Edgar Filing: Eaton Vance Enhanced Equity Income Fund II

PROSPECTUS January 26, 2005
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43,750,000 SHARES

EATON VANCE ENHANCED EQUITY INCOME FUND II

COMMON SHARES
[EATON VANCE LOGO]

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INVESTMENT OBJECTIVES. Eaton Vance Enhanced Equity Income Fund II (the "Fund")
is a newly organized, diversified, closed-end management investment company. The
Fund's primary investment objective is to provide current income, with a
secondary objective of capital appreciation. The Fund will pursue its investment
objectives by investing primarily in a portfolio of mid- and
large-capitalization common stocks, seeking to invest primarily in companies
with above-average growth and financial strength. Under normal market
conditions, the Fund will seek to generate current earnings from option premiums
by selling covered call options on a substantial portion of its portfolio
securities. There can be no assurance that the Fund will achieve its investment
objectives.

INVESTMENT ADVISER AND SUB-ADVISER. The Fund's investment adviser is Eaton
Vance Management ("Eaton Vance" or the "Adviser"). As of October 31, 2004, Eaton
Vance and its subsidiaries managed approximately $94.5 billion on behalf of
funds, institutional clients and individuals, including approximately $55.8
billion in equity assets. Eaton Vance has engaged Rampart Investment Management
Company, Inc. ("Rampart" or the "Sub-Adviser") as a sub-adviser to provide
advice on and execution of the Fund's options strategy. Rampart, founded in
1983, specializes in options management and trading for institutional and high
net worth investors. Rampart managed approximately $1.8 billion in assets as of
November 30, 2004.

PORTFOLIO CONTENTS. Under normal market conditions, the Fund will invest at
least 80% of its total assets in common stocks. Normally, the Fund will invest
primarily in common stocks of mid- and large-capitalization issuers that meet
the Fund's selection criteria of above-average growth and financial strength.
Initially, the Fund expects to invest between 55% and 65% of its total assets in
mid-capitalization stocks and between 35% and 45% of its total assets in
large-capitalization stocks. Under normal market conditions, the Fund expects to
invest in at least 75 securities, seeking to reduce the Fund's exposure to
individual stock risks. The Fund generally will invest in common stocks on which
exchange traded call options are currently available. The Fund will invest
primarily in common stocks of U.S. issuers, although the Fund may invest up to
25% of its total assets in securities of foreign issuers.

BECAUSE THE FUND IS NEWLY ORGANIZED, ITS COMMON SHARES HAVE NO HISTORY OF PUBLIC
TRADING.

INVESTING IN SHARES INVOLVES CERTAIN RISKS. SEE "INVESTMENT OBJECTIVES, POLICIES
AND RISKS" BEGINNING AT PAGE 13.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

PRICE TO PUBLIC SALES LOAD(1) PROCEEDS TO FUND
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Per share $20.00 $0.90 $19.10
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Total $875,000,000 $39,375,000 $835,625,000
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Total assuming full exercise of the over-allotment option $1,006,250,000 $45,281,250 $960,968,750
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(1) Eaton Vance (not the Fund) will pay certain additional compensation to
qualifying underwriters. See "Underwriting." Eaton Vance (not the Fund)
will pay UBS Securities LLC for services provided pursuant to a shareholder
servicing agreement between UBS Securities LLC and Eaton Vance. See
"Underwriting."

In addition to the sales load, the Fund will pay offering expenses of up to
$0.04 per share, estimated to total $713,200, which will reduce the "Proceeds to
Fund" (above). Eaton Vance or an affiliate has agreed to pay the amount by which
the aggregate of all of the Fund's offering costs (other than sales loads)
exceeds $0.04 per share. Eaton Vance or an affiliate has agreed to reimburse all
Fund organizational costs.

UBS INVESTMENT BANK MERRILL LYNCH & CO. WACHOVIA SECURITIES
A.G. EDWARDS H&R BLOCK FINANCIAL ADVISORS, J.J.B. HILLIARD, W.L. LYONS,
INC. INC.
OPPENHEIMER & CO. RAYMOND JAMES
RBC CAPITAL MARKETS WELLS FARGO SECURITIES

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(continued from previous page)

The extent of option writing activity will depend upon market conditions and the
Adviser's ongoing assessment of the attractiveness of writing call options on
the Fund's stock holdings. Writing covered call options involves a tradeoff
between the option premiums received and reduced participation in potential
future stock price appreciation. Depending on the Adviser's evaluation, the Fund
may write covered call options on varying percentages of the Fund's common stock
holdings. The Fund seeks to generate current earnings from option writing
premiums and, to a lesser extent, from dividends on stocks held. The Fund's call
option-writing program will seek to achieve a high level of net option premiums,
while maintaining the potential for capital appreciation in each stock on which
options are written up to a defined target price for that stock determined by
the Adviser. The Adviser and Sub-Adviser believe that by coordinating their
activities they will be able to achieve the Fund's investment objectives. In
particular, the Adviser believes its active management style, which incorporates
a research-driven fundamental investment approach, complements the Sub-Adviser's
systematic option methodology, which utilizes a proprietary options analysis and
management system.

The Fund may in certain circumstances purchase put options on the Standard &
Poor's 500 Composite Stock Price Index, the S&P MidCap 400 Index, any other
broad-based securities index deemed suitable for this purpose, and/or on
individual stocks held in its portfolio or use other derivative instruments in
order to help protect against a decline in the value of its portfolio
securities. If the Adviser decides to purchase an index put option, the Adviser
and the Sub-Adviser will evaluate put options on a particular index based upon
their assessment of the expected degree of correlation of the performance of the
index to that of all or some of the common stocks held in the Fund's portfolio.
However, there can be no assurance that the performance of such an index will
correlate with that of all or some of the common stocks held in the Fund's
portfolio and accordingly that the put option will have the desired protective
effect.

Eaton Vance believes that the Fund could be an appropriate investment for
investors seeking an investment vehicle that combines regular distributions of
current earnings and the potential for capital appreciation.

EXCHANGE LISTING. The Fund has been approved for listing of its common shares
on the New York Stock Exchange under the symbol "EOS." Because the Fund is newly
organized, its common shares have no history of public trading. The shares of
closed-end management investment companies frequently trade at a discount from
their net asset value. The returns earned by holders of the Fund's common shares
("Common Shareholders") who purchase their shares in this offering and sell
their shares below net asset value will be reduced.

The Fund's net asset value and distribution rate will vary and may be affected
by numerous factors, including changes in stock prices, option premiums, market
interest rates, dividend rates and other factors. An investment in the Fund may
not be appropriate for all investors. There is no assurance that the Fund will
achieve its investment objectives.

This Prospectus sets forth concisely information you should know before
investing in the shares of the Fund. Please read and retain this Prospectus for
future reference. A Statement of Additional Information dated January 26, 2005,
has been filed with the Securities and Exchange Commission ("SEC") and can be
obtained without charge by calling 1-800-225-6265 or by writing to the Fund. A
table of contents to the Statement of Additional Information is located at page
51 of this Prospectus. This Prospectus incorporates by reference the entire
Statement of Additional Information. The Statement of Additional Information is
available along with other Fund-related materials: at the SEC's public reference
room in Washington, DC (call 1-202-942-8090 for information on the operation of
the reference room); from the EDGAR database on the SEC's internet site
(http://www.sec.gov); upon payment of copying fees by writing to the SEC's
public reference section, Washington, DC 20549-0102; or by electronic mail at
publicinfo@sec.gov. The Fund's address is The Eaton Vance Building, 255 State
Street, Boston, Massachusetts 02109 and its telephone number is 1-800-225-6265.

The Fund's shares do not represent a deposit or obligation of, and are not
guaranteed or endorsed by, any bank or other insured depository institution, and
are not federally insured by the Federal Deposit Insurance Corporation, the
Federal Reserve Board or any other government agency.

The underwriters named in the Prospectus may purchase up to 6,562,500 additional
shares from the Fund under certain circumstances.

The underwriters expect to deliver the shares to purchasers on or about January
31, 2005.

You should rely only on the information contained or incorporated by reference
in this Prospectus. The Fund has not authorized anyone to provide you with
different information. The Fund is not making an offer of these securities in
any state where the offer is not permitted.

