<PAGE>
[EATON VANCE LOGO]
[PHOTO OF STOCK CERTIFICATES]
ANNUAL REPORT JANUARY 31, 2000
EATON VANCE
[PHOTO OF PAUL REVERE STATUE] HIGH YIELD
MUNICIPALS
FUND
Global Management-Global Distribution
[PHOTO OF BOSTON WATER FRONT SKYLINE]
<PAGE>
EATON VANCE HIGH YIELD MUNICIPALS FUND AS OF JANUARY 31, 2000
LETTER TO SHAREHOLDERS
[PHOTO]
Thomas J. Fetter
President
Eaton Vance High Yield Municipals Fund Class A had a total return of -8.62% for
the year ended January 31, 2000. That return was the result of a decrease in net
asset value (NAV) from $11.38 on January 31, 1999 to $9.79 on January 31, 2000,
and the reinvestment of $0.645 in tax-exempt dividends.(1)
Class B shares had a total return of -9.32% for the year, the result of a
decrease in NAV from $11.33 to $9.75, and the reinvestment of $0.560 in
tax-exempt dividends.(1)
Class C shares had a total return of -9.38% for the year, the result of a
decrease in NAV from $10.49 to $9.03, and the reinvestment of $0.508 in
tax-exempt dividends distributions.(1)
Based on the Fund's most recent dividends and net asset values of $9.79,
$9.75, and $9.03, respectively, the Fund's Classes A, B and C shares had
distribution rates of 6.59%, 5.69%, and 5.59% at January 31, 2000.(2) The
distribution rates of Classes A, B and C are equivalent to taxable rates of
10.91%, 9.42% and 9.25%.(3) SEC 30-day yields for Classes A, B, and C were
6.88%, 6.45%, and 6.39%, respectively, at January 31, 2000.(4) The SEC 30-day
yields of Classes A, B and C are equivalent to taxable rates of 11.39%,
10.68% and 10.58%.(3)
In the wake of last year's bond market decline, municipal yields nearly equal
Treasury yields...
The past year proved very challenging for bond investors, as a strong economy
led to higher interest rates and a difficult environment for fixed-income
vehicles. Amid a continuing robust economy, the Federal Reserve maintained a
watchful eye for any sign of inflation. On four occasions during the past twelve
months, the Fed raised its Federal Funds rate - a key barometer of short-term
interest rates - in an attempt to reduce the potential for inflation. Rising
interest rates pushed municipal bond yields significantly higher in 1999. As a
result, the ratio of municipal bond yields to Treasury yields was very high by
historical standards, reaching around 96% of Treasury yields at January 31.
Municipal bonds finance vital public projects while providing relief to
tax-weary investors...
Through their purchases of municipal bonds, investors provide financing for a
broad array of vital public works, including those for transportation
facilities, highway construction and industrial development. These projects not
only improve our quality of life, but also promote private enterprise and create
new jobs. Adding to their unique role, municipal bonds are among the few
tax-advantaged vehicles remaining for investors. Eaton Vance High Yield
Municipals Fund will continue to provide excellent tax-exempt income
opportunities for today's tax-burdened investors.
Sincerely,
/s/ Thomas J. Fetter
Thomas J. Fetter
President
March 8, 2000
- --------------------------------------------------------------------------------
Fund Information
AS OF JANUARY 31, 2000
<TABLE>
<CAPTION>
Performance(5) Class A Class B Class C
- --------------------------------------------------------------------------------
Average Annual Total Returns (at net asset value)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
One Year -8.62% -9.32% -9.38%
Life of Fund+ 5.90 5.02 1.23
SEC Average Annual Total Returns (including sales charge or applicable CDSC)
- --------------------------------------------------------------------------------
One Year -12.98% -13.62% -10.24%
Life of Fund+ 4.76 4.65 1.23
</TABLE>
+Inception dates: Class A: 8/7/95; Class B: 8/7/95; Class C: 6/18/97
[BAR CHART]
Five Largest Sector Weightings(6)
- -----------------------------------------------------------
<TABLE>
<S> <C>
Industrial Development Revenue 20.8%
Senior Living/Life Care 11.5%
Hospitals 11.1%
Housing 8.2%
Nursing Homes 7.3%
</TABLE>
(1) These returns do not include the 4.75% maximum sales charge for the Fund's
Class A shares or the applicable contingent deferred sales charge (CDSC) for
Class B or C shares. A portion of the Fund's income may be subject to
federal income and/or alternative minimum tax. Income may be subject to
state tax. (2) The Fund's distribution rate represents actual distributions
paid to shareholders and is calculated by dividing the last distribution per
share (annualized) by the net asset value. (3) After-tax rates assume
maximum 39.6% federal income tax rate. (4) The Fund's SEC yield is
calculated by dividing the net investment income per share for the 30-day
period by the offering price at the end of the period and annualizing the
result. (5) Returns are historical and are calculated by determining the
percentage change in net asset value with all distributions reinvested. SEC
returns for Class A reflect the maximum 4.75% sales charge. SEC returns for
Class B reflect applicable CDSC based on the following schedule: 5% - 1st
and 2nd years; 4% - 3rd year; 3% - 4th year; 2% - 5th year; 1% - 6th year.
Class C 1-year SEC return reflects 1% CDSC. (6) Five largest sector
weightings account for 58.9% of the Portfolio's investments, determined by
dividing the total market value of the holdings by the total net assets of
the Portfolio. Holdings are subject to change.
Past performance is no guarantee of future results. Investment return and
principal value will fluctuate so that shares, when redeemed, may be worth
more or less than their original cost.
- --------------------------------------------------------------------------------
Federal income tax information on distributions. For federal income tax
purposes, 98.99% of the total dividends paid by the Fund from net investment
income during the year ended January 31, 2000 was designated as an
exempt-interest dividend.
- --------------------------------------------------------------------------------
2
<PAGE>
EATON VANCE HIGH YIELD MUNICIPALS FUND AS OF JANUARY 31, 2000
MANAGEMENT DISCUSSION
[PHOTO]
Thomas M. Metzold
Portfolio Manager
AN INTERVIEW WITH THOMAS M. METZOLD, PORTFOLIO MANAGER OF EATON VANCE HIGH YIELD
MUNICIPALS FUND.
Q: Tom, 1999 was a volatile and troubling year for the fixed-income markets,
including the municipal market. In your view, what contributed to the
difficult environment for the bond market?
A: The environment was very challenging for fixed-income investors in the past
year. With a continuing strong economy, the Federal Reserve raised interest
rates on four occasions. As energy prices continued to rise sharply, the Fed
indicated it would continue to closely monitor the economy for any sign of
future inflation. Actual inflation has been fairly subdued, but the Fed has
launched a pre-emptive strike against the potential for inflation further
down the road. While Fed vigilance is highly desirable over the long term, it
has created difficult conditions for the municipal market over the past year.
The high-yield segment of the municipal market was hampered by
difficulties in several major sectors. Some issuers of industrial
development bonds, most notably paper manufacturers and resource recovery
plants, have encountered difficulties. In addition, there was a widening
of quality spreads - the difference in yields between bonds of varying
quality in the health care sector. Many hospitals have felt a financial
pinch due to new Medicare reimbursement rules and the difficulties
encountered by health maintenance organizations. Thus, overall, this was a
very difficult year for the high yield municipal market.
Q: How does this market decline compare to previous municipal market downturns?
A: By any historical measure, this past year's decline was a significant
correction. But it's important to keep a long-term perspective. We've seen
severe market declines in the past, including those related to the oil
embargoes of the 1970s, runaway inflation in the early 1980s and, most
recently, a Fed-driven collapse in 1994, the most severe municipal market
decline in history. In each of those instances, the municipal market
recovered over time to post new highs.
Q: How have you positioned the Portfolio in recent months?(1)
A: The largest sector weighting at January 31 was industrial development bonds,
at 20.8% of the Portfolio. As I indicated earlier, some industry sectors
encountered problems in an economy that has distinctly favored technology.
We've made an effort to increase the Portfolio's diversification among
industrial sectors. Steel com-
- --------------------------------------------------------------------------------
Portfolio Quality Weightings(1)
- -----------------------------------------------------------
[PIE CHART]
<TABLE>
<S> <C>
Non-rated 78.4%
AAA 5.6%
AA 2.8%
A 2.6%
BBB 4.4%
BB 4.8%
B 1.4%
</TABLE>
Portfolio Overview(1)
- -----------------------------------------------------------
<TABLE>
<S> <C>
Number of Issues 150
Average Rating(2) BB+
Average Maturity 24.2 Yrs.
Effective Maturity 20.4 Yrs.
Average Call 10.9 Yrs.
Average Dollar Price $89.35
</TABLE>
(1) Because the Fund is actively managed, Portfolio Quality Weightings and
Portfolio Overview are subject to change. (2) Average Rating includes Eaton
Vance's internal ratings assigned to non-rated bonds.
- --------------------------------------------------------------------------------
Mutual fund shares are not insured by the FDIC and are not deposits or other
obligations of, or guaranteed by, any depository institution. Shares are subject
to investment risks, including possible loss of principal invested.
- --------------------------------------------------------------------------------
3
<PAGE>
EATON VANCE HIGH YIELD MUNICIPALS FUND AS OF JANUARY 31, 2000
MANAGEMENT DISCUSSION CONT'D
panies, in particular, have underperformed lately. However, the outlook for
the industry is likely to improve with the recent passage of new tariffs on
steel imports.
Air cargo facilities have also been an attractive area. The need to expand
and upgrade air cargo facilities at the nation's major airports has grown as
more manufacturing industries adopt "just-in-time" inventory management.
Modern cargo facilities are needed to ensure the timely delivery of parts and
equipment to manufacturing plants around the country. The Portfolio's air
cargo holdings included issues for Austin (TX) Cargoport Development, L.L.C.
and Airline Cargo Facilities of Kansas City.(1)
Q: What other areas have you emphasized in the Portfolio?
A: Health care-related issues were a major area of concentration. Senior living
and life care facilities represented 11.5% of the Portfolio's holdings at
January 31. In a rapidly aging population, these facilities have become
increasingly popular health care alternatives for senior citizens. The
programs are designed to provide a level of care consistent with the needs of
the individual and typically emphasize a high degree of independence.
However, with the popularity of the concept, the field has become
- --------------------------------------------------------------------------------
YOUR INVESTMENT AT WORK [ICON]
- -----------------------------------------------------------
Oregon Health Authority
Trillium Affordable Housing
Portland Habilitation Center Project
- - Portland Habilitation Center, Inc. is a non-profit organization that provides
vocational and employment programs for adults with disabilities. Its contracts
in the Portland area include workshops, custodial, landscaping and laundry
services.
