portion of the total obligation. Participations entitle their
holders to receive a pro rata share of all payments under the lease. A trustee
is usually responsible for administering the terms of the participation and
enforcing the participants' rights in the underlying lease. Leases and
installment purchase or conditional sale contracts (which normally provide for
title to the leased equipment without meeting the constitutional and statutory
requirements for the issuance of debt. State debt-issuance limitations are
deemed to be inapplicable to these arrangements because of the inclusion in
many leases or contracts of "non-appropriation" clauses that provide that the
governmental issuer has no obligation to make future payments under the lease
or contract unless money is appropriated for such purpose by the appropriate
legislative body on a yearly or other periodic basis. Such arrangements are,
therefore, subject to the risk that the governmental issuer will not
appropriate funds for lease payments.
Certain municipal lease obligations 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
taking place within a specified number of days after the date of the
Portfolio's commitment and are subject to certain conditions such as the
issuance of satisfactory legal opinions. The Portfolio may also purchase
securities on a when-issued basis pursuant to refunding contracts in
connection with the refinancing of an issuer's outstanding indebtedness.
Refunding contracts generally require the issuer to sell and the Portfolio to
buy such securities on a settlement date that could be several months or
several years in the future.
The Portfolio will make commitments to purchase when-issued securities
only with the intention of actually acquiring the securities, but may sell
such securities before the settlement date if it is deemed advisable as a
matter of investment strategy. The payment obligation and the interest rate
that will be received on the securities are fixed at the time the Portfolio
enters into the purchase commitment. The Portfolio's custodian will segregate
cash or high grade liquid debt securities in a separate account of the
Portfolio in an amount at least equal to the when-issued commitments. If the
value of the securities placed in the separate account declines, additional
cash or high grade liquid debt securities will be placed in the account on a
daily basis so that the value of the account will at least equal the amount of
the Portfolio's when-issued commitments. When the Portfolio commits to
purchase a security on a when-issued basis it records the transaction and
reflects the value of the security in determining its net asset value.
Securities purchased on a when-issued basis and the securities held by the
Portfolio are subject to changes in value based upon the perception of the
creditworthiness of the issuer and changes in the level of interest rates
(i.e. appreciation when interest rates decline and depreciation when interest
rates rise). Therefore, to the extent that the Portfolio remains substantially
fully invested at the same time that it has purchased securities on a when-
issued basis, there will be greater fluctuations in the Portfolio's net asset
value than if it solely set aside cash to pay for when-issued securities.
VARIABLE RATE OBLIGATIONS
The Portfolio may purchase variable rate obligations. Variable rate
instruments provide for adjustments in the interest rate at specified
intervals (weekly, monthly, semi-annually, etc.). The revised rates are
usually set at the issuer's discretion, in which case the investor normally
enjoys the right to "put" the security back to the issuer or his agent. Rate
revisions may alternatively be determined by formula or in some other
contractual fashion. Variable rate obligations normally provide that the
holder can demand payment of the obligation on short notice at par with
accrued interest and are frequently secured by letters of credit or other
credit support arrangements provided by banks. To the extent that such letters
of credit or other arrangements constitute an unconditional guarantee of the
issuer's obligations, a bank may be treated as the issuer of a security for
the purpose of complying with the diversification requirements set forth in
Section 5(b) of the 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. Interest income generated by certain bonds
having demand features may not qualify as tax-exempt interest. Longer term
fixed-rate bonds may give the holder a right to request redemption at certain
times (often annually after the lapse of an intermediate term). These bonds
are more defensive than conventional long term bonds (protecting to some
degree against a rise in interest rates) while providing greater opportunity
than comparable intermediate term bonds, because the Portfolio may retain the
bond if interest rates decline. By acquiring these kinds of obligations the
Portfolio obtains the contractual right to require the issuer of the security
or some other person (other than a broker or dealer) to purchase the security
at an agreed upon price, which right is contained in the obligation itself
rather than in a separate agreement with the seller or some other person.
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 features may not qualify
as tax-exempt interest.
SECURITIES LENDING
The Portfolio may seek to increase its income by lending portfolio
securities to broker-dealers or other institutional borrowers. Under present
regulatory policies of the Commission, such loans are required to be secured
continuously by collateral in cash, cash equivalents or U.S. Government
securities held by the Portfolio's custodian and maintained on a current basis
at an amount at least equal to the market value of the securities loaned,
which will be marked to market daily. Cash equivalents include short-term
municipal obligations as well as taxable certificates of deposit, commercial
paper and other short-term money market instruments. The Portfolio would have
the right to call a loan and obtain the securities loaned at any time on up to
five business days' notice. During the existence of a loan, the Portfolio will
continue to receive the equivalent of the interest paid by the issuer on the
securities loaned and will also receive a fee, or all or a portion of the
interest on investment of the collateral, if any. However, the Portfolio may
pay lending fees to such borrowers. The Portfolio would not have the right to
vote any securities having voting rights during the existence of the loan, but
would call the loan in anticipation of an important vote to be taken among
holders of the securities or the giving or withholding of their consent on a
material matter affecting the investment. As with other extensions of credit
there are risks of delay in recovery or even loss of rights in the securities
loaned if the borrower of the securities fails financially. However, the loans
will be made only to organizations deemed by the Portfolio's management to be
of good standing and when, in the judgment of the Portfolio's management, the
consideration which can be earned from securities loans of this type justifies
the attendant risk. Distributions by the Fund of any income realized by the
Portfolio from securities loans will be taxable. If the management of the
Portfolio decides to make securities loans, it is intended that the value of
the securities loaned would not exceed 30% of the Portfolio's total assets.
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
Internal Revenue Code for maintaining qualification of the Fund as a regulated
investment company for federal income tax purposes (see "Taxes").
Transactions using 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, receivables and short-term debt 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, U.S. Government securities or other liquid, high-
grade debt securities in a segregated account with its custodian in the
prescribed amount.
Assets used as cover or held in a segregated account cannot be sold while
the position in the corresponding futures contract or option is open, unless
they are replaced with other appropriate assets. As a result, the commitment
of a large portion of the Portfolio's assets to cover or segregated accounts
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, which as used in this
Statement of Additional Information means the lesser of (a) 67% of the
outstanding voting securities of the Portfolio present or represented by proxy
at a meeting if the holders of more than 50% of the outstanding voting
securities of the Portfolio are present or represented at the meeting or (b)
more than 50% of the outstanding voting securities of the Portfolio. The term
"voting securities" as used in this paragraph has the same meaning as in the
1940 Act. Whenever the Trust is requested to vote on a change in the
fundamental investment restrictions of the Portfolio (or the Portfolio's 80%
investment policy as described in the Fund's current Prospectus), the Trust
will hold a meeting of Fund shareholders and will cast its vote as instructed
by the shareholders.
The Fund and the Portfolio have adopted the following investment policies
which may be changed by the Trust with respect to the Fund without approval by
the Fund's shareholders or by the Portfolio with respect to the Portfolio
without 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 will make such sales only for the
purpose of deferring realization of gain or loss for federal income tax
purposes); an 15% of net assets in investments which are not readily
marketable, including restricted securities and repurchase agreements maturing
in more than seven days. Restricted securities for the purposes of this
limitation do not include securities eligible for resale pursuant to Rule 144A
under the Securities Act of 1933 that the Board of Trustees of the Trust or
the Portfolio, or its delegate, determines to be liquid, based upon the
trading markets for the specific security; (d) purchase or retain in its
portfolio any securities issued by an issuer any of whose officers, directors,
trustees or security holders is an officer or Trustee of the Trust or the
Portfolio or is a member, officer, director or trustee of any investment
adviser of the Trust or the Portfolio, if after the purchase of the securities
of such issuer by the Fund or the Portfolio one or more of such persons owns
beneficially more than 1/2 of 1% of the shares or securities or both (all
taken at market value) of such issuer and such persons owning more than 1/2
of 1% of such shares or securities together own beneficially more than 5% of
such shares or securities or both (all taken at market value); or (e) purchase
oil, gas or other mineral leases or purchase partnership interests in oil, gas
or other mineral exploration or development programs.
For purposes of the Portfolio's investment restrictions, the determination
of the "issuer" of a municipal obligation which is not a general obligation
bond will be made by the Portfolio's Investment Adviser on the basis of the
characteristics of the obligation and other relevant factors, the most
significant of which is the source of funds committed to meeting interest and
principal payments of such obligations.
In order to permit the sale of shares of the Fund in certain states, the
Fund may make commitments more restrictive than the policies described above.
Should the Fund determine that any such commitment is no longer in the best
interest of the Fund and its shareholders, it will revoke the commitment by
terminating sales of its shares in the state(s) involved.
TRUSTEES AND OFFICERS
The Trustees and officers of the Trust and the Portfolio are listed below.
Except as indicated, each individual has held the office shown or other offices
in the same company for the last five years. Unless otherwise noted, the
business address of each Trustee and officer is 24 Federal Street, Boston,
Massachusetts 02110, which is also the address of the Portfolio's investment
adviser, Boston Management and Research ("BMR"), a wholly-owned subsidiary of
Eaton Vance Management ("Eaton Vance"); of Eaton Vance's parent, Eaton Vance
Corp. ("EVC"); and of BMR's and Eaton Vance's trustee, Eaton Vance, Inc. ("EV").
Eaton Vance and EV are both wholly-owned subsidiaries of EVC. Those Trustees who
are "interested persons" of the Trust, the Portfolio, BMR, Eaton Vance, EVC or
EV, as defined in the 1940 Act, by virtue of their affiliation with any one or
more of the Trust, the Portfolio, BMR, Eaton Vance, EVC or EV, are indicated by
an asterisk(*).
TRUSTEES OF THE TRUST AND THE PORTFOLIO
DONALD R. DWIGHT (64), Trustee
President of Dwight Partners, Inc. (a corporate relations and communications
company) founded in 1988; Chairman of the Board of Newspapers of New England,
Inc., since 1983. Director or Trustee of various investment companies managed
by Eaton Vance or BMR.
Address: Clover Mill Lane, Lyme, New Hampshire 03768
JAMES B. HAWKES (54), Vice President and Trustee*
Executive Vice President of BMR, Eaton Vance, EVC and EV, and a Director of
EVC and EV. Director, Trustee and officer of various investment companies
managed by Eaton Vance or BMR.
SAMUEL L. HAYES, III (60), Trustee
Jacob H. Schiff Professor of Investment Banking, Harvard University Graduate
School of Business Administration. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: Harvard University Graduate School of Business Administration,
Soldiers Field Road, Boston, Massachusetts 02163
NORTON H. REAMER (60), Trustee
President and Director, United Asset Management Corporation, a holding company
owning institutional investment management firms. Chairman, President and
Director, The Regis Fund, Inc. (mutual fund). Director or Trustee of various
investment companies managed by Eaton Vance or BMR.
Address: One International Place, Boston, Massachusetts 02110
JOHN L. THORNDIKE
(69), Trustee
Director, Fiduciary Company Incorporated, Director or Trustee of various
investment companies managed by Eaton Vance or BMR.
Address: 175 Federal Street, Boston, Massachusetts 02110
JACK L. TREYNOR (65),
Trustee
Investment Adviser and Consultant. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: 504 Via Almar, Palos Verdes Estates, California 90274
OFFICERS OF THE TRUST AND THE PORTFOLIO
THOMAS J. FETTER (52), President
Vice President of BMR, Eaton Vance and EV. (Mr. Fetter was elected a Vice
President of the Trust on December 17, 1990 and President of the Trust on
December 13, 1993. Officer of various investment companies managed by Eaton
Vance or BMR.
ROBERT B. MACINTOSH (39), Vice President
Vice President of BMR since August 11, 1992, and of Eaton Vance and EV, and an
employee of Eaton Vance since March 8, 1991. Fidelity Investments --
Portfolio Manager (1986-1991). Officer of various investment companies
managed by Eaton Vance or BMR. Mr. MacIntosh was elected Vice President of
the Trust on March 22, 1993.
JAMES L. O'CONNOR (50), Treasurer
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
THOMAS OTIS (64), 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 (60), Assistant Secretary
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
A. JOHN MURPHY (33), Assistant Secretary
Assistant Vice President of BMR, Eaton Vance and EV since March 1, 1994;
employee of Eaton Vance since March 1993. State Regulations Supervisor, The
Boston Company (1991-1993) and Registration Specialist, Fidelity Management
& Research Co. (1986-1991). Officer of various investment companies managed
by Eaton Vance or BMR. Mr. Murphy was elected Assistant Secretary of the
Trust on March 27, 1995.
ERIC G. WOODBURY (38), Assistant Secretary
Vice President of Eaton Vance 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. Thorndike (Chairman), Hayes and Reamer are members of the Special
Committee of the Board of Trustees of the Trust and of the Portfolio. The
Special Committee's functions include a continuous review of the Trust's
contractual relationship with the Administrator on behalf of the Fund and the
Portfolio's contractual relationship with the Investment Adviser, making
recommendations to the Trustees regarding the compensation of those Trustees who
are not members of the Eaton Vance organization, and making recommendations to
the Trustees regarding candidates to fill vacancies, as and when they occur, in
the ranks of those Trustees who are not "interested persons" of the Trust, the
Portfolio, or the Eaton Vance organization.
Messrs. Treynor (Chairman) and Dwight are members of the Audit Committee of
the Board of Trustees of the Trust and of the Portfolio. The Audit Committee's
functions include making recommendations to the Trustees regarding the selection
of the independent certified public accountants, and reviewing with such
accountants and the Treasurer of the Trust and of the Portfolio matters relative
to accounting and auditing practices and procedures, accounting records,
internal accounting controls, and the functions performed by the custodian and
transfer agent of the Fund and of the Portfolio.
Trustees of the Portfolio who are not affiliated with the Investment Adviser
may elect to defer receipt of all or a percentage of their annual fees in
accordance with the terms of a Trustees Deferred Compensation Plan (the "Plan").
Under the Plan, an eligible Trustee may elect to have his deferred fees invested
by the Portfolio in the shares of one or more funds in the Eaton Vance Family of
Funds, and the amount paid to the Trustees under the Plan will be determined
based upon the performance of such investments. Deferral of Trustees' fees in
accordance with the Plan will have a negligible effect on the Portfolio's
assets, liabilities, and net income per share, and will not obligate the
Portfolio to retain the services of any Trustee or obligate the Portfolio to pay
any particular level of compensation to the Trustee. Neither the Portfolio nor
the Fund 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 approximately $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 offers single-state tax-free portfolios in more states than any
other sponsor of mutual funds. There are 31 long-term state portfolios, 3
national portfolios and 12 limited maturity portfolios. A staff of 32 is
responsible for the day-to-day management of over 3,500 issues in 46 mutual fund
portfolios. Assets managed by the municipal investment group are currently over
$9.1 billion. The following persons manage one or more of the Eaton Vance
tax-free 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 Management and the
portfolio manager of single-state, tax-exempt funds in five states: Hawaii,
Louisiana, Massachusetts, 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.
David C. Reilly is a Vice President of Eaton Vance and BMR. Mr. Reilly, a
Chartered Financial Analyst, received a B.S. from Skidmore College. He is a
member and former President of the Boston Municipal Analysts Forum. He also
holds memberships in the Boston Securities Analysts Society and the Financial
Analysts Federation.
BMR manages the investments and affairs of the Portfolio subject to the
supervision of the Portfolio's Board of Trustees. BMR furnishes to the Portfolio
investment research, advice and supervision, furnishes an investment program and
determines what securities will be purchased, held or sold by the Portfolio and
what portion, if any, of the Portfolio's assets will be held uninvested. The
Investment Advisory Agreement requires BMR to pay the salaries and fees of all
officers and Trustees of the Portfolio who are members of the BMR organization
and all personnel of BMR performing services relating to research and investment
activities. The Portfolio is responsible for all expenses not expressly stated
to be payable by BMR under the Investment Advisory Agreement, including, without
implied limitation, (i) expenses of maintaining the Portfolio and continuing its
existence, (ii) registration of the Portfolio under the 1940 Act, (iii)
commissions, fees and other expenses connected with the acquisition, holding and
disposition of securities and other investments, (iv) auditing, accounting and
legal expenses, (v) taxes and interest, (vi) governmental fees, (vii) expenses
of issue, sale and redemption of interests in the Portfolio, (viii) expenses of
registering and qualifying the Portfolio and interests in the Portfolio under
federal and state securities laws and of preparing and printing registration
statements or other offering statements or memoranda for such purposes and for
distributing the same to investors, and fees and expenses of registering and
maintaining registrations of the Portfolio and of the Portfolio's placement
agent as broker-dealer or agent under state securities laws, (ix) expenses of
reports and notices to investors and of meetings of investors and proxy
solicitations therefor, (x) expenses of reports to governmental officers and
commissions, (xi) insurance expenses, (xii) association membership dues, (xiii)
fees, expenses and disbursements of custodians and subcustodians for all
services to the Portfolio (including without limitation safekeeping of funds,
securities and other investments, keeping of books, accounts and records, and
determination of net asset values, book capital account balances and tax capital
account balances), (xiv) fees, expenses and disbursements of transfer agents,
dividend disbursing agents, investor servicing agents and registrars for all
services to the Portfolio, (xv) expenses for servicing the accounts of
investors, (xvi) any direct charges to investors approved by the Trustees of the
Portfolio, (xvii) compensation and expenses of Trustees of the Portfolio who are
not members of BMR's organization, and (xviii) such non-recurring items as may
arise, including expenses incurred in connection with litigation, proceedings
and claims and the obligation of the Portfolio to indemnify its Trustees,
officers and investors with respect thereto.
For a description of the compensation that the Portfolio pays BMR under the
Investment Advisory Agreement, see the Fund's current Prospectus. For additional
information about the Investment Advisory Agreement, including the net assets of
the Portfolio and the investment advisory fees that the Portfolio paid BMR under
the Investment Advisory Agreement, see "Fees and Expenses" in the Fund's Part
II.
A commitment may be made to a state securities authority that Eaton Vance
will take certain actions, if necessary, so that the Fund's expenses will not
exceed expense limitation requirements of such state. The commitment may be
amended or rescinded by Eaton Vance in response to changes in the requirements
of the state or for other reasons.
The Investment Advisory Agreement with BMR may be continued indefinitely so
long as such continuance is approved at least annually (i) by the vote of a
majority of the Trustees of the Portfolio who are not interested persons of the
Portfolio or of BMR cast in person at a meeting specifically called for the
purpose of voting on such approval and (ii) by the Board of Trustees of the
Portfolio or by vote of a majority of the outstanding voting securities of the
Portfolio. The Agreement may be terminated at any time without penalty on sixty
(60) days' written notice by the Board of Trustees of either party, or by vote
of the majority of the outstanding voting securities of the Portfolio, and the
Agreement will terminate automatically in the event of its assignment. The
Agreement provides that BMR may render services to others and engage in other
business activities and may permit other fund clients and other corporations and
organizations to use the words "Eaton Vance" or "Boston Management and Research"
in their names. The Agreement also provides that BMR shall not be liable for any
loss incurred in connection with the performance of its duties, or action taken
or omitted under that Agreement, in the absence of willful misfeasance, bad
faith, gross negligence in the performance of its duties or by reason of its
reckless disregard of its obligations and duties thereunder, or for any losses
sustained in the acquisition, holding or disposition of any security or other
investment.
As indicated in the Prospectus, Eaton Vance serves as Administrator of the
Fund, but 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 litigation, proceedings and
claims and the obligation of the Trust to indemnify its Trustees and officers
with respect thereto.
BMR is a wholly-owned subsidiary of Eaton Vance. Eaton Vance and EV are
both wholly-owned subsidiaries of EVC. BMR and Eaton Vance are both
Massachusetts business trusts, and EV is the trustee of BMR and Eaton Vance.
The Directors of EV are Landon T. Clay, H. Day Brigham, Jr., M. Dozier
Gardner, James B. Hawkes and Benjamin A. Rowland, Jr. The Directors of EVC
consist of the same persons and John G. L. Cabot and Ralph Z. Sorenson. Mr.
Clay is chairman and Mr. Gardner is president and chief executive officer of
EVC, BMR, Eaton Vance and EV. All of the issued and outstanding shares of
Eaton Vance and EV are owned by EVC. All of the issued and outstanding shares
of BMR are owned by Eaton Vance. All shares of the outstanding Voting Common
Stock of EVC are deposited in a Voting Trust, which expires on December 31,
1996, the Voting Trustees of which are Messrs. Clay, Brigham, Gardner, Hawkes
and Rowland. The Voting Trustees have unrestricted voting rights for the
election of Directors of EVC. All of the outstanding voting trust receipts
issued under said Voting Trust are owned by certain of the officers of BMR and
Eaton Vance who are also officers and Directors of EVC and EV. As of January
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, Metzold, 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.
Eaton Vance owns all of the stock of Energex Energy Corporation, which is
engaged in oil and gas operations. In addition, Eaton Vance owns all of the
stock of Northeast Properties, Inc., which is engaged in real estate investment,
consulting and management. EVC owns all of the stock of Fulcrum Management, Inc.
and MinVen Inc., which are engaged in the development of precious metal
properties. EVC, BMR, Eaton Vance and EV may also enter into other businesses.
EVC and its affiliates and their officers and employees from time to time
have transactions with various banks, including the custodian of the Fund and
the Portfolio, Investors Bank & Trust Company. It is Eaton Vance's opinion that
the terms and conditions of such transactions were not and will not be
influenced by existing or potential custodial or other relationships between the
Fund or the Portfolio and such banks.
CUSTODIAN
Investors Bank & Trust Company ("IBT"), 89 South Street, Boston,
Massachusetts, (a 77.3% owned subsidiary of EVC) acts as custodian for the Fund
and the Portfolio. IBT has the custody of all cash and securities representing
the Fund's interest in the Portfolio, has custody of all the Portfolio's assets,
maintains the general ledger of the Portfolio and the Fund, and computes the
daily net asset value of interests in the Portfolio and the net asset value of
shares of the Fund. In such capacity it attends to details in connection with
the sale, exchange, substitution, transfer or other dealings with the
Portfolio's investments, receives and disburses all funds and performs various
other ministerial duties upon receipt of proper instructions from the Fund and
the Portfolio. IBT charges fees which are competitive within the industry. A
portion of the fee relates to custody, bookkeeping and valuation services and is
based upon a percentage of Fund and Portfolio net assets and a portion of the
fee relates to activity charges, primarily the number of portfolio transactions.
These fees are then reduced by a credit for cash balances of the particular
investment company at the custodian equal to 75% of the 91-day, U.S. Treasury
Bill auction rate applied to the particular investment company's average daily
collected balances for the week. In view of the ownership of EVC in IBT, the
Portfolio is treated as a self-custodian pursuant to Rule 17f-2 under the 1940
Act, and the Portfolio's investments held by IBT as custodian are thus subject
to the additional examinations by the Portfolio's independent certified public
accountants as called for by such Rule. For the custody fees that the Portfolio
and the Fund paid to IBT, see "Fees and Expenses" in the Fund's Part II.
SERVICE FOR WITHDRAWAL
By a standard agreement, the Trust's Transfer Agent will send to the
shareholder regular monthly or quarterly payments of any permitted amount
designated by the shareholder (see "Eaton Vance Shareholder Services --
Withdrawal Plan" in the Fund's current Prospectus) based upon the value of the
shares held. The checks will be drawn from share redemptions and hence, are a
return of principal. Income dividends and capital gains distributions in
connection with withdrawal accounts will be credited at net asset value as of
the record date for each distribution. Continued withdrawals in excess of
current income will eventually use up principal, particularly in a period of
declining market prices.
To use this service, at least $5,000 in cash or shares at the public
offering price will have to be deposited with the Transfer Agent. The
maintenance of a withdrawal plan concurrently with purchases of additional Fund
shares would be disadvantageous if a sales charge is included in such purchases.
A shareholder may not have a withdrawal plan in effect at the same time he or
she has authorized Bank Automated Investing or is otherwise making regular
purchases of Fund shares. The shareholder, the Transfer Agent or the Principal
Underwriter will be able to terminate the withdrawal plan at any time without
penalty.
DETERMINATION OF NET ASSET VALUE
The net asset value of the shares of the Fund is determined by IBT (as
agent and custodian for the Fund) 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 (a New
York Stock Exchange holiday), 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 New York Stock Exchange (the
"Exchange") is open for trading ("Portfolio Business Day") as of the close of
regular trading on the Exchange (the "Portfolio Valuation Time"). The value of
each investor's interest in the Portfolio will be determined by multiplying the
net asset value of the Portfolio by the percentage, determined on the prior
Portfolio Business Day, which represented that investor's share of the aggregate
interests in the Portfolio on such prior day. Any additions or withdrawals for
the current Portfolio Business Day will then be recorded. Each investor's
percentage of the aggregate interest in the Portfolio will then be recomputed as
a percentage equal to a fraction (i) the numerator of which is the value of such
investor's investment in the Portfolio as of the Portfolio Valuation Time on the
prior Portfolio Business Day plus or minus, as the case may be, the amount of
any additions to or withdrawals from the investor's investment in the Portfolio
on the current Portfolio Business Day and (ii) the denominator of which is the
aggregate net asset value of the Portfolio as of the Portfolio Valuation Time on
the prior Portfolio Business Day plus or minus, as the case may be, the amount
of the net additions to or withdrawals from the aggregate investment in the
Portfolio on the current Portfolio Business Day by all investors in the
Portfolio. The percentage so determined will then be applied to determine the
value of the investor's interest in the Portfolio for the current Portfolio
Business Day.
INVESTMENT PERFORMANCE
The average annual total return is determined by multiplying a hypothetical
initial purchase order of $1,000 by the average annual compound rate of return
(including capital appreciation/depreciation, and dividends and distributions
paid and reinvested) for the stated period and annualizing the result. The
calculation assumes that all distributions are reinvested at net asset value on
the reinvestment dates during the period, and either (i) the deduction of the
maximum sales charge from the initial $1,000 purchase order or (ii) a complete
redemption of the investment and, if applicable, the deduction of the contingent
deferred sales charge at the end of the period. For information concerning the
total return of the Fund, see "Performance Information" in the Fund's Part II.
The Fund's yield is computed pursuant to a standardized formula by dividing
the net investment income per share earned during a recent thirty-day period by
the maximum offering price (including, if applicable, the maximum sales charge)
per share on the last day of the period and annualizing the resulting figure.
Net investment income per share is calculated from the yields to maturity of all
debt obligations held by the Portfolio based on prescribed methods, reduced by
accrued Fund expenses for the period with the resulting number being divided by
the average daily number of Fund shares outstanding and entitled to receive
distributions during the period. The yield figure does not reflect the deduction
of any contingent deferred sales charges which (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 of this
Statement of Additional Information.
The Fund may also publish the distribution rate and/or the effective
distribution rate. The Fund's distribution rate is computed by dividing the most
recent monthly distribution per share annualized, by the current net asset value
per share. The Fund's effective distribution rate is computed by dividing the
distribution rate by the ratio (the days in a year divided by the accrual days
of the monthly period) used to annualize the most recent monthly distribution
and reinvesting the resulting amount for a full year on the basis of such ratio.
The effective distribution rate will be higher than the distribution rate
because of the compounding effect of the assumed reinvestment. Investor's should
note that the Fund's yield is calculated using a standardized formula, the
income component of which is computed from the yields to maturity of all debt
obligations held by the Portfolio based on prescribed methods (with all
purchases and sales of securities during such period included in the income
calculation on a settlement date basis), whereas the distribution rate is based
on the Fund's last monthly distribution which tends to be relatively stable and
may be more or less than the amount of net investment income and short-term
capital gain actually earned by the Fund during the month. See "Distribution and
Taxes" in the Fund's current Prospectus. For the Fund's distribution rate and
effective distribution rate, see "Performance Information" in the Fund's Part II
of this Statement of Additional Information.
The Fund's total return may be compared to the Consumer Price Index and to
the domestic securities indices of the Bond Buyer 25 Revenue Bond Index and the
Lehman Brothers Municipal Bond Index. The Fund's total return and comparisons
with these indices may be used in advertisements and in information furnished to
present or prospective shareholders. The Fund's performance may differ from that
of other investors in the Portfolio, including other investment companies.
From time to time, evaluations of the Fund's performance made by independent
sources, e.g., Lipper Analytical Services, Inc., CDA/Wiesenberger and
Morningstar, Inc., may be used in advertisements and in information
furnished to present or prospective shareholders.
From time to time, information, charts and illustrations relating to
inflation and the effects of inflation on the dollar may be included in
advertisements and other material furnished to present and prospective
shareholders. For example, after 10 years, the purchasing power of $25,000 would
shrink to $16,621, $14,968, $13,465 and $12,100, if the annual rates of
inflation during such period were 4%, 5%, 6% and 7%, respectively. (To calculate
the purchasing power, the value at the end of each year is reduced by the above
inflation rates for 10 consecutive years.)
From time to time, information about portfolio allocation and holdings of
the Portfolio at a particular date (including ratings assigned by independent
ratings services such as Moody's, S&P and Fitch) may be included in
advertisements and other material furnished to present and prospective
shareholders. Such information may be stated as a percentage of the Portfolio's
bond holdings on such date. For an example of the Portfolio's diversification by
quality ratings, see "Performance Information" in the Fund's Part II of this
Statement of Additional Information.
Comparative information about the yield or distribution rate of the Fund and
about average rates of return on certificates of deposit, bank money market
deposit accounts, money market mutual funds and other short-term investments may
also be included in advertisements, supplemental sales literature or
communications of the Fund. A bank certificate of deposit, unlike the Fund's
shares, pays a fixed rate of interest and entitles the depositor to receive the
face amount of the certificate of deposit at maturity. A bank money market
deposit account is a form of savings account which pays a variable rate of
interest. Unlike the Fund's shares, bank certificates of deposit and bank money
market deposit accounts are insured by the Federal Deposit Insurance
Corporation. A money market mutual fund is designed to maintain a constant value
of $1.00 per share and, thus, a money market fund's shares are subject to less
price fluctuation than the Fund's shares.
The average rates of return of money market mutual funds, certificates of
deposit and bank money market deposit accounts referred to in advertisements,
supplemental sales literature or communications of the Fund will be based on
rates published by the Federal Reserve Bank, Donoghues Money Fund Averages,
RateGram or The Wall Street Journal.
Advertisements and other material furnished to present and prospective
shareholders may also compare the taxable equivalent yield of the Fund to
after-tax yields of certificates of deposits, bank money market deposit accounts
and money market mutual funds over various income tax brackets.
Information used in advertisements and in materials furnished to present and
prospective shareholders may include statements or illustrations relating to the
appropriateness of types of securities and/or mutual funds which may be employed
to meet specific financial goals, such as (1) funding retirement, (2) paying for
children's education, and (3) financially supporting aging parents. These three
financial goals may be referred to in such advertisements or materials as the
"Triple Squeeze."
For additional information, charts and illustrations relating to the Fund's
investment performance, see "Performance Information" in the Fund's Part II of
this Statement of Additional Information.
TAXES
See "Distribution and Taxes" in the Fund's current Prospectus.
Each series of the Trust is treated as a separate entity for federal income
tax purposes. The Fund has elected or will elect to be treated and intends to
qualify each year, as a regulated investment company ("RIC") under the Internal
Revenue Code of 1986, as amended (the "Code"). 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 period 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. 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) 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 original issue discount with respect to certain
stripped municipal obligations or their stripped coupons, and certain realized
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 required certifications, as well as shareholders with respect to whom
the Fund has received notification from the Internal Revenue Service or a
broker, may be subject to "backup" withholding of federal income tax from the
Fund's dividends and distributions and the proceeds of redemptions (including
repurchases and exchanges), at a rate of 31%. An individual's taxpayer
identification number is generally his or her social security number.
Non-resident alien individuals and certain foreign corporations and other
foreign entities generally will be subject to a U.S. withholding tax at a rate
of 30% on the Fund's distributions from its ordinary income and the excess of
its net short-term capital gain over its net long-term capital loss, unless the
tax is reduced or eliminated by an applicable tax treaty. Distributions from the
excess of the Fund's net long-term capital gain over its net short-term capital
loss received by such shareholders and any gain from the sale or other
disposition of shares of the Fund generally will not be subject to U.S. federal
income taxation, provided that non-resident alien status has been certified by
the shareholder. Different U.S. tax consequences may result if the shareholder
is engaged in a trade or business in the United States, is present in the United
States for a sufficient period of time during a taxable year to be treated as a
U.S. resident, or fails to provide any required certifications regarding status
as a non-resident alien investor. Foreign shareholders should consult their tax
advisers regarding the U.S. and foreign tax consequences of an investment in the
Fund.
The foregoing discussion does not address the special tax rules applicable
to certain classes of investors, such as tax-exempt entities, insurance
companies and financial institutions. Shareholders should consult their own tax
advisers with respect to special tax rules that may apply in their particular
situations, as well as the state, local or foreign tax consequences of investing
in the Fund.
PORTFOLIO SECURITY TRANSACTIONS
Decisions concerning the execution of portfolio security transactions,
including the selection of the market and the executing firm, are made by BMR.
BMR is also responsible for the execution of transactions for all other accounts
managed by it.
BMR places the portfolio security transactions of the Portfolio and of all
other accounts managed by it for execution with many firms. BMR uses its best
efforts to obtain execution of portfolio security transactions at prices which
are advantageous to the Portfolio and at reasonably competitive spreads or (when
a disclosed commission is being charged) at reasonably competitive commission
rates. In seeking such execution, BMR will use its best judgment in evaluating
the terms of a transaction, and will give consideration to various relevant
factors, including without limitation the size and type of the transaction, the
nature and character of the market for the security, the confidentiality, speed
and certainty of effective execution required for the transaction, the general
execution and operational capabilities of the executing firm, the reputation,
reliability, experience and financial condition of the firm, the value and
quality of the services rendered by the firm in this and other transactions, and
the reasonableness of the spread or commission, if any. Municipal obligations,
including State obligations, purchased and sold by the Portfolio are generally
traded in the over-the-counter market on a net basis (i.e., without commission)
through broker-dealers and banks acting for their own account rather than as
brokers, or otherwise involve transactions directly with the issuer of such
obligations. Such firms attempt to profit from such transactions by buying at
the bid price and selling at the higher asked price of the market for such
obligations, and the difference between the bid and asked price is customarily
referred to as the spread. The Portfolio may also purchase municipal obligations
from underwriters, the cost of which may include undisclosed fees and
concessions to the underwriters. While it is anticipated that the Portfolio will
not pay significant brokerage commissions in connection with such portfolio
security transactions, on occasion it may be necessary or appropriate to
purchase or sell a security through a broker on an agency basis, in which case
the Portfolio will incur a brokerage commission. Although spreads or commissions
on portfolio security transactions will, in the judgment of BMR, be reasonable
in relation to the value of the services provided, spreads or commissions
exceeding those which another firm might charge may be paid to firms who were
selected to execute transactions on behalf of the Portfolio and BMR's other
clients for providing brokerage and research services to BMR.
As authorized in Section 28(e) of the Securities Exchange Act of 1934, a
broker or dealer who executes a portfolio transaction on behalf of the Portfolio
may receive a commission which is in excess of the amount of commission another
broker or dealer would have charged for effecting that transaction if BMR
determines in good faith that such commission was reasonable in relation to the
value of the brokerage and research services provided. This determination may be
made on the basis of either that particular transaction or on the basis of
overall responsibilities which BMR and its affiliates have for accounts over
which they exercise investment discretion. In making any such determination, BMR
will not attempt to place a specific dollar value on the brokerage and research
services provided or to determine what portion of the commission should be
related to such services. Brokerage and research services may include advice as
to the value of securities, the advisability of investing in, purchasing, or
selling securities, and the availability of securities or purchasers or sellers
of securities; furnishing analyses and reports concerning issuers, industries,
securities, economic factors and trends, portfolio strategy and the performance
of accounts; effecting securities transactions and performing functions
incidental thereto (such as clearance and settlement); and the "Research
Services" referred to in the next paragraph.
It is a common practice of the investment advisory industry and of the
advisers of investment companies, institutions and other investors to receive
research, statistical and quotation services, data, information and other
services, products and materials which assist such advisers in the performance
of their investment responsibilities ("Research Services") from broker-dealer
firms which execute portfolio transactions for the clients of such advisers and
from third parties with which such broker-dealers have arrangements. Consistent
with this practice, BMR receives Research Services from many broker-dealer firms
with which BMR places the Portfolio transactions and from third parties with
which these broker-dealers have arrangements. These Research Services include
such matters as general economic and market reviews, industry and company
reviews, evaluations of securities and portfolio strategies and transactions and
recommendations as to the purchase and sale of securities and other portfolio
transactions, financial, industry and trade publications, news and information
services, pricing and quotation equipment and services, and research oriented
computer hardware, software, data bases and services. Any particular Research
Service obtained through a broker-dealer may be used by BMR in connection with
client accounts other than those accounts which pay commissions to such
broker-dealer. Any such Research Service may be broadly useful and of value to
BMR in rendering investment advisory services to all or a significant portion of
its clients, or may be relevant and useful for the management of only one
client's account or of a few clients' accounts, or may be useful for the
management of merely a segment of certain clients' accounts, regardless of
whether any such account or accounts paid commissions to the broker-dealer
through which such Research Service was obtained. The advisory fee paid by the
Portfolio is not reduced because BMR receives such Research Services. BMR
evaluates the nature and quality of the various Research Services obtained
through broker-dealer firms and attempts to allocate sufficient commissions to
such firms to ensure the continued receipt of Research Services which BMR
believes are useful or of value to it in rendering investment advisory services
to its clients.
Subject to the requirement that BMR shall use its best efforts to seek and
execute portfolio security transactions at advantageous prices and at reasonably
competitive spreads or commission rates, BMR is authorized to consider as a
factor in the selection of any firm with whom portfolio orders may be placed the
fact that such firm has sold or is selling shares of the Fund or of other
investment companies sponsored by BMR or Eaton Vance. This policy is not
inconsistent with a rule of the National Association of Securities Dealers,
Inc., which rule provides that no firm which is a member of the Association
shall favor or disfavor the distribution of shares of any particular investment
company or group of investment companies on the basis of brokerage commissions
received or expected by such firm from any source.
Municipal obligations considered as investments for the Portfolio may also
be appropriate for other investment accounts managed by BMR or its affiliates.
BMR will attempt to allocate equitably portfolio security transactions among the
Portfolio and the portfolios of its other investment accounts purchasing
municipal obligations whenever decisions are made to purchase or sell securities
by the Portfolio and one or more of such other accounts simultaneously. In
making such allocations, the main factors to be considered are the respective
investment objectives of the Portfolio and such other accounts, the relative
size of portfolio holdings of the same or comparable securities, the
availability of cash for investment by the Portfolio and such accounts, the size
of investment commitments generally held by the Portfolio and such accounts and
the opinions of the persons responsible for recommending investments to the
Portfolio and such accounts. While this procedure could have a detrimental
effect on the price or amount of the securities available to the Portfolio from
time to time, it is the opinion of the Trustees of the Trust and the Portfolio
that the benefits available from the BMR organization outweigh any disadvantage
that may arise from exposure to simultaneous transactions. For the brokerage
commissions paid by the Portfolio on portfolio transactions, see "Fees and
Expenses" in the Fund's Part II of this Statement of Additional Information.
OTHER INFORMATION
Eaton Vance, pursuant to its agreement with the Trust, controls the use of
the words "Eaton Vance" in the Fund's name and may use the words "Eaton Vance"
in other connections and for other purposes.
As permitted by Massachusetts law, there will normally be no meetings of
shareholders for the purpose of electing Trustees unless and until such time as
less than a majority of the Trustees of the Trust holding office have been
elected by shareholders. In such an event, the Trustees then in office will call
a shareholders' meeting for the election of Trustees. Except for the foregoing
circumstances and unless removed by action of the shareholders in accordance
with the Trust's by-laws, the Trustees shall continue to hold office and may
appoint successor Trustees.
The Trust's by-laws provide that no person shall serve as a Trustee if
shareholders holding two-thirds of the outstanding shares have removed him from
that office either by a written declaration filed with the Trust's custodian or
by votes cast at a meeting called for that purpose. The by-laws further provide
that under certain circumstances the shareholders may call a meeting to remove a
Trustee and that the Trust is required to provide assistance in communication
with shareholders about such a meeting.
The Trust's Declaration of Trust may be amended by the Trustees when
authorized by vote of a majority of the outstanding voting securities of the
Trust, the financial interests of which are affected by the amendment. The
Trustees may also amend the Declaration of Trust without the vote or consent of
shareholders to change the name of the Trust or any series or to make such other
changes as do not have a materially adverse effect on the financial interests of
shareholders or if they deem it necessary to conform it to applicable Federal or
state laws or regulations. The Trust or any series or class thereof may be
terminated by: (1) the affirmative vote of the holders of not less than
two-thirds of the shares outstanding and entitled to vote at any meeting of
shareholders of the Trust or the appropriate series or class thereof, or by an
instrument or instruments in writing without a meeting, consented to by the
holders of two-thirds of the shares of the Trust or a series or class thereof,
provided, however, that, if such termination is recommended by the Trustees, the
vote of a majority of the outstanding voting securities of the Trust or a series
or class thereof entitled to vote thereon shall be sufficient authorization; or
(2) by means of an instrument in writing signed by a majority of the Trustees,
to be followed by a written notice to shareholders stating that a majority of
the Trustees has determined that the continuation of the Trust or a series or a
class thereof is not in the best interest of the Trust, such series or class or
of their respective shareholders.
The Declaration of Trust further provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law; but nothing in the
Declaration of Trust protects a Trustee against any liability to which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
office.
In accordance with the Declaration of Trust of the Portfolio, there will
normally be no meetings of the investors for the purpose of electing Trustees
unless and until such time as less than a majority of the Trustees holding
office have been elected by investors. In such an event the Trustees of the
Portfolio then in office will call an investors' meeting for the election of
Trustees. Except for the foregoing circumstances and unless removed by action of
the investors in accordance with the Portfolio's Declaration of Trust, the
Trustees shall continue to hold office and may appoint successor Trustees.
The Declaration of Trust of the Portfolio provides that no person shall
serve as a Trustee if investors holding two-thirds of the outstanding interest
have removed him from that office either by a written declaration filed with the
Portfolio's custodian or by votes cast at a meeting called for that purpose. The
Declaration of Trust further provides that under certain circumstances the
investors may call a meeting to remove a Trustee and that the Portfolio is
required to provide assistance in communicating with investors about such a
meeting.
The right to redeem shares of the Fund can be suspended and the payment of
the redemption price deferred when the Exchange is closed (other than for
customary weekend and holiday closings), during periods when trading on the
Exchange is restricted as determined by the Commission, or during any emergency
as determined by the Commission which makes it impracticable for the Portfolio
to dispose of its securities or value its assets, or during any other period
permitted by order of the Commission for the protection of investors.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Deloitte & Touche LLP, 125 Summer Street, Boston, Massachusetts, are the
independent certified public accountants of the Fund and the Portfolio,
providing audit services, tax return preparation, and assistance and
consultation with respect to the preparation of filings with the Commission.
For the financial statements of the Portfolio, see "Financial Statements" in
the Fund's Part II.
<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 Statement of Additional Information for the
securities listed. Ratings are generally given to securities at the time of
issuance. While the rating agencies may from time to time revise such ratings,
they undertake no obligation to do so, and the ratings indicated do not
necessarily represent ratings which would be given to these securities on the
date of the Portfolio's fiscal year end.
<PAGE>
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 FLORIDA INSURED
MUNICIPALS FUND. The investment objective of the Fund is to provide current
income exempt from regular federal income tax in the form of an investment
exempt from Florida intangibles tax. The Fund currently seeks to meet its
investment objective by investing its assets in the Florida Insured Municipals
Portfolio (the "Portfolio").
RISKS OF CONCENTRATION
The following information as to certain Florida considerations is given to
investors in view of the Portfolio's policy of concentrating its investments
in Florida issuers. Such information supplements the information in the
Prospectus. It is derived from sources that are generally available to
investors and is believed to be accurate. Such information constitutes only a
brief summary, does not purport to be a complete description and is based on
information from official statements relating to securities offerings of
Florida issuers. Neither the Trust nor the Portfolio has independently
verified this information.
Florida is characterized by rapid population growth and substantial
capital needs which are being funded through more frequent debt issuance and
pay-as-you-go financing. The State of Florida operates on the basis of a
fiscal biennium for its appropriations and expenditures and is
constitutionally bound to maintain a balanced budget. The State's financial
operations are considerably different than most other states because, under
the State's constitution, there is no state income tax on individuals. A
constitutional amendment would therefore be necessary to impose such an income
tax. Only seven states currently do not impose income taxes on individuals.
The lack of an income tax on individuals exposes total State tax collections
to considerably more volatility than would otherwise be the case and, in the
event of an economic downswing, could affect the State's ability to pay
principal and interest in a timely manner.
Florida has a proportionally greater number of persons of retirement age;
a factor that makes Florida's property and transfer payment taxes a relatively
more important source of State funding. Because transfer payments are
typically less sensitive to the business cycle than employment income, they
may act as a stabilizing force in weak economic periods.
In 1993, the Florida constitution was amended to limit the annual growth
in the assessed valuation of residential property, which, over time, could
constrain growth in property taxes, a major source of revenue for local
governments. In 1994, the Florida constitution was amended to limit State
revenue collections in any fiscal year to, subject to exception, that which
was allowed in the prior fiscal year plus a growth factor, to be determined by
reference to the average annual growth rate in Florida personal income over
the previous five years.
Florida tourism appears to be suffering the effects of negative publicity
regarding crime against tourists in the State, "product maturity," higher
prices and more aggressive marketing by competing vacation destinations.
Although Florida experienced a 4.0% drop in the number of tourists visiting
the State in the fiscal year 1993-94, the State anticipates an increase in the
number of visiting tourists in the current and succeeding fiscal years. The
number of visiting tourists is expected to increase by 0.1% and 4.3% during
fiscal years 1995-96 and 1996-97, respectively. The total number of visiting
tourists is expected to reach 41.4 million and 43.2 million during fiscal
years 1995-96 and 1996-97, respectively.
There has been a decline in Florida's dependency on highly cyclical
construction and construction-related manufacturing sectors. For example, the
total contract construction employment as a share of total non-farm employment
reached a peak of over 10% in 1973. In 1980, the share was roughly 7.5%, and
in 1994, the share had edged downward to nearly 5%. This trend is expected to
continue as Florida's economy continues to diversify.
INSURANCE
The following information relates to the Fund and supplements the
information contained under "Additional Information about Investment Policies
- -- Insurance" in Part I of this Statement of Additional Information.
In General. Insured Florida obligations held by the Portfolio will be insured
as to their scheduled payment of principal and interest under (i) an insurance
policy obtained by the issuer or underwriter of the Florida obligation at the
time of its original issuance ("Issue Insurance"), (ii) an insurance policy
obtained by the Portfolio or a third party subsequent to the Florida
obligation's original issuance ("Secondary Market Insurance") or (iii) a
municipal insurance policy purchased by the Portfolio ("Mutual Fund
Insurance"). The Portfolio anticipates that all or substantially all of its
insured Florida obligations will be subject to Issue Insurance or Secondary
Market Insurance. Although the insurance feature reduces certain financial
risks, the premiums for Mutual Fund Insurance (which, if purchased by the
Portfolio, are paid from the Portfolio's assets) and the higher market price
paid for Florida obligations covered by Issue Insurance or Secondary Market
Insurance reduce the Portfolio's current yield.
Insurance will cover the timely payment of interest and principal on
Florida obligations and will be obtained from insurers with a claims-paying
ability rated Aaa by Moody's or AAA by S&P or Fitch. Florida obligations
insured by any insurer with such a claims-paying ability rating will generally
carry the same rating or credit risk as the insurer. See the Appendix to the
Statement of Additional Information for a brief description of Moody's,
Fitch's and S&P's claims-paying ability ratings. Such insurers must guarantee
the timely payment of all principal and interest on Florida obligations as
they become due. Such insurance may, however, provide that in the event of
non-payment of interest or principal when due with respect to an insured
Florida obligation, the insurer is not obligated to make such payment until a
specified time period has lapsed (which may be 30 days or more after it has
been notified by the Portfolio that such non-payment has occurred). For these
purposes, a payment of principal is due only at final maturity of the Florida
obligation and not at the time any earlier sinking fund payment is due. While
the insurance will guarantee the timely payment of principal and interest, it
does not guarantee the market value of the Florida obligations or the net
asset value of the Portfolio or the Fund.
Florida obligations are generally eligible to be insured under Mutual Fund
Insurance if, at the time of purchase by the Portfolio, they are identified
separately or by category in qualitative guidelines furnished by the mutual
fund insurer and are in compliance with the aggregate limitations on amounts
set forth in such guidelines. Premium variations are based, in part, on the
rating of the Florida obligations being insured at the time the Portfolio
purchases the obligations. The insurer may prospectively withdraw particular
Florida obligations from the classifications of securities eligible for
insurance or change the aggregate amount limitation of each issue or category
of eligible Florida obligations. The insurer must, however, continue to insure
the full amount of the Florida obligations previously acquired which the
insurer has indicated are eligible for insurance, so long as they continue to
be held by the Portfolio. The qualitative guidelines and aggregate amount
limitations established by the insurer from time to time will not necessarily
be the same as those the Portfolio would use to govern selection of Florida
obligations for the Portfolio. Therefore, from time to time such guidelines
and limitations may affect investment decisions in the event the Portfolio's
securities are insured by Mutual Fund Insurance.
For Mutual Fund Insurance that terminates upon the sale of the insured
security, the insurance does not have any effect on the resale value of such
security. Therefore, the Portfolio will generally retain any insured Florida
obligations which are in default or, in the judgment of the Investment
Adviser, are in significant risk of default and place a value on the
insurance. This value will be equal to the difference between the market value
of the defaulted Florida obligations and the market value of similar Florida
obligations which are not in default. As a result, the Investment Adviser may
be unable to manage the securities held by the Portfolio to the extent the
Portfolio holds defaulted Florida obligations, which will limit its ability in
certain circumstances to purchase other Florida obligations. While a defaulted
Florida obligation is held by the Portfolio, the Portfolio will continue to
pay the insurance premium thereon but will also collect interest payments from
the insurer and retain the right to collect the full amount of principal from
the insurer when the Florida obligation becomes due. The Portfolio expects
that the market value of a defaulted Florida obligation covered by Issue
Insurance or Secondary Market Insurance will generally be greater than the
market value of an otherwise comparable defaulted Florida obligation covered
by Mutual Fund Insurance.
The Portfolio may also invest in Florida obligations that are secured by
an escrow or trust account which contains securities issued or guaranteed by
the U.S. Government, its agencies or instrumentalities, that are backed by the
full faith and credit of the United States, and sufficient in amount to ensure
the payment of interest on and principal of the secured Florida obligation
("collateralized obligations"). Collateralized obligations generally are
regarded as having the credit characteristics of the underlying U.S.
Government, agency or instrumentality securities. These obligations will not
be subject to Issue Insurance, Secondary Market Insurance or Mutual Fund
Insurance, but will be considered to be insured Florida obligations for
purposes of the Portfolio's policy of investing at least 80% of its net assets
in insured Florida obligations (but such obligations shall not constitute more
than 15% of the insured portion of the Portfolio).
Principal Insurers. Currently, Municipal Bond Investors Assurance Corporation
("MBIA"), Capital Guaranty Insurance Company ( "Capital Guaranty" ), Financial
Guaranty Insurance Company ( "FGIC" ), AMBAC Indemnity Corporation ("AMBAC"),
and Financial Security Assurance Corp., together with its affiliated insurance
companies--Financial Security Assurance International Inc. and Financial
Security Assurance of Oklahoma, Inc. (collectively, "FSA" ), are considered to
have a high claims-paying ability and, therefore, are eligible insurers for
the Portfolio's Florida obligations. Additional insurers may be added without
further notification. The following information concerning these eligible
insurers is based upon information provided by such insurers or information
filed with certain state insurance regulators. Neither the Portfolio nor the
Fund has independently verified such information and make no representations
as to the accuracy and adequacy of such information or as to the absence of
material adverse changes subsequent to the date thereof.
MBIA is a monoline financial guaranty insurance company created from an
unincorporated association (the Municipal Bond Insurance Association), through
which its members wrote municipal bond insurance on a several and joint-basis
through 1986. On January 5, 1990, MBIA acquired all of the outstanding stock
of Bond Investors Group, Inc., the parent of Bond Investors Guaranty Insurance
Company ("BIG"), which has subsequently changed its name to MBIA Insurance
Corp. of Illinois. Through a reinsurance agreement, BIG ceded all of its net
insured risks, as well as its related unearned premium and contingency
reserves, to MBIA. MBIA issues municipal bond insurance policies guarantying
the timely payment of principal and interest on new municipal bond issues and
leasing obligations of municipal entities, secondary market insurance of such
instruments and insurance on such instruments held in unit investment trusts
and mutual funds. As of December 31, 1994, MBIA had total assets of
approximately $3.4 billion and qualified statutory capital of approximately
$1.7 billion. MBIA has a claims-paying ability rating of "AAA" by S&P and
"Aaa" by Moody's.
Capital Guaranty is a monoline insurance company whose policies guaranty
the timely payment of principal and interest on new issue and secondary market
issue municipal bond transactions. As of December 31, 1994, Capital Guaranty
had total assets of approximately $304 million and qualified statutory capital
of approximately $197 million. Capital Guaranty has a claims-paying ability
rating of "AAA" by S&P. Moody's has not issued a claims-paying ability rating
for Capital Guaranty.
Financial Guaranty Insurance Corporation, a wholly owned subsidiary of
FGIC Corporation, which is a wholly owned subsidiary of General Electric
Capital Corporation, is an insurer of municipal securities, including new
issues, securities held in unit investment trusts and mutual funds, and those
traded on secondary market. The investors in FGIC Corporation are not
obligated to pay the debts of or claims against FGIC. As of December 31, 1994,
FGIC had total assets of approximately $2.1 billion and qualified statutory
capital of approximately $1.2 billion. FGIC has a claims-paying ability rating
of "AAA" by S&P and Fitch, and "Aaa" by Moody's.
AMBAC, a wholly owned subsidiary of AMBAC Inc., is a monoline insurance
company whose policies guaranty the payment of principal and interest on
municipal obligations issues. As of December 31, 1994, AMBAC had admitted
assets of approximately $2.1 billion and qualified statutory capital of
approximately $1.2 billion. AMBAC has a claims-paying ability rating of "AAA"
by S&P and "Aaa" by Moody's.
FSA is a monoline insurer whose policies guaranty the timely payment of
principal and interest on new issue and secondary market issue municipal
securities transactions, among other financial obligations. As of December 31,
1994, FSA had total admitted assets of approximately $804 million and
qualified statutory capital of approximately $466 million. FSA has a claims-
paying ability rating of "AAA" by S&P and "Aaa" by Moody's.
FEES AND EXPENSES
INVESTMENT ADVISER
As of January 31, 1996, the Portfolio had net assets of $ . For
the fiscal year ended January 31, 1996, the Portfolio paid BMR advisory fees
of $ (equivalent to % of the Portfolio's average daily net assets for
such period). For the period from the start of business, March 2, 1994, to
January 31, 1995, absent a fee reduction, the Portfolio would have paid BMR
advisory fees of $8,420 (equivalent to 0.16% (annualized) of the Portfolio's
average daily net assets for such period). To enhance the net income of the
Portfolio, BMR made a reduction of the full amount of its advisory fee and BMR
was allocated expenses related to the operation of the Portfolio in the amount
of $13,139. The Portfolio's Investment Advisory Agreement with BMR is dated
February 25, 1994 and remains in effect until February 28, 1997. The Agreement
may be continued as described under "Investment Adviser and Administrator" in
Part I of this SAI.
ADMINISTRATOR
As stated under "Investment Adviser and Administrator" in Part I of this
SAI, the Administrator currently receives no compensation for providing
administrative services to the Fund. For the fiscal year ended January 31,
1996, and for the period from the start of business, March 3, 1994, to January
31, 1995, $ and $16,043, respectively of the Fund's operating expenses
were allocated to the Administrator.
SERVICE PLAN
For the fiscal year ended, January 31, 1996, the Fund did not pay any
service fees under the Plan. The Fund began accruing for its service fee
payments during the quarter ending June 30, 1995.
PRINCIPAL UNDERWRITER
For the fiscal year ended, January 31, 1996, the Fund paid no repurchase
transaction fees to the Principal Underwriter.
The total sales charges for sales of shares of the Fund for the fiscal
year January 31, 1996, were $ , of which $ was received by the
Principal Underwriter and $ was received by Authorized Firms.
CUSTODIAN
For the fiscal year ended, January 31, 1996, the Fund paid IBT $ and
the Portfolio paid IBT $ .
BROKERAGE
For the fiscal year ended January 31, 1996 and for the period from the
start of business, March 2, 1994, to January 31, 1995, 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.) During the fiscal year ended January 31, 1996, the
noninterested Trustees of the Trust and the Portfolio received the following
compensation in their capacities as Trustees from the Fund and the Portfolio,
and, during 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 $--0-- $33(2) $135,000(4)
Samuel L. Hayes, III --0-- 32(3) 150,000(5)
Norton H. Reamer --0-- 31 135,000
John L. Thorndike --0-- 32 140,000
Jack L. Treynor --0-- 34 140,000
(1) The Eaton Vance fund complex consists of 219 registered investment
companies or series thereof.
(2) Includes $11 of deferred compensation.
(3) Includes $11 of deferred compensation.
(4) Includes $35,000 of deferred compensation.
(5) Includes $33,750 of deferred compensation.
PRINCIPAL UNDERWRITER
Shares of the Fund may be continuously purchased at the public offering
price through certain Authorized Firms which have agreements with the
Principal Underwriter. The Principal Underwriter is a wholly-owned subsidiary
of Eaton Vance.
The public offering price is the net asset value next computed after
receipt of the order, plus, where applicable, a variable percentage (sales
charge) depending upon the amount of purchase as indicated by the sales charge
table set forth in the Fund's current Prospectus (see "How to Buy Fund
Shares"). Such table is applicable to purchases of the Fund alone or in
combination with purchases of the other funds offered by the Principal
Underwriter, made at a single time by (i) an individual, or an individual, his
spouse and their children under the age of twenty-one, purchasing shares for
his or their own account, and (ii) a trustee or other fiduciary purchasing
shares for a single trust estate or a single fiduciary account.
The table is also presently applicable to (1) purchases of Fund shares,
alone or in combination with purchases of any of the other funds offered by
the Principal Underwriter, through one dealer aggregating $50,000 or more made
by any of the persons enumerated above within a thirteen-month period starting
with the first purchase pursuant to a written Statement of Intention, in the
form provided by the Principal Underwriter, which includes provisions for a
price adjustment depending upon the amount actually purchased within such
period (a purchase not made pursuant to such Statement may be included
thereunder if the Statement is filed within 90 days of such purchase); or (2)
purchases of the Fund pursuant to the Right of Accumulation and declared as
such at the time of purchase.
Subject to the applicable provisions of the 1940 Act, the Fund may issue
shares at net asset value in the event that an investment company (whether a
regulated or private investment company or a personal holding company) is
merged or consolidated with or acquired by the Fund. Normally no sales charges
will be paid in connection with an exchange of Fund shares for the assets of
such investment company. Shares may be sold at net asset value to any officer,
director, trustee, general partner or employee of the Fund, the Portfolio or
any investment company for which Eaton Vance or BMR acts as investment
adviser, any investment advisory, agency, custodial or trust account managed
or administered by Eaton Vance or by any parent, subsidiary or other affiliate
of Eaton Vance, or any officer, director or employee of any parent, subsidiary
or other affiliate of Eaton Vance. The terms "officer," "director," "trustee,"
"general partner" or "employee" as used in this paragraph include any such
person's spouse and minor children, and also retired officers, directors,
trustees, general partners and employees and their spouses and minor children.
Shares of the Fund may also be sold at net asset value to registered
representatives and employees of Authorized Firms and to the spouses and
children under the age of 21 and beneficial accounts of such persons.
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. The
Principal Underwriter allows Authorized Firms discounts from the applicable
public offering price which are alike for all 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. See "How to Buy Fund Shares" in the Fund's current Prospectus
for the discount allowed to Authorized Firms on the sale of Fund shares.
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.
The Fund has authorized the Principal Underwriter to act as its agent in
repurchasing shares at the rate of $2.50 for each repurchase transaction
handled by the Principal Underwriter. The Principal Underwriter estimates that
the expenses incurred by it in acting as repurchase agent for the Fund will
exceed the amounts paid therefor by the Fund. For the amount paid by the Fund
to the Principal Underwriter for acting as repurchase agent, see "Fees and
Expenses" in this Part II.
SERVICE PLAN
The Trust on behalf of the Fund has adopted 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. (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 voting securities of the Fund. 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 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 by
the Fund under the Plan, see "Fees and Expenses" in this Part II.