Until February 20, 2005 (25 days after the date of this Prospectus), all dealers
that buy, sell or trade the shares, whether or not participating in this
offering, may be required to deliver a Prospectus. This is in addition to the
dealers' obligation to deliver a Prospectus when acting as underwriters and with
respect to their unsold allotments or subscriptions.

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TABLE OF CONTENTS
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Prospectus summary.................... 1
Summary of Fund expenses.............. 12
The Fund.............................. 13
Use of proceeds....................... 13
Investment objectives, policies and
risks............................... 13
Management of the Fund................ 31
Distributions......................... 33
Dividend reinvestment plan............ 38
Description of capital structure...... 40
Underwriting.......................... 46
Shareholder Servicing Agent, custodian
and transfer agent.................. 50
Legal opinions........................ 50
Reports to shareholders............... 50
Independent registered public
accounting firm..................... 50
Additional information................ 50
Table of contents for the Statement of
Additional Information.............. 51
The Fund's privacy policy............. 51

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Prospectus summary

This is only a summary. This summary may not contain all of the information that
you should consider before investing in the Fund's common shares. You should
review the more detailed information contained in this Prospectus and in the
Statement of Additional Information, especially the information set forth under
the heading "Investment objectives, policies and risks."

THE FUND

Eaton Vance Enhanced Equity Income Fund II (the "Fund") is a newly organized,
diversified, closed-end management investment company. The Fund's primary
investment objective is to provide current income, with a secondary objective of
capital appreciation. Investments are based on Eaton Vance Management's ("Eaton
Vance" or the "Adviser") internal research and ongoing company analysis, which
is generally not available to individual investors. Rampart Investment
Management Company, Inc. ("Rampart" or the "Sub-Adviser") has been engaged as a
sub-adviser to provide Eaton Vance with advice on and execution of the Fund's
option writing strategy. An investment in the Fund may not be appropriate for
all investors. There is no assurance that the Fund will achieve its investment
objectives.

THE OFFERING

The Fund is offering 43,750,000 common shares of beneficial interest, par value
$0.01 per share, through a group of underwriters (the "Underwriters") led by UBS
Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Wachovia
Capital Markets, LLC. The common shares of beneficial interest are called
"Common Shares." The Underwriters have been granted an option by the Fund to
purchase up to 6,562,500 additional Common Shares solely to cover orders in
excess of 43,750,000 Common Shares. The initial public offering price is $20.00
per share. The minimum purchase in this offering is 100 Shares ($2,000). See
"Underwriting." Eaton Vance or an affiliate has agreed to (i) reimburse all
organizational costs and (ii) pay all offering costs (other than sales loads)
that exceed $0.04 per Common Share.

INVESTMENT OBJECTIVES AND POLICIES

The Fund's primary investment objective is to provide current income, with a
secondary objective of capital appreciation. The Fund will pursue its investment
objectives by investing primarily in a portfolio of mid- and
large-capitalization common stocks, seeking to invest primarily in companies
with above-average growth and financial strength. Under normal market
conditions, the Fund will seek to generate current earnings from option premiums
by selling covered call options on a substantial portion of its portfolio
securities. There can be no assurance that the Fund will achieve its investment
objectives.

Under normal market conditions, the Fund will invest at least 80% of its total
assets in common stocks. Normally, the Fund will invest primarily in common
stocks of mid- and large-capitalization issuers that meet the Fund's selection
criteria of above-average growth and financial strength. Initially, the Fund
expects to invest between 55% and 65% of its total assets in mid-capitalization
stocks and between 35% and 45% of its total assets in large-capitalization
stocks. Under normal market conditions, the Fund expects to invest in at least
75 securities, seeking to reduce the Fund's exposure to individual stock risks.
The Fund generally will invest in common stocks on which exchange traded call
options are currently available. The Fund will invest primarily in common stocks
of U.S. issuers, although the Fund may invest up to 25% of its total assets in
securities of foreign issuers, including American Depositary Receipts ("ADRs"),
Global Depositary Receipts ("GDRs") and European Depositary Receipts ("EDRs").

MidCap 400 was approximately $2.2 billion. Eaton Vance generally considers
large-capitalization companies to be those companies having market
capitalizations equal to or greater than the median market capitalization of the
companies included in the Standard & Poor's 500 Composite Stock Price Index
("S&P 500"). As of November 30, 2004, the median capitalization of companies in
the S&P 500 was approximately $10.1 billion.

Under normal market conditions, the Fund intends to pursue its primary
investment objective principally by employing an options strategy of writing
(selling) covered call options on a substantial portion of its portfolio
securities. The extent of option writing activity will depend upon market
conditions and the Adviser's ongoing assessment of the attractiveness of writing
call options on the Fund's stock holdings. Writing covered call options involves
a tradeoff between the option premiums received and reduced participation in
potential future stock price appreciation. Depending on the Adviser's
evaluation, the Fund may write covered call options on varying percentages of
the Fund's common stock holdings. The Fund seeks to generate current earnings
from option writing premiums and, to a lesser extent, from dividends on stocks
held. The Fund may in certain circumstances purchase put options on the S&P 500,
the S&P MidCap 400, any other broad-based securities index deemed suitable for
this purpose, and/or on individual stocks held in its portfolio or use other
derivative instruments in order to help protect against a decline in the value
of its portfolio securities. If the Adviser decides to purchase an index put
option, the Adviser and the Sub-Adviser will evaluate put options on a
particular index based upon their assessment of the expected degree of
correlation of the performance of the index to that of all or some of the common
stocks held in the Fund's portfolio. However, there can be no assurance that the
performance of such an index will correlate with that of all or some of the
common stocks held in the Fund's portfolio and accordingly that the put option
will have the desired protective effect.

The Fund normally expects that its investments will be invested across a broad
range of industries and market sectors. The Fund may not invest 25% or more of
its total assets in the securities of issuers in any single industry or group of
industries. Eaton Vance believes that the Fund could be an appropriate
investment for investors seeking an investment vehicle that combines regular
distributions of current earnings and the potential for capital appreciation.

INVESTMENT STRATEGY

A team of Eaton Vance investment professionals with extensive experience in
equity research and management is responsible for the overall management of the
Fund's investments. Rampart Investment Management Company, Inc. ("Rampart" or
the "Sub-Adviser") has been engaged as a sub-adviser to provide Eaton Vance with
advice on and execution of the Fund's option writing strategy. The Fund's
investments are actively managed, and securities and other investments may be
bought or sold on a daily basis.

The Adviser believes that a strategy combining active equity portfolio
management with a systematic program of covered call option writing can provide
potentially attractive long-term returns. The Adviser further believes that a
strategy of owning common stocks in conjunction with writing covered call
options on a substantial portion of the stocks held should generally provide
returns that are superior to simply owning the same stocks under three different
stock market scenarios: (1) down-trending equity markets; (2) flat market
conditions; and (3) moderately rising equity markets. In the Adviser's opinion,
only in more strongly rising equity markets would the stock-plus-covered calls
strategy generally be expected to underperform the stocks held. For these
purposes, the Adviser considers more strongly rising equity market conditions to
exist whenever the current annual rate of return for U.S. stocks materially
exceeds the long-term historical average of stock market returns. The Adviser
considers moderately rising equity market conditions to exist whenever current
annual returns on U.S. common stocks are positive, but not materially higher
than the long-term historical average of stock market returns.

The Adviser will employ its signature "growth at a reasonable price" investment
style. Investment decisions for the Fund will be made primarily on the basis of
fundamental research. The Eaton Vance portfolio managers will utilize
information provided by, and the expertise of, the Adviser's research staff in
making investment decisions. The Adviser believes that investments in companies
with above average growth and financial strength should provide attractive
opportunities for investment appreciation. The Adviser seeks to identify such
stocks by focusing, without limitation, on issuers with the following
characteristics: (1) sustainable competitive advantages, (2) predictable and
dependable cash flows, (3) high quality management teams and (4) solid balance
sheets. Many of these considerations are subjective. In addition to its careful
research based analysis in selecting investments for the Fund, the Adviser will
also place a strong emphasis on the ongoing evaluation of portfolio holdings and
the appropriate time and circumstances to sell or reduce a holding. In this
regard, the Adviser may sell a stock when it believes it is fully valued, the
fundamentals of the company deteriorate, the stock's price falls below its
acquisition cost, management fails to execute its strategy or to pursue other
more attractive investment opportunities, among other reasons.