- - The Center has found that a key determinant in the success of its programs is
finding stable, long-term housing for its participants. These bonds were used
to finance the purchase and renovation of seven multi-family housing
properties.
- - The non-rated bonds have a very attractive 6.75% coupon. They are an example
of the Portfolio's on-going efforts to find good opportunities in
research-intensive, private placements.
- --------------------------------------------------------------------------------
increasingly competitive. Therefore, we have focused on the leading providers
in communities with favorable demographics.
In another heath care-related area, hospitals constituted 11.1% of the
Portfolio's investments. The hospital industry has struggled to adjust to the
changes in reimbursement policies that were mandated by the Balanced Budget
Act of 1997. One result of those changes has been to reduce revenues for
health care companies. Many hospitals have been under severe cost constraints
while others have been forced to merge with competing hospitals. While the
federal government is just now making some allowances for hard-pressed
institutions, there are still many uncertainties. We have focused on what we
believe are well-positioned, fundamentally sound institutions and, in the
recent downturn, were able to purchase bonds at very attractive levels.
Q: Was there any segment of the market that held up well in this market?
A: Yes. While housing bonds declined along with the overall market, they
nonetheless fared better on a RELATIVE basis. Housing bonds tend to have
defensive characteristics which help them in a declining market. The sector
was attractive during the most recent decline, especially given the
difficulties within the IDB and health care sectors. The Portfolio's housing
bonds represented 8.2% of its investments at January 31.
(1) Comments regarding individual securities reflect management's opinion at the
time of this report. Portfolio holdings will change over time.
4
<PAGE>
EATON VANCE HIGH YIELD MUNICIPALS FUND AS OF JANUARY 31, 2000
MANAGEMENT DISCUSSION CONT'D
Q: Tom, what is your outlook for the high-yield municipal market in the coming
year?
A: I believe that the outlook has improved. While the rise in energy prices
bears watching, inflation appears to be in check. The recent federal budget
surpluses increase the likelihood of reducing the Treasury's long-term debt.
That would be a favorable development for longer-duration bonds. From a
fundamental standpoint, some of the hard-hit industries in the industrial
development bond area have already showed signs of a recovery. Finally,
supply pressures should be less intense than in recent years, when refundings
contributed to a sharp increase in municipal issuance. A better
supply-and-demand balance should help the market significantly.
This past year once again demonstrated the volatility of the stock market and
suggested that equities are increasingly sensitive to Federal Reserve policy.
As I've indicated in past reports, I think it's worthwhile periodically to
review one's asset allocations. For example, it may be prudent to shift some
equity profits to bonds for a better balanced portfolio. With tax-exempt
yields nearly equaling Treasury yields, there is remarkable value in the
municipal market and, in my view, the recent decline was an excellent buying
opportunity. Most importantly, with today's continuing high tax rates,
municipal bonds still merit strong consideration.
Comparison of Change in Value of a $10,000 Investment in Eaton Vance High Yield
Municipals Fund, Class A vs. the Lehman Brothers Municipal Bond Index*
August 31, 1995-January 31, 2000
[CHART]
<TABLE>
<CAPTION>
DATE FUND/NAV FUND/MOP LBMBI
<S> <C> <C> <C>
8/31/95 $10,000 $9,523 $10,000
9/30/95 $10,229 $9,741 $10,063
10/31/95 $10,420 $9,923 $10,209
11/30/95 $10,680 $10,171 $10,379
12/31/95 $10,824 $10,307 $10,479
1/31/96 $10,854 $10,337 $10,558
2/28/96 $10,770 $10,256 $10,487
3/31/96 $10,617 $10,111 $10,353
4/30/96 $10,524 $10,022 $10,323
5/31/96 $10,669 $10,160 $10,319
6/30/96 $10,781 $10,267 $10,432
7/31/96 $10,938 $10,416 $10,526
8/31/96 $11,021 $10,496 $10,524
9/30/96 $11,177 $10,643 $10,671
10/31/96 $11,345 $10,804 $10,791
11/30/96 $11,523 $10,974 $10,989
12/31/96 $11,554 $11,003 $10,943
1/31/97 $11,563 $11,011 $10,963
2/28/97 $11,664 $11,107 $11,064
3/31/97 $11,574 $11,022 $10,917
4/30/97 $11,658 $11,102 $11,008
5/31/97 $11,788 $11,226 $11,174
6/30/97 $12,105 $11,528 $11,293
7/31/97 $12,560 $11,961 $11,605
8/31/97 $12,513 $11,916 $11,497
9/30/97 $12,633 $12,030 $11,633
10/31/97 $12,800 $12,190 $11,708
11/30/97 $12,898 $12,283 $11,777
12/31/97 $13,159 $12,531 $11,949
1/31/98 $13,352 $12,715 $12,072
2/28/98 $13,457 $12,815 $12,076
3/31/98 $13,534 $12,889 $12,086
4/30/98 $13,493 $12,849 $12,032
5/31/98 $13,653 $13,002 $12,222
6/30/98 $13,717 $13,063 $12,270
7/31/98 $13,619 $12,969 $12,301
8/31/98 $13,816 $13,157 $12,491
9/30/98 $13,857 $13,196 $12,647
10/31/98 $13,828 $13,168 $12,647
11/30/98 $13,796 $13,138 $12,691
12/31/98 $13,791 $13,133 $12,723
1/31/99 $13,907 $13,244 $12,874
2/28/99 $13,870 $13,208 $12,818
3/31/99 $13,913 $13,249 $12,836
4/30/99 $13,966 $13,299 $12,868
5/31/99 $13,873 $13,211 $12,793
6/30/99 $13,677 $13,025 $12,609
7/31/99 $13,671 $13,018 $12,655
8/31/99 $13,463 $12,820 $12,553
9/30/99 $13,391 $12,752 $12,559
10/31/99 $13,105 $12,479 $12,423
11/30/99 $13,147 $12,520 $12,555
12/31/99 $12,922 $12,305 $12,461
1/31/00 $12,708 $12,102 $12,407
</TABLE>
Comparison of Change in Value of a $10,000 Investment in Eaton Vance High Yield
Municipals Fund, Class B vs. the Lehman Brothers Municipal Bond Index*
August 31, 1995-January 31, 2000
[CHART]
<TABLE>
<CAPTION>
DATE FUND/NAV LBMBI
<S> <C> <C>
8/31/95 $10,000 $10,000
9/30/95 $10,183 $10,063
10/31/95 $10,358 $10,209
11/30/95 $10,612 $10,379
12/31/95 $10,747 $10,479
1/31/96 $10,764 $10,558
2/28/96 $10,687 $10,487
3/31/96 $10,526 $10,353
4/30/96 $10,428 $10,323
5/31/96 $10,564 $10,319
6/30/96 $10,675 $10,432
7/31/96 $10,821 $10,526
8/31/96 $10,897 $10,524
9/30/96 $11,049 $10,671
10/31/96 $11,206 $10,791
11/30/96 $11,378 $10,989
12/31/96 $11,403 $10,943
1/31/97 $11,403 $10,963
2/28/97 $11,506 $11,064
3/31/97 $11,404 $10,917
4/30/97 $11,478 $11,008
5/31/97 $11,598 $11,174
6/30/97 $11,909 $11,293
7/31/97 $12,348 $11,605
8/31/97 $12,294 $11,497
9/30/97 $12,408 $11,633
10/31/97 $12,564 $11,708
11/30/97 $12,649 $11,777
12/31/97 $12,904 $11,949
1/31/98 $13,075 $12,072
2/28/98 $13,182 $12,076
3/31/98 $13,243 $12,086
4/30/98 $13,195 $12,032
5/31/98 $13,342 $12,222
6/30/98 $13,399 $12,270
7/31/98 $13,292 $12,301
8/31/98 $13,482 $12,491
9/30/98 $13,513 $12,647
10/31/98 $13,462 $12,647
11/30/98 $13,426 $12,691
12/31/98 $13,420 $12,723
1/31/99 $13,524 $12,874
2/28/99 $13,475 $12,818
3/31/99 $13,513 $12,836
4/30/99 $13,557 $12,868
5/31/99 $13,447 $12,793
6/30/99 $13,257 $12,609
7/31/99 $13,239 $12,655
8/31/99 $13,030 $12,553
9/30/99 $12,950 $12,559
10/31/99 $12,673 $12,423
11/30/99 $12,694 $12,555
12/31/99 $12,463 $12,461
1/31/00 $12,264 $12,407
</TABLE>
+ THIS FIGURE REFLECTS THE FUND'S MAXIMUM APPLICABLE CONTINGENT DEFERRED
SALES CHARGE DEDUCTED AT REDEMPTION AS FOLLOWS: 5% - 1ST AND 2ND YEARS; 4%
- 3RD YEAR; 3% - 4TH YEAR; 2% - 5TH YEAR; AND 1% - 6TH YEAR.
<TABLE>
<CAPTION>
Performance** Class A Class B Class C
- --------------------------------------------------------------------------------
Average Annual Total Returns (at net asset value)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
One Year -8.62% -9.32% -9.38%
Life of Fund++ 5.90 5.02 1.23
SEC Average Annual Total Returns (including sales charge or applicable CDSC)
- --------------------------------------------------------------------------------
One Year -12.98% -13.62% -10.24%
Life of Fund++ 4.76 4.65 1.23
</TABLE>
++Inception dates: Class A: 8/7/95; Class B: 8/7/95; Class C: 6/18/97
* Source: Towers Data Systems, Bethesda, MD. Investment operations commenced on
8/7/95. Index information is available only at month-end; therefore, the line
comparison begins at the next month following the commencement of the Fund's
investment operations.
The chart compares the Fund's total return with that of the Lehman Brothers
Municipal Bond Index, a broad-based, unmanaged market index of municipal
bonds. Returns are calculated by determining the percentage change in net
asset value (NAV) with all distributions reinvested. The lines on the chart
represent the total returns of $10,000 hypothetical investments in the Fund
and the Index. The Index's total return does not reflect commissions or
expenses that would have been incurred if an investor individually purchased
or sold the securities represented in the Index. It is not possible to invest
directly in an Index. An investment in the Fund's Class C shares on 6/18/97 at
net asset value would have been worth $10,324 on January 31, 2000.