ADDITIONAL OFFICER INFORMATION
In addition to the officers of the Portfolio listed under "Officers of the
Trust and the Portfolio" in Part I of this SAI, Timothy T. Browse (36) is a
Vice President of the Portfolio. Mr. Browse has served as a Vice President of
the Portfolio since June 19, 1995. Mr. Browse has been a Vice President of BMR
and Eaton Vance since 1993 and an employee of Eaton Vance since 1992. Mr.
Browse is an officer of various investment companies managed by Eaton Vance or
BMR. Prior to joining Eaton Vance, Mr. Browse was a Municipal Bond Trader --
Fidelity Management & Research Company (1987-1992).
PERFORMANCE INFORMATION
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 life of the Fund from March 2, 1994 through January 31,
1996. The total return for the period prior to the Fund's commencement of
operations on March 3, 1994 reflects the Portfolio's total return adjusted to
reflect any applicable Fund sales charge. The total return for such prior
period has not been adjusted to reflect the Fund's service fees and certain
other expenses.
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT
TOTAL RETURN TOTAL RETURN
EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
INVESTMENT INVESTMENT AMOUNT OF VALUE OF INVESTMENT ---------------------- ----------------------
PERIOD DATE<F1> INVESTMENT<F2> ON 1/31/95 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
------ ----- ------------ -------- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of the Fund<F3> 3/2/94 $ $ % -- % %
1 Year Ended
1/31/96<F1> 1/31/95 $ $ % % % %
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.
<FN>
- ----------
<F1> Investment operations began on March 2, 1994.
<F2> Initial investment less the maximum sales charge of 3.75%.
<F3> If a portion of the Portfolio's and/or the Fund's expenses had not been subsidized, the Fund would have had lower returns.
</FN>
</TABLE>
For the thirty-day period ended January 31, 1996, the yield of the Fund
was %. The yield required of a taxable security that would produce an
after-tax yield equivalent to that earned by the Fund of % would be %,
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, respectively, the Fund would have had a lower yield.
The Fund's distribution rate (calculated on January 31, 1996 and based on
the Fund's monthly distribution paid January 31, 1996) was %, and the
Fund's effective distribution rate (calculated on the same date and based on
the same monthly distribution) was %. If a portion of the Portfolio's and
the Fund's expenses had not been allocated to the Investment Adviser and the
Administrator, respectively, the Fund would have had a lower distribution rate
and effective distribution rate.
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 April 30, 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 April 30, 1996, the following shareholders owned beneficially and of record
the percentages of outstanding shares of the Fund indicated after their names:
Al Ross & Diana Ross & Adam L. Ross & Jennifer Ross & Susie F. Ross JT/WROS,
Miami, FL( %). In addition, as of April 28, 1996, Merrill Lynch Pierce
Fenner & Smith, New Brunswick, NJ and Smith Barney Inc., New York, NY, were
the record owners of approximately % and % of the outstanding shares,
respectively, which are held on behalf of their customes who are the
beneficial owners of such shares, and as to which they have voting power under
certain limited circumstances. To the knowledge of the Trust, no other person
owned of record or beneficially 5% or more of the Fund's outstanding shares as
of such date.
OTHER INFORMATION
The Fund changed its name from EV Traditional Florida Insured Tax Free
Fund to EV Traditional Florida Insured Municipals Fund on February 1, 1996.
FINANCIAL STATEMENTS
Registrant incorporates by reference the audited financial information for
the Fund and the Portfolio contained in the Fund's shareholder report for the
fiscal year ended January 31, 1995 as previously filed electronically with the
Securities and Exchange Commission (Accession Number 0000950135-95-000872).
<PAGE>
TAX EQUIVALENT YIELD TABLE
The tables below give the approximate yield a taxable security must earn
at various income brackets to produce after-tax yields equivalent to those of
tax exempt bonds yielding from 4% to 7% under the regular federal income tax
and the Florida intangibles tax laws and tax rates applicable for 1996.
<TABLE>
<CAPTION>
Or the taxable income You are in
If the taxable income on on this federal In your bracket, a tax-free yield of
your single return is* your joint return is* bracket 4% 4.5% 5% 5.5% 6% 6.5% 7%
- ------------------------- --------------------- ---------------- -------------------------------------------------------------
equals that of a taxable investment yielding
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Up to $24,000 Up to $40,100 15.00% 4.71% 5.29% 5.88% 6.47% 7.06% 7.65% 8.24%
$ 24,001-$ 58,150 $ 40,101-$ 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
<CAPTION>
Or the taxable income
If the taxable income on on
your single return is<F1> your joint return is<F1> 4% 4.5% 5% 5.5% 6% 6.5% 7%
- ------------------------- --------------------- -------------------------------------------------------------------
tax equivalent yield reflecting exemption from intangibles tax:<F2>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Up to $24,000 Up to $40,100 4.95% 5.54% 6.13% 6.71% 7.30% 7.89% 8.48%
$ 24,001-$ 58,150 $ 40,101-$ 96,900 5.85 6.54 7.23 7.93 8.62 9.31 10.01
$ 58,151-$121,300 $ 96,901-$147,700 6.10 6.83 7.55 8.27 9.00 9.72 10.44
$121,301-$263,750 $147,701-$263,750 6.58 7.36 8.14 8.92 9.70 10.48 11.26
Over $263,750 Over $263,750 6.97 7.80 8.62 9.45 10.28 11.10 11.93
<FN>
<F1> Net amount subject to federal personal income tax after deductions and exemptions.
<F2> A Florida intangibles tax on personal property of $2.00 per $1,000 is generally imposed after exemptions on the
value of stocks, bonds, other evidences of indebtedness and mutual fund shares. An example of the effect of the
Florida intangibles tax on the tax brackets of Florida taxpayers is as follows. A $10,000 investment subject to the
tax would require payment of $20 annually in intangibles taxes. If the investment yielded 5.5% annually or $550, the
intangibles tax as a percentage of income would be $20/$550 or 3.64%. If a taxpayer were in the 36% federal income
tax bracket, assuming the intangibles taxes were deducted as an itemized deduction on the federal return, the
taxpayer would be on a combined federal and Florida State tax bracket of 38.33% [36% + (1 - .36) X 3.64%] with
respect to such investment. A Florida taxpayer whose intangible personal property is exempt or partially exempt from
tax due to the availability of exemptions will have a lower taxable equivalent yield than indicated above.
</FN>
</TABLE>
Note: The 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. The tax brackets also do not show
the effects of phaseout of personal exemptions for single and joint filers
with adjusted gross incomes in excess of $117,950 and $176,950. The effective
tax brackets and equivalent taxable yields of such taxpayers will be higher
than those indicated above.
Yields shown are for illustration purposes only and are not meant to represent
the Fund's actual yield. No assurance can be given that the Fund will achieve
any specific tax exempt yield. While it is expected that the Portfolio will
invest principally in obligations, the interest from which is exempt from the
regular federal income tax, other income received by the Portfolio and
allocated to the Fund may be taxable. The table does not take into account the
Florida intangibles tax, state or local taxes, if any, payable on Fund
distributions to individuals who are not Florida residents, or intangibles
taxes, if any, imposed under the laws of other states. 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>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EV TRADITIONAL HAWAII MUNICIPALS
FUND. The investment objective of the Fund is to provide current income exempt
from regular federal income tax and Hawaii State individual income taxes. The
Fund currently seeks to achieve its investment objective by investing its
assets in the Hawaii Municipals Portfolio (the "Portfolio").
RISKS OF CONCENTRATION
The following information as to certain Hawaii considerations is given to
investors in view of the Portfolio's policy of concentrating its investments
in Hawaii issuers. Such information supplements the information in the
Prospectus. It is derived from sources that are generally available to
investors and is believed to be accurate. Such information constitutes only a
brief summary, does not purport to be a complete description and is based on
information from official statements relating to securities offerings of
Hawaii issuers. Neither the Trust nor the Portfolio has independently verified
this information.
Following a period of strong growth in the late 1980s, the rate of growth
of the Hawaiian economy slowed considerably between 1990 and 1993. This was
due primarily to the U.S. mainland recession and financial restructuring in
Japan. The general economic slowdown affected important sectors of the
Hawaiian economy, particularly tourism and construction. During 1994, the
Hawaiian economy showed modest signs of recovery following the economic
recovery on the U.S. mainland. The Kobe, Japan earthquake, however, apparently
contributed to a decline in eastbound visitor arrivals, and construction
continued to decline. The number of eastbound visitors increased 4% in 1994
over 1993 and the number of westbound visitors increased 6.3% in 1994 over
1993. In 1994, a total of about 6.5 million visitors came to the State, which
represents an increase of 5.4% from 1993.
Total personal income in Hawaii has increased at a 7.4% average annual
rate since 1980, slightly faster than the national rate over the comparable
decade. Per capita personal income has increased at a 6.4% average annual rate
since 1980 as compared with the 6.1% rate for the nation. Overall,
unemployment in Hawaii fell from a seasonally-adjusted 6.6% in the third
quarter of 1994 to 5.2% in the first quarter of 1995, compared to the national
unemployment rate of approximately 5.5%.
After six years of rapid expansion in the construction industry through
1991, building activity declined in 1992. The value of construction completed,
as measured by the general excise tax base for contracting, fell 8.2% in 1992,
4.2% in 1993, and 12.4% in 1994, following a 4.5% increase in 1991 from 1990
and a 29.1% increase in 1990 from 1989. The value of private building permits,
an indicator of future activity, decreased 9.2% in 1994 from 1993.
Agriculture, dominated by sugar and pineapple production, faces increased
foreign competition. Employment in the sugar industry has been steadily
decreasing over the past few years. Sugar manufacturing sales decreased 7.1%
in 1992 from 1991. Over the same time period, pineapple sales decreased 17.9%.
During the past years, agricultural sales have become somewhat more
diversified, particularly in the growing and exporting of papayas, macadamia
nuts, Kona coffee, flowers and nursery products. Agriculture is also an
industry in development. Sales of the State's diversified agriculture totalled
$262 million in 1993, a 1.1% decrease from 1992's total.
Hawaii's county governments (the only units of local government in the
State) may issue government obligation bonds. The counties, however, have
preferred not to finance capital investment with debt. As a result, relatively
minimal amounts are charged to the county general obligation debt limit, which
restricts local government indebtedness to not more than 15% of net assessed
value of real property.
FEES AND EXPENSES
INVESTMENT ADVISER
As of January 31, 1996, the Portfolio had net assets of $ . For
the fiscal year ended January 31, 1996, the Portfolio paid BMR advisory fees
of $ (equivalent to % of the Portfolio's average daily net assets
for such period). For the period from the Portfolio's start of business, March
2, 1994, to January 31, 1995, absent a fee reduction, the Portfolio would have
paid BMR advisory fees of $13,231 (equivalent to 0.16% (annualized) of the
Portfolio's average daily net assets for such period). To enhance the net
income of the Portfolio, BMR made a reduction of the full amount of its
advisory fee and BMR was allocated expenses related to the operation of the
Portfolio in the amount of $13,430. The Portfolio's Investment Advisory
Agreement with BMR is dated February 25, 1994 and remains in effect until
February 28, 1997. The Agreement may be continued as described under
"Investment Adviser and Administrator" in Part I of this SAI.
ADMINISTRATOR
As stated under "Investment Adviser and Administrator" in Part I of this
SAI, the Administrator currently receives no compensation for providing
administrative services to the Fund. For the fiscal year ended January 31,
1996, and for the period from the start of business, March 14, 1994, to
January 31, 1995, $ and $12,533, respectively of the Fund's operating
expenses were allocated to the Administrator.
SERVICE PLAN
Prior to February 1, 1996, the Fund made sales commission, distribution
fee and service fee payments pursuant to a Distribution Plan. For the fiscal
year ended January 31, 1996, the Fund accrued sales commission payments under
that Plan aggregating $ , of which $ was paid to the Principal
Underwriter. The Principal Underwriter paid such amount as sales commissions
to Authorized Firms. During such period no contingent deferred sales charges
were paid to the Principal Underwriter. As at January 31, 1996, the
outstanding Uncovered Distribution Charges of the Principal Underwriter
calculated under the Distribution Plan amounted to approximately $
(which amount was equivalent to % of the Fund's net assets on such day). For
the fiscal year ended January 31, 1996, the Fund accrued service fee payments
under the Distribution Plan aggregating $ , of which $ was paid to the
Principal Underwriter. The Principal Underwriter paid such amount as service
fee payments to Authorized Firms.
PRINCIPAL UNDERWRITER
For the fiscal year ended January 31, 1996, the Fund paid the Principal
Underwriter $ for repurchase transactions handled (being $2.50 for each
such transaction).
CUSTODIAN
For the fiscal year ended January 31, 1996, the Fund paid IBT $ and
the Portfolio paid IBT $ .
BROKERAGE
For the fiscal year ended January 31, 1996 and for the period from the
start of business, March 2, 1994, to January 31, 1995, 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.) During the fiscal year ended January 31, 1996, the
noninterested Trustees of the Trust and the Portfolio received the following
compensation in their capacities as Trustees from the Fund and the Portfolio,
and, during 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
NAME ------------ FROM PORTFOLIO AND FUND COMPLEX
- ---- FROM FUND -------------- ----------------
Donald R. Dwight ........ --0-- $33(2) $135,000(4)
Samuel L. Hayes, III .... --0-- 32(3) 150,000(5)
Norton H. Reamer ........ --0-- 31 135,000
John L. Thorndike ....... --0-- 32 140,000
Jack L. Treynor ......... --0-- 34 140,000
- ----------
(1) The Eaton Vance fund complex consists of 219 registered investment
companies or series thereof.
(2) Includes $11 of deferred compensation.
(3) Includes $15 of deferred compensation.
(4) Includes $35,000 of deferred compensation.
(5) Includes $33,750 of deferred compensation.
PRINCIPAL UNDERWRITER
Shares of the Fund may be continuously purchased at the public offering
price through certain Authorized Firms which have agreements with the
Principal Underwriter. The Principal Underwriter is a wholly-owned subsidiary
of Eaton Vance.
The public offering price is the net asset value next computed after
receipt of the order, plus, where applicable, a variable percentage (sales
charge) depending upon the amount of purchase as indicated by the sales charge
table set forth in the Fund's current Prospectus (see "How to Buy Fund
Shares"). Such table is applicable to purchases of the Fund alone or in
combination with purchases of the other funds offered by the Principal
Underwriter, made at a single time by (i) an individual, or an individual, his
spouse and their children under the age of twenty-one, purchasing shares for
his or their own account, and (ii) a trustee or other fiduciary purchasing
shares for a single trust estate or a single fiduciary account.
The table is also presently applicable to (1) purchases of Fund shares,
alone or in combination with purchases of any of the other funds offered by
the Principal Underwriter, through one dealer aggregating $50,000 or more made
by any of the persons enumerated above within a thirteen-month period starting
with the first purchase pursuant to a written Statement of Intention, in the
form provided by the Principal Underwriter, which includes provisions for a
price adjustment depending upon the amount actually purchased within such
period (a purchase not made pursuant to such Statement may be included
thereunder if the Statement is filed within 90 days of such purchase); or (2)
purchases of the Fund pursuant to the Right of Accumulation and declared as
such at the time of purchase.
Subject to the applicable provisions of the 1940 Act, the Fund may issue
shares at net asset value in the event that an investment company (whether a
regulated or private investment company or a personal holding company) is
merged or consolidated with or acquired by the Fund. Normally no sales charges
will be paid in connection with an exchange of Fund shares for the assets of
such investment company. Shares may be sold at net asset value to any officer,
director, trustee, general partner or employee of the Fund, the Portfolio or
any investment company for which Eaton Vance or BMR acts as investment
adviser, any investment advisory, agency, custodial or trust account managed
or administered by Eaton Vance or by any parent, subsidiary or other affiliate
of Eaton Vance, or any officer, director or employee of any parent, subsidiary
or other affiliate of Eaton Vance. The terms "officer," "director," "trustee,"
"general partner" or "employee" as used in this paragraph include any such
person's spouse and minor children, and also retired officers, directors,
trustees, general partners and employees and their spouses and minor children.
Shares of the Fund may also be sold at net asset value to registered
representatives and employees of Authorized Firms and to the spouses and
children under the age of 21 and beneficial accounts of such persons.
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. The
Principal Underwriter allows Authorized Firms discounts from the applicable
public offering price which are alike for all 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. See "How to Buy Fund Shares" in the Fund's current Prospectus
for the discount allowed to Authorized Firms on the sale of Fund shares.
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.
The Fund has authorized the Principal Underwriter to act as its agent in
repurchasing shares at the rate of $2.50 for each repurchase transaction
handled by the Principal Underwriter. The Principal Underwriter estimates that
the expenses incurred by it in acting as repurchase agent for the Fund will
exceed the amounts paid therefor by the Fund. For the amount paid by the Fund
to the Principal Underwriter for acting as repurchase agent, see "Fees and
Expenses" in this Part II.
SERVICE PLAN
The Trust on behalf of the Fund has adopted 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. (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 voting securities of the Fund. 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 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 by
the Fund under the Plan, see "Fees and Expenses" in this Part II.
PERFORMANCE INFORMATION
The table below indicates the total return (capital changes plus
reinvestment of all distributions) on a hypothetical investment of $1,000 in
the Fund from March 2, 1994 through January 31, 1996. The total return for the
period prior to the Fund's commencement of operations on March 14, 1994
reflects the Portfolio's total return adjusted to reflect any applicable Fund
sales charge. The total return for such prior period has not been adjusted to
reflect the Fund's service fees and certain other expenses. The performance
(including the yield and total return rate figures set forth below) reflects
the Fund's sales charge effective February 1, 1996.
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT
TOTAL RETURN TOTAL RETURN
EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
INVESTMENT INVESTMENT AMOUNT OF VALUE OF INVESTMENT ---------------------- ----------------------
PERIOD DATE INVESTMENT<F1> ON 1/31/95 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
------ ----- ------------ -------- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of the Fund<F2> 3/2/94 $ $ % % % %
1 Year Ended
1/31/96<F1> 1/31/95 $ $ % % % %
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 orginal cost.
<FN>
- ----------
<F1> Initial investment less the maximum sales charge of 3.75%. This sales charge is effective February 1, 1996. Prior
thereto, Fund shares redeemed within one year of their purchase are subject to a contingent deferred sales charge of 1%.
<F2> If a portion of the Portfolio's and/or the Fund's expenses had not been subsidized, the Fund would have had lower returns.
</FN>
</TABLE>
For the thirty-day period ended January 31, 1996, the yield of the Fund
was %. The yield required of a taxable security that would produce an
after-tax yield equivalent to that earned by the Fund of % would be %,
assuming a combined federal and State tax rate of %. If a portion of the
Portfolio's and the Fund's expenses had not been allocated to the Investment
Adviser and the Administrator, respectively, the Fund would have had a lower
yield.
The Fund's distribution rate (calculated on January 31, 1996 and based on
the Fund's monthly distribution paid January 23, 1996) was %, and the
Fund's effective distribution rate (calculated on the same date and based on
the same monthly distribution) was %. If a portion of the Portfolio's and
the Fund's expenses had not been allocated to the Investment Adviser and the
Administrator, respectively, the Fund would have had a lower distribution rate
and effective distribution rate.
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 April 30, 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 April 30, 1996, the following shareholders owned beneficially and of record
the percentages of outstanding shares of the Fund indicated after their names:
PaineWebber for the Benefit of : HUI500, Wailuku, HI ( %); Randall D.J. Yee
DDs and Elizabeth A.C. Yee JTTEN, Pukalani, Hi ( %); Donna H. Ueki, Kahului,
HI ( %); Jean F. Nakamoto trustee under the Jean F. Nakamoto REV LIV dated
11-30-90, Kahului, HI ( %) and Gayle Namamoto and Riki Nakamoto trustees for
the trust dated 6-11-92, Aiea, HI( %). 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
The Fund changed its name from EV Classic Hawaii Tax Free Fund to EV
Classic Hawaii Municipals Fund on December 15, 1995 and to EV Traditional
Hawaii Municipals Fund on February 1, 1996.
FINANCIAL STATEMENTS
Registrant incorporates by reference the audited financial information for
the Fund and the Portfolio contained in the Funds' shareholder report for the
fiscal year ended January 31, 1995 as previously filed electronically with the
Securities and Exchange Commission (Accession Number 0000950135-95-000874).
<PAGE>
TAX EQUIVALENT YIELD TABLE
The table below gives the approximate yield a taxable security must earn
at various income brackets to produce after-tax yields equivalent to those of
tax exempt bonds yielding from 4% to 7% under the regular federal income tax
and the Hawaii State individual income tax laws and tax rates applicable for
1996.
<TABLE>
<CAPTION>
A FEDERAL AND HAWAII STATE
COMBINED TAX EXEMPT YIELD OF:
SINGLE RETURN JOINT RETURN FEDERAL AND 4% 4.5% 5% 5.5% 6% 6.5% 7%
- ------------------------- --------------------- HI STATE --------------------------------------------------------------
(TAXABLE INCOME<F1>) TAX BRACKET<F2> IS EQUIVALENT TO A FULLY TAXABLE YIELD OF:
- ------------------------------------------------ ---------------- --------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Up to $ 24,000 Up to $ 40,100 23.50% 5.23% 5.88% 6.54% 7.19% 7.84% 8.50% 9.15%
$ 24,001-$ 58,150 $ 40,101-$ 96,900 35.20 6.17 6.94 7.72 8.49 9.26 10.03 10.80
$ 58,151-$121,300 $ 96,901-$147,700 37.90 6.44 7.25 8.05 8.86 9.66 10.47 11.27
$121,301-$263,750 $147,701-$263,750 42.40 6.94 7.81 8.68 9.55 10.42 11.28 12.15
Over $263,750 Over $263,750 45.64 7.36 8.28 9.20 10.12 11.04 11.96 12.88
<FN>
<F1> Net amount subject to the federal and Hawaii individual income tax after deductions and exemptions.
<F2> The first tax bracket is calculated using the highest Hawaii tax rate within the bracket. Taxpayers with taxable
income within this bracket may have a lower combined bracket and taxable equivalent yield than indicated above. The
combined tax brackets assume that Hawaii taxes are itemized deductions for federal income tax purposes. Investors
who do not itemize deductions on their federal income tax return will have a higher combined bracket and higher
taxable equivalent yield than those indicated above. The applicable federal tax rates within the brackets set forth
above are 15%, 28%, 31%, 36% and 39.6% over the same ranges of income. The assumed Hawaii State income tax rate is 10%.
</FN>
</TABLE>
Note: The federal income tax portion of above-indicated combined income tax
brackets does not take into account the effect of a reduction in the
deductibility of itemized deductions (including Hawaii State income taxes) for
taxpayers with adjusted gross income in excess of $117,950. The tax brackets
also do not show the effects of phaseout of personal exemptions for single
filers with adjusted gross income in excess of $117,950 and joint filers
adjusted gross income in excess of $176,950. The effective tax brackets and
equivalent taxable yields of such taxpayers will be higher than those
indicated above.
Yields shown are for illustration purposes only and are not meant to represent
the Fund's actual yield. No assurance can be given that the Fund will achieve
any specific tax exempt yield. While it is expected that the Portfolio will
invest principally in obligations the interest from which is exempt from the
regular federal income tax and Hawaii individual income taxes, other income
received by the Portfolio and allocated to the Fund may be taxable. The table
does not take into account state or local taxes, if any, payable on Fund
distributions except for Hawaii individual income taxes. 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
credit that may be available.
The information set forth above is as of the date of this Statement of
Additional Information. Subsequent tax law changes could result in prospective
or retroactive changes in the tax brackets, tax rates, and tax equivalent
yields set forth above. Investors should consult their tax adviser for
additional information.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EV TRADITIONAL KANSAS MUNICIPALS
FUND. The investment objective of the Fund is to provide current income exempt
from regular federal income tax and Kansas State personal income taxes. The
Fund currently seeks to achieve its investment objective by investing its
assets in the Kansas Municipals Portfolio (the "Portfolio").
RISKS OF CONCENTRATION
The following information as to certain Kansas considerations is given to
investors in view of the Portfolio's policy of concentrating its investments
in Kansas issuers. Such information supplements the information in the
Prospectus. It is derived from sources that are generally available to
investors and is believed to be accurate. Such information constitutes only a
brief summary, does not purport to be a complete description and is based on
information from official statements relating to securities offerings of
Kansas issuers. Neither the Trust nor the Portfolio has independently verified
this information.
Traditionally a farm-based economy, recent growth in the trade, services
and manufacturing sectors has decreased Kansas' strong dependence on
agriculture. At present, the Kansas economy has four major economic sectors
(wholesale and retail trade, manufacturing, services, and government) which
employ from 16 to 24 percent of the labor force. Agriculture employed an
estimated 4.7 percent of the work force in 1994.
Primary sources of state revenue are a 4.9% sales tax, a corporate income
tax between 4% and 7.35% and an individual income tax between 3.5% and 7.75%.
In 1994, the sales tax constituted 31% of taxes collected. The largest
percentage of expenditures from all state funds are in the areas of education
and research (public schools, state universities, state board of education)
and human resources (assistance programs). General property taxes generate a
large portion of local tax revenue. Local sales and use taxes have provided an
increased amount of revenue, from $30 million in 1980 to $307.9 million in
1994, as voters in more cities and counties have elected to impose the tax or
to raise the tax rate to the maximum permitted by state law.
The state's 1994 General Fund showed total revenues of $3.2 billion
against total expenditures of $2.5 billion. In 1990, the Kansas legislature
approved House Bill 2867 which established ending balances as a mechanism to
hold state expenditure growth to the level of revenue growth. House Bill 2867
requires that in each fiscal year certain funds be transferred from the state
General Fund to the newly created cash operating reserve fund. The reserve
fund is designed to be available in the event that revenues in the General
Fund are insufficient to meet budgeted expenditures. House Bill 2867 also
provides that state General Fund balances in addition to the cash operating
reserve fund must be one percent of expenditures in fiscal year 1993, two
percent of expenditures in fiscal year 1994 and 2.5 percent in 1995 and each
fiscal year thereafter.
FEES AND EXPENSES
INVESTMENT ADVISER
As of January 31, 1996, the Portfolio had net assets of $ . For
the fiscal year ended January 31, 1996, the Portfolio paid BMR advisory fees
of $ (equivalent to % of the Portfolio's average daily net assets
for scuh period). For the period from the Portfolio's start of business,
March 2, 1994, to January 31, 1995, absent a fee reduction, the Portfolio
would have paid BMR advisory fees of $7,589 (equivalent to 0.16% (annualized)
of the Portfolio's average daily net assets for such period). To enhance the
net income of the Portfolio, BMR made a reduction of the full amount of its
advisory fee and BMR was allocated expenses related to the operation of the
Portfolio in the amount of $12,847. The Portfolio's Investment Advisory
Agreement with BMR is dated February 25, 1994 and remains in effect until
February 28, 1997. The Agreement may be continued as described under
"Investment Adviser and Administrator" in Part I of this SAI.
ADMINISTRATOR
As stated under "Investment Adviser and Administrator" in Part I of this
SAI, the Administrator currently receives no compensation for providing
administrative services to the Fund. For the period from the start of
business, March 3, 1993, to January 31, 1995, $13,344 of the Fund's operating
expenses were allocated to the Administrator.
SERVICE PLAN
Prior to February 1, 1996, the Fund made sales commission, distribution
fee and service fee payments pursuant to a Distribution Plan. For the fiscal
year ended January 31, 1996, the Fund accrued sales commission payments under
that Plan aggregating $ , of which $ was paid to the Principal
Underwriter. The Principal Underwriter paid such amount as sales commissions
to Authorized Firms. During such period no contingent deferred sales charges
were paid to the Principal Underwriter. As at January 31, 1996, the
outstanding Uncovered Distribution Charges of the Principal Underwriter
calculated under the Distribution Plan amounted to $ (which amount was
equivalent to % of the Fund's net assets on such day). For the fiscal year
ended January 31, 1996, the Fund accrued service fee payments under the
Distribution Plan aggregating $ , of which $ was paid to the
Principal Underwriter. The Principal Underwriter paid such amount as service
fee payments to Authorized Firms.
PRINCIPAL UNDERWRITER
For the fiscal year ended January 31, 1996, the Fund paid the Principal
Underwriter $ for repurchase transactions handled (being $2.50 for each
such transaction).
CUSTODIAN
For the fiscal year ended January 31, 1996, the Fund paid IBT $ and
the Portfolio paid IBT $ .
BROKERAGE
For the fiscal year ended January 31, 1996 and for the period from the
start of business, March 2, 1994, to January 31, 1995, 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 of the Portfolio who
are members of the Eaton Vance organization receive no compensation from the
Trust or the Portfolio.) During the fiscal year ended January 31, 1995, the
noninterested Trustees of the Trust and the Portfolio earned the following
compensation in their capacities as Trustees from the Fund and the Portfolio,
and, during the first quarter ended March 31, 1995, earned the following
compensation in their capacities as Trustees of the other funds in the Eaton
Vance fund complex:(1)
AGGREGATE AGGREGATE TOTAL COMPENSATION
COMPENSATION COMPENSATION FROM TRUST
NAME ------------ FROM PORTFOLIO AND FUND COMPLEX
- ---- FROM FUND -------------- ----------------
Donald R. Dwight ........ --0-- $33(2) $135,000(4)
Samuel L. Hayes, III .... --0-- $32(3) 150,000(5)
Norton H. Reamer ........ --0-- 31 135,000
John L. Thorndike ....... --0-- 32 140,000
Jack L. Treynor ......... --0-- 34 140,000
- ----------
(1) The Eaton Vance fund complex consists of 219 registered investment
companies or series thereof.
(2) Includes $11 of deferred compensation.
(3) Includes $15 of deferred compensation.
(4) Includes $35,000 of deferred compensation.
(5) Includes $33,750 of deferred compensation.
PRINCIPAL UNDERWRITER
Shares of the Fund may be continuously purchased at the public offering
price through certain Authorized Firms which have agreements with the
Principal Underwriter. The Principal Underwriter is a wholly-owned subsidiary
of Eaton Vance.
The public offering price is the net asset value next computed after
receipt of the order, plus, where applicable, a variable percentage (sales
charge) depending upon the amount of purchase as indicated by the sales charge
table set forth in the Fund's current Prospectus (see "How to Buy Fund
Shares"). Such table is applicable to purchases of the Fund alone or in
combination with purchases of the other funds offered by the Principal
Underwriter, made at a single time by (i) an individual, or an individual, his
spouse and their children under the age of twenty-one, purchasing shares for
his or their own account, and (ii) a trustee or other fiduciary purchasing
shares for a single trust estate or a single fiduciary account.
The table is also presently applicable to (1) purchases of Fund shares,
alone or in combination with purchases of any of the other funds offered by
the Principal Underwriter, through one dealer aggregating $50,000 or more made
by any of the persons enumerated above within a thirteen-month period starting
with the first purchase pursuant to a written Statement of Intention, in the
form provided by the Principal Underwriter, which includes provisions for a
price adjustment depending upon the amount actually purchased within such
period (a purchase not made pursuant to such Statement may be included
thereunder if the Statement is filed within 90 days of such purchase); or (2)
purchases of the Fund pursuant to the Right of Accumulation and declared as
such at the time of purchase.
Subject to the applicable provisions of the 1940 Act, the Fund may issue
shares at net asset value in the event that an investment company (whether a
regulated or private investment company or a personal holding company) is
merged or consolidated with or acquired by the Fund. Normally no sales charges
will be paid in connection with an exchange of Fund shares for the assets of
such investment company. Shares may be sold at net asset value to any officer,
director, trustee, general partner or employee of the Fund, the Portfolio or
any investment company for which Eaton Vance or BMR acts as investment
adviser, any investment advisory, agency, custodial or trust account managed
or administered by Eaton Vance or by any parent, subsidiary or other affiliate
of Eaton Vance, or any officer, director or employee of any parent, subsidiary
or other affiliate of Eaton Vance. The terms "officer," "director," "trustee,"
"general partner" or "employee" as used in this paragraph include any such
person's spouse and minor children, and also retired officers, directors,
trustees, general partners and employees and their spouses and minor children.
Shares of the Fund may also be sold at net asset value to registered
representatives and employees of Authorized Firms and to the spouses and
children under the age of 21 and beneficial accounts of such persons.
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. The
Principal Underwriter allows Authorized Firms discounts from the applicable
public offering price which are alike for all 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. See "How to Buy Fund Shares" in the Fund's current Prospectus
for the discount allowed to Authorized Firms on the sale of Fund shares.
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.
The Fund has authorized the Principal Underwriter to act as its agent in
repurchasing shares at the rate of $2.50 for each repurchase transaction
handled by the Principal Underwriter. The Principal Underwriter estimates that
the expenses incurred by it in acting as repurchase agent for the Fund will
exceed the amounts paid therefor by the Fund. For the amount paid by the Fund
to the Principal Underwriter for acting as repurchase agent, see "Fees and
Expenses" in this Part II.
SERVICE PLAN
The Trust on behalf of the Fund has adopted 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. (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 voting securities of the Fund. 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 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 by
the Fund under the Plan, see "Fees and Expenses" in this Part II.
ADDITIONAL OFFICER INFORMATION
In addition to the officers of the Portfolio listed under "Officers of the
Trust and the Portfolio" in Part I of this SAI, Nicole Anderes (34) is a Vice
President of the Portfolio. Ms. Anderes has served as a Vice President of the
Portfolio since June 19, 1995. Ms. Anderes has been a Vice President of BMR
and Eaton Vance since 1994 and is an officer of various investment companies
managed by Eaton Vance or BMR. Prior to joining Eaton Vance, Ms. Anderes was
Vice President and portfolio manager, Lazard Freres Asset Management (1992-
1994) and Vice President and Manager -- Municipal Research, Roosevelt & Cross
(1987-1992).
PERFORMANCE INFORMATION
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 life of the Fund from March 2, 1994 through January 31,
1996. The total return for the period prior to the Fund's commencement of
operations on March 3, 1994 reflects the Portfolio's total return adjusted to
reflect any applicable Fund sales charge. The total return for such prior
period has not been adjusted to reflect the Fund's service fees and certain
other expenses. The performance (including the yield and distribution rate
figures set forth below) reflects the Fund's sales charge effective February
1, 1996.
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT
TOTAL RETURN TOTAL RETURN
VALUE OF EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
INVESTMENT INVESTMENT AMOUNT OF INVESTMENT --------------------------- --------------------------
PERIOD DATE** INVESTMENT* ON 1/31/95 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------- ---------- ----------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of the Fund*** 3/2/94 $ $ %** % % %
1 Year Ended 1/31/96+ 1/31/95 $962.24 $1,025.94 6.62% 6.62% 2.59% 2.59%
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 orginal cost.
<FN>
- ----------
* Initial investment less the maximum sales charge of 3.75%. This sales charge is effective February 1, 1996. Prior thereto, Fund
shares redeemed within one year of their purchase are subject to a contingent deferred sales charge of 1%.
** Investment operations began on March 2, 1994.
*** If a portion of the Portfolio's and/or the Fund's expenses had not been subsidized, the Fund would have had lower returns.
</FN>
</TABLE>
For the thirty-day period ended January 31, 1996, the yield of the Fund
was %. The yield required of a taxable security that would produce an
after-tax yield equivalent to that earned by the Fund of % would be %,
assuming a combined federal and State tax rate of %. If a portion of the
Portfolio's and the Fund's expenses had not been allocated to the Investment
Adviser and the Administrator, respectively, the Fund would have had a lower
yield.
The Fund's distribution rate (calculated on January 31, 1996 and based on
the Fund's monthly distribution paid January 23, 1996) was %, and the
Fund's effective distribution rate (calculated on the same date and based on
the same monthly distribution) was %. If a portion of the Portfolio's and
the Fund's expenses had not been allocated to the Investment Adviser and the
Administrator, respectively, the Fund would have had a lower distribution rate
and effective distribution rate.
%95etc was:
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 April 30, 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 April 30, 1996, the following shareholders owned of record the percentages
of shares indicated after their names: Glendora Brindle, Trustee of Glendora
Brindle Living Trust under Agreement dated June 2, 1992, Fredonia, KS ( %),
Thomas E. Niehaus & Karl K. Niehaus, JTWROS, Olathe, KS ( %), M. Earline
Foster, Independence, KS ( %), Wanda M. Sloan, Trustee of Wanda M. Sloan
Trust under Agreement dated February 8, 1990, Neodesha, KS ( %), Lee L. Hoyt
& Inez L. Hoyt, JTWROS, Longton, KS ( %) and John M. Yoger, Trustee under
Agreement dated October 7, 1992 of John L. Yoger Revocable Living Trust,
Girard, KS ( %). 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
The Fund changed its name from EV Classic Kansas Tax Free Fund to EV
Classic Kansas Municipals Fund on December 15, 1995 and to EV Traditional
Kansas Municipals Fund on February 1, 1996.
FINANCIAL STATEMENTS
Registrant incorporates by reference the audited financial information for
the Fund and the Portfolio contained in the Funds' shareholder report for the
fiscal year ended January 31, 1995 as previously filed electronically with the
Securities and Exchange Commission (Accession Number 0000950135-95-000874).
TAX EQUIVALENT YIELD TABLE
The tables below give the approximate yield a taxable security must earn
at various income brackets to produce after-tax yields equivalent to those of
tax-exempt bonds yielding from 4% to 7% under the regular federal income tax
and Kansas State income tax laws applicable for 1996.
<TABLE>
<CAPTION>
A FEDERAL AND KANSAS STATE
COMBINED TAX EXEMPT YIELD OF:
JOINT RETURN FEDERAL AND 4% 4.5% 5% 5.5% 6% 6.5% 7%
- ------------------- KS STATE -------------------------------------------------
TAXABLE INCOME<F1> TAX BRACKET<F2> IS EQUIVALENT TO A FULLY TAXABLE YIELD OF:
- ------------------- ----------- -------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Up to $ 24,000 22.86% 5.19% 5.83% 6.48% 7.13% 7.78% 8.43% 9.07%
$ 24,001 - $ 58,150 34.80 6.14 6.90 7.67 8.44 9.20 9.97 10.74
$ 58,151 - $121,300 37.52 6.40 7.20 8.00 8.80 9.60 10.40 11.20
$121,301 - $263,750 42.05 6.90 7.77 8.63 9.49 10.35 11.22 12.08
Over $263,750 45.31 7.31 8.23 9.14 10.06 10.97 11.88 12.80
<CAPTION>
A FEDERAL AND KANSAS STATE
COMBINED TAX EXEMPT YIELD OF:
JOINT RETURN FEDERAL AND 4% 4.5% 5% 5.5% 6% 6.5% 7%
- ------------------- KS STATE -------------------------------------------------
TAXABLE INCOME<F1> TAX BRACKET<F2> IS EQUIVALENT TO A FULLY TAXABLE YIELD OF:
- ------------------- ----------- -------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Up to $ 40,100 23.93% 5.26% 5.92% 6.57% 7.23% 7.89% 8.54% 9.20%
$ 40,101 - $ 96,900 35.74 6.22 7.00 7.78 8.56 9.34 10.12 10.89
$ 96,901 - $147,700 38.42 6.50 7.31 8.12 8.93 9.74 10.55 11.37
$147,701 - $263,750 42.88 7.00 7.88 8.75 9.63 10.50 11.38 12.25
Over $263,750 46.09 7.42 8.35 9.28 10.20 11.13 12.06 12.99
<FN>
<F1> Net amount subject to federal and Kansas personal income tax after deductions and exemptions.
<F2> The combined tax rates are calculated using the highest State income tax rate for each federal income bracket shown
and a local intangibles rate of 3.00%. An investor with taxable income below the highest dollar amount in the lowest
bracket and/or residing in a county, city or township imposing a lower intangibles tax rate may have a lower combined
tax rate and taxable equivalent yield than shown above. The applicable federal tax rates within the brackets set forth
above are 15%, 28%, 31%, 36% and 39.6% over the same ranges of income.
</FN>
</TABLE>
The above-indicated combined federal and Kansas State income brackets assume
that State and local intangibles income taxes are itemized deductions for
federal income tax purposes and do not take into account the effect of a
reduction in the deductibility of itemized deductions (including Kansas State
and local intangibles income taxes) for taxpayers with adjusted gross income
in excess of $117,950, nor do they reflect phaseout of personal exemptions for
single and joint filers with adjusted gross income in excess of $117,950 and
$176,950, respectively. The effective combined tax brackets and equivalent
taxable yields of such taxpayers will be higher than those indicated above.
Note: Yields shown are for illustration purposes only and are not meant to
represent the Fund's actual yield. No assurance can be given that the Fund
will achieve any specific tax exempt yield. While it is expected that the
Portfolio will invest principally in obligations, the interest from which is
exempt from the regular federal income tax and Kansas personal income taxes,
other income received by the Portfolio and allocated to the Fund may be
taxable. The table does not take into account state or local taxes, if any,
payable on Fund distributions except for Kansas personal income taxes. It
should also be noted that the interest earned on certain "private activity
bonds" issued after August 7, 1986, while exempt from the regular federal
income tax, is treated as a tax preference item which could subject the
recipient to the federal alternative minimum tax. The illustrations assume
that the federal alternative minimum tax is not applicable and do not take
into account any tax credits that may be available.
The information set forth above is as of the date of this Statement of
Additional Information. Subsequent tax law changes could result in prospective
or retroactive changes in the tax brackets, tax rates, and tax equivalent
yields set forth above. Investors should consult their tax adviser for
additional information.
<PAGE>
EV TRADITIONAL
MUNICIPAL
FUNDS
STATEMENT OF ADDITIONAL INFORMATION
JUNE 1, 1996
EV TRADITIONAL FLORIDA INSURED MUNICIPALS FUND
EV TRADITIONAL HAWAII MUNICIPALS FUND
EV TRADITIONAL KANSAS MUNICIPALS FUND
EV TRADITIONAL
MUNICIPAL FUNDS
24 FEDERAL STREET
BOSTON, MA 02110
PORTFOLIO INVESTMENT ADVISER
Boston Management and Research, 24 Federal Street, Boston, MA 02110
FUND ADMINISTRATOR
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, BOS725, P.O. Box 1559, Boston, MA 02104
(800) 262-1122
AUDITORS
Deloitte &Touche LLP, 125 Summer Street, Boston, MA 02110
T-TFC6/1SAI
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
May 20, 1996
EV MARATHON HIGH YIELD MUNICIPALS FUND
24 Federal Street
Boston, Massachusetts 02110
(800) 225-6265
This Statement of Additional Information consists of two parts. Part I
provides information about EV Marathon High Yield Municipals Fund (the "Fund")
and certain other series of Eaton Vance Municipals Trust II (the "Trust"). As
described in the Prospectus, the Fund invests its assets in High Yield
Municipals Portfolio (the "Portfolio"), a separate registered investment
company with the same investment objective and policies as the Fund. Part II
provides information solely about the Fund and the Portfolio. Where
appropriate, Part I includes cross-references to the relevant sections of Part
II. This Statement of Additional Information is sometimes referred to as the
"SAI".
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
PART I
<S> <C>
Additional Information about Investment Policies ............................................................ 1
Investment Restrictions ..................................................................................... 8
Trustees and Officers ....................................................................................... 9
Investment Adviser and Administrator ........................................................................ 10
Custodian ................................................................................................... 12
Service for Withdrawal ...................................................................................... 13
Determination of Net Asset Value ............................................................................ 13
Investment Performance ...................................................................................... 14
Taxes ....................................................................................................... 15
Portfolio Security Transactions ............................................................................. 17
Other Information ........................................................................................... 19
Independent Certified Public Accountants .................................................................... 20
Appendix .................................................................................................... 21
PART II
Fees and Expenses ........................................................................................... a-1
Additional Officer Information .............................................................................. a-2
Principal Underwriter ....................................................................................... a-2
Distribution Plan ........................................................................................... a-2
Performance Information ..................................................................................... a-4
Control Persons and Principal Holders of Securities ......................................................... a-5
Tax Equivalent Yield Table .................................................................................. a-6
Financial Statements ........................................................................................ a-7
</TABLE>
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 MAY 20, 1996, AS SUPPLEMENTED FROM
TIME TO TIME. THIS STATEMENT OF ADDITIONAL INFORMATION SHOULD BE READ IN
CONJUNCTION WITH SUCH PROSPECTUS, A COPY OF WHICH MAY BE OBTAINED WITHOUT
CHARGE BY CONTACTING EATON VANCE DISTRIBUTORS, INC. (THE "PRINCIPAL
UNDERWRITER") (SEE BACK COVER FOR ADDRESS AND PHONE NUMBER).
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
May 20, 1996
EV TRADITIONAL HIGH YIELD MUNICIPALS FUND
24 Federal Street
Boston, Massachusetts 02110
(800) 225-6265
This Statement of Additional Information consists of two parts. Part I
provides information about EV Traditional High Yield Municipals Fund (the
"Fund") and certain other series of Eaton Vance Municipals Trust II (the
"Trust"). As described in the Prospectus, the Fund invests its assets in High
Yield Municipals Portfolio (the "Portfolio"), a separate registered investment
company with the same investment objective and policies as the Fund. Part II
provides information solely about the Fund and the Portfolio. Where
appropriate, Part I includes cross-references to the relevant sections of Part
II. This Statement of Additional Information is sometimes referred to as the
"SAI".
<TABLE>
TABLE OF CONTENTS
<CAPTION>
Page
PART I
<S> <C>
Additional Information about Investment Policies ............................................................ 1
Investment Restrictions ..................................................................................... 8
Trustees and Officers ....................................................................................... 9
Investment Adviser and Administrator ........................................................................ 10
Custodian ................................................................................................... 12
Service for Withdrawal ...................................................................................... 13
Determination of Net Asset Value ............................................................................ 13
Investment Performance ...................................................................................... 14
Taxes ....................................................................................................... 15
Portfolio Security Transactions ............................................................................. 17
Other Information ........................................................................................... 19
Independent Certified Public Accountants .................................................................... 20
Appendix .................................................................................................... 21
PART II
Fees and Expenses ........................................................................................... a-1
Additional Officer Information .............................................................................. a-2
Services for Accumulation ................................................................................... a-2
Principal Underwriter ....................................................................................... a-3
Service Plan ................................................................................................ a-4
Performance Information ..................................................................................... a-4
Control Persons and Principal Holders of Securities ......................................................... a-5
Tax Equivalent Yield Table .................................................................................. a-6
Financial Statements ........................................................................................ a-7
</TABLE>
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 MAY 20, 1996, AS SUPPLEMENTED FROM
TIME TO TIME. THIS STATEMENT OF ADDITIONAL INFORMATION SHOULD BE READ IN
CONJUNCTION WITH SUCH PROSPECTUS, A COPY OF WHICH MAY BE OBTAINED WITHOUT
CHARGE BY CONTACTING EATON VANCE DISTRIBUTORS, INC. (THE "PRINCIPAL
UNDERWRITER") (SEE BACK COVER FOR ADDRESS AND PHONE NUMBER).
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EV MARATHON HIGH YIELD MUNICIPALS
FUND. On May 15, 1995, the Fund became a series of the Trust. THE FUND'S
INVESTMENT OBJECTIVE IS TO PROVIDE HIGH CURRENT INCOME EXEMPT FROM REGULAR
FEDERAL INCOME TAX. The Fund currently seeks to meet its investment objective
by investing its assets in High Yield Municipals Portfolio, a separate
registered investment company which invests primarily in below investment
grade municipal obligations. The Fund may not be appropriate for investors who
cannot assume the greater risk of capital depreciation or loss inherent in
seeking higher tax-exempt yields.
FEES AND EXPENSES
INVESTMENT ADVISER
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 remains in effect until February 28, 1997. The Agreement may be continued
as described under "Investment Adviser and Administrator" in Part I of this
SAI.
ADMINISTRATOR
As stated under "Investment Adviser and Administrator" Part I of this SAI,
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, $24,811 of the Fund's operating
expenses were allocated to the Administrator.
DISTRIBUTION PLAN
During the period from the start of business, August 7, 1995, to January
31, 1996, the Principal Underwriter paid to Authorized Firms sales commissions
of $1,269,869 on sales of shares of the Fund. During the same period, the Fund
made sales commission payments under the Plan to the Principal Underwriter
aggregating $41,402 and the Principal Underwriter received $4,000 in
contingent deferred sales charges ("CDSCs") imposed on early redeeming
shareholders. These sales commissions and CDSC payments reduced Uncovered
Distribution Charges under the Plan. As at January 31, 1996, the outstanding
Uncovered Distribution charges of the Principal Underwriter calculated under
the Plan amounted to approximately $1,513,000 (which amount was equivalent to
3.5% of the Fund's net assets on such day). The Fund expects to begin accruing
for its service fee payments during the quarter ending September 30, 1996.
PRINCIPAL UNDERWRITER
The Fund paid the Principal Underwriter $80.00 for the period from the
start of business, August 7, 1995, to January 31, 1996 (being $2.50 for each
repurchase transaction handled by the Principal Underwriter).
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 Trust
or the Portfolio.) During the fiscal year ended January 31, 1996, the
noninterested Trustees of the Trust and the Portfolio received 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):
<PAGE>
AGGREGATE AGGREGATE TOTAL COMPENSATION
COMPENSATION COMPENSATION FROM TRUST AND
NAME FROM FUND FROM PORTFOLIO FUND COMPLEX
---- ------------ -------------- -------------
Donald R. Dwight .............. $8 $8(2) $135,000(4)
Samuel L. Hayes, III .......... 7 7(3) 150,000(5)
Norton H. Reamer .............. 7 7 135,000
John L. Thorndike ............. 8 8 140,000
Jack L. Treynor ............... 8 8 140,000
(1) The Eaton Vance fund complex consists of 219 registered investment
companies or series thereof.
(2) Includes $3 of deferred compensation.
(3) Includes $7 of deferred compensation.
(4) Includes $35,000 of deferred compensation.
(5) 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 of this SAI, Thomas M. Metzold (36), 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.
PRINCIPAL UNDERWRITER
Under the Distribution Agreement the Principal Underwriter acts as
principal in selling shares of the Fund. The expenses of printing copies of
prospectuses used to offer shares to Authorized Firms or investors and other
selling literature and of advertising is borne by the Principal Underwriter.
The fees and expenses of qualifying and registering and maintaining
qualifications and registrations of the Fund and its shares under federal and
state securities laws is borne by the Fund. In addition, the Fund makes
payments to the Principal Underwriter pursuant to its Distribution Plan as
described in the Fund's current Prospectus; the provisions of the Fund's
Distribution Plan relating to such payments are included in the Distribution
Agreement. The Distribution Agreement is renewable annually by the Trust's
Board of Trustees (including a majority of its Trustees who are not interested
persons of the Trust and who have no direct or indirect financial interest in
the operation of the Fund's Distribution Plan or the Distribution Agreement),
may be terminated on sixty days' notice either by such Trustees or by vote of
a majority of the outstanding voting securities of the Fund or on six months'
notice by the Principal Underwriter and is automatically terminated upon
assignment. The Principal Underwriter distributes Fund shares on a "best
efforts" basis under which it is required to take and pay for only such shares
as may be sold.
The Fund has authorized the Principal Underwriter to act as its agent in
repurchasing shares at the rate of $2.50 for each repurchase transaction
handled by the Principal Underwriter. The Principal Underwriter estimates that
the expenses incurred by it in acting as repurchase agent for the Fund will
exceed the amounts paid therefor by the Fund. For the amount paid by the Fund
to the Principal Underwriter for acting as repurchase agent, see "Fees and
Expenses" in this Part II.
DISTRIBUTION PLAN
The Distribution Plan ("the Plan") is described in the Prospectus and is
designed to meet the requirements of Rule 12b-1 under the 1940 Act and the
NASD. The purpose of the Plan is to compensate the Principal Underwriter for
its distribution services and facilities provided to the Fund by paying the
Principal Underwriter sales commissions and a separate distribution fee in
connection with sales of Fund shares. The following supplements the discussion
of the Plan contained in the Fund's Prospectus.
The amount payable to the Principal Underwriter pursuant to the Plan as
sales commissions and distribution fees with respect to each day will be
accrued on such day as a liability of the Fund and will accordingly reduce the
Fund's net assets upon such accrual, all in accordance with generally accepted
accounting principles. The amount payable on each day is limited to 1/365 of
.75% of the Fund's net assets on such day. The level of the Fund's net assets
changes each day and depends upon the amount of sales and redemptions of Fund
shares, the changes in the value of the investments held by the Portfolio, the
expenses of the Fund and the Portfolio accrued and allocated to the Fund on
such day, income on portfolio investments of the Portfolio accrued and
allocated to the Fund on such day, and any dividends and distributions
declared on Fund shares. The Fund does not accrue possible future payments as
a liability of the Fund or reduce the Fund's current net assets in respect of
unknown amounts which may become payable under the Plan in the future because
the standards for accrual of such a liability under accounting principles have
not been satisfied.
The Plan provides that the Fund will receive all CDSCs and will make no
payments to the Principal Underwriter in respect of any day on which there are
no outstanding Uncovered Distribution Charges of the Principal Underwriter.
CDSCs and accrued amounts will be paid by the Fund to the Principal
Underwriter whenever there exist Uncovered Distribution Charges under the
Fund's Plan.
Periods with a high level of sales of Fund shares accompanied by a low
level of early redemptions of Fund shares resulting in the imposition of CDSCs
will tend to increase the time during which there will exist Uncovered
Distribution Charges of the Principal Underwriter. Conversely, periods with a
low level of sales of Fund shares accompanied by a high level of early
redemptions of Fund shares resulting in the imposition of CDSCs will tend to
reduce the time during which there will exist Uncovered Distribution Charges
of the Principal Underwriter.
In calculating daily the amount of Uncovered Distribution Charges,
distribution charges will include the aggregate amount of sales commissions
and distribution fees theretofore paid plus the aggregate amount of sales
commissions and distribution fees which the Principal Underwriter is entitled
to be paid under the Plan since its inception. Payments theretofore paid or
payable under the Plan by the Fund to the Principal Underwriter and CDSCs
theretofore paid or payable to the Principal Underwriter will be subtracted
from such distribution charges; if the result of such subtraction is positive,
a distribution fee (computed at 1% over the prime rate then reported in The
Wall Street Journal) will be computed on such amount and added thereto, with
the resulting sum constituting the amount of outstanding Uncovered
Distribution Charges with respect to such day. The amount of outstanding
Uncovered Distribution Charges of the Principal Underwriter calculated on any
day does not constitute a liability recorded on the financial statements of
the Fund.
The amount of Uncovered Distribution Charges of the Principal Underwriter
at any particular time depends upon various changing factors, including the
level and timing of sales of Fund shares, the nature of such sales (i.e.,
whether they result from exchange transactions, reinvestments or from cash
sales through Authorized Firms), the level and timing of redemptions of Fund
shares upon which a CDSC will be imposed, the level and timing of redemptions
of Fund shares upon which no CDSC will be imposed (including redemptions
involving exchanges of Fund shares for shares of another fund in the Eaton
Vance Marathon Group of Funds which result in a reduction of Uncovered
Distribution Charges), changes in the level of the net assets of the Fund, and
changes in the interest rate used in the calculation of the distribution fee
under the Plan.
As currently implemented by the Trustees, the Plan authorizes payments of
sales commissions and distribution fees to the Principal Underwriter and
service fees to the Principal Underwriter and Authorized Firms which may be
equivalent, on an aggregate basis during any fiscal year of the Fund, to 1% of
the Fund's average daily net assets for such year. For the sales commissions
and service fee payments made by the Fund and the outstanding Uncovered
Distribution Charges of the Principal Underwriter, see "Fees and Expenses --
Distribution Plan" in this Part II. The Fund believes that the combined rate
of all these payments may be higher than the rate of payments made under
distribution plans adopted by other investment companies pursuant to Rule
12b-1. Although the Principal Underwriter will use its own funds (which may be
borrowed from banks) to pay sales commissions at the time of sale, it is
anticipated that the Eaton Vance organization will profit by reason of the
operation of the Plan through an increase in the Fund's assets (thereby
increasing the advisory fee payable to BMR by the Portfolio) resulting from
sale of Fund shares and through the amounts paid to the Principal Underwriter,
including CDSCs, pursuant to the Plan. The Eaton Vance organization may be
considered to have realized a profit under the Plan if at any point in time
the aggregate amounts theretofore received by the Principal Underwriter
pursuant to the Plan and from CDSCs have exceeded the total expenses
theretofore incurred by such organization in distributing shares of the Fund.
Total expenses for this purpose will include an allocable portion of the
overhead costs of such organization and its branch offices, which costs will
include without limitation leasing expense, depreciation of building and
equipment, utilities, communication and postage expense, compensation and
benefits of personnel, travel and promotional expense, stationery and
supplies, literature and sales aids, interest expense, data processing fees,
consulting and temporary help costs, insurance, taxes other than income taxes,
legal and auditing expense and other miscellaneous overhead items. Overhead is
calculated and allocated for such purpose by the Eaton Vance organization in a
manner deemed equitable to the Fund.
The Plan continues in effect through and including April 28, 1996, and
shall continue in effect indefinitely thereafter for so long as such
continuance is approved at least annually by the vote of both a majority of
(i) the Trustees of the Trust who are not interested persons of the Trust and
who have no direct or indirect financial interest in the operation of the Plan
or any agreements related to the Plan (the "Rule 12b-1 Trustees") and (ii) all
of the Trustees then in office, and the Distribution Agreement contains a
similar provision. The Plan and Distribution Agreement may be terminated at
any time by vote of a majority of the Rule 12b-1 Trustees or by a vote of a
majority of the outstanding voting securities of the Fund. The provisions of
the Plan relating to payments of sales commissions and distribution fees to
the Principal Underwriter are also included in the Distribution Agreement
between the Trust on behalf of the Fund and the Principal Underwriter.
Pursuant to Rule 12b-1, the Plan has been approved by the Fund's initial sole
shareholder (Eaton Vance) and by the Board of Trustees of the Trust, including
the Rule 12b-1 Trustees. Under the Plan, the President or a Vice President of
the Trust shall provide to the Trustees for their review, and the Trustees
shall review at least quarterly, a written report of the amount expended under
the Plan and the purposes for which such expenditures were made. The Plan may
not be amended to increase materially the payments described therein without
approval of the shareholders of the Fund, and all material amendments of the
Plan must also be approved by the Trustees as required by Rule 12b-1. So long
as the Plan is in effect, the selection and nomination of Trustees who are not
interested persons of the Trust shall be committed to the discretion of the
Trustees who are not such interested persons.
The Trustees believe that the Plan will be a significant factor in the
expected growth of the Fund's assets, and will result in increased investment
flexibility and advantages which will benefit the Fund and its shareholders.
Payments for sales commissions and distribution fees made to the Principal
Underwriter under the Plan will compensate the Principal Underwriter for its
services and expenses in distributing shares of the Fund. Service fee payments
made to the Principal Underwriter and Authorized Firms under the Plan provide
incentives to provide continuing personal services to investors and the
maintenance of shareholder accounts. By providing incentives to the
Principal Underwriter and Authorized Firms, the Plan is expected to result in
the maintenance of, and possible future growth in, the assets of the Fund.
Based on the foregoing and other relevant factors, the Trustees have
determined that in their judgment there is a reasonable likelihood that the
Plan will benefit the Fund and its shareholders.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average total return on a
hypothetical investment of $1,000 in the Fund covering the life of the Fund
from August 8, 1985 through January 31, 1996.
<TABLE>
<CAPTION>
VALUE OF VALUE OF
INVEST- INVEST-
MENT BEFORE MENT AFTER TOTAL RETURN BEFORE TOTAL RETURN AFTER
DEDUCTING THE DEDUCTING THE DEDUCTING THE CDSC DEDUCTING THE CDSC**
INVESTMENT INVESTMENT AMOUNT OF CDSC ON CDSC** ON -------------------------- --------------------------
PERIOD DATE INVESTMENT 1/31/96 1/31/96 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------- ------------ ----------- --------------- --------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of the
Fund*** 8/8/95* $1,000 $1,093.65 $1,043.65 9.73% -- % 4.37% -- %
- ----------
*Investment operations began on August 8, 1985.
**No CDSC is imposed on certain redemptions. See the Fund's current Prospectus.
***If a portion of the Portfolio's and/or the Fund's expenses had not been dubsidized, the Fund would have had lower returns.
</TABLE>
For the thirty-day period ended January 31, 1996, the yield of the Fund
was 6.21%. The yield required of a taxable security that would produce an
after-tax yield equivalent to that earned by the Fund of 6.21% would be 9.00%,
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.
The Fund's distribution rate (calculated on January 31, 1996 and based on
the Fund's monthly distribution paid January 15, 1996) was 6.24%, and the
Fund's effective distribution rate (calculated on the same date and based on
the same monthly distribution) was 6.43%. 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 distribution rate and effective
distribution rate.