The Adviser and Sub-Adviser believe that by coordinating their activities, they
will be able to achieve the Fund's investment objectives. In particular, the
Adviser believes its active management style complements the Sub-Adviser's
systematic option methodology. The Fund's call option-writing program will seek
to achieve a high level of net option premiums, while maintaining the potential
for capital appreciation in each stock on which options are written up to a
defined target price for that stock determined by the Adviser. To achieve this
goal, Rampart utilizes proprietary options management and options trading
analytical tools (Rampart Options Management System (ROMS)). Eaton Vance
believes that a long-term investment approach and low core turnover of the
underlying portfolio can support an efficient options program. Transaction costs
associated with the Fund's options strategy will vary depending on market
circumstances and other factors. Although it is not possible to accurately
predict such costs because of this variability, the Adviser estimates that such
costs on an annualized basis may range from between 0.20% and 0.30% of the
Fund's total assets assuming the same offering size assumed for purposes of
presenting the information set forth under "Summary of Fund expenses." There can
be no certainty that upon changing market conditions such costs will fall within
this range.

The Fund expects initially to write primarily exchange-listed call options on
individual stocks held in the Fund's portfolio (rather than S&P 500, S&P MidCap
400, or other index options), primarily with shorter maturities (typically two
to six months until expiration) and primarily at exercise prices approximately
equal to or slightly above the current stock price when written. When an
option-writing program is established for a particular stock, options will
typically be written on a portion of the total stock position, which may allow
for upside potential. If the stock price increases, the Fund will normally look
to buy back the call options written and to sell new call options at higher
exercise prices (up to the target price determined by the Adviser) on a greater
number of shares. When a stock's price moves to or above its target price, the
Adviser will evaluate the stock and option-writing program and determine whether
to raise its target price and continue to hold the stock and write covered call
options or, alternatively, whether to deliver the stock in settlement of the
option position or otherwise exit the position by buying back the options
written and selling the stock. If the stock price declines, the Fund will
normally seek to buy back the call options written and to sell new call options
at lower exercise prices on fewer shares. The Fund will seek to execute option
rolls (as described above) such that the premium received from writing new
options generally exceeds the amounts paid to close the positions being
replaced. The Fund may also write covered call options with different
characteristics and managed differently than described in this paragraph.

derivative strategies, the Fund may purchase put options on the S&P 500, the S&P
MidCap 400, any other broad-based securities index deemed suitable for this
purpose, and/or on individual stocks held in its portfolio or use other
derivative instruments in order to help protect against a decline in the value
of its portfolio securities. Derivative instruments may be used by the Fund to
enhance returns or as a substitute for the purchase or sale of securities.

The foregoing policies relating to investment in common stocks and options
writing are the Fund's primary investment policies. In addition to its primary
investment policies, the Fund may invest to a limited extent in other types of
securities and engage in certain other investment practices.

LISTING

The Fund has been approved for listing of its Common Shares on the New York
Stock Exchange under the symbol "EOS."

INVESTMENT ADVISER, ADMINISTRATOR AND SUB-ADVISER

Eaton Vance, a direct wholly-owned subsidiary of Eaton Vance Corp., is the
Fund's investment adviser and administrator. The Adviser and its subsidiaries
managed approximately $94.5 billion on behalf of funds, institutional clients
and individuals as of October 31, 2004, including approximately $55.8 billion in
equity assets. Twenty-nine of the funds managed by Eaton Vance are closed-end
funds. Eaton Vance has engaged Rampart as a sub-adviser to provide advice on and
execution of the Fund's options strategy. Rampart, founded in 1983, specializes
in option management and trading for institutional and high net worth investors.
Rampart managed approximately $1.8 billion in assets as of November 30, 2004.
See "Management of the Fund."

DISTRIBUTIONS

Commencing with the Fund's first distribution, the Fund intends to make regular
monthly distributions to Common Shareholders based upon the Fund's projected
annual cash available from option premiums and dividends. For distribution
purposes, "cash available from option premiums and dividends" will consist of
the total proceeds of options sales plus dividends and interest received, less
amounts paid to purchase options and Fund expenses. The Fund's distribution rate
may be adjusted from time-to-time. The Board may modify this distribution policy
at any time without obtaining the approval of Common Shareholders. The initial
distribution is expected to be declared approximately 45-60 days and paid
approximately 60-90 days after the completion of this offering, depending on
market conditions.

The Fund's annual cash available from options premiums and dividends will likely
differ from annual net investment income. The investment income of the Fund will
consist of all dividend and interest income accrued on portfolio investments,
short-term capital gain (including short-term gains on terminated option
positions and gains on the sale of portfolio investments held for one year or
less) in excess of long-term capital loss and income from certain hedging
transactions, less all expenses of the Fund. Expenses of the Fund will be
accrued each day. The Fund expects that over time it will distribute all of its
investment company taxable income. In addition, at least annually, the Fund
intends to distribute any net capital gain (which is the excess of net long-term
capital gain over net short-term capital loss). To the extent that that Fund's
net investment income and net capital gain for any taxable year exceed the total
monthly distributions paid during the year, the Fund will make a special
distribution at or near year-end of such excess amount as may be required to
maintain its qualification as a regulated investment company or to avoid income
and excise taxes. If the Fund's total monthly distributions in any taxable year
exceed the amount of its current and accumulated earnings and profits for the
year, any such excess would be characterized as a return of capital. Under the
1940 Act, for any distribution that includes amounts from sources other than net
income, the Fund is required to provide Common Shareholders a written statement
regarding the components of such distribution.

To permit the Fund to maintain more stable distributions, distribution rates
will be based on projected annual cash available from options premiums and
dividends. As a result, the distributions paid by the Fund for any particular
month may be more or less than the amount of cash available from options
premiums and dividends for that month. In such circumstances, the Fund may have
to sell a portion of its investment portfolio to make a distribution at a time
when independent investment judgment might not dictate such action.
Undistributed net investment income is included in the Common Shares' net asset
value, and, correspondingly, distributions from net investment income will
reduce the Common Shares' net asset value.

Common Shareholders may elect automatically to reinvest some or all of their
distributions in additional Common Shares under the Fund's dividend reinvestment
plan. See "Distributions" and "Dividend reinvestment plan."

DIVIDEND REINVESTMENT PLAN

The Fund has established a dividend reinvestment plan (the "Plan"). Under the
Plan, a Common Shareholder may elect to have all distributions automatically
reinvested in additional Common Shares either purchased in the open market or
newly issued by the Fund if the Common Shares are trading at or above their net
asset value. Common Shareholders may elect to participate in the Plan by
completing the dividend reinvestment plan application form. Common Shareholders
who do not elect to participate in the Plan will receive all distributions in
cash paid by check mailed directly to them by PFPC Inc., as dividend paying
agent. Common Shareholders who intend to hold their Common Shares through a
broker or nominee should contact such broker or nominee to determine whether or
how they may participate in the Plan. See "Dividend reinvestment plan."

CLOSED-END STRUCTURE

Closed-end funds differ from traditional, open-end management investment
companies (commonly referred to as mutual funds) in that closed-end funds
generally list their shares for trading on a securities exchange and do not
redeem their shares at the option of the shareholder. By comparison, mutual
funds issue securities that are redeemable at net asset value at the option of
the shareholder and typically engage in a continuous offering of their shares.

Shares of closed-end funds frequently trade at a discount from their net asset
value. In recognition of this possibility and that any such discount may not be
in the interest of Common Shareholders, the Fund's Board of Trustees (the
"Board"), in consultation with Eaton Vance, from time to time may review
possible actions to reduce any such discount. The Board might consider open
market repurchases or tender offers for Common Shares at net asset value. There
can be no assurance that the Board will decide to undertake any of these actions
or that, if undertaken, such actions would result in the Common Shares trading
at a price equal to or close to net asset value per Common Share. The Board
might also consider the conversion of the Fund to an open-end mutual fund. The
Board believes, however, that the closed-end structure is desirable, given the
Fund's investment objectives and policies. Investors should assume, therefore,
that it is highly unlikely that the Board would vote to convert the Fund to an
open-end investment company.

Although the Fund has no current intention to issue preferred shares, investors
should note that any possible future issuance of preferred shares to provide
investment leverage could make a conversion to open-end form more difficult
because of the voting rights of preferred shareholders, the costs of redeeming
preferred shares and other factors. See "Description of capital structure."