**Returns are calculated by determining the percentage change in net asset value
(NAV) with all distributions reinvested. SEC returns for Class A reflect the
maximum 4.75% sales charge. SEC returns for Class B reflect applicable CDSC
based on the following schedule: 5% - 1st and 2nd years; 4% - 3rd year; 3% -
4th year; 2% - 5th year; 1% - 6th year. SEC 1-Year return for Class C reflects
1% CDSC.
Past performance is no guarantee of future results. Investment return and
principal value will fluctuate so that shares, when redeemed, may be worth
more or less than their original cost.
5
<PAGE>
EATON VANCE HIGH YIELD MUNICIPALS FUND AS OF JANUARY 31, 2000
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
AS OF JANUARY 31, 2000
<S> <C>
Assets
- ------------------------------------------------------
Investment in High Yield Municipals
Portfolio, at value
(identified cost, $373,846,904) $338,793,161
Receivable for Fund shares sold 260,712
Deferred organization expenses 18,416
- ------------------------------------------------------
TOTAL ASSETS $339,072,289
- ------------------------------------------------------
Liabilities
- ------------------------------------------------------
Payable for Fund shares redeemed $ 1,446,497
Dividends payable 849,877
Accrued expenses 118,591
- ------------------------------------------------------
TOTAL LIABILITIES $ 2,414,965
- ------------------------------------------------------
NET ASSETS $336,657,324
- ------------------------------------------------------
Sources of Net Assets
- ------------------------------------------------------
Paid-in capital $376,919,765
Accumulated net realized loss from
Portfolio (computed on the basis of
identified cost) (4,358,821)
Accumulated distributions in excess of
net investment income (849,877)
Net unrealized depreciation from
Portfolio (computed on the basis of
identified cost) (35,053,743)
- ------------------------------------------------------
TOTAL $336,657,324
- ------------------------------------------------------
Class A Shares
- ------------------------------------------------------
NET ASSETS $114,610,074
SHARES OUTSTANDING 11,704,177
NET ASSET VALUE AND REDEMPTION PRICE PER
SHARE
(net assets DIVIDED BY shares of
beneficial interest outstanding) $ 9.79
MAXIMUM OFFERING PRICE PER SHARE
(100 DIVIDED BY 95.25 of $9.79) $ 10.28
- ------------------------------------------------------
Class B Shares
- ------------------------------------------------------
NET ASSETS $204,348,091
SHARES OUTSTANDING 20,958,326
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE
(net assets DIVIDED BY shares of
beneficial interest outstanding) $ 9.75
- ------------------------------------------------------
Class C Shares
- ------------------------------------------------------
NET ASSETS $ 17,699,159
SHARES OUTSTANDING 1,959,106
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE
(net assets DIVIDED BY shares of
beneficial interest outstanding) $ 9.03
- ------------------------------------------------------
</TABLE>
On sales of $25,000 or more, the offering price of Class A shares is reduced.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
JANUARY 31, 2000
<S> <C>
Investment Income
- ------------------------------------------------------
Interest allocated from Portfolio $ 27,159,682
Expenses allocated from Portfolio (2,632,716)
- ------------------------------------------------------
NET INVESTMENT INCOME FROM PORTFOLIO $ 24,526,966
- ------------------------------------------------------
Expenses
- ------------------------------------------------------
Trustees fees and expenses $ 4,724
Distribution and service fees
Class A 227,127
Class B 2,184,616
Class C 247,032
Transfer and dividend disbursing agent
fees 383,277
Registration fees 75,487
Amortization of organization expenses 34,091
Custodian fee 30,270
Printing and postage 29,185
Legal and accounting services 19,286
Miscellaneous 28,888
- ------------------------------------------------------
TOTAL EXPENSES $ 3,263,983
- ------------------------------------------------------
NET INVESTMENT INCOME $ 21,262,983
- ------------------------------------------------------
Realized and Unrealized
Gain (Loss) from Portfolio
- ------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified
cost basis) $ (2,634,052)
Financial futures contracts (59,808)
- ------------------------------------------------------
NET REALIZED LOSS $ (2,693,860)
- ------------------------------------------------------
Change in unrealized appreciation
(depreciation) --
Investments (identified cost basis) $(54,966,051)
- ------------------------------------------------------
NET CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) $(54,966,051)
- ------------------------------------------------------
NET REALIZED AND UNREALIZED LOSS $(57,659,911)
- ------------------------------------------------------
NET DECREASE IN NET ASSETS FROM
OPERATIONS $(36,396,928)
- ------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE>
EATON VANCE HIGH YIELD MUNICIPALS FUND AS OF JANUARY 31, 2000
FINANCIAL STATEMENTS CONT'D
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
INCREASE (DECREASE) YEAR ENDED YEAR ENDED
IN NET ASSETS JANUARY 31, 2000 JANUARY 31, 1999
<S> <C> <C>
- ----------------------------------------------------------------------------
From operations --
Net investment income $ 21,262,983 $ 17,869,800
Net realized gain (loss) (2,693,860) 2,026,308
Net change in unrealized
appreciation (depreciation) (54,966,051) (7,604,686)
- ----------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS $ (36,396,928) $ 12,291,422
- ----------------------------------------------------------------------------
Distributions to shareholders --
From net investment income
Class A $ (7,866,145) $ (6,551,562)
Class B (12,139,741) (10,527,829)
Class C (1,250,912) (790,409)
In excess of net investment income
Class A (63,815) (143,542)
Class B (18,596) (422,357)
Class C -- (32,682)
- ----------------------------------------------------------------------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS $ (21,339,209) $ (18,468,381)
- ----------------------------------------------------------------------------
Transactions in shares of beneficial interest --
Proceeds from sale of shares
Class A $ 45,591,473 $ 48,904,668
Class B 54,465,067 70,941,243
Class C 13,119,026 18,783,566
Issued in reorganization of EV
Traditional and EV Classic High
Yield Municipals Funds
Class A -- 103,128,404
Class C -- 9,447,074
Net asset value of shares issued to
shareholders in payment of
distributions declared
Class A 3,299,679 2,724,257
Class B 4,079,737 3,952,176
Class C 788,006 495,975
Cost of shares redeemed
Class A (43,081,449) (24,448,279)
Class B (57,070,198) (25,227,540)
Class C (17,217,692) (3,811,012)
- ----------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM FUND
SHARE TRANSACTIONS $ 3,973,649 $ 204,890,532
- ----------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS $ (53,762,488) $ 198,713,573
- ----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
NET ASSETS JANUARY 31, 2000 JANUARY 31, 1999
<S> <C> <C>
- ----------------------------------------------------------------------------
At beginning of year $ 390,419,812 $ 191,706,239
- ----------------------------------------------------------------------------
AT END OF YEAR $ 336,657,324 $ 390,419,812
- ----------------------------------------------------------------------------
Accumulated distributions
in excess of net investment
income included in net assets
- ----------------------------------------------------------------------------
AT END OF YEAR $ (849,877) $ (934,198)
- ----------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE>
EATON VANCE HIGH YIELD MUNICIPALS FUND AS OF JANUARY 31, 2000
FINANCIAL STATEMENTS CONT'D
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A
------------------------
YEAR ENDED JANUARY 31,
------------------------
2000 1999(1)
<S> <C> <C>
- ----------------------------------------------------------------------
Net asset value -- Beginning of year $ 11.380 $ 11.570
- ----------------------------------------------------------------------
Income (loss) from operations
- ----------------------------------------------------------------------
Net investment income $ 0.640 $ 0.647
Net realized and unrealized loss (1.585) (0.176)
- ----------------------------------------------------------------------
TOTAL INCOME (LOSS) FROM OPERATIONS $ (0.945) $ 0.471
- ----------------------------------------------------------------------
Less distributions
- ----------------------------------------------------------------------
From net investment income $ (0.640) $ (0.647)
In excess of net investment income (0.005) (0.014)
- ----------------------------------------------------------------------
TOTAL DISTRIBUTIONS $ (0.645) $ (0.661)
- ----------------------------------------------------------------------
NET ASSET VALUE -- END OF YEAR $ 9.790 $ 11.380
- ----------------------------------------------------------------------
TOTAL RETURN(2) (8.62)% 4.16%
- ----------------------------------------------------------------------
Ratios/Supplemental Data
- ----------------------------------------------------------------------
Net assets, end of year (000's omitted) $114,610 $128,347
Ratios (As a percentage of average daily
net assets):
Expenses(3) 1.01% 0.95%
Expenses after custodian fee
reduction(3) 1.00% 0.94%
Net investment income 5.95% 5.60%
Portfolio Turnover of the Portfolio 58% 25%
- ----------------------------------------------------------------------
</TABLE>
(1) Net investment income per share was computed using average shares
outstanding.
(2) 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
reinvested at the net asset value on the reinvestment date. Total return
is not computed on an annualized basis.
(3) Includes the Fund's share of the Portfolio's allocated expenses.
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE>
EATON VANCE HIGH YIELD MUNICIPALS FUND AS OF JANUARY 31, 2000
FINANCIAL STATEMENTS CONT'D
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS B
---------------------------------------------------------------------
YEAR ENDED JANUARY 31,
---------------------------------------------------------------------
2000 1999(1) 1998 1997 1996(2)
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
Net asset value -- Beginning of year $ 11.330 $ 11.520 $ 10.620 $ 10.650 $ 10.000
- -------------------------------------------------------------------------------------------------------------------
Income (loss) from operations
- -------------------------------------------------------------------------------------------------------------------
Net investment income $ 0.554 $ 0.554 $ 0.594 $ 0.626 $ 0.299
Net realized and unrealized gain (loss) (1.579) (0.167) 0.916 (0.026) 0.657
- -------------------------------------------------------------------------------------------------------------------
TOTAL INCOME (LOSS) FROM OPERATIONS $ (1.025) $ 0.387 $ 1.510 $ 0.600 $ 0.956
- -------------------------------------------------------------------------------------------------------------------
Less distributions
- -------------------------------------------------------------------------------------------------------------------
From net investment income $ (0.554) $ (0.554) $ (0.594) $ (0.626) $ (0.299)
In excess of net investment income (0.001) (0.023) (0.016) (0.003) (0.007)
From net realized gain -- -- -- (0.001) --
- -------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS $ (0.555) $ (0.577) $ (0.610) $ (0.630) $ (0.306)
- -------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE -- END OF PERIOD $ 9.750 $ 11.330 $ 11.520 $ 10.620 $ 10.650
- -------------------------------------------------------------------------------------------------------------------
TOTAL RETURN(3) (9.32)% 3.44% 14.67% 5.90% 9.40%
- -------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data+
- -------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000's omitted) $204,348 $237,497 $191,706 $123,024 $ 43,520
Ratios (As a percentage of average daily
net assets):
Expenses(4) 1.77% 1.72% 1.76% 1.36% 0.88%(5)
Expenses after custodian fee
reduction(4) 1.76% 1.71% 1.74% 1.32% 0.88%(5)
Net investment income 5.18% 4.83% 5.36% 5.91% 5.86%(5)
Portfolio Turnover of the Portfolio 58% 25% 8% 41% 32%
- -------------------------------------------------------------------------------------------------------------------
+ The operating expenses of the Fund and the Portfolio may reflect a reduction of the investment adviser fee, an
allocation of expenses to the Administrator, or both. Had such actions not been taken, the ratios and net
investment income per share would have been as follows:
Ratios (As a percentage of average daily
net assets):
Expenses(4) 1.73% 1.77%(5)
Expenses after custodian fee
reduction(4) 1.69% 1.77%(5)
Net investment income 5.54% 4.97%(5)
Net investment income per share $ 0.587 $ 0.254
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Net investment income per share was computed using average shares
outstanding.