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 January 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 January 31, 1996, Merrill Lynch, Pierce, Fenner & Smith, Inc.,
Jacksonville, FL 32246 was the record owner of approximately 17.7% 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. 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.
<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 $ 41,100 15.00% 4.71% 5.29% 5.88% 6.47% 7.06% 7.65% 8.24%
$ 24,001- 58,150 $ 41,101- 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>
<TABLE>
<CAPTION>
EV Marathon High Yield Municipals Fund
Financial Statements
Statement of Assets and Liabilities
- -----------------------------------------------------------------------------------------------------------------
January 31, 1996 (Unaudited)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets:
Investment in High Yield Municipals Portfolio (Portfolio), at value (Note 1A)
(identified cost, $41,235,890) $42,076,140
Receivable for Fund shares sold 1,498,733
Receivable from Administrator (Note 4) 24,811
Deferred organization expenses (Note 1D) 46,822
------------
Total assets $43,646,506
Liabilities:
Dividends payable $104,363
Payable for Fund shares redeemed 500
Payable to affiliate -
Trustees' fees 13
Accrued organization expense 6,659
Accrued expenses 15,256
----------
Total liabilities 126,791
------------
Net Assets for 4,085,123 shares of beneficial interest outstanding $43,519,715
============
Sources of Net Assets:
Proceeds from sales of shares (including shares issued to shareholders electing
to receive payment of distributions in shares), less cost of shares redeemed $42,687,463
Accumulated net realized gain on investment transactions
(computed on the basis of identified cost) 5,322
Unrealized appreciation of investments (computed on the basis of identified cost) 840,250
Accumulated distributions in excess of net investment income (13,320)
------------
Total $43,519,715
============
Net Asset Value, Offering and Redemption Price (Note 6) Per Share
($43,519,715 (divided by) 4,085,123 shares of beneficial interest) $10.65
======
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of Operations
- ------------------------------------------------------------------------------------------
For the period from the start of business, August 7, 1995 to January 31, 1996 (Unaudited)
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Income (Note 1B):
Interest income allocated from Portfolio $ 651,160
Expenses allocated from Portfolio (5,599)
------------
Total investment income $ 645,561
Expenses -
Compensation of Trustees not members of the
Administrator's organization (Note 4) $ 51
Custodian fee (Note 4) 651
Distribution fees (Note 5) 71,402
Transfer and dividend disbursing agent fees 7,225
Printing and postage 780
Legal and accounting services 210
Registration fees 17,994
Amortization of organization expenses (Note 1D) 4,777
Miscellaneous 1,393
----------
Total expenses $104,483
Deduct:
Allocation of expenses to the Administrator (Note 4) 24,811
----------
Net expenses 79,672
------------
Net investment income $ 565,889
Realized and Unrealized Gain from Portfolio:
Net realized gain on investments (identified cost basis) $ 5,322
Unrealized appreciation of investments 840,250
----------
Net realized and unrealized gain on investments 845,572
------------
Net increase in net assets resulting from operations $1,411,461
------------
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- ------------------------------------------------------------------------------------------
For the period from the start of business, August 7, 1995 to January 31, 1996 (Unaudited)
- ------------------------------------------------------------------------------------------
<S> <C>
Increase (Decrease) in Net Assets:
From operations -
Net investment income $ 565,889
Net realized gain on investments 5,322
Change in unrealized appreciation of investments 840,250
--------------
Net increase in net assets resulting from operations $ 1,411,461
--------------
Distributions to shareholders -
From net investment income $ (565,889)
In excess of net investment income (13,320)
--------------
Total distributions to shareholders $ (579,209)
--------------
Transactions in shares of capital stock (Note 3) -
Proceeds from sale of shares $43,338,440
Net asset value of shares issued to shareholders in
payment of distributions declared 201,331
Cost of shares redeemed (852,308)
--------------
Net increase in net assets from Fund share transactions $42,687,463
--------------
Net increase in net assets $43,519,715
Net Assets:
At beginning of period --
--------------
At end of period (including accumulated distributions in excess of
net investment income of $13,320) $43,519,715
==============
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights
- -----------------------------------------------------------------------------------------
For the period from the start of business, August 7, 1995 to January 31, 1996 (Unaudited)
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value - Beginning of period $10.000
--------
Income from operations:
Net investment income $ 0.299
Net realized and unrealized gain on investments 0.657
--------
Total income from operations $ 0.956
--------
Less distributions:
From net investment income $ (0.299)
In excess of net investment income (0.007)
--------
Total distributions $ (0.306)
--------
Net asset value - End of period $10.650
========
Total Return (2) 9.40%
Ratios/Supplemental Data**
Net assets, end of period (000's omitted) $43,520
Ratio of net expenses to average net assets (1) 0.88%+
Ratio of net investment income to average net assets 5.86%+
**The expenses related to the operation of the Fund and 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 $0.254
========
Ratios/Supplemental Data:
Expenses (1) 1.77%+
Net investment income 4.97%+
+ Annualized.
(1) Includes the Fund's share of High Yield Municipal 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.
Dividends and distributions, if any, are assumed to be reinvested at the net asset value on
the payable date. Total return is calculated on a non-annualized basis.
See notes to financial statements
</TABLE>
<PAGE>
Notes to Financial Statements
(Unaudited)
(1) Significant Accounting Policies
EV Marathon High Yield Municipals Fund (the Fund) is a non-diversified
series of Eaton Vance Municipals Trust II (the Trust).The Trust is an
entity of the type commonly known as a Massachusetts business trust and
is registered under the Investment Company Act of 1940, as amended, as
an open-end management investment company. The Fund invests all of its
investable assets in interests in High Yield Municipals Portfolio (the
Portfolio), a New York Trust, having the same investment objective as
the Fund. The value of the Fund's investment in the Portfolio reflects
the Fund's proportionate interest in the net assets of the Portfolio
(58.5%, at Janurary 31, 1996). The performance of the Fund is directly
affected by the performance of the Portfolio. The financial statements
of the Portfolio, including the portfolio of investments, are included
elsewhere in this report and should be read in conjunction with the
Fund's financial statements. The following is a summary of significant
accounting policies consistently followed by the Fund in the preparation
of its financial statements. The policies are in conformity with
generally accepted accounting principles.
A. Investment Valuations -- Valuation of securities by the Portfolio is
discussed in Note 1 of the Portfolio's Notes to Financial Statements
which are included elsewhere in this report.
B. Income -- The Fund's net investment income consists of the Fund's
pro rata share of the net investment income of the Portfolio, less all
actual and accrued expenses of the Fund determined in accordance with
generally accepted accounting priniciples.
C. Federal Taxes -- The Fund's policy is to comply with the provisions
of the Internal Revenue Code applicable to regulated investment
companies and to distribute to shareholders each year all of its taxable
and tax-exempt income, including any net realized gain on investments.
Accordingly, no provision for federal income or excise tax is necessary.
Dividends paid by the Fund from net tax-exempt interest on municipal
bonds allocated from the Portfolio are not includable by shareholders as
gross income for federal income tax purposes because the Fund and
Portfolio intend to meet certain requirements of the Internal Revenue
Code applicable to regulated investment companies which will enable the
Fund to pay exempt-interest dividends. The portion of such interest, if
any, earned on private activity bonds issued after August 7, 1986, may
be considered a tax preference item to shareholders.
D. Deferred Organization Expenses -- Costs incurred by the Fund in
connection with its organization are being amortized on the straight-
line basis over five years.
E. Use of Estimates -- The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expense during the
reporting period. Actual results could differ from those estimates.
F. Other - Investment transactions are accounted for on a trade date
basis.
(2) Distribution to Shareholders
The net income of the Fund is determined daily, and substantially all of
the net income so determined is declared as a dividend to shareholders
of record at the time of declaration. Distributions are paid monthly.
Distributions of allocated realized capital gains, if any, are made at
least annually. Shareholders may reinvest capital gain distributions in
additional shares of the Fund at the net asset value as of the ex-
dividend date. Distributions are paid in the form of additional shares
or, at the election of the shareholder, in cash. The Fund distinguishes
between distributions on a tax basis and a financial reporting basis.
Generally accepted accounting principles require that only distributions
in excess of tax basis earnings and profits be reported in the financial
statements as a return of capital.
Differences in the recognition or classification of income between the
financial statements and tax earnings and profits which result in over-
distributions for financial statement purposes are classified as
distributions in excess of net investment income or accumulated net
realized gains. Permanent differences between book and tax accounting
relating to distributions are reclassified to paid-in capital.
(3) Shares of Beneficial Interest
The Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without par
value). Transactions in Fund shares for the period from the start of
business, August 7, 1995 to January 31, 1996 were as folows:
Sales 4,146,946
Issued to shareholders electing to receive
payments of distributions in Fund shares 19,130
Redemptions (80,953)
----------
Net increase 4,085,123
==========
(4) Investment Adviser Fee and Other Transactions with Affiliates
Eaton Vance Management (EVM) serves as the administrator of the Fund,
but receives no compensation. The Portfolio has engaged Boston
Management and Research (BMR), a subsidiary of EVM, to render investment
advisory services. See Note 2 of the Portfolio's Notes to Financial
Statements which are included elsewhere in this report. To enhance the
net income of the Fund, $24,811 of expenses related to the operation of
the Fund were allocated to EVM. Except as to Trustees of the Fund and
the Portfolio who are not members of EVM's or BMR's organization,
officers and Trustees receive remuneration for their services to the
Fund out of such investment adviser fee. Investors Bank & Trust Company
(IBT) serves as custodian of the Fund and the Portfolio. Prior to
November 10, 1995, IBT was an affiliate of EVM. Pursuant to the
respective custodian agreements, IBT receives a fee reduced by credits
which are determined based on the average cash balances the Fund or the
Portfolio maintains with IBT. No significant credit balances were used
to reduce the Fund's custody fees. Certain of the officers and Trustees
of the Fund and Portfolio are officers and directors/trustees of the
above organizations (Note 5).
(5) Distribution Plan
The Fund has adopted a distribution plan (the Plan) pursuant to Rule
12b-1 under the Investment Company Act of 1940. The Plan requires the
Fund to pay the Principal Underwriter, Eaton Vance Distributors, Inc.
(EVD), amounts equal to 1U365 of 0.75% of the Fund's daily net assets,
for providing ongoing distribution services and facilities to the Fund.
The Fund will automatically discontinue payments to EVD during any
period in which there are no outstanding Uncovered Distribution Charges,
which are equivalent to the sum of (i) 5% of the aggregate amount
received by the Fund for shares sold plus, (ii) distribution fees
calculated by applying the rate of 1% over the prevailing prime rate to
the outstanding balance of Uncovered Distribution Charges of EVD reduced
by the aggregate amount of contingent deferred sales charges (see Note
6) and daily amounts theretofore paid to EVD. The amount payable to EVD
with respect to each day is accrued on such day as a liability of the
Fund and, accordingly, reduces the Fund's net assets. The Fund paid or
accured $71,402 to or payable to EVD for the period from the start of
business, August 7, 1995, to January 31, 1996, representing 0.75%
(annualized) of daily average net assets. At January 31, 1996, the
amount of Uncovered Distribution Charges of EVD calculated under the
Plan was approximately $1,513,000.
In addition, the Plan authorizes the Fund to make payments of service
fees to the Principal Underwriter, Authorized Firms and other persons in
amounts not exceeding 0.25% of the Fund's average daily net assets for
each fiscal year. The Trustees have initially implemented the Plan by
authorizing the Fund to make quarterly payments of service fees to the
Principal Underwriter and Authorized Firms in amounts not expected to
exceed 0.25% per annum of the Fund's average daily net assets based on
the value of Fund shares sold by such persons and remaining outstanding
for at least one year. Service fee payments are made for personal
services and/or the maintenance of shareholder accounts. Service fees
paid to EVD and Authorized Firms are seperate and distinct from the
sales commissions and distribution fees payable by the Fund to EVD, and,
as such, are not subject to automatic discontinuance where there are no
outstanding Uncovered Distribution Charges of EVD. The Fund expects to
begin accruing for its service fee payments during the quarter ending
September 30, 1996.
Certain officers and Trustees of the Fund are officers or directors of
EVD
(6) Contingent Deferred Sales Charge
A contingent deferred sales charge (CDSC) is imposed on any redemption
of Fund shares made within six years of purchase. Generally, the CDSC is
based upon the lower of net asset value at date of redemption or date of
purchase. No charge is levied on shares acquired by reinvestment of
dividends or capital gain distributions. The CDSC is imposed at
declining rates that begin at 5% in the case of redemptions in the first
year and second year after purchase, declining one percentage point each
subsequent year. No CDSC is levied on shares which have been sold to EVM
or its affiliates or to their respective employees or clients. CDSC
charges are paid to EVD to reduce the amount of Uncovered Distribution
Charges calculated under the Fund's Distribution Plan. CDSC charges
received when no Uncovered Distribution Charges exist will be credited
to the Fund. EVD received approximately $4,000 of CDSC paid by
shareholders for the period ended January 31, 1996.
(7) Investment Transactions
Increases and decreases in the Fund's investment in the Portfolio
aggregated $41,887,043 and $1,302,036 respectively.
<PAGE>
<TABLE>
<CAPTION>
High Yield Municipals Portfolio
Portfolio of Investments
January 31, 1996
(Unaudited)
- ---------------------------------------------------------------------------------------------------------------------
Tax-Exempt Investments -- 100%
- ---------------------------------------------------------------------------------------------------------------------
Principal
Amount
(000
Omitted) Security Value
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Transportation- 7.7%
$1,500 Denver, Colorado, Special Facilities Airport Revenue Bonds, United Airlines
Project (AMT), 6.875%, 10/1/32 $1,551,645
1,500 Kenton County, Kentucky, Special Facilities Revenue Bonds, Delta Airlines, Inc.
Project (AMT), 6.125%, 2/1/22 1,477,935
1,000 Missouri Bridge System, Lake of the Ozarks Bridge Corp., 6.4%, 12/1/25 991,990
1,500 Tulsa, Oklahoma, Municipal Airport, American Airlines, 6.25%, 6/1/20 1,514,520
------------------
$5,536,090
------------------
Assisted Living- 7.0%
$2,500 Arizona Health Facilities Authority, Care Institute-Mesa Project, 7.625%, 1/1/26 $2,360,075
1,000 Chester County, Pennsylvania, Industrial Development Authority, Senior
LifeChoice of Kimberton (AMT), 8.5%, 9/1/25 1,019,220
1,600 Delaware County, Pennsylvania, Industrial Development Authority, Senior
Quarters at Glen Riddle Project (AMT), 8.625%, 9/1/25 1,646,224
------------------
$190,969,722
------------------
Cogeneration Facilities- 14.9%
$2,500 Maryland Energy Cogeneration, AES Warrior Run Project (AMT), 7.4%, 9/1/19 $2,637,100
2,000 Palm Beach County, Florida, Osceola Power Project (AMT), 6.95%, 1/1/22 2,077,280
4,950 Pennsylvania Economic Development Financing Authority, Northhampton
Generating Project (AMT), 6.6%, 1/1/19 4,953,218
1,000 Pennsylvania Economic Development Finance Authority, Northhampton
Generating Project-Subordinated (AMT), 6.875%, 1/1/11 995,770
------------------
$10,663,368
------------------
Escrowed- 4.4%
$1,400 Colorado Health Facilities Authority, Liberty Heights Project, 0%, 7/15/20 $303,520
2,995 Colorado Health Facilities Authority, Liberty Heights Project, 0%, 7/15/22 573,003
10,000 Dawson Ridge Metropolitan District #1, Douglas County, Colorado, 0%, 10/1/22 1,808,200
3,295 Illinois Development Finance Authority, Regency Park Project, 0%, 7/15/25 515,206
------------------
$3,199,929
------------------
Hospitals- 22.3%
$1,750 LaFourche Parish, Louisiana, Hospital Service District #3, 6%, 10/1/23 $1,688,120
3,000 Lufkin, Texas, Memorial Health System, 6.875%, 2/15/26 2,967,960
1,000 Michigan Housing Finance Authority, Presbyterian Village, 6.5, 1/1/25 989,630
275 Missouri Health and Education, Jefferson Memorial Hospital, 6%, 8/15/23 254,504
1,000 Montgomery County, Pennsylvania, United Hospitals, 8.375%, 11/1/11 1,066,080
1,000 Montgomery County, Pennsylvania, United Hospitals, 7.5%, 11/1/15 1,019,370
2,500 Philadelphia, Pennsylvania, Temple Hospital-93A, 6.625%, 11/15/23 2,623,450
$2,350 Prince George's, Maryland, Greater Southeast Health, 6.375%, 1/1/23 2,235,555
1,500 Scranton-Lackawanna, Pennsylvania, Moses Taylor Hospital, 8.5%, 7/1/20 1,638,255
1,500 Vermont Health & Education, Northwest Medical Center Project, 6.25%, 9/1/18 1,478,490
------------------
$15,961,414
------------------
Industrial Development Revenue Bonds - 18.5%
$2,500 East Chicago, Indiana, PCR, Inland Steel, 6.8%, 6/1/13 $2,588,325
2,500 Kansas City, Missouri, IDA, AFCO Cargo MCI (AMT), 8.5%, 1/1/17 2,532,225
1,000 Michigan Strategic, PCR, Roseville K-Mart Co., 6.25%,10/1/06 858,190
1,000 Michigan Strategic, PCR, S.D. Warren Series 87C (AMT), 7.375%, 1/15/22 1,048,950
1,000 Mobile, Alabama, IDA, Mobile Energy Project, 6.95%, 1/1/20 1,064,440
1,135 New Albany, Indiana, IDA, K-Mart Co., 7.4%, 6/1/06 1,049,773
500 New Jersey EDA, 777 Pattison Ave., Inc. (AMT), 8.95%, 12/15/18 530,405
2,000 Oregon State EDA, Georgia Pacific Corp. (AMT), 6.35%, 8/1/25 2,010,240
500 Philadelphia, Pennsylvania, IDA, Refrigerated Enterprises (AMT), 9.05%, 12/1/19 533,745
1,000 Polk County, Florida, IDA, IMC Fertilizer (AMT), 7.525%, 1/1/15 1,060,880
------------------
$13,277,173
------------------
Insured General Obligation - 0.8%
$600 California State, General Obligation (FGIC), 4.75%, 9/1/23 $548,772
------------------
Lease/Certificate of Participation - 2.7%
$9,190 Los Angeles, California, COPs, Disney Parking Project, 0%, 9/1/19 $1,916,023
------------------
Multi-Purpose Utilities- 2.9%
$2,000 Southern California Public Power Authority, Residual Interest Bonds, $2,110,000
Variable Rate, 7/1/12 (1) ------------------
Nursing Homes- 11.8%
$1,250 Greene County, Ohio, Fairview Extended Care-91, 10.125%, 1/1/11 $1,420,525
1,850 Massachusetts Health & Education Finance Authority, Fairview Extended Care,
10.125%,1/1/11 2,109,315
2,500 Massachusetts Industrial Finance Authority, AGE Institute of Massachusetts,
8.05%, 11/1/25 2,523,825
1,000 Mississippi Business Finance Corp.,Magnolia Health Care 95A, 7.99%, 7/1/25 989,820
1,250 Wilkins Area, Pennsylvania, Industrial Development Authority, Fairview Extended
Care, 10.25%, 1/1/21 1,435,900
------------------
$8,479,385
------------------
Solid Waste- 7.0%
$10,090 Mercer County, New Jersey, Solid Waste Improvement Bonds (AMT), 0%, 4/1/15 $2,536,222
2,500 Robbins, Cook County, Illinois, Resource Recovery 94B, 9.25%, 10/15/14 2,453,700
------------------
$4,989,922
------------------
Total Tax-Exempt Investments (identified cost $70,055,986) $71,707,595
==================
(1) The above designated security has been issued as an inverse floater bond.
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
High Yield Municipals Portfolio
Financial Statements
Statement of Assets and Liabilities
- -------------------------------------------------------------------------------------------------------------------------
January 31, 1996 (Unaudited)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets:
Investments, at value (Note 1A) (identified cost, $70,055,986) $71,707,595
Cash 471,713
Interest receivable 863,416
Receivable from Investment Adviser (Note 2) 10,465
Deferred organization expenses (Note 1D) 20,008
------------------
Total assets $73,073,197
Liabilities:
Payable for investments purchased $980,340
Payable to affiliate --
Trustees' fees 13
Accrued expenses 15,377
------------------
Total liabilities 995,730
------------------
Net Assets applicable to investors' interest in Portfolio $72,077,467
==================
Sources of Net Assets:
Net proceeds from capital contributions and withdrawals $70,425,858
Unrealized appreciation of investments (computed on the basis of identified cost) 1,651,609
------------------
Total $72,077,467
==================
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Statement of Operations
- -------------------------------------------------------------------------------------------------------
For the period from the start of business, August 7, 1995 to January 31, 1996 (Unaudited)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Income (Note 1B):
Interest Income $1,196,627
Expenses --
Investment adviser fee (Note 2) $100,763
Compensation of Trustees not members of the
Investment Adviser's organization (Note 2) 51
Custodian fee (Note 2) 623
Interest expense (Note 5) 15,725
Legal and accounting services 1,460
Amortization of organization expenses (Note 1D) 2,042
Miscellaneous 907
------------------
Total expenses $121,571
------------------
Deduct -
Reduction of investment adviser fee (Note 2) $100,763
Allocation of expenses to adviser (Note 2) 10,465
------------------
Total $111,228
------------------
Net expenses 10,343
------------------
Net investment income $1,186,284
Realized and Unrealized Gain on Investments:
Net realized gain on investments (identified cost basis) $9,767
Unrealized appreciation of investments 1,651,609
------------------
Net realized and unrealized gain on investments 1,661,376
------------------
Net increase in net assets resulting from operations $2,847,660
==================
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Statement of Changes in Net Assets
- ------------------------------------------------------------------------------------
For the period from the start of business,
August 7, 1995 to January 31, 1996 (Unaudited)
- ------------------------------------------------------------------------------------
<S> <C>
Increase (Decrease) in Net Assets:
From operations --
Net investment income $1,186,284
Net realized gain on investments 9,767
Unrealized appreciation of investments 1,651,609
------------------
Net increase in net assets resulting from operations $2,847,660
------------------
Capital transactions --
Contributions $71,481,472
Withdrawals (2,351,685)
------------------
Increase in net assets resulting from capital transactions $69,129,787
------------------
Total increase in net assets $71,977,447
Net Assets:
At beginning of period 100,020
------------------
At end of period $72,077,467
==================
- ------------------------------------------------------------------------------------
Supplementary Data
- ------------------------------------------------------------------------------------
For the period from the start of business,
August 7, 1995 to January 31, 1996 (Unaudited)
- ------------------------------------------------------------------------------------
Ratios (as a percentage of net assets):
Expenses 0.06%+
Net investment income 6.95%+
Portfolio Turnover 32%
* The operating expenses of the Portfolio reflect a
reduction of the investment adviser fee and an allocation of
expenses to the Investment Adviser. Had such actions not been
taken, the ratios would have been as follows:
Ratios (as a percentage of net assets):
Expenses 0.71%+
Net investment income 6.30%+
+ Annualized.
See notes to financial statements
</TABLE>
<PAGE>
Notes to Financial Statements
(Unaudited)
(1) Significant Accounting Policies
High Yield Municipals Portfolio (the Portfolio) is registered under the
Investment Company Act of 1940 as a non-diversified open-end management
investment company. The Portfolio, which was organized as a trust under
the laws of the State of New York on May 1, 1995, seeks to provide high
current income exempt from regular federal income tax. The Declaration
of Trust permits the Trustees to issue interests in the Portfolio. The
following is a summary of significant accounting policies of the
Portfolio. The policies are in conformity with generally accepted
accounting principles.
A. Investment Valuations -- Municipal bonds are normally valued on the
basis of valuations furnished by a pricing service. Taxable obligations,
if any, for which price quotations are readily available are normally
valued at the mean between the latest bid and asked prices. Futures
contracts listed on commodity exchanges are valued at closing settlement
prices. Short-term obligations, maturing in sixty days or less, are
valued at amortized cost, which approximates value. Investments for
which valuations or market quotations are unavailable are valued at fair
value using methods determined in good faith by or at the direction of
the Trustees.
B. Income -- Interest income is determined on the basis of interest
accrued, adjusted for amortization of premium or discount when required
for federal income
tax purposes.
C. Income Taxes -- The Portfolio is treated as a partnership for Federal
tax purposes. No provision is made by the Portfolio for federal or state
taxes on any taxable income of the Portfolio because each investor in
the Portfolio is ultimately responsible for the payment of any taxes.
Since some of the Portfolio's investors are regulated investment
companies that invest all or substantially all of their assets in the
Portfolio, the Portfolio normally must satisfy the applicable source of
income and diversification requirements (under the Internal Revenue
Code) in order for its investors to satisfy them. The Portfolio will
allocate at least annually among its investors each investors'
distributive share of 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. Interest income
received by the Portfolio on investments in municipal bonds, which is
excludable from gross income under the Internal Revenue Code, will
retain its status as income exempt from Federal income tax when
allocated to the Portfolio's investors. The portion of such interest, if
any, earned on private activity bonds issued after August 7, 1986 may be
considered a tax preference item for investors.
D. Deferred Organization Expenses -- Costs incurred by the Portfolio in
connection with its organization are being amortized on the straight-
line basis over five years.
E. Financial Futures Contracts -- Upon the entering of a financial
futures contract, the Portfolio is required to deposit ("initial
margin") either in cash or securities an amount equal to a certain
percentage of the purchase price indicated in the financial futures
contract. Subsequent payments are made or received by the Portfolio
("margin maintenance") each day, dependent on the daily fluctuations in
the value of the underlying security, and are recorded for book purposes
as unrealized gains or losses by the Portfolio. The Portfolio's
investment in financial futures contracts is designed only to hedge
against anticipated future changes in interest rates. Should interest
rates move unexpectedly, the Portfolio may not achieve the anticipated
benefits of the financial futures contracts and may realize a loss.
F. Legal Fees -- Legal fees and other related expenses incurred as part
of negotiations of the terms and requirements of capital infusions, or
that are expected to result in the restructuring of or a plan of
reorganization for an investment are recorded as realized losses.
Ongoing expenditures to protect or enhance an investment are treated as
operating expenses.
G. When-issued and Delayed Delivery Transactions -- The Portfolio may
engage in when-issued and delayed delivery transactions. The Portfolio
records when-issued securities on trade date and maintains security
positions such that sufficient liquid assets will be available to make
payments for the securities purchased. Securities purchased on a when-
issued or delayed delivery basis are marked to market daily and begin
accruing interest on settlement date.
H. Use of Estimates -- The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expense during the
reporting period. Actual results could differ from those estimates.
I. Other -- Investment transactions are accounted for on a trade date
basis.
(2) Investment Adviser Fee and Other Transactions with Affiliates
The investment adviser fee is earned by Boston Management and Research
(BMR), a wholly-owned subsidiary of Eaton Vance Management (EVM), as
compensation for management and investment advisory services rendered to
the Portfolio. The fee is based upon a percentage of average daily net
assets plus a percentage of gross income, (i.e. income other than gains
from the sale of securities). For the period from the start of business,
August 7, 1995, to January 31, 1996, the fee was equivalent to 0.59%
(annualized) of the Portfolio's average net assets for such period and
amounted to $100,763. To enhance the net income of the Portfolio, BMR
made a reduction of its fee in the amount of $100,763 and $10,465 of
expenses related to the operation of the Portfolio were allocated to
BMR. Except as to Trustees of the Portfolio who are not members of EVM's
or BMR's organization, officers and Trustees receive remuneration for
their services to the Portfolio out of such investment adviser fee.
Investors Bank and Trust Company (IBT) serves as custodian of the
Portfolio. Prior to November 10, 1995, IBT was an affiliate of EVM and
BMR. Pursuant to the custodian agreement, IBT receives a fee reduced by
credits which are determined based on the average daily cash balances
the Portfolio maintains with IBT. No significant credit balances were
used to reduce the fund's custody fees. Certain of the officers and
Trustees of the Portfolio are officers and directors/trustees of the
above organizations.
Trustees of the Portfolio that 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 the Trustees Deferred
Compensation Plan. For the period ended January 31, 1996, no significant
amounts have been deferred.
(3) Investments
Purchases and sales of investments, other that U.S. Government
securities and short term obligations, aggregated $82,921,735 and
$12,950,298, respectively.
(4) Federal Income Tax Basis of Investments
The cost and unrealized appreciation/depreciation in value of the
investments owned at January 31, 1996, as computed on a federal income
tax basis, were as follows:
Aggregate cost $70,055,986
===========
Gross unrealized appreciation $ 1,979,931
Gross unrealized depreciation 328,322
-----------
Net unrealized appreciation $ 1,651,609
===========
(5) Line of Credit
The Portfolio participates with other portfolios and funds managed by
BMR and EVM in a $120 million unsecured line of credit agreement with a
bank. The line of credit consists of a $20 million committed facility
and a $100 million discretionary facility. Borrowings will be made by
the Portfolio solely to facilitate the handling of unusual and/or
unanticipated short-term cash requirements. Interest is charged to each
Portfolio based on its borrowings at an amount above either the bank's
adjusted certificate of deposit rate, a variable adjusted certificate of
deposit rate, or a federal funds effective rate. In addition, a fee
computed at an annual rate of 1/4 of 1% on the $20 million committed
facility and on the daily unused portion of the $100 million
discretionary facility is allocated among the participating funds and
portfolios at the end of each quarter. For the period ended January 31,
1996, the average daily loan balance was $1,395,000. The maximum borrowings
during the period ended January 31, 1996 was $4,493,000.
(6) Financial Instruments
The Portfolio regularly trades in financial instruments with off-balance
sheet risk in the normal course of its investing activities to assist in
managing exposure to various market risks. These financial instruments
include written options and futures contracts and may involve, to a
varying degree, elements of risk in excess of the amounts recognized for
financial statement purposes.
The notional or contractual amounts of these instruments represent the
investment the Portfolio has in particular classes of financial
instruments and does not necessarily represent the amounts potentially
subject to risk. The measurement of the risks associated with these
instruments is meaningful only when all related and offsetting
transactions are considered. The Portfolio did not have any open
obligations under these financial instruments at January 31, 1996.
<PAGE>
[LOGO]
EV MARATHON
HIGH YIELD
MUNICIPALS FUND
STATEMENT OF
ADDITIONAL INFORMATION
MAY 20, 1996
EV MARATHON 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 MARATHON HIGH YIELD MUNICIPALS FUND
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111
TRANSFER AGENT
First Data Investor Services Group, BOS725, P.O. Box 1559, Boston, MA 02104
(800) 262-1122
AUDITORS
Deloitte & Touche LLP, 125 Summer Street, Boston, MA 02110
M-HYSAI
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EV TRADITIONAL HIGH YIELD
MUNICIPALS FUND. On May 15, 1995, the Fund became a series of the Trust. THE
FUND'S INVESTMENT OBJECTIVE IS TO PROVIDE HIGH CURRENT INCOME EXEMPT FROM
REGULAR FEDERAL INCOME TAX. The Fund currently seeks to meet its investment
objective by investing its assets in High Yield Municipals Portfolio, a
separate registered investment company which invests primarily in below
investment grade municipal obligations. The Fund may not be appropriate for
investors who cannot assume the greater risk of capital depreciation or loss
inherent in seeking higher tax-exempt yields.
FEES AND EXPENSES
INVESTMENT ADVISER
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 remains in effect until February 28, 1997. The Agreement may be continued
as described under "Investment Adviser and Administrator" in Part I of this
SAI.
ADMINISTRATOR
As stated under "Investment Adviser and Administrator" Part I of this SAI,
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 expects to begin accruing for its service fee payments during the
quarter ending September 30, 1996.
PRINCIPAL UNDERWRITER
The total sales charges for sale of shares of the Fund for the period from
the start of business, August 7, 1995, to January 31, 1996 was $883,525, of
which $337 was received by the Principal Underwriter and $883,188 was received
by Authorized Firms.
The Fund paid the Principal Underwriter $70.00 for the period from the
start of business, August 7, 1995, to January 31, 1996 (being $2.50 for each
repurchase transaction handled by the Principal Underwriter).
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 Trust
or the Portfolio.) During the fiscal year ended January 31, 1996, the
noninterested Trustees of the Trust and the Portfolio received 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/:
<PAGE>
<TABLE>
<CAPTION>
AGGREGATE AGGREGATE TOTAL COMPENSATION
COMPENSATION COMPENSATION FROM TRUST AND
NAME FROM FUND FROM PORTFOLIO FUND COMPLEX
- ---- ---------- -------------- ------------
<S> <C> <C> <C>
Donald R. Dwight .............................. $8 $8\2/ $135,000\4/
Samuel L. Hayes, III .......................... 7 7\3/ 150,000\5/
Norton H. Reamer .............................. 7 7 135,000
John L. Thorndike ............................. 8 8 140,000
Jack L. Treynor ............................... 8 8 140,000
\1/ The Eaton Vance fund complex consists of 219 registered investment
companies or series thereof.
\2/ Includes $3 of deferred compensation.
\3/ Includes $7 of deferred compensation.
\4/ Includes $35,000 of deferred compensation.
\5/ Includes $33,750 of deferred compensation.
</TABLE>
ADDITIONAL OFFICER INFORMATION
In addition to the officers of the Portfolio listed under "Officers of the
Trust and the Portfolio" in Part I of this SAI, Thomas M. Metzold (36), 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 are voluntary, involve no extra charge other than
the sales charge included in the offering price, and may be changed or
discontinued without penalty at any time.
INTENDED QUANTITY INVESTMENT -- STATEMENT OF INTENTION. If it is
anticipated that $50,000 or more of Fund shares and shares of the other
continuously offered open-end funds listed under "The Eaton Vance Exchange
Privilege" in the current Prospectus of the Fund will be purchased within a
13-month period, a Statement of Intention should be signed so that shares may
be obtained at the same reduced sales charge as though the total quantity were
invested in one lump sum. Shares held under Right of Accumulation (see below)
as of the date of the Statement will be included toward the completion of the
Statement. The Statement authorizes the Transfer Agent to hold in escrow
sufficient shares (5% of the dollar amount specified in the Statement) which
can be redeemed to make up any difference in sales charge on the amount
intended to be invested and the amount actually invested. Execution of a
Statement does not obligate the shareholder to purchase or the Fund to sell
the full amount indicated in the Statement, and should the amount actually
purchased during the 13-month period be more or less than that indicated on
the Statement, price adjustments will be made. For sales charges and other
information on quantity purchases, see "How to Buy Fund Shares" in the Fund's
current Prospectus. Any investor considering signing a Statement of Intention
should read it carefully.
RIGHT OF ACCUMULATION -- CUMULATIVE QUANTITY DISCOUNT.The applicable sales
charge level for the purchase of Fund shares is calculated by taking the
dollar amount of the current purchase and adding it to the value (calculated
at the maximum current offering price) of the shares the shareholder owns in
his account(s) in the Fund and in the other continuously offered open-end
funds listed under "The Eaton Vance Exchange Privilege" in the current
Prospectus of the Fund for which Eaton Vance acts as investment adviser or
administrator at the time of purchase. The sales charge on the shares being
purchased will then be at the rate applicable to the aggregate. For example,
if the shareholder owned shares valued at $30,000 in EV Traditional California
Municipals Fund, and purchased an additional $20,000 of Fund shares, the sales
charge for the $20,000 purchase would be at the rate of 2.75% of the offering
price (2.83% of the net amount invested) which is the rate applicable to
single transactions of $50,000. For sales charges on quantity purchases, see
"How to Buy Fund Shares" in the Fund's current Prospectus. Shares purchased
(i) by an individual, his or her spouse and their children under the age of
twenty-one, and (ii) by a trustee, guardian or other fiduciary of a single
trust estate or a single fiduciary account, will be combined for the purpose
of determining whether a purchase will qualify for the Right of Accumulation
and if qualifying, the applicable sales charge level.
For any such discount to be made available, at the time of purchase a
purchaser or his or her 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. Corfirmation of the order is subject to such verification. The
Right of Accumulation privilege may be amended or terminated at any time as to
purchases occurring thereafter.
PRINCIPAL UNDERWRITER
Shares of the Fund may be continuously purchased at the public offering
price through certain Authorized Firms which have agreements with the
Principal Underwriter. The Principal Underwriter is a wholly-owned subsidiary
of Eaton Vance. The public offering price is the net asset value next computed
after receipt of the order, plus, where applicable, a variable percentage
(sales charge) depending upon the amount of purchase as indicated by the sales
charge table set forth in the Fund's current Prospectus (see "How to Buy Fund
Shares"). Such table is applicable to purchases of the Fund alone or in
combination with purchases of the other funds offered by the Principal
Underwriter, made at a single time by (i) an individual, or an individual, his
or her spouse and their children under the age of twenty-one, purchasing
shares for his or their own account; and (ii) a trustee or other fiduciary
purchasing shares for a single trust estate or a single fiduciary account.
The table is also presently applicable to (1) purchases of Fund shares,
alone or in combination with purchases of any of the other funds offered by
the Principal Underwriter through one dealer aggregating $50,000 or more made
by any of the persons enumerated above within a thirteen-month period starting
with first purchase pursuant to a written Statement of Intention, in the form
provided by the Principal Underwriter, which includes provisions for a price
adjustment depending upon the amount actually purchased within such period (a
purchase not made pursuant to such Statement may be included thereunder if the
Statement is filed within 90 days of such purchase); or (2) purchases of the
Fund pursuant to the Right of Accumulation and declared as such at the time of
purchase.
Subject to the applicable provisions of the 1940 Act, the Fund may issue
shares at net asset value in the event that an investment company (whether a
regulated or private investment company or a personal holding company) is
merged or consolidated with or acquired by the Fund. Normally no sales charges
will be paid in connection with an exchange of Fund shares for the assets of
such investment company.
Shares may be sold at net asset value to any officer, director, trustee,
general partner or employee of the Fund, the Portfolio or any investment
company for which Eaton Vance or BMR acts as investment adviser, any
investment advisory, agency, custodial or trust account managed or
administered by Eaton Vance or by any parent, subsidiary or other affiliate of
Eaton Vance, or any officer, director or employee of any parent, subsidiary or
other affiliate of Eaton Vance. The terms "officer," "director," "trustee,"
"general partner" or "employee" as used in this paragraph include any such
person's spouse and minor children, and also retired officers, directors,
trustees, general partners and employees and their spouses and minor children.
Shares of the Fund may also be sold at net asset value to registered
representatives and employees of certain Authorized Firms and to such persons'
spouses and children under the age of 21 and their beneficial accounts.
The Trust reserves the right to suspend or limit the offering of shares of
the Fund to the public at any time.
The Principal Underwriter acts as principal in selling shares of the Fund
under the Distribution Agreement with the Trust on behalf of the Fund. The
expenses of printing copies of prospectuses used to offer shares to 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. The
Principal Underwriter allows Authorized Firms discounts from the applicable
public offering price which are alike for all Authorized Firms. However, the
Principal Underwriter may allow, upon notice to all Authorized Firms with whom
it has agreements, discounts up to the full sales charge during the periods
specified in the notice. See "How to Buy Fund Shares" in the Fund's current
Prospectus for the discount allowed to Authorized Firms on the sale of Fund
shares. 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.
The Fund has authorized the Principal Underwriter to act as its agent in
repurchasing shares at the rate of $2.50 for each repurchase transaction
handled by the Principal Underwriter. The Principal Underwriter estimates that
the expenses incurred by it in acting as repurchase agent for the Fund will
exceed the amounts paid therefor by the Fund. For the amount paid by the Fund
to the Principal Underwriter for acting as repurchase agent, see "Fees and
Expenses" in this Part II.
SERVICE PLAN
The Trust on behalf of the Fund has adopted 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. (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 "Non-interested 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 Non-interested Trustees or by a vote of a majority of the
outstanding voting securities of the Fund. Pursuant to such Rule, the Plan has
been approved by the Fund's initial sole shareholder (Eaton Vance) and by the
Board of Trustees of the Trust, including the Non-interested Trustees.
Under the Plan, the President or a Vice President of the Trust shall
provide to the Trustees for their review, and the Trustees shall review at
least quarterly, a written report of the amount expended under the Plan and
the purposes for which such expenditures were made. The Plan may not be
amended to increase materially the payments described herein without approval
of the shareholders of the Fund, and all material amendments of the Plan must
also be approved by the Trustees of the Trust as prescribed by 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 by
the Fund 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 the Fund from August 8, 1995 through
January 31, 1996.
<PAGE>
VALUE OF A $1,000 INVESTMENT
<TABLE>
<CAPTION>
TOTAL RETURN TOTAL RETURN
VALUE OF VALUE OF EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
INVESTMENT INVESTMENT INITIAL INVESTMENT ------------------------------ ------------------------------
PERIOD DATE INVESTMENT* ON 1/31/96 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
------ ---------- ----------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of
the Fund** 8/8/95 $962.46 $1,063.52 10.50% -- 6.35% --
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 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.
</TABLE>
For the thirty-day period ended January 31, 1996, the yield of the Fund
was 7.02%. The yield required of a taxable security that would produce an
after-tax yield equivalent to that earned by the Fund of 7.02% would be
10.17%, 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.
The Fund's distribution rate (calculated on January 31, 1996 and based on
the Fund's monthly distribution paid January 31, 1996) was 6.43%, and the
Fund's effective distribution rate (calculated on the same date and based on
the same monthly distribution) was 6.62%. 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 distribution rate and effective
distribution rate.
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 January 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 January 31, 1996, Merrill Lynch, Pierce, Fenner & Smith, Inc.,
Jacksonville, FL, was the record owner of approximately 7.9% 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 the same 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 02205-1537 (8.5%). 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.
<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
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Net amount subject to federal personal income tax after deductions and
exemptions.
Note: The above-indicated federal income tax brackets do not take into
account the effect of a reduction in the deductibility of itemized deductions
for taxpayers with adjusted gross income in excess of $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>
<TABLE>
<CAPTION>
EV Traditional High Yield Municipals Fund
Financial Statements
Statement of Assets and Liabilities
- ------------------------------------------------------------------------------------------------------
January 31, 1996 (Unaudited)
- ------------------------------------------------------------------------------------------------------
<S> <C>
Assets:
Investment in High Yield Municipals Portfolio (Portfolio), at value
(Note 1A) (identified cost, $29,086,535) $29,890,310
Receivable for Fund shares sold 706,522
Receivable from Administrator (Note 4) 26,174
Deferred organization expenses (Note 1D) 46,005
--------------
Total assets $30,669,011
Liabilities:
Dividends payable $113,042
Payable to affiliate -
Trustees' fees 13
Accrued organization expense 8,225
Accrued expenses 13,117
----------
Total liabilities 134,397
--------------
Net Assets for 2,854,506 shares of beneficial interest outstanding $30,534,614
==============
Sources of Net Assets:
Proceeds from sales of shares (including shares issued to shareholders electing
to receive payment of distributions in shares), less cost of shares redeemed $29,726,653
Accumulated net realized gain on investment transactions
(computed on the basis of identified cost) 4,443
Unrealized appreciation of investments (computed on the basis of identified cost) 803,775
Accumulated distributions in excess of net investment income (257)
--------------
Total $30,534,614
==============
Net Asset Value and Redemption Price Per Share
($30,534,614 (divided by) 2,854,506 shares of beneficial interest) $10.70
======
Computation of Offering Price:
Offering price per share (100(divided by)96.25) of $10.70 $11.12
On sales of $100,000 or more the offering price is reduced. ======
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of Operations
- --------------------------------------------------------------------------------------------------------
For the period from the start of business, August 7, 1995 to January 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Income (Note 1B):
Interest income allocated from Portfolio $ 542,012
Expenses allocated from Portfolio (4,721)
------------
Total investment income $ 537,291
Expenses:
Compensation of Trustees not members of the
Administrator's organization (Note 4) $ 51
Custodian fee (Note 4) 526
Transfer and dividend disbursing agent fees 5,638
Printing and postage 1,751
Legal and accounting services 209
Registration fees 14,645
Amortization of organization expenses (Note 1D) 4,695
Miscellaneous 1,375
------------
Total expenses $ 28,890
Deduct -
Allocation of expenses to the Administrator (Note 4) 26,174
------------
Net expenses 2,716
------------
Net investment income $ 534,575
Realized and Unrealized Gain from Portfolio:
Net realized gain on investments (identified cost basis) $4,443
Unrealized appreciation of investments 803,775
-----------
Net realized and unrealized gain on investments 808,218
------------
Net increase in net assets resulting from operations $1,342,793
============
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- -------------------------------------------------------------------------------------------
For the period from the start of business, August 7, 1995 to January 31, 1996 (Unaudited)
- -------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets:
From operations -
<S> <C>
Net investment income $ 534,575
Net realized gain on investments 4,443
Unrealized appreciation of investments 803,775
------------
Net increase in net assets resulting from operations $ 1,342,793
------------
Distributions to shareholders-
From net investment income $ (534,575)
In excess of net investment income (257)
------------
Total distributions to shareholders $ (534,832)
------------
Transactions in shares of capital stock (Note 3) -
Proceeds from sale of shares $ 30,289,128
Net asset value of shares issued to shareholders in
payment of distributions declared 173,528
Cost of shares redeemed (736,003)
------------
Net increase in net assets from Fund share transactions $ 29,726,653
------------
Net increase in net assets $ 30,534,614
Net Assets:
At beginning of period --
------------
At end of period (including accumulated distributions in
excess of net investment income of $257) $ 30,534,614
============
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights
- -------------------------------------------------------------------------------------------
For the period from the start of business, August 7, 1995 to January 31, 1996 (Unaudited)
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value - Beginning of period $10.000
--------
Income from operations:
Net investment income $ 0.340
Net realized and unrealized gain on investments 0.700
--------
Total income from operations $ 1.040
--------
Less distributions:
From net investment income $ (0.340)
--------
Net asset value - End of period $10.700
========
Total Return (1) 10.50%
Ratios/Supplemental Data**
Net assets, end of period (000's omitted) $30,535
Ratio of net expenses to average net assets * 0.09%+
Ratio of net investment income to average net assets 6.60%+
** The expenses related to the operation of the Fund and 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 $0.291
==========
Ratios/Supplemental Data:
Expenses (*) 1.04%+
Net investment income 5.65%+
+ Computed on an annualized basis.
* Includes the Fund's share of High Yield Municpals Portfolio's allocated expenses.
(1) 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.
Dividends and 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.
See notes to financial statements
</TABLE>
<PAGE>
Notes to Financial Statements
(Unaudited)
(1) Significant Accounting Policies
EV Traditional High Yield Municipals Fund (the Fund) is a non- diversified
series of Eaton Vance Municipal Trust II (the Trust). The Trust is an entity of
the type commonly known as a Massachusetts business trust and is registered
under the Investment Company Act of 1940, as amended as an open-end management
investment company. The Fund invests all of its investable assets in interests
in the High Yield Municipals Portfolio (the Portfolio), a New York Trust, having
the same investment objective as the Fund. The value of the Fund's investment in
the Portfolio reflects the Fund's proportionate interest in the net assets of
the Portfolio (41.5% at January 31, 1996). The performance of the Fund is
directly affected by the performance of the Portfolio. The financial statements
of the Portfolio, including the portfolio of investments, are included elsewhere
in this report and should be read in conjunction with the Fund's financial
statements. The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its financial
statements. The policies are in conformity with generally accepted accounting
principles.
A. Investment Valuation -- Valuation of securities by the Portfolio is discussed
Note 1 of the Portfolio's Notes to Financial Statements which are included
elsewhere in this report.
B. Income -- The Fund's net investment income consists of the Fund's pro rata
share of the net investment income of the Portfolio, less all actual accrued
expenses of the Fund determined in accordance with generally accepted accounting
principles.
C. Federal Taxes -- The Fund's policy is to comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute to shareholders each year all of its taxable and tax-exempt income,
including any net realized gain on investments. Accordingly, no provision for
federal income or excise tax is necessary. Dividends paid by the Fund from the
net tax-exempt interest on municipal bonds allocated from the Portfolio are not
includable by shareholders as gross income for federal income tax purposes
because the Fund and Portfolio intend to meet certain requirements of the
Internal Revenue Code applicable regulated investment companies which will
enable the Fund to pay exempt-interest dividends. The portion of such interest,
if any, earned on private activity bonds issued after August 7, 1986, may be
considered a tax preference item to shareholders.
D. Deferred Organization Expenses -- Costs incurred by the Fund in connection
with its organization, are being amortized on the straight- line basis over five
years.
E. Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenue and expense during the reporting period. Actual results could differ
from those estimates.
F. Other -- Investment transactions are accounted for on a trade date basis.
(2) Distributions to Shareholders
The net income of the Fund is determined daily and substantially all of the net
income so determined is declared as a dividend to shareholders of record at the
time of declaration. Distributions are paid monthly. Distributions of allocated
realized capital gains, if any, are made at least annually. Shareholders may
reinvest capital gain distributions in additional shares of the Fund at the net
asset value as of the ex- dividend date. Distributions are paid in the form of
additional shares or, at the election of the shareholder, in cash. The Fund
distinguishes between distributions on a tax basis and a financial reporting
basis. Generally accepted accounting principles require that only distributions
in excess of tax basis earnings and profits be reported in the financial
statements as a return of capital. Differences in the recognition or
classification of income between the financial statements and tax earnings and
profits which result in temporary over distributions for financial statement
purposes are classified as distributions in excess of net investment income or
accumulated net realized gains. Permanent differences between book and tax
accounting relating to distributions are reclassified to paid-in capital.
(3) Share of Beneficial Interest
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares for the period from the start of business, August 7,
1995, to January 31, 1996, were as follows:
Sales 2,907,342
Issued to shareholders electing to receive
payments of distributions in Fund shares 16,353
Redemptions (69,189)
------------
Net increase 2,854,506
============
(4) Transactions with Affiliates
Eaton Vance Management (EVM) serves as the administrator of the Fund, but
received no compensation. The portfolio has engaged Boston Management and
Research (BMR), a subsidiary of EVM, to render investment advisory services. See
Note 2 of the Portfolio's Notes to Financial Statements which are included
elsewhere in this report. To enhance the net income of the Fund $26,174 of
expenses related to the operation of the Fund were allocated to EVM. Except as
to Trustees of the Fund and the Portfolio who are not members of EVM's or BMR's
organization, officers and Trustees receive remuneration for their services to
the Fund out of such investment adviser fee. Eaton Vance Distributors, Inc.
(EVD), a subsidiary of EVM and the Fund's principal underwriter did not receive
any portion of the sales charge on sales of Fund shares for the period ended
January 31, 1996. EVD also receives a contingent deferred sales charge (CDSC) on
shareholder redemptions made within one year of purchase, where initial
investment in the Fund was $1 million or more. EVD received no CDSC during the
period. Investors Bank & Trust Company (IBT) serves as custodian to the Fund and
the Portfolio. Prior to November 10, 1995, IBT was an affiliate of EVM. Pursuant
to the respective custodian agreements, IBT receives a fee reduced by credits
which are determined based on the average cash balances the Fund or the
Portfolio maintains with IBT. No significant credit balances were used to reduce
the Fund's custody fees. Certain of the officers and Trustees of the Fund and
the portfolio are officers and/or directors/trustees of the above organizations
(Note 5).
(5) Service Plan
The Fund has adopted a Service Plan designed to meet the requirements of Rule
12b-1 under the Investment Company Act of 1940 and the service fee requirements
of the revised sales charge rule of The National Association of Securities
Dealers, Inc. The Service Plan provides that the Fund may make service fee
payments to the Principal Underwriter, Eaton Vance Distributors, Inc. (EVD), a
subsidiary of Eaton Vance Management, Authorized Firms or other persons in
amounts not exceeding 0.25% of the Fund's average daily net assets for any
fiscal year. The Trustees 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 exceeding 0.25% of the Fund's average daily net
assets for any fiscal year which is attributable to shares of the Fund sold by
such persons and remaining outstanding for at least one year. Service fee
payments are made for personal services and/or the maintenance of shareholder
accounts. The Fund expects to begin accruing for its service fee payments during
the quarter ending September 30, 1996.
Certain of the officers and Trustees of the Fund are officers and directors of
EVD.
(6) Investment Transactions
Increases and decreases in the Fund's investment in the Portfolio for the period
from the start of business, August 7, 1995, to January 31, 1996 aggregated
$29,594,449 to $1,049,648, respectively.
<PAGE>
<TABLE>
<CAPTION>
High Yield Municipals Portfolio
Portfolio of Investments
January 31, 1996
(Unaudited)
- ---------------------------------------------------------------------------------------------------------------------
Tax-Exempt Investments -- 100%
- ---------------------------------------------------------------------------------------------------------------------
Principal
Amount
(000
Omitted) Security Value
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Transportation- 7.7%
$1,500 Denver, Colorado, Special Facilities Airport Revenue Bonds, United Airlines
Project (AMT), 6.875%, 10/1/32 $1,551,645
1,500 Kenton County, Kentucky, Special Facilities Revenue Bonds, Delta Airlines, Inc.
Project (AMT), 6.125%, 2/1/22 1,477,935
1,000 Missouri Bridge System, Lake of the Ozarks Bridge Corp., 6.4%, 12/1/25 991,990
1,500 Tulsa, Oklahoma, Municipal Airport, American Airlines, 6.25%, 6/1/20 1,514,520
------------------
$5,536,090
------------------
Assisted Living- 7.0%
$2,500 Arizona Health Facilities Authority, Care Institute-Mesa Project, 7.625%, 1/1/26 $2,360,075
1,000 Chester County, Pennsylvania, Industrial Development Authority, Senior
LifeChoice of Kimberton (AMT), 8.5%, 9/1/25 1,019,220
1,600 Delaware County, Pennsylvania, Industrial Development Authority, Senior
Quarters at Glen Riddle Project (AMT), 8.625%, 9/1/25 1,646,224
------------------
$190,969,722
------------------
Cogeneration Facilities- 14.9%
$2,500 Maryland Energy Cogeneration, AES Warrior Run Project (AMT), 7.4%, 9/1/19 $2,637,100
2,000 Palm Beach County, Florida, Osceola Power Project (AMT), 6.95%, 1/1/22 2,077,280
4,950 Pennsylvania Economic Development Financing Authority, Northhampton
Generating Project (AMT), 6.6%, 1/1/19 4,953,218
1,000 Pennsylvania Economic Development Finance Authority, Northhampton
Generating Project-Subordinated (AMT), 6.875%, 1/1/11 995,770
------------------
$10,663,368
------------------
Escrowed- 4.4%
$1,400 Colorado Health Facilities Authority, Liberty Heights Project, 0%, 7/15/20 $303,520
2,995 Colorado Health Facilities Authority, Liberty Heights Project, 0%, 7/15/22 573,003
10,000 Dawson Ridge Metropolitan District #1, Douglas County, Colorado, 0%, 10/1/22 1,808,200
3,295 Illinois Development Finance Authority, Regency Park Project, 0%, 7/15/25 515,206
------------------
$3,199,929
------------------
Hospitals- 22.3%
$1,750 LaFourche Parish, Louisiana, Hospital Service District #3, 6%, 10/1/23 $1,688,120
3,000 Lufkin, Texas, Memorial Health System, 6.875%, 2/15/26 2,967,960
1,000 Michigan Housing Finance Authority, Presbyterian Village, 6.5, 1/1/25 989,630
275 Missouri Health and Education, Jefferson Memorial Hospital, 6%, 8/15/23 254,504
1,000 Montgomery County, Pennsylvania, United Hospitals, 8.375%, 11/1/11 1,066,080
1,000 Montgomery County, Pennsylvania, United Hospitals, 7.5%, 11/1/15 1,019,370
2,500 Philadelphia, Pennsylvania, Temple Hospital-93A, 6.625%, 11/15/23 2,623,450
$2,350 Prince George's, Maryland, Greater Southeast Health, 6.375%, 1/1/23 2,235,555
1,500 Scranton-Lackawanna, Pennsylvania, Moses Taylor Hospital, 8.5%, 7/1/20 1,638,255
1,500 Vermont Health & Education, Northwest Medical Center Project, 6.25%, 9/1/18 1,478,490
------------------
$15,961,414
------------------
Industrial Development Revenue Bonds - 18.5%
$2,500 East Chicago, Indiana, PCR, Inland Steel, 6.8%, 6/1/13 $2,588,325
2,500 Kansas City, Missouri, IDA, AFCO Cargo MCI (AMT), 8.5%, 1/1/17 2,532,225
1,000 Michigan Strategic, PCR, Roseville K-Mart Co., 6.25%,10/1/06 858,190
1,000 Michigan Strategic, PCR, S.D. Warren Series 87C (AMT), 7.375%, 1/15/22 1,048,950
1,000 Mobile, Alabama, IDA, Mobile Energy Project, 6.95%, 1/1/20 1,064,440
1,135 New Albany, Indiana, IDA, K-Mart Co., 7.4%, 6/1/06 1,049,773
500 New Jersey EDA, 777 Pattison Ave., Inc. (AMT), 8.95%, 12/15/18 530,405
2,000 Oregon State EDA, Georgia Pacific Corp. (AMT), 6.35%, 8/1/25 2,010,240
500 Philadelphia, Pennsylvania, IDA, Refrigerated Enterprises (AMT), 9.05%, 12/1/19 533,745
1,000 Polk County, Florida, IDA, IMC Fertilizer (AMT), 7.525%, 1/1/15 1,060,880
------------------
$13,277,173
------------------
Insured General Obligation - 0.8%
$600 California State, General Obligation (FGIC), 4.75%, 9/1/23 $548,772
------------------
Lease/Certificate of Participation - 2.7%
$9,190 Los Angeles, California, COPs, Disney Parking Project, 0%, 9/1/19 $1,916,023
------------------
Multi-Purpose Utilities- 2.9%
$2,000 Southern California Public Power Authority, Residual Interest Bonds, $2,110,000
Variable Rate, 7/1/12 (1)
------------------
Nursing Homes- 11.8%
$1,250 Greene County, Ohio, Fairview Extended Care-91, 10.125%, 1/1/11 $1,420,525
1,850 Massachusetts Health & Education Finance Authority, Fairview Extended Care,
10.125%,1/1/11 2,109,315
2,500 Massachusetts Industrial Finance Authority, AGE Institute of Massachusetts,
8.05%, 11/1/25 2,523,825
1,000 Mississippi Business Finance Corp.,Magnolia Health Care 95A, 7.99%, 7/1/25 989,820
1,250 Wilkins Area, Pennsylvania, Industrial Development Authority, Fairview Extended
Care, 10.25%, 1/1/21 1,435,900
------------------
$8,479,385
------------------
Solid Waste- 7.0%
$10,090 Mercer County, New Jersey, Solid Waste Improvement Bonds (AMT), 0%, 4/1/15 $2,536,222
2,500 Robbins, Cook County, Illinois, Resource Recovery 94B, 9.25%, 10/15/14 2,453,700
------------------
$4,989,922
------------------
Total Tax-Exempt Investments (identified cost $70,055,986) $71,707,595
==================
(1) The above designated security has been issued as an inverse floater bond.
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
High Yield Municipals Portfolio
Financial Statements
Statement of Assets and Liabilities
- -------------------------------------------------------------------------------------------------------------------------
January 31, 1996 (Unaudited)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets:
Investments, at value (Note 1A) (identified cost, $70,055,986) $71,707,595
Cash 471,713
Interest receivable 863,416
Receivable from Investment Adviser (Note 2) 10,465
Deferred organization expenses (Note 1D) 20,008
------------------
Total assets $73,073,197
Liabilities:
Payable for investments purchased $980,340
Payable to affiliate --
Trustees' fees 13
Accrued expenses 15,377
------------------
Total liabilities 995,730
------------------
Net Assets applicable to investors' interest in Portfolio $72,077,467
==================
Sources of Net Assets:
Net proceeds from capital contributions and withdrawals $70,425,858
Unrealized appreciation of investments (computed on the basis of identified cost) 1,651,609
------------------
Total $72,077,467
==================
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Statement of Operations
- -------------------------------------------------------------------------------------------------------
For the period from the start of business, August 7, 1995 to January 31, 1996 (Unaudited)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Income (Note 1B):
Interest Income $1,196,627
Expenses --
Investment adviser fee (Note 2) $100,763
Compensation of Trustees not members of the
Investment Adviser's organization (Note 2) 51
Custodian fee (Note 2) 623
Interest expense (Note 5) 15,725
Legal and accounting services 1,460
Amortization of organization expenses (Note 1D) 2,042
Miscellaneous 907
--------
Total expenses $121,571
--------
Deduct -
Reduction of investment adviser fee (Note 2) $100,763
Allocation of expenses to adviser (Note 2) 10,465
--------
Total $111,228
--------
Net expenses 10,343
-----------
Net investment income $1,186,284
Realized and Unrealized Gain on Investments:
Net realized gain on investments (identified cost basis) $9,767
Unrealized appreciation of investments 1,651,609
---------
Net realized and unrealized gain on investments 1,661,376
-----------
Net increase in net assets resulting from operations $2,847,660
===========
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Statement of Changes in Net Assets
- ------------------------------------------------------------------------------------
For the period from the start of business,
August 7, 1995 to January 31, 1996 (Unaudited)
- ------------------------------------------------------------------------------------
<S> <C>
Increase (Decrease) in Net Assets:
From operations --
Net investment income $1,186,284
Net realized gain on investments 9,767
Unrealized appreciation of investments 1,651,609
------------------
Net increase in net assets resulting from operations $2,847,660
------------------
Capital transactions --
Contributions $71,481,472
Withdrawals (2,351,685)
------------------
Increase in net assets resulting from capital transactions $69,129,787
------------------
Total increase in net assets $71,977,447
Net Assets:
At beginning of period 100,020
------------------
At end of period $72,077,467
==================
- ------------------------------------------------------------------------------------
Supplementary Data
- ------------------------------------------------------------------------------------
For the period from the start of business,
August 7, 1995 to January 31, 1996 (Unaudited)
- ------------------------------------------------------------------------------------
Ratios (as a percentage of net assets):
Expenses 0.06%+
Net investment income 6.95%+
Portfolio Turnover 32%
* The operating expenses of the Portfolio reflect a
reduction of the investment adviser fee and an allocation of
expenses to the Investment Adviser. Had such actions not been
taken, the ratios would have been as follows:
Ratios (as a percentage of net assets):
Expenses 0.71%+
Net investment income 6.30%+
+ Annualized.