SPECIAL RISK CONSIDERATIONS

NO OPERATING HISTORY
The Fund is a closed-end investment company with no history of operations and is
designed for long-term investors and not as a trading vehicle.

INVESTMENT AND MARKET RISK
An investment in Common Shares is subject to investment risk, including the
possible loss of the entire principal amount invested. An investment in Common
Shares represents an indirect investment in the securities owned by the Fund,
which are generally traded on a securities exchange or in the over-the-counter
markets. The value of these securities, like other market investments, may move
up or down, sometimes rapidly and unpredictably. In addition, by writing
(selling) call options on the equity securities held in the Fund's portfolio,
the capital appreciation potential of such securities will be limited to the
difference between the exercise price of the call options written and the
purchase price of the equity security underlying such options. The Common Shares
at any point in time may be worth less than the original investment, even after
taking into account any reinvestment of distributions.

ISSUER RISK
The value of securities held by the Fund may decline for a number of reasons
that directly relate to the issuer, such as management performance, financial
leverage and reduced demand for the issuer's goods and services.

EQUITY RISK
At least 80% of the Fund's total assets will be invested in common stocks and
therefore a principal risk of investing in the Fund is equity risk. Equity risk
is the risk that securities held by the Fund will fall due to general market or
economic conditions, perceptions regarding the industries in which the issuers
of securities held by the Fund participate, and the particular circumstances and
performance of particular companies whose securities the Fund holds. Although
common stocks have historically generated higher average returns than
fixed-income securities over the long term, common stocks also have experienced
significantly more volatility in returns. An adverse event, such as an
unfavorable earnings report, may depress the value of equity securities of an
issuer held by the Fund; the price of common stock of an issuer may be
particularly sensitive to general movements in the stock market; or a drop in
the stock market may depress the price of most or all of the common stocks and
other equity securities held by the Fund. In addition, common stock of an issuer
in the Fund's portfolio may decline in price if the issuer fails to make
anticipated dividend payments because, among other reasons, the issuer of the
security experiences a decline in its financial condition. Common equity
securities in which the Fund will invest are structurally subordinated to
preferred stocks, bonds and other debt instruments in a company's capital
structure, in terms of priority to corporate income, and therefore will be
subject to greater dividend risk than preferred stocks or debt instruments of
such issuers. Finally, common stock prices may be sensitive to rising interest
rates, as the costs of capital rise and borrowing costs increase.

RISKS ASSOCIATED WITH OPTIONS ON SECURITIES
There are numerous risks associated with transactions in options on securities.
A decision as to whether, when and how to use options involves the exercise of
skill and judgment, and even a well-conceived transaction may be unsuccessful to
some degree because of market behavior or unexpected events. As the writer of a
covered call option, the Fund forgoes, during the option's life, the opportunity
to profit from increases in the market value of the security covering the call
option above the sum of the option premium received and the exercise price of
the call, but has retained the risk of loss, minus the option premium received,
should the price of the underlying security decline. The writer of an option has
no control over when during the exercise period of the option it may be required
to fulfill its obligation as a writer of the option. Once an option writer has
received an exercise notice, it cannot effect a closing purchase transaction in
order to terminate its obligation under the option and must deliver the
underlying security at the exercise price. Thus, the use of options may require
the Fund to sell portfolio securities at inopportune times or for prices other
than current market values, will limit the amount of appreciation the Fund can
realize above the exercise price of an option on a common stock, or may cause
the Fund to hold a security that it might otherwise sell.

The value of options may also be adversely affected if the market for such
options becomes less liquid or smaller. There can be no assurance that a liquid
market will exist when the Fund seeks to close out an option position either, in
the case of a call option written, by buying the option, or, in the case of a
purchased put option, by selling the option. Reasons for the absence of a liquid
secondary market on an exchange include the following: (i) there may be
insufficient trading interest in certain options; (ii) restrictions may be
imposed by an exchange on opening transactions or closing transactions or both;
(iii) trading halts, suspensions or other restrictions may be imposed with
respect to particular classes or series of options; (iv) unusual or unforeseen
circumstances may interrupt normal operations on an exchange; (v) the facilities
of an exchange or the Options Clearing Corporation (the "OCC") may not at all
times be adequate to handle current trading volume; or (vi) one or more
exchanges could, for economic or other reasons, decide or be compelled to
discontinue the trading of options (or a particular class or series of options)
at some future date. If trading were discontinued, the secondary market on that
exchange (or in that class or series of options) would cease to exist. However,
outstanding options on that exchange that had been issued by the OCC as a result
of trades on that exchange would continue to be exercisable in accordance with
their terms. The Fund's ability to terminate over-the-counter options will be
more limited than with exchange-traded options and may involve the risk that
broker-dealers participating in such transactions will not fulfill their
obligations. If the Fund were unable to close out a covered call option that it
had written on a security, it would not be able to sell the underlying security
unless the option expired without exercise.

The hours of trading for options may not conform to the hours during which the
underlying securities are traded. To the extent that the options markets close
before the markets for the underlying securities, significant price and rate
movements can take place in the underlying markets that would not be reflected
concurrently in the options markets. Call options are marked to market daily and
their value will be affected by changes in the value of and dividend rates of
the underlying common stocks, changes in interest rates, changes in the actual
or perceived volatility of the stock market and the underlying common stocks and
the remaining time to the options' expiration. Additionally, the exercise price
of an option may be adjusted downward before the option's expiration as a result
of the occurrence of certain corporate events affecting the underlying equity
security, such as extraordinary dividends, stock splits, merger or other
extraordinary distributions or events. A reduction in the exercise price of an
option would reduce the Fund's capital appreciation potential on the underlying
security.

The number of call options the Fund can write is limited by the number of shares
of common stock the Fund holds, and further limited by the fact that listed call
options on individual common stocks generally trade in units representing 100
shares of the underlying stock. Furthermore, the Fund's options transactions
will be subject to limitations established by each of the exchanges, boards of
trade or other trading facilities on which such options are traded. These
limitations govern the maximum number of options in each class which may be
written or purchased by a single investor or group of investors acting in
concert, regardless of whether the options are written or purchased on the same
or different exchanges, boards of trade or other trading facilities or are held
or written in one or more accounts or through one or more brokers. Thus, the
number of options which the Fund may write or purchase may be affected by
options written or purchased by other investment advisory clients of the Adviser
or Sub-Adviser. An exchange, board of trade or other trading facility may order
the liquidation of positions found to be in excess of these limits, and may
impose certain other sanctions. The Fund will not write "naked" or uncovered
call options.

purchase options positions likely will not mirror the Fund's actual portfolio
holdings. The effectiveness of index put options as hedges against declines in
the Fund's stock portfolio will be limited to the extent that the performance of
the underlying index does not correlate with that of the Fund's holdings.

RISKS OF MID-CAP COMPANIES
The Fund may invest substantially in companies whose market capitalization is
considered middle sized or "mid-cap." Mid-cap companies often are newer or less
established companies than larger companies. Investments in mid-cap companies
carry additional risks because earnings of these companies tend to be less
predictable; they often have limited product lines, markets, distribution
channels or financial resources; and the management of such companies may be
dependent upon one or a few key people. The market movements of equity
securities of mid-cap companies may be more abrupt or erratic than the market
movements of equity securities of larger, more established companies or the
stock market in general. Historically, mid-cap companies have sometimes gone
through extended periods when they did not perform as well as larger companies.
In addition, equity securities of mid-cap companies generally are less liquid
than those of larger companies. This means that the Fund could have greater
difficulty selling such securities at the time and price that the Fund would
like.

RISKS OF GROWTH STOCK INVESTING
The Fund expects to invest substantially in stocks with "growth"
characteristics. Growth stocks can react differently to issuer, political,
market, and economic developments than the market as a whole and other types of
stocks. Growth stocks tend to be more expensive relative to their earnings or
assets compared to other types of stocks. As a result, growth stocks tend to be
sensitive to changes in their earnings and more volatile than other types of
stocks.