(2) For the period from the start of business, August 7, 1995, to
January 31, 1996.
(3) 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
reinvested at the net asset value on the reinvestment date. Total return
is not computed on an annualized basis.
(4) Includes the Fund's share of the Portfolio's allocated expenses.
(5) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE>
EATON VANCE HIGH YIELD MUNICIPALS FUND AS OF JANUARY 31, 2000
FINANCIAL STATEMENTS CONT'D
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS C
------------------------
YEAR ENDED JANUARY 31,
------------------------
2000 1999(1)
<S> <C> <C>
- ----------------------------------------------------------------------
Net asset value -- Beginning of year $ 10.490 $ 10.680
- ----------------------------------------------------------------------
Income (loss) from operations
- ----------------------------------------------------------------------
Net investment income $ 0.505 $ 0.506
Net realized and unrealized loss (1.460) (0.169)
- ----------------------------------------------------------------------
TOTAL INCOME (LOSS) FROM OPERATIONS $ (0.955) $ 0.337
- ----------------------------------------------------------------------
Less distributions
- ----------------------------------------------------------------------
From net investment income $ (0.505) $ (0.506)
In excess of net investment income -- (0.021)
- ----------------------------------------------------------------------
TOTAL DISTRIBUTIONS $ (0.505) $ (0.527)
- ----------------------------------------------------------------------
NET ASSET VALUE -- END OF YEAR $ 9.030 $ 10.490
- ----------------------------------------------------------------------
TOTAL RETURN(2) (9.38)% 3.22%
- ----------------------------------------------------------------------
Ratios/Supplemental Data
- ----------------------------------------------------------------------
Net assets, end of year (000's omitted) $ 17,699 $ 24,576
Ratios (As a percentage of average daily
net assets):
Expenses(3) 1.84% 1.79%
Expenses after custodian fee
reduction(3) 1.83% 1.78%
Net investment income 5.09% 4.73%
Portfolio Turnover of the Portfolio 58% 25%
- ----------------------------------------------------------------------
</TABLE>
(1) Net investment income per share was computed using average shares
outstanding.
(2) 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
reinvested at the net asset value on the reinvestment date. Total return
is not computed on an annualized basis.
(3) Includes the Fund's share of the Portfolio's allocated expenses.
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE>
EATON VANCE HIGH YIELD MUNICIPALS FUND AS OF JANUARY 31, 2000
NOTES TO FINANCIAL STATEMENTS
1 Significant Accounting Policies
- -------------------------------------------
Eaton Vance High Yield Municipals Fund (the Fund) is a 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 offers three classes of shares. Class A shares
are generally sold subject to a sales charge imposed at time of purchase.
Class B and Class C shares are sold at net asset value and are subject to a
declining contingent deferred sales charge (see Note 6). Each class
represents a pro-rata interest in the Fund, but votes separately on
class-specific matters and (as noted below) is subject to different expenses.
Realized and unrealized gains and losses are allocated daily to each class of
shares based on the relative net assets of each class to the total net assets
of the Fund. Net investment income, other than class-specific expenses, is
allocated daily to each class of shares based upon the ratio of the value of
each classes' paid shares to the total value of all paid shares. Each class
of shares differs in its distribution plan and certain other class-specific
expenses. 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 (99.9% at January 31, 2000). 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
in Note 1A 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 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 (if any) and
tax-exempt income, including any net realized gain on investments.
Accordingly, no provision for federal income or excise tax is necessary. At
January 31, 2000, the Fund, for federal income tax purposes, had a capital
loss carryover of $4,114,673, which will reduce the Fund's taxable income
arising from future net realized gain on investments, if any, to the extent
permitted by the Internal Revenue Code, and thus will reduce the amount of
distributions to shareholders which would otherwise be necessary to relieve
the Fund of any liability for federal income or excise tax. A portion of such
capital loss carryovers were acquired through the Fund Reorganization (see
Note 8) and may be subject to certain limitations. Such capital loss
carryover will expire January 31, 2008 ($2,693,858) and January 31, 2006
($1,420,815). 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 Expense Reduction -- Investors Bank & Trust Company (IBT) serves as custodian
to the Fund and the Portfolio. Pursuant to the respective custodian
agreements, IBT receives a fee reduced by credits which are determined based
on the average daily cash balances the Fund or the Portfolio maintains with
IBT. All significant credit balances used to reduce the Fund's custodian fees
are reported as a reduction of total expenses in the Statement of Operations.
F Use of Estimates -- The preparation of the 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 income and expense during the reporting period. Actual results could
differ from those estimates.
G Other -- Investment transactions are accounted for on a trade-date basis.
11
<PAGE>
EATON VANCE HIGH YIELD MUNICIPALS FUND AS OF JANUARY 31, 2000
NOTES TO FINANCIAL STATEMENTS CONT'D
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 net realized gain on investments. Permanent differences
between book and tax accounting relating to distributions are reclassified to
paid-in capital.
3 Shares of Beneficial Interest
- -------------------------------------------
The Fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without par
value). Such shares may be issued in a number of different series (such as
the Fund) and classes. Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
------------------------
CLASS A 2000 1999
<S> <C> <C>
------------------------------------------------------------------
Sales 4,219,333 4,249,799
Issued to shareholders electing to
receive payments of distributions in
Fund shares 308,513 236,663
Redemptions (4,101,777) (2,125,063)
Issued to EV Traditional High Yield
Municipals Fund shareholders -- 8,916,709
------------------------------------------------------------------
NET INCREASE 426,069 11,278,108
------------------------------------------------------------------
<CAPTION>
YEAR ENDED JANUARY 31,
------------------------
CLASS B 2000 1999
<S> <C> <C>
------------------------------------------------------------------
Sales 5,062,706 6,184,460
Issued to shareholders electing to
receive payments of distributions in
Fund shares 381,157 344,632
Redemptions (5,455,288) (2,202,194)
------------------------------------------------------------------
NET INCREASE (DECREASE) (11,425) 4,326,898
------------------------------------------------------------------
<CAPTION>
YEAR ENDED JANUARY 31,
------------------------
CLASS C 2000 1999
<S> <C> <C>
------------------------------------------------------------------
Sales 1,306,680 1,770,160
Issued to shareholders electing to
receive payments of distributions in
Fund shares 79,526 46,821
Redemptions (1,768,824) (360,167)
Issued to EV Classic High Yield
Municipals Fund shareholders -- 884,910
------------------------------------------------------------------
NET INCREASE (DECREASE) (382,618) 2,341,724
------------------------------------------------------------------
</TABLE>
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). 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 the
investment advisor fee earned by BMR. Certain officers and Trustees of the
Fund and of the Portfolio are officers of EVM and BMR. Eaton Vance
Distributors, Inc. (EVD), a subsidiary of EVM and the Fund's principal
underwriter, received $36,557 as its portion of the sales charge on sales of
Class A shares for the year ended January 31, 2000.
5 Distribution and Service Plans
- -------------------------------------------
The Fund has in effect distribution plans for Class B Shares (Class B Plan)
and Class C Shares (Class C Plan) pursuant to Rule 12b-1 under the Investment
Company Act of 1940 and a service plan for Class A shares (Class A Plan)
(collectively, the Plans). The Class B and Class C Plans require the Fund to
pay amounts equal to 1/365 of 0.75% of the Fund's average daily net assets
attributable to Class B and Class C shares 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% and 6.25% of
the aggregate amount received by the Fund for the Class B and Class C shares
sold, respectively, plus (ii) interest 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
by each respective class. The Fund paid or accrued $1,758,652
12
<PAGE>
EATON VANCE HIGH YIELD MUNICIPALS FUND AS OF JANUARY 31, 2000
NOTES TO FINANCIAL STATEMENTS CONT'D
and $185,274 for Class B and Class C shares, respectively, to EVD for the
year ended January 31, 2000, representing 0.75% and 0.75% of the average
daily net assets for Class B and Class C shares, respectively. At
January 31, 2000, the amount of Uncovered Distribution Charges of EVD
calculated under the Plan was approximately $9,152,000 and $2,176,000 for
Class B and Class C shares, respectively.
The Plans authorize the Fund to make payments of service fees to EVD,
investment dealers and other persons in amounts not exceeding 0.25% of the
Fund's average daily net assets attributable to Class A, Class B, and
Class C shares for each fiscal year. The Trustees initially implemented the
Plans by authorizing the Fund to make quarterly payments of service fees to
EVD and investment dealers in amounts equal to 0.25% per annum of the Fund's
average daily net assets attributable to Class A and Class B shares based on
the value of Fund shares sold by such persons and remaining outstanding for
at least one year. On October 4, 1999, the Trustees approved service fee
payments equal to 0.25% per annum of the Fund's average daily net assets
attributable to Class A and Class B shares for any fiscal year on shares of
the Fund sold on or after October 12, 1999. The Class C Plan permits the Fund
to make monthly payments of service fees in amounts not expected to exceed
0.25% of the Fund's average daily net assets attributable to Class C shares
for any fiscal year. Service fee payments will be 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 EVD and, as such are not subject to automatic discontinuance where there
are no outstanding Uncovered Distribution Charges of EVD. Service fee
payments for the year January 31, 2000 amounted to $227,127, $425,964, and
$61,758 for Class A, Class B, and Class C shares, respectively.