See notes to financial statements
</TABLE>
<PAGE>
Notes to Financial Statements
(Unaudited)
(1) Significant Accounting Policies
High Yield Municipals Portfolio (the Portfolio) is registered under the
Investment Company Act of 1940 as a non-diversified open-end management
investment company. The Portfolio, which was organized as a trust under the laws
of the State of New York on May 1, 1995, seeks to provide high current income
exempt from regular federal income tax. The Declaration of Trust permits the
Trustees to issue interests in the Portfolio. The following is a summary of
significant accounting policies of the Portfolio. The policies are in conformity
with generally accepted accounting principles.
A. Investment Valuations -- Municipal bonds are normally valued on the basis of
valuations furnished by a pricing service. Taxable obligations, if any, for
which price quotations are readily available are normally valued at the mean
between the latest bid and asked prices. Futures contracts listed on commodity
exchanges are valued at closing settlement prices. Short-term obligations,
maturing in sixty days or less, are valued at amortized cost, which approximates
value. Investments for which valuations or market quotations are unavailable are
valued at fair value using methods determined in good faith by or at the
direction of the Trustees.
B. Income -- Interest income is determined on the basis of interest accrued,
adjusted for amortization of premium or discount when required for federal
income tax purposes.
C. Income Taxes -- The Portfolio is treated as a partnership for Federal tax
purposes. No provision is made by the Portfolio for federal or state taxes on
any taxable income of the Portfolio because each investor in the Portfolio is
ultimately responsible for the payment of any taxes. Since some of the
Portfolio's investors are regulated investment companies that invest all or
substantially all of their assets in the Portfolio, the Portfolio normally must
satisfy the applicable source of income and diversification requirements (under
the Internal Revenue Code) in order for its investors to satisfy them. The
Portfolio will allocate at least annually among its investors each investors'
distributive share of 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. Interest income received by the Portfolio on
investments in municipal bonds, which is excludable from gross income under the
Internal Revenue Code, will retain its status as income exempt from Federal
income tax when allocated to the Portfolio's investors. The portion of such
interest, if any, earned on private activity bonds issued after August 7, 1986
may be considered a tax preference item for investors.
D. Deferred Organization Expenses -- Costs incurred by the Portfolio in
connection with its organization are being amortized on the straight- line basis
over five years.
E. Financial Futures Contracts -- Upon the entering of a financial futures
contract, the Portfolio is required to deposit ("initial margin") either in cash
or securities an amount equal to a certain percentage of the purchase price
indicated in the financial futures contract. Subsequent payments are made or
received by the Portfolio ("margin maintenance") each day, dependent on the
daily fluctuations in the value of the underlying security, and are recorded for
book purposes as unrealized gains or losses by the Portfolio. The Portfolio's
investment in financial futures contracts is designed only to hedge against
anticipated future changes in interest rates. Should interest rates move
unexpectedly, the Portfolio may not achieve the anticipated benefits of the
financial futures contracts and may realize a loss.
F. Legal Fees -- Legal fees and other related expenses incurred as part of
negotiations of the terms and requirements of capital infusions, or that are
expected to result in the restructuring of or a plan of reorganization for an
investment are recorded as realized losses. Ongoing expenditures to protect or
enhance an investment are treated as operating expenses.
G. When-issued and Delayed Delivery Transactions -- The Portfolio may engage in
when-issued and delayed delivery transactions. The Portfolio records when-issued
securities on trade date and maintains security positions such that sufficient
liquid assets will be available to make payments for the securities purchased.
Securities purchased on a when- issued or delayed delivery basis are marked to
market daily and begin accruing interest on settlement date.
H. Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenue and expense during the reporting period. Actual results could differ
from those estimates.
I. Other -- Investment transactions are accounted for on a trade date basis.
(2) Investment Adviser Fee and Other Transactions with Affiliates
The investment adviser fee is earned by Boston Management and Research (BMR), a
wholly-owned subsidiary of Eaton Vance Management (EVM), as compensation for
management and investment advisory services rendered to the Portfolio. The fee
is based upon a percentage of average daily net assets plus a percentage of
gross income, (i.e. income other than gains from the sale of securities). For
the period from the start of business, August 7, 1995, to January 31, 1996, the
fee was equivalent to 0.59% (annualized) of the Portfolio's average net assets
for such period and amounted to $100,763. To enhance the net income of the
Portfolio, BMR made a reduction of its fee in the amount of $100,763 and $10,465
of expenses related to the operation of the Portfolio were allocated to BMR.
Except as to Trustees of the Portfolio who are not members of EVM's or BMR's
organization, officers and Trustees receive remuneration for their services to
the Portfolio out of such investment adviser fee. Investors Bank and Trust
Company (IBT) serves as custodian of the Portfolio. Prior to November 10, 1995,
IBT was an affiliate of EVM and BMR. Pursuant to the custodian agreement, IBT
receives a fee reduced by credits which are determined based on the average
daily cash balances the Portfolio maintains with IBT. No significant credit
balances were used to reduce the fund's custody fees. Certain of the officers
and Trustees of the Portfolio are officers and directors/trustees of the above
organizations.
Trustees of the Portfolio that 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 the Trustees Deferred Compensation Plan. For the
period ended January 31, 1996, no significant amounts have been deferred.
(3) Investments
Purchases and sales of investments, other that U.S. Government securities and
short term obligations, aggregated $82,921,735 and $12,950,298, respectively.
(4) Federal Income Tax Basis of Investments
The cost and unrealized appreciation/depreciation in value of the investments
owned at January 31, 1996, as computed on a federal income tax basis, were as
follows:
Aggregate cost $70,055,986
===========
Gross unrealized appreciation $ 1,979,931
Gross unrealized depreciation 328,322
-----------
Net unrealized appreciation $ 1,651,609
===========
(5) Line of Credit
The Portfolio participates with other portfolios and funds managed by BMR and
EVM in a $120 million unsecured line of credit agreement with a bank. The line
of credit consists of a $20 million committed facility and a $100 million
discretionary facility. Borrowings will be made by the Portfolio solely to
facilitate the handling of unusual and/or unanticipated short-term cash
requirements. Interest is charged to each Portfolio based on its borrowings at
an amount above either the bank's adjusted certificate of deposit rate, a
variable adjusted certificate of deposit rate, or a federal funds effective
rate. In addition, a fee computed at an annual rate of 1/4 of 1% on the $20
million committed facility and on the daily unused portion of the $100 million
discretionary facility is allocated among the participating funds and portfolios
at the end of each quarter. For the period ended January 31, 1996, the average
daily loan balance was $1,395,000. The maximum borrowings during the period
ended January 31, 1996 was $4,493,000.
(6) Financial Instruments
The Portfolio regularly trades in financial instruments with off-balance sheet
risk in the normal course of its investing activities to assist in managing
exposure to various market risks. These financial instruments include written
options and futures contracts and may involve, to a varying degree, elements of
risk in excess of the amounts recognized for financial statement purposes.
The notional or contractual amounts of these instruments represent the
investment the Portfolio has in particular classes of financial instruments and
does not necessarily represent the amounts potentially subject to risk. The
measurement of the risks associated with these instruments is meaningful only
when all related and offsetting transactions are considered. The Portfolio did
not have any open obligations under these financial instruments at January 31,
1996.
<PAGE>
EV TRADITIONAL
HIGH YIELD
MUNICIPALS FUND
STATEMENT OF
ADDITIONAL INFORMATION
MAY 20, 1996
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, BOS725, P.O. Box 1559, Boston, MA 02104
(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:
For EV TRADITIONAL FLORIDA INSURED MUNICIPALS FUND (Florida
Insured);
EV TRADITIONAL HAWAII MUNICIPALS FUND (Hawaii); and
EV TRADITIONAL KANSAS MUNICIPALS FUND (Kansas):
Financial Highlights for the period from the start of business,
March 3, 1994, March 14, 1994, and March 3, 1994, for Florida
Insured, Hawaii and Kansas, respectively, to January 31, 1995
For EV MARATHON HIGH YIELD MUNICIPALS FUND:
Financial Highlights for the period from the start of business,
August 7, 1995, to January 31, 1996 (Unaudited)
For EV TRADITIONAL HIGH YIELD MUNICIPALS FUND:
Financial Highlights for the period from the start of business,
August 7, 1995, to January 31, 1996 (Unaudited)
INCLUDED IN PART B:
FOR EV MARATHON HIGH YIELD MUNICIPALS FUND:
Financial Statements for EV Marathon High Yield Municipals Fund:
Statement of Assets and Liabilities as of January 31, 1996
(Unaudited)
Statement of Operations for the period from the start of
business, August 7, 1995, to January 31, 1996 (Unaudited)
Statement of Changes in Net Assets for the period from the
start of business, August 7, 1995, to January 31, 1996
(Unaudited)
Financial Highlights for the period from the start of
business, August 7, 1995, to January 31, 1996 (Unaudited)
Notes to Financial Statements
For EV TRADITIONAL HIGH YIELD MUNICIPALS FUND:
Financial Statements for EV Traditional High Yield Municipals
Fund:
Statement of Assets and Liabilities as of January 31, 1996
(Unaudited)
Statement of Operations for the period from the start of
business, August 7, 1995, to January 31, 1996 (Unaudited)
Statement of Changes in Net Assets for the period from the
start of business, August 7, 1995, to January 31, 1996
(Unaudited)
Financial Highlights for the period from the start of
business, August 7, 1995, to January 31, 1996 (Unaudited)
Notes to Financial Statements
Financial Statements for HIGH YIELD MUNICIPALS PORTFOLIO:
Portfolio of Investments as of January 31, 1996 (Unaudited)
Statement of Asset and Liabilities as of January 31, 1996
(Unaudited)
Statement of Operations for the period from the start of
business, August 7, 1995, to January 31, 1996 (Unaudited)
Statement of Changes in Net Assets for the period from the start
of business, August 7, 1995, to January 31, 1996 (Unaudited)
Supplementary Data for the period from the start of business,
August 7, 1995, to January 31, 1996 (Unaudited)
Notes to Financial Statements
(b) EXHIBITS:
(1)(a) Declaration of Trust of Eaton Vance Municipals Trust II
dated October 25, 1993 filed herewith.
(b) Amendment and Restatement of Establishment and Designation
of Series of Shares dated May 15, 1995 filed herewith.
(c) Amendment and Restatement of Establishment and Designation
of Series of Shares dated December 18, 1995 filed
herewith.
(2)(a) By-Laws dated October 25, 1993, filed herewith.
(b) Amendment to By-Laws of Eaton Vance Municipals Trust II
dated December 13, 1993 filed herewith.
(3) Not applicable
(4) Not applicable
(5) Not applicable
(6)(a)(1) Distribution Agreement between EV Classic Florida
Insured Tax Free Fund and Eaton Vance Distributors, Inc.
dated February 25, 1994, with attached schedule pursuant
to Rule 8b- 31 under the Investment Company Act of 1940,
as amended, regarding other series of Registrant, filed as
Exhibit (6)(a)(1) to Post-Effective Amendment No. 1 and
incorporated herein by reference.
(2) Distribution Agreement between EV Marathon Florida Insured
Tax Free Fund and Eaton Vance Distributors, Inc. dated
February 25, 1994, with attached schedule pursuant to Rule
8b-31 under the Investment Company Act of 1940, as
amended, regarding other series of Registrant, filed as
Exhibit (6)(a)(2) to Post-Effective Amendment No. 1 and
incorporated herein by reference.
(3) Disribution Agreement between EV Traditional Florida
Insured Tax Free Fund and Eaton Vance Distributors, Inc.
dated February 25, 1994, filed as Exhibit (6)(a)(3) to
Post- Effective Amendment No. 1 and incorporated herein by
reference.
(4) Amended Distribution Agreement between Eaton Vance
Municipals Trust II (on behalf of its Marathon series) and
Eaton Vance Distributors, Inc. dated June 19, 1995, with
attached schedule, filed herewith.
(5) Amended Distribution Agreement between Eaton Vance
Municipals Trust II (on behalf of its Traditional series)
and Eaton Vance Distributors, Inc. dated June 19, 1995,
with attached schedules (including Schedule A dated
February 1, 1996) filed herewith.
(6) Amended Distribution Agreement between Eaton Vance
Municipals Trust II (on behalf of its Classic series) and
Eaton Vance Distributors, Inc. dated January 27, 1995,
with attached schedules (including Amended Schedule A
dated February 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) Not applicable
(8)(a) Custodian Agreement between Eaton Vance Municipals Trust II
and Investors Bank & Trust Company dated August 1,
1995, filed herewith.
(b) Amendment to Custodian Agreement with Investors Bank &
Trust Company dated October 23, 1995 filed herewith.
(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)
and Eaton Vance Management, filed herewith.
(10) Not applicable
(11) Consent of Independent Certified Public Accountants of
Eaton Vance Municipals Trust II on behalf of EV
Traditional Florida Insured Municipals Fund, EV
Traditional Hawaii Municipals Fund and EV Traditional
Kansas Municipals Fund filed herewith.
(12) Not applicable
(13) Not applicable
(14) Not applicable
(15)(a) Distribution Plan pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended, for EV Classic
Florida Insured Tax Free Fund dated February 25, 1994,
with attached schedule pursuant to Rule 8b-31 under the
Investment Company Act of 1940, as amended, regarding
other series of Registrant, filed as Exhibit (15)(a) to
Post- Effective Amendment No. 1 and incorporated herein by
reference.
(b) Distribution Plan pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended, for EV
Marathon Florida Insured Tax Free Fund dated February 25,
1994, with attached schedule pursuant to Rule 8b-31 under
the Investment Company Act of 1940, as amended, regarding
other series of Registrant, filed as Exhibit (15)(b) to
Post- Effective Amendment No. 1 and incorporated herein by
reference.
(c) Service Plan pursuant to Rule 12b-1 under the Investment
Company Act of 1940, as amended, for EV Traditional
Florida Insured Tax Free Fund dated February 25, 1994,
filed as Exhibit (15)(c) to Post-Effective Amendment No. 1
and incorporated herein by reference.
(d) 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
herewith.
(e) 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
herewith.
(f) 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 Classic
series) dated January 27, 1995, with attached schedules
(including Amended Schedule A dated February 1, 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 herewith.
(b) Power of Attorney for Florida Insured Tax Free Portfolio,
Hawaii Tax Free Portfolio and Kansas Tax Free Portfolio
dated January 10, 1994 filed herewith.
(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.
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 January 31, 1996
EV Classic Florida Insured Municipals Fund 10
EV Marathon Florida Insured Municipals Fund 281
EV Traditional Florida Insured Municipals Fund 35
EV Traditional Hawaii Municipals Fund 17
EV Marathon Hawaii Municipals Fund 606
EV Traditional Kansas Municipals Fund 46
EV Marathon Kansas Municipals Fund 268
EV Marathon High Yield Municipals Fund 942
EV Traditional High Yield Municipals Fund 830
ITEM 27. INDEMNIFICATION
Reference is hereby made to Article V of the Registrant's Declaration of
Trust, filed as Exhibit (1) to the original Registration Statement.
Registrant's Trustees and officers are insured under a standard mutual fund
errors and omissions insurance policy covering incurred by reason of negligent
errors and omissions committed in their capacities as such.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Reference is made to the information set forth under the caption
"Investment Adviser and Administrator" in the SAI which is incorporated herein
by reference.
ITEM 29. PRINCIPAL UNDERWRITER
(a) Registrant's principal underwriter, Eaton Vance Distributors, Inc., a
wholly-owned subsidiary of Eaton Vance Management, is the principal
underwriter for each of the investment companies named below:
<TABLE>
<CAPTION>
<S> <C>
EV Classic California Municipals Fund EV Classic Total Return Fund
EV Classic Connecticut Municipals Fund EV Marathon Alabama Municipals Fund
EV Classic Florida Insured Municipals Fund EV Marathon Arizona Limited Maturity
EV Classic Florida Limited Maturity Municipals Fund
Municipals Fund EV Marathon Arizona Municipals Fund
EV Classic Florida Municipals Fund EV Marathon Arkansas Municipals Fund
EV Classic Government Obligations Fund EV Marathon California Limited Maturity
EV Classic Greater China Growth Fund Municipals Fund
EV Classic Growth Fund EV Marathon California Municipals Fund
EV Classic High Income Fund EV Marathon Colorado Municipals Fund
EV Classic Information Age Fund EV Marathon Connecticut Limited Maturity
EV Classic Investors Fund Municipals Fund
EV Classic Massachusetts Limited Maturity EV Marathon Connecticut Municipals Fund
Municipals Fund EV Marathon Emerging Markets Fund
EV Classic National Limited Maturity EV Marathon Florida Insured Municipals Fund
Municipals Fund EV Marathon Florida Limited Maturity
EV Classic National Municipals Fund Municipals Fund
EV Classic New Jersey Municipals Fund EV Marathon Florida Municipals Fund
EV Classic New York Limited Maturity EV Marathon Georgia Municipals Fund
Municipals Fund EV Marathon Gold & Natural Resources Fund
EV Classic New York Municipals Fund EV Marathon Government Obligations Fund
EV Classic Pennsylvania Municipals Fund EV Marathon Greater China Growth Fund
EV Classic Rhode Island Municipals Fund EV Marathon Greater India Fund
EV Classic Senior Floating-Rate Fund EV Marathon Growth Fund
EV Classic Strategic Income Fund EV Marathon Hawaii Municipals Fund
EV Classic Special Equities Fund EV Marathon High Income Fund
EV Classic Stock Fund EV Marathon High Yield Municipals Fund
<PAGE>
EV Marathon Information Age Fund EV Traditional Florida Municipals Fund
EV Marathon Investors Fund EV Traditional Georgia Municipals Fund
EV Marathon Kansas Municipals Fund EV Traditional Government Obligations Fund
EV Marathon Kentucky Municipals Fund EV Traditional Greater China Growth Fund
EV Marathon Louisiana Municipals Fund EV Traditional Greater India Fund
EV Marathon Maryland Municipals Fund EV Traditional Growth Fund
EV Marathon Massachusetts Limited Maturity EV Traditional Hawaii Municipals Fund
Municipals Fund EV Traditional High Yield Municipals Fund
EV Marathon Massachusetts Municipals Fund Eaton Vance Income Fund of Boston
EV Marathon Michigan Limited Maturity EV Traditional Information Age Fund
Municipals Fund EV Traditional Investors Fund
EV Marathon Michigan Municipals Fund EV Traditional Kansas Municipals Fund
EV Marathon Minnesota Municipals Fund EV Traditional Kentucky Municipals Fund
EV Marathon Mississippi Municipals Fund EV Traditional Louisiana Municipals Fund
EV Marathon Missouri Municipals Fund EV Traditional Maryland Municipals Fund
EV Marathon National Limited Maturity EV Traditional Massachusetts Municipals Fund
Municipals Fund EV Traditional Michigan Limited Maturity
EV Marathon National Municipals Fund Municipals Fund
EV Marathon New Jersey Limited Maturity EV Traditional Michigan Municipals Fund
Municipals Fund EV Traditional Minnesota Municipals Fund
EV Marathon New Jersey Municipals Fund EV Traditional Mississippi Municipals Fund
EV Marathon New York Limited Maturity EV Traditional Missouri Municipals Fund
Municipals Fund Eaton Vance Municipal Bond Fund L.P.
EV Marathon New York Municipals Fund EV Traditional National Limited Maturity
EV Marathon North Carolina Municipals Fund Municipals Fund
EV Marathon Ohio Limited Maturity EV Traditional National Municipals Fund
Municipals Fund EV Traditional New Jersey Limited Maturity
EV Marathon Ohio Municipals Fund Municipals Fund
EV Marathon Oregon Municipals Fund EV Traditional New Jersey Municipals Fund
EV Marathon Pennsylvania Limited Maturity EV Traditional New York Limited Maturity
Municipals Fund Municipals Fund
EV Marathon Pennsylvania Municipals Fund EV Traditional New York Municipals Fund
EV Marathon Rhode Island Municipals Fund EV Traditional North Carolina Municipals Fund
EV Marathon Strategic Income Fund EV Traditional Ohio Limited
EV Marathon South Carolina Municipals Fund Maturity Municipals Fund
EV Marathon Special Equities Fund EV Traditional Ohio Municipals Fund
EV Marathon Stock Fund EV Traditional Oregon Municipals Fund
EV Marathon Tennessee Municipals Fund EV Traditional Pennsylvania Limited Maturity
EV Marathon Texas Municipals Fund Municipals Fund
EV Marathon Total Return Fund EV Traditional Pennsylvania Municipals Fund
EV Marathon Virginia Municipals Fund EV Traditional South Carolina Municipals Fund
EV Marathon West Virginia Municipals Fund EV Traditional Special Equities Fund
EV Traditional Alabama Municipals Fund EV Traditional Stock Fund
EV Traditional Arizona Municipals Fund EV Traditional Tennessee Municipals Fund
EV Traditional Arkansas Municipals Fund EV Traditional Texas Municipals Fund
EV Traditional California Limited Maturity EV Traditional Total Return Fund
Municipals Fund EV Traditional Virginia Municipals Fund
EV Traditional California Municipals Fund EV Traditional West Virginia Municipals Fund
EV Traditional Colorado Municipals Fund Eaton Vance Cash Management Fund
EV Traditional Connecticut Limited Maturity Eaton Vance Liquid Assets Trust
Municipals Fund Eaton Vance Money Market Fund
EV Traditional Connecticut Municipals Fund Eaton Vance Prime Rate Reserves
EV Traditional Emerging Markets Fund Eaton Vance Short-Term Treasury Fund
EV Traditional Florida Insured Municipals Fund Eaton Vance Tax Free Reserves
EV Traditional Florida Limited Maturity Massachusetts Municipal Bond Portfolio
Municipals Fund
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
(b)
(1) (2) (3)
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICE
BUSINESS ADDRESS WITH PRINCIPAL UNDERWRITER WITH REGISTRANT
---------------- -------------------------- --------------------
<S> <C> <C>
James B. Hawkes* Vice President and Director Trustee
William M. Steul* Vice President and Director None
Wharton P. Whitaker* President and Director None
Chris Berg Vice President None
45 Windsor Lane
Palm Beach Gardens, Florida
H. Day Brigham, Jr.* Vice President None
Susan W. Bukima Vice President None
106 Princess Street
Alexandria, Virginia
Jeffrey W. Butterfield Vice President None
9378 Mirror Road
Columbus, Indiana
Mark A. Carlson* Vice President None
Jeffrey Chernoff Vice President None
115 Concourse West
Bright Waters, New York
James S. Comforti Vice President None
1859 Crest Drive
Encinitas, California
Mark P. Doman Vice President None
107 Pine Street
Philadelphia, Pennsylvania
Michael A. Foster Vice President None
850 Kelsey Court
Centerville, Ohio
William M. Gillen Vice President None
280 Rea Street
North Andover, Massachusetts
Hugh S. Gilmartin Vice President None
1531-184th Avenue, NE
Bellevue, Washington
Brian Jacobs* Senior Vice President None
Thomas J. Marcello Vice President None
553 Belleville Avenue
Glen Ridge, New Jersey
Timothy D. McCarthy Vice President None
9801 Germantown Pike
Lincoln Woods Apt. 416
Lafayette Hill, Pennsylvania
Morgan C. Mohrman* Senior Vice President None
James A. Naughton* Vice President None
James L. O'Connor* Vice President None
Thomas Otis* Secretary and Clerk Secretary
George D. Owen Vice President None
1911 Wildwood Court
Blue Springs, Missouri
F. Anthony Robinson Vice President None
510 Gravely Hill Road
Wakefield, Rhode Island
Benjamin A. Rowland, Jr.* Vice President, None
Treasurer and Director
John P. Rynne* Vice President None
George V.F. Schwab, Jr. Vice President None
9501 Hampton Oaks Lane
Charlotte, North Carolina
Cornelius J. Sullivan* Vice President None
David M. Thill Vice President None
126 Albert Drive
Lancaster, New York
Chris Volf Vice President None
6517 Thoroughbred Loop
Odessa, Florida
Sue Wilder Vice President None
141 East 89th Street
New York, New York
- ----------
*Address is 24 Federal Street, Boston, MA 02110
</TABLE>
(c) Not applicable
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All applicable accounts, books and documents required to be maintained by
the Registrant by Section 31(a) of the Investment Company Act of 1940 and the
Rules promulgated thereunder are in the possession and custody of the
Registrant's custodian, Investors Bank & Trust Company, 89 South Street, Boston,
MA 02111, and its transfer agent, First Data Investor Services Group, 53 State
Street, Boston, MA 02104, with the exception of certain corporate documents and
portfolio trading documents which are in the possession and custody of Eaton
Vance Management, 24 Federal Street, Boston, MA 02110. The Registrant is
informed that all applicable accounts, books and documents required to be
maintained by registered investment advisers are in the custody and possession
of Eaton Vance Management.
ITEM 31. MANAGEMENT SERVICES
Not applicable
ITEM 32. UNDERTAKINGS
The Registrant undertakes to 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 Post-
Effective 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 29th day of February, 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 Post-
Effective 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) February 29, 1996
- ------------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and Accounting
/s/ JAMES L. O'CONNOR Officer February 29, 1996
- ------------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee February 29, 1996
- ------------------------------------
DONALD R. DWIGHT
/s/ JAMES B. HAWKES Trustee February 29, 1996
- ------------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee February 29, 1996
- ------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee February 29, 1996
- ------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee February 29, 1996
- ------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee February 29, 1996
- ------------------------------------
JACK L. TREYNOR
*By: /s/ H. DAY BRIGHAM, JR.
---------------------------
As attorney-in-fact
</TABLE>
<PAGE>
SIGNATURES
Florida Insured 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 29th day of February,
1996.
FLORIDA INSURED MUNICIPALS PORTFOLIO
By /s/ THOMAS J. FETTER
-------------------------------
THOMAS J. FETTER, President
<TABLE>
<CAPTION>
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.
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
President (Chief Executive
/s/ THOMAS J. FETTER Officer) February 29, 1996
- ------------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and Accounting
/s/ JAMES L. O'CONNOR Officer February 29, 1996
- ------------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee February 29, 1996
- ------------------------------------
DONALD R. DWIGHT
/s/ JAMES B. HAWKES Trustee February 29, 1996
- ------------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee February 29, 1996
- ------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee February 29, 1996
- ------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee February 29, 1996
- ------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee February 29, 1996
- ------------------------------------
JACK L. TREYNOR
*By: /s/ H. DAY BRIGHAM, JR.
---------------------------
As attorney-in-fact
</TABLE>
<PAGE>
SIGNATURES
Hawaii 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 29th day of February,
1996.
HAWAII 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) February 29, 1996
- ------------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and Accounting
/s/ JAMES L. O'CONNOR Officer February 29, 1996
- ------------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee February 29, 1996
- ------------------------------------
DONALD R. DWIGHT
/s/ JAMES B. HAWKES Trustee February 29, 1996
- ------------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee February 29, 1996
- ------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee February 29, 1996
- ------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee February 29, 1996
- ------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee February 29, 1996
- ------------------------------------
JACK L. TREYNOR
*By: /s/ H. DAY BRIGHAM, JR.
---------------------------
As attorney-in-fact
</TABLE>
<PAGE>
SIGNATURES
Kansas 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 29th day of February,
1996.
KANSAS 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) February 29, 1996
- ------------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and Accounting
/s/ JAMES L. O'CONNOR Officer February 29, 1996
- ------------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee February 29, 1996
- ------------------------------------
DONALD R. DWIGHT
/s/ JAMES B. HAWKES Trustee February 29, 1996
- ------------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee February 29, 1996
- ------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee February 29, 1996
- ------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee February 29, 1996
- ------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee February 29, 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 29th day of February,
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) February 29, 1996
- ------------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and Accounting
/s/ JAMES L. O'CONNOR Officer February 29, 1996
- ------------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee February 29, 1996
- ------------------------------------
DONALD R. DWIGHT
/s/ JAMES B. HAWKES Trustee February 29, 1996
- ------------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee February 29, 1996
- ------------------------------------
SAMUEL L. HAYES, III
Trustee February 29, 1996
- ------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee February 29, 1996
- ------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee February 29, 1996
- ------------------------------------
JACK L. TREYNOR
*By: /s/ H. DAY BRIGHAM, JR.
---------------------------
As attorney-in-fact
</TABLE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
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(1)(a) Declaration of Trust of Eaton Vance Municipals Trust II dated October 25, 1993.
(b) Amendment and Restatement of Establishment and Designation of Series of Shares dated May
15, 1995.
(c) Amendment and Restatement of Establishment and Designation of Series of Shares dated
December 18, 1995.
(2)(a) By-Laws, as amended, dated October 25, 1993.
(b) Amendment to By-Laws of Eaton Vance Municipals Trust II dated December 13, 1993.
(6)(a)(4) Amended Distribution Agreement between Eaton Vance Municipals Trust II (on behalf of its
Marathon series) and Eaton Vance Distributors, Inc.
(5) Amended Distribution Agreement between Eaton Vance Municipals Trust II (on behalf of its
Traditional series) and Eaton Vance Distributors, Inc.
(6) Amended Distribution Agreement between Eaton Vance Municipals Trust II (on behalf of its
Classic series) and Eaton Vance Distributors, Inc.
(8)(a) Custodian Agreement with Investors Bank & Trust Company dated August 1, 1995.
(b) Amendment to Custodian Agreement with Investors Bank & Trust Company dated October 23,
1995.
(9)(b) Amended Administrative Services Agreement between Eaton
Vance Municipals Trust II (on behalf of each of its
series) and Eaton Vance Management.
(11) Consent of Independent Certified Public Accountants for Eaton Vance Municipals Trust II
on behalf of EV Traditional Florida Insured Municipals Fund, EV Traditional Hawaii
Municipals Fund and EV Traditional Kansas Municipals Fund dated February 29, 1996.
(15)(d) Amended Distribution Plan for Eaton Vance Municipals Trust II (on behalf of its Marathon
series) dated June 19, 1995.
(e) Amended Service Plan for Eaton Vance Municipals Trust II
(on behalf of its Traditional series) dated June 19,
1995.
(f) Amended Distribution Plan for Eaton Vance Municipals
Trust II (on behalf of its Classic series) dated January
27, 1995.
(16) Schedules for Computation of Performance Quotations.
(17)(a) Power of Attorney for Eaton Vance Municipals Trust II dated January 10, 1994.
(b) Power of Attorney for Florida Insured Tax Free Portfolio, Hawaii Tax Free Portfolio and
Kansas Tax Free Portfolio dated January 10, 1994.
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EXHIBIT 99.1(a)
DECLARATION OF TRUST
OF
EATON VANCE MUNICIPALS TRUST II
Dated: October 25, 1993
DECLARATION OF TRUST, made October 25, 1993 by the Trustees (together
with all other persons from time to time duly elected, qualified and serving as
Trustees in accordance with this Declaration of Trust the "Trustees").
WHEREAS, the Trustees desire to establish a trust under a Declaration
of Trust pursuant to the provision hereof for the investment and reinvestment of
funds contributed hereto;
NOW, THEREFORE, the Trustees declare that all money and property
contributed to the trust established hereunder shall be held and managed under
this Declaration of Trust as so amended and restated for the benefit of the
holders, from time to time, of the shares of beneficial interest issued
hereunder and subject to the provisions set forth below.
ARTICLE I
NAME AND DEFINITIONS
Section 1.1. Name. The name of the trust created hereby is Eaton Vance
Municipals Trust II (the "Trust").
Section 1.2. Definitions. Wherever they are used herein, the following terms
have the following respective meanings:
(a) "Administrator" means the party, other than the Trust, to a
contract described in Section 3.3 hereof.
(b) "By-Laws" means the By-Laws referred to in Section 2.5 hereof, as
from time to time amended.
(c) "Class" means any division or Class of Shares within a Series or
Fund, which Class is or has been established within such Series or Fund in
accordance with the provisions of Article V.
(d) The term "Commission" has the meaning given it in the 1940 Act.
(e) "Custodian" means any person other than the Trust who has custody
of any Trust Property as required by Section 17(f) of the 1940 Act, but does not
include a system for the central handling of securities described in said
Section 17(f).
(f) "Declaration" means this Declaration of Trust as amended from time
to time. Reference in this Declaration of Trust to "Declaration," "hereof,"
"herein," and "hereunder" shall be deemed to refer to this Declaration rather
than exclusively to the article or section in which such words appear.
(g) "Fund" or "Funds," individually or collectively, means the separate
Series of Shares of the Trust, together with the assets and liabilities
belonging and allocated thereto.
(h) "His" shall include the feminine and neuter, as well as the
masculine, genders.
(i) The term "Interested Person" has the meaning specified in the 1940
Act subject, however, to such exceptions and exemptions as may be granted by the
Commission in any rule, regulation or order.
(j "Investment Adviser" means the party, other than the Trust, to an
agreement described in Section 3.2 hereof.
(k) The "1940 Act" means the Investment Company Act of 1940 and the
Rules and Regulations thereunder, as amended from time to time.
(l) "Person" means and includes individuals, corporations,
partnerships, trusts, associations, firms, joint ventures and other entities,
whether or not legal entities, as well as governments instrumentalities, and
agencies and political subdivisions thereof, and quasi-governmental agencies and
instrumentalities.
(m) "Principal Underwriter" means the party, other than the Trust, to a
contract described in Section 3.1 hereof.
(n) "Prospectus" means the Prospectus and Statement of Additional
Information included in the Registration Statement of the Trust under the
Securities Act of 1933 as such Prospectus and Statement of Additional
Information may be amended or supplemented and filed with the Commission from
time to time.
(o) "Series" individually or collectively means the separately managed
component(s) of Fund(s) of the Trust (or, if the Trust shall have only one such
component or Fund, then that one) as may be established and designated from time
to time by the Trustees pursuant to Section 5.5 hereof.
(p) "Shareholder" means a record owner of Outstanding Shares. A
Shareholder of Shares of a Series shall be deemed to own a proportionate
undivided beneficial interest in such Series equal to the number of Shares of
such Series of which he is the record owner divided by the total number of
Outstanding Shares of such Series. A Shareholder of Shares of a Class within a
Series shall be deemed to own a proportionate undivided beneficial interest in
such Class equal to the number of Shares of such Class of which he is the record
owner divided by the total number of Outstanding Shares of such Class. As used
herein the term "Shareholder" shall, when applicable to one or more Series or
Funds or to one or more Classes thereof, refer to the record owners of
Outstanding Shares of such Series, Fund or Funds or of such Class or Classes of
Shares.
(q "Shares" means the equal proportionate units of interest into which
the beneficial interest in the Trust shall be divided from time to time,
including the Shares of any and all Series or of any Class within any Series (as
the context may require) which may be established by the Trustees, and includes
fractions of Shares as well as whole Shares. "Outstanding Shares" means those
Shares shown from time to time on the books of the Trust or its Transfer Agent
as then issued and outstanding, but shall not include Shares which have been
redeemed or repurchased by the Trust and which are at the time held in the
treasury of the Trust.
(r) "Transfer Agent" means any Person other than the Trust who
maintains the Shareholder records of the Trust, such as the list of
Shareholders, the number of Shares credited to each account, and the like.
(s) "Trust" means Eaton Vance Municipals Trust II. As used herein the
term Trust shall, when applicable to one or more Series or Funds, refer to such
Series or Funds.
(t) The "Trustees" means the persons who have signed this Declaration,
so long as they shall continue in office in accordance with the terms hereof,
and all other persons who now serve or may from time to time be duly elected,
qualified and serving as Trustees in accordance with the provisions of Article
II hereof and the By-Laws of the Trust, and reference herein to a Trustee or the
Trustees shall refer to such person or persons in this capacity or their
capacities as trustees hereunder.
(u) "Trust Property" means any and all property, real or personal,
tangible or intangible, which is owned or held by or for the account of the
Trust or the Trustees, including any and all assets of or allocated to any
Series or Class, as the context may require.
(v) Except as such term may be otherwise defined by the Trustees in
connection with any meeting or other action of Shareholders or in conjunction
with the establishment of any Series or Class of Shares, the term "vote" when
used in connection with an action of Shareholders shall include a vote taken at
a meeting of Shareholders or the consent or consents of Shareholders taken
without such a meeting. Except as such term may be otherwise defined by the
Trustees in connection with any meeting or other action of Shareholders or in
conjunction with the establishment of any Series or Class of Shares, the term
"vote of a majority of the outstanding voting securities" as used in Sections
8.2 and 8.4 shall have the same meaning as is assigned to that term in the 1940
Act.
ARTICLE II
TRUSTEES
Section 2.1. Management of the Trust. The business and affairs of the
Trust shall be managed by the Trustees and they shall have all powers and
authority necessary, appropriate or desirable to perform that function. The
number, term of office, manner of election, resignation, filling of vacancies
and procedures with respect to meetings and actions of the Trustees shall be as
prescribed in the By-Laws of the Trust.
Section 2.2. General Powers. The Trustees in all instances shall act as
principals for and on behalf of the Trust and the applicable Series thereof, and
their acts shall bend the Trust and the applicable Series. The Trustees shall
have full power and authority to do any and all acts and to make and execute any
and all contracts and instruments that they may consider necessary, appropriate
or desirable in connection with the management of the Trust. The Trustees shall
not be bound or limited in any way by present or future laws, practices or
customs in regard to trust investments or to other investments which may be made
by fiduciaries, but shall have full authority and power to make any and all
investments which they, in their uncontrolled discretion, shall deem proper to
promote, implement or accomplish the various objectives and interests of the
Trust and of its Series of Shares. The Trustees shall have full power and
authority to adopt such accounting and tax accounting practices as they consider
appropriate for the Trust and for any Series or Class of Shares. The Trustees
shall have exclusive and absolute control over the Trust Property and over the
business of the Trust to the same extent as if the Trustees were the sole owners
of the Trust Property and business in their own right, and with such full powers
of delegation as the Trustees may exercise from time to time. The Trustees shall
have power to conduct the business of the Trust and carry on its operations in
any and all of its branches and maintain offices both within and without the
Commonwealth of Massachusetts, in any and all states of the United States of
America, in the District of Columbia, and in any and all commonwealths,
territories, dependencies, colonies, possessions, agencies of instrumentalities
of the United States of America and of foreign governments, and to do all such
other things as they deem necessary, appropriate or desirable in order to
promote or implement the interests of the Trust or of any Series or Class of
Shares although such things are not herein specifically mentioned. Any
determination as to what is in the interests of the Trust or of any Series or
Class of Shares made by the Trustees in good faith shall be conclusive and
binding upon all Shareholders. In construing the provisions of this Declaration,
the presumption shall be in favor of a grand of plenary power and authority to
the Trustees.
The enumeration of any specific power in this Declaration shall not be
construed as limiting the aforesaid general and plenary powers.
Section 2.3. Investments. The Trustees shall have full power and
authority:
(a) To operate as and carry on the business of an investment company,
and exercise all the powers necessary and appropriate to the conduct of such
operations.
(b) To acquire or buy, and invest Trust Property in, own, hold for
investment or otherwise, and to sell or otherwise dispose of, all types and
kinds of securities including, but not limited to, stocks, profit-sharing
interests or participations and all other contracts for or evidences of equity
interests, bonds, debentures, warrants and rights to purchase securities,
certificates of beneficial interest, bills, notes and all other contracts for or
evidences of indebtedness, money market instruments including bank certificates
of deposit, finance paper, commercial paper, bankers' acceptances and other
obligations, and all other negotiable and non-negotiable securities and
instruments, however named or described, issued by corporations, trusts,
associations or any other Persons, domestic or foreign, or issued or guaranteed
by the United States of America or any agency or instrumentality thereof, by the
government of any foreign country, by any State, territory or possession of the
United States, by any political subdivision or agency or instrumentality of any
State or foreign country, or by any other government or other governmental or
quasi-governmental agency or instrumentality, domestic or foreign; to acquire
and dispose of interests in domestic or foreign loans made by banks and other
financial institutions; to deposit any assets of the Trust in any bank, trust
company or banking institution or retain any such assets in domestic or foreign
cash or currency; to purchase and sell gold and silver bullion, precious or
strategic metals, coins and currency of all countries; to engage in "when
issued" and delayed delivery transactions; to enter into repurchase agreements,
reverse repurchase agreements and firm commitment agreements; to employ all
types and kinds of hedging techniques and investment management strategies; and
to change the investments of the Trust and of each Series.
(c) To acquire (by purchase, subscription or otherwise), to hold, to
trade in and deal in, to acquire any rights or options to purchase or sell, to
sell or otherwise dispose of, to lend and to pledge any Trust Property or any of
the foregoing securities, instruments or investments; to purchase and sell (or
write) options on securities, currency, precious metals and other commodities,
indices, futures contracts and other financial instruments and assets and enter
into closing and other transactions in connection therewith; to enter into all
types of commodities contracts, including without limitation the purchase and
sale of futures contracts on securities, currency, precious metals and other
commodities, indices and other financial instruments and assets; to enter into
forward foreign currency exchange contracts and other foreign exchange and
currency transactions of all types and kinds; to enter into interest rate,
currency and other swap transactions; and to engage in all types and kinds of
hedging and risk management transactions.
(d) To exercise all rights, powers and privileges of ownership or
interest in all securities and other assets included in the Trust Property,
including without limitation the right to vote thereon and otherwise act with
respect thereto; and to do all acts and things for the preservation, protection,
improvement and enhancement in value of all such securities and assets.
(e) To acquire (by purchase, lease or otherwise) and to hold, use,
maintain, lease, develop and dispose of (by sale or otherwise) any type or kind
of property, real or personal, including domestic or foreign currency, and any
right or interest therein.
(f) To borrow money and in this connection issue notes, commercial
paper or other evidence of indebtedness; to secure borrowings by mortgaging,
pledging or otherwise subjecting as security all or any part of the Trust
Property; to endorse, guarantee, or undertake the performance of any obligation
or engagement of any other Person; and to lend all or any part of the Trust
Property to other Persons.
(g) To aid, support or assist by further investment or other action any
Person, any obligation of or interest in which is included in the Trust Property
or in the affairs of which the Trust or any Series has any direct or indirect
interest; to do all acts and things designed to protect, preserve, improve or
enhance the value of such obligation or interest; and to guarantee or become
surety on any or all of the contracts, securities and other obligations of any
such Person.
(h) To carry on any other business in connection with or incidental to
any of the foregoing powers referred to in this Declaration, to do everything
necessary, appropriate or desirable for the accomplishment of any purpose or the
attainment of any object or the furtherance of any power referred to in this
Declaration, either alone or in association with others, and to do every other
act or thing incidental or appurtenant to or arising out of or connected with
such business or purposes, objects or powers.
The foregoing clauses shall be construed both as objects and powers,
and shall not be held to limit or restrict in any manner the general and plenary
powers of the Trustees.
Notwithstanding any other provision herein, the Trustees shall have
full power in their discretion, without any requirement of approval by
Shareholders, to invest part or all of the Trust Property (or part or all of the
assets of any Fund), or to dispose of part or all of the Trust Property (or part
or all of the assets of any Fund) and invest the proceeds of such disposition,
in securities issued by one or more other investment companies registered under
the 1940 Act. Any such other investment company may (but need not) be a trust
(formed under the laws of the State of New York or of any other state) which is
classified as a partnership for federal income tax purposes.
Section 2.4. Legal Title. Legal title to all the Trust Property shall
be vested in the Trustees who from time to time shall be in office. The Trustees
may hold any security or other Trust Property in a form not indicating any
trust, whether in bearer, unregistered or other negotiable form, and may cause
legal title to any security or other Trust Property to be held by or in the name
of one or more of the Trustees, or in the name of the Trust or any Series, or in
the name of a custodian, subcustodian, agent, securities depository, clearing
agency, system for the central handling of securities or other book-entry
system, or in the name of a nominee or nominees of the Trust or a Series, or in
the name of a nominee or nominees of a custodian, subcustodian, agent,
securities depository, clearing agent, system for the central handling of
securities or other book-entry system, or in the name of any other Person as
nominee. The right, title and interest of the Trustees in the Trust Property
shall vest automatically in each Person who may hereafter become a Trustee. Upon
the termination of the term of office, resignation, removal or death of a
Trustee he shall automatically cease to have any right, title or interest in any
of the Trust Property, and the right, title and interest of such Trustee in the
Trust Property shall vest automatically in the remaining Trustees.
Section 2.5. By-Laws. The Trustees shall have full power and authority
to adopt By-Laws providing for the conduct of the business of the Trust and
containing such other provisions as they deem necessary, appropriate or
desirable, and to amend and repeal such By-Laws. Unless the ByLaws specifically
require that Shareholders authorize or approve the amendment or repeal of a
particular provision of the By-Laws, any provision of the By-Laws may be amended
or repealed by the Trustees without Shareholder authorization or approval.
Section 2.6. Distribution and Repurchase of Shares. The Trustees shall
have full power and authority to issue, sell, repurchase, redeem, retire,
cancel, acquire, hold, resell, reissue, dispose of, transfer, and otherwise deal
in Shares. Shares may be sold for cash or property or other consideration
whenever and in such amounts and manner as the Trustees deem desirable. The
Trustees shall have full power to provide for the distribution of Shares either
through one or more principal underwriters or by the Trust itself, or both. The
Trustees shall have full power and authority to cause the Trust and any Series
and Class of Shares to finance distribution activities in the manner described
in Section 3.7, and to authorize the Trust, on behalf of one or more Series or
Classes of Shares, to adopt or enter into one or more plans or arrangements
whereby multiple Series and Classes of Shares may be issued and sold to various
types of investors.
Section 2.7. Delegation. The Trustees shall have full power and
authority to delegate from time to time to such of their number or to officers,
employees or agents of the Trust or to other Persons the doing of such things
and the execution of such agreements or other instruments either in the name of
the Trust or any Series of the Trust or the names of the Trustees or otherwise
as the Trustees may deem desirable or expedient.
Section 2.8. Collection and Payment. The Trustees shall have full power
and authority to collect all property due to the Trust; to pay all claims,
including taxes, against the Trust or Trust Property; to prosecute, defend,
compromise, settle or abandon any claims relating to the Trust or Trust
Property; to foreclose any security interest securing any obligations, by virtue
of which any property is owed to the Trust; and to enter into releases,
agreements and other instruments.
Section 2.9. Expenses. The Trustees shall have full power and authority
to incur on behalf of the Trust or any Series or Class of Shares and pay any
costs or expenses which the Trustees deem necessary, appropriate, desirable or
incidental to carry out, implement or enhance the business or operations of the
Trust or any Series thereof, and to pay compensation from the funds of the Trust
to themselves as Trustees. The Trustees shall determine the compensation of all
officers, employees and Trustees of the Trust. The Trustees shall have full
power and authority to cause the Trust to charge all or any part of any cost,
expense or expenditure (including without limitation any expense of selling or
distributing Shares) or tax against the principal or capital of the Trust or any
Series or Class of Shares, and to credit all or any part of the profit, income
or receipt (including without limitation any deferred sales charge or fee,
whether contingent or otherwise, paid or payable to the Trust or any Series or
Class of Shares on any redemption or repurchase of Shares) to the principal or
capital of the Trust or any Series or Class of Shares.
Section 2.10. Manner of Acting. Except as otherwise provided herein or
in the By-Laws, the Trustees and committees of the Trustees shall have full
power and authority to act in any manner which they deem necessary, appropriate
or desirable to carry out, implement or enhance the business or operations of
the Trust or any Series thereof.
Section 2.11. Miscellaneous Powers. The Trustees shall have full power
and authority to: (a) distribute to Shareholders all or any part of the earnings
or profits, surplus (including paid-in surplus), capital (including paid-in
capital) or assets of the Trust or of any Series or Class of Shares, the amount
of such distributions and the manner of payment thereof to be solely at the
discretion of the Trustees; (b) employ, engage or contract with such Persons as
the Trustees may deem desirable for the transaction of the business or
operations of the Trust or any Series thereof; (c) enter into or cause the Trust
or any Series thereof to enter into joint ventures, partnerships (whether as
general partner, limited partner or otherwise) and any other combinations or
associations; (d) remove Trustees or fill vacancies in or add to their number,
elect and remove such officers and appoint and terminate such agents or
employees or other Persons as they consider appropriate, and appoint from their
own number, and terminate, any one or more committees which may exercise some or
all of the power and authority of the Trustees as the Trustees may determine;
(e) purchase, and pay for out of Trust Property, insurance policies which may
insure such of the Shareholders, Trustees, officers, employees, agents,
investment advisers, administrators, principal underwriters, distributors or
independent contractors of the Trust as the Trustees deem appropriate against
loss or liability arising by reason of holding any such position or by reason of
any action taken or omitted by any such Person in such capacity, whether or not
constituting negligence, or whether or not the Trust would have the power to
indemnify such Person against such loss or liability; (f) establish pension,
profit-sharing, share purchase, and other retirement, incentive and benefit
plans for any Trustees, officers, employees and agents of the Trust; (g)
indemnify or reimburse any Person with whom the Trust or any Series thereof has
dealings, including without limitation the Investment Adviser, Administrator,
Principal Underwriter, Transfer Agent and financial service firms, to such
extent as the Trustees shall determine; (h) guarantee the indebtedness or
contractual obligations of other Persons; (i) determine and change the fiscal
year of the Trust or any Series thereof and the methods by which its and their
books, accounts and records shall be kept; and (j) adopt a seal for the Trust,
but the absence of such seal shall not impair the validity of any instrument
executed on behalf of the Trust or any Series thereof.
Section 2.12. Litigation. The Trustees shall have full power and
authority, in the name and on behalf of the Trust, to engage in and to
prosecute, defend, compromise, settle, abandon, or adjust by arbitration or
otherwise, any actions, suits, proceedings, disputes, claims and demands
relating to the Trust, and out of the assets of the Trust or any Series thereof
to pay or to satisfy any liabilities, losses, debts, claims or expenses
(including without limitation attorneys' fees) incurred in connection therewith,
including those of litigation, and such power shall include without limitation
the power of the Trustees or any committee thereof, in the exercise of their or
its good faith business judgment, to dismiss or terminate any action, suit,
proceeding, dispute, claim or demand, derivative or otherwise, brought by any
Person, including a Shareholder in his own name or in the name of the Trust or
any Series thereof, whether or not the Trust or any Series thereof or any of the
Trustees may be named individually therein or the subject matter arises by
reason of business for or on behalf of the Trust or any Series thereof.
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ARTICLE III
CONTRACTS
Section 3.1. Principal Underwriter. The Trustees may in their
discretion from time to time authorize the Trust to enter into one or more
contracts providing for the sale of the Shares. Pursuant to any such contract
the Trust may either agree to sell the Shares to the other party to the contract
or appoint such other party its sales agent for such Shares. In either case, any
such contract shall be on such terms and conditions as the Trustees may in their
discretion determine; and any such contract may also provide for the repurchase
or sale of Shares by such other party as principal or as agent of the Trust.
Section 3.2. Investment Adviser. The Trustees may in their discretion
from time to time authorize the Trust to enter into one or more investment
advisory agreements, or, if the Trustees establish multiple Series, separate
investment advisory agreements, with respect to one or more Series whereby the
other party or parties to any such agreements shall undertake to furnish the
Trust or such Series investment advisory and research facilities and services
and such other facilities and services, if any, as the Trustees shall consider
desirable and all upon such terms and conditions as the Trustees may in their
discretion determine. Notwithstanding any provisions of this Declaration, the
Trustees may authorize the Investment Adviser, in its discretion and without any
prior consultation with the Trust, to buy, sell, lend and otherwise trade and
deal in any and all securities, commodity contracts and other investments and
assets of the Trust and of each Series and to engage in and employ all types of
transactions and strategies in connection therewith. Any such action taken
pursuant to such agreement shall be deemed to have been authorized by all of the
Trustees.
The Trustees may also authorize the Trust to employ, or authorize the
Investment Adviser to employ, one or more sub-investment advisers from time to
time to perform such of the acts and services of the Investment Adviser and upon
such terms and conditions as may be agreed upon between the Investment Adviser
and such sub-investment adviser and approved by the Trustees.
Section 3.3. Administrator. The Trustees may in their discretion from
time to time authorize the Trust to enter into an administration agreement or,
if the Trustees establish multiple Series or Classes, separate administration
agreements with respect to one or more Series or Classes, whereby the other
party to such agreement shall undertake to furnish to the Trust or a Series or a
Class thereof with such administrative facilities and services and such other
facilities and services, if any, as the Trustees consider desirable and all upon
such terms and conditions as the Trustees may in their discretion determine.
Section 3.4. Other Service Providers. The Trustees may in their
discretion from time to time authorize the Trust to enter into one or more
agreements with respect to one or more Series or Classes of Shares whereby the
other party or parties to any such agreements with respect to one or more Series
or Classes of Shares whereby the other party or parties to any such agreements
will undertake to provide to the Trust or Series or Class or Shareholders or
beneficial owners of Shares such services as the Trustees consider desirable and
all upon such terms and conditions as the Trustees in their discretion may
determine.
Section 3.5. Transfer Agents. The Trustees may in their discretion from
time to time appoint one or more transfer agents for the Trust or any Series
thereof. Any contract with a transfer agent shall be on such terms and
conditions as the Trustees may in their discretion determine.
Section 3.6. Custodian. The Trustees may appoint a bank or trust
company having an aggregate capital, surplus and undivided profits (as shown in
its last published report) of at least $2,000,000 as the principal custodian of
the Trust (the "Custodian") with authority as its agent to hold cash and
securities owned by the Trust and to release and deliver the same upon such
terms and conditions as may be agreed upon between the Trust and the Custodian.
Section 3.7. Plans of Distribution. The Trustees may in their
discretion authorize the Trust, on behalf of one or more Series or Classes of
Shares, to adopt or enter into a plan or plans of distribution and any related
agreements whereby the Trust or Series or Class may finance directly or
indirectly any activity which is primarily intended to result in sales of Shares
or any distribution activity within the meaning of Rule 12b-1 (or successor
rule) under the 1940 Act. Such plan or plans of distribution and any related
agreements may contain such terms and conditions as the Trustees may in their
discretion determine, subject to the requirements of the 1940 Act and any other
applicable rules and regulations.
Section 3.8. Affiliations. The fact that:
(i) any of the Shareholders, Trustees or officers of the Trust is a
shareholder, creditor, director, officer, partner, trustee or employee of or has
any interest in any Person or any parent or affiliate of any such Person, with
which a contract or agreement of the character described in Sections 3.1, 3.2,
3.3, 3.4, 3.5 or 3.6 above has been or will be made or to which payments have
been or will be made pursuant to a plan or related agreement described in
Section 3.7 above, or that any such Person, or any parent or affiliate thereof,
is a Shareholder of or has an interest in the Trust, or that
(ii) any such Person also has similar contracts, agreements or plans
with other investment companies (including, without limitation, the investment
companies referred to in the last paragraph of Section 2.3) or organizations, or
has other business activities or interests, shall not affect in any way the
validity of any such contract, agreement or plan or disqualify any Shareholder,
Trustee or officer of the Trust from authorizing, voting upon or executing the
same or create any liability or accountability to the Trust or its Shareholders.
ARTICLE IV
LIMITATIONS OF LIABILITY OF SHAREHOLDERS, TRUSTEES AND OTHERS
Section 4.1. No Personal Liability of Shareholders, Trustees, Officers
and Employees. No Shareholder shall be subject to any personal liability
whatsoever to any Person in connection with Trust Property or the acts,
obligations or affairs of the Trust or any Series thereof. All Persons dealing
or contracting with the Trustees as such or with the Trust or any Series thereof
shall have recourse only to the Trust or such Series for the payment of their
claims or for the payment or satisfaction of claims, obligations or liabilities
arising out of such dealings or contracts. No Trustee, officer or employee of
the Trust, whether past, present or future, shall be subject to any personal
liability whatsoever to any such Person, and all such Persons shall look solely
to the Trust Property, or the assets of one or more specific Series of the Trust
if the claim arises from the act, omission or other conduct of such Trustee,
officer or employee with respect to only such Series, for satisfaction of claims
of any nature arising in connection with the affairs of the Trust or such
Series. If any Shareholder, Trustee, officer or employee, as such, of the Trust
or any Series thereof, is made a party to any suit or proceeding to enforce any
such liability of the Trust or any Series thereof, he shall not, on account
thereof, be held to any personal liability.
Section 4.2. Trustee's Good Faith Action; Advice of Others; No Bond or
Surety. The exercise by the Trustees of their powers and discretions hereunder
shall be binding upon everyone interested. A Trustee shall not be liable for
errors of judgment or mistakes of fact or law. The Trustees shall not be
responsible or liable in any event for any neglect or wrongdoing of any officer,
agent, employee, consultant, investment adviser or other adviser, administrator,
distributor or principal underwriter, custodian or transfer, dividend
disbursing, shareholder servicing or accounting agent of the Trust, nor shall
any Trustee be responsible for the act or omission of any other Trustee. The
Trustees may take advice of counsel or other experts with respect to the meaning
and operation of this Declaration and their duties as Trustees, and shall be
under no liability for any act or omission in accordance with such advice or for
failing to follow such advice. In discharging their duties, the Trustees, when
acting in good faith, shall be entitled to rely upon the records, books and
accounts of the Trust and upon reports made to the Trustees by any officer,
employee, agent, consultant, accountant, attorney, investment adviser or other
adviser, principal underwriter, expert, professional firm or independent
contractor. The Trustees as such shall not be required to give any bond or
surety or any other security for the performance of their duties. No provision
of this Declaration shall protect any Trustee or officer of the Trust against
any liability to the Trust or its Shareholders to which he would otherwise be
subject by reason of his own willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office.
Section 4.3. Indemnification. The Trustees may provide, whether in the
By-Laws or by contract, vote or other action, for the indemnification by the
Trust or by any Series thereof of the Shareholders, Trustees, officers and
employees of the Trust and of such other Persons as the Trustees in the exercise
of their discretion may deem appropriate or desirable. Any such indemnification
may be mandatory or permissive, and may be insured against by policies
maintained by the Trust.
Section 4.4. No Duty of Investigation. No purchaser, lender or other
Person dealing with the Trustees or any officer, employee or agent of the Trust
or a Series thereof shall be bound to make any inquiry concerning the validity
of any transaction purporting to be made by the Trustees or by said officer,
employee or agent or be liable for the application of money or property paid,
loaned, or delivered to or on the order of the Trustees or of said officer,
employee or agent. Every obligation, contract, instrument, certificate, Share,
other security of the Trust or a Series thereof or undertaking, and every other
act or thing whatsoever executed in connection with the Trust shall be
conclusively presumed to have been executed or done by the executors thereof
only in their capacity as Trustees under this Declaration or in their capacity
as officers, employees or agents of the Trust or a Series thereof. Every written
obligation, contract, instrument, certificate, Share, other security of the
Trust or a Series thereof or undertaking made or issued by the Trustees may
recite that the same is executed or made by them not individually, but as
Trustees under the Declaration, and that the obligations of the Trust or a
Series thereof under any such instrument are not binding upon any of the
Trustees or Shareholders individually, but bind only the Trust Property or the
Trust Property of the applicable Series, and may contain any further recital
which they may deem appropriate, but the omission of any such recital shall not
operate to bind the Trustees or Shareholders individually.