DISTRIBUTION RISK
The monthly distributions Common Shareholders receive from the Fund will be
based primarily on the level of net option premiums and the dividends received
by the Fund. Net option premiums and dividend payments the Fund receives in
respect of its portfolio securities can vary widely over the short- and
long-term. If stock prices or stock price volatility declines, the level of
premiums from options writing and the amounts available for distribution from
options activity will likely decrease as well. Payments to purchase put options
and to close written call options will reduce amounts available for distribution
from call option premiums received and proceeds of closing put options.
Dividends on common stocks are not fixed but are declared at the discretion of
the issuer's board of directors. There is no guarantee that the issuers of
common stocks in which the Fund invests will declare dividends in the future or
that if declared they will remain at current levels or increase over time.
Dividends on any preferred stocks in which the Fund may invest are not
guaranteed and certain issues of preferred stock held by the Fund may be called
by the issuer.

denominated or quoted in currencies other than the U.S. dollar, the Fund will be
affected by changes in foreign currency exchange rates (and exchange control
regulations) which affect the value of investments in the Fund and the accrued
income and appreciation or depreciation of the investments in U.S. dollars.
Changes in foreign currency exchange rates relative to the U.S. dollar will
affect the U.S. dollar value of the Fund's assets denominated in that currency
and the Fund's return on such assets as well as any temporary uninvested
reserves in bank deposits in foreign currencies. In addition, the Fund will
incur costs in connection with conversions between various currencies.

Because foreign companies are not subject to uniform accounting, auditing and
financial reporting standards, practices and requirements comparable to those
applicable to U.S. companies, there may be less publicly available information
about a foreign company than about a domestic company. Volume and liquidity in
most foreign debt markets are less than in the United States and securities of
some foreign companies are less liquid and more volatile than securities of
comparable U.S. companies. There is generally less government supervision and
regulation of securities exchanges, broker-dealers and listed companies than in
the United States. Mail service between the United States and foreign countries
may be slower or less reliable than within the United States, thus increasing
the risk of delayed settlements of portfolio transactions for, or loss of
certificates of, portfolio securities. Payment for securities before delivery
may be required. In addition, with respect to certain foreign countries, there
is the possibility of expropriation or confiscatory taxation, political or
social instability, or diplomatic developments, which could affect investments
in those countries. Moreover, individual foreign economies may differ favorably
or unfavorably from the U.S. economy in such respects as growth of gross
national product, rate of inflation, capital reinvestment, resource
self-sufficiency and balance of payments position. Foreign securities markets,
while growing in volume and sophistication, are generally not as developed as
those in the United States, and securities of some foreign issuers (particularly
those located in developing countries) may be less liquid and more volatile than
securities of comparable U.S. companies.

INTEREST RATE RISK
The level of premiums from call options writing and the amounts available for
distribution from the Fund's options activity may decrease in declining interest
rate environments. Any preferred stocks paying fixed dividend rates in which the
Fund invests, will likely change in value as market interest rates change. When
interest rates rise, the market value of such securities generally will fall. To
the extent that the Fund invests in preferred stocks, the net asset value and
price of the Common Shares may decline if market interest rates rise. Interest
rates are currently low relative to historic levels. During periods of declining
interest rates, an issuer of preferred stock may exercise its option to redeem
securities prior to maturity, forcing the Fund to reinvest in lower yielding
securities. This is known as call risk. During periods of rising interest rates,
the average life of certain types of securities may be extended because of
slower than expected payments. This may lock in a below market yield, increase
the security's duration, and reduce the value of the security. This is known as
extension risk. The value of the Fund's common stock investments may also be
influenced by changes in interest rates.

SECTOR RISK
The Fund may invest a significant portion of its assets in securities of issuers
in any single industry or sector of the economy (a broad based economic segment
that may include many distinct industries) if companies in that industry or
sector meet the Fund's investment criteria. If the Fund is focused in an
industry or sector, it may present more risks than if it were broadly
diversified over numerous industries or sectors of the economy. This may make
the Fund more susceptible to adverse economic, political, or regulatory
occurrences affecting these sectors. A "sector" is a broader economic segment
that may include many different industries. As the percentage of the Fund's
assets invested in a particular sector increases, so does the potential for
fluctuation in the net asset value of Common Shares. The Fund may not invest 25%
or more of its total assets in the securities of issuers in any single industry
or group of industries.

DERIVATIVES RISK
In addition to writing covered call options, the risks of which are described
above, the Fund may invest up to 20% of its total assets in other derivative
investments acquired for hedging, risk management and investment purposes.
Derivative transactions including options on securities and securities indices
and other transactions in which the Fund may engage (such as futures contracts
and options thereon, swaps and short sales) may subject the Fund to increased
risk of principal loss due to unexpected movements in stock prices, changes in
stock volatility levels and interest rates, and imperfect correlations between
the Fund's securities holdings and indices upon which derivative transactions
are based. The Fund also will be subject to credit risk with respect to the
counterparties to any over-the-counter derivatives contracts purchased by the
Fund. If a counterparty becomes bankrupt or otherwise fails to perform its
obligations under a derivative contract due to financial difficulties, the Fund
may experience significant delays in obtaining any recovery under the derivative
contract in a bankruptcy or other reorganization proceeding. The Fund may obtain
only a limited recovery or may obtain no recovery in such circumstances.

LIQUIDITY RISK
The Fund may invest up to 15% of its total assets in securities for which there
is no readily available trading market or which are otherwise illiquid. The Fund
may not be able readily to dispose of such securities at prices that approximate
those at which the Fund could sell such securities if they were more widely
traded and, as a result of such illiquidity, the Fund may have to sell other
investments or engage in borrowing transactions if necessary to raise cash to
meet its obligations. In addition, the limited liquidity could affect the market
price of the securities, thereby adversely affecting the Fund's net asset value.

INFLATION RISK
Inflation risk is the risk that the purchasing power of assets or income from
investment will be worth less in the future as inflation decreases the value of
money. As inflation increases, the real value of the Common Shares and
distributions thereon can decline.

MARKET PRICE OF COMMON SHARES
The shares of closed-end management investment companies often trade at a
discount from their net asset value, and the Fund's Common Shares may likewise
trade at a discount from net asset value. The trading price of the Fund's Common
Shares may be less than the public offering price. The returns earned by Common
Shareholders who purchased their Common Shares in this offering and sell their
Common Shares below net asset value will be reduced.

FINANCIAL LEVERAGE
Although the Fund has no current intention to do so, the Fund is authorized to
utilize leverage through the issuance of preferred shares and/or borrowings,
including the issuance of debt securities. In the event that the Fund determines
in the future to utilize investment leverage, there can be no assurance that
such a leveraging strategy will be successful during any period in which it is
employed. Leverage creates risks for Common Shareholders, including the
likelihood of greater volatility of net asset value and market price of the
Common Shares and the risk that fluctuations in distribution rates on any
preferred shares or fluctuations in borrowing costs may affect the return to
Common Shareholders. To the extent the income derived from securities purchased
with proceeds received from leverage exceeds the cost of leverage, the Fund's
distributions will be greater than if leverage had not been used. Conversely, if
the income from the securities purchased with such proceeds is not sufficient to
cover the cost of leverage, the amount available for distribution to Common
Shareholders will be less than if leverage had not been used. In the latter
case, Eaton Vance, in its best judgment, may nevertheless determine to maintain
the Fund's leveraged position if it deems such action to be appropriate. The
costs of an offering of preferred shares and/or a borrowing program would be
borne by Common Shareholders and consequently would result in a reduction of the
net asset value of Common Shares. In addition, the fee paid to Eaton Vance will
be calculated on the basis of the Fund's

average daily gross assets, including proceeds from the issuance of preferred
shares and/or borrowings, so the fees will be higher when leverage is utilized.
In this regard, holders of preferred shares do not bear the investment advisory
fee. Rather, Common Shareholders bear the portion of the investment advisory fee
attributable to the assets purchased with the proceeds of the preferred shares
offering.

MANAGEMENT RISK
The Fund is subject to management risk because it is an actively managed
portfolio. Eaton Vance, Rampart and the individual portfolio managers will apply
investment techniques and risk analyses in making investment decisions for the
Fund, but there can be no guarantee that these will produce the desired results.
The Fund may be subject to additional management risk because the Fund's options
program will require effective coordination between the Adviser and the
Sub-Adviser.