6 Contingent Deferred Sales Charge
- -------------------------------------------
A contingent deferred sales charge (CDSC) generally is imposed on redemptions
of Class B shares made within six years of purchase and on redemptions of
Class C shares made within one year of purchase. Generally, the CDSC is based
upon the lower of the 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. Class B CDSC is imposed at declining rates
that begin at 5% in the case of redemptions in the first and second year
after purchase, declining one percentage point each subsequent year. Class C
shares will be subject to a 1% CDSC if redeemed within one year of purchase.
No CDSC is levied on shares which have been sold to EVM or its affiliates or
to their respective employees or clients and may be waived under certain
other limited conditions. CDSC charges are paid to EVD to reduce the amount
of Uncovered Distribution Charges calculated under the Fund's Distribution
Plan (see Note 5). CDSC charges received when no Uncovered Distribution
Charges exist will be credited to the Fund. EVD received approximately
$930,000 and $29,000 of CDSC paid by shareholders for Class B shares and
Class C shares, respectively, for the year ended January 31, 2000.
7 Investment Transactions
- -------------------------------------------
Increases and decreases in the Fund's investment in the Portfolio for the
year ended January 31, 2000 aggregated $114,068,297 and $132,907,536,
respectively.
8 Transfer of Net Assets
- -------------------------------------------
On February 1, 1998, EV Marathon High Yield Municipals Fund acquired the net
assets of the EV Traditional High Yield Municipals Fund and EV Classic High
Yield Municipals Fund pursuant to an Agreement and Plan of Reorganization
dated June 23, 1997. In accordance with the agreement, EV Marathon High Yield
Municipals Fund, at the closing, issued 8,916,709 Class A shares and 884,910
Class C shares of the Fund having an aggregate value of $103,128,404 and
$9,447,074, respectively. As a result, the Fund issued one Class A share and
one Class C share for each share of EV Traditional High Yield Municipals Fund
and EV Classic High Yield Municipals Fund, respectively. The transaction was
structured for tax purposes to qualify as a tax free reorganization under the
Internal Revenue Code. The EV Traditional High Yield Municipals Fund's and EV
Classic High Yield Municipals Fund's net assets at February 1, 1998 were
$103,128,404 and $9,447,074, respectively, including $9,165,643 and $297,279
of unrealized appreciation. Directly after the merger, the combined net
assets of the Eaton Vance High Yield Municipals Fund (formerly EV Marathon
High Yield Municipals Fund) were $304,281,717 with a net asset value of
$11.57, $11.52 and $10.68 for Class A, Class B and Class C shares,
respectively.
13
<PAGE>
EATON VANCE HIGH YIELD MUNICIPALS FUND AS OF JANUARY 31, 2000
INDEPENDENT AUDITORS' REPORT
TO THE TRUSTEES AND SHAREHOLDERS
OF EATON VANCE MUNICIPALS TRUST II:
- ---------------------------------------------
We have audited the accompanying statement of assets and liabilities of Eaton
Vance High Yield Municipals Fund (one of the series of Eaton Vance Municipals
Trust II) as of January 31, 2000, the related statement of operations for the
year then ended, the statements of changes in net assets for the years ended
January 31, 2000 and 1999 and the financial highlights for the four years ended
January 31, 2000 and for the period from the start of business, August 7, 1995,
to January 31, 1996. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Eaton Vance High
Yield Municipals Fund at January 31, 2000, the results of its operations, the
changes in its net assets and its financial highlights for the respective stated
periods in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
March 3, 2000
14
<PAGE>
HIGH YIELD MUNICIPALS PORTFOLIO AS OF JANUARY 31, 2000
PORTFOLIO OF INVESTMENTS
TAX-EXEMPT INVESTMENTS -- 99.3%
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
<C> <S> <C>
- -----------------------------------------------------------------------------
Assisted Living -- 5.2%
- -----------------------------------------------------------------------------
$ 2,500 Arizona Health Facilities Authority,
(Care Institute, Inc. - Mesa),
7.625%, 1/1/26 $ 2,332,125
1,000 Chester, PA, IDA, (Senior Life-Choice of
Kimberton), (AMT), 8.50%, 9/1/25 1,063,330
1,970 Chester, PA, IDA, (Senior Life-Choice of
Paoli L.P.), 8.05%, 1/1/24 2,053,607
1,585 Delaware, PA, IDA, (Glen Riddle), (AMT),
8.625%, 9/1/25 1,697,614
1,000 Glen Cove, NY, IDA, (The Regency at Glen
Cove), 0.00%, 1/1/13 292,580
1,000 Glen Cove, NY, IDA, (The Regency at Glen
Cove), 0.00%, 7/1/13 277,920
1,000 Glen Cove, NY, IDA, (The Regency at Glen
Cove), 0.00%, 1/1/14 263,910
1,000 Glen Cove, NY, IDA, (The Regency at Glen
Cove), 0.00%, 7/1/14 250,820
1,000 Glen Cove, NY, IDA, (The Regency at Glen
Cove), 0.00%, 1/1/15 238,220
1,000 Glen Cove, NY, IDA, (The Regency at Glen
Cove), 0.00%, 7/1/15 226,340
1,000 Glen Cove, NY, IDA, (The Regency at Glen
Cove), 0.00%, 1/1/16 215,040
1,000 Glen Cove, NY, IDA, (The Regency at Glen
Cove), 0.00%, 7/1/16 204,260
1,000 Glen Cove, NY, IDA, (The Regency at Glen
Cove), 0.00%, 1/1/17 193,960
1,000 Glen Cove, NY, IDA, (The Regency at Glen
Cove), 0.00%, 7/1/17 184,290
1,000 Glen Cove, NY, IDA, (The Regency at Glen
Cove), 0.00%, 1/1/18 175,080
1,000 Glen Cove, NY, IDA, (The Regency at Glen
Cove), 0.00%, 7/1/18 166,300
1,000 Glen Cove, NY, IDA, (The Regency at Glen
Cove), 0.00%, 1/1/19 158,030
1,000 Glen Cove, NY, IDA, (The Regency at Glen
Cove), 0.00%, 7/1/19 150,120
3,740 Illinois Development Finance Authority,
(Care Institute, Inc.), 7.80%, 6/1/25 3,810,948
3,500 New Jersey EDA, (Chelsea at East
Brunswick), (AMT), 8.25%, 10/1/20 3,580,710
- -----------------------------------------------------------------------------
$ 17,535,204
- -----------------------------------------------------------------------------
Certificates of Participation -- 0.5%
- -----------------------------------------------------------------------------
$ 2,500 Cape Canaveral, FL, Hospital District,
5.25%, 1/1/28 $ 1,800,875
- -----------------------------------------------------------------------------
$ 1,800,875
- -----------------------------------------------------------------------------
<CAPTION>
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
<C> <S> <C>
- -----------------------------------------------------------------------------
Cogeneration -- 4.4%
- -----------------------------------------------------------------------------
$ 7,000 Maryland Energy Cogeneration, (AES
Warrior Run), (AMT), 7.40%, 9/1/19 $ 7,153,720
3,500 Palm Beach County, FL, (Okeelanta
Power), (AMT), 6.85%, 2/15/21(1) 1,960,000
4,000 Palm Beach County, FL, (Osceola Power),
(AMT), 6.95%, 1/1/22(1) 2,200,000
1,000 Pennsylvania EDA, (Northampton
Generating), Junior Liens, (AMT),
6.875%, 1/1/11 995,150
1,500 Robbins, Cook County, IL, (Robbins
Resource Recovery Partners, L.P.),
8.375%, 10/15/10(2) 780,000
3,500 Robbins, IL, Resource Recovery, (AMT),
8.375%, 10/15/16(2) 1,820,000
- -----------------------------------------------------------------------------
$ 14,908,870
- -----------------------------------------------------------------------------
Education -- 0.6%
- -----------------------------------------------------------------------------
$ 2,000 New Hampshire HEFA, (Colby-Sawyer
College), 7.50%, 6/1/26 $ 2,062,680
- -----------------------------------------------------------------------------
$ 2,062,680
- -----------------------------------------------------------------------------
Electric Utilities -- 2.6%
- -----------------------------------------------------------------------------
$ 1,250 Connecticut Development Authority,
(Connecticut Light and Power), Variable
Rate, 9/1/28(3)(4) $ 939,500
2,500 Connecticut Development Authority,
(Western Mass Electric), Variable Rate,
9/1/28(3)(4) 1,784,975
3,500 Intermountain Power Agency, UT,
Variable Rate, 7/1/11(3) 3,377,500
4,000 Salt River, AZ, Agricultural Improvement
and Power District Electric, Residual
Certificates,
Variable Rate, 1/1/25(3)(4) 2,661,360
- -----------------------------------------------------------------------------
$ 8,763,335
- -----------------------------------------------------------------------------
Escrowed / Prerefunded -- 2.4%
- -----------------------------------------------------------------------------
$12,115 Colorado Health Facilities Authority,
(Liberty Heights),
Escrowed to Maturity, 0.00%, 7/15/24 $ 2,297,731
11,195 Colorado HFA, (Liberty Heights),
Escrowed to Maturity, 0.00%, 7/15/22 2,432,450
10,000 Dawson Ridge, CO, Metropolitan District
#1, Escrowed to Maturity,
0.00%, 10/1/22 2,086,300
3,500 Dawson Ridge, CO, Metropolitan District
#1, Escrowed to Maturity,
0.00%, 10/1/22 730,205
3,295 Illinois Development Finance Authority,
(Regency Park), Escrowed to Maturity,
0.00%, 7/15/25 539,688
- -----------------------------------------------------------------------------
$ 8,086,374
- -----------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
15
<PAGE>
HIGH YIELD MUNICIPALS PORTFOLIO AS OF JANUARY 31, 2000
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