Section 4.5. Reliance on Records and Experts. Each Trustee, officer or
employee of the Trust or a Series thereof shall, in the performance of his
duties, be fully and completely justified and protected with regard to any act
or any failure to act resulting from reliance in good faith upon the records,
books and accounts of the Trust or a Series thereof, upon an opinion or other
advice of legal counsel, or upon reports made or advice given to the Trust or a
Series thereof by any Trustee or any of its officers or employees or by the
Investment Adviser, the Administrator, the Custodian, the Principal Underwriter,
Transfer Agent, accountants, appraisers or other experts, advisers, consultants
or professionals selected with reasonable care by the Trustees or officers of
the Trust, regardless of whether the person rendering such report or advice may
also be a Trustee, officer or employee of the Trust.
ARTICLE V
SHARES OF BENEFICIAL INTEREST
Section 5.1. Beneficial Interest. The interest of the beneficiaries
hereunder shall be divided into transferable Shares of beneficial interest
without par value. The number of such Shares of beneficial interest authorized
hereunder is unlimited, and the number of Shares of each Series or Class thereof
that may be issued hereunder is unlimited. The Trustees shall have the exclusive
authority without the requirement of Shareholder authorization or approval to
establish and designate one or more Series of Shares and one or more Classes
thereof as the Trustees deem necessary, appropriate or desirable. Each Share of
any series shall represent a beneficial interest only in the assets of that
Series. Subject to the provisions of Section 5.5 hereof, the Trustees may also
authorize the creation of additional Series of Shares (the proceeds of which may
be invested in separate and independent investment portfolios) and additional
Classes of Shares within any Series. All Series issued hereunder including,
without limitation, Shares issued in connection with a dividend or distribution
in Shares or a split in Shares, shall be fully paid and nonassessable.
Section 5.2. Rights of Shareholders. The ownership of the Trust
property of every description and the right to conduct any business of the Trust
are vested exclusively in the Trustees, and the Shareholders shall have no
interest therein other than the beneficial interest conferred by their Shares,
and they shall have no right to call for any partition or division of any
property, profits, rights or interests of the Trust or of any Fund nor can they
be called upon to share or assume any losses of the Trust or of any Fund or
suffer an assessment of any kind by virtue of their ownership of Shares. The
Shares shall be personal property giving only the rights specifically set forth
in this Declaration. The Shares shall not entitle the holder to preference,
preemptive, appraisal, conversion or exchange rights, except as the Trustees may
specifically determine with respect to any Series or Class of Shares.
Section 5.3. Trust Only. It is the intention of the Trustees to create
only the relationship of Trustee and beneficiary between the Trustees and each
Shareholder from time to time. It is not the intention of the Trustees to create
a general partnership, limited partnership, joint stock association,
corporation, bailment or any form of legal relationship other than a
Massachusetts business trust. Nothing in this Declaration shall be construed to
make the Shareholders, either by themselves or with the Trustees, partners or
members of a joint stock association.
Section 5.4. Issuance of Shares. The Trustees in their discretion may,
from time to time and without any authorization or vote of the Shareholders,
issue Shares, in addition to the then issued and outstanding Shares and Shares
held in the treasury, to such party or parties and for such amount and type of
consideration, including cash or property, a such time or times and on such
terms as the Trustees may deem appropriate or desirable, except that only Shares
previously contracted to be sold may be issued during any period when the right
of redemption is suspended pursuant to Section 6.9 hereof, and may in such
manner acquire other assets (including the acquisition of assets subject to, and
in connection with the assumption of, liabilities) and businesses. In connection
with any issuance of Shares, the Trustees may issue fractional Shares and
reissue and resell full and fractional Shares held in the treasury. The Trustees
may from time to time divide or combine the Shares of the Trust or, if the
Shares be divided into Series or Classes, of any Series or any Class thereof of
the Trust, into a greater or lesser number without thereby changing the
proportionate beneficial interests in the Trust or in the Trust Property
allocated or belonging to such Series or Class. Contributions to the Trust or
Series thereof may be accepted for, and Shares shall be redeemed as, whole
Shares and/or fractional Shares as the Trustees may in their discretion
determine. The Trustees may authorize the issuance of certificates of beneficial
interest to evidence the ownership of Shares. Shares held in the treasury shall
not be voted nor shall such Shares be entitled to any dividends or other
distributions declared with respect thereto.
Section 5.5. Series and Class Designations. Without limiting the
exclusive authority of the Trustees set forth in Section 5.1 to establish and
designate any further Series, it is hereby confirmed that the Trust consists of
no outstanding Series and no distinct Classes of Shares of any Series. The
Shares of any Series and Classes thereof that may from time to time be
established and designated by the Trustees shall be established and designated,
and the variations in the relative rights and preferences as between the
different Series and Classes shall be fixed and determined, by the Trustees
(unless the Trustees otherwise determine with respect to Series or Classes at
the time of establishing and designating the same); provided, that all Shares
shall be identical except that there may be variations so fixed and determined
between different Series or Classes thereof as to investment objective, policies
and restrictions, sales charges, purchase prices, determination of net asset
value, assets, liabilities, expenses, costs, charges and reserves belonging or
allocated thereto, the price, terms and manner of redemption or repurchase,
special and relative rights as to dividends and distributions and on
liquidation, conversion rights, exchange rights, and voting rights. All
references to Shares in this Declaration shall be deemed to be Shares of any or
all Series or Classes as the context may require. As to any division of Shares
of the Trust into Series or Classes, the following provisions shall be
applicable:
(i) The number of authorized Shares and the number of Shares of each
Series or Class thereof that may be issued shall be unlimited. The Trustees may
classify or reclassify any unissued Shares or any Shares previously issued and
reacquired of any Series or Class into one or more other Series or one or more
other Classes that may be established and designated from time to time. The
Trustees may hold as treasury shares (of the same or some other Series or
Class), reissue for such consideration and on such terms as they may determine,
or cancel any Shares of any Series or Class reacquired by the Trust at their
discretion from time to time.
(ii) All consideration received by the Trust for the issue or sale of
Shares of a particular Series, together with all assets in which such
consideration is invested or reinvested, all income, earnings, profits, and
proceeds thereof, including any proceeds derived from the sale, exchange or
liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall
irrevocably belong to that Series for all purposes, subject only to the rights
of creditors of such Series and except as may otherwise be required by
applicable tax laws, and shall be so recorded upon the books of account of the
Trust. In the event that there are any assets, income, earnings, profits, and
proceeds thereof, funds, or payments which are not readily identifiable as
belonging to any particular Series, the Trustees or their delegate shall
allocate them among any one or more of the Series established and designated
from time to time in such manner and on such basis as the Trustees in their sole
discretion deem fair and equitable. Each such allocation by the Trustees or
their delegate shall be conclusive and binding upon the Shareholders of all
Series for all purposes. No holder of Shares of any Series shall have any claim
on or right to any assets allocated or belonging to any other Series.
(iii) Any general liabilities, expenses, costs, charges or reserves of
the Trust which are not readily identifiable as belonging to any particular
Series shall be allocated and charged by the Trustees or their delegate to and
among any one or more of the Series established and designated from time to time
in such manner and on such basis as the Trustees in their sole discretion deem
fair and equitable. The assets belonging to each particular Series shall be
charged with the liabilities, expenses, costs, charges and reserves of the Trust
so allocated to that Series and all liabilities, expenses, costs, charges and
reserves attributable to that Series which are not readily identifiable as
belonging to any particular Class thereof. Each allocation of liabilities,
expenses, costs, charges and reserves by the Trustees or their delegate shall be
conclusive and binding upon the Shareholders of all Series and Classes for all
purposes. The Trustees shall have full discretion to determine which items are
capital; and each such determination shall be conclusive and binding upon the
Shareholders. The assets of a particular Series of the Trust shall, under no
circumstances, be charged with liabilities, expenses, costs, charges and
reserves attributable to any other Series or Class thereof of the Trust. All
Persons extending credit to, or contracting with or having any claim against a
particular Series of the Trust shall look only to the assets of that particular
Series for payment of such credit, contract or claim.
(iv) Dividends and distributions on Shares of a particular Series or
Class may be paid or credited in such manner and with such frequency as the
Trustees may determine, to the holders of Shares of that Series or Class, from
such of the earnings or profits, surplus (including paid-in surplus), capital
(including paid-in capital) or assets belonging to that Series, as the Trustees
may deem appropriate or desirable, after providing for actual and accrued
liabilities, expenses, costs, charges and reserves belonging and allocated to
that Series or Class. Such dividends and distributions may be paid daily or
otherwise pursuant to the offering prospectus relating to the Shares or pursuant
to a standing vote or votes of the Trustees adopted only once or from time to
time or pursuant to other authorization or instruction of the Trustees. All
dividends and distributions on Shares of a particular Series or Class shall be
distributed pro rata to the Shareholders of that Series or Class in proportion
to the number of Shares of that Series or Class held by such Shareholders at the
time of record established for the payment or crediting of such dividends or
distributions.
(v) Each Share of a Series of the Trust shall represent a beneficial
interest in the net assets of such Series. Each holder of Shares of a Series or
Class thereof shall be entitled to receive his pro rata share of distributions
of income and capital gains made with respect to such Series or Class net of
liabilities, expenses, costs, charges and reserves belonging and allocated to
such Series or Class. Upon redemption of his Shares or indemnification for
liabilities incurred by reason of his being or having been a Shareholder of a
Series or Class, such Shareholder shall be paid solely out of the funds and
property of such Series of the Trust. Upon liquidation or termination of a
Series or Class thereof of the Trust, a Shareholder of such Series or Class
thereof shall be entitled to receive a pro rata share of the net assets of such
Series based on the net asset value of his Shares. A Shareholder of a particular
Series of the Trust shall not be entitled to commence or participate in a
derivative or class action on behalf of any other Series or the Shareholders of
any other Series of the Trust.
(vi) On any matter submitted to a vote of Shareholder, the Shares
entitled to vote thereon and the manner in which such Shares shall be voted
shall be as set forth in the By-Laws or proxy materials for the meeting or other
solicitation materials or as otherwise determined by the Trustees, subject to
any applicable requirements of the 1940 Act. The Trustees shall have full power
and authority to call meetings of the Shareholders of a particular Class or
Classes of Shares or of one or more particular Series of Shares, or otherwise
call for the action of such Shareholders on any particular matter.
(vii) Except as otherwise provided in this Article V, the Trustees
shall have full power and authority to determine the designations, preferences,
privileges, sales charges, purchase prices, assets, liabilities, expenses,
costs, charges and reserves belonging or allocated thereto, limitations and
rights, including without limitation voting, dividend, distribution and
liquidation rights, of each Class and Series of Shares. Subject to any
applicable requirements of the 1940 Act, the Trustees shall have the authority
to provide that Shares of one Class shall be automatically converted into Shares
of another Class of the same Series or that the holders of Shares of any Series
or Class shall have the right to convert or exchange such Shares into Shares of
one or more other Series or Classes of Shares, all in accordance with such
requirements, conditions and procedures as may be established by the Trustees.
(viii) The establishment and designation of any Series or Class of
Shares shall be effective upon the execution by a majority of the then Trustees
of an instrument setting forth such establishment and designation and the
relative rights and preferences of such Series or Class, or as otherwise
provided in such instrument. The Trustees may by an instrument subsequently
executed by a majority of their number amend, restate or rescind any prior
instrument relating to the establishment and designation of any such Series or
Class. Each instrument referred to in this paragraph shall have the status of an
amendment to this Declaration in accordance with Section 8.4 hereof, and a copy
of each such instrument shall be filed in accordance with Section 10.2 hereof.
Section 5.6. Assent to Declaration of Trust and By-Laws. Every
Shareholder, by virtue of having become a Shareholder, shall be held to have
expressly assented and agreed to all the terms and provisions of this
Declaration and of the By-Laws of the Trust.
ARTICLE VI
REDEMPTION AND REPURCHASE OF SHARES
Section 6.1. Redemption of Shares. (a)Shares of the Trust shall be
redeemable, at such times and in such manner as may be permitted by the Trustees
from time to time. The Trustees shall have full power and authority to vary and
change the right of redemption applicable to the various Series and Classes of
Shares established by the Trustees. Redeemed or repurchased Shares may be resold
by the Trust. The Trust may require any Shareholder to pay a sales charge to the
Trust, the Principal Underwriter or any other Person designated by the Trustees
upon redemption or repurchase of Shares in such amount and upon such conditions
as shall be determined from time to time by the Trustees.
(b) The Trust shall redeem the Shares of the Trust or any Series or
Class thereof at the price determined as hereinafter set forth, upon the
appropriately verified written application of the record holder thereof (or upon
such other form of request as the Trust may use for the purpose) deposited at
such office or agency as may be designated from time to time for that purpose by
the Trustees. The Trust may from time to time establish additional requirements,
terms, conditions and procedures, not inconsistent with the 1940 Act, relating
to the redemption of Shares.
Section 6.2. Price. Shares shall be redeemed at a price based on their
net asset value determined as set forth in Section 7.1 hereof as of such time as
the Trustees shall prescribe. The amount of any sales charge or redemption fee
payable upon redemption of Shares may be deducted from the proceeds of such
redemption.
Section 6.3. Payment. Payment of the redemption price of Shares thereof
shall be made in cash or in property to the Shareholder at such time and in the
manner, not inconsistent with the 1940 Act, as may be specified from time to
time in the then effective prospectus relating to such Shares, subject to the
provisions of Sections 6.4 and 6.9 hereof. Notwithstanding the foregoing, the
Trust or its agent may withhold from such redemption proceeds any amount arising
(i) from a liability of the redeeming Shareholder to the Trust or (ii) in
connection with any federal or state tax withholding requirements.
Section 6.4. Effect of Suspension of Determination of Net Asset Value.
If, pursuant to Section 7.1 hereof, the Trust shall declare a suspension of the
determination of net asset value with respect to Shares of the Trust or of any
Series or Class thereof, the rights of Shareholders (including those who shall
have applied for redemption pursuant to Section 6.1 hereof but who shall not yet
have received payment) to have Shares redeemed and paid for by the Trust or a
Series shall be suspended until the termination of such suspension is declared.
Any record holder who shall have his redemption right so suspended may, during
the period of such suspension, by appropriate written notice at the office or
agency where his application or request for redemption was made, withdraw his
application or request and withdraw any Share certificates on deposit.
Section 6.5. Repurchase by Agreement. The Trust may repurchase Shares
directly, or through the Principal Underwriter or another agent designated for
the purpose, by agreement with the owner thereof at a price not exceeding the
net asset value per share determined as of such time as the Trustees shall
prescribe. The Trust may from time to time establish the requirements, terms,
conditions and procedures relating to such repurchases, and the amount of any
sales charge or repurchase fee payable on any repurchase of Shares may be
deducted from the proceeds of such repurchase.
Section 6.6. Redemption of Shareholder's Interest. The Trustees, in
their sole discretion, may cause the Trust to redeem all of the Shares of one or
more Series or Class thereof held by any Shareholder if the value of such Shares
held by such Shareholder is less than the minimum amount established from time
to time by the Trustees.
Section 6.7. Redemption of Shares in Order to Qualify as Regulated
Investment Company; Disclosure of Holding. (a)If the Trustees shall, at any time
and in good faith, be of the opinion that direct or indirect ownership of Shares
or other securities of the Trust has or may become concentrated in any Person to
an extent which would disqualify the Trust or any Series of the Trust as a
regulated investment company under the Internal Revenue Code of 1986, then the
Trustees shall have the power by lot or other means deemed equitable by them (i)
to call for redemption by any such Person a number, or principal amount, of
Shares or other securities of the Trust or any Series of the Trust sufficient to
maintain or bring the direct or indirect ownership of Shares or other securities
of the Trust or any Series of the Trust into conformity with the requirements
for such qualification and (ii) to refuse to transfer or issue Shares or other
securities of the Trust or any Series of the Trust to any Person whose
acquisition of the Shares or other securities of the Trust or any Series of the
Trust in question would result in such disqualification. The redemption shall be
effected in the manner provided in Section 6.1 and at the redemption price
referred to in Section 6.2.
(b)The holders of Shares or other securities of the Trust shall upon
demand disclose to the Trustees in writing such information with respect to
direct and indirect ownership of Shares or other securities of the Trust as the
Trustees deem necessary to comply with the provisions of the Internal Revenue
Code of 1986, or to comply with the requirements of any other taxing authority.
Section 6.8. Reduction in Number of Outstanding Shares Pursuant to Net
Asset Value Formula. The Trust may also reduce the number of outstanding Shares
of the Trust or of any Series or Class thereof pursuant to the provisions of
Section 7.3.
Section 6.9. Suspension of Right of Redemption. The Trust may declare a
suspension of the right of redemption or postpone the date of payment or
redemption for the whole or any part of any period (i) during which the New York
Stock Exchange is closed other than customary weekend and holiday closings, (ii)
during which trading on the New York Stock Exchange is restricted, (iii) during
which an emergency exists as a result of which disposal by the Trust or a Fund
of securities owned by it is not reasonably practicable or it is not reasonable
practicable for the Trust or a Fund fairly to determine the value of its net
assets, or (iv) as the Commission may by order permit for the protection of
security holders of the Trust. Such suspension shall take effect at such time as
the Trust shall specify but not later than the close of business on the business
day next following the declaration of suspension, and thereafter there shall be
no right of redemption or payment on redemption until the Trust shall declare
the suspension at an end, except that the suspension shall terminate in any
event on the first day on which said stock exchange shall have reopened or the
period specified in (ii) or (iii) shall have expired (as to which in the absence
of an official ruling by the Commission, the determination of the Trust shall be
conclusive). In the case of a suspension of the right of redemption, a
Shareholder may either withdraw his application or request for redemption or
receive payment based on the net asset value existing after the termination of
the suspension.
ARTICLE VII
DETERMINATION OF NET ASSET VALUE, NET INCOME AND DISTRIBUTIONS
Section 7.1. Net Asset Value. The net asset value of each outstanding
Share of the Trust or of each Series or Class thereof shall be determined on
such days and at or as of such time or times as the Trustees may determine. Any
reference in this Declaration to the time at which a determination of net asset
value is made shall mean the time as of which the determination is made. The
power and duty to determine net asset value may be delegated by the Trustees
from time to time to the Investment Adviser, the Administrator, the Custodian,
the Transfer Agent or such other Person or Persons as the Trustees may
determine. The value of the assets of the Trust or any Series thereof shall be
determined in a manner authorized by the Trustees. From the total value of said
assets, there shall be deducted all indebtedness, interest, taxes, payable or
accrued, including estimated taxes on unrealized book profits, expenses and
management charges accrued to the appraisal date, amounts determined and
declared as a dividend or distribution and all other items in the nature of
liabilities which shall be deemed appropriate, as incurred by or allocated to
the Trust or any Series or Class thereof. The resulting amount, which shall
represent the total net assets of the Trust or Series or Class thereof, shall be
divided by the number of Shares of the Trust or Series or Class thereof
outstanding at the time and the quotient so obtained shall be deemed to be the
net asset value of the Shares of the Trust or Series or Class thereof. The Trust
may declare a suspension of the determination of net asset value to the extent
permitted by the 1940 Act. It shall not be a violation of any provision of this
Declaration if Shares are sold, redeemed or repurchased by the Trust at a price
other than one based on net asset value if the net asset value is affected by
one or more errors inadvertently made in the pricing of portfolio securities or
other investments or in accruing or allocating income, expenses, reserves or
liabilities. No provision of this Declaration shall be construed to restrict or
affect the right or ability of the Trust to employ or authorize the use of
pricing services, appraisers or any other means, methods, procedures, or
techniques in valuing the assets or calculating the liabilities of the Trust or
any Series or Class thereof.
Section 7.2. Dividends and Distributions. (a)The Trustees may from time
to time distribute ratably among the Shareholders of the Trust or of a Series or
Class thereof such proportion of the net earnings or profits, surplus (including
paid-in surplus), capital (including paid-in capital), or assets of the Trust or
such Series held by the Trustees as they may deem appropriate or desirable. Such
distributions may be made in cash, additional Shares or property (including
without limitation any type of obligations of the Trust or Series or Class or
any assets thereof), and the Trustees may distribute ratably among the
Shareholders of the Trust or Series or Class thereof additional Shares of the
Trust or Series or Class thereof issuable hereunder in such manner, at such
times, and on such terms as the Trustees may deem appropriate or desirable. Such
distributions may be among the Shareholders of the Trust or Series or Class
thereof at the time of declaring a distribution or among the Shareholders of the
Trust or Series or Class thereof at such other date or time or dates or times as
the Trustees shall determine. The Trustees may in their discretion determine
that, solely for the purposes of such distributions, Outstanding Shares shall
exclude Shares for which orders have been placed subsequent to a specified time.
The Trustees may always retain from the earnings or profits such amounts as they
may deem appropriate or desirable to pay the expenses and liabilities of the
Trust or a Series or Class thereof or to meet obligations of the Trust or a
Series or Class thereof, together with such amounts as they may deem desirable
to use in the conduct of its affairs or to retain for future requirements or
extensions of the business or operations of the Trust or such Series. The Trust
may adopt and offer to Shareholders such dividend reinvestment plans, cash
dividend payout plans or other distribution plans as the Trustees may deem
appropriate or desirable. The Trustees may in their discretion determine that an
account administration fee or other similar charge may be deducted directly from
the income and other distributions paid on Shares to a Shareholder's account in
any Series or Class.
(b) The Trustees may prescribe, in their absolute discretion, such
bases and times for determining the amounts for the declaration and payment of
dividends and distributions as they may deem necessary, appropriate or
desirable.
(c) Inasmuch as the computation of net income and gains for federal
income tax purposes may vary from the computation thereof on the books of
account, the above provisions shall be interpreted to give the Trustees full
power and authority in their absolute discretion to distribute for any fiscal
year as dividends and as capital gains distributions, respectively, additional
amounts sufficient to enable the Trust or a Series thereof to avoid or reduce
liability for taxes.
Section 7.3. Constant Net Asset Value; Reduction of Outstanding Shares.
The Trustees may determine to maintain the net asset value per Share of any
Series or Class at a designated constant amount and in connection therewith may
adopt procedures not inconsistent with the 1940 Act for the continuing
declarations of income attributable to that Series or Class as dividends payable
in additional Shares of that Series or Class or in cash or in any combination
thereof and for the handling of any losses attributable to that Series or Class.
Such procedures may provide that, if, for any reason, the income of any such
Series or Class determined at any time is a negative amount, the Trust may with
respect to such Series or Class (i) offset each Shareholder's pro rata share of
such negative amount from the accrued dividend account of such Shareholder, or
(ii) reduce the number of Outstanding Shares of such Series or Class by reducing
the number of Shares in the account of such Shareholder by that number of full
and fractional Shares which represents the amount of such excess negative
income, or (iii) cause to be recorded on the books of the Trust an asset account
in the amount of such negative income, which account may be reduced by the
amount, provided that the same shall thereupon become the property of the Trust
with respect to such Series or Class and shall not be paid to any Shareholder,
of dividends declared thereafter upon the Outstanding Shares of such Series or
Class on the day such negative income is experienced, until such asset account
is reduced to zero, or (iv) combine the methods described in clauses (i), (ii)
and (iii) of this sentence, in order to cause the net asset value per Share of
such Series or Class to remain at a constant amount per Outstanding Share
immediately after such determination and declaration. The Trust may also fail to
declare a dividend out of income for the purpose of causing the net asset value
of any such Share to be increased. The Trustees shall have full discretion to
determine whether any cash or property received shall be treated as income or as
principal and whether any item expense shall be charged to the income or the
principal account, and their determination made in good faith shall be
conclusive upon all Shareholders. In the case of stock dividends or similar
distributions received, the Trustees shall have full discretion to determine, in
the light of the particular circumstances, how much if any of the value thereof
shall be treated as income, the balance, if any, to be treated as principal.
Section 7.4. Power to Modify Foregoing Procedures. Notwithstanding any
provision contained in this Declaration, the Trustees may prescribe, in their
absolute discretion, such other means, methods, procedures or techniques for
determining the per Share net asset value of a Series or Class thereof or the
income of the Series or Class thereof, or for the declaration and payment of
dividends and distributions on any Series or Class of Shares.
ARTICLE VIII
DURATION; TERMINATION OF TRUST OR A
SERIES OR CLASS; MERGERS; AMENDMENTS
Section 8.1. Duration. The Trust shall continue without limitation of
time but subject to the provisions of this Article VIII. The death, declination,
resignation, retirement, removal or incapacity of the Trustees, or any one of
them, shall not operate to terminate or annul the Trust or to revoke any
existing agency or delegation of authority pursuant to the terms of this
Declaration or of the By-Laws.
Section 8.2. Termination of the Trust or a Series or a Class. (a) The
Trust or any Series or Class thereof may be terminated by: (1) the affirmative
vote of the holders of not less than two-thirds of the Shares outstanding and
entitled to vote at any meeting of Shareholders of the Trust or the appropriate
Series or Class thereof, or by an instrument or instruments in writing without a
meeting, consented to by the holders of two-thirds of the Shares of the Trust or
a Series or Class thereof, provided, however, that, if such termination is
recommended by the Trustees, the vote of a majority of the outstanding voting
securities of the Trust or a Series or Class thereof entitled to vote thereon
shall be sufficient authorization; or (2) by means of an instrument in writing
signed by a majority of the Trustees, to be followed by a written notice to
Shareholders stating that a majority of the Trustees has determined that the
continuation of the Trust or a Series or a Class thereof is not in the best
interest of the Trust, such Series or Class or of their respective Shareholders.
Such determination may (but need not) be based on factors or events adversely
affecting the ability of the Trust, such Series or Class to conduct its business
and operations in an economically viable manner. Such factors and events may
include (but are not limited to) the inability of a Series or Class or the Trust
to maintain its assets at an appropriate size, changes in laws or regulations
governing the Series or Class or the Trust or affecting assets of the type in
which such Series or Class or the Trust invests, or political, social, legal or
economic developments or trends having an adverse impact on the business or
operations of such Series or Class or the Trust. Upon the termination of the
Trust or the Series or Class,
(i) The Trust, Series or Class shall carry on no business except for
the purpose of winding up its affairs.
(ii) The Trustees shall proceed to wind up the affairs of the Trust,
Series or Class and all of the powers of the Trustees under this Declaration
shall continue until the affairs of the Trust, Series or Class shall have been
wound up, including the power to fulfill or discharge the contracts of the
Trust, Series or Class, collect its assets, sell, convey, assign, exchange,
transfer or otherwise dispose of all or any part of the remaining Trust Property
or assets allocated or belonging to such Series or Class to one or more persons
at public or private sale for consideration which may consist in whole or in
part of cash, securities or other property of any kind, discharge or pay its
liabilities, and do all other acts appropriate to liquidate its business.
(iii) After paying or adequately providing for the payment of all
liabilities, and upon receipt of such releases, indemnities and refunding
agreements as they deem necessary for their protection, the Trustees may
distribute the remaining Trust Property or the remaining property of the
terminated Series or Class, in cash or in kind or in any combination thereof,
among the Shareholders of the Trust or the Series or Class according to their
respective rights.
(b) After termination of the Trust, Series or Class and distribution to
the Shareholders as herein provided, a majority of the Trustees shall execute
and lodge among the records of the Trust and file with the Massachusetts
Secretary of State an instrument in writing setting forth the fact of such
termination, and the Trustees shall thereupon be discharged from all further
liabilities and duties with respect to the Trust or the terminated Series or
Class, and the rights and interests of all Shareholders of the Trust or the
terminated Series or Class shall thereupon cease.
Section 8.3. Merger, Consolidation or Sale of Assets of a Series. A
particular Series may merge or consolidate with any other corporation,
association, trust or other organization or may sell, lease or exchange all or
substantially all of its property, including its good will, upon such terms and
conditions and for such consideration when and as authorized by the Trustees and
without any authorization, vote or consent of the Shareholders; and any such
merger, consolidation, sale, lease or exchange shall be deemed for all purposes
to have been accomplished under and pursuant to the statutes of the Commonwealth
of Massachusetts. The Trustees may also at any time sell and convert into money
all the assets of a particular Series. Upon making provision for the payment of
all outstanding obligations, taxes, and other liabilities, accrued or
contingent, of the particular Series, the Trustees shall distribute the
remaining assets of such Series among the Shareholders of such Series according
to their respective rights. Upon completion of the distribution of the remaining
proceeds or the remaining assets, the Series shall terminate and the Trustees
shall take the action provided in Section 8.2(b) hereof and they shall thereupon
be discharged from all further liabilities and duties with respect to such
Series, and the rights and interests of all Shareholders of the terminated
Series shall thereupon cease.
Section 8.4. Amendments. The execution of an instrument setting forth
the establishment and designation and the relative rights and preferences of any
Series or Class of Shares (or amending, restating or rescinding any such prior
instrument) in accordance with Section 5.5 hereof shall, without any
authorization, consent or vote of the Shareholders, effect an amendment of this
Declaration. Except as otherwise provided in this Section 8.4, if authorized by
vote of a majority of the outstanding voting securities of the Trust the
financial interests of which are affected by the amendment and which are
entitled to vote thereon (which securities shall, unless otherwise provided by
the Trustees, vote together on such amendment as a single class), the Trustees
may amend this Declaration by an instrument signed by a majority of the Trustees
then in office. No Shareholder not so affected by any such amendment shall be
entitled to vote thereon. The Trustees may (by such an instrument) also amend or
otherwise supplement this Declaration of Trust, without any authorization,
consent or vote of the Shareholders, to change the name of the Trust or any Fund
or to make such other changes as do not have a materially adverse effect on the
financial interests of Shareholders hereunder or if they deem it necessary or
desirable to conform this Declaration to the requirements of applicable federal
or state laws or regulations or the requirements of the Internal Revenue Code of
1986, but the Trustees shall not be liable for failing to do so. Any such
amendment or supplemental Declaration of Trust shall be effective as provided in
the instrument containing its terms or, if there is no provision therein with
respect to effectiveness, upon the signing of such instrument by a majority of
the Trustees then in office. Copies of any amendment or of any supplemental
Declaration of Trust shall be filed as specified in Section 9 hereof. Nothing
contained in this Declaration shall permit the amendment of this Declaration to
impair the exemption from personal liability of the Shareholders, Trustees,
officers, employees and agents of the Trust or to permit assessments upon
Shareholders.
Notwithstanding any other provision hereof, until such time as Shares
are issued and sold, this Declaration may be terminated or amended in any
respect by an instrument signed by a majority of the Trustees then in office.
ARTICLE IX
MISCELLANEOUS
Section 9.1. Use of the Words "Eaton Vance". Eaton Vance Corp.
(hereinafter referred to as "EVC"), which owns (either directly or through
subsidiaries) all of the capital shares of the Investment Adviser of the Trust
and the Funds (or of the investment adviser of each of the investment companies
referred to in the last paragraph of Section 2.3), has consented to the use by
the Trust and the Funds of the identifying words "Eaton Vance" in the name of
the Trust and in the name of each Fund. Such consent is conditioned upon the
continued employment of EVC or a subsidiary or affiliate of EVC as Investment
Adviser of the Trust and of each such Fund or as the investment adviser of each
of the investment companies referred to in the last paragraph of Section 2.3. As
between the Trust and itself, EVC shall control the use of the name of the Trust
and the name of any Fund insofar as such name contains the identifying words
"Eaton Vance". EVC may from time to time use the identifying words "Eaton Vance"
in other connections and for other purposes, including, without limitation, in
the names of other investment companies, trusts, corporations or businesses
which it may manage, advise, sponsor or own or in which it may have a financial
interest. EVC may require the Trust to cease using the identifying words "Eaton
Vance" in the name of the Trust or any Fund if EVC or a subsidiary or affiliate
of EVC ceases to act as investment adviser of the Trust or such Fund or as the
investment adviser of each of the investment companies referred to in the last
paragraph of Section 2.3.
Section 9.2. Filing of Copies, References, Headings and Counterparts.
The original or a copy of this instrument, of any amendment hereto and of each
declaration of trust supplemental hereto, shall be kept at the office of the
Trust. A copy of this instrument, of any amendment hereto, and of each
supplemental declaration of trust shall be filed with the Massachusetts
Secretary of State and with any other governmental office where such filing may
from time to time be required. Anyone dealing with the Trust may rely on a
certificate by a Trustee or an officer of the Trust as to whether or not any
such amendments or supplemental declarations of trust have been made and as to
any matters in connection with the Trust hereunder, and with the same effect as
if it were the original, may rely on a copy certified by a Trustee or an officer
of the Trust to be a copy of this instrument or of any such amendment hereto or
supplemental declaration of trust.
In this instrument or in any such amendment or supplemental declaration
of trust, references to this instrument, and all expressions such as "herein",
"hereof", and "hereunder", shall be deemed to refer to this instrument as
amended or affected by any such supplemental declaration of trust. Headings are
placed herein for convenience of reference only and in case of any conflict, the
text of this instrument, rather than the headings, shall control. This
instrument may be executed in any number of counterparts each of which shall be
deemed an original, but such counterparts shall constitute one instrument. A
restated Declaration, integrating into a single instrument all of the provisions
of the Declaration which are then in effect and operative, may be executed from
time to time by a majority of the Trustees then in office and filed with the
Massachusetts Secretary of State. A restated Declaration shall, upon execution,
be conclusive evidence of all amendments and supplemental declarations contained
therein and may hereafter be referred to in lieu of the original Declaration and
the various amendments and supplements thereto.
Section 9.3. Applicable Law. The Trust set forth in this instrument is
made in the Commonwealth of Massachusetts, and it is created under and is to be
governed by and construed and administered according to the laws of said
Commonwealth. The Trust shall be of the type commonly called a Massachusetts
business trust, and without limiting the provisions hereof, the Trust may
exercise all powers which are ordinarily exercised by such a trust.
Section 9.4. Provisions in Conflict with Law or Regulations. (a) The
provisions of this Declaration are severable, and if the Trustees shall
determine, with the advice of legal counsel, that any of such provisions is in
conflict with the 1940 Act, the Internal Revenue code of 1986 or with other
applicable laws and regulations, the conflicting provision shall be deemed never
to have constituted a part of this Declaration; provided, however, that such
determination shall not affect any of the remaining provisions of this
Declaration or render invalid or improper any action taken or omitted prior to
such determination.
(b) If any provision of this Declaration shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
attach only to such provision in such jurisdiction and shall not in any manner
affect such provisions in any other jurisdiction or any other provision of this
Declaration in any jurisdiction.
IN WITNESS WHEREOF, the undersigned, being a majority of the current
Trustees of the Trust, have executed this instrument this 25th day of October,
1993.
/s/ Donald R. Dwight
- --------------------------------
Donald R. Dwight
/s/ James B. Hawkes
- --------------------------------
James B. Hawkes
/s/ Samuel L. Hayes, III
- --------------------------------
Samuel L. Hayes, III
/s/ Norton H. Reamer
- --------------------------------
Norton H. Reamer
/s/ John L. Thorndike
- --------------------------------
John L. Thorndike
/s/ Jack L. Treynor
- --------------------------------
Jack L. Treynor
<PAGE>
THE COMMONWEALTH OF MASSACHUSETTS
Suffolk, ss. Boston, Massachusetts
Then personally appeared the above named Donald R. Dwight, James B.
Hawkes, Samuel L. Hayes, III, Norton H. Reamer, John L. Thorndike and Jack L.
Treynor, being all of the Trustees then in office, who severally acknowledge the
foregoing instrument to be their free act and deed.
Before me,
/s/ Lynn M. Hetu
My commission expires 7/31/98
<PAGE>
The names and addresses of all the Trustees of the Trust
are as follows:
Donald R. Dwight Samuel L. Hayes, III
Clover Mill Lane 345 Nahatan Street
Lyme, NH 03768 Westwood, MA 02090
James B. Hawkes Norton H. Reamer
11 Quincy Park 70 Circuit Road
Beverly, MA 01915 Chestnut Hill, MA 02167
John L. Thorndike Jack L. Treynor
10 Main Street 504 Via Almar
Dover, MA 02030 Palos, Verdes Estates
CA 90274
TRUST ADDRESS
24 Federal Street
Boston, MA 02110
EXHIBIT 99.1(b)
EATON VANCE MUNICIPALS TRUST II
Amendment and Restatement of
Establishment and Designation of Series of Shares
of Beneficial Interest, Without Par Value
(as amended and restated May 15, 1995)
WHEREAS, pursuant to an Establishment and Designation of Series of
Shares of Beneficial Interest, Without Par Value, dated October 25, 1993 the
Trustees of Eaton Vance Municipals Trust II, a Massachusetts business trust (the
"Trust"), designated seven separate series (or "Funds"); and
WHEREAS, the Trustees now desire to further redesignate the series or
Funds pursuant to Section 5.1 of Article V of the Trust's Declaration of Trust
dated October 25, 1993 (the "Declaration of Trust");
NOW, THEREFORE, the undersigned, being at least a majority of the duly
elected and qualified Trustees presently in office of the Trust, hereby divide
the shares of beneficial interest of the Trust into nine separate series
("Funds"), each Fund to have the following special and relative rights:
1. The Funds shall be designated as follows:
EV Traditional Florida Insured Tax Free Fund
EV Marathon Florida Insured Tax Free Fund
EV Classic Florida Insured Tax Free Fund
EV Marathon Hawaii Tax Free Fund
EV Classic Hawaii Tax Free Fund
EV Marathon Kansas Tax Free Fund
EV Classic Kansas Tax Free Fund
EV Marathon High Yield Municipals Fund
EV Traditional High Yield Municipals Fund
2. Each Fund shall be authorized to invest in cash, securities,
instruments and other property as from time to time described in the Trust's
then currently effective registration statements under the Securities Act of
1933 and the Investment Company Act of 1940. Each share of beneficial interest
of each Fund ("share") shall be redeemable, shall be entitled to one vote (or
fraction thereof in respect of a fractional share) on matters on which shares of
that Fund shall be entitled to vote and shall represent a pro rata beneficial
interest in the assets allocated to that Fund, all as provided in the
Declaration of Trust. The proceeds of sales of shares of each Fund, together
with any income and gain thereon, less any diminution or expenses thereof, shall
irrevocably belong to such Fund, unless otherwise required by law. Each share of
a Fund shall be entitled to receive its pro rata share of net assets of that
Fund upon liquidation of that Fund.
3. Shareholders of each Fund shall vote separately as a class to the
extent provided in Rule 18f-2, as from time to time in effect, under the
Investment Company Act of 1940.
4. The assets and liabilities of the Trust shall be allocated among the
above-referenced Funds as set forth in Section 5.5 of Article V of the
Declaration of Trust, except as provided below.
(a) Costs incurred by each Fund in connection with its organization and
start-up, including Federal and state registration and qualification fees and
expenses of the initial public offering of such Fund's shares, shall be borne by
such Fund and deferred and amortized over the five year period beginning on the
date that such Fund commences operations.
(b) Reimbursement required under any expense limitation applicable to
the Trust shall be allocated among those Funds whose expense ratios exceed such
limitation on the basis of the relative expense ratios of such Funds.
(c) The liabilities, expenses, costs, charges and reserves of the Trust
(other than the management and investment advisory fees or the organizational
expenses paid by the Trust) which are not readily identifiable as belonging to
any particular Fund shall be allocated among the Funds on an equitable basis as
determined by the Trustees.
5. The Trustees (including any successor Trustees) shall have the right
at any time and from time to time to reallocate assets and expenses or to change
the designation of any Fund now or hereafter created, or to otherwise change the
special and relative rights of any such Fund, and to terminate any Fund or add
additional Funds as provided in the Declaration of Trust.
6. Any Fund may merge or consolidate with any other corporation,
association, trust or other organization or may sell, lease or exchange all or
substantially all of its property, including its good will, upon such terms and
conditions and for such consideration when and as authorized by the Trustees;
and any such merger, consolidation, sale, lease or exchange shall be deemed for
all purposes to have been accomplished under and pursuant to the statutes of the
Commonwealth of Massachusetts. The Trustees may also at any time sell and
convert into money all the assets of any Fund. Upon making provision for the
payment of all outstanding obligations, taxes and other liabilities, accrued or
contingent, of such Fund, the Trustees shall distribute the remaining assets of
such Fund ratably among the holders of the outstanding shares. Upon completion
of the distribution of the remaining proceeds or the remaining assets as
provided in this paragraph 6, the Fund shall terminate and the Trustees shall be
discharged of any and all further liabilities and duties hereunder with respect
to such Fund and the right, title and interest of all parties with respect to
such Fund shall be cancelled and discharged.
7. The Declaration of Trust authorizes the Trustees to divide each Fund
and any other series of shares into two or more classes and to fix and determine
the relative rights and preferences as between, and all provisions applicable
to, each of the different classes so established and designated by the Trustees.
The establishment and designation of any class of any Fund or other series of
shares shall be effective upon the execution by a majority of the then Trustees
of an instrument setting forth such establishment and designation and the
relative rights and preferences, and provisions applicable to, such class, or as
otherwise provided in such instrument.
Dated:
/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
<PAGE>
THE COMMONWEALTH OF MASSACHUSETTS
Suffolk, ss Boston, Massachusetts
Then personally appeared the above named Donald R. Dwight, James B.
Hawkes, Samuel L. Hayes, III, Norton H. Reamer, John L. Thorndike and Jack L.
Treynor being all of the Trustees then in office, who severally acknowledged the
foregoing instrument to be their free act and deed.
Before me,
/s/Lynn W. Ostberg
----------------------------------
Notary Public
My Commission Expires December 27, 1996
EXHIBIT 99.1(c)
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 December 18, 1995)
WHEREAS, pursuant to an Establishment and Designation of Series of
Shares of Beneficial Interest, Without Par Value, dated October 25, 1993 the
Trustees of Eaton Vance Municipals Trust II, a Massachusetts business trust (the
"Trust"), designated seven separate series (or "Funds"); and
WHEREAS, the Trustees now desire to further redesignate the series or
Funds pursuant to Section 5.1 of Article V of the Trust's Declaration of Trust
dated October 25, 1993 (the "Declaration of Trust");
NOW, THEREFORE, the undersigned, being at least a majority of the duly
elected and qualified Trustees presently in office of the Trust, hereby divide
the shares of beneficial interest of the Trust into nine separate series
("Funds"), each Fund to have the following special and relative rights:
1. The Funds shall be redesignated as follows:
EV Traditional Florida Insured Municipals Fund
EV Marathon Florida Insured Municipals Fund
EV Classic 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
The redesignation of each Fund shall be effective February 1, 1996.
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: December 18, 1995
/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
<PAGE>
THE COMMONWEALTH OF MASSACHUSETTS
Suffolk, ss Boston, Massachusetts
Then personally appeared the above named Donald R. Dwight, James B.
Hawkes, Samuel L. Hayes, III, Norton H. Reamer, John L. Thorndike and Jack L.
Treynor being all of the Trustees then in office, who severally acknowledged the
foregoing instrument to be their free act and deed.
Before me,
/s/Lynn W. Ostberg
--------------------------------
Notary Public
My Commission Expires December 27, 1996
EXHIBIT 99.2(a)
BY-LAWS
OF
EATON VANCE MUNICIPALS TRUST II
ARTICLE I
The Trustees
SECTION 1. Election and Term of Office. The Trustees named in the Declaration of
Trust dated October 25, 1993, as from time to time amended (the "Declaration of
Trust"), and any additional Trustees appointed pursuant to Section 4 of this
Article 1, shall serve as Trustees during the lifetime of the Trust, except as
otherwise provided below.
SECTION 2. Number of Trustees. The number of Trustees shall be fixed by the
Trustees, provided, however, that such number shall at no time exceed eighteen.
SECTION 3. Resignation and Removal. Any Trustee may resign his trust by written
instrument signed by him and delivered to the other Trustees, which shall take
effect upon such delivery or upon such later date as is specified therein. Any
Trustee who requests in writing to be retired or who has become incapacitated by
illness or injury may be retired by written instruments signed by a majority of
the other Trustees, specifying the date of his retirement. Any Trustee may be
removed at any time by written instrument, signed by at least two-thirds of the
number of Trustees prior to such removal, specifying the date when such removal
shall become effective.
No natural person shall serve as a Trustee of the Trust after the
holders of record of not less than two-thirds of the outstanding shares of
beneficial interest of the Trust (the "shares") have declared that he be removed
from that office by a declaration in writing signed by such holders and filed
with the Custodian of the assets of the Trust or by votes cast by such holders
in person or by proxy at a meeting called for the purpose. Solicitation of such
a declaration shall be deemed a solicitation of a proxy within the meaning of
Section 20(a) of the Investment Company Act of 1940 (the "Act").
The Trustees of the Trust shall promptly call a meeting of the
shareholders for the purpose of voting upon a question of removal of any such
Trustee or Trustees when requested in writing so to do by the record holders of
not less than 10 per centum of the outstanding shares.
Whenever ten or more shareholders of record of the Trust who have been
such for at least six months preceding the date of application, and who hold in
the aggregate either shares having a net asset value of at least $25,000 or at
least 1 per centum of the outstanding shares, whichever is less, shall apply to
the Trustees in writing, stating that they wish to communicate with other
shareholders with a view to obtaining signatures to a request for a meeting of
shareholders pursuant to this Section 3 and accompanied by a form of
communication and request which they wish to transmit, the Trustees shall within
five business days after receipt of such application either
(1) afford to such applicants access to a list of the names and
addresses of all shareholders as recorded on the books of the Trust; or
(2) inform such applicants as to the approximate number of shareholders
of record, and the approximate cost of mailing to them the proposed
communication and form of request.
If the Trustees elect to follow the course specified in subparagraph
(2) above of this Section 3, the Trustees, upon the written request of such
applicants, accompanied by a tender of the material to be mailed and of the
reasonable expenses of mailing, shall, with reasonable promptness, mail such
material to all shareholders of record at their addresses as recorded on the
books, unless within five business days after such tender the Trustees shall
mail to such applicants and file with the Securities and Exchange Commission
(the "Commission"), together with a copy of the material to be mailed, a written
statement signed by at least a majority of the Trustees to the effect that in
their opinion either such material contains untrue statements of fact or omits
to state facts necessary to make the statements contained therein not
misleading, or would be in violation of applicable law, and specifying the basis
of such opinion.
After the Commission has had an opportunity for hearing upon the
objections specified in the written statement so filed by the Trustees, the
Trustees or such applicants may demand that the Commission enter an order either
sustaining one or more of such objections or refusing to sustain any of such
objections. If the Commission shall enter an order refusing to sustain any of
such objections, or if, after the entry of an order sustaining one or more of
such objections, the Commission shall find, after notice and opportunity for
hearing, that all objections so sustained have been met, and shall enter an
order so declaring, the Trustees shall mail copies of such material to all
shareholders with reasonable promptness after the entry of such order and the
renewal of such tender.
Until such provisions become null, void, inoperative and removed from
these By-Laws pursuant to the next sentence, the provisions of all but the first
paragraph of this Section 3 may not be amended or repealed without the vote of a
majority of the Trustees and a majority of the outstanding shares of the Trust.
These same provisions shall be deemed null, void, inoperative and removed from
these By-Laws upon the effectiveness of any amendment to the Act which
eliminates them from Section 16 of the Act or the effectiveness of any successor
Federal law governing the operation the Trust which does not contain such
provisions.
SECTION 4. Vacancies. In case of the declination, death, resignation,
retirement, removal, or inability of any of the Trustees, or in case a vacancy
shall, by reason of an increase in number, or for any other reason, exist, the
remaining Trustees shall fill such vacancy by appointing such other person as
they in their discretion shall see fit. Such appointment shall be evidenced by a
written instrument signed by a majority of the Trustees in office whereupon the
appointment shall take effect. Within three months of such appointment the
Trustees shall cause notice of such appointment to be mailed to each shareholder
at his address as recorded on the books of the Trustees. An appointment of a
Trustee may be made by the Trustees then in office and notice thereof mailed to
shareholders as aforesaid in anticipation of a vacancy to occur by reason of
retirement, resignation or increase in number of Trustees effective at a later
date, provided that said appointment shall become effective only at or after the
effective date of said retirement, resignation or increase in number of
Trustees. As soon as any Trustee so appointed shall have accepted this trust,
the trust estate shall vest in the new Trustee or Trustees, together with the
continuing Trustees, without any further act or conveyance, and he shall be
deemed a Trustee hereunder and under the Declaration of Trust. The power of
appointment is subject to the provisions of Section 16(a) of the Act.
Whenever a vacancy among the Trustees shall occur, until such
vacancy is filled, or while any Trustee is absent from the Commonwealth of
Massachusetts or, if not a domiciliary of Massachusetts, is absent from his
state of domicile, or is physically or mentally incapacitated by reason of
disease or otherwise, the other Trustees shall have all the powers hereunder and
the certificate of the other Trustees of such vacancy, absence or incapacity
shall be conclusive, provided, however, that no vacancy shall remain unfilled
for a period longer than six calendar months.
SECTION 5. Temporary Absence of Trustee. Any Trustee may, by power of attorney,
delegate his power for a period not exceeding six months at any one time to any
other Trustee or Trustees, provided that in no case shall less than two Trustees
personally exercise the other powers hereunder except as herein otherwise
expressly provided. No such delegation shall be deemed to confer power to
approve the terms of any contract or agreement referred to in Section 15(c) of
the Act and submitted to the Trustees for their approval at a meeting of the
Trustees called for the purpose of voting on such approval.
SECTION 6. Effect of Death, Resignation, Removal, Etc. of a Trustee. The death,
declination, resignation, retirement, removal, or incapacity of the Trustees, or
any one of them, shall not operate to annul the Trust or to revoke any existing
agency created pursuant to the terms of the Declaration of Trust or these
By-Laws.
ARTICLE II
Officers and Their Election
SECTION 1. Officers. The officers of the Trust shall be a President, a
Treasurer, a Secretary, and such other officers or agents as the Trustees may
from time to time elect. It shall not be necessary for any Trustee or other
officer to be a holder of shares in the Trust.
SECTION 2. Election of Officers. The Treasurer and Secretary shall be chosen
annually by the Trustees. The President shall be chosen annually by and from the
Trustees.
Except for the offices of President and Secretary, two or more offices
may be held by a single person. The officers shall hold office until their
successors are chosen and qualified.
SECTION 3. Resignations and Removals. Any officer of the Trust may resign by
filing a written resignation with the President or with the Trustees or with the
Secretary, which shall take effect on being so filed or at such time as may
otherwise be specified therein. The Trustees may at any meeting remove an
officer.
ARTICLE III
Powers and Duties of Trustees and Officers
SECTION 1. Trustees. The business and affairs of the Trust shall be managed by
the Trustees, and they shall have all powers necessary and desirable to carry
out that responsibility, so far as such powers are not inconsistent with the
laws of the Commonwealth of Massachusetts, the Declaration of Trust, or these
By-Laws.
SECTION 2. Executive and Other Committees. The Trustees may elect from their own
number an executive committee to consist of not less than three nor more than
five members, which shall have the power and duty to conduct the current and
ordinary business of the Trust, including the purchase and sale of securities,
while the Trustees are not in session, and such other powers and duties as the
Trustees may from time to time delegate to such committee. The Trustees may also
elect from their own number other committees from time to time, the number
composing such committees and the powers conferred upon the same to be
determined by vote of the Trustees.
SECTION 3. Chairman of the Trustees. The Trustees may, but need not, appoint
from among their number a Chairman. When present he shall preside at the
meetings of the shareholders and of the Trustees. He may call meetings of the
Trustees and of any committee thereof whenever he deems it necessary. He shall
be an executive officer of this Trust and shall have, with the President,
general supervision over the business and policies of this Trust, subject to the
limitations imposed upon the President, as provided in Section 4 of this Article
III.
SECTION 4. President. In the absence of the Chairman of the Trustees, the
President when present shall preside at all meetings of the shareholders and of
the Trustees. Subject to the Trustees and to any committees of the Trustees,
within their respective spheres, as provided by the Trustees, he shall at all
times exercise a general supervision and direction over the affairs of the
Trust. He shall have the power to employ attorneys and counsel for the Trust and
to employ such subordinate officers, agents, clerks and employees as he may find
necessary to transact the business of the Trust. He shall also have the power to
grant, issue, execute or sign such powers of attorney, proxies or other
documents as may be deemed advisable or necessary in furtherance of the
interests of the Trust. The President shall have such other powers and duties
as, from time to time, may be conferred upon or assigned to him by the Trustees.
SECTION 5. Treasurer. The Treasurer shall be the principal financial and
accounting officer of the Trust. He shall deliver all funds and securities of
the Trust which may come into his hands to such bank or trust company as the
Trustees shall employ as custodian in accordance with Article VII of the
Declaration of Trust. He shall make annual reports in writing of the business
conditions of the Trust, which reports shall be preserved upon its records, and
he shall furnish such other reports regarding the business and condition as the
Trustees may from time to time require. The Treasurer shall perform such duties
additional to foregoing as the Trustees may from time to time designate.
SECTION 6. Secretary. The Secretary shall record in books kept for the purpose
all votes and proceedings of the Trustees and the shareholders at their
respective meetings. He shall have custody of the seal, if any, of the Trust and
shall perform such duties additional to the foregoing as the Trustees may from
time to time designate.
SECTION 7. Other Officers. Other officers elected by the Trustees shall perform
such duties as the Trustees may from time to time designate.
SECTION 8. Compensation. The Trustees and officers of the Trust may receive such
reasonable compensation from the Trust for the performance of their duties as
the Trustees may from time to time determine.
ARTICLE IV
Meetings of Shareholders
SECTION 1. Meetings. Meetings of the shareholders may be called at any time by
the President, and shall be called by the President or the Secretary at the
request, in writing or by resolution, of a majority of the Trustees, or at the
written request of the holder or holders of ten percent (10%) or more of the
total number of shares of the then issued and outstanding shares of the Trust
entitled to vote at such meeting. Any such request shall state the purposes of
the proposed meeting.
SECTION 2. Place of Meetings. Meetings of the shareholders shall be held at the
principal place of business of the Trust in Boston, Massachusetts, unless a
different place within the United States is designated by the Trustees and
stated as specified in the respective notices or waivers of notice with respect
thereto.
SECTION 3. Notice of Meetings. Notice of all meetings of the shareholders,
stating the time, place and the purposes for which the meetings are called,
shall be given by the Secretary to each shareholder entitled to vote thereat,
and to each shareholder who under the By-Laws is entitled to such notice, by
mailing the same postage paid, addressed to him at his address as it appears
upon the books of the Trust, at least seven (7) days before the time fixed for
the meeting, and the person giving such notice shall make an affidavit with
respect thereto. If any shareholder shall have failed to inform the Trust of his
post office address, no notice need be sent to him. No notice need be given to
any shareholder if a written waiver of notice, executed before or after the
meeting by the shareholder or his attorney thereunto authorized, is filed with
the records of the meeting.
SECTION 4. Quorum. Except as otherwise provided by law, to constitute a quorum
for the transaction of any business at any meeting of shareholders, there must
be present, in person or by proxy, holders of a majority of the total number of
shares of the then issued and outstanding shares of the Trust entitled to vote
at such meeting; provided that if a series of shares is entitled to vote as a
separate series on any matter, then in the case of that matter a quorum shall
consist of the holders of a majority of the total number of shares of the then
issued and outstanding shares of that series entitled to vote at the meeting.
Shares owned directly or indirectly by the Trust, if any, shall not be deemed
outstanding for this purpose.
If a quorum, as above defined, shall not be present for the purpose of
any vote that may properly come before any meeting of shareholders at the time
and place of any meeting, the shareholders present in person or by proxy and
entitled to vote at such meeting on such matter holding a majority of the shares
present and entitled to vote on such matter may by vote adjourn the meeting from
time to time to be held at the same place without further notice than by
announcement to be given at the meeting until a quorum, as above defined,
entitled to vote on such matter, shall be present, whereupon any such matter may
be voted upon at the meeting as though held when originally convened.
SECTION 5. Voting. At each meeting of the shareholders every shareholder of the
Trust who shall be entitled to one (1) vote in person or by proxy for each of
the then issued and outstanding shares of the Trust then having voting power in
respect of the matter upon which the vote is to be taken, standing in his name
on the books of the Trust at the time of the closing of the transfer books for
the meeting, or, if the books be not closed for any meeting, on the record date
fixed as provided in Section 4 of Article VI of these By-Laws for determining
the shareholders entitled to vote at such meeting, or if the books be not closed
and no record date be fixed, at the time of the meeting. The record holder of a
fraction of a share shall be entitled in like manner to a corresponding fraction
of a vote. Notwithstanding the foregoing, the Trustees may, in conjunction with
the establishment of any series of shares, establish conditions under which the
several series shall have separate voting rights or no voting rights.
All elections of Trustees shall be conducted in any manner approved at
the meeting of the shareholders at which said election is held, and shall be by
ballot if so requested by any shareholder entitled to vote thereon. The persons
receiving the greatest number of votes shall be deemed and declared elected.
Except as otherwise required by law or by the Declaration of Trust or by these
By-Laws, all matters shall be decided by a majority of the votes cast, as
hereinabove provided, by persons entitled to vote thereon. With respect to the
submission of a management or investment advisory contract or a distribution
plan or a change in investment policy to the shareholders for any shareholder
approval required by the Act, such matter shall be deemed to have been
effectively acted upon with respect to any series of shares if the holders of
the lesser of
(i) 67 per centum or more of the shares of that series present or
represented at the meeting if the holders of more than 50 per centum of
the outstanding shares of that series are present or represented by
proxy at the meeting or
(ii) more than 50 per centum of the outstanding shares of that series
vote for the approval of such matter, notwithstanding (a) that such matter has
not been approved by the holders of a majority of the outstanding voting
securities of any other series affected by such matter (as described in Rule
18f-2 under the Act) or (b) that such matter has not been approved by the vote
of a majority of the outstanding voting securities of the Trust (as defined in
the Act).
SECTION 6. Proxies. Any shareholder entitled to vote upon any matter at any
meeting of the shareholders may so vote by proxy. A proxy may be in writing
subscribed by the shareholder or by his duly authorized representative, agent or
attorney. A written proxy shall be dated; if an undated written proxy solicited
by the management of the Trust is delivered to the Trust or its agent or
representative, such proxy shall be deemed dated by the shareholder on the date
of its receipt by the Trust or its agent or representative. A written proxy need
not be sealed, witnessed or acknowledged. The shareholder may also authorized
and empower the persons named as proxies, representatives, agents or attorneys
(or their duly appointed substitutes), or any one of them on any form of proxy
solicited by the management of the Trust to vote all shares of the Trust which
he is entitled to vote upon any matter at any meeting of the shareholders by
recording his voting instructions on any recording device maintained for the
purpose by the Trust or its agent or representative; such recorded instructions
shall be deemed to constitute a written proxy subscribed by the shareholder and
delivered by him to the Trust or its agent or representative and shall be deemed
to be dated as of the date such instructions were transmitted, and the
shareholder shall be deemed to have approved and ratified all actions taken by
such persons in accordance with the voting instructions so recorded. No proxy
which is dated (or deemed dated) more than six months before the initial session
of the meeting shall be accepted and no such proxy shall be valid after the
final adjournment of the meeting. A proxy solicited by the management of the
Trust purporting to be executed or transmitted by or on behalf of a shareholder
shall be valid unless challenged at or prior to exercise of the proxy, and the
burden of proving any invalidity shall be borne by the person asserting the
challenge. A proxy solicited by the management of the Trust with respect to
shares held in the name of two or more persons shall be valid if executed or
transmitted by one of them unless at or prior to its exercise the Trust receives
a specific written notice to the contrary from any one of them.
SECTION 7. Consents. Any action which may be taken by shareholders may be taken
without a meeting if a majority of shareholders entitled to vote on the matter
(or such larger proportion thereof as shall be required by law, the Declaration
of Trust or these By-Laws for approval of such matter) consent to the action in
writing and the written consents are filed with the records of the meetings of
shareholders. Such contents shall be treated for all purposes as a vote taken at
a meeting of shareholders.
ARTICLE V
Trustees Meetings
SECTION 1. Meetings. The Trustees may in their discretion provide for regular or
stated meetings of the Trustees. Meetings of the Trustees other than regular or
stated meetings shall be held whenever called by the Chairman, President or by
any other Trustee at the time being in office. Any or all of the Trustees may
participate in a meeting by means of a conference telephone or similar
communications equipment through which all persons participating in the meeting
can hear each other at the same time, and participation by such means shall
constitute presence in person at a meeting; provided, however, that for the
purposes of Section 15(c) of the Act only the votes of those Trustees who are
physically present at a meeting of the Trustees shall be deemed to be cast in
person at such meeting.
SECTION 2. Notices. Notice of regular or stated meetings need not be given.
Notice of the time and place of each meeting other than regular or stated
meetings shall be given by the Secretary or by the Trustee calling the meeting
and shall be mailed to each Trustee at least two (2) days before the meeting, or
shall be telegraphed, cabled, or wirelessed to each Trustee at his business
address or personally delivered to him at least one (1) day before the meeting.