MARKET DISRUPTION
The terrorist attacks in the United States on September 11, 2001 had a
disruptive effect on the securities markets. These terrorist attacks and related
events, including the war in Iraq, its aftermath, and continuing occupation of
Iraq by coalition forces, have raised short-term market risk and may have
adverse long-term effects on U.S. and world economies and markets. A similar
disruption of the financial markets could impact trading in common stocks and
stock options, interest rates, credit risk, inflation and other factors relating
to the Common Shares. The Fund cannot predict the effects of similar events in
the future on the U.S. economy and securities markets.

ANTI-TAKEOVER PROVISIONS
The Fund's Agreement and Declaration of Trust includes provisions that could
have the effect of limiting the ability of other persons or entities to acquire
control of the Fund or to change the composition of its Board. See "Description
of capital structure--Anti-takeover provisions in the Declaration of Trust."

Summary of Fund expenses

The purpose of the table below is to help you understand all fees and expenses
that you, as a Common Shareholder, would bear directly or indirectly.

Shareholder transaction expenses
Sales load paid by you (as a percentage of offering
price)................................................. 4.50%
Expenses borne by the Fund................................ 0.20%(1)
Dividend reinvestment plan fees........................... None(2)

PERCENTAGE OF NET ASSETS
ATTRIBUTABLE
TO COMMON SHARES
---------------------------------------------------------------------------------------

Annual expenses
Management fees........................................... 1.00%
Other expenses............................................ 0.20%(3)
----
Total annual expenses..................................... 1.20%
====

------------
(1) Eaton Vance or an affiliate has agreed to reimburse all organizational costs
and pay all offering costs (other than sales loads) that exceed $0.04 per
Common Share (0.20% of the offering price).

(2) You will be charged a $5.00 service charge and pay brokerage charges if you
direct the plan agent to sell your Common Shares held in a dividend
reinvestment account.

(3) Estimated expenses based on the current fiscal year.

The expenses shown in the table are based on estimated amounts for the Fund's
first year of operations and assume that the Fund issues approximately
12,500,000 Common Shares. See "Management of the Fund" and "Dividend
reinvestment plan."

EXAMPLE

The following example illustrates the expenses that you would pay on a $1,000
investment in Common Shares (including the sales load of $45, estimated offering
expenses of this offering of $2), assuming (1) total annual expenses of 1.20% of
net assets attributable to Common Shares and (2) a 5% annual return(1):

1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------------------------------------

$59 $83 $110 $186

THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES. ACTUAL
EXPENSES MAY BE HIGHER OR LOWER.
------------
(1) The example assumes that the estimated Other expenses set forth in the
Annual expenses table are accurate, and that all dividends and distributions
are reinvested at net asset value. Actual expenses may be greater or less
than those assumed. Moreover, the Fund's actual rate of return may be
greater or less than the hypothetical 5% return shown in the example.

--------------------------------------------------------------------------------

The Fund

Eaton Vance Enhanced Equity Income Fund II (the "Fund") is a newly organized,
diversified, closed-end management investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act" or the "Investment
Company Act"). The Fund was organized as a Massachusetts business trust on
November 8, 2004 pursuant to a Declaration of Trust governed by the laws of The
Commonwealth of Massachusetts and has no operating history. The Fund's principal
office is located at The Eaton Vance Building, 255 State Street, Boston,
Massachusetts 02109, and its telephone number is 1-800-225-6265.

This Prospectus relates to the initial public offering of the Fund's common
shares of beneficial interest, $0.01 par value (the "Common Shares"). See
"Underwriting."

Use of proceeds

The net proceeds of this offering of Common Shares will be approximately
$835,625,000 (or $960,968,750 assuming exercise of the Underwriters'
over-allotment option in full), which, after payment of the estimated offering
expenses, will be invested in accordance with the Fund's investment objectives
and policies as soon as practicable, but, in no event, under normal market
conditions, later than three months after the receipt thereof. Pending such
investment, the proceeds may be invested in high-quality, short-term debt
securities, cash and/or cash equivalents. Eaton Vance or an affiliate has agreed
to (i) reimburse all organizational costs and (ii) pay all offering costs of the
Fund (other than sales loads) that exceed $0.04 per Common Share.

Investment objectives, policies and risks

INVESTMENT OBJECTIVES

PRIMARY INVESTMENT POLICIES

GENERAL COMPOSITION OF THE FUND
Under normal market conditions, the Fund will invest at least 80% of its total
assets in common stocks. Normally, the Fund will invest primarily in common
stocks of mid- and large-capitalization issuers that meet the Fund's selection
criteria of above-average growth and financial strength. Initially, the Fund
expects to invest between 55% and 65% of its total assets in mid-capitalization
stocks and between 35% and 45% of its total assets in large-capitalization
stocks. Under normal market conditions, the Fund expects to invest in at least
75 securities, seeking to reduce the Fund's exposure to individual stock risks.
The Fund generally will invest in common stocks on which exchange traded call
options are currently available. The Fund will invest primarily in common stocks
of U.S. issuers, although the Fund may invest up to 25% of its total assets in
securities of foreign issuers, including

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13

INVESTMENT OBJECTIVES, POLICIES AND RISKS
--------------------------------------------------------------------------------

American Depositary Receipts ("ADRs"), Global Depositary Receipts ("GDRs") and
European Depositary Receipts ("EDRs").

Eaton Vance generally considers mid-capitalization companies to be those
companies having market capitalizations within the range of capitalizations for
the S&P MidCap 400 Index ("S&P MidCap 400"). As of November 30, 2004, the median
market capitalization of companies in the S&P MidCap 400 was approximately $2.2
billion. Eaton Vance generally considers large-capitalization companies to be
those companies having market capitalizations equal to or greater than the
median capitalization of the companies included in the Standard & Poor's 500
Composite Stock Price Index ("S&P 500"). As of November 30, 2004, the median
market capitalization of companies in the S&P 500 was approximately $10.1
billion.

The Fund's policy of investing, under normal market circumstances, at least 80%
of its total assets in common stocks is not considered to be fundamental by the
Fund and can be changed without a vote of the Fund's shareholders. However, this
policy may only be changed by the Fund's Board of Trustees (the "Board")
following the provision of 60 days prior written notice to the Fund's
shareholders.

The Fund may in certain circumstances purchase put options on the S&P 500, S&P
MidCap 400, any other broad-based securities index deemed suitable for this
purpose, and/or on individual stocks held in its portfolio or use other
derivative instruments in order to help protect against a decline in the value
of its portfolio securities. If the Adviser decides to purchase an index put
option, the Adviser and the Sub-Adviser will evaluate put options on a
particular index based upon their assessment of the expected degree of
correlation of the performance of the index to that of all or some of the common
stocks held in the Fund's portfolio. However, there can be no assurance that the
performance of such an index will correlate with that of all or some of the
common stocks held in the Fund's portfolio and accordingly that the put option
will have the desired protective effect. The premiums paid to acquire any such
put options will reduce the amounts available for distribution to Common
Shareholders from options activities.

The Fund normally expects that its investments will be invested across a broad
range of industries and market sectors. The Fund may, however, invest up to any
amount less than 25% of its total assets in the securities of issuers in any
single industry or group of industries. See "Risk considerations--Sector risk."
Eaton Vance believes that the Fund could be an appropriate investment for
investors seeking an investment vehicle that combines regular distributions of
current earnings and the potential for capital appreciation.

INVESTMENT STRATEGY
A team of Eaton Vance investment professionals with extensive experience in
equity research and management is responsible for the overall management of the
Fund's investments. Rampart Investment Management Company, Inc. ("Rampart" or
the "Sub-Adviser") has been engaged as a sub-adviser to provide the Fund with
advice on and execution of its option writing strategy. The Fund's investments
are actively managed, and securities and other investments may be bought or sold
on a daily basis.

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14

INVESTMENT OBJECTIVES, POLICIES AND RISKS
--------------------------------------------------------------------------------

The Adviser believes that a strategy combining active equity portfolio
management with a systematic program of covered call option writing can provide
potentially attractive long-term returns. The Adviser further believes that a
strategy of owning common stocks in conjunction with writing covered call
options on a substantial portion of the stocks held should generally provide
returns that are superior to simply owning the same stocks under three different
stock market scenarios: (1) Down-trending equity markets; (2) flat market
conditions; and (3) moderately rising equity markets. In the Adviser's opinion,
only in more strongly rising equity markets would the stock-plus-covered calls
strategy generally be expected to underperform the stocks held. For these
purposes, the Adviser considers more strongly rising equity market conditions to
exist whenever the current annual rate of return for U.S. stocks materially
exceeds the long-term historical average of stock market returns. The Adviser
considers moderately rising equity market conditions to exist whenever current
annual returns on U.S. common stocks are positive, but not materially higher
than the long-term historical average of stock market returns.