<C> <S> <C>
- -----------------------------------------------------------------------------
Gas Utilities -- 0.6%
- -----------------------------------------------------------------------------
$ 2,000 Southern California Public Power
Authority, Variable Rate, 7/1/12(3) $ 2,082,500
- -----------------------------------------------------------------------------
$ 2,082,500
- -----------------------------------------------------------------------------
General Obligations -- 1.6%
- -----------------------------------------------------------------------------
$ 2,290 Bell Mountain Ranch, CO, Metropolitan
District, 6.625%, 11/15/25 $ 2,052,252
3,450 Bell Mountain Ranch, CO, Metropolitan
District, 7.375%, 11/15/19 3,365,475
- -----------------------------------------------------------------------------
$ 5,417,727
- -----------------------------------------------------------------------------
Health Care-Miscellaneous -- 7.1%
- -----------------------------------------------------------------------------
$ 2,845 Illinois Development Finance Authority,
(Community Rehabilitation Providers),
5.60%, 7/1/19 $ 2,329,145
5,000 Muni Mae Tax Revenue Exempt Bond, (AMT),
Variable Rate, 6/30/09 4,887,400
1,965 Tax Revenue Exempt Securities Trust,
Community Health Provider, (Pooled Loan
Program Various States Certificates),
8.81%, 12/1/36 2,098,656
2,535 Tax Revenue Exempt Securities Trust,
Community Health Provider, (Pooled Loan
Program Various States Trust
Certificates), 6.75%, 12/1/36 2,461,981
1,307 Tax Revenue Exempt Securities Trust,
Community Health Provider, (Pooled Loan
Program Various States Trust
Certificates), 7.00%, 12/1/36 1,301,782
1,081 Tax Revenue Exempt Securities Trust,
Community Health Provider, (Pooled Loan
Program Various States Trust
Certificates), 7.00%, 12/1/36 1,076,662
2,358 Tax Revenue Exempt Securities Trust,
Community Health Provider, (Pooled Loan
Program Various States Trust
Certificates), 7.75%, 12/1/36 2,326,346
1,983 Tax Revenue Exempt Securities Trust,
Community Health Provider, (Pooled Loan
Program Various States Trust
Certificates), 7.90%, 12/1/36 1,976,184
372 Tax Revenue Exempt Securities Trust,
Community Health Provider, (Pooled Loan
Program Various States Trust
Certificates), 8.25%, 12/1/36 382,130
845 Tax Revenue Exempt Securities Trust,
Community Health Provider, (Pooled Loan
Program Various States Trust
Certificates), 8.375%, 12/1/36 877,137
2,341 Tax Revenue Exempt Securities Trust,
Community Health Provider, (Pooled Loan
Program Various States Trust
Certificates), 8.50%, 12/1/36 2,448,145
983 Tax Revenue Exempt Securities Trust,
Community Health Provider, (Pooled Loan
Program Various States Trust
Certificates), 8.70%, 12/1/36 1,042,420
<CAPTION>
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
<C> <S> <C>
- -----------------------------------------------------------------------------
Health Care-Miscellaneous (continued)
- -----------------------------------------------------------------------------
$ 590 Tax Revenue Exempt Securities Trust,
Community Health Provider, (Pooled Loan
Program Various States Trust
Certificates), 8.875%, 12/1/36 $ 627,256
- -----------------------------------------------------------------------------
$ 23,835,244
- -----------------------------------------------------------------------------
Hospital -- 11.1%
- -----------------------------------------------------------------------------
$ 2,500 California Health Facilities Financing
Authority, (Cedars-Sinai Medical
Center), Variable Rate, 12/1/34(3)(4) $ 2,274,325
2,250 Chautauqua County, NY, IDA, (Women's
Christian Association), 6.40%, 11/15/29 1,915,762
10,000 Colorado Health Facilities Authority,
(Rocky Mountain Adventist),
6.625%, 2/1/22 8,469,500
3,685 Forsyth County, GA, Hospital Authority
Revenue, (Georgia Baptist Health Care
System), 6.25%, 10/1/18 3,177,833
3,700 Forsyth County, GA, Hospital Authority
Revenue, (Georgia Baptist Health Care
System), 6.375%, 10/1/28 3,126,537
1,000 Halifax Hospital Medical Center,
7.25%, 10/1/24 923,650
2,500 Hidalgo County, TX, (Health Services
Corp., Mission Hospital, Inc.),
6.875%, 8/15/26 2,383,075
2,825 Louisiana Public Facilities Authority,
(General Health Systems),
6.80%, 11/1/16 2,783,020
400 Monroeville, PA, Hospital Authority,
(Forbes Health System), 5.75%, 10/1/05 376,876
1,000 Monroeville, PA, Hospital Authority,
(Forbes Health System), 6.25%, 10/1/15 894,250
2,000 New Hampshire HEFA, (Littleton Hospital
Assn.), 6.00%, 5/1/28 1,604,640
1,500 New Jersey Health Care Facilities
Financing Authority, (Trinitas Hospital
Obligated Group), 7.50%, 7/1/30 1,459,665
2,205 Philadelphia, PA, HEFA, (Graduate Health
System), 6.625%, 7/1/21(1) 796,556
3,170 Philadelphia, PA, HEFA, (Graduate Health
System), 7.00%, 7/1/05(1) 1,145,162
875 Prince George's County, MD, (Greater
Southeast Healthcare System),
6.375%, 1/1/13(1) 360,937
5,900 Prince George's County, MD, (Greater
Southeast Healthcare System),
6.375%, 1/1/23(1) 2,433,750
1,785 San Gorgonio, CA, (Memorial Health Care
District), 5.75%, 5/1/20 1,450,919
500 Tomball Hospital Authority, (Tomball
Regional Hospital), 6.00%, 7/1/29 411,930
1,500 Wells County, IN, (Caylor-Nickel Medical
Center), 8.75%, 4/15/12 1,698,420
- -----------------------------------------------------------------------------
$ 37,686,807
- -----------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
16
<PAGE>
HIGH YIELD MUNICIPALS PORTFOLIO AS OF JANUARY 31, 2000
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
<C> <S> <C>
- -----------------------------------------------------------------------------
Housing -- 8.2%
- -----------------------------------------------------------------------------
$ 1,680 Atlanta, GA, Urban Residential Finance
Authority, (John Hope), 7.25%, 6/1/07 $ 1,613,522
4,000 Charter Mac Equity, TN, (AMT),
6.625%, 6/30/09 3,868,600
2,405 Cuyahoga County, OH, (Rolling Hills
Apartment), (AMT), 8.00%, 1/1/28 2,262,552
500 Jefferson County, MO, IDA, Multifamily
Revenue, (Riverview Bend Apartments),
(AMT), 7.125%, 11/1/29 483,185
1,900 Jefferson County, MO, IDA, Multifamily,
(Riverview Bend Apartments), (AMT),
6.75%, 11/1/29 1,833,728
1,000 Lake Creek, CO, Affordable Housing
Corp., Multifamily, 7.00%, 12/1/23 918,880
3,695 Lucas County, OH, (Country Creek),
(AMT), 8.00%, 7/1/26 3,400,213
4,305 Maricopa County, AZ, IDA, (National
Health Facilities II), 6.375%, 1/1/19 3,932,531
1,500 Maricopa County, AZ, IDA, (National
Health Facilities II), 6.625%, 7/1/33 1,353,240
2,400 Maricopa County, AZ, IDA, (National
Health Facilities), 8.00%, 1/1/34 2,129,184
1,680 Minneapolis, MN, Community Development
Agengy, Multifamily Housing, (Lindsay
Brothers), 6.60%, 12/1/18 1,606,685
3,400 Oregon Health Authority, (Trillium
Affordable Housing), 6.75%, 8/15/29 3,072,954
1,500 Oregon Health Authority, (Trillium
Affordable Housing), (AMT),
6.75%, 2/15/29 1,355,715
- -----------------------------------------------------------------------------
$ 27,830,989
- -----------------------------------------------------------------------------
Industrial Development Revenue -- 20.8%
- -----------------------------------------------------------------------------
$ 2,440 Abia Development Corp., TX, (Austin
Cargoport Development), (AMT),
6.50%, 10/1/24 $ 2,224,353
2,815 Abia Development Corp., TX, (Austin
Cargoport Development, L.L.C.), (AMT),
9.25%, 10/1/21 2,958,537
2,000 Camden County, NJ, (Holt Hauling),
(AMT), 9.875%, 1/1/21 2,270,460
3,900 Carbon County, UT, (Laidlaw
Environmental Services Inc.), (AMT),
7.45%, 7/1/17 3,880,851
4,000 Charleston County, SC, IDA, (Zeigler
Coal Holding), 6.95%, 8/10/28 3,285,720
5,000 Clark County, NV, (Nevada Power), RITES,
(AMT), Variable Rate, 10/1/30(3) 3,485,900
1,390 Florence County, SC, (Stone Container
Co.), 7.375%, 2/1/07 1,395,282
2,700 Hancock County, KY, (Southwire Co.),
(AMT), 7.75%, 7/1/26 2,751,408
3,715 Iowa Finance Authority, (Southbridge
Mall), 6.375%, 12/1/13 3,510,266
<CAPTION>
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
<C> <S> <C>
- -----------------------------------------------------------------------------
Industrial Development Revenue (continued)
- -----------------------------------------------------------------------------
$ 3,880 Kansas City, MO, IDA, (Airline Cargo
Facilities), (AMT), 8.50%, 1/1/17 $ 4,123,936
2,970 Kimball, NE, EDA, (Clean Harbors, Inc.),
10.75%, 9/1/26 3,056,457
2,730 Maryland EDA, (AFCO Cargo),
6.50%, 7/1/24 2,523,312
1,700 Michigan Strategic Fund, (Crown Paper),
(AMT), 6.50%, 8/1/21 1,334,500
3,500 Michigan Strategic Fund, (S.D. Warren
Co.), (AMT), 7.375%, 1/15/22 3,607,030
1,095 New Albany, IN, IDA, (K-Mart Co.),
7.40%, 6/1/06 1,118,871
2,750 New Hampshire Business Finance
Authority, (Crown Paper Co.), (AMT),
7.875%, 7/1/26 2,377,182
2,500 New Jersey EDA, (Continental Airlines),
(AMT), Variable Rate, 9/15/29(3)(4) 1,898,925
500 New Jersey EDA, (Holt Hauling),
8.95%, 12/15/18 531,420
4,000 New Jersey EDA, (Holt Hauling), (AMT),
7.90%, 3/1/27 4,239,720
4,000 Ohio Solid Waste Revenue, (Republic
Engineered Steels, Inc.), (AMT),
9.00%, 6/1/21 2,001,120
2,000 Perry County, KY, (TJ International,
Inc.), (AMT), 6.55%, 4/15/27 1,966,100
500 Philadelphia, PA, IDA, (Refrigerated