Such notice may, however, be waived by all the Trustees. Notice of a meeting
need not be given to any Trustee if a written waiver of notice, executed by him
before or after the meeting, is filed with the records of the meeting, or to any
Trustee who attends the meeting without protesting prior thereto or at its
commencement the lack of notice to him. A notice or waiver of notice need not
specify the purpose of any special meeting.
SECTION 3. Consents. Any action required or permitted to be taken at any meeting
of the Trustees may be taken by the Trustees without a meeting if a written
consent thereto is signed by all the Trustees and filed with the records of the
Trustees' meetings. Such consent may be signed in several counterparts and shall
be treated as a vote at a meeting for all purposes. The Trustees may not act by
written consent to approve the terms of any contract or agreement referred to in
Section 15(c) of the Act.
SECTION 4. Place of Meetings. The Trustees may hold their meetings within or
without the Commonwealth of Massachusetts.
SECTION 5. Quorum and Manner of Acting. A majority of the Trustees in office
shall be present in person at any regular stated or special meeting of the
Trustees in order to constitute a quorum for the transaction of business at such
meeting and (except as otherwise required by the Declaration of Trust, by these
By-Laws or by statute) the act of a majority of the Trustees present at any such
meeting, at which a quorum is present, shall be the act of the Trustees. In the
absence of quorum, a majority of the Trustees present may adjourn the meeting
from time to time until a quorum shall be present. Notice of any adjourned
meeting need not be given.
ARTICLE VI
Shares of Beneficial Interest
SECTION 1. Certificates for Shares of Beneficial Interest. Certificates for
shares of beneficial interest of any series of shares of the Trust, if issued,
shall be in such form as shall be approved by the Trustees. They shall be signed
by, or in the name of, the Trust by the President and by the Treasurer and may,
but need not be, sealed with seal of the Trust; provided, however, that where
such certificate is signed by a transfer agent or a transfer clerk acting on
behalf of the Trust or a registrar other than a Trustee, officer or employee of
the Trust, the signature of the President or Treasurer and the seal may be
facsimile. In case any officer or officers who shall have signed, or whose
facsimile signature or signatures shall have been used on any such certificate
or certificates, shall cease to be such officer or officers of the Trust whether
because of death, resignation or otherwise, before such certificate or
certificates shall have been delivered by the Trust, such certificate or
certificates may nevertheless be adopted by the Trust and be issued and
delivered as though the person or persons who signed such certificate or
certificates or whose facsimile signatures shall have been used thereon had not
ceased to be such officer or officers of the Trust.
SECTION 2. Transfer of Shares. Transfers of shares of beneficial interest of any
series of shares of the Trust shall be made only on the books of the Trust by
the owner thereof or by his attorney thereunto authorized by a power of attorney
duly executed and filed with the Secretary or a transfer agent, and only upon
the surrender of any certificate or certificates for such shares. The Trust
shall not impose any restrictions upon the transfer of the shares of any series
of the Trust, but this requirement shall not prevent the charging of customary
transfer agent fees.
SECTION 3. Transfer Agent and Registrar; Regulations. The Trust shall, if and
whenever the Trustees shall so determine, maintain one or more transfer offices
or agencies, each in the charge of a transfer agent designated by the Trustees,
where the shares of beneficial interest of the Trust shall be directly
transferable. The Trust shall, if and whenever the Trustees shall so determine,
maintain one or more registry offices, each in the charge of a registrar
designated by the Trustees, where such shares shall be registered, and no
certificate for shares of the Trust in respect of which a transfer agent and/or
registrar shall have been designated shall be valid unless countersigned by such
transfer agent and/or registered by such registrar. The principal transfer agent
may be located within or without the Commonwealth of Massachusetts and shall
have charge of the share transfer books, lists and records, which shall be kept
within or without Massachusetts in an office which shall be deemed to be the
share transfer office of the Trust. The Trustees may also make such additional
rules and regulations as it may deem expedient concerning the issue, transfer
and redemption of certificates for shares of the Trust.
SECTION 4. Closing of Transfer Books and Fixing Record Date. The Trustees may
fix in advance a time which shall be not more than sixty (60) days before the
date of any meeting of shareholders, or the date for the payment of any dividend
or the making of any distribution to shareholders or the last day on which the
consent or dissent of shareholders may be effectively expressed for any purpose,
as the record date for determining the shareholders having the right to notice
of and to vote at such meeting, and any adjournment thereof, or the right to
receive such dividend or distribution or the right to give such consent or
dissent, and in such case only shareholders of record on such record date shall
have such right, notwithstanding any transfer of shares on the books of the
Trust after the record date. The Trustees may, without fixing such record date,
close the transfer books for all or any part of such period for any of the
foregoing purposes.
SECTION 5. Lost, Destroyed or Mutilated Certificates. The holder of any shares
of the Trust shall immediately notify the Trust of any loss, destruction or
mutilation of the certificate therefor, and the Trustees may, in their
discretion, cause a new certificate or certificates to be issued to him, in case
of mutilation of the certificate, upon the surrender of the mutilated
certificate, or, in case of loss or destruction of the certificate, upon
satisfactory proof of such loss or destruction and, in any case, if the Trustees
shall so determine, upon the delivery of a bond in such form and in such sum and
with such surety or sureties as the Trustees may direct, to indemnify the Trust
against any claim that may be made against it on account of the alleged loss or
destruction of any such certificate.
SECTION 6. Record Owner of Shares. The Trust shall be entitled to treat the
person in whose name any share of a series of the Trust is registered on the
books of the Trust as the owner thereof, and shall not be bound to recognize any
equitable or other claim to or interest in such share or shares on the part of
any other person.
ARTICLE VII
Fiscal Year
The fiscal year of the Trust shall end on September 31, of each year,
provided, however, that the Trustees may from time to time change the fiscal
year.
ARTICLE VIII
Seal
The Trustees may adopt a seal of the Trust which shall be in such form
and shall have such inscription thereon as the Trustees may from time to time
prescribe.
ARTICLE IX
Inspection of Books
The Trustees shall from time to time determine whether and to what
extent, and at what times and places, and under what conditions and regulations
the accounts and books of the Trust or any of them shall be open to the
inspection of the shareholders; and no shareholder shall have any right of
inspecting any account or book or document of the Trust except as conferred by
law or authorized by the Trustees or by resolution of the shareholders.
ARTICLE X
Custodian
The following provisions shall apply to the employment of the principal
Custodian pursuant to Article VII of the Declaration of Trust:
(a) The Trust may employ the principal Custodian:
(1) To hold securities owned by the Trust and deliver the same upon
written order or oral order, if confirmed in writing, or by
such electro-mechanical or electronic devices as are agreed to
by the Trust and such Custodian;
(2) To receive and receipt for any moneys due to the Trust and
deposit the same in its own banking department or, as the
Trustees may direct, in any bank, trust company or banking
institution approved by such Custodian, provided that all such
deposits shall be subject only to the draft or order of such
Custodian; and
(3) To disburse such funds upon orders or vouchers.
(b) The Trust may also employ such Custodian as its agent:
(1) To keep the books and accounts of the Trust and furnish
clerical and accounting services; and
(2) To compute the net asset value per share in the manner approved
by the Trust.
(c) All of the foregoing services shall be performed upon such basis of
compensation as may be agreed upon between the Trust and the
principal Custodian. If so directed by vote of the holders of a
majority of the outstanding shares of the Trust, the principal
Custodian shall deliver and pay over all property of the Trust held
by it as specified in such vote.
(d) In case of the resignation, removal or inability to serve of any
such Custodian, the Trustees shall promptly appoint another bank or
trust company meeting the requirements of said Article VII as
successor principal Custodian. The agreement with the principal
Custodian shall provide that the retiring principal Custodian
shall, upon receipt of notice of such appointment, deliver the
funds and property of the Trust in its possession to and only to
such successor, and that pending appointment of a successor
principal Custodian,, or a vote of the shareholders to function
without a principal Custodian, the principal Custodian shall not
deliver funds and property of the Trust to the Trustees, but may
deliver them to a bank or trust company doing business in Boston,
Massachusetts, of its own selection, having an aggregate capital,
surplus and undivided profits, as shown by its last published
report, of not less than $2,000,000, as the property of the Trust
to be held under terms similar to those on which they were held by
the retiring principal Custodian.
The Trust may also authorize the principal Custodian to employ one or
more sub-custodians from time to time to perform such of the acts and services
of the Custodian and upon such terms and conditions as may be agreed upon
between the Custodian and sub-custodian.
Subject to such rules, regulations and orders as the Commission may
adopt, the Trust may authorize or direct the principal Custodian or any
sub-custodian to deposit all or any part of the securities in or with one or
more depositories or clearing agencies or systems for the central handling of
securities or other book-entry systems approved by the Trust, or in or with such
other persons or systems as may be permitted by the Commission, or otherwise in
accordance with the 1940 Act, pursuant to which all securities of any particular
class or series of any issuer deposited within the system are treated as
fungible and may be transferred or pledged by bookkeeping entry without physical
delivery of such securities, provided that all such deposits shall be subject to
withdrawal only upon the order of the Trust or the principal Custodian or the
sub-custodian. The Trust may also authorize the deposit in or with one or more
eligible foreign custodians (or in or with one or more foreign depositories,
clearing agencies or systems for the central handling of securities) of all or
part of the Trust's foreign assets, securities, cash and cash equivalents in
amounts reasonably necessary to effect the Trust's foreign investments
transactions, in accordance with such rules, regulations and orders as the
Commission may adopt.
ARTICLE XI
Limitation of Liability and Indemnification
SECTION 1. Limitation of Liability. Provided they have acted in good faith in
the reasonable belief that their actions are in the best interest of the Trust,
the Trustees shall not be responsible for or liable in any event for neglect or
wrongdoing of them or any officer, agent, employee or investment adviser of the
Trust, but nothing contained in the Declaration of Trust or herein shall protect
any 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.
SECTION 2. Indemnification of Trustees and Officers.
(A) Subject to the exceptions and limitations contained in Paragraph
(B) of this Section 2,
(1) every person who is, or has been, a Trustee or officer of the
Trust shall be indemnified by the Trust to the fullest extend permitted by law
against liability and against all expenses reasonably incurred or paid by him in
connection with any claim, action, suit or proceeding in which he becomes
involved as a party or otherwise by virtue of his being or having been a Trustee
or officer (or by virtue of his serving or having served at the request of the
Trust as a trustee, director, partner, officer, employee or agent of another
trust, corporation, partnership, joint venture or other enterprise) and against
amounts paid or incurred by him in the settlement thereof;
(2) the words "claim", "action", "suit", "proceeding" shall apply to
all claims, actions, suits or proceedings (civil, criminal, administrative,
investigative, legislative or other, including appeals), actual or threatened,
whether or not based on any act or omission antedating the organization of the
Trust; and the words "liability" and "expenses" shall include, without
limitation, attorneys' fees, costs, judgments, amounts paid in settlement,
fines, penalties, taxes and other liabilities.
(B) No indemnification shall be provided hereunder to a Trustee or
officer:
(1) against any liability to the Trust or its shareholders by reason
of willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office;
(2) with respect to any matter as to which he shall have been finally
adjudicated not to have acted in good faith in the reasonable belief that his
action was in the best interests of the Trust;
(3) in the event of a settlement involving a payment by the officer
or Trustee unless there has been a determination that such Trustee or officer
did not engage in willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office,
(a) by the court or other body approving the settlement; or
(b) by vote of a majority of the outstanding shares of the Trust
not including any shares owned by any affiliated person of the Trust; or
(c) by vote of a majority of those members of the Board of
Trustees of the Trust who are not themselves involved in the claim, action,
suit, or proceeding, provided that a majority of the Board of Trustees consists
of members not so involved; or
(d) by written opinion of independent counsel,
provided, however, that any shareholder may, by appropriate legal proceedings,
challenge any such determination by the Board of Trustees, or by independent
counsel.
(C) The rights of indemnification herein provided may be insured
against by policies maintained by the Trust, shall be severable, shall not be
exclusive of or affect any other rights to which any Trustee or officer may now
or hereafter by entitled, shall continue as to a person who has ceased to be
such Trustee or officer and shall inure to the benefit of the heirs, executors
and administrators of such a person. Noting contained herein shall affect any
rights to indemnification to which Trust personnel other than Trustees and
officers may be entitled by contract or otherwise under law.
(D) Expenses incurred with respect to any claim, action, suit, or
proceeding of the character described in paragraph (A) of this Section 2 may be
advanced by the Trust prior to final disposition thereof upon receipt of an
undertaking by or on behalf of the recipient to repay such amount if it is
ultimately determined that he is not entitled to indemnification under this
Article XI.
(E) For the purposes of this Section 2, the Trustees and
officers of the Trust shall also mean the directors and officers of the Trust's
predecessor Eaton Vance Stock Fund (established under an indenture of trust
dated August 26, 1931).
SECTION 3. Indemnification of Shareholders. In case any shareholder or former
shareholder shall be held to be personally liable solely by reason of his being
or having been a shareholder and not because of his acts or omissions or for
some other reason, the shareholder or former shareholder (or his heirs,
executors, administrators or other legal representatives or, in the case of a
corporation or other entity, its corporate or other general successor) shall be
entitled out of the Trust estate to be held harmless from and indemnified
against all loss and expense arising from such liability. The Trust shall, upon
request by the shareholder, assume the defense of any claim made against any
shareholder for any act or obligation of the Trust and satisfy any judgment
thereon.
ARTICLE XII
Underwriting Arrangements
Any contract entered into for the sale of shares of the Trust pursuant
to Article VIII, Section 2 of the Declaration of Trust shall require the other
party thereto (hereinafter called the "underwriter") whether acting as principal
or as agent to use all reasonable efforts, consistent with the other business of
the underwriter, to secure purchasers for the shares of the Trust.
The underwriter may be granted the right
(a) To purchase as principal, from the Trust, at not less than
net asset value per share, the shares needed, but no more
than the shares needed (except for clerical errors and
errors of transmission), to fill unconditional orders for
shares of the Trust received by the underwriter.
(b) To purchase as principal, from shareholders of the Trust at
not less than net asset value per share (minus any
applicable sales charge payable upon redemption or
repurchase of shares) such shares as may be presented to the
Trust, or the transfer agent of the Trust, for redemption
and as may be determined by the underwriter in its sole
discretion.
(c) to resell any such shares purchased at not less than net
asset value per share (minus any applicable sales charge
payable upon redemption or repurchase of shares).
ARTICLE XIII
Report to Shareholders
The Trustees shall at least semi-annually submit to the shareholders a
written financial report of the transactions of the Trust including financial
statements which shall at least annually be certified by independent public
accountants.
ARTICLE XIV
Certain Transactions
SECTION 1. Long and Short Positions. Except as hereinafter provided, no officer
or Trustee of the Trust and no partner, officer, director or shareholder of the
manager or investment adviser of the Trust or of the underwriter of the Trust,
and no manager or investment adviser or underwriter of the Trust, shall take
long or short positions in the securities issued by the Trust.
(a) The foregoing provision shall not prevent the underwriter
from purchasing shares of the Trust from the Trust if such
purchases are limited (except for reasonable allowances for
clerical errors, delays and errors of transmission and
cancellation of orders) to purchases for the purpose of
filling orders for such shares received by the underwriter,
and provided that orders to purchase from the Trust are
entered with the Trust or the Custodian promptly upon
receipt by the underwriter of purchase orders for such
shares, unless the underwriter is otherwise instructed by
its customer.
(b) The foregoing provision shall not prevent the underwriter
from purchasing shares of the Trust as agent for the account
of the Trust.
(c) The foregoing provision shall not prevent the purchase from
the Trust or from the underwriter of shares issued by the
Trust by any officer or Trustee of the Trust or by any
partner, officer, director or shareholder of the manager,
administrator or investment adviser of the Trust at the
price available to the public generally at the moment of
such purchase or, to the extent that any such person is a
shareholder, at the price available to shareholders of the
Trust generally at the moment of such purchase, or as
described in the current Prospectus of the Trust.
SECTION 2. Loans of Trust Assets. The Trust shall not lend assets of the Trust
to any officer or Trustee of the Trust, or to any partner, officer, director or
shareholder of, or person financially interested in, the manager or investment
adviser of the Trust, or the underwriter of the Trust, or to the manager or
investment adviser of the Trust or to the underwriter of the Trust.
SECTION 3. Miscellaneous. The Trust shall not permit any officer or Trustee, or
any officer or director of the manager or investment adviser or underwriter of
the Trust, to deal for or on behalf of the Trust with himself as principal or
agent, or with any partnership, association or corporation in which he has a
financial interest; provided that the foregoing provisions shall not prevent (i)
officers and Trustees of the Trust from buying, holding or selling shares in the
Trust, or from being partners, officers or directors of or otherwise financially
interested in the manager or investment adviser or underwriter of the Trust;
(ii) purchases or sales of securities or other property by the Trust from or to
an affiliated person or to the manager or investment adviser or underwriter of
the Trust if such transaction is exempt from the applicable provisions of the
Act; (iii) purchases of investments from the portfolio of the Trust or sales of
investments owned by the Trust through a security dealer who is, or one or more
of whose partners, shareholders, officers or directors is, an officer or Trustee
of the Trust, if such transactions are handled in the capacity of broker only
and commissions charged do not exceed customary brokerage charges for such
services; (iv) employment of legal counsel, registrar, transfer agent, dividend
disbursing agent or custodian who is, or has a partner, shareholder, officer or
director who is, an officer or Trustee of the Trust if only customary fees are
charged for services to the Trust; (v) sharing statistical, research, legal and
management expenses and office hire and expenses with any other investment
company in which an officer or Trustee of the Trust is an officer, trustee or
director or otherwise financially interested; or (vi) the purchase for the
portfolio of the Trust of securities issued by an issuer having an officer,
director or security holder who is an officer or Trustee or director of the
Trust or of the manager or investment adviser of the Trust, unless such purchase
would violate the Trust's investment policies or restrictions.
References to the manager or investment adviser of the Trust contained
in this Article XIV shall also be deemed to refer to any sub-adviser appointed
in accordance with Article VIII, Section 1 of the Declaration of Trust.
ARTICLE XV
Amendments
Except as provided in Section 3 of Article I of these By-Laws for the
portions of such Section 3 referred to therein, these By-Laws may be amended at
any meeting of the Trustees by a vote of a majority of the Trustees then in
office.
**********
EXHIBIT 99.2(b)
AMENDMENT TO
BY-LAWS
OF
EATON VANCE MUNICIPALS TRUST II
December 13, 1993
Pursuant to ARTICLE XV of the BY-LAWS of Eaton Vance Municipals Trust II, (the
"Trust") upon vote of a majority of the Trustees of the Trust SECTION 2. of
ARTICLE II of the BY-LAWS of the Trust was amended to read as follows:
SECTION 2. Election of Officers. The President, Treasurer and Secretary shall
be chosen annually by the Trustees.
Except for the offices of President and Secretary, two or more offices
may be held by a single person. The officers shall hold office until their
successors are chosen and qualified.
********************
EXHIBIT 99.6(a)(4)
EATON VANCE MUNICIPALS TRUST II
AMENDED DISTRIBUTION AGREEMENT
(MARATHON FUNDS)
AGREEMENT effective as of June 19, 1995 between EATON VANCE MUNICIPALS
TRUST II, a Massachusetts business trust having its principal place of business
in Boston in the Commonwealth of Massachusetts, hereinafter called the "Trust",
on behalf of each of its series listed on Schedule A (the "Funds") and EATON
VANCE DISTRIBUTORS, INC., a Massachusetts corporation having its principal place
of business in said Boston, hereinafter sometimes called the "Principal
Underwriter".
IN CONSIDERATION of the mutual promises and undertakings herein
contained, the parties hereto agree with respect to each Fund:
1. The Trust grants to the Principal Underwriter the right to purchase
shares of the Fund upon the terms hereinbelow set forth during the term of this
Agreement. While this Agreement is in force, the Principal Underwriter agrees to
use its best efforts to find purchasers for shares of the Fund.
The Principal Underwriter shall have the right to buy from the Fund the
shares needed, but not more than the shares needed (except for clerical errors
and errors of transmission) to fill unconditional orders for shares of the Fund
placed with the Principal Underwriter by financial service firms or investors as
set forth in the current Prospectus relating to shares of the Fund. The price
which the Principal Underwriter shall pay for the shares so purchased shall be
equal to the price paid by investors upon purchasing such shares. The Principal
Underwriter shall notify Investors Bank & Trust Company, Custodian of the Fund
("IBT") and The Shareholder Services Group, Inc., Transfer Agent of the Fund
("TSSG"), or a successor transfer agent, at the end of each business day, or as
soon thereafter as the orders placed with it have been compiled, of the number
of shares and the prices thereof which the Principal Underwriter is to purchase
as principal for resale. The Principal Underwriter shall take down and pay for
shares ordered from the Fund on or before the eleventh business day (excluding
Saturdays) after the shares have been so ordered.
The right granted to the Principal Underwriter to buy shares from the
Fund shall be exclusive, except that said exclusive right shall not apply to
shares issued in connection with the merger or consolidation of any other
investment company or personal holding company with the Fund or the acquisition
by purchase or otherwise of all (or substantially all) the assets or the
outstanding shares of any such company, by the Fund; nor shall it apply to
shares, if any, issued by the Fund in distribution of income or realized capital
gains of the Fund payable in shares or in cash at the option of the shareholder.
2. The shares may be resold by the Principal Underwriter to or through
financial service firms having agreements with the Principal Underwriter, and to
investors, upon the following terms and conditions.
The public offering price, i.e., the price per share at which the
Principal Underwriter or financial service firm purchasing shares from the
Principal Underwriter may sell shares to the public, shall be equal to the net
asset value at which the Principal Underwriter is to purchase the shares.
The net asset value of shares of the Fund shall be determined by the
Trust or IBT, as the agent of the Fund, as of the close of regular trading on
the New York Stock Exchange on each business day on which said Exchange is open,
or as of such other time on each such business day as may be determined by the
Trustees of the Trust, in accordance with the methodology and procedures for
calculating such net asset value authorized by the Trustees. The Trust may also
cause the net asset value to be determined in substantially the same manner or
estimated in such manner and as of such other time or times as may from time to
time be agreed upon by the Trust and Principal Underwriter. The Trust will
notify the Principal Underwriter each time the net asset value of the Fund's
shares is determined and when such value is so determined it shall be applicable
to transactions as set forth in the current Prospectus and Statement of
Additional Information (hereafter the "Prospectus") relating to the Fund's
shares.
No shares of the Fund shall be sold by the Fund during any period when
the determination of net asset value is suspended pursuant to the Declaration of
Trust, except to the Principal Underwriter, in the manner and upon the terms
above set forth to cover contracts of sale made by the Principal Underwriter
with its customers prior to any such suspension, and except as provided in the
last paragraph of paragraph 1 hereof. The Trust shall also have the right to
suspend the sale of the Fund's shares if in the judgment of the Trust conditions
obtaining at any time render such action advisable. The Principal Underwriter
shall have the right to suspend sales at any time, to refuse to accept or
confirm any order from an investor or financial service firm, or to accept or
confirm any such order in part only, if in the judgment of the Principal
Underwriter such action is in the best interests of the Fund.
3. The Trust agrees that it will, from time to time, but subject to the
necessary approval of the Fund's shareholders, take such steps as may be
necessary to register the Fund's shares under the federal Securities Act of
1933, as amended from time to time (the "1933 Act"), to the end that there will
be available for sale such number of shares as the Principal Underwriter may
reasonably be expected to sell. The Trust agrees to indemnify and hold harmless
the Principal Underwriter and each person, if any, who controls the Principal
Underwriter within the meaning of Section 15 of the 1933 Act against any loss,
liability, claim, damages or expense (including the reasonable cost of
investigating or defending any alleged loss, liability, claim, damages or
expense and reasonable counsel fees incurred in connection therewith), arising
by reason of any person acquiring any shares of the Fund, which may be based
upon the 1933 Act or on any other statute or at common law, on the ground that
the Registration Statement or Prospectus, as from time to time amended and
supplemented, includes an untrue statement of a material fact or omits to state
a material fact required to be stated therein or necessary in order to make the
statements therein not misleading, unless such statement or omission was made in
reliance upon, and in conformity with, information furnished in writing to the
Trust in connection therewith by or on behalf of the Principal Underwriter;
provided, however, that in no case (i) is the indemnity of the Trust in favor of
the Principal Underwriter and any such controlling person to be deemed to
protect such Principal Underwriter or any such controlling person against any
liability to the Trust or the Fund or its security holders to which such
Principal Underwriter or any such controlling person would otherwise be subject
by reason of willful misfeasance, bad faith, or gross negligence in the
performance of its duties or by reason of its reckless disregard of its
obligations and duties under this Agreement, or (ii) is the Trust or the Fund to
be liable under its indemnity agreement contained in this paragraph with respect
to any claim made against the Principal Underwriter or any such controlling
person unless the Principal Underwriter or any such controlling person, as the
case may be, shall have notified the Trust in writing within a reasonable time
after the summons or other first legal process giving information of the nature
of the claim shall have been served upon the Principal Underwriter or such
controlling person (or after such Principal Underwriter or such controlling
person shall have received notice of such service on any designated agent), but
failure to notify the Trust of any such claim shall not relieve it from any
liability which the Fund may have to the person against whom such action is
brought otherwise than on account of its indemnity agreement contained in this
paragraph. The Trust shall be entitled to participate, at the expense of the
Fund, in the defense, or, if the Trust so elects, to assume the defense of any
suit brought to enforce any such liability, but if the Trust elects to assume
the defense, such defense shall be conducted by counsel chosen by it and
satisfactory to the Principal Underwriter or controlling person or persons,
defendant or defendants in the suit. In the event the Trust elects to assume the
defense of any such suit and retains such counsel, the Principal Underwriter or
controlling person or persons, defendant or defendants in the suit, shall bear
the fees and expenses of any additional counsel retained by them, but, in case
the Trust does not elect to assume the defense of any such suit, the Fund shall
reimburse the Principal Underwriter or controlling person or persons, defendant
or defendants in the suit, for the reasonable fees and expenses of any counsel
retained by them. The Trust agrees promptly to notify the Principal Underwriter
of the commencement of any litigation or proceedings against it or any of its
officers or Trustees in connection with the issuance or sale of any of the
Fund's shares.
4. The Principal Underwriter covenants and agrees that, in selling the
shares of the Fund, it will use its best efforts in all respects duly to conform
with the requirements of all state and federal laws relating to the sale of such
shares, and will indemnify and hold harmless the Trust and each of its Trustees
and officers and each person, if any, who controls the Trust within the meaning
of Section 15 of the 1933 Act, against any loss, liability, damages, claim or
expense (including the reasonable cost of investigating or defending any alleged
loss, liability, damages, claim or expense and reasonable counsel fees incurred
in connection therewith), arising by reason of any person acquiring any shares
of the Fund, which may be based upon the 1933 Act or any other statute or at
common law, on account of any wrongful act of the Principal Underwriter or any
of its employees (including any failure to conform with any requirement of any
state or federal law relating to the sale of such shares) or on the ground that
the registration statement or Prospectus, as from time to time amended and
supplemented, includes an untrue statement of a material fact or omits to state
a material fact required to be stated therein or necessary in order to make the
statements therein not misleading, insofar as any such statement or omission was
made in reliance upon, and in conformity with information furnished in writing
to the Fund in connection therewith by or on behalf of the Principal
Underwriter, provided, however, that in no case (i) is the indemnity of the
Principal Underwriter in favor of any person indemnified to be deemed to protect
the Fund or any such person against any liability to which the Fund or any such
person would otherwise be subject by reason of willful misfeasance, bad faith,
or gross negligence in the performance of its or his duties or by reason of its
or his reckless disregard of its obligations and duties under this Agreement, or
(ii) is the Principal Underwriter to be liable under its indemnity agreement
contained in this paragraph with respect to any claim made against the Fund or
any person indemnified unless the Trust or such person, as the case may be,
shall have notified the Principal Underwriter in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon the Trust, the Fund or upon such
person (or after the Trust, 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
Amended 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 has been
paid pursuant to this paragraph (d) (and pursuant to paragraph (d) of the
Original Agreement) plus all sales commissions which it is entitled to be paid
pursuant to paragraph 5(c) (and pursuant to paragraph (d) of the Original
Agreement) since inception of the Original Agreement through and including the
day next preceding the date of calculation, and (b) an amount equal to the
aggregate of all distribution fees referred to below which the Principal
Underwriter has been paid pursuant to this paragraph (d) (and pursuant to
paragraph (d) of the Original Agreement) plus all such fees which it is entitled
to be paid pursuant to paragraph 5(c) (and pursuant to paragraph 5(c) of the
Original Agreement) since inception of the Original Agreement through and
including the day next preceding the date of calculation. From this sum
(distribution charges) there shall be subtracted (i) the aggregate amount paid
or payable to the Principal Underwriter pursuant to this paragraph (d) (and
pursuant to paragraph (d) of the Original Agreement) since inception of the
Original Agreement through and including the day next preceding the date of
calculation and (ii) the aggregate amount of all contingent deferred sales
charges paid or payable to the Principal Underwriter since inception of the
Original Agreement through and including the day next preceding the date of
calculation. If the result of such subtraction is a positive amount, a
distribution fee [computed at the rate of 1% per annum above the prime rate
(being the base rate on corporate loans posted by at least 75% of the nation's
30 largest banks) then being reported in the Eastern Edition of The Wall Street
Journal or if such prime rate is not so reported such other rate as may be
designated from time to time by vote or other action of a majority of (i) those
Trustees of the Trust who are not "interested persons" of the Trust (as defined
in the 1940 Act) and have no direct or indirect financial interest in the
operation of the Plan or any agreements related to it (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 TSSG, at
the end of each business day, or as soon thereafter as the repurchases in each
pricing period have been compiled, of the number of shares repurchased for the
account of the Fund since the last previous report, together with the prices at
which such repurchases were made, and upon the request of any officer or Trustee
of the Trust shall furnish similar information with respect to all repurchases
made up to the time of the request on any day.
(b) The Trust reserves the right to suspend or revoke the foregoing
authorization at any time; unless otherwise stated, any such suspension or
revocation shall be effective forthwith upon receipt of notice thereof by an
officer of the Principal Underwriter, by telegraph or by written instrument from
an officer of the Trust duly authorized by its Trustees. In the event that the
authorization of the Principal Underwriter is, by the terms of such notice,
suspended for more than twenty-four hours or until further notice, the
authorization given by this paragraph 6 shall not be revived except by action of
a majority of the Trustees of the Trust.
(c) The Principal Underwriter shall have the right to terminate the
operation of this paragraph 6 upon giving to the Trust thirty (30) days' written
notice thereof.
(d) The Trust agrees to authorize and direct 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, 1996 (or, if applicable, the next April 28 which follows the day on which
the Fund has become a party hereto by amendment of Schedule A subsequent to
April 28, 1996) and shall continue in full force and effect indefinitely
thereafter, but only so long as such continuance is specifically approved at
least annually (i) by the vote of a majority of the 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. All references in this Agreement to the "Original Agreement" shall
mean the Distribution Agreement referenced on Schedule A hereto between the
Trust on behalf of the Fund and the Principal Underwriter. Such references shall
not be applicable to any additional series of the Trust which becomes a Fund
hereunder by amendment of Schedule A subsequent to the date below.
17. This Agreement shall amend, replace and be substituted for the
Original Agreement as of the opening of business on June 20, 1995, and this
Agreement shall be effective as of such time. The outstanding uncovered
distribution charges of the Principal Underwriter calculated under the Original
Agreement as of the close of business on June 19, 1995 shall be outstanding
uncovered distribution charges of the Principal Underwriter calculated under
this Agreement as of the opening of business on June 20, 1995.
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement on
the 19th day of June, 1995.
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
AMENDED DISTRIBUTION AGREEMENT
(MARATHON FUNDS)
DATED JUNE 19, 1995
NAME OF FUND INCEPTION DATE OF ORIGINAL AGREEMENT
- ------------ ------------------------------------
EV Marathon Florida Insured Tax Free Fund February 25, 1994
EV Marathon Hawaii Tax Free Fund February 25, 1994
EV Marathon High Yield Municipals Fund N/A
EV Marathon Kansas Tax Free Fund February 25, 1994
EXHIBIT 99.6(a)(5)
EATON VANCE MUNICIPALS TRUST II
AMENDED DISTRIBUTION AGREEMENT
(Traditional Series)
AGREEMENT effective as of June 19, 1995 between EATON VANCE MUNICIPALS
TRUST II, hereinafter called the "Trust", a Massachusetts business trust having
its principal place of business in Boston in the Commonwealth of Massachusetts,
on behalf of each of its series listed on Schedule A (the "Funds") and EATON
VANCE DISTRIBUTORS, INC., a Massachusetts corporation having its principal place
of business in said Boston, hereinafter sometimes called the "Principal
Underwriter".
IN CONSIDERATION of the mutual promises and undertakings herein
contained, the parties hereto agree with respect to each Fund:
1. The Trust grants to the Principal Underwriter the right to purchase
shares of the Fund upon the terms hereinbelow set forth during the term of this
Agreement. While this Agreement is in force, the Principal Underwriter agrees to
use its best efforts to find purchasers for shares of the Fund.
The Principal Underwriter shall have the right to buy from the Fund the
shares needed, but not more than the shares needed (except for clerical errors
and errors of transmission) to fill unconditional orders for shares of the Fund
placed with the Principal Underwriter by financial service firms or investors as
set forth in the current Prospectus relating to shares of the Fund. The price
which the Principal Underwriter shall pay for the shares so purchased shall be
the net asset value used in determining the public offering price on which such
orders were based. The Principal Underwriter shall notify Investors Bank & Trust
Company, Custodian of the Fund ("IBT"), and The Shareholder Services Group,
Inc., Transfer Agent of the Fund, or a successor transfer agent, ("TSSG"), at
the end of each business day, or as soon thereafter as the orders placed with it
have been compiled, of the number of shares and the prices thereof which the
Principal Underwriter is to purchase as principal for resale. The Principal
Underwriter shall take down and pay for shares ordered from the Fund on or
before the eleventh business day (excluding Saturdays) after the shares have
been so ordered.
The right granted to the Principal Underwriter to buy shares from the
Fund shall be exclusive, except that said exclusive right shall not apply to
shares issued in connection with the merger or consolidation of any other
investment company or personal holding company with the Fund or the acquisition
by purchase or otherwise of all (or substantially all) the assets or the
outstanding shares of any such company, by the Fund; nor shall it apply to
shares, if any, issued by the Fund in distribution of income or realized capital
gains of the Fund payable in shares or in cash at the option of the shareholder.
2. The shares may be resold by the Principal Underwriter to or through
financial service firms having agreements with the Principal Underwriter, and to
investors, upon the following terms and conditions.
The public offering price, i.e., the price per share at which the
Principal Underwriter or financial service firm purchasing shares from the
Principal Underwriter may sell shares to the public, shall be the public
offering price as set forth in the current Prospectus relating to said shares,
but not to exceed the net asset value at which the Principal Underwriter is to
purchase the shares, plus a sales charge not to exceed 7.25% of the public
offering price (the net asset value divided by .9275). If the resulting public
offering price does not come out to an even cent, the public offering price
shall be adjusted to the nearer cent.
The Principal Underwriter may also sell shares at the net asset value
at which the Principal Underwriter is to purchase such shares, provided such
sales are not inconsistent with the provisions of Section 22(d) of the
Investment Company Act of 1940, as amended from time to time (the "1940 Act"),
and the rules thereunder, including any applicable exemptive orders or
administrative interpretations or "no-action" positions with respect thereto.
The net asset value of shares of the Fund shall be determined by the
Trust or IBT, as the agent of the Fund, as of the close of regular trading on
the New York Stock Exchange on each business day on which said Exchange is open,
or as of such other time on each such business day as may be determined by the
Trustees of the Trust, in accordance with the methodology and procedures for
calculating such net asset value authorized by the Trustees. The Trust may also
cause the net asset value to be determined in substantially the same manner or
estimated in such manner and as of such other time or times as may from time to
time be agreed upon by the Trust and Principal Underwriter. The Trust will
notify the Principal Underwriter each time the net asset value of the Fund's
shares is determined and when such value is so determined it shall be applicable
to transactions as set forth in the current Prospectus and Statement of
Additional Information (hereafter the "Prospectus") relating to the Fund's
shares.
No shares of the Fund shall be sold by the Fund during any period when
the determination of net asset value is suspended pursuant to the Declaration of
Trust, except to the Principal Underwriter, in the manner and upon the terms
above set forth to cover contracts of sale made by the Principal Underwriter
with its customers prior to any such suspension, and except as provided in the
last paragraph of paragraph 1 hereof. The Trust shall also have the right to
suspend the sale of the Fund's shares if in the judgment of the Trust conditions
obtaining at any time render such action advisable. The Principal Underwriter
shall have the right to suspend sales at any time, to refuse to accept or
confirm any order from an investor or financial service firm, or to accept or
confirm any such order in part only, if in the judgment of the Principal
Underwriter such action is in the best interests of the Fund.
3. The Trust covenants and agrees that it will, from time to time, but
subject to the necessary approval of the Fund's shareholders, take such steps as
may be necessary to register the Fund's shares under the federal Securities Act
of 1933, as amended from time to time (the "1933 Act"), to the end that there
will be available for sale such number of shares as the Principal Underwriter
may reasonably be expected to sell. The Trust covenants and agrees to indemnify
and hold harmless the Principal Underwriter and each person, if any, who
controls the Principal Underwriter within the meaning of Section 15 of the 1933
Act against any loss, liability, claim, damages or expense (including the
reasonable cost of investigating or defending any alleged loss, liability,
claim, damages or expense and reasonable counsel fees incurred in connection
therewith), arising by reason of any person acquiring any shares of the Fund,
which may be based upon the 1933 Act or on any other statute or at common law,
on the ground that the Registration Statement or Prospectus, as from time to
time amended and supplemented, includes an untrue statement of a material fact
or omits to state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading, unless such statement or
omission was made in reliance upon, and in conformity with, information
furnished in writing to the Trust in connection therewith by or on behalf of the
Principal Underwriter; provided, however, that in no case (i) is the indemnity
of the Trust in favor of the Principal Underwriter and any such controlling
person to be deemed to protect such Principal Underwriter or any such
controlling person against any liability to the Trust or the Fund or its
security holders to which such Principal Underwriter or any such controlling
person would otherwise be subject by reason of willful misfeasance, bad faith,
or gross negligence in the performance of its duties or by reason of its
reckless disregard of its obligations and duties under this Agreement, or (ii)
is the Trust or the Fund to be liable under its indemnity agreement contained in
this paragraph with respect to any claim made against the Principal Underwriter
or any such controlling person unless the Principal Underwriter or any such
controlling person, as the case may be, shall have notified the Trust in writing
within a reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon the Principal
Underwriter or such controlling person (or after such Principal Underwriter or
such controlling person shall have received notice of such service on any
designated agent), but failure to notify the Trust of any such claim shall not
relieve it from any liability which the Fund may have to the person against whom
such action is brought otherwise than on account of its indemnity agreement
contained in this paragraph. The Trust shall be entitled to participate, at the
expense of the Fund, in the defense, or, if the Trust so elects, to assume the
defense of any suit brought to enforce any such liability, but if the Trust
elects to assume the defense, such defense shall be conducted by counsel chosen
by it and satisfactory to the Principal Underwriter or controlling person or
persons, defendant or defendants in the suit. In the event the Trust elects to
assume the defense of any such suit and retains such counsel, the Principal
Underwriter or controlling person or persons, defendant or defendants in the
suit, shall bear the fees and expenses of any additional counsel retained by
them, but, in case the Trust does not elect to assume the defense of any such
suit, the Fund shall reimburse the Principal Underwriter or controlling person
or persons, defendant or defendants in the suit, for the reasonable fees and
expenses of any counsel retained by them. The Trust agrees promptly to notify
the Principal Underwriter of the commencement of any litigation or proceedings
against it or any of its officers or Trustees in connection with the issuance or
sale of any of the Fund's shares.
4. The Principal Underwriter covenants and agrees that, in selling the
shares of the Fund, it will use its best efforts in all respects duly to conform
with the requirements of all state and federal laws relating to the sale of such
shares, and will indemnify and hold harmless the Trust and each of its Trustees
and officers and each person, if any, who controls the Trust within the meaning
of Section 15 of the 1933 Act, against any loss, liability, damages, claim or
expense (including the reasonable cost of investigating or defending any alleged
loss, liability, damages, claim or expense and reasonable counsel fees incurred
in connection therewith), arising by reason of any person acquiring any shares
of the Fund, which may be based upon the 1933 Act or any other statute or at
common law, on account of any wrongful act of the Principal Underwriter or any
of its employees (including any failure to conform with any requirement of any
state or federal law relating to the sale of such shares) or on the ground that
the registration statement or Prospectus, as from time to time amended and
supplemented, includes an untrue statement of a material fact or omits to state
a material fact required to be stated therein or necessary in order to make the
statements therein not misleading, insofar as any such statement or omission was
made in reliance upon, and in conformity with information furnished in writing
to the Trust in connection therewith by or on behalf of the Principal
Underwriter, provided, however, that in no case (i) is the indemnity of the
Principal Underwriter in favor of any person indemnified to be deemed to protect
the Fund or any such person against any liability to which the Fund or any such
person would otherwise be subject by reason of willful misfeasance, bad faith,
or gross negligence in the performance of its or his duties or by reason of its
or his reckless disregard of its obligations and duties under this Agreement, or
(ii) is the Principal Underwriter to be liable under its indemnity agreement
contained in this paragraph with respect to any claim made against the Fund or
any person indemnified unless the Trust or such person, as the case may be,
shall have notified the Principal Underwriter in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon the Trust, the Fund or upon such
person (or after the Trust, the Fund or such person shall have received notice
of such service on any designated agent), but failure to notify the Principal
Underwriter of any such claim shall not relieve it from any liability which it
may have to the Fund or any person against whom such action is brought otherwise
than on account of its indemnity agreement contained in this paragraph. The
Principal Underwriter shall be entitled to participate, at its own expense, in
the defense, or, if it so elects, to assume the defense of any suit brought to
enforce any such liability, but if the Principal Underwriter elects to assume
the defense, such defense shall be conducted by counsel chosen by it and
satisfactory to the Trust, or to its officers or Trustees, or to any controlling
person or persons, defendant or defendants in the suit. In the event that the
Principal Underwriter elects to assume the defense of any such suit and retains
such counsel, the Fund or such officers or Trustees or controlling person or
persons, defendant or defendants in the suit, shall bear the fees and expenses
of any additional counsel retained by them or the Trust, but, in case the
Principal Underwriter does not elect to assume the defense of any such suit, it
shall reimburse the Fund, any such officers and Trustees or controlling person
or persons, defendant or defendants in such suit, for the reasonable fees and
expenses of any counsel retained by them or the Trust. The Principal Underwriter
agrees promptly to notify the Trust of the commencement of any litigation or
proceedings against it in connection with the issue and sale of any of the
Fund's shares.
Neither the Principal Underwriter nor any financial service firm nor
any other person is authorized by the Trust to give any information or to make
any representations, other than those contained in the Registration Statement or
Prospectus filed with the Securities and Exchange Commission (the "Commission")
under the 1933 Act (as said Registration Statement and Prospectus may be amended
or supplemented from time to time), covering the shares of the Fund. Neither the
Principal Underwriter nor any financial service firm nor any other person is
authorized to act as agent for the Trust or the Fund in connection with the
offering or sale of shares of the Fund to the public or otherwise. All such
sales made by the Principal Underwriter shall be made by it as principal, for
its own account. The Principal Underwriter may, however, act as agent in
connection with the repurchase of shares as provided in paragraph 6 below, or in
connection with "exchanges" between investment companies for which the Principal
Underwriter (or an affiliate thereof) acts as principal underwriter or
investment adviser.
5(a). The Fund will pay, or cause to be paid -
(i) all the costs and expenses of the Fund, including fees and
disbursements of its counsel, in connection with the preparation and filing of
any required Registration Statement and/or Prospectus under the 1933 Act, or the
1940 Act, covering its shares and all amendments and supplements thereto, and
preparing and distributing periodic reports to shareholders (including the
expense of setting up in type any such Registration Statement, Prospectus or
periodic report);
(ii) the cost of preparing temporary and permanent share
certificates (if any) for shares of the Fund;
(iii) the cost and expenses of delivering to the Principal
Underwriter at its office in Boston, Massachusetts, all shares of the Fund
purchased by it as principal hereunder;
(iv) all the federal and state (if any) issue and/or transfer
taxes payable upon the issue by or (in the case of treasury shares) transfer
from the Fund to the Principal Underwriter of any and all shares of the Fund
purchased by the Principal Underwriter hereunder;
(v) the fees, costs and expenses of the registration or
qualification of shares of the Fund for sale in the various states, territories
or other jurisdictions (including without limitation the registering or
qualifying the Fund as a broker or dealer or any officer of the Fund as agent or
salesman in any state, territory or other jurisdiction); and
(vi) all payments to be made by the Fund pursuant to any written
plan approved in accordance with Rule 12b-1 under the 1940 Act.
(b) The Principal Underwriter agrees that, after the Prospectus (other
than to existing shareholders of the Fund) and periodic reports have been set up
in type, it will bear the expense of printing and distributing any copies
thereof which are to be used in connection with the offering of shares of the
Fund to financial service firms or investors. The Principal Underwriter further
agrees that it will bear the expenses of preparing, printing and distributing
any other literature used by the Principal Underwriter or furnished by it for
use by financial service firms in connection with the offering of the shares of
the Fund for sale to the public and any expenses of advertising in connection
with such offering.
(c) The Principal Underwriter shall be entitled to receive all
contingent deferred sales charges imposed in accordance with the Prospectus on
early redemptions of Fund shares.
6. The Trust hereby authorizes the Principal Underwriter to
repurchase, upon the terms and conditions set forth in written instructions
given by the Trust to the Principal Underwriter from time to time, as agent of
the Fund and for its account, such shares of the Fund as may be offered for sale
to the Fund from time to time.
(a) The Principal Underwriter shall notify in writing IBT and TSSG, at
the end of each business day, or as soon thereafter as the repurchases in each
pricing period have been compiled, of the number of shares repurchased for the
account of the Fund since the last previous report, together with the prices at
which such repurchases were made, and upon the request of any officer or Trustee
of the Trust shall furnish similar information with respect to all repurchases
made up to the time of the request on any day.
(b) The Trust reserves the right to suspend or revoke the foregoing
authorization at any time; unless otherwise stated, any such suspension or
revocation shall be effective forthwith upon receipt of notice thereof by an
officer of the Principal Underwriter, by telegraph or by written instrument from
an officer of the Trust duly authorized by its Trustees. In the event that the
authorization of the Principal Underwriter is, by the terms of such notice,
suspended for more than twenty-four hours or until further notice, the
authorization given by this paragraph 6 shall not be revived except by action of
a majority of the Trustees of the Trust.
(c) The Principal Underwriter shall have the right to terminate the
operation of this paragraph 6 upon giving to the Trust thirty (30) days' written
notice thereof.
(d) The Trust agrees to authorize and direct TSSG, to pay, for the
account of the Fund, the purchase price of any shares so repurchased against
delivery of the certificates in proper form for transfer to the Fund or for
cancellation by the Fund.
(e) The Principal Underwriter shall receive no commission in respect of
any repurchase of shares under the foregoing authorization and appointment as
agent.
(f) The Trust agrees that the Fund will reimburse the Principal
Underwriter, from time to time on demand, for any reasonable expenses incurred
in connection with the repurchase of shares of the Fund pursuant to this
paragraph 6.
7. If, at any time during the existence of this Agreement, the Trust
shall deem it necessary or advisable in the best interests of the Fund that any
amendment of this Agreement be made in order to comply with the recommendations
or requirements of the Commission or other governmental authority or to obtain
any advantage under Massachusetts or federal tax laws, and shall notify the
Principal Underwriter of the form of amendment which it deems necessary or
advisable and the reasons therefor, and, if the Principal Underwriter declines
to assent to such amendment, the Trust may terminate this Agreement forthwith by
written notice to the Principal Underwriter. If, at any time during the
existence of this Agreement upon request by the Principal Underwriter, the Trust
fails (after a reasonable time) to make any changes in its Declaration of Trust,
as amended, or in its methods of doing business which are necessary in order to
comply with any requirement of federal law or regulations of the Commission or
of a national securities association of which the Principal Underwriter is or
may be a member, relating to the sale of the shares of the Fund, the Principal
Underwriter may terminate this Agreement forthwith by written notice to the
Trust.
8(a). The Principal Underwriter is a corporation in the United States
organized under the laws of Massachusetts and holding membership in the National
Association of Securities Dealers, Inc., a securities association registered
under Section 15A of the Securities Exchange Act of 1934, as amended from time
to time, and during the life of this Agreement will continue to be so resident
in the United States, so organized and a member in good standing of said
Association. The Principal Underwriter covenants that it and its officers and
directors will comply with the Trust's Declaration of Trust and By-Laws, and the
1940 Act and the rules promulgated thereunder, insofar as they are applicable to
the Principal Underwriter.
(b) The Principal Underwriter shall maintain in the United States and
preserve therein for such period or periods as the Commission shall prescribe by
rules and regulations applicable to it as Principal Underwriter of an open-end
investment company registered under the 1940 Act such accounts, books and other
documents as are necessary or appropriate to record its transactions with the
Fund. Such accounts, books and other documents shall be subject at any time and
from time to time to such reasonable periodic, special and other examinations by
the Commission or any member or representative thereof as the Commission may
prescribe. The Principal Underwriter shall furnish to the Commission within such
reasonable time as the Commission may prescribe copies of or extracts from such
records which may be prepared without effort, expense or delay as the Commission
may by order require.
9. This Agreement shall continue in force indefinitely until terminated
as in this Agreement above provided, except that:
(a) this Agreement shall continue in effect through and including April
28, 1996 (or, if applicable, the next April 28 which follows the day on which
the Fund has become a party hereto by amendment of Schedule A subsequent to
April 28, 1996) and shall continue in full force and effect indefinitely
thereafter, but only so long as such continuance is specifically approved at
least annually (i) by the vote of a majority of the Trustees of the Trust who
are not interested persons of the Trust or of the Principal Underwriter cast in
person at a meeting called for the purpose of voting on such approval, and (ii)
by the Trustees of the Trust or by vote of a majority of the outstanding voting
securities of the Fund;
(b) that either party shall have the right to terminate this Agreement
on six (6) months' written notice thereof given in writing to the other; and
(c) additional series of the Trust will become parties hereto upon
approval by the Trustees of the Trust and amendment of Schedule A.
10. In the event of the assignment of this Agreement by the Principal
Underwriter, this Agreement shall automatically terminate.
11. Any notice under this Agreement shall be in writing, addressed and
delivered, or mailed postage paid, to the other party, at such address as such
other party may designate for the receipt of such notices. Until further notice
to the other party, it is agreed that the record address of the Trust and that
of the Principal Underwriter, shall be 24 Federal Street, Boston, Massachusetts
02110.
12. The services of the Principal Underwriter to the Fund hereunder are
not to be deemed to be exclusive, the Principal Underwriter being free to (a)
render similar services to, and to act as principal underwriter in connection
with the distribution of shares of, other series of the Trust or other
investment companies, and (b) engage in other business and activities from time
to time.
13. The terms "vote of a majority of the outstanding voting
securities," "assignment" and "interested persons," when used herein, shall have
the respective meanings specified in the 1940 Act, subject, however, to such
exemptions as may be granted by the Commission by any rule, regulation or order.
14. The Principal Underwriter expressly acknowledges the provision in
the Trust's Declaration of Trust limiting the personal liability of the
shareholders of the Fund or the Trustees of the Trust. The Principal Underwriter
hereby agrees that it shall have recourse only to the assets of the Fund for
payment of claims or obligations as between the Trust on behalf of the Fund, and
the Principal Underwriter arising out of this Agreement and shall not seek
satisfaction from any shareholders of the Trust or from the Trustees or any
Trustee of the Trust. The Fund shall not be responsible for obligations of any
other series of the Trust.
15. All references in this Agreement to the "Original Agreement" shall
mean the Distribution Agreement referenced on Schedule A hereto between the
Trust on behalf of the Fund and the Principal Underwriter.
16. This Agreement shall amend, replace and be substituted for the
Original Agreement as of the opening of business on June 20, 1995, and this
Agreement shall be effective as of such time.
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement the
19th day of June, 1995.
EATON VANCE MUNICIPALS TRUST II
By /s/Thomas J. Fetter
-----------------------------------
President
EATON VANCE DISTRIBUTORS INC.
By /s/Wharton P. Whitaker
------------------------------------
Vice President
<PAGE>
SCHEDULE A
EATON VANCE MUNICIPALS TRUST II
NAME OF FUND INCEPTION DATE OF ORIGINAL AGREEMENT
- ------------ ------------------------------------
EV Traditional Florida Insured Tax Free Fund February 25, 1994
EV Traditional High Yield Municipals Fund N/A
<PAGE>
AMENDED SCHEDULE A
Eaton Vance Municipals Trust II
AMENDED DISTRIBUTION AGREEMENT
(Traditional Funds)
DATED: February 1, 1996
NAME OF FUND INCEPTION DATE OF PRIOR PLANS
- ------------ ------------------------------
EV Traditional Hawaii Municipals Fund* February 25, 1994/
January 27, 1995
EV Traditional Florida Insured Municipals Fund February 25, 1994
EV Traditional High Yield Municipals Fund N/A
EV Traditional Kansas Municipals Fund* February 25, 1994/
January 27, 1995
- --------
*This fund formerly was a classic series of the Trust.
EXHIBIT 99.6(a)(6)
EATON VANCE MUNICIPALS TRUST II
AMENDED DISTRIBUTION AGREEMENT
(CLASSIC FUNDS)
AGREEMENT effective as of January 27, 1995 between EATON VANCE
MUNICIPALS TRUST II, a Massachusetts business trust having its principal place
of business in Boston in the Commonwealth of Massachusetts, hereinafter called
the "Trust", on behalf of each of its series listed on Schedule A (the "Funds"),
and EATON VANCE DISTRIBUTORS, INC., a Massachusetts corporation having its
principal place of business in said Boston, hereinafter sometimes called the
"Principal Underwriter".
IN CONSIDERATION of the mutual promises and undertakings herein
contained, the parties hereto agree with respect to each Fund:
1. The Trust grants to the Principal Underwriter the right to purchase
shares of the Fund upon the terms hereinbelow set forth during the term of this
Agreement. While this Agreement is in force, the Principal Underwriter agrees to
use its best efforts to find purchasers for shares of the Fund.
The Principal Underwriter shall have the right to buy from the Fund the
shares needed, but not more than the shares needed (except for clerical errors
and errors of transmission) to fill unconditional orders for shares of the Fund
placed with the Principal Underwriter by financial service firms or investors as
set forth in the current Prospectus relating to shares of the Fund. The price
which the Principal Underwriter shall pay for the shares so purchased shall be
equal to the price paid by investors upon purchasing such shares. The Principal
Underwriter shall notify Investors Bank & Trust Company, Custodian of the Fund
("IBT"), and The Shareholder Services Group, Inc., Transfer Agent of the Fund
("TSSG"), or a successor transfer agent, at the end of each business day, or as
soon thereafter as the orders placed with it have been compiled, of the number
of shares and the prices thereof which the Principal Underwriter is to purchase
as principal for resale. The Principal Underwriter shall take down and pay for
shares ordered from the Fund on or before the eleventh business day (excluding
Saturdays) after the shares have been so ordered.
The right granted to the Principal Underwriter to buy shares from the
Fund shall be exclusive, except that said exclusive right shall not apply to
shares issued in connection with the merger or consolidation of any other
investment company or personal holding company with the Fund or the acquisition
by purchase or otherwise of all (or substantially all) the assets or the
outstanding shares of any such company, by the Fund; nor shall it apply to
shares, if any, issued by the Fund in distribution of income or realized capital
gains of the Fund payable in shares or in cash at the option of the shareholder.
2. The shares may be resold by the Principal Underwriter to or through
financial service firms having agreements with the Principal Underwriter, and to
investors, upon the following terms and conditions.
The public offering price, i.e., the price per share at which the
Principal Underwriter or financial service firm purchasing shares from the
Principal Underwriter may sell shares to the public, shall be equal to the net
asset value at which the Principal Underwriter is to purchase the shares.
The net asset value of shares of the Fund shall be determined by the
Trust or IBT, as the agent of the Fund, as of the close of regular trading on
the New York Stock Exchange on each business day on which said Exchange is open,
or as of such other time on each such business day as may be determined by the
Trustees of the Trust, in accordance with the methodology and procedures for
calculating such net asset value authorized by the Trustees. The Trust may also
cause the net asset value to be determined in substantially the same manner or
estimated in such manner and as of such other time or times as may from time to
time be agreed upon by the Trust and Principal Underwriter. The Trust will
notify the Principal Underwriter each time the net asset value of the Fund's
shares is determined and when such value is so determined it shall be applicable
to transactions as set forth in the current Prospectus and Statement of
Additional Information (hereafter the "Prospectus") relating to the Fund's
shares.
No shares of the Fund shall be sold by the Fund during any period when
the determination of net asset value is suspended pursuant to the Declaration of
Trust, except to the Principal Underwriter, in the manner and upon the terms
above set forth to cover contracts of sale made by the Principal Underwriter
with its customers prior to any such suspension, and except as provided in the
last paragraph of paragraph 1 hereof. The Trust shall also have the right to
suspend the sale of the Fund's shares if in the judgment of the Trust conditions
obtaining at any time render such action advisable. The Principal Underwriter
shall have the right to suspend sales at any time, to refuse to accept or
confirm any order from an investor or financial service firm, or to accept or
confirm any such order in part only, if in the judgment of the Principal
Underwriter such action is in the best interests of the Fund.
3. The Trust agrees that it will, from time to time, but subject to the
necessary approval of the Fund's shareholders, take such steps as may be
necessary to register the Fund's shares under the federal Securities Act of
1933, as amended from time to time, (the "1933 Act"), to the end that there will
be available for sale such number of shares as the Principal Underwriter may
reasonably be expected to sell. The Trust agrees to indemnify and hold harmless
the Principal Underwriter and each person, if any, who controls the Principal
Underwriter within the meaning of Section 15 of the 1933 Act against any loss,
liability, claim, damages or expense (including the reasonable cost of
investigating or defending any alleged loss, liability, claim, damages or
expense and reasonable counsel fees incurred in connection therewith), arising
by reason of any person acquiring any shares of the Fund, which may be based
upon the 1933 Act or on any other statute or at common law, on the ground that
the Registration Statement or Prospectus, as from time to time amended and
supplemented, includes an untrue statement of a material fact or omits to state
a material fact required to be stated therein or necessary in order to make the
statements therein not misleading, unless such statement or omission was made in
reliance upon, and in conformity with, information furnished in writing to the
Trust in connection therewith by or on behalf of the Principal Underwriter;
provided, however, that in no case (i) is the indemnity of the Trust in favor of
the Principal Underwriter and any such controlling person to be deemed to
protect such Principal Underwriter or any such controlling person against any
liability to the Trust or the Fund or its security holders to which such
Principal Underwriter or any such controlling person would otherwise be subject
by reason of willful misfeasance, bad faith, or gross negligence in the
performance of its duties or by reason of its reckless disregard of its
obligations and duties under this Agreement, or (ii) is the Trust or the Fund to
be liable under its indemnity agreement contained in this paragraph with respect
to any claim made against the Principal Underwriter or any such controlling
person unless the Principal Underwriter or any such controlling person, as the
case may be, shall have notified the Trust in writing within a reasonable time
after the summons or other first legal process giving information of the nature
of the claim shall have been served upon the Principal Underwriter or such
controlling person (or after such Principal Underwriter or such controlling
person shall have received notice of such service on any designated agent), but
failure to notify the Trust of any such claim shall not relieve it from any
liability which the Fund may have to the person against whom such action is
brought otherwise than on account of its indemnity agreement contained in this
paragraph. The Trust shall be entitled to participate, at the expense of the
Fund, in the defense, or, if the Trust so elects, to assume the defense of any
suit brought to enforce any such liability, but if the Trust elects to assume
the defense, such defense shall be conducted by counsel chosen by it and
satisfactory to the Principal Underwriter or controlling person or persons,
defendant or defendants in the suit. In the event the Trust elects to assume the
defense of any such suit and retains such counsel, the Principal Underwriter or
controlling person or persons, defendant or defendants in the suit, shall bear
the fees and expenses of any additional counsel retained by them, but, in case
the Trust does not elect to assume the defense of any such suit, the Fund shall
reimburse the Principal Underwriter or controlling person or persons, defendant
or defendants in the suit, for the reasonable fees and expenses of any counsel
retained by them. The Trust agrees promptly to notify the Principal Underwriter
of the commencement of any litigation or proceedings against it or any of its
officers or Trustees in connection with the issuance or sale of any of the
Fund's shares.