The Adviser will employ its signature "growth at a reasonable price" investment
style. Investment decisions for the Fund will be made primarily on the basis of
fundamental research. The Eaton Vance portfolio managers will utilize
information provided by, and the expertise of, the Adviser's research staff in
making investment decisions. The Adviser believes that investments in companies
with above average growth and financial strength should provide attractive
opportunities for investment appreciation. The Adviser seeks to identify such
stocks by focusing, without limitation, on issuers with the following
characteristics: (1) sustainable competitive advantages, (2) predictable and
dependable cash flows, (3) high quality management teams and (4) solid balance
sheets. Many of these considerations are subjective. In addition to its careful
research based analysis in selecting investments for the Fund, the Adviser also
places a strong emphasis on the ongoing evaluation of portfolio holdings and the
appropriate time and circumstances to sell or reduce a holding. In this regard,
the Adviser may sell a stock when it believes it is fully valued, the
fundamentals of a company deteriorate, a stock's price falls below its
acquisition cost, management fails to execute its strategy or to pursue other
more attractive investment opportunities, among other reasons.

The Fund expects initially to write primarily exchange-listed call options on
individual stocks held in the Fund's portfolio (rather than S&P 500, S&P MidCap
400 or other index options), primarily with shorter maturities (typically two to
six months until expiration) and primarily at exercise prices approximately
equal to or slightly above the current stock price when written. When an
option-writing program is established for a particular stock, options will
typically be written on a portion of the total stock position, which may allow
for upside potential. If the stock price increases, the Fund will

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15

INVESTMENT OBJECTIVES, POLICIES AND RISKS
--------------------------------------------------------------------------------

normally look to buy back the call options written and to sell new call options
at higher exercise prices (up to the target price determined by the Adviser) on
a greater number of shares. When a stock's price moves to or above its target
price, the Adviser will evaluate the stock and option-writing program and
determine whether to raise its target price and continue to hold the stock and
write covered call options or, alternatively, whether to deliver the stock in
settlement of the option position or otherwise exit the position by buying back
the options written and selling the stock. If the stock price declines, the Fund
will normally seek to buy back the call options written and to sell new call
options at lower exercise prices on fewer shares. The Fund will seek to execute
option rolls (as described above) such that the premium received from writing
new options generally exceeds the amounts paid to close the positions being
replaced. The Fund may also write covered call options with different
characteristics and managed differently than described in this paragraph.

In addition to the intended strategy of selling covered call options, the Fund
may invest up to 20% of its total assets in other derivative instruments
acquired for hedging, risk management and investment purposes (to gain exposure
to securities, securities markets, markets indices and/or currencies consistent
with its investment objectives and policies), provided that no more than 10% of
the Fund's total assets may be invested in such derivative instruments acquired
for non-hedging purposes. Among other derivative strategies, the Fund may
purchase put options on the S&P 500, the S&P MidCap 400, any other broad-based
securities index deemed suitable for this purpose, and/or on individual stocks
held in its portfolio in order to help protect against a decline in the value of
its portfolio securities. Derivative instruments may be used by the Fund to
enhance returns or as a substitute for the purchase or sale of securities.

COMMON STOCKS
Under normal market conditions, the Fund will invest at least 80% of its total
assets in common stocks. Common stock represents an equity ownership interest in
the issuing corporation. Holders of common stock generally have voting rights in
the issuer and are entitled to receive common stock dividends when, as and if
declared by the corporation's board of directors. Common stock normally occupies
the most subordinated position in an issuer's capital structure. Returns on
common stock investments consist of any dividends received plus the amount of
appreciation or depreciation in the value of the stock. The Fund will have
substantial exposure to common stocks.

Although common stocks have historically generated higher average returns than
fixed-income securities over the long term and particularly during periods of
high or rising concerns about inflation, common stocks also have experienced
significantly more volatility in returns and may not maintain their real value
during inflationary periods. An adverse event, such as an unfavorable earnings
report, may depress the value of a particular common stock held by the Fund.
Also, the prices of common stocks are sensitive to general movements in the
stock market and a drop in the stock market may depress the price of common
stocks to which the Fund has exposure. Common stock prices fluctuate for many
reasons, including changes in investors' perceptions of the financial condition
of an issuer or the general condition of the relevant stock market, or when
political or economic events affecting the issuers occur. In addition, common
stock prices may be sensitive to rising interest rates, as the costs of capital
rise and borrowing costs increase.

FOREIGN SECURITIES
The Fund may invest up to 25% of its total assets in securities of issuers
located in countries other than the United States. The value of foreign
securities is affected by changes in currency rates, foreign tax laws (including
withholding tax), government policies (in this country or abroad), relations
between nations and trading, settlement, custodial and other operational risks.
In addition, the costs of investing abroad are generally higher than in the
United States, and foreign securities markets may be less liquid, more volatile
and less subject to governmental supervision than markets in the United

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16

INVESTMENT OBJECTIVES, POLICIES AND RISKS
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States. Foreign investments also could be affected by other factors not present
in the United States, including expropriation, armed conflict, confiscatory
taxation, lack of uniform accounting and auditing standards, less publicly
available financial and other information and potential difficulties in
enforcing contractual obligations. As an alternative to holding foreign-traded
securities, the Fund may invest in dollar-denominated securities of foreign
companies that trade on U.S. exchanges or in the U.S. over-the-counter market
(including depositary receipts, which evidence ownership in underlying foreign
securities).

Because foreign companies are not subject to uniform accounting, auditing and
financial reporting standards, practices and requirements comparable to those
applicable to U.S. companies, there may be less publicly available information
about a foreign company than about a domestic company. Volume and liquidity in
most foreign debt markets are less than in the United States and securities of
some foreign companies are less liquid and more volatile than securities of
comparable U.S. companies. There is generally less government supervision and
regulation of securities exchanges, broker-dealers and listed companies than in
the United States. Mail service between the United States and foreign countries
may be slower or less reliable than within the United States, thus increasing
the risk of delayed settlements of portfolio transactions or loss of
certificates for portfolio securities. Payment for securities before delivery
may be required. In addition, with respect to certain foreign countries, there
is the possibility of expropriation or confiscatory taxation, political or
social instability, or diplomatic developments, which could affect investments
in those countries. Moreover, individual foreign economies may differ favorably
or unfavorably from the U.S. economy in such respects as growth of gross
national product, rate of inflation, capital reinvestment, resource
self-sufficiency and balance of payments position. Foreign securities markets,
while growing in volume and sophistication, are generally not as developed as
those in the United States, and securities of some foreign issuers (particularly
those located in developing countries) may be less liquid and more volatile than
securities of comparable U.S. companies.

Since the Fund will invest in securities denominated or quoted in currencies
other than the U.S. dollar, the Fund will be affected by changes in foreign
currency exchange rates (and exchange control regulations) which affect the
value of investments in the Fund and the accrued income and appreciation or
depreciation of the investments in U.S. dollars. Changes in foreign currency
exchange rates relative to the U.S. dollar will affect the U.S. dollar value of
the Fund's assets denominated in that currency and the Fund's return on such
assets as well as any temporary uninvested reserves in bank deposits in foreign
currencies. In addition, the Fund will incur costs in connection with
conversions between various currencies.

The Fund may invest in ADRs, EDRs and GDRs. ADRs, EDRs and GDRs are certificates
evidencing ownership of shares of foreign issuers and are alternatives to
purchasing directly the underlying foreign securities in their national markets
and currencies. However, they continue to be subject to many of the risks
associated with investing directly in foreign securities. These risks include
foreign exchange risk as well as the political and economic risks of the
underlying issuer's country. ADRs, EDRs and GDRs may be sponsored or
unsponsored. Unsponsored receipts are established without the participation of
the issuer. Unsponsored receipts may involve higher expenses, they may not pass-
through voting or other shareholder rights, and they may be less liquid.