Enterprises), (AMT), 9.05%, 12/1/19 535,945
3,500 Riverdale Village, IL, (ACME Metals,
Inc.), (AMT), 7.90%, 4/1/24(2) 3,001,250
3,345 Riverdale Village, IL, (ACME Metals,
Inc.), (AMT), 7.95%, 4/1/25(2) 2,868,337
3,148 Santa Fe, NM, (1st Interstate Plaza),
8.00%, 7/1/13 3,221,817
3,300 Santa Fe, NM, (Crow Hobbs),
8.50%, 9/1/16 3,455,034
3,000 Skowhegan, ME, (S.D. Warren Co.), (AMT),
6.65%, 10/15/15 2,876,280
- -----------------------------------------------------------------------------
$ 70,500,013
- -----------------------------------------------------------------------------
Insured-Hospital -- 0.6%
- -----------------------------------------------------------------------------
$ 2,415 California Statewide Communities
Development Authority, (Sutter Health)
Residual Certificates, (FSA),
Variable Rate, 8/15/27(4)(5) $ 2,052,678
- -----------------------------------------------------------------------------
$ 2,052,678
- -----------------------------------------------------------------------------
Insured-Lease Revenue / Certificates of Participation -- 0.3%
- -----------------------------------------------------------------------------
$ 1,500 San Mateo County, CA, Joint Powers
Financing Authority, Residual
Certificates, (FSA),
Variable Rate, 7/15/29(3)(4) $ 1,013,610
- -----------------------------------------------------------------------------
$ 1,013,610
- -----------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
17
<PAGE>
HIGH YIELD MUNICIPALS PORTFOLIO AS OF JANUARY 31, 2000
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
<C> <S> <C>
- -----------------------------------------------------------------------------
Insured-Special Tax Revenue -- 0.4%
- -----------------------------------------------------------------------------
$ 2,500 Pennsylvania Turnpike Commission Oil
Franchise, (AMBAC),
Variable Rate, 12/1/27(3)(4) $ 1,441,850
- -----------------------------------------------------------------------------
$ 1,441,850
- -----------------------------------------------------------------------------
Lease Revenue / Certificates of Participation -- 1.2%
- -----------------------------------------------------------------------------
$ 4,000 Hardeman County, TN, (Correctional
Facilities Corp.), 7.75%, 8/1/17 $ 4,166,240
- -----------------------------------------------------------------------------
$ 4,166,240
- -----------------------------------------------------------------------------
Miscellaneous -- 2.9%
- -----------------------------------------------------------------------------
$ 3,755 Atlanta, GA, Downtown Development
Authority, (Central Atlanta Hospitality
Childcare, Inc.), 8.00%, 1/1/26 $ 3,864,083
3,000 Colorado River Indian Tribe,
6.25%, 8/1/04 2,913,510
1,320 Pittsfield Township, MI, (Arbor
Hospice), 8.125%, 8/15/17 1,322,614
1,900 Union, OR, Facility Revenue, (Buffalo
Peak Golf Club), 6.75%, 7/1/24 1,807,850
- -----------------------------------------------------------------------------
$ 9,908,057
- -----------------------------------------------------------------------------
Nursing Home -- 7.3%
- -----------------------------------------------------------------------------
$ 3,410 Clovis, NM, IDR, (Retirement Ranches,
Inc.), 7.75%, 4/1/19 $ 3,413,103
1,100 Colorado HFA, Residential Care
Facilities, (Volunteers of America),
6.00%, 7/1/29 897,424
2,000 Grove City, PA, Area Hospital Health
Facilities Authority, (Grove Manor),
6.625%, 8/15/29 1,718,900
2,175 Kansas City, MO, IDA, (Beverly
Enterprises, Inc.), 8.00%, 12/1/02 2,218,543
2,500 Massachusetts IFA, (Age Institute of
Massachusetts), 8.05%, 11/1/25 2,587,575
3,200 Minneapolis, MN, (Walker Methodist
Senior Services), 6.00%, 11/15/28 2,573,312
1,200 Mississippi Business Finance Corp.,
(Magnolia Healthcare), 7.99%, 7/1/25 1,188,288
7,500 Tarrant County, TX, Health Facilities,
(3927 Foundation), 10.25%, 9/1/19 6,586,425
3,415 Westmoreland, PA, (Highland Health
Systems, Inc.), 9.25%, 6/1/22 3,652,616
- -----------------------------------------------------------------------------
$ 24,836,186
- -----------------------------------------------------------------------------
Pooled Loans -- 1.1%
- -----------------------------------------------------------------------------
$ 3,500 Osceola County, FL, IDA, Community
Pooled Loan-93, 7.75%, 7/1/17 $ 3,565,975
- -----------------------------------------------------------------------------
$ 3,565,975
- -----------------------------------------------------------------------------
<CAPTION>
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
<C> <S> <C>
- -----------------------------------------------------------------------------
Senior Living / Life Care -- 11.5%
- -----------------------------------------------------------------------------
$ 8,000 Albuquerque, NM, Retirement Facilities,
(La Vida Liena Retirement Center),
6.60%, 12/15/28 $ 6,851,040
2,300 Colorado HFA, Revenue, (Volunteers of
America), 5.75%, 7/1/20 1,869,187
3,600 Colorado HFA, Revenue, (Volunteers of
America), 5.875%, 7/1/28 2,891,232
3,500 Delaware County, PA, (White Horse
Village), 7.30%, 7/1/14 3,470,495
7,500 Kansas City, MO, IDA, (Kingswood United
Methodist Manor), 5.875%, 11/15/29 6,010,650
3,545 Louisiana HFA, (HCC Assisted Living
Group 1), (AMT), 9.00%, 3/1/25 3,717,252
5,355 Massachusetts IFA, (Forge Hill), (AMT),
6.75%, 4/1/30 4,427,568
5,240 North Miami, FL, Health Care Facilities,
(Imperial Club), 8.00%, 1/1/33 4,594,642
2,000 Ohio HFA, Retirement Rental Housing,
(Encore Retirement Partners),
6.75%, 3/1/19 1,725,040
3,790 Wisconsin HEFA, (Wisconsin Illinois
Senior Housing), 7.00%, 8/1/29 3,488,695
- -----------------------------------------------------------------------------
$ 39,045,801
- -----------------------------------------------------------------------------
Solid Waste -- 1.0%
- -----------------------------------------------------------------------------
$ 3,400 Morgantown, KY, (IMCO Recycling, Inc.),
7.45%, 5/1/22 $ 3,374,602
- -----------------------------------------------------------------------------
$ 3,374,602
- -----------------------------------------------------------------------------
Special Tax Revenue -- 2.7%
- -----------------------------------------------------------------------------
$ 3,800 Cottonwood, CO, Water and Sanitation
District, 7.75%, 12/1/20 $ 3,861,180
1,500 Dulles, VA, Community Development
Authority, (Dulles Town Center),
6.25%, 3/1/26 1,385,220
4,250 Frederick County, MD, Urbana Community
Development Authority, 6.625%, 7/1/25 3,950,163
- -----------------------------------------------------------------------------
$ 9,196,563
- -----------------------------------------------------------------------------
Transportation -- 4.7%
- -----------------------------------------------------------------------------
$ 500 Eagle County, CO, (Airport Terminal),
(AMT), 7.50%, 5/1/21 $ 506,785
2,985 Monroe County, NY, Airport Authority
Revenue, DRIVERS, (AMT),
8.364%, 1/1/18(3)(4) 2,961,717
5,000 New Jersey Transportation Authority,
Variable Rate, 6/15/17(3)(4) 3,984,200
3,750 Niagara, NY, Frontier Airport Authority,
(AMT), Variable Rate, 4/1/29(3)(4) 3,045,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
18
<PAGE>
HIGH YIELD MUNICIPALS PORTFOLIO AS OF JANUARY 31, 2000
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
<C> <S> <C>
- -----------------------------------------------------------------------------
Transportation (continued)
- -----------------------------------------------------------------------------
$ 5,250 Northwest Arkansas Regional Airport
Authority, (AMT), 7.625%, 2/1/27 $ 5,297,198
- -----------------------------------------------------------------------------
$ 15,794,900
- -----------------------------------------------------------------------------
Water and Sewer -- 0.5%
- -----------------------------------------------------------------------------
$ 3,000 Metropolitan Water District, (Southern
California Waterworks),
Variable Rate, 7/1/27(4)(5) $ 1,545,960
- -----------------------------------------------------------------------------
$ 1,545,960
- -----------------------------------------------------------------------------
Total Tax-Exempt Investments -- 99.3%
(identified cost $371,511,589) $336,453,040
- -----------------------------------------------------------------------------
Other Assets, Less Liabilities -- 0.7% $ 2,471,856
- -----------------------------------------------------------------------------
Net Assets -- 100.0% $338,924,896
- -----------------------------------------------------------------------------
</TABLE>
AMT - Interest earned from these securities may be considered a tax
preference item for purposes of the Federal Alternative Minimum Tax.
At January 31, 2000, the concentration of the Portfolio's investments in the
various states, determined as a percentage of net assets, is as follows:
<TABLE>
<S> <C>
Colorado 10.4%
Others, representing less than 10% individually 88.9%
</TABLE>
(1) Non-income producing security.
(2) The Portfolio is accruing only partial interest on this security.
(3) Security has been issued as an inverse floater bond.
(4) Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
(5) Security has been issued as a leveraged inverse floater bond.