4. The Principal Underwriter covenants and agrees that, in selling the
shares of the Fund, it will use its best efforts in all respects duly to conform
with the requirements of all state and federal laws relating to the sale of such
shares, and will indemnify and hold harmless the Trust and each of its Trustees
and officers and each person, if any, who controls the Trust within the meaning
of Section 15 of the 1933 Act, against any loss, liability, damages, claim or
expense (including the reasonable cost of investigating or defending any alleged
loss, liability, damages, claim or expense and reasonable counsel fees incurred
in connection therewith), arising by reason of any person acquiring any shares
of the Fund, which may be based upon the 1933 Act or any other statute or at
common law, on account of any wrongful act of the Principal Underwriter or any
of its employees (including any failure to conform with any requirement of any
state or federal law relating to the sale of such shares) or on the ground that
the Registration Statement or Prospectus, as from time to time amended and
supplemented, includes an untrue statement of a material fact or omits to state
a material fact required to be stated therein or necessary in order to make the
statements therein not misleading, insofar as any such statement or omission was
made in reliance upon, and in conformity with information furnished in writing
to the Fund in connection therewith by or on behalf of the Principal
Underwriter, provided, however, that in no case (i) is the indemnity of the
Principal Underwriter in favor of any person indemnified to be deemed to protect
the Fund or any such person against any liability to which the Fund or any such
person would otherwise be subject by reason of willful misfeasance, bad faith,
or gross negligence in the performance of its or his duties or by reason of its
or his reckless disregard of its obligations and duties under this Agreement, or
(ii) is the Principal Underwriter to be liable under its indemnity agreement
contained in this paragraph with respect to any claim made against the Fund or
any person indemnified unless the Trust or such person, as the case may be,
shall have notified the Principal Underwriter in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon the Trust, the Fund or upon such
person (or after the Trust or such person shall have received notice of such
service on any designated agent), but failure to notify the Principal
Underwriter of any such claim shall not relieve it from any liability which it
may have to the Fund or any person against whom such action is brought otherwise
than on account of its indemnity agreement contained in this paragraph. The
Principal Underwriter shall be entitled to participate, at its own expense, in
the defense, or, if it so elects, to assume the defense of any suit brought to
enforce any such liability, but if the Principal Underwriter elects to assume
the defense, such defense shall be conducted by counsel chosen by it and
satisfactory to the Trust, or to its officers or Trustees, or to any controlling
person or persons, defendant or defendants in the suit. In the event that the
Principal Underwriter elects to assume the defense of any such suit and retains
such counsel, the Fund or such officers or Trustees or controlling person or
persons, defendant or defendants in the suit, shall bear the fees and expenses
of any additional counsel retained by them or the Trust, but, in case the
Principal Underwriter does not elect to assume the defense of any such suit, it
shall reimburse the Fund, any such officers and Trustees or controlling person
or persons, defendant or defendants in such suit, for the reasonable fees and
expenses of any counsel retained by them or the Trust. The Principal Underwriter
agrees promptly to notify the Trust of the commencement of any litigation or
proceedings against it in connection with the issue and sale of any of the
Fund's shares.
Neither the Principal Underwriter nor any financial service firm nor
any other person is authorized by the Trust to give any information or to make
any representations, other than those contained in the Registration Statement or
Prospectus filed with the Securities and Exchange Commission (the "Commission")
under the 1933 Act, (as said Registration Statement and Prospectus may be
amended or supplemented from time to time), covering the shares of the Fund.
Neither the Principal Underwriter nor any financial service firm nor any other
person is authorized to act as agent for the Trust or the Fund in connection
with the offering or sale of shares of the Fund to the public or otherwise. All
such sales made by the Principal Underwriter shall be made by it as principal,
for its own account. The Principal Underwriter may, however, act as agent in
connection with the repurchase of shares as provided in paragraph 6 below, or in
connection with "exchanges" between investment companies for which the Principal
Underwriter acts as Principal Underwriter or for which an affiliate of the
Principal Underwriter acts as investment adviser.
5(a). The Fund will pay, or cause to be paid -
(i) all the costs and expenses of the Fund, including fees and
disbursements of its counsel, in connection with the preparation and filing of
any required Registration Statement and/or Prospectus under the 1933 Act, or the
Investment Company Act of 1940, as amended from time to time, (the "1940 Act")
covering its shares and all amendments and supplements thereto, and preparing
and mailing periodic reports to shareholders (including the expense of setting
up in type any such Registration Statement, Prospectus or periodic report);
(ii) the cost of preparing temporary and permanent share certificates
(if any) for shares of the Fund;
(iii) the cost and expenses of delivering to the Principal Underwriter
at its office in Boston, Massachusetts, all shares of the Fund purchased by it
as principal hereunder; and
(iv) all the federal and state (if any) issue and/or transfer taxes
payable upon the issue by or (in the case of treasury shares) transfer from the
Fund to the Principal Underwriter of any and all shares of the Fund purchased by
the Principal Underwriter hereunder.
(b) The Principal Underwriter agrees that, after the Prospectus and
periodic reports have been set up in type, it will bear the expense of printing
and distributing any copies thereof which are to be used in connection with the
offering of shares of the Fund to financial service firms or investors. The
Principal Underwriter further agrees that it will bear the expenses of
preparing, printing and distributing any other literature used by the Principal
Underwriter or furnished by it for use by financial service firms in connection
with the offering of the shares of the Fund for sale to the public and any
expenses of advertising in connection with such offering. The Fund agrees to
pay the expenses of registration and maintaining registration of its shares for
sale under federal and state securities laws, and, if necessary or advisable in
connection therewith, of qualifying the Trust or the Fund as a dealer or
broker, in such states as shall be selected by the Principal Underwriter and
the fees payable to each such state for continuing the qualification therein
until the Principal Underwriter notifies the Trust that it does not wish such
qualification continued.
(c) In addition, the Trust agrees, in accordance with the Fund's
Amended 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 6.25% 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 has been
paid pursuant to this paragraph (d) (and pursuant to paragraph (d) of the
Original Agreement) plus all sales commissions which it is entitled to be paid
pursuant to paragraph 5(c) (and pursuant to paragraph 5(c) of the Original
Agreement) since inception of the Original Agreement through and including the
day next preceding the date of calculation, and (b) an amount equal to the
aggregate of all distribution fees referred to below which the Principal
Underwriter has been paid pursuant to this paragraph (d) (and pursuant to
paragraph (d) of the Original Agreement) plus all such fees which it is entitled
to be paid pursuant to paragraph 5(c) (and pursuant to paragraph 5(c) of the
Original Agreement) since inception of the Original Agreement through and
including the day next preceding the date of calculation. From this sum
(distribution charges) there shall be subtracted (i) the aggregate amount paid
or payable to the Principal Underwriter pursuant to this paragraph (d) (and
pursuant to paragraph (d) of the Original Agreement) since inception of the
Original Agreement through and including the day next preceding the date of
calculation and (ii) the aggregate amount of all contingent deferred sales
charges paid or payable to the Principal Underwriter since inception of the
Original Agreement through and including the day next preceding the date of
calculation. If the result of such subtraction is a positive amount, a
distribution fee [computed at the rate of 1% per annum above the prime rate
(being the base rate on corporate loans posted by at least 75% of the nation's
30 largest banks) then being reported in the Eastern Edition of The Wall Street
Journal or if such prime rate is not so reported such other rate as may be
designated from time to time by vote or other action of a majority of (i) those
Trustees of the Trust who are not "interested persons" of the Trust (as defined
in the 1940 Act) and have no direct or indirect financial interest in the
operation of the Plan or any agreements related to it (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 by the Fund pursuant to the Plan or this Agreement shall be the
President or any Vice President of the Trust. Such persons shall provide to the
Trust's Trustees and the Trustees shall review, at least quarterly, a written
report of the amounts so expended and the purposes for which such expenditures
were made.
(g) In addition to the payments to the Principal Underwriter provided
for in paragraph 5(d), the Fund may make payments of service fees to the
Principal Underwriter, Authorized Firms and other persons. The aggregate of such
payments during any fiscal year of the Fund shall not exceed .25% of the Fund's
average daily net assets for such year.
6. The Trust hereby authorizes the Principal Underwriter to repurchase,
upon the terms and conditions set forth in written instructions given by the
Trust to the Principal Underwriter from time to time, as agent of the Fund and
for its account, such shares of the Fund as may be offered for sale to the Fund
from time to time.
(a) The Principal Underwriter shall notify in writing IBT and TSSG at
the end of each business day, or as soon thereafter as the repurchases in each
pricing period have been compiled, of the number of shares repurchased for the
account of the Fund since the last previous report, together with the prices at
which such repurchases were made, and upon the request of any officer or Trustee
of the Trust shall furnish similar information with respect to all repurchases
made up to the time of the request on any day.
(b) The Trust reserves the right to suspend or revoke the foregoing
authorization at any time; unless otherwise stated, any such suspension or
revocation shall be effective forthwith upon receipt of notice thereof by an
officer of the Principal Underwriter, by telegraph or by written instrument from
an officer of the Trust duly authorized by its Trustees. In the event that the
authorization of the Principal Underwriter is, by the terms of such notice,
suspended for more than twenty-four hours or until further notice, the
authorization given by this paragraph 6 shall not be revived except by action of
a majority of the Trustees of the Trust.
(c) The Principal Underwriter shall have the right to terminate the
operation of this paragraph 6 upon giving to the Trust thirty (30) days' written
notice thereof.
(d) The Trust agrees to authorize and direct 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 remain in effect through and including April
28, 1995 (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, 1995), 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. All references in this Agreement to the "Original Agreement" shall
mean the Distribution Agreement referenced on Schedule A hereto between the
Trust on behalf of the Fund and the Principal Underwriter. Such references shall
not be applicable to any additional series of the Trust which becomes a Fund
hereunder by amendment of Schedule A subsequent to January 27, 1995.
17. This Agreement shall amend, replace and be substituted for the
Original Agreement as of the opening of business on January 30, 1995, and this
Agreement shall be effective as of such time. The outstanding uncovered
distribution charges of the Principal Underwriter calculated under the Original
Agreement as of the close of business on January 29, 1995 shall be the out-
standing uncovered distribution charges of the Principal Underwriter calculated
under this Agreement as of the opening of business on January 30, 1995.
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement
on the 27th day of January, 1995.
EATON VANCE MUNICIPALS TRUST II
By /s/Thomas J. Fetter
--------------------------------
President
EATON VANCE DISTRIBUTORS INC.
By /s/Wharton P. Whitaker
--------------------------------
President
<PAGE>
SCHEDULE A
EATON VANCE MUNICIPALS TRUST II
AMENDED DISTRIBUTION AGREEMENT
DATED JANUARY 27, 1995
NAME OF FUND INCEPTION DATE OF ORIGINAL AGREEMENT
- ------------ ------------------------------------
EV Classic Florida Insured Tax Free Fund February 25, 1994
EV Classic Hawaii Tax Free Fund February 25, 1994
EV Classic Kansas Tax Free Fund February 25, 1994
<PAGE>
AMENDED SCHEDULE A
EATON VANCE MUNICIPALS TRUST II
AMENDED DISTRIBUTION AGREEMENT
DATED FEBRUARY 1, 1996
NAME OF FUND INCEPTION DATE OF ORIGINAL AGREEMENT
- ------------ ------------------------------------
EV Classic Florida Insured Municipals Fund February 25, 1994
<PAGE>
EXHIBIT 99.8(a)
Eaton Vance Municipals Trust II
24 Federal Street
Boston, MA 02110
(617) 482-8260
August 1, 1995
Eaton Vance Municipals Trust II hereby adopts and agrees to become a party to
the attached Master Custodian Agreement between the Eaton Vance Group of Funds
and Investors Bank & Trust Company on behalf of the series of the Trust listed
on the attached Schedule A.
EATON VANCE MUNICIPALS TRUST II
BY: /s/ James L. O'Connor
-------------------------
Treasurer
Accepted and agreed to:
INVESTORS BANK & TRUST COMPANY
BY: /s/ Michael Rogers
------------------------------
Title: Sr. Vice President
<PAGE>
August 1, 1995
Schedule A
EATON VANCE MUNICIPALS TRUST II
EV Classic Florida Insured Tax Free Fund
EV Marathon Florida Insured Tax Free Fund
EV Traditional Florida Insured Tax Free Fund
EV Classic Hawaii Tax Free Fund
EV Marathon Hawaii Tax Free Fund
EV Classic Kansas Tax Free Fund
EV Marathon Kansas Tax Free Fund
EV Marathon High Yield Municipals Fund
EV Traditional High Yield Municipals Fund
<PAGE>
MASTER CUSTODIAN AGREEMENT
between
EATON VANCE GROUP OF FUNDS
and
INVESTORS BANK & TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
-----------------
1. Definitions................................................... 1-2
2. Employment of Custodian and Property to be held by it......... 2-3
3. Duties of the Custodian with Respect to
Property of the Fund.......................................... 3
A. Safekeeping and Holding of Property....................... 3
B. Delivery of Securities.................................... 3-6
C. Registration of Securities................................ 6
D. Bank Accounts............................................. 6
E. Payments for Shares of the Fund........................... 6
F. Investment and Availability of Federal Funds.............. 6
G. Collections............................................... 7
H. Payment of Fund Moneys.................................... 8-9
I. Liability for Payment in Advance of
Receipt of Securities Purchased........................... 9
J. Payments for Repurchases of Redemptions
of Shares of the Fund..................................... 9-10
K. Appointment of Agents by the Custodian.................... 10
L. Deposit of Fund Portfolio Securities in Securities Systems 10-11
M. Deposit of Fund Commercial Paper in an Approved Book-Entry
System for Commercial Paper............................... 12-13
N. Segregated Account........................................ 13-14
O. Ownership Certificates for Tax Purposes................... 14
P. Proxies................................................... 14
Q. Communications Relating to Fund Portfolio Securities...... 14
R. Exercise of Rights; Tender Offers........................ 14-15
S. Depository Receipts........................................ 15
T. Interest Bearing Call or Time Deposits.................... 15
U. Options, Futures Contracts and Foreign Currency Transactions 15-17
V. Actions Permitted Without Express Authority............... 17
4. Duties of Bank with Respect to Books of Account and
Calculations of Net Asset Value............................... 17
5. Records and Miscellaneous Duties.............................. 18
6. Opinion of Fund`s Independent Public Accountants.............. 18
7. Compensation and Expenses of Bank............................. 18
8. Responsibility of Bank........................................ 18-19
9. Persons Having Access to Assets of the Fund................... 19
10. Effective Period, Termination and Amendment; Successor Custodian 20
11. Interpretive and Additional Provisions........................ 20
12. Notices....................................................... 21
13. Massachusetts Law to Apply.................................... 21
14. Adoption of the Agreement by the Fund......................... 21
<PAGE>
MASTER CUSTODIAN AGREEMENT
This Agreement is made between each investment company advised by Eaton
Vance Management which has adopted this Agreement in the manner provided herein
and Investors Bank & Trust Company (hereinafter called "Bank", "Custodian" and
"Agent"), a trust company established under the laws of Massachusetts with a
principal place of business in Boston, Massachusetts.
Whereas, each such investment company is registered under the
Investment Company Act of 1940 and has appointed the Bank to act as Custodian of
its property and to perform certain duties as its Agent, as more fully
hereinafter set forth; and
Whereas, the Bank is willing and able to act as each such investment
company's Custodian and Agent, subject to and in accordance with the provisions
hereof;
Now, therefore, in consideration of the premises and of the mutual
covenants and agreements herein contained, each such investment company and the
Bank agree as follows:
1. Definitions
Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:
(a) "Fund" shall mean the investment company which has adopted this
Agreement. If the Fund is a Massachusetts business trust, it may in the future
establish and designate other separate and distinct series of shares, each of
which may be called a "portfolio"; in such case, the term "Fund" shall also
refer to each such separate series or portfolio.
(b) "Board" shall mean the board of directors/trustees/managing general
partners/director general partners of the Fund, as the case may be.
(c) "The Depository Trust Company", a clearing agency registered with
the Securities and Exchange Commission under Section 17A of the Securities
Exchange Act of 1934 which acts as a securities depository and which has been
specifically approved as a securities depository for the Fund by the Board.
(d) "Participants Trust Company", a clearing agency registered with the
Securities and Exchange Commission under Section 17A of the Securities Exchange
Act of 1934 which acts as a securities depository and which has been
specifically approved as a securities depository for the Fund by the Board.
(e) "Approved Clearing Agency" shall mean any other domestic clearing
agency registered with the Securities and Exchange Commission under Section 17A
of the Securities Exchange Act of 1934 which acts as a securities depository but
only if the Custodian has received a certified copy of a vote of the Board
approving such clearing agency as a securities depository for the Fund.
(f) "Federal Book-Entry System" shall mean the book-entry system
referred to in Rule 17f-4(b) under the Investment Company Act of 1940 for United
States and federal agency securities (i.e., as provided in Subpart O of Treasury
Circular No. 300, 31 CFR 306, Subpart B of 31 CFR Part 350, and the book-entry
regulations of federal agencies substantially in the form of Subpart O).
(g) "Approved Foreign Securities Depository" shall mean a foreign
securities depository or clearing agency referred to in Rule 17f-4 under the
Investment Company Act of 1940 for foreign securities but only if the Custodian
has received a certified copy of a vote of the Board approving such depository
or clearing agency as a foreign securities depository for the Fund.
(h) "Approved Book-Entry System for Commercial Paper" shall mean a
system maintained by the Custodian or by a subcustodian employed pursuant to
Section 2 hereof for the holding of commercial paper in book-entry form but only
if the Custodian has received a certified copy of a vote of the Board approving
the participation by the Fund in such system.
(i) The Custodian shall be deemed to have received "proper
instructions" in respect of any of the matters referred to in this Agreement
upon receipt of written or facsimile instructions signed by such one or more
person or persons as the Board shall have from time to time authorized to give
the particular class of instructions in question. Electronic instructions for
the purchase and sale of securities which are transmitted by Eaton Vance
Management to the Custodian through the Eaton Vance equity trading system and
the Eaton Vance fixed income trading system shall be deemed to be proper
instructions; the Fund shall cause all such instructions to be confirmed in
writing. Different persons may be authorized to give instructions for different
purposes. A certified copy of a vote of the Board may be received and accepted
by the Custodian as conclusive evidence of the authority of any such person to
act and may be considered as in full force and effect until receipt of written
notice to the contrary. Such instructions may be general or specific in terms
and, where appropriate, may be standing instructions. Unless the vote delegating
authority to any person or persons to give a particular class of instructions
specifically requires that the approval of any person, persons or committee
shall first have been obtained before the Custodian may act on instructions of
that class, the Custodian shall be under no obligation to question the right of
the person or persons giving such instructions in so doing. Oral instructions
will be considered proper instructions if the Custodian reasonably believes them
to have been given by a person authorized to give such instructions with respect
to the transaction involved. The Fund shall cause all oral instructions to be
confirmed in writing. The Fund authorizes the Custodian to tape record any and
all telephonic or other oral instructions given to the Custodian. Upon receipt
of a certificate signed by two officers of the Fund as to the authorization by
the President and the Treasurer of the Fund accompanied by a detailed
description of the communication procedures approved by the President and the
Treasurer of the Fund, "proper instructions" may also include communications
effected directly between electromechanical or electronic devices provided that
the President and Treasurer of the Fund and the Custodian are satisfied that
such procedures afford adequate safeguards for the Fund's assets. In performing
its duties generally, and more particularly in connection with the purchase,
sale and exchange of securities made by or for the Fund, the Custodian may take
cognizance of the provisions of the governing documents and registration
statement of the Fund as the same may from time to time be in effect (and votes,
resolutions or proceedings of the shareholders or the Board), but, nevertheless,
except as otherwise expressly provided herein, the Custodian may assume unless
and until notified in writing to the contrary that so-called proper instructions
received by it are not in conflict with or in any way contrary to any provisions
of such governing documents and registration statement, or votes, resolutions or
proceedings of the shareholders or the Board.
2. Employment of Custodian and Property to be Held by It
The Fund hereby appoints and employs the Bank as its Custodian and
Agent in accordance with and subject to the provisions hereof, and the Bank
hereby accepts such appointment and employment. The Fund agrees to deliver to
the Custodian all securities, participation interests, cash and other assets
owned by it, and all payments of income, payments of principal and capital
distributions and adjustments received by it with respect to all securities and
participation interests owned by the Fund from time to time, and the cash
consideration received by it for such new or treasury shares ("Shares") of the
Fund as may be issued or sold from time to time. The Custodian shall not be
responsible for any property of the Fund held by the Fund and not delivered by
the Fund to the Custodian. The Fund will also deliver to the Bank from time to
time copies of its currently effective charter (or declaration of trust or
partnership agreement, as the case may be), by-laws, prospectus, statement of
additional information and distribution agreement with its principal
underwriter, together with such resolutions, votes and other proceedings of the
Fund as may be necessary for or convenient to the Bank in the performance of its
duties hereunder.
The Custodian may from time to time employ one or more subcustodians to
perform such acts and services upon such terms and conditions as shall be
approved from time to time by the Board of Directors. Any such subcustodian so
employed by the Custodian shall be deemed to be the agent of the Custodian, and
the Custodian shall remain primarily responsible for the securities,
participation interests, moneys and other property of the Fund held by such
subcustodian. Any foreign subcustodian shall be a bank or trust company which is
an eligible foreign custodian within the meaning of Rule 17f-5 under the
Investment Company Act of 1940, and the foreign custody arrangements shall be
approved by the Board of Directors and shall be in accordance with and subject
to the provisions of said Rule. For the purposes of this Agreement, any property
of the Fund held by any such subcustodian (domestic or foreign) shall be deemed
to be held by the Custodian under the terms of this Agreement.
3. Duties of the Custodian with Respect to Property of the Fund
A. Safekeeping and Holding of Property The Custodian shall keep
safely all property of the Fund and on behalf of the Fund shall
from time to time receive delivery of Fund property for
safekeeping. The Custodian shall hold, earmark and segregate on
its books and records for the account of the Fund all property of
the Fund, including all securities, participation interests and
other assets of the Fund (1) physically held by the Custodian,
(2) held by any subcustodian referred to in Section 2 hereof or
by any agent referred to in Paragraph K hereof, (3) held by or
maintained in The Depository Trust Company or in Participants
Trust Company or in an Approved Clearing Agency or in the Federal
Book-Entry System or in an Approved Foreign Securities
Depository, each of which from time to time is referred to herein
as a "Securities System", and (4) held by the Custodian or by any
subcustodian referred to in Section 2 hereof and maintained in
any Approved Book-Entry System for Commercial Paper.
B. Delivery of Securities The Custodian shall release and deliver
securities or participation interests owned by the Fund held (or
deemed to be held) by the Custodian or maintained in a Securities
System account or in an Approved Book-Entry System for Commercial
Paper account only upon receipt of proper instructions, which may
be continuing instructions when deemed appropriate by the
parties, and only in the following cases:
1) Upon sale of such securities or participation interests
for the account of the Fund, but only against receipt
of payment therefor; if delivery is made in Boston or
New York City, payment therefor shall be made in
accordance with generally accepted clearing house
procedures or by use of Federal Reserve Wire System
procedures; if delivery is made elsewhere payment
therefor shall be in accordance with the then current
"street delivery" custom or in accordance with such
procedures agreed to in writing from time to time by
the parties hereto; if the sale is effected through a
Securities System, delivery and payment therefor shall
be made in accordance with the provisions of Paragraph
L hereof; if the sale of commercial paper is to be
effected through an Approved Book-Entry System for
Commercial Paper, delivery and payment therefor shall
be made in accordance with the provisions of Paragraph
M hereof; if the securities are to be sold outside the
United States, delivery may be made in accordance with
procedures agreed to in writing from time to time by
the parties hereto; for the purposes of this
subparagraph, the term "sale" shall include the
disposition of a portfolio security (i) upon the
exercise of an option written by the Fund and (ii) upon
the failure by the Fund to make a successful bid with
respect to a portfolio security, the continued holding
of which is contingent upon the making of such a bid;
2) Upon the receipt of payment in connection with any
repurchase agreement or reverse repurchase agreement
relating to such securities and entered into by the
Fund;
3) To the depository agent in connection with tender or
other similar offers for portfolio securities of the
Fund;
4) To the issuer thereof or its agent when such securities
or participation interests are called, redeemed,
retired or otherwise become payable; provided that, in
any such case, the cash or other consideration is to be
delivered to the Custodian or any subcustodian employed
pursuant to Section 2 hereof;
5) To the issuer thereof, or its agent, for transfer into
the name of the Fund or into the name of any nominee of
the Custodian or into the name or nominee name of any
agent appointed pursuant to Paragraph K hereof or into
the name or nominee name of any subcustodian employed
pursuant to Section 2 hereof; or for exchange for a
different number of bonds, certificates or other
evidence representing the same aggregate face amount or
number of units; provided that, in any such case, the
new securities or participation interests are to be
delivered to the Custodian or any subcustodian employed
pursuant to Section 2 hereof;
6) To the broker selling the same for examination in
accordance with the "street delivery" custom; provided
that the Custodian shall adopt such procedures as the
Fund from time to time shall approve to ensure their
prompt return to the Custodian by the broker in the
event the broker elects not to accept them;
7) For exchange or conversion pursuant to any plan of
merger, consolidation, recapitalization, reorganization
or readjustment of the securities of the Issuer of such
securities, or pursuant to provisions for conversion of
such securities, or pursuant to any deposit agreement;
provided that, in any such case, the new securities and
cash, if any, are to be delivered to the Custodian or
any subcustodian employed pursuant to Section 2 hereof;
8) In the case of warrants, rights or similar securities,
the surrender thereof in connection with the exercise
of such warrants, rights or similar securities, or the
surrender of interim receipts or temporary securities
for definitive securities; provided that, in any such
case, the new securities and cash, if any, are to be
delivered to the Custodian or any subcustodian employed
pursuant to Section 2 hereof;
9) For delivery in connection with any loans of securities
made by the Fund (such loans to be made pursuant to the
terms of the Fund's current registration statement),
but only against receipt of adequate collateral as
agreed upon from time to time by the Custodian and the
Fund, which may be in the form of cash or obligations
issued by the United States government, its agencies or
instrumentalities; except that in connection with any
securities loans for which collateral is to be credited
to the Custodian's account in the book-entry system
authorized by the U.S. Department of Treasury, the
Custodian will not be held liable or responsible for
the delivery of securities loaned by the Fund prior to
the receipt of such collateral;
10) For delivery as security in connection with any
borrowings by the Fund requiring a pledge or
hypothecation of assets by the Fund (if then permitted
under circumstances described in the current
registration statement of the Fund), provided, that the
securities shall be released only upon payment to the
Custodian of the monies borrowed, except that in cases
where additional collateral is required to secure a
borrowing already made, further securities may be
released for that purpose; upon receipt of proper
instructions, the Custodian may pay any such loan upon
redelivery to it of the securities pledged or
hypothecated therefor and upon surrender of the note or
notes evidencing the loan;
11) When required for delivery in connection with any
redemption or repurchase of Shares of the Fund in
accordance with the provisions of Paragraph J hereof;
12) For delivery in accordance with the provisions of any
agreement between the Custodian (or a subcustodian
employed pursuant to Section 2 hereof) and a
broker-dealer registered under the Securities Exchange
Act of 1934 and, if necessary, the Fund, relating to
compliance with the rules of The Options Clearing
Corporation or of any registered national securities
exchange, or of any similar organization or
organizations, regarding deposit or escrow or other
arrangements in connection with options transactions by
the Fund;
13) For delivery in accordance with the provisions of any
agreement among the Fund, the Custodian (or a
subcustodian employed pursuant to Section 2 hereof),
and a futures commissions merchant, relating to
compliance with the rules of the Commodity Futures
Trading Commission and/or of any contract market or
commodities exchange or similar organization, regarding
futures margin account deposits or payments in
connection with futures transactions by the Fund;
14) For any other proper corporate purpose, but only upon
receipt of, in addition to proper instructions, a
certified copy of a vote of the Board specifying the
securities to be delivered, setting forth the purpose
for which such delivery is to be made, declaring such
purpose to be proper corporate purpose, and naming the
person or persons to whom delivery of such securities
shall be made.
C. Registration of Securities Securities held by the Custodian
(other than bearer securities) for the account of the Fund shall
be registered in the name of the Fund or in the name of any
nominee of the Fund or of any nominee of the Custodian, or in the
name or nominee name of any agent appointed pursuant to Paragraph
K hereof, or in the name or nominee name of any subcustodian
employed pursuant to Section 2 hereof, or in the name or nominee
name of The Depository Trust Company or Participants Trust
Company or Approved Clearing Agency or Federal Book-Entry System
or Approved Book-Entry System for Commercial Paper; provided,
that securities are held in an account of the Custodian or of
such agent or of such subcustodian containing only assets of the
Fund or only assets held by the Custodian or such agent or such
subcustodian as a custodian or subcustodian or in a fiduciary
capacity for customers. All certificates for securities accepted
by the Custodian or any such agent or subcustodian on behalf of
the Fund shall be in "street" or other good delivery form or
shall be returned to the selling broker or dealer who shall be
advised of the reason thereof.
D. Bank Accounts The Custodian shall open and maintain a separate
bank account or accounts in the name of the Fund, subject only to
draft or order by the Custodian acting in pursuant to the terms
of this Agreement, and shall hold in such account or accounts,
subject to the provisions hereof, all cash received by it from or
for the account of the Fund other than cash maintained by the
Fund in a bank account established and used in accordance with
Rule 17f-3 under the Investment Company Act of 1940. Funds held
by the Custodian for the Fund may be deposited by it to its
credit as Custodian in the Banking Department of the Custodian or
in such other banks or trust companies as the Custodian may in
its discretion deem necessary or desirable; provided, however,
that every such bank or trust company shall be qualified to act
as a custodian under the Investment Company Act of 1940 and that
each such bank or trust company and the funds to be deposited
with each such bank or trust company shall be approved in writing
by two officers of the Fund. Such funds shall be deposited by the
Custodian in its capacity as Custodian and shall be subject to
withdrawal only by the Custodian in that capacity.
E. Payment for Shares of the Fund The Custodian shall make
appropriate arrangements with the Transfer Agent and the
principal underwriter of the Fund to enable the Custodian to make
certain it promptly receives the cash or other consideration due
to the Fund for such new or treasury Shares as may be issued or
sold from time to time by the Fund, in accordance with the
governing documents and offering prospectus and statement of
additional information of the Fund. The Custodian will provide
prompt notification to the Fund of any receipt by it of payments
for Shares of the Fund.
F. Investment and Availability of Federal Funds Upon agreement
between the Fund and the Custodian, the Custodian shall, upon the
receipt of proper instructions, which may be continuing
instructions when deemed appropriate by the parties,
1) invest in such securities and instruments as may be set
forth in such instructions on the same day as received
all federal funds received after a time agreed upon
between the Custodian and the Fund; and
2) make federal funds available to the Fund as of
specified times agreed upon from time to time by the
Fund and the Custodian in the amount of checks received
in payment for Shares of the Fund which are deposited
into the Fund's account.
G. Collections The Custodian shall promptly collect all income and
other payments with respect to registered securities held
hereunder to which the Fund shall be entitled either by law or
pursuant to custom in the securities business, and shall promptly
collect all income and other payments with respect to bearer
securities if, on the date of payment by the issuer, such
securities are held by the Custodian or agent thereof and shall
credit such income, as collected, to the Fund's custodian
account.
The Custodian shall do all things necessary and proper in
connection with such prompt collections and, without limiting the
generality of the foregoing, the Custodian shall
1) Present for payment all coupons and other income items
requiring presentations;
2) Present for payment all securities which may mature or
be called, redeemed, retired or otherwise become
payable;
3) Endorse and deposit for collection, in the name of the
Fund, checks, drafts or other negotiable instruments;
4) Credit income from securities maintained in a
Securities System or in an Approved Book-Entry System
for Commercial Paper at the time funds become available
to the Custodian; in the case of securities maintained
in The Depository Trust Company funds shall be deemed
available to the Fund not later than the opening of
business on the first business day after receipt of
such funds by the Custodian.
The Custodian shall notify the Fund as soon as reasonably
practicable whenever income due on any security is not promptly
collected. In any case in which the Custodian does not receive
any due and unpaid income after it has made demand for the same,
it shall immediately so notify the Fund in writing, enclosing
copies of any demand letter, any written response thereto, and
memoranda of all oral responses thereto and to telephonic
demands, and await instructions from the Fund; the Custodian
shall in no case have any liability for any nonpayment of such
income provided the Custodian meets the standard of care set
forth in Section 8 hereof. The Custodian shall not be obligated
to take legal action for collection unless and until reasonably
indemnified to its satisfaction.
The Custodian shall also receive and collect all stock dividends,
rights and other items of like nature, and deal with the same
pursuant to proper instructions relative thereto.
H. Payment of Fund Moneys Upon receipt of proper instructions, which
may be continuing instructions when deemed appropriate by the
parties, the Custodian shall pay out moneys of the Fund in the
following cases only:
1) Upon the purchase of securities, participation
interests, options, futures contracts, forward
contracts and options on futures contracts purchased
for the account of the Fund but only (a) against the
receipt of
(i) such securities registered as provided in
Paragraph C hereof or in proper form for transfer
or
(ii) detailed instructions signed by an officer of
the Fund regarding the participation interests to
be purchased or
(iii) written confirmation of the purchase by the
Fund of the options, futures contracts, forward
contracts or options on futures contracts
by the Custodian (or by a subcustodian employed
pursuant to Section 2 hereof or by a clearing
corporation of a national securities exchange of which
the Custodian is a member or by any bank, banking
institution or trust company doing business in the
United States or abroad which is qualified under the
Investment Company Act of 1940 to act as a custodian
and which has been designated by the Custodian as its
agent for this purpose or by the agent specifically
designated in such instructions as representing the
purchasers of a new issue of privately placed
securities); (b) in the case of a purchase effected
through a Securities System, upon receipt of the
securities by the Securities System in accordance with
the conditions set forth in Paragraph L hereof; (c) in
the case of a purchase of commercial paper effected
through an Approved Book-Entry System for Commercial
Paper, upon receipt of the paper by the Custodian or
subcustodian in accordance with the conditions set
forth in Paragraph M hereof; (d) in the case of
repurchase agreements entered into between the Fund and
another bank or a broker-dealer, against receipt by the
Custodian of the securities underlying the repurchase
agreement either in certificate form or through an
entry crediting the Custodian's segregated,
non-proprietary account at the Federal Reserve Bank of
Boston with such securities along with written evidence
of the agreement by the bank or broker-dealer to
repurchase such securities from the Fund; or (e) with
respect to securities purchased outside of the United
States, in accordance with written procedures agreed to
from time to time in writing by the parties hereto;
2) When required in connection with the conversion,
exchange or surrender of securities owned by the Fund
as set forth in Paragraph B hereof;
3) When required for the redemption or repurchase of
Shares of the Fund in accordance with the provisions of
Paragraph J hereof;
4) For the payment of any expense or liability incurred by
the Fund, including but not limited to the following
payments for the account of the Fund: advisory fees,
distribution plan payments, interest, taxes, management
compensation and expenses, accounting, transfer agent
and legal fees, and other operating expenses of the
Fund whether or not such expenses are to be in whole or
part capitalized or treated as deferred expenses;
5) For the payment of any dividends or other distributions
to holders of Shares declared or authorized by the
Board; and
6) For any other proper corporate purpose, but only upon
receipt of, in addition to proper instructions, a
certified copy of a vote of the Board, specifying the
amount of such payment, setting forth the purpose for
which such payment is to be made, declaring such
purpose to be a proper corporate purpose, and naming
the person or persons to whom such payment is to be
made.
I. Liability for Payment in Advance of Receipt of Securities
Purchased In any and every case where payment for purchase of
securities for the account of the Fund is made by the Custodian
in advance of receipt of the securities purchased in the absence
of specific written instructions signed by two officers of the
Fund to so pay in advance, the Custodian shall be absolutely
liable to the Fund for such securities to the same extent as if
the securities had been received by the Custodian; except that in
the case of a repurchase agreement entered into by the Fund with
a bank which is a member of the Federal Reserve System, the
Custodian may transfer funds to the account of such bank prior to
the receipt of (i) the securities in certificate form subject to
such repurchase agreement or (ii) written evidence that the
securities subject to such repurchase agreement have been
transferred by book-entry into a segregated non-proprietary
account of the Custodian maintained with the Federal Reserve Bank
of Boston or (iii) the safekeeping receipt, provided that such
securities have in fact been so transfered by book-entry and the
written repurchase agreement is received by the Custodian in due
course; and except that if the securities are to be purchased
outside the United States, payment may be made in accordance with
procedures agreed to in writing from time to time by the parties
hereto.
J. Payments for Repurchases or Redemptions of Shares of the Fund
From such funds as may be available for the purpose, but subject
to any applicable votes of the Board and the current redemption
and repurchase procedures of the Fund, the Custodian shall, upon
receipt of written instructions from the Fund or from the Fund's
transfer agent or from the principal underwriter, make funds
and/or portfolio securities available for payment to holders of
Shares who have caused their Shares to be redeemed or repurchased
by the Fund or for the Fund`s account by its transfer agent or
principal underwriter.
The Custodian may maintain a special checking account upon which
special checks may be drawn by shareholders of the Fund holding
Shares for which certificates have not been issued. Such checking
account and such special checks shall be subject to such rules
and regulations as the Custodian and the Fund may from time to
time adopt. The Custodian or the Fund may suspend or terminate
use of such checking account or such special checks (either
generally or for one or more shareholders) at any time. The
Custodian and the Fund shall notify the other immediately of any
such suspension or termination.
K. Appointment of Agents by the Custodian The Custodian may at any
time or times in its discretion appoint (and may at any time
remove) any other bank or trust company (provided such bank or
trust company is itself qualified under the Investment Company
Act of 1940 to act as a custodian or is itself an eligible
foreign custodian within the meaning of Rule 17f-5 under said
Act) as the agent of the Custodian to carry out such of the
duties and functions of the Custodian described in this Section 3
as the Custodian may from time to time direct; provided, however,
that the appointment of any such agent shall not relieve the
Custodian of any of its responsibilities or liabilities
hereunder, and as between the Fund and the Custodian the
Custodian shall be fully responsible for the acts and omissions
of any such agent. For the purposes of this Agreement, any
property of the Fund held by any such agent shall be deemed to be
held by the Custodian hereunder.
L. Deposit of Fund Portfolio Securities in Securities Systems The
Custodian may deposit and/or maintain securities owned by the
Fund
(1) in The Depository Trust Company;
(2) in Participants Trust Company;
(3) in any other Approved Clearing Agency;
(4) in the Federal Book-Entry System; or
(5) in an Approved Foreign Securities Depository
in each case only in accordance with applicable Federal Reserve
Board and Securities and Exchange Commission rules and
regulations, and at all times subject to the following
provisions:
(a) The Custodian may (either directly or through one or
more subcustodians employed pursuant to Section 2 keep securities
of the Fund in a Securities System provided that such securities
are maintained in a non-proprietary account ("Account") of the
Custodian or such subcustodian in the Securities System which
shall not include any assets of the Custodian or such
subcustodian or any other person other than assets held by the
Custodian or such subcustodian as a fiduciary, custodian, or
otherwise for its customers.
(b) The records of the Custodian with respect to securities
of the Fund which are maintained in a Securities System shall
identify by book-entry those securities belonging to the Fund,
and the Custodian shall be fully and completely responsible for
maintaining a recordkeeping system capable of accurately and
currently stating the Fund's holdings maintained in each such
Securities System.
(c) The Custodian shall pay for securities purchased in
book-entry form for the account of the Fund only upon (i) receipt
of notice or advice from the Securities System that such
securities have been transferred to the Account, and (ii) the
making of any entry on the records of the Custodian to reflect
such payment and transfer for the account of the Fund. The
Custodian shall transfer securities sold for the account of the
Fund only upon (i) receipt of notice or advice from the
Securities System that payment for such securities has been
transferred to the Account, and (ii) the making of an entry on
the records of the Custodian to reflect such transfer and payment
for the account of the Fund. Copies of all notices or advices
from the Securities System of transfers of securities for the
account of the Fund shall identify the Fund, be maintained for
the Fund by the Custodian and be promptly provided to the Fund at
its request. The Custodian shall promptly send to the Fund
confirmation of each transfer to or from the account of the Fund
in the form of a written advice or notice of each such
transaction, and shall furnish to the Fund copies of daily
transaction sheets reflecting each day's transactions in the
Securities System for the account of the Fund on the next
business day.
(d) The Custodian shall promptly send to the Fund any report
or other communication received or obtained by the Custodian
relating to the Securities System's accounting system, system of
internal accounting controls or procedures for safeguarding
securities deposited in the Securities System; the Custodian
shall promptly send to the Fund any report or other communication
relating to the Custodian's internal accounting controls and
procedures for safeguarding securities deposited in any
Securities System; and the Custodian shall ensure that any agent
appointed pursuant to Paragraph K hereof or any subcustodian
employed pursuant to Section 2 hereof shall promptly send to the
Fund and to the Custodian any report or other communication
relating to such agent's or subcustodian's internal accounting
controls and procedures for safeguarding securities deposited in
any Securities System. The Custodian's books and records relating
to the Fund's participation in each Securities System will at all
times during regular business hours be open to the inspection of
the Fund's authorized officers, employees or agents.
(e) The Custodian shall not act under this Paragraph L in
the absence of receipt of a certificate of an officer of the Fund
that the Board has approved the use of a particular Securities
System; the Custodian shall also obtain appropriate assurance
from the officers of the Fund that the Board has annually
reviewed the continued use by the Fund of each Securities System,
and the Fund shall promptly notify the Custodian if the use of a
Securities System is to be discontinued; at the request of the
Fund, the Custodian will terminate the use of any such Securities
System as promptly as practicable.
(f) Anything to the contrary in this Agreement
notwithstanding, the Custodian shall be liable to the Fund for
any loss or damage to the Fund resulting from use of the
Securities System by reason of any negligence, misfeasance or
misconduct of the Custodian or any of its agents or subcustodians
or of any of its or their employees or from any failure of the
Custodian or any such agent or subcustodian to enforce
effectively such rights as it may have against the Securities
System or any other person; at the election of the Fund, it shall
be entitled to be subrogated to the rights of the Custodian with
respect to any claim against the Securities System or any other
person which the Custodian may have as a consequence of any such
loss or damage if and to the extent that the Fund has not been
made whole for any such loss or damage.
M. Deposit of Fund Commercial Paper in an Approved Book-Entry System
for Commercial Paper Upon receipt of proper instructions with
respect to each issue of direct issue commercial paper purchased
by the Fund, the Custodian may deposit and/or maintain direct
issue commercial paper owned by the Fund in any Approved
Book-Entry System for Commercial Paper, in each case only in
accordance with applicable Securities and Exchange Commission
rules, regulations, and no-action correspondence, and at all
times subject to the following provisions:
(a) The Custodian may (either directly or through one or
more subcustodians employed pursuant to Section 2) keep
commercial paper of the Fund in an Approved Book-Entry System for
Commercial Paper, provided that such paper is issued in book
entry form by the Custodian or subcustodian on behalf of an
issuer with which the Custodian or subcustodian has entered into
a book-entry agreement and provided further that such paper is
maintained in a non-proprietary account ("Account") of the
Custodian or such subcustodian in an Approved Book-Entry System
for Commercial Paper which shall not include any assets of the
Custodian or such subcustodian or any other person other than
assets held by the Custodian or such subcustodian as a fiduciary,
custodian, or otherwise for its customers.
(b) The records of the Custodian with respect to commercial
paper of the Fund which is maintained in an Approved Book-Entry
System for Commercial Paper shall identify by book-entry each
specific issue of commercial paper purchased by the Fund which is
included in the System and shall at all times during regular
business hours be open for inspection by authorized officers,
employees or agents of the Fund. The Custodian shall be fully and
completely responsible for maintaining a recordkeeping system
capable of accurately and currently stating the Fund's holdings
of commercial paper maintained in each such System.
(c) The Custodian shall pay for commercial paper purchased
in book-entry form for the account of the Fund only upon
contemporaneous (i) receipt of notice or advice from the issuer
that such paper has been issued, sold and transferred to the
Account, and (ii) the making of an entry on the records of the
Custodian to reflect such purchase, payment and transfer for the
account of the Fund. The Custodian shall transfer such commercial
paper which is sold or cancel such commercial paper which is
redeemed for the account of the Fund only upon contemporaneous
(i) receipt of notice or advice that payment for such paper has
been transferred to the Account, and (ii) the making of an entry
on the records of the Custodian to reflect such transfer or
redemption and payment for the account of the Fund. Copies of all
notices, advices and confirmations of transfers of commercial
paper for the account of the Fund shall identify the Fund, be
maintained for the Fund by the Custodian and be promptly provided
to the Fund at its request. The Custodian shall promptly send to
the Fund confirmation of each transfer to or from the account of
the Fund in the form of a written advice or notice of each such
transaction, and shall furnish to the Fund copies of daily
transaction sheets reflecting each day's transactions in the
System for the account of the Fund on the next business day.
(d) The Custodian shall promptly send to the Fund any report
or other communication received or obtained by the Custodian
relating to each System's accounting system, system of internal
accounting controls or procedures for safeguarding commercial
paper deposited in the System; the Custodian shall promptly send
to the Fund any report or other communication relating to the
Custodian's internal accounting controls and procedures for
safeguarding commercial paper deposited in any Approved
Book-Entry System for Commercial Paper; and the Custodian shall
ensure that any agent appointed pursuant to Paragraph K hereof or
any subcustodian employed pursuant to Section 2 hereof shall
promptly send to the Fund and to the Custodian any report or
other communication relating to such agent's or subcustodian's
internal accounting controls and procedures for safeguarding
securities deposited in any Approved Book-Entry System for
Commercial Paper.
(e) The Custodian shall not act under this Paragraph M in
the absence of receipt of a certificate of an officer of the Fund
that the Board has approved the use of a particular Approved
Book-Entry System for Commercial Paper; the Custodian shall also
obtain appropriate assurance from the officers of the Fund that
the Board has annually reviewed the continued use by the Fund of
each Approved Book-Entry System for Commercial Paper, and the
Fund shall promptly notify the Custodian if the use of an
Approved Book-Entry System for Commercial Paper is to be
discontinued; at the request of the Fund, the Custodian will
terminate the use of any such System as promptly as practicable.
(f) The Custodian (or subcustodian, if the Approved
Book-Entry System for Commercial Paper is maintained by the
subcustodian) shall issue physical commercial paper or promissory
notes whenever requested to do so by the Fund or in the event of
an electronic system failure which impedes issuance, transfer or
custody of direct issue commercial paper by book-entry.
(g) Anything to the contrary in this Agreement
notwithstanding, the Custodian shall be liable to the Fund for
any loss or damage to the Fund resulting from use of any Approved
Book-Entry System for Commercial Paper by reason of any
negligence, misfeasance or misconduct of the Custodian or any of
its agents or subcustodians or of any of its or their employees
or from any failure of the Custodian or any such agent or
subcustodian to enforce effectively such rights as it may have
against the System, the issuer of the commercial paper or any
other person; at the election of the Fund, it shall be entitled
to be subrogated to the rights of the Custodian with respect to
any claim against the System, the issuer of the commercial paper
or any other person which the Custodian may have as a consequence
of any such loss or damage if and to the extent that the Fund has
not been made whole for any such loss or damage.
N. Segregated Account The Custodian shall upon receipt of proper
instructions establish and maintain a segregated account or
accounts for and on behalf of the Fund, into which account or
accounts may be transferred cash and/or securities, including
securities maintained in an account by the Custodian pursuant to
Paragraph L hereof, (i) in accordance with the provisions of any
agreement among the Fund, the Custodian and any registered
broker-dealer (or any futures commission merchant), relating to
compliance with the rules of the Options Clearing Corporation and
of any registered national securities exchange (or of the
Commodity Futures Trading Commission or of any contract market or
commodities exchange), or of any similar organization or
organizations, regarding escrow or deposit or other arrangements
in connection with transactions by the Fund, (ii) for purposes of
segregating cash or U.S. Government securities in connection with
options purchased, sold or written by the Fund or futures
contracts or options thereon purchased or sold by the Fund, (iii)
for the purposes of compliance by the Fund with the procedures
required by Investment Company Act Release No. 10666, or any
subsequent release or releases of the Securities and Exchange
Commission relating to the maintenance of segregated accounts by
registered investment companies and (iv) for other proper
purposes, but only, in the case of clause (iv), upon receipt of,
in addition to proper instructions, a certificate signed by two
officers of the Fund, setting forth the purpose such segregated
account and declaring such purpose to be a proper purpose.
O. Ownership Certificates for Tax Purposes The Custodian shall
execute ownership and other certificates and affidavits for all
federal and state tax purposes in connection with receipt of
income or other payments with respect to securities of the Fund
held by it and in connection with transfers of securities.
P. Proxies The Custodian shall, with respect to the securities held
by it hereunder, cause to be promptly delivered to the Fund all
forms of proxies and all notices of meetings and any other
notices or announcements or other written information affecting
or relating to the securities, and upon receipt of proper
instructions shall execute and deliver or cause its nominee to
execute and deliver such proxies or other authorizations as may
be required. Neither the Custodian nor its nominee shall vote
upon any of the securities or execute any proxy to vote thereon
or give any consent or take any other action with respect thereto
(except as otherwise herein provided) unless ordered to do so by
proper instructions.
Q. Communications Relating to Fund Portfolio Securities The
Custodian shall deliver promptly to the Fund all written
information (including, without limitation, pendency of call and
maturities of securities and participation interests and
expirations of rights in connection therewith and notices of
exercise of call and put options written by the Fund and the
maturity of futures contracts purchased or sold by the Fund)
received by the Custodian from issuers and other persons relating
to the securities and participation interests being held for the
Fund. With respect to tender or exchange offers, the Custodian
shall deliver promptly to the Fund all written information
received by the Custodian from issuers and other persons relating
to the securities and participation interests whose tender or
exchange is sought and from the party (or his agents) making the
tender or exchange offer.
R. Exercise of Rights; Tender Offers In the case of tender offers,
similar offers to purchase or exercise rights (including, without
limitation, pendency of calls and maturities of securities and
participation interests and expirations of rights in connection
therewith and notices of exercise of call and put options and the
maturity of futures contracts) affecting or relating to
securities and participation interests held by the Custodian
under this Agreement, the Custodian shall have responsibility for
promptly notifying the Fund of all such offers in accordance with
the standard of reasonable care set forth in Section 8 hereof.
For all such offers for which the Custodian is responsible as
provided in this Paragraph R, the Fund shall have responsibility
for providing the Custodian with all necessary instructions in
timely fashion. Upon receipt of proper instructions, the
Custodian shall timely deliver to the issuer or trustee thereof,
or to the agent of either, warrants, puts, calls, rights or
similar securities for the purpose of being exercised or sold
upon proper receipt therefor and upon receipt of assurances
satisfactory to the Custodian that the new securities and cash,
if any, acquired by such action are to be delivered to the
Custodian or any subcustodian employed pursuant to Section 2
hereof. Upon receipt of proper instructions, the Custodian shall
timely deposit securities upon invitations for tenders of
securities upon proper receipt therefor and upon receipt of
assurances satisfactory to the Custodian that the consideration
to be paid or delivered or the tendered securities are to be
returned to the Custodian or subcustodian employed pursuant to
Section 2 hereof. Notwithstanding any provision of this Agreement
to the contrary, the Custodian shall take all necessary action,
unless otherwise directed to the contrary by proper instructions,
to comply with the terms of all mandatory or compulsory
exchanges, calls, tenders, redemptions, or similar rights of
security ownership, and shall thereafter promptly notify the Fund
in writing of such action.
S. Depository Receipts The Custodian shall, upon receipt of proper
instructions, surrender or cause to be surrendered foreign
securities to the depository used by an issuer of American
Depository Receipts or International Depository Receipts
(hereinafter collectively referred to as "ADRs") for such
securities, against a written receipt therefor adequately
describing such securities and written evidence satisfactory to
the Custodian that the depository has acknowledged receipt of
instructions to issue with respect to such securities ADRs in the
name of a nominee of the Custodian or in the name or nominee name
of any subcustodian employed pursuant to Section 2 hereof, for
delivery to the Custodian or such subcustodian at such place as
the Custodian or such subcustodian may from time to time
designate. The Custodian shall, upon receipt of proper
instructions, surrender ADRs to the issuer thereof against a
written receipt therefor adequately describing the ADRs
surrendered and written evidence satisfactory to the Custodian
that the issuer of the ADRs has acknowledged receipt of
instructions to cause its depository to deliver the securities
underlying such ADRs to the Custodian or to a subcustodian
employed pursuant to Section 2 hereof.
T. Interest Bearing Call or Time Deposits The Custodian shall, upon
receipt of proper instructions, place interest bearing fixed term
and call deposits with the banking department of such banking
institution (other than the Custodian) and in such amounts as the
Fund may designate. Deposits may be denominated in U.S. Dollars
or other currencies. The Custodian shall include in its records
with respect to the assets of the Fund appropriate notation as to
the amount and currency of each such deposit, the accepting
banking institution and other appropriate details and shall
retain such forms of advice or receipt evidencing the deposit, if
any, as may be forwarded to the Custodian by the banking
institution. Such deposits shall be deemed portfolio securities
of the applicable Fund for the purposes of this Agreement, and
the Custodian shall be responsible for the collection of income
from such accounts and the transmission of cash to and from such
accounts.
U. Options, Futures Contracts and Foreign Currency Transactions
1. Options. The Custodians shall, upon receipt of proper
instructions and in accordance with the provisions of any
agreement between the Custodian, any registered
broker-dealer and, if necessary, the Fund, relating to
compliance with the rules of the Options Clearing
Corporation or of any registered national securities
exchange or similar organization or organizations, receive
and retain confirmations or other documents, if any,
evidencing the purchase or writing of an option on a
security or securities index or other financial instrument
or index by the Fund; deposit and maintain in a segregated
account for each Fund separately, either physically or by
book-entry in a Securities System, securities subject to a
covered call option written by the Fund; and release and/or
transfer such securities or other assets only in accordance
with a notice or other communication evidencing the
expiration, termination or exercise of such covered option
furnished by the Options Clearing Corporation, the
securities or options exchange on which such covered option
is traded or such other organization as may be responsible
for handling such options transactions. The Custodian and
the broker-dealer shall be responsible for the sufficiency
of assets held in each Fund's segregated account in
compliance with applicable margin maintenance requirements.
2. Futures Contracts The Custodian shall, upon receipt of
proper instructions, receive and retain confirmations and
other documents, if any, evidencing the purchase or sale of
a futures contract or an option on a futures contract by the
Fund; deposit and maintain in a segregated account, for the
benefit of any futures commission merchant, assets
designated by the Fund as initial, maintenance or variation
"margin" deposits (including mark-to-market payments)
intended to secure the Fund's performance of its obligations
under any futures contracts purchased or sold or any options
on futures contracts written by Fund, in accordance with the
provisions of any agreement or agreements among the Fund,
the Custodian and such futures commission merchant, designed
to comply with the rules of the Commodity Futures Trading
Commission and/or of any contract market or commodities
exchange or similar organization regarding such margin
deposits or payments; and release and/or transfer assets in
such margin accounts only in accordance with any such
agreements or rules. The Custodian and the futures
commission merchant shall be responsible for the sufficiency
of assets held in the segregated account in compliance with
the applicable margin maintenance and mark-to-market payment
requirements.
3. Foreign Exchange Transactions The Custodian shall,
pursuant to proper instructions, enter into or cause a
subcustodian to enter into foreign exchange contracts or
options to purchase and sell foreign currencies for spot and
future delivery on behalf and for the account of the Fund.
Such transactions may be undertaken by the Custodian or
subcustodian with such banking or financial institutions or
other currency brokers, as set forth in proper instructions.
Foreign exchange contracts and options shall be deemed to be
portfolio securities of the Fund; and accordingly, the
responsibility of the Custodian therefor shall be the same
as and no greater than the Custodian's responsibility in
respect of other portfolio securities of the Fund. The
Custodian shall be responsible for the transmittal to and
receipt of cash from the currency broker or banking or
financial institution with which the contract or option is
made, the maintenance of proper records with respect to the
transaction and the maintenance of any segregated account
required in connection with the transaction. The Custodian
shall have no duty with respect to the selection of the
currency brokers or banking or financial institutions with
which the Fund deals or for their failure to comply with the
terms of any contract or option. Without limiting the
foregoing, it is agreed that upon receipt of proper
instructions and insofar as funds are made available to the
Custodian for the purpose, the Custodian may (if determined
necessary by the Custodian to consummate a particular
transaction on behalf and for the account of the Fund) make
free outgoing payments of cash in the form of U.S. dollars
or foreign currency before receiving confirmation of a
foreign exchange contract or confirmation that the
countervalue currency completing the foreign exchange
contact has been delivered or received. The Custodian shall
not be responsible for any costs and interest charges which
may be incurred by the Fund or the Custodian as a result of
the failure or delay of third parties to deliver foreign
exchange; provided that the Custodian shall nevertheless be
held to the standard of care set forth in, and shall be
liable to the Fund in accordance with, the provisions of
Section 8.
V. Actions Permitted Without Express Authority The Custodian may in
its discretion, without express authority from the Fund:
1) make payments to itself or others for minor expenses of
handling securities or other similar items relating to
its duties under this Agreement, provided, that all
such payments shall be accounted for by the Custodian
to the Treasurer of the Fund;
2) surrender securities in temporary form for securities
in definitive form;
3) endorse for collection, in the name of the Fund,
checks, drafts and other negotiable instruments; and
4) in general, attend to all nondiscretionary details in
connection with the sale, exchange, substitution,
purchase, transfer and other dealings with the
securities and property of the Fund except as otherwise
directed by the Fund.
4. Duties of Bank with Respect to Books of Account and Calculations of
Net Asset Value
The Bank shall as Agent (or as Custodian, as the case may be) keep such
books of account (including records showing the adjusted tax costs of the Fund's
portfolio securities) and render as at the close of business on each day a
detailed statement of the amounts received or paid out and of securities
received or delivered for the account of the Fund during said day and such other
statements, including a daily trial balance and inventory of the Fund's
portfolio securities; and shall furnish such other financial information and
data as from time to time requested by the Treasurer or any executive officer of
the Fund; and shall compute and determine, as of the close of business of the
New York Stock Exchange, or at such other time or times as the Board may
determine, the net asset value of a Share in the Fund, such computation and
determination to be made in accordance with the governing documents of the Fund
and the votes and instructions of the Board at the time in force and applicable,
and promptly notify the Fund and its investment adviser and such other persons
as the Fund may request of the result of such computation and determination. In
computing the net asset value the Custodian may rely upon security quotations
received by telephone or otherwise from sources or pricing services designated
by the Fund by proper instructions, and may further rely upon information
furnished to it by any authorized officer of the Fund relative (a) to
liabilities of the Fund not appearing on its books of account, (b) to the
existence, status and proper treatment of any reserve or reserves, (c) to any
procedures established by the Board regarding the valuation of portfolio
securities, and (d) to the value to be assigned to any bond, note, debenture,
Treasury bill, repurchase agreement, subscription right, security, participation
interests or other asset or property for which market quotations are not readily
available.
5. Records and Miscellaneous Duties
The Bank shall create, maintain and preserve all records relating to
its activities and obligations under this Agreement in such manner as will meet
the obligations of the Fund under the Investment Company Act of 1940, with
particular attention to Section 31 thereof and Rules 31a-1 and 31a-2 thereunder,
applicable federal and state tax laws and any other law or administrative rules
or procedures which may be applicable to the Fund. All books of account and
records maintained by the Bank in connection with the performance of its duties
under this Agreement shall be the property of the Fund, shall at all times
during the regular business hours of the Bank be open for inspection by
authorized officers, employees or agents of the Fund, and in the event of
termination of this Agreement shall be delivered to the Fund or to such other
person or persons as shall be designated by the Fund. Disposition of any account
or record after any required period of preservation shall be only in accordance
with specific instructions received from the Fund. The Bank shall assist
generally in the preparation of reports to shareholders, to the Securities and
Exchange Commission, including Forms N-SAR and N-1Q, to state "blue sky"
authorities and to others, audits of accounts, and other ministerial matters of
like nature; and, upon request, shall furnish the Fund's auditors with an
attested inventory of securities held with appropriate information as to
securities in transit or in the process of purchase or sale and with such other
information as said auditors may from time to time request. The Custodian shall
also maintain records of all receipts, deliveries and locations of such
securities, together with a current inventory thereof, and shall conduct
periodic verifications (including sampling counts at the Custodian) of
certificates representing bonds and other securities for which it is responsible
under this Agreement in such manner as the Custodian shall determine from time
to time to be advisable in order to verify the accuracy of such inventory. The
Bank shall not disclose or use any books or records it has prepared or
maintained by reason of this Agreement in any manner except as expressly
authorized herein or directed by the Fund, and the Bank shall keep confidential
any information obtained by reason of this Agreement.