SEE NOTES TO FINANCIAL STATEMENTS
19
<PAGE>
HIGH YIELD MUNICIPALS PORTFOLIO AS OF JANUARY 31, 2000
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
AS OF JANUARY 31, 2000
<S> <C>
Assets
- ------------------------------------------------------
Investments, at value
(identified cost, $371,511,589) $336,453,040
Cash 50,351
Receivable for investments sold 180,000
Interest receivable 6,871,974
- ------------------------------------------------------
TOTAL ASSETS $343,555,365
- ------------------------------------------------------
Liabilities
- ------------------------------------------------------
Demand note payable $ 4,600,000
Accrued expenses 30,469
- ------------------------------------------------------
TOTAL LIABILITIES $ 4,630,469
- ------------------------------------------------------
NET ASSETS APPLICABLE TO INVESTORS'
INTEREST IN PORTFOLIO $338,924,896
- ------------------------------------------------------
Sources of Net Assets
- ------------------------------------------------------
Net proceeds from capital contributions
and withdrawals $373,983,445
Net unrealized depreciation (computed on
the basis of identified cost) (35,058,549)
- ------------------------------------------------------
TOTAL $338,924,896
- ------------------------------------------------------
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
JANUARY 31, 2000
<S> <C>
Investment Income
- ------------------------------------------------------
Interest $ 27,169,367
- ------------------------------------------------------
TOTAL INVESTMENT INCOME $ 27,169,367
- ------------------------------------------------------
Expenses
- ------------------------------------------------------
Investment adviser fee $ 2,323,971
Trustees fees and expenses 29,737
Custodian fee 189,385
Legal and accounting services 40,290
Amortization of organization expenses 1,423
Miscellaneous 90,638
- ------------------------------------------------------
TOTAL EXPENSES $ 2,675,444
- ------------------------------------------------------
Deduct --
Reduction of custodian fee $ 41,790
- ------------------------------------------------------
TOTAL EXPENSE REDUCTIONS $ 41,790
- ------------------------------------------------------
NET EXPENSES $ 2,633,654
- ------------------------------------------------------
NET INVESTMENT INCOME $ 24,535,713
- ------------------------------------------------------
Realized and Unrealized Gain (Loss)
- ------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified
cost basis) $ (2,634,340)
Financial futures contracts (59,828)
- ------------------------------------------------------
NET REALIZED LOSS $ (2,694,168)
- ------------------------------------------------------
Change in unrealized appreciation
(depreciation) --
Investments (identified cost basis) $(54,986,374)
- ------------------------------------------------------
NET CHANGE IN UNREALIZED
APPRECIATION (DEPRECIATION) $(54,986,374)
- ------------------------------------------------------
NET REALIZED AND UNREALIZED LOSS $(57,680,542)
- ------------------------------------------------------
NET DECREASE IN NET ASSETS FROM
OPERATIONS $(33,144,829)
- ------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
20
<PAGE>
HIGH YIELD MUNICIPALS PORTFOLIO AS OF JANUARY 31, 2000
FINANCIAL STATEMENTS CONT'D
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
INCREASE (DECREASE) YEAR ENDED YEAR ENDED
IN NET ASSETS JANUARY 31, 2000 JANUARY 31, 1999
<S> <C> <C>
- ----------------------------------------------------------------------------
From operations --
Net investment income $ 24,535,713 $ 20,697,182
Net realized gain (loss) (2,694,168) 2,027,824
Net change in unrealized
appreciation (depreciation) (54,986,374) (7,608,338)
- ----------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS $ (33,144,829) $ 15,116,668
- ----------------------------------------------------------------------------
Capital transactions --
Contributions $ 114,068,297 $ 141,274,518
Withdrawals (132,907,536) (68,691,387)
- ----------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
FROM CAPITAL TRANSACTIONS $ (18,839,239) $ 72,583,131
- ----------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS $ (51,984,068) $ 87,699,799
- ----------------------------------------------------------------------------
Net Assets
- ----------------------------------------------------------------------------
At beginning of year $ 390,908,964 $ 303,209,165
- ----------------------------------------------------------------------------
AT END OF YEAR $ 338,924,896 $ 390,908,964
- ----------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
21
<PAGE>
HIGH YIELD MUNICIPALS PORTFOLIO AS OF JANUARY 31, 2000
FINANCIAL STATEMENTS CONT'D
SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
---------------------------------------------------
2000 1999 1998 1997 1996(1)
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------
Ratios to average daily net assets+
- -----------------------------------------------------------------------------------
Net expenses 0.68% 0.67% 0.68% 0.34% 0.06%(2)
Net expenses after custodian
fee reduction 0.67% 0.66% 0.66% 0.30% 0.06%(2)
Net investment income 6.25% 5.88% 6.43% 6.96% 6.95%(2)
Portfolio Turnover 58% 25% 8% 41% 32%
- -----------------------------------------------------------------------------------
NET ASSETS, END OF YEAR
(000'S OMITTED) $338,925 $390,909 $303,209 $180,700 $72,077
- -----------------------------------------------------------------------------------
+ The operating expenses of the Portfolio may reflect a reduction of the investment
adviser fee, an allocation of expenses to the Investment Adviser, or both. Had
such actions not been taken, the ratios would have been as follows:
Expenses 0.71% 0.71%(2)
Expenses after custodian fee
reduction 0.67% 0.71%(2)
Net investment income 6.59% 6.30%(2)
- -----------------------------------------------------------------------------------
</TABLE>
(1) For the period from the start of business, August 7, 1995, to
January 31, 1996.
(2) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
22
<PAGE>
HIGH YIELD MUNICIPALS PORTFOLIO AS OF JANUARY 31, 2000
NOTES TO FINANCIAL STATEMENTS
1 Significant Accounting Policies
- -------------------------------------------
High Yield Municipals Portfolio (the Portfolio) is registered under the
Investment Company Act of 1940, as a 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 Valuation -- 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
investor's 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 futures 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 Expense Reduction -- Investors Bank & Trust Company (IBT) serves as custodian
of the Portfolio. 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. All significant credit balances
used to reduce the Portfolio's custodian fees are reported as a reduction of
operating expenses on the Statement of Operations.
23
<PAGE>
HIGH YIELD MUNICIPALS PORTFOLIO AS OF JANUARY 31, 2000
NOTES TO FINANCIAL STATEMENTS CONT'D
I Use of Estimates -- The preparation of the 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 income and expense during the reporting period. Actual results could
differ from those estimates.
J 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 sales of
securities). For the year ended January 31, 2000, the fee was equivalent to
0.59% of the Portfolio's average net assets for such period and amounted to
$2,323,971. 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. Certain
officers and Trustees of the Portfolio are officers 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 year ended January 31, 2000, no significant
amounts have been deferred.
3 Investments
- -------------------------------------------
Purchases and sales of investments, other than U.S. Government securities and
short-term obligations, aggregated $225,988,879 and $223,139,093,
respectively, for the year ended January 31, 2000.
4 Federal Income Tax Basis of Investments
- -------------------------------------------
The cost and unrealized appreciation (depreciation) in value of the
investments owned at January 31, 2000 as computed on a federal income tax
basis, were as follows:
<TABLE>
<S> <C>
AGGREGATE COST $371,755,737
------------------------------------------------------
Gross unrealized appreciation $ 4,024,611
Gross unrealized depreciation (39,327,308)
------------------------------------------------------
NET UNREALIZED DEPRECIATION $(35,302,697)
------------------------------------------------------
</TABLE>
5 Line of Credit
- -------------------------------------------
The Portfolio participates with other portfolios and funds managed by BMR and
EVM and its affiliates in a $150 million unsecured line of credit agreement
with a group of banks. 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 participating portfolio or fund
based on its borrowings at an amount above either the Eurodollar rate or
federal funds rate. In addition, a fee computed at an annual rate of 0.10% on
the daily unused portion of the line of credit is allocated among the
participating portfolios and funds at the end of each quarter. At
January 31, 2000, the Portfolio had a balance outstanding pursuant to this
line of credit of $4,600,000. The Portfolio did not have any significant
borrowings or allocated fees during the year ended January 31, 2000.
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 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 do 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. At January 31,
2000, the Portfolio had no open futures contracts.
24
<PAGE>
HIGH YIELD MUNICIPALS PORTFOLIO AS OF JANUARY 31, 2000
INDEPENDENT AUDITORS' REPORT
TO THE TRUSTEES AND INVESTORS
OF HIGH YIELD MUNICIPALS PORTFOLIO:
- ---------------------------------------------
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of High Yield Municipals Portfolio as of
January 31, 2000, the related statement of operations for the year then ended,
the statements of changes in net assets for the years ended January 31, 2000 and
1999 and the supplementary data for the four years ended January 31, 2000 and
for the period from the start of business, August 7, 1995, to January 31, 1996.
These financial statements and supplementary data are the responsibility of the
Portfolio's management. Our responsibility is to express an opinion on these
financial statements and supplementary data based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and supplementary
data are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
January 31, 2000 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and supplementary data present fairly,
in all material respects, the financial position of High Yield Municipals
Portfolio at January 31, 2000, the results of its operations, the changes in its
net assets and its supplementary data for the respective stated periods in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
March 3, 2000
25
<PAGE>
EATON VANCE HIGH YIELD MUNICIPALS FUND AS OF JANUARY 31, 2000
INVESTMENT MANAGEMENT
EATON VANCE HIGH YIELD MUNICIPALS FUND
Officers
Thomas J. Fetter
President
James B. Hawkes
Vice President and Trustee
Robert B. MacIntosh
Vice President
James L. O'Connor
Treasurer
Alan R. Dynner
Secretary
Trustees
Jessica M. Bibliowicz
President and Chief Executive Officer,
National Financial Partners
Donald R. Dwight
President, Dwight Partners, Inc.
Samuel L. Hayes, III
Jacob H. Schiff Professor of Investment Banking
Emeritus, Harvard University Graduate School of
Business Administration
Norton H. Reamer
Chairman and Chief Executive Officer,
United Asset Management Corporation
Lynn A. Stout
Professor of Law,
Georgetown University Law Center
Jack L. Treynor
Investment Adviser and Consultant
HIGH YIELD MUNICIPALS PORTFOLIO
Officers
Thomas J. Fetter
President
James B. Hawkes
Vice President and Trustee
Thomas Metzold
Vice President and
Portfolio Manager
James L. O'Connor
Treasurer
Alan R. Dynner
Secretary
Trustees
Jessica M. Bibliowicz
President and Chief Executive Officer,
National Financial Partners
Donald R. Dwight
President, Dwight Partners, Inc.
Samuel L. Hayes, III
Jacob H. Schiff Professor of Investment Banking
Emeritus, Harvard University Graduate School of
Business Adminstration
Norton H. Reamer
Chairman and Chief Executive Officer,
United Asset Management Corporation
Lynn A. Stout
Professor of Law,
Georgetown University Law Center
Jack L. Treynor
Investment Adviser and Consultant
26
<PAGE>
INVESTMENT ADVISER OF
HIGH YIELD MUNICIPALS PORTFOLIO
Boston Management and Research
The Eaton Vance Building
255 State Street
Boston, MA 02109
ADMINISTRATOR OF
EATON VANCE HIGH YIELD MUNICIPALS FUND
Eaton Vance Management
The Eaton Vance Building
255 State Street
Boston, MA 02109
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc.
The Eaton Vance Building
255 State Street
Boston, MA 02109
(617) 482-8260
CUSTODIAN
Investors Bank & Trust Company
200 Clarendon Street
Boston, MA 02116
TRANSFER AGENT
PFPC Global Fund Services
Attention: Eaton Vance Funds
P.O. Box 9653
Providence, RI 02904-9653
INDEPENDENT AUDITORS
Deloitte & Touche LLP
200 Berkeley Street
Boston, MA 02116
EATON VANCE HIGH YIELD MUNICIPALS FUND
THE EATON VANCE BUILDING
255 STATE STREET
BOSTON, MA 02109
- --------------------------------------------------------------------------------
This report must be preceded or accompanied by a current prospectus which
contains more complete information on the Fund, including its distribution plan,
sales charges and expenses. Please read the prospectus carefully before you
invest or send money.
- --------------------------------------------------------------------------------
416-3/00 HYSRC-3/00