6. Opinion of Fund's Independent Public Accountants
The Custodian shall take all reasonable action, as the Fund may from
time to time request, to enable the Fund to obtain from year to year favorable
opinions from the Fund's independent public accountants with respect to its
activities hereunder in connection with the preparation of the Fund's
registration statement and Form N-SAR or other periodic reports to the
Securities and Exchange Commission and with respect to any other requirements of
such Commission.
7. Compensation and Expenses of Bank
The Bank shall be entitled to reasonable compensation for its services
as Custodian and Agent, as agreed upon from time to time between the Fund and
the Bank. The Bank shall be entitled to receive from the Fund on demand
reimbursement for its cash disbursements, expenses and charges, including
counsel fees, in connection with its duties as Custodian and Agent hereunder,
but excluding salaries and usual overhead expenses.
8. Responsibility of Bank
So long as and to the extent that it is in the exercise of reasonable
care, the Bank as Custodian and Agent shall be held harmless in acting upon any
notice, request, consent, certificate or other instrument reasonably believed by
it to be genuine and to be signed by the proper party or parties.
The Bank as Custodian and Agent shall be entitled to rely on and may
act upon advice of counsel (who may be counsel for the Fund) on all matters, and
shall be without liability for any action reasonably taken or omitted pursuant
to such advice.
The Bank as Custodian and Agent shall be held to the exercise of
reasonable care in carrying out the provisions of this Agreement but shall be
liable only for its own negligent or bad faith acts or failures to act.
Notwithstanding the foregoing, nothing contained in this paragraph is intended
to nor shall it be construed to modify the standards of care and responsibility
set forth in Section 2 hereof with respect to subcustodians and in subparagraph
f of Paragraph L of Section 3 hereof with respect to Securities Systems and in
subparagraph g of Paragraph M of Section 3 hereof with respect to an Approved
Book-Entry System for Commercial Paper.
The Custodian shall be liable for the acts or omissions of a foreign
banking institution to the same extent as set forth with respect to
subcustodians generally in Section 2 hereof, provided that, regardless of
whether assets are maintained in the custody of a foreign banking institution, a
foreign securities depository or a branch of a U.S. bank, the Custodian shall
not be liable for any loss, damage, cost, expense, liability or claim resulting
from, or caused by, the direction of or authorization by the Fund to maintain
custody of any securities or cash of the Fund in a foreign county including, but
not limited to, losses resulting from nationalization, expropriation, currency
restrictions, acts of war, civil war or terrorism, insurrection, revolution,
military or usurped powers, nuclear fission, fusion or radiation, earthquake,
storm or other disturbance of nature or acts of God.
If the Fund requires the Bank in any capacity to take any action with
respect to securities, which action involves the payment of money or which
action may, in the opinion of the Bank, result in the Bank or its nominee
assigned to the Fund being liable for the payment of money or incurring
liability of some other form, the Fund, as a prerequisite to requiring the
Custodian to take such action, shall provide indemnity to the Custodian in an
amount and form satisfactory to it.
9. Persons Having Access to Assets of the Fund
(i) No trustee, director, general partner, officer, employee or agent
of the Fund shall have physical access to the assets of the Fund held by the
Custodian or be authorized or permitted to withdraw any investments of the Fund,
nor shall the Custodian deliver any assets of the Fund to any such person. No
officer or director, employee or agent of the Custodian who holds any similar
position with the Fund or the investment adviser of the Fund shall have access
to the assets of the Fund.
(ii) Access to assets of the Fund held hereunder shall only be
available to duly authorized officers, employees, representatives or agents of
the Custodian or other persons or entities for whose actions the Custodian shall
be responsible to the extent permitted hereunder, or to the Fund's independent
public accountants in connection with their auditing duties performed on behalf
of the Fund.
(iii) Nothing in this Section 9 shall prohibit any officer, employee or
agent of the Fund or of the investment adviser of the Fund from giving
instructions to the Custodian or executing a certificate so long as it does not
result in delivery of or access to assets of the Fund prohibited by paragraph
(i) of this Section 9.
10. Effective Period, Termination and Amendment; Successor Custodian
This Agreement shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter provided, may
be amended at any time by mutual agreement of the parties hereto and may be
terminated by either party by an instrument in writing delivered or mailed,
postage prepaid to the other party, such termination to take effect not sooner
than sixty (60) days after the date of such delivery or mailing; provided, that
the Fund may at any time by action of its Board, (i) substitute another bank or
trust company for the Custodian by giving notice as described above to the
Custodian, or (ii) immediately terminate this Agreement in the event of the
appointment of a conservator or receiver for the Custodian by the Federal
Deposit Insurance Corporation or by the Banking Commissioner of The Commonwealth
of Massachusetts or upon the happening of a like event at the direction of an
appropriate regulatory agency or court of competent jurisdiction. Upon
termination of the Agreement, the Fund shall pay to the Custodian such
compensation as may be due as of the date of such termination and shall likewise
reimburse the Custodian for its costs, expenses and disbursements.
Unless the holders of a majority of the outstanding Shares of the Fund
vote to have the securities, funds and other properties held hereunder delivered
and paid over to some other bank or trust company, specified in the vote, having
not less than $2,000,000 of aggregate capital, surplus and undivided profits, as
shown by its last published report, and meeting such other qualifications for
custodians set forth in the Investment Company Act of 1940, the Board shall,
forthwith, upon giving or receiving notice of termination of this Agreement,
appoint as successor custodian, a bank or trust company having such
qualifications. The Bank, as Custodian, Agent or otherwise, shall, upon
termination of the Agreement, deliver to such successor custodian, all
securities then held hereunder and all funds or other properties of the Fund
deposited with or held by the Bank hereunder and all books of account and
records kept by the Bank pursuant to this Agreement, and all documents held by
the Bank relative thereto. In the event that no such vote has been adopted by
the shareholders and that no written order designating a successor custodian
shall have been delivered to the Bank on or before the date when such
termination shall become effective, then the Bank shall not deliver the
securities, funds and other properties of the Fund to the Fund but shall have
the right to deliver to a bank or trust company doing business in Boston,
Massachusetts of its own selection, having an aggregate capital, surplus and
undivided profits, as shown by its last published report, of not less than
$2,000,000, all funds, securities and properties of the Fund held by or
deposited with the Bank, and all books of account and records kept by the Bank
pursuant to this Agreement, and all documents held by the Bank relative thereto.
Thereafter such bank or trust company shall be the successor of the Custodian
under this Agreement.
11. Interpretive and Additional Provisions
In connection with the operation of this Agreement, the Custodian and
the Fund may from time to time agree on such provisions interpretive of or in
addition to the provisions of this Agreement as may in their joint opinion be
consistent with the general tenor of this Agreement. Any such interpretive or
additional provisions shall be in a writing signed by both parties and shall be
annexed hereto, provided that no such interpretive or additional provisions
shall contravene any applicable federal or state regulations or any provision of
the governing instruments of the Fund. No interpretive or additional provisions
made as provided in the preceding sentence shall be deemed to be an amendment of
this Agreement.
12. Notices
Notices and other writings delivered or mailed postage prepaid to the
Fund addressed to 24 Federal Street, Boston, Massachusetts 02110, or to such
other address as the Fund may have designated to the Bank, in writing, or to
Investors Bank & Trust Company, 24 Federal Street, Boston, Massachusetts 02110,
shall be deemed to have been properly delivered or given hereunder to the
respective addressees.
13. Massachusetts Law to Apply
This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of The Commonwealth of
Massachusetts.
If the Fund is a Massachusetts business trust, the Custodian expressly
acknowledges the provision in the Fund's declaration of Trust limiting the
personal liability of the trustees and shareholders of the Fund; and the
Custodian agrees that it shall have recourse only to the assets of the Fund for
the payment of claims or obligations as between the Custodian and the Fund
arising out of this Agreement, and the Custodian shall not seek satisfaction of
any such claim or obligation from the trustees or shareholders of the Fund.
14. Adoption of the Agreement by the Fund
The Fund represents that its Board has approved this Agreement and has
duly authorized the Fund to adopt this Agreement, such adoption to be evidenced
by a letter agreement between the Fund and the Bank reflecting such adoption,
which letter agreement shall be dated and signed by a duly authorized officer of
the Fund and duly authorized officer of the Bank. This Agreement shall be deemed
to be duly executed and delivered by each of the parties in its name and behalf
by its duly authorized officer as of the date of such letter agreement, and this
Agreement shall be deemed to supersede and terminate, as of the date of such
letter agreement, all prior agreements between the Fund and the Bank relating to
the custody of the Fund's assets.
* * * * *
<PAGE>
EXHIBIT 99.8(b)
AMENDMENT TO
MASTER CUSTODIAN AGREEMENT
BETWEEN
EATON VANCE GROUP OF FUNDS
AND
INVESTORS BANK & TRUST COMPANY
This Amendment, dated as of October 23, 1995, is made to the MASTER
CUSTODIAN AGREEMENT (the "Agreement") between each investment company for which
Eaton Vance Management acts as investment adviser or administrator which has
adopted the Agreement (the "Funds") and Investors Bank & Trust Company (the
"Custodian") pursuant to Section 10 of the Agreement.
The Funds and the Custodian agree that Section 10 of the Agreement
shall, as of October 23, 1995, be amended to read as follows:
Unless otherwise defined herein, terms which are defined in the
Agreement and used herein are so used as so defined.
10. Effective Period, Termination and Amendment; Successor Custodian
This Agreement shall become effective as of its execution, shall
continue in full force and effect until terminated by either party after August
31, 2000 by an instrument in writing delivered or mailed, postage prepaid to the
other party, such termination to take effect not sooner than sixty (60) days
after the date of such delivery or mailing; provided, that the Fund may at any
time by action of its Board, (i) substitute another bank or trust company for
the Custodian by giving notice as described above to the Custodian in the event
the Custodian assigns this Agreement to another party without consent of the
noninterested Trustees of the Funds, or (ii) immediately terminate this
Agreement in the event of the appointment of a conservator or receiver for the
Custodian by the Federal Deposit Insurance Corporation or by the Banking
Commissioner of The Commonwealth of Massachusetts or upon the happening of a
like event at the direction of an appropriate regulatory agency or court of
competent jurisdiction. Upon termination of the Agreement, the Fund shall pay to
the Custodian such compensation as may be due as of the date of such termination
(and shall likewise reimburse the Custodian for its costs, expenses and
disbursements).
This Agreement may be amended at any time by the written agreement of
the parties hereto. If a majority of the non-interested trustees of any of the
Funds determines that the performance of the Custodian has been unsatisfactory
or adverse to the interests of shareholders of any Fund or Funds or that the
terms of the Agreement are no longer consistent with publicly available industry
standards, then the Fund or Funds shall give written notice to the Custodian of
such determination and the Custodian shall have 60 days to (1) correct such
performance to the satisfaction of the non-interested trustees or (2)
renegotiate terms which are satisfactory to the non-interested trustees of the
Funds. If the conditions of the preceding sentence are not met then the Fund or
Funds may terminate this Agreement on sixty (60) days written notice.
The Board of the Fund shall, forthwith, upon giving or receiving notice
of termination of this Agreement, appoint as successor custodian, a bank or
trust company having the qualifications required by the Investment Company Act
of 1940 and the Rules thereunder. The Bank, as Custodian, Agent or otherwise,
shall, upon termination of the Agreement, deliver to such successor custodian,
all securities then held hereunder and all funds or other properties of the Fund
deposited with or held by the Bank hereunder and all books of account and
records kept by the Bank pursuant to this Agreement, and all documents held by
the Bank relative thereto. In the event that no written order designating a
successor custodian shall have been delivered to the Bank on or before the date
when such termination shall become effective, then the Bank shall not deliver
the securities, funds and other properties of the Fund to the Fund but shall
have the right to deliver to a bank or trust company doing business in Boston,
Massachusetts of its own selection meeting the above required qualifications,
all funds, securities and properties of the Fund held by or deposited with the
Bank, and all books of account and records kept by the Bank pursuant to this
Agreement, and all documents held by the Bank relative thereto. Thereafter such
bank or trust company shall be the successor of the Custodian under this
Agreement.
Except as expressly provided herein, the Agreement shall remain
unchanged and in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their duly authorized officers, as of the day and year first above
written.
CAPITAL EXCHANGE FUND, INC. EATON VANCE MUNICIPALS TRUST II
DEPOSITORS FUND OF BOSTON, INC. EATON VANCE MUTUAL FUNDS TRUST
DIVERSIFICATION FUND, INC. EATON VANCE PRIME RATE RESERVES
EATON VANCE EQUITY-INCOME TRUST EATON VANCE SPECIAL INVESTMENT TRUST
EATON VANCE GROWTH TRUST EV CLASSIC SENIOR FLOATING-RATE FUND
EATON VANCE INVESTMENT FUND, INC. FIDUCIARY EXCHANGE FUND, INC.
EATON VANCE INVESTMENT TRUST SECOND FIDUCIARY EXCHANGE FUND, INC.
EATON VANCE MUNICIPAL BOND FUND L.P. THE EXCHANGE FUND OF BOSTON, INC.
EATON VANCE MUNICIPALS TRUST VANCE, SANDERS EXCHANGE FUND
By: /s/James L. O'Connor
------------------------
Treasurer
INVESTORS BANK & TRUST COMPANY
By: /s/Michael Rogers
------------------------
<PAGE>
EXHIBIT 99.9(b)
EATON VANCE MUNICIPALS TRUST II
AMENDED ADMINISTRATIVE SERVICES AGREEMENT
AGREEMENT made this 19th day of June, 1995, between Eaton Vance
Municipals Trust II, a Massachusetts business trust (the "Trust") on behalf of
each of its series listed on Schedule A (the "Funds") and Eaton Vance
Management, a Massachusetts business Trust, (the "Administrator").
IN CONSIDERATION of the mutual promises and undertakings herein
contained, the parties hereto agree with respect to each Fund:
1. Duties of the Administrator. The Trust hereby employs the
Administrator to act as administrator of the Fund and to administer its affairs,
subject to the supervision of the Trustees of the Trust, for the period and on
the terms set forth in this Agreement.
The Administrator hereby accepts such employment, and undertakes to
afford to the Trust the advice and assistance of the Administrator's
organization in the administration of the Fund and to furnish for the use of the
Fund office space and all necessary office facilities, equipment and personnel
for administering the affairs of the Fund and to pay the salaries and fees of
all officers and Trustees of the Trust who are members of the Administrator's
organization and all personnel of the Administrator performing services relating
to administrative activities. The Administrator shall for all purposes herein be
deemed to be an independent contractor and shall, except as otherwise expressly
provided or authorized, have no authority to act for or represent the Trust in
any way or otherwise be deemed an agent of the Trust.
Notwithstanding the foregoing, the Administrator shall not be deemed to
have assumed any duties with respect to, and shall not be responsible for, the
management of the Fund's assets or the rendering of investment advice and
supervision with respect thereto or the distribution of shares of the Fund, nor
shall the Administrator be deemed to have assumed or have any responsibility
with respect to functions specifically assumed by any transfer agent, custodian
or shareholder servicing agent of the Trust or the Fund. It is intended that the
assets of the Fund will be invested in an interest in a registered open-end
investment company having substantially the same investment objective, policies
and restrictions as the Fund (the "Portfolio"). Boston Management and Research
("BMR"), an affiliate of the Administrator, currently acts as investment adviser
to the Portfolio under an Investment Advisory Agreement between the Portfolio
and BMR.
2. Allocation of Charges and Expenses. The Administrator shall pay the
entire salaries and fees of all of the Trust's Trustees and officers who devote
part or all of their time to the affairs of the Administrator, and the salaries
and fees of such persons shall not be deemed to be expenses incurred by the
Trust for purposes of this Section 2. Except as provided in the foregoing
sentence, the Administrator shall not pay any expenses relating to the Trust or
the Fund including, without implied limitation, (i) expenses of maintaining the
Fund and continuing its existence, (ii) registration of the Trust under the
Investment Company Act of 1940, (iii) commissions, fees and other expenses
connected with the acquisition, disposition and valuation of securities and
other investments, (iv) auditing, accounting and legal expenses, (v) taxes and
interest, (vi) governmental fees, (vii) expenses of issue, sale, repurchase and
redemption of shares, (viii) expenses of registering and qualifying the Trust,
the Fund and its shares under federal and state securities laws and of preparing
and printing prospectuses for such purposes and for distributing the same to
shareholders and investors, and fees and expenses of registering and maintaining
registrations of the Fund and of the Fund's principal underwriter, if any, as
broker-dealer or agent under state securities laws, (ix) expenses of reports and
notices to shareholders and of meetings of shareholders and proxy solicitations
therefor, (x) expenses of reports to governmental officers and commissions, (xi)
insurance expenses, (xii) association membership dues (xiii) fees, expenses and
disbursements of custodians and subcustodians for all services to the Fund
(including without limitation safekeeping of funds, securities and other
investments, keeping of books and accounts and determination of net asset
values), (xiv) fees, expenses and disbursements of transfer agents, dividend
disbursing agents, shareholder servicing agents and registrars for all services
to the Fund, (xv) expenses for servicing shareholder accounts, (xvi) any direct
charges to shareholders approved by the Trustees of the Trust, (xvii)
compensation and expenses of Trustees of the Trust who are not members of the
Adviser's organization, and (xviii) such non-recurring items as may arise,
including expenses incurred in connection with litigation, proceedings and
claims and the obligation of the Trust to indemnify its Trustees and officers
with respect thereto.
3. Compensation of Administrator. The Board of Trustees of the Trust
have currently determined that, based on the current level of compensation
payable to BMR by the Portfolio under the Portfolio's present Investment
Advisory Agreement with BMR, the Administrator shall receive no compensation
from the Trust or the Fund in respect of the services to be rendered and the
facilities to be provided by the Administrator under this Agreement. If the
Trustees determine that the Trust or Fund, should compensate the Administrator
for such services and facilities, such compensation shall be set forth in a new
agreement or in an amendment to this Agreement to be entered into by the parties
hereto.
4. Other Interests. It is understood that Trustees and officers of the
Trust and shareholders of the Fund are or may be or become interested in the
Administrator as trustees, officers, employees, shareholders or otherwise and
that trustees, officers, employees and shareholders of the Administrator are or
may be or become similarly interested in the Fund, and that the Administrator
may be or become interested in the Fund as shareholder or otherwise. It is also
understood that trustees, officers, employees and shareholders of the
Administrator may be or become interested (as directors, trustees, officers,
employees, stockholders or otherwise) in other companies or entities (including,
without limitation, other investment companies) which the Administrator may
organize, sponsor or acquire, or with which it may merge or consolidate, and
which may include the words "Eaton Vance" or "Eaton & Howard" or "Vance Sanders"
or any combination thereof as part of their name, and that the Administrator or
its subsidiaries or affiliates may enter into advisory or management or
administration agreements or other contracts or relationships with such other
companies or entities.
5. Limitation of Liability of the Administrator. The services of the
Administrator to the Trust and the Fund are not to be deemed to be exclusive,
the Administrator being free to render services to others and engage in other
business activities. In the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of obligations or duties hereunder on the part
of the Administrator, the Administrator shall not be subject to liability to the
Trust or the Fund or to any shareholder of the Fund for any act or omission in
the course of, or connected with, rendering services hereunder or for any losses
which may be sustained in the acquisition, holding or disposition of any
security or other investment.
6. Sub-Administrators. The Administrator may employ one or more
sub-administrators from time to time to perform such of the acts and services of
the Administrator and upon such terms and conditions as may be agreed upon
between the Administrator and such sub-administrators and approved by the
Trustees of the Trust.
7. Duration and Termination of this Agreement. This Agreement shall
become effective upon the date of its execution, and, unless terminated as
herein provided, shall remain in full force and effect through and including
February 28, 1996 and shall continue in full force and effect indefinitely
thereafter, but only so long as such continuance after February 28, 1996 is
specifically approved at least annually (i) by the Board of Trustees of the
Trust and (ii) by the vote of a majority of those Trustees of the Trust who are
not interested persons of the Administrator or the Trust.
Either party hereto may, at any time on sixty (60) days' prior written
notice to the other, terminate this Agreement without the payment of any
penalty, by action of Trustees of the Trust or the trustee of the Administrator,
as the case may be, and the Trust may, at any time upon such written notice to
the Administrator, terminate this Agreement by vote of a majority of the
outstanding voting securities of the Fund. This Agreement shall terminate
automatically in the event of its assignment.
8. Amendments of the Agreement. This Agreement may be amended by a
writing signed by both parties hereto, provided that no amendment to this
Agreement shall be effective until approved (i) by the vote of a majority of
those Trustees of the Trust who are not interested persons of the Administrator
or the Trust, and (ii) by vote of the Board of Trustees of the Trust. Additional
series of the Trust, however, will become a Fund hereunder upon approval by the
Trustees of the Trust and amendment of Schedule A.
9. Limitation of Liability. The Fund shall not be responsible for the
obligations of any other series of the Trust. The Administrator expressly
acknowledges the provision in the Declaration of Trust of the Trust limiting the
personal liability of shareholders of the Fund and of the officers and Trustees
of the Trust, and the Administrator hereby agrees that it shall have recourse to
the Trust or the Fund for payment of claims or obligations as between the Trust
or the Fund and the Administrator arising out of this Agreement and shall not
seek satisfaction from the shareholders or any shareholder of the Fund or from
the officers or Trustees of the Trust.
10. Use of the Name "Eaton Vance." The Administrator hereby consents to
the use by the Fund of the name "Eaton Vance" as part of the Fund's name;
provided, however, that such consent shall be conditioned upon the employment of
the Administrator or one of its affiliates as the administrator of the Fund. The
name "Eaton Vance" or any variation thereof may be used from time to time in
other connections and for other purposes by the Administrator and its affiliates
and other investment companies that have obtained consent to the use of the name
"Eaton Vance." The Administrator shall have the right to require the Fund to
cease using the name "Eaton Vance" as part of the Fund's name if the Fund
ceases, for any reason, to employ the Administrator or one of its affiliates as
the Fund's administrator. Future names adopted by the Fund for itself, insofar
as such names include identifying words requiring the consent of the
Administrator, shall be the property of the Administrator and shall be subject
to the same terms and conditions.
11. Certain Definitions. The terms "assignment" and "interested
persons" when used herein shall have the respective meanings specified in the
Investment Company Act of 1940 as now in effect or as hereafter amended subject,
however, to such exemptions as may be granted by the Securities and Exchange
Commission by any rule, regulation or order. The term "vote of a majority of the
outstanding voting securities" shall mean the vote of the lesser of (a) 67 per
centum or more of the shares of the Fund present or represented by proxy at the
meeting if the holders of more than 50 per centum of the outstanding shares of
the Fund are present or represented by proxy at the meeting, or (b) more than 50
per centum of the outstanding shares of the Fund.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the day and year first above written.
EATON VANCE MUNICIPALS TRUST II EATON VANCE MANAGEMENT
By /s/Thomas J. Fetter By /s/William M. Steul
------------------- -----------------------------------
President Vice President and not individually
<PAGE>
SCHEDULE A
EATON VANCE MUNICIPALS TRUST II
AMENDED ADMINISTRATION SERVICES AGREEMENT
DATED JUNE 19, 1995
EV Classic Florida Insured Tax Free Fund
EV Classic Hawaii Tax Free Fund
EV Classic Kansas Tax Free Fund
EV Marathon Florida Insured Tax Free Fund
EV Marathon Hawaii Tax Free Fund
EV Marathon High Yield Municipals Fund
EV Marathon Kansas Tax Free Fund
EV Traditional Florida Insured Tax Free Fund
EV Traditional High Yield Municipals Fund
EXHIBIT 99.11
INDEPENDENT AUDITORS' CONSENT
We consent to the references to us under the heading "The Funds' Financial
Highlights" appearing in the Prospectus and "Independent Certified Public
Accountants" in the Statement of Additional Information contained in this
Post-Effective Amendment No. 4 to the Registration Statement (1933 Act File No.
33-71320) of Eaton Vance Municipals Trust II filed on behalf of EV Traditional
Florida Insured Municipals Fund, EV Traditional Hawaii Municipals Fund and EV
Traditional Kansas Municipals Fund.
/s/ Deloitte & Touche LLP
------------------------------------
Deloitte & Touche LLP
February 29, 1996
Boston, Massachusetts
<PAGE>
EXHIBIT 99.15(d)
EATON VANCE MUNICIPALS TRUST II
AMENDED DISTRIBUTION PLAN
(Marathon Series)
WHEREAS, Eaton Vance Municipals Trust II (the "Trust") engages in
business as an open-end investment company with multiple series and is
registered as such under the Investment Company Act of 1940, as amended (the
"Act");
WHEREAS, the Trust adopted a separate Distribution Plan (the "Original
Plan") on behalf of each of its series listed on Schedule A (the "Funds"),
pursuant to which each Fund has made payments in connection with the
distribution of shares of the Fund;
WHEREAS, the Trust employs Eaton Vance Distributors, Inc. to act as
Principal Underwriter (as defined in the Act) of shares of each Fund, but does
not intend to remunerate the Principal Underwriter unless and until the
Principal Underwriter sells shares of the Fund;
WHEREAS, each Fund will pay the Principal Underwriter sales commissions
and distribution fees only in connection with the sale of shares of the Fund;
WHEREAS, each Fund intends to pay service fees as contemplated in
subsections (b) and (d) of Section 26 of Article III of the Rules of Fair
Practice of the National Association of Securities Dealers, Inc. (the "NASD
Rules");
WHEREAS, the Trustees of the Trust have determined that it is desirable
to amend and replace the Original Plan with this Amended Distribution Plan on
behalf of the Funds listed on Schedule A; and
WHEREAS, the Trustees of the Trust have determined that there is a
reasonable likelihood that adoption of this Amended Distribution Plan will
benefit each Fund and its shareholders.
NOW, THEREFORE, the Trust hereby adopts this Distribution Plan (this
"Plan") on behalf of each Fund in accordance with Rule 12b-1 under the Act and
containing the following terms and conditions:
1. The Fund will pay sales commissions and distribution fees to the
Principal Underwriter only after and as a result of the sales of shares of the
Fund. The Principal Underwriter will provide the Fund with such distribution
services and facilities as the Trust may from time to time consider necessary to
accomplish the sale of shares of the Fund. It is understood that the Principal
Underwriter may pay such sales commissions and make such other payments to
Authorized Firms and other persons as it considers appropriate to encourage
distribution of such shares.
2. On each sale of Fund shares (excluding reinvestment of dividends and
distributions), the Fund shall pay the Principal Underwriter a sales commission
in an amount not exceeding 5% of the price received by the Fund therefor, such
payment to be made in the manner set forth and subject to the terms of this
Plan. The amount of the sales commission shall be established from time to time
by vote or other action of a majority of (i) those Trustees of the Trust who are
not "interested persons" (as defined in the Act) of the Trust and have no direct
or indirect financial interest in the operation of this Plan or any agreements
related to it (the "Rule 12b-1 Trustees") and (ii) all of the Trustees then in
office. The Fund shall also pay the Principal Underwriter a separate
distribution fee (calculated in accordance with Section 3), such payment to be
made in the manner set forth and subject to the terms of this Plan.
3. The sales commissions and distribution fees referred to in Section 2
shall be accrued and paid by the Fund in the following manner. The Fund shall
accrue daily an amount calculated at the rate of .75% per annum of the daily net
assets of the Fund, which net assets shall be computed in accordance with the
governing documents of the Trust and applicable votes and determinations of the
Trustees of the Trust. The daily amounts so accrued throughout the month shall
be paid to the Principal Underwriter on the last day of each month. The amount
of such daily accrual, as so calculated, shall first be applied and charged to
all unpaid sales commissions, and the balance, if any, shall then be applied and
charged to all unpaid distribution fees. No amount shall be accrued with respect
to any day on which there exist no outstanding uncovered distribution charges of
the Principal Underwriter. The amount of such uncovered distribution charges
shall be calculated daily. For purposes of this calculation, distribution
charges of the Principal Underwriter shall include (a) the aggregate of all
sales commissions which the Principal Underwriter has been paid pursuant to this
Section 3 (and pursuant to Section 3 of the Original Plan) plus all sales
commissions which it is entitled to be paid pursuant to Section 2 (and pursuant
to Section 2 of the Original Plan) since inception of the Original Plan through
and including the day next preceding the date of calculation, and (b) an amount
equal to the aggregate of all distribution fees referred to below which the
Principal Underwriter has been paid pursuant to this Section 3 (and pursuant to
Section 3 of the Original Plan) plus all such fees which it is entitled to be
paid pursuant to Section 2 (and pursuant to Section 2 of the Original Plan)
since inception of the Original Plan through and including the day next
preceding the date of calculation. From this sum (distribution charges) there
shall be subtracted (i) the aggregate amount paid or payable to the Principal
Underwriter pursuant to this Section 3 (and pursuant to Section 3 of the
Original Plan) since inception of the Original Plan through and including the
day next preceding the date of calculation and (ii) the aggregate amount of all
contingent deferred sales charges paid or payable to the Principal Underwriter
since inception of the Original Plan through and including the day next
preceding the date of calculation. If the result of such subtraction is a
positive amount, a distribution fee [computed at the rate of 1% per annum above
the prime rate (being the base rate on corporate loans posted by at least 75% of
the nation's 30 largest banks) then being reported in the Eastern Edition of The
Wall Street Journal or if such prime rate is not so reported such other rate as
may be designated from time to time by vote or other action of a majority of (i)
the Rule 12b-1 Trustees and (ii) all of the Trustees then in office] shall be
computed on such amount and added to such amount, with the resulting sum
constituting the amount of outstanding uncovered distribution charges of the
Principal Underwriter with respect to such day for all purposes of this Plan. If
the result of such subtraction is a negative amount, there shall exist no
outstanding uncovered distribution charges of the Principal Underwriter with
respect to such day and no amount shall be accrued or paid to the Principal
Underwriter with respect to such day. The aggregate amounts accrued and paid
pursuant to this Section 3 during any fiscal year of the Fund shall not exceed
.75% of the average daily net assets of the Fund for such year.
4. The Principal Underwriter shall be entitled to receive all
contingent deferred sales charges paid or payable with respect to any day on
which there exist outstanding uncovered distribution charges of the Principal
Underwriter. The Fund shall be entitled to receive all remaining contingent
deferred sales charges paid or payable by shareholders with respect to any day
on which there exist no outstanding uncovered distribution charges of the
Principal Underwriter, provided that no such sales charge which would cause the
Fund to exceed the maximum applicable cap imposed thereon by paragraph (2) of
subsection (d) of Section 26 of Article III of the NASD Rules shall be imposed.
5. The Fund may make payments of service fees to the Principal
Underwriter, Authorized Firms and other persons. The aggregate of such payments
during any fiscal year of the Fund shall not exceed .25% of the Fund's average
daily net assets for such year. Appropriate adjustment of service fee payments
shall be made whenever necessary to ensure that no such payment shall cause the
Fund to exceed the applicable maximum cap imposed thereon by paragraph (5) of
subsection (d) of Section 26 of Article III of the NASD Rules.
6. This Plan shall not take effect until after it has been approved by
both a majority of (i) the Rule 12b-1 Trustees and (ii) all of the Trustees then
in office, cast in person at a meeting (or meetings) called for the purpose of
voting on this Plan.
7. Any agreements between the Trust on behalf of the Fund and any
person relating to this Plan shall be in writing and shall not take effect until
approved in the manner provided for Trustee approval of this Plan in Section 6.
8. This Plan shall continue in effect through and including April 28,
1996 (or, if applicable, the next April 28 which follows the day on which the
Fund has become a Fund hereunder by amendment of Schedule A subsequent to April
28, 1996), and shall continue in effect indefinitely thereafter, but only for so
long as such continuance after April 28, 1996 (or, if applicable, said next
April 28) is specifically approved at least annually in the manner provided for
Trustee approval of this Plan in Section 6.
9. The persons authorized to direct the disposition of monies paid or
payable by the Fund pursuant to this Plan or any related agreement made on
behalf of the Fund shall be the President or any Vice President of the Trust.
Such persons shall provide to the Trustees of the Trust and the Trustees shall
review, at least quarterly, a written report of the amounts so expended and the
purposes for which such expenditures were made.
10. This Plan may be terminated at any time by vote of a majority of
the Rule 12b-1 Trustees, or by vote of a majority of the outstanding voting
securities of the Fund. The Principal Underwriter shall also be entitled to
receive all contingent deferred sales charges paid or payable with respect to
any day subsequent to termination of this Plan on which there exist outstanding
uncovered distribution charges of the Principal Underwriter.
11. This Plan may not be amended to increase materially the payments to
be made by the Fund as provided in Sections 2, 3 and 5 unless such amendment is
approved by a vote of at least a majority of the outstanding voting securities
of the Fund. In addition, all material amendments to this Plan shall be approved
in the manner provided for Trustee approval of this Plan in Section 6.
Additional series of the Trust will be governed hereby upon approval by the
Trustees of the Trust and amendment of Schedule A. With respect to such series,
this Plan shall, prior to the initial accrual or payment of any amount
hereunder, be approved by a vote of at least a majority of the outstanding
voting securities of the Fund.
12. While this Plan is in effect, the selection and nomination of the
Rule 12b-1 Trustees shall be committed to the discretion of the Rule 12b-1
Trustees.
13. The Trust shall preserve copies of this Plan and any related
agreements made by the Trust on behalf of the Fund and all reports made pursuant
to Section 9, for a period of not less than six years from the date of this
Plan, or of the agreements or of such report, as the case may be, the first two
years in an easily accessible place.
14. Consistent with the limitation of shareholder, officer and Trustee
liability as set forth in the Trust's Declaration of Trust, any obligations
assumed by the Fund pursuant to this Plan shall be limited in all cases to the
assets of the Fund and no person shall seek satisfaction thereof from the
shareholders of the Trust, officers or Trustees of the Trust or any other series
of the Trust.
15. When used in this Plan, the term "service fees" shall have the same
meaning as such term has in subsections (b) and (d) of Section 26 of Article III
of the NASD Rules. When used in this Plan, the term "vote of a majority of the
outstanding voting securities of the Fund" shall mean the vote of the lesser of
(a) 67 per centum or more of the shares of the Fund present or represented by
proxy at the meeting if the holders of more than 50 per centum of the
outstanding shares of the Fund are present or represented by proxy at the
meeting, or (b) more than 50 per centum of the outstanding shares of the Fund.
16. If any provision of this Plan shall be held or made invalid by a
court decision, statute, rule or regulation of the Securities and Exchange
Commission or otherwise, the remainder of this Plan shall not be affected
thereby.
17. This Plan shall amend, replace and be substituted for the Original
Plan as of the opening of business on June 20, 1995 and this Plan shall be
effective as of such time. The outstanding uncovered distribution charges of the
Principal Underwriter calculated under the Original Plan as of the close of
business on June 19, 1995 shall be the outstanding uncovered distribution
charges of the Principal Underwriter calculated under this Plan as of the
opening of business on June 19, 1995.
ADOPTED June 19, 1995
* * *
<PAGE>
SCHEDULE A
EATON VANCE MUNICIPALS TRUST II
AMENDED DISTRIBUTION PLAN
(MARATHON FUNDS)
DATED JUNE 19, 1995
NAME OF FUND INCEPTION DATE OF ORIGINAL PLAN
- ------------ -------------------------------
EV Marathon Florida Insured Tax Free Fund February 25, 1994
EV Marathon Hawaii Tax Free Fund February 25, 1994
EV Marathon Kansas Tax Free Fund February 25, 1994
EV Marathon High Yield Municipals Fund N/A
EXHIBIT 99.15(e)
EATON VANCE MUNICIPALS TRUST II
AMENDED SERVICE PLAN
(Traditional Series)
WHEREAS, Eaton Vance Municipals Trust II (the "Trust") engages in
business as an open-end management investment company with multiple series and
is registered as such under the Investment Company Act of 1940, as amended (the
"Act");
WHEREAS, the Trust adopted a Service Plan (the "Original Plan") on
behalf of its original series and desires to adopt a Service Plan on behalf of
its new series, all listed on Schedule A (the "Funds"), pursuant to which each
Fund has paid, or intends to pay, service fees as contemplated in subsections
(b) and (d) of Section 26 of Article III of the Rules of Fair Practice of the
National Association of Securities Dealers, Inc. (the "NASD Rules");
WHEREAS, the Trust employs Eaton Vance Distributors, Inc. to act as
Principal Underwriter (as defined in the Act) of Fund shares;
WHEREAS, the Trustees of the Trust have determined that it is desirable
to amend and replace the Original Plan with this Amended Service Plan on behalf
of the Funds listed on Schedule A; and
WHEREAS, the Trustees of the Trust have determined that there is a
reasonable likelihood that adoption of this Amended Service Plan will benefit
each Fund and its shareholders.
NOW, THEREFORE, the Trust hereby adopts this Amended Service Plan (the
"Plan") on behalf of each Fund in accordance with Rule 12b-1 under the Act and
containing the following terms and conditions:
1. The Fund may make payments of service fees to the Principal
Underwriter, Authorized Firms and other persons. The aggregate of such payments
during any fiscal year of the Fund shall not exceed .25% of the Fund's average
daily net assets for such year. Appropriate adjustment of service fee payments
shall be made whenever necessary to ensure that no such payment shall cause the
Fund to exceed the applicable maximum cap imposed thereon by paragraph (5) of
subsection (d) of Section 26 of Article III of the NASD Rules.
2. This Plan shall not take effect until after it has been approved by
both a majority of (i) those Trustees of the Trust who are not "interested
persons" of the Trust (as defined in the Act) and have no direct or indirect
financial interest in the operations of this Plan or any agreements related to
it (the "Rule 12b-1 Trustees"), and (ii) all of the Trustees then in office,
cast in person at a meeting (or meetings) called for the purpose of voting on
this Plan.
3. Any agreements between the Trust on behalf of the Fund and any
person relating to this Plan shall be in writing and shall not take effect until
approved in the manner provided for Trustee approval of this Plan in Section 2.
4. This Plan shall continue in effect for so long as such continuance
is specifically approved at least annually in the manner provided for Trustee
approval of this Plan in Section 2.
5. The persons authorized to direct the disposition of monies paid or
payable by the Fund pursuant to this Plan or any related agreement made on
behalf of the Fund shall be the President or any Vice President of the Trust.
One or more of such persons shall provide to the Trustees of the Trust and the
Trustees shall review, at least quarterly, a written report of the amounts so
expended and the purposes for which such expenditures were made.
6. This Plan may be terminated at any time by vote of a majority of the
Rule 12b-1 Trustees, or by vote of a majority of the outstanding voting
securities of the Fund.
7. This Plan may not be amended to increase materially the payments to
be made by the Fund as provided in Section 1 unless such amendment, if required
by law, is approved by a vote of at least a majority of the outstanding voting
securities of the Fund. In addition, all material amendments to this Plan shall
be approved in the manner provided for in Section 2. Additional series of the
Trust will become a Fund hereunder upon approval by the Trustees of the Trust
and amendment of Schedule A with respect to such series.
8. While this Plan is in effect, the selection and nomination of the
Rule 12b-1 Trustees shall be committed to the discretion of the Rule 12b-1
Trustees.
9. The Trust shall preserve copies of this Plan and any related
agreements made by the Trust on behalf of the Fund and all reports made pursuant
to Section 5, for a period of not less than six years from the date of this
Plan, or of the agreements or of such report, as the case may be, the first two
years in an easily accessible place.
10. Consistent with the limitation of shareholder, officer and Trustee
liability as set forth in the Trust's Declaration of Trust, any obligations
assumed by the Fund pursuant to this Plan shall be limited in all cases to the
assets of the Fund and no person shall seek satisfaction thereof from the
shareholders of the Trust, officers or Trustees of the Trust or any other series
of the Trust.
11. When used in this Plan, the term "service fees" shall have the same
meaning as such term has in subsections (b) and (d) of Section 26 of Article III
of the NASD Rules. When used in this Plan, the term "vote of a majority of the
outstanding voting securities" shall mean the vote of the lesser of (a) 67 per
centum or more of the shares of the Fund present or represented by proxy at the
meeting if the holders of more than 50 per centum of the outstanding shares of
the Fund are present or represented by proxy at the meeting, or (b) more than 50
per centum of the outstanding shares of the Fund.
12. If any provision of this Plan shall be held or made invalid by a
court decision, statute, rule or regulation of the Securities and Exchange
Commission or otherwise, the remainder of this Plan shall not be affected
thereby.
ADOPTED June 20, 1995
* * *
<PAGE>
SCHEDULE A
EATON VANCE MUNICIPALS TRUST II
AMENDED SERVICE PLAN
DATED JUNE 19, 1995
NAME OF FUND INCEPTION DATE OF ORIGINAL PLAN
- ------------ -------------------------------
EV Traditional Florida Insured Tax Free Fund February 25, 1994
EV Traditional High Yield Municipals Fund N/A
<PAGE>
AMENDED SCHEDULE A
Eaton Vance Municipals Trust II
AMENDED SERVICE PLAN
(Traditional Funds)
DATED: February 1, 1996
<TABLE>
<CAPTION>
NAME OF FUND INCEPTION DATE OF PRIOR PLANS
- ------------ -----------------------------
<S> <C>
EV Traditional Hawaii Municipals Fund* February 25, 1994/January 27, 1995
EV Traditional Florida Insured Municipals Fund February 25, 1994
EV Traditional High Yield Municipals Fund N/A
EV Traditional Kansas Municipals Fund* February 25, 1994/January 27, 1995
- -----------
* This fund formerly was a classic series of the Trust with a Rule 12b-1 distribution plan.
</TABLE>
<PAGE>
EXHIBIT 99.15(f)
EATON VANCE MUNICIPALS TRUST II
AMENDED DISTRIBUTION PLAN
(CLASSIC FUNDS)
WHEREAS, Eaton Vance Municipals Trust II (the "Trust") engages in
business as an open-end investment company with multiple series and is
registered as such under the Investment Company Act of 1940, as amended (the
"Act");
WHEREAS, the Trust adopted a separate Distribution Plan (the "Original
Plan") on behalf of each of its series listed on Schedule A (the "Funds"),
pursuant to which each Fund has made payments in connection with the
distribution of shares of the Fund;
WHEREAS, the Trust employs Eaton Vance Distributors, Inc. to act as
Principal Underwriter (as defined in the Act) of shares of each Fund, but does
not intend to remunerate the Principal Underwriter unless and until the
Principal Underwriter sells shares of the Fund;
WHEREAS, each Fund will pay the Principal Underwriter sales commissions
and distribution fees only in connection with the sale of shares of the Fund;
WHEREAS, each Fund intends to pay service fees as contemplated in
subsections (b) and (d) of Section 26 of Article III of the Rules of Fair
Practice of the National Association of Securities Dealers, Inc. (the "NASD
Rules");
WHEREAS, the Trustees of the Trust have determined that it is desirable
to amend and replace the Original Plan with this Amended Distribution Plan on
behalf of the Funds listed on Schedule A; and
WHEREAS, the Trustees of the Trust have determined that there is a
reasonable likelihood that adoption of this Amended Distribution Plan will
benefit each Fund and its shareholders.
NOW, THEREFORE, the Trust hereby adopts this Amended Distribution Plan
(this "Plan") on behalf of each Fund in accordance with Rule 12b-1 under the Act
and containing the following terms and conditions:
1. The Fund will pay sales commissions and distribution fees to the
Principal Underwriter only after and as a result of the sales of shares of the
Fund. The Principal Underwriter will provide the Fund with such distribution
services and facilities as the Trust may from time to time consider necessary to
accomplish the sale of shares of the Fund. It is understood that the Principal
Underwriter may pay such sales commissions and make such other payments to
Authorized Firms and other persons as it considers appropriate to encourage
distribution of such shares.
2. On each sale of Fund shares (excluding reinvestment of dividends and
distributions), the Fund shall pay the Principal Underwriter a sales commission
in an amount not exceeding 6.25% of the price received by the Fund therefor,
such payment to be made in the manner set forth and subject to the terms of this
Plan. The amount of the sales commission shall be established from time to time
by vote or other action of a majority of (i) those Trustees of the Trust who are
not "interested persons" (as defined in the Act) of the Trust and have no direct
or indirect financial interest in the operation of this Plan or any agreements
related to it (the "Rule 12b-1 Trustees") and (ii) all of the Trustees then in
office. The Fund shall also pay the Principal Underwriter a separate
distribution fee (calculated in accordance with Section 3), such payment to be
made in the manner set forth and subject to the terms of this Plan.
3. The sales commissions and distribution fees referred to in Section 2
shall be accrued and paid by the Fund in the following manner. The Fund shall
accrue daily an amount calculated at the rate of .75% per annum of the daily net
assets of the Fund, which net assets shall be computed in accordance with the
governing documents of the Trust and applicable votes and determinations of the
Trustees of the Trust. The daily amounts so accrued throughout the month shall
be paid to the Principal Underwriter on the last day of each month. The amount
of such daily accrual, as so calculated, shall first be applied and charged to
all unpaid sales commissions, and the balance, if any, shall then be applied and
charged to all unpaid distribution fees. No amount shall be accrued with respect
to any day on which there exist no outstanding uncovered distribution charges of
the Principal Underwriter. The amount of such uncovered distribution charges
shall be calculated daily. For purposes of this calculation, distribution
charges of the Principal Underwriter shall include (a) the aggregate of all
sales commissions which the Principal Underwriter has been paid pursuant to this
Section 3 (and pursuant to Section 3 of the Original Plan) plus all sales
commissions which it is entitled to be paid pursuant to Section 2 (and pursuant
to Section 2 of the Original Plan) since inception of the Original Plan through
and including the day next preceding the date of calculation, and (b) an amount
equal to the aggregate of all distribution fees referred to below which the
Principal Underwriter has been paid pursuant to this Section 3 (and pursuant to
Section 3 of the Original Plan) plus all such fees which it is entitled to be
paid pursuant to Section 2 (and pursuant to Section 2 of the Original Plan)
since inception of the Original Plan through and including the day next
preceding the date of calculation. From this sum (distribution charges) there
shall be subtracted (i) the aggregate amount paid or payable to the Principal
Underwriter pursuant to this Section 3 (and pursuant to Section 3 of the
Original Plan) since inception of the Original Plan through and including the
day next preceding the date of calculation and (ii) the aggregate amount of all
contingent deferred sales charges paid or payable to the Principal Underwriter
since inception of the Original Plan through and including the day next
preceding the date of calculation. If the result of such subtraction is a
positive amount, a distribution fee [computed at the rate of 1% per annum above
the prime rate (being the base rate on corporate loans posted by at least 75% of
the nation's 30 largest banks) then being reported in the Eastern Edition of The
Wall Street Journal or if such prime rate is not so reported such other rate as
may be designated from time to time by vote or other action of a majority of (i)
the Rule 12b-1 Trustees and (ii) all of the Trustees then in office] shall be
computed on such amount and added to such amount, with the resulting sum
constituting the amount of outstanding uncovered distribution charges of the
Principal Underwriter with respect to such day for all purposes of this Plan. If
the result of such subtraction is a negative amount, there shall exist no
outstanding uncovered distribution charges of the Principal Underwriter with
respect to such day and no amount shall be accrued or paid to the Principal
Underwriter with respect to such day. The aggregate amounts accrued and paid
pursuant to this Section 3 during any fiscal year of the Fund shall not exceed
.75% of the average daily net assets of the Fund for such year.
4. The Principal Underwriter shall be entitled to receive all
contingent deferred sales charges paid or payable with respect to any day on
which there exist outstanding uncovered distribution charges of the Principal
Underwriter. The Fund shall be entitled to receive all remaining contingent
deferred sales charges paid or payable by shareholders with respect to any day
on which there exist no outstanding uncovered distribution charges of the
Principal Underwriter, provided that no such sales charge which would cause the
Fund to exceed the maximum applicable cap imposed thereon by paragraph (2) of
subsection (d) of Section 26 of Article III of the NASD Rules shall be imposed.
5. The Fund may make payments of service fees to the Principal
Underwriter, Authorized Firms and other persons. The aggregate of such payments
during any fiscal year of the Fund shall not exceed .25% of the Fund's average
daily net assets for such year. Appropriate adjustment of service fee payments
shall be made whenever necessary to ensure that no such payment shall cause the
Fund to exceed the applicable maximum cap imposed thereon by paragraph (5) of
subsection (d) of Section 26 of Article III of the NASD Rules.
6. This Plan shall not take effect until after it has been approved by
both a majority of (i) the Rule 12b-1 Trustees and (ii) all of the Trustees then
in office, cast in person at a meeting (or meetings) called for the purpose of
voting on this Plan.
7. Any agreements between the Trust on behalf of the Fund and any
person relating to this Plan shall be in writing and shall not take effect until
approved in the manner provided for Trustee approval of this Plan in Section 6.
8. This Plan shall continue in effect through and including April 28,
1995 (or, if applicable, the next April 28 which follows the day on which the
Fund has become a Fund hereunder by amendment of Schedule A subsequent to April
28, 1995), and shall continue in effect indefinitely thereafter, but only for so
long as such continuance after April 28, 1995 (or, if applicable, said next
April 28) is specifically approved at least annually in the manner provided for
Trustee approval of this Plan in Section 6.
9. The persons authorized to direct the disposition of monies paid or
payable by the Fund pursuant to this Plan or any related agreement made on
behalf of the Fund shall be the President or any Vice President of the Trust.
Such persons shall provide to the Trustees of the Trust and the Trustees shall
review, at least quarterly, a written report of the amounts so expended and the
purposes for which such expenditures were made.
10. This Plan may be terminated at any time by vote of a majority of
the Rule 12b-1 Trustees, or by vote of a majority of the outstanding voting
securities of the Fund. The Principal Underwriter shall also be entitled to
receive all contingent deferred sales charges paid or payable with respect to
any day subsequent to termination of this Plan on which there exist outstanding
uncovered distribution charges of the Principal Underwriter.
11. This Plan may not be amended to increase materially the payments to
be made by the Fund as provided in Sections 2, 3 and 5 unless such amendment is
approved by a vote of at least a majority of the outstanding voting securities
of the Fund. In addition, all material amendments to this Plan shall be approved
in the manner provided for Trustee approval of this Plan in Section 6.
Additional series of the Trust will be governed hereby upon approval by the
Trustees of the Trust and amendment of Schedule A. All references in this Plan
to the "Original Plan" shall not be applicable to any such additional series of
the Trust which becomes a Fund hereunder by amendment of Schedule A subsequent
to January 27, 1995.
12. While this Plan is in effect, the selection and nomination of the
Rule 12b-1 Trustees shall be committed to the discretion of the Rule 12b-1
Trustees.
13. The Trust shall preserve copies of this Plan and any related
agreements made by the Trust on behalf of the Fund and all reports made pursuant
to Section 9, for a period of not less than six years from the date of this
Plan, or of the agreements or of such report, as the case may be, the first two
years in an easily accessible place.
14. Consistent with the limitation of shareholder, officer and Trustee
liability as set forth in the Trust's Declaration of Trust, any obligations
assumed by the Fund pursuant to this Plan shall be limited in all cases to the
assets of the Fund and no person shall seek satisfaction thereof from the
shareholders of the Trust, officers or Trustees of the Trust or any other series
of the Trust.
15. When used in this Plan, the term "service fees" shall have the same
meaning as such term has in subsections (b) and (d) of Section 26 of Article III
of the NASD Rules. When used in this Plan, the term "vote of a majority of the
outstanding voting securities of the Fund" shall mean the vote of the lesser of
(a) 67 per centum or more of the shares of the Fund present or represented by
proxy at the meeting if the holders of more than 50 per centum of the
outstanding shares of the Fund are present or represented by proxy at the
meeting, or (b) more than 50 per centum of the outstanding shares of the Fund.
16. If any provision of this Plan shall be held or made invalid by a
court decision, statute, rule or regulation of the Securities and Exchange
Commission or otherwise, the remainder of this Plan shall not be affected
thereby.
17. This Plan shall amend, replace and be substituted for the Current
Plan as of the opening of business on January 30, 1995 and this Plan shall be
effective as of such time. The outstanding uncovered distribution charges of the
Principal Underwriter calculated under the Current Plan as of the close of
business on January 29, 1995 shall be the outstanding uncovered distribution
charges of the Principal Underwriter calculated under this Plan as of the
opening of business on January 30, 1995.
IN WITNESS WHEREOF, the Trust has executed this Plan on behalf of each
Fund listed on Schedule A on the 27th day of January, 1995.
EATON VANCE MUNICIPALS TRUST II
BY /s/Thomas J. Fetter
---------------------
President
Attest:
/s/Thomas Otis
- ------------------
Secretary
<PAGE>
SCHEDULE A
EATON VANCE MUNICIPALS TRUST II
AMENDED DISTRIBUTION PLAN
DATED JANUARY 27, 1995
NAME OF FUND INCEPTION DATE OF ORIGINAL PLAN
------------ -------------------------------
EV Classic Florida Insured Tax Free Fund February 25, 1994
EV Classic Hawaii Tax Free Fund February 25, 1994
EV Classic Kansas Tax Free Fund February 25, 1994
<PAGE>
AMENDED SCHEDULE A
EATON VANCE MUNICIPALS TRUST II
AMENDED DISTRIBUTION PLAN
DATED FEBRUARY 1, 1996
NAME OF FUND INCEPTION DATE OF ORIGINAL PLAN
------------ -------------------------------
EV Classic Florida Insured Municipals Fund February 25, 1994
EXHIBIT 99.16
<TABLE>
INVESTMENT PERFORMANCE -- EV MARATHON 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 8, 1995 through January 31, 1996.
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC BEFORE DEDUCTING CDSC AFTER DEDUCTING CDSC
PERIOD DATE ON 01/31/96 ON 01/31/96 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- --------- ---------- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 08/08/95 $1,093.65 $1,043.65 9.37% NA 4.37% 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 after
deducting the CDSC *
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 after
deducting the CDSC **
P = an initial investment of $1,000
* The average annual total return not including the CDSC is calculated based on the ending investment value
before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based on the ending investment value before
deducting the CDSC.
CALCULATION OF DISTRIBUTION RATE AND EFFECTIVE DISTRIBUTION RATE
The distribution rate as of 01/31/96 was 6.24% and was calculated by annualizing the most recent dividend
distribution ($0.056424700) and dividing the result by the current maximum offering price ($10.65).
The effective distribution rate as of 01/31/96 was 6.43% and was calculated by dividing the distribtion rate by the compounding
period (366/31), and then compounding the result by adding 1, raising the sum to a power equal to the compounding period, and
subtracting 1 from the result according to the following formula:
(366/31)
EFFECTIVE DISTRIBUTION RATE = [(DISTRIBUTION RATE/(366/31))+1] - 1
</TABLE>
<PAGE>
EV MARATHON HIGH-YIELD MUNICIPALS FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 1/31/96:
Interest Income Earned: $227,627
Plus Dividend Income Earned:
--------
Equal Gross Income: $227,627
Minus Expenses: $ 32,882
--------
Equal Net Investment Income: $194,745
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 3,573,961
---------
Equal Net Investment Income Earned Per Share: $0.0545
Net Asset Value Per Share 1/31/96: $10.65
30 Day Yield*: 6.21%
Divided by One minus the Tax Rate of 31%: 0.69
------
Equal Tax Equivalent Yield **: 9.00%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0545/$10.65)+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 8, 1995 through January 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 01/31/96 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------- ----------- ----------- ----------- --------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 08/08/95 $962.46 $1,063.52 10.50% NA 6.35% 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%.
CALCULATION OF DISTRIBUTION RATE AND EFFECTIVE DISTRIBUTION RATE
The distribution rate as of 01/31/96 was 6.43% and was calculated by annualizing the most recent dividend
distribution ($0.060560112) and dividing the result by the current maximum offering price ($11.12).
The effective distribution rate as of 01/31/96 was 6.62% and was calculated by dividing the distribtion rate by the compounding
period (366/31), and then compounding the result by adding 1, raising the sum to a power equal to the compounding period, and
subtracting 1 from the result according to the following formula:
(366/31)
EFFECTIVE DISTRIBUTION RATE = [(DISTRIBUTION RATE/(366/31))+1] - 1
</TABLE>
<PAGE>
EV TRADITIONAL HIGH-YIELD MUNICIPALS FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 1/31/96:
Interest Income Earned: $167,190
Plus Dividend Income Earned:
--------
Equal Gross Income: $167,190
Minus Expenses: $ 3,363
--------
Equal Net Investment Income: $163,827
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 2,556,240
---------
Equal Net Investment Income Earned Per Share: $0.0641
Net Asset Value Per Share 1/31/96: $11.11
30 Day Yield*: 7.02%
Divided by One minus the Tax Rate of 31%: 0.69
------
Equal Tax Equivalent Yield **: 10.17%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0641/$11.11)+1)-1]
** Assuming a tax rate of 31%
<PAGE>
EXHIBIT 99.17(a)
POWER OF ATTORNEY
We, the undersigned officers and Trustees of Eaton Vance Municipals
Trust II, a Massachusetts business trust, do hereby severally constitute and
appoint H. Day Brigham, Jr., Thomas J. Fetter and Thomas Otis, or any of them,
to be true, sufficient and lawful attorneys, or attorney for each of us, to sign
for each of us, in the name of each of us in the capacities indicated below, any
and all amendments (including post-effective amendments) to the Registration
Statement on Form N-1A filed by Eaton Vance Municipals Trust II with the
Securities and Exchange Commission in respect of shares of beneficial interest
and other documents and papers relating thereto.
IN WITNESS WHEREOF we have hereunto set our hands on the dates set
opposite our respective signatures.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
President (Chief
/s/ Thomas J. Fetter Executive Officer) January 10, 1994
- -----------------------------
Thomas J. Fetter
Treasurer and Principal
/s/ James L. O'Connor Financial and Accounting January 10, 1994
- ----------------------------- Officer
James L. O'Connor
/s/ Donald R. Dwight Trustee January 10, 1994
- -----------------------------
Donald R. Dwight
/s/ James B. Hawkes Trustee January 10, 1994
- -----------------------------
James B. Hawkes
/s/ Samuel L. Hayes, III Trustee January 10, 1994
- -----------------------------
Samuel L. Hayes, III
/s/ Norton H. Reamer Trustee January 10, 1994
- -----------------------------
Norton H. Reamer
/s/ John L. Thorndike Trustee January 10, 1994
- -----------------------------
John L. Thorndike
/s/ Jack L. Treynor Trustee January 10, 1994
- -----------------------------
Jack L. Treynor
</TABLE>
<PAGE>
EXHIBIT 99.17(b)
POWER OF ATTORNEY
We, the undersigned officers and Trustees of Florida Insured Tax Free
Portfolio, Hawaii Tax Free Portfolio and Kansas Tax Free Portfolio, each a New
York trust, do hereby severally constitute and appoint H. Day Brigham, Jr.,
Thomas J. Fetter and Thomas Otis, or any of them, to be true, sufficient and
lawful attorneys, or attorney for each of us, to sign for each of us, in the
name of each of us in the capacities indicated below, any and all amendments
(including post-effective amendments) to the Registration Statement on Form N-1A
filed by Eaton Vance Municipals Trust II on behalf of any existing or proposed
series with the Securities and Exchange Commission in respect of shares of
beneficial interest and other documents and papers relating thereto.
IN WITNESS WHEREOF we have hereunto set our hands on the dates set
opposite our respective signatures.
<TABLE>
<CAPTION>
Name Capacity Date
---- -------- ----
<S> <C> <C>
/s/ Donald R. Dwight Trustee January 10, 1994
- -----------------------------
Donald R. Dwight
/s/ James B. Hawkes Trustee January 10, 1994
- -----------------------------
James B. Hawkes
/s/ Samuel L. Hayes, III Trustee January 10, 1994
- -----------------------------
Samuel L. Hayes, III
/s/ Norton H. Reamer Trustee January 10, 1994
- -----------------------------
Norton H. Reamer
/s/ John L. Thorndike Trustee January 10, 1994
- -----------------------------
John L. Thorndike
/s/ Jack L. Treynor Trustee January 10, 1994
- -----------------------------
Jack L. Treynor
/s/ Thomas J. Fetter President (Chief January 10, 1994
- ----------------------------- Executive Officer)
Thomas J. Fetter
/s/ James L. O'Connor Treasurer and January 10, 1994
- ----------------------------- Principal Financial
James L. O'Connor and Accounting
Officer
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000914529
<NAME> EATON VANCE MUNICIPALS TRUST II
<SERIES>
<NUMBER> 9
<NAME> EV MARATHON 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> 41236
<INVESTMENTS-AT-VALUE> 42076
<RECEIVABLES> 1523
<ASSETS-OTHER> 47
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 43646
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 127
<TOTAL-LIABILITIES> 127
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 42687
<SHARES-COMMON-STOCK> 4085
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (13)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 5
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 840
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