The Fund may write covered call options on common stocks of foreign issuers
subject to the same guidelines described herein with respect to its covered call
options writing program generally.

OPTIONS--GENERALLY
The Fund's principal options activity will consist of writing (selling) covered
call options on common stocks held. Among other potential options strategies,
the Fund may purchase put options on the S&P 500, the S&P MidCap 400, any other
broad-based securities index deemed suitable for this

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purpose, and/or on individual stocks held in its portfolio to help protect
against a decline in the value of its portfolio securities. An option on a
security is a contract that gives the holder of the option, in return for a
premium, the right to buy from (in the case of a call) or sell to (in the case
of a put) the writer of the option the security underlying the option at a
specified exercise or "strike" price. The writer of an option on a security has
the obligation upon exercise of the option to deliver the underlying security
upon payment of the exercise price or to pay the exercise price upon delivery of
the underlying security. Certain options, known as "American style" options may
be exercised at any time during the term of the option. Other options, known as
"European style" options, may be exercised only on the expiration date of the
option. Since listed options on individual stocks in the United States are
generally American style options, the Adviser believes that substantially all of
the single-stock options written or acquired by the Fund will be American style
options. Exchange-traded options on stock indices are generally European style
options.

The Fund will write call options only if they are "covered." A call option on a
common stock or other security is covered if the Fund owns the security
underlying the call or has an absolute and immediate right to acquire that
security without additional cash consideration (or, if additional cash
consideration is required, cash or other assets determined to be liquid by the
Adviser (in accordance with procedures established by the Board) in such amount
are segregated by the Fund's custodian) upon conversion or exchange of other
securities held by the Fund. A call option is also covered if the Fund holds a
call on the same security as the call written where the exercise price of the
call held is (i) equal to or less than the exercise price of the call written,
or (ii) greater than the exercise price of the call written, provided the
difference is maintained by the Fund in segregated assets determined to be
liquid by the Adviser as described above.

If an option written by the Fund expires unexercised, the Fund realizes on the
expiration date a capital gain equal to the premium received by the Fund at the
time the option was written. If an option purchased by the Fund expires
unexercised, the Fund realizes a capital loss equal to the premium paid. Prior
to the earlier of exercise or expiration, an exchange-traded option may be
closed out by an offsetting purchase or sale of an option of the same series
(type, underlying security, exercise price, and expiration). There can be no
assurance, however, that a closing purchase or sale transaction can be effected
when the Fund desires. The Fund may sell put or call options it has previously
purchased, which could result in a net gain or loss depending on whether the
amount realized on the sale is more or less than the premium and other
transaction costs paid on the put or call option when purchased. The Fund will
realize a capital gain from a closing purchase transaction if the cost of the
closing option is less than the premium received from writing the option, or, if
it is more, the Fund will realize a capital loss. If the premium received from a
closing sale transaction is more than the premium paid to purchase the option,
the Fund will realize a capital gain or, if it is less, the Fund will realize a
capital loss. In most cases, net gains from the Fund's option strategy will be
short-term capital gains which, for federal income tax purposes, will constitute
net investment company taxable income. See "Distributions--Federal income tax
matters."

The principal factors affecting the market value of an option include supply and
demand, interest rates, the current market price of the underlying security in
relation to the exercise price of the option, the actual or perceived volatility
of the underlying security, and the time remaining until the expiration date.
The premium paid for an option purchased by the Fund is an asset of the Fund.
The premium received for an option written by the Fund is recorded as an asset
and equivalent liability. The Fund then adjusts over time the liability to the
market value of the option. The value of an option purchased or written is
marked to market daily and is valued at the closing price on the exchange on
which it is traded or, if not traded on an exchange or no closing price is
available, at the mean between the last bid and asked prices or otherwise at
fair value as determined by the Board of the Fund.

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The transaction costs of buying and selling options consist primarily of
commissions (which are imposed in opening, closing, exercise and assignment
transactions), but may also include margin and interest costs in particular
transactions. The impact of transaction costs on the profitability of a
transaction may often be greater for options transactions than for transactions
in the underlying securities because these costs are often greater in relation
to options premiums than in relation to the prices of underlying securities.
Transaction costs may be especially significant in option strategies calling for
multiple purchases and sales of options, such as spreads or straddles.
Transaction costs may be different for transactions effected in foreign markets
than for transactions effected in U.S. markets.

Transaction costs associated with the Fund's options strategy will vary
depending on market circumstances and other factors. Although it is not possible
to accurately predict such costs because of this variability, the Adviser
estimates that such costs on an annualized basis may range from between 0.20%
and 0.30% of the Fund's total assets assuming the same offering size assumed for
purposes of presenting the information set forth under "Summary of Fund
expenses." There can be no certainty that upon changing market conditions such
costs will fall within this range.

CALL OPTIONS AND COVERED CALL WRITING
The Fund does not intend to purchase call options as an investment. It will
follow a principal options strategy known as "covered call option writing,"
which is a strategy designed to generate earnings and offset a portion of a
market decline in the underlying common stock. The Fund will only write (sell)
options on common stocks held in the Fund's portfolio. It may not sell "naked"
call options, i.e., options representing more shares of the stock than are held
in the portfolio.

The standard contract size for an exchange-listed single-stock option is 100
shares of the common stock. There are four items needed to identify a particular
option contract: (1) the underlying security, (2) the expiration month, (3) the
exercise (or strike) price and (4) the type (call or put). For example, 20 ABC
Corp. January 40 call options provide the right to purchase 2,000 shares of ABC
Corp. common stock on or before January 22, 2005 at $40 per share. A call option
whose strike price is above the current price of the underlying stock is called
"out-of-the-money," a call option whose strike price is equal to the current
price of the underlying stock is called "at-the-money" and a call option whose
strike price is below the current price of the underlying stock is called
"in-the-money."

The following is a conceptual example of the returns that may be achieved from a
stock-plus-covered-call position, making the following assumptions: ABC common
stock trades at $36.36 per share and ABC January 40 call options (10%
out-of-the-money) trade at $1.82 per underlying share (5% option premium). This
example is not meant to represent the performance of any actual common stock,
option contract or the Fund itself.

The return over the period until option expiration earned by a holder of ABC
stock who writes ABC January 40 call options and maintains the position until
expiration will be as follows: (1) if the stock price declines 5%, the option
will expire worthless and the holder will have a net return of zero (option
premium offsets loss in stock); (2) if the stock price is flat, the option will
again expire worthless and the holder will have a net return of 5% (option
premium plus no gain or loss on stock); (3) if the stock price rises 10% (to the
$40 strike price), the option will again expire with no value and the holder
will have a net return of 15% (option premium plus 10% stock return); and (4) if
the stock rises 20%, the exercise of the option would limit stock gain to 10%
and total net return to 15%. If the stock price at exercise exceeds the strike
price, returns from the position are capped at 15%.

As demonstrated in the example, writing covered call options on common stocks
lowers the variability of potential returns and can enhance returns in three of
four stock price performance scenarios (down, flat or moderately up). Only when
the stock price at expiration exceeds the sum of the premium

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INVESTMENT OBJECTIVES, POLICIES AND RISKS
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received and the option exercise price would the stock-plus-covered-call
strategy be expected to provide lower returns than the underlying stock. The
amount of downside protection afforded by the strategy in declining stock
scenarios is limited, however, to the amount of option premium received. If the
stock price declines in an amount greater than the option premium, the Fund will
incur a net loss.

For conventional listed call options, the option's expiration date can be up to
nine months from the date the call options are first listed for trading.
Longer-term call options can have expiration dates up to three years from the
date of listing. It is anticipated that many options that are written by the
Fund against its stock holdings will be repurchased prior to the option's
expiration date, generating a gain or loss in the options. Options that are not
repurchased prior to expiration are subject to exercise by the option holder if
the stock price at expiration is above the strike price.

Exchange listed options contracts are originated and standardized by an
independent entity called the Options Clearing Corporation (the "OCC").
Currently, listed options are available on over 2,300 stocks with new listings
added periodically. The Fund will write (sell) call options that are generally
issued, guaranteed and cleared by the OCC. Listed call options are traded on the
American Stock Exchange, Chicago Board Options Exchange International Securities
Exchange, New York Stock Exchange, Pacific Stock Exchange and Philadelphia Stock
Exchange. With multiple exercise prices and expiration dates for options on
different stocks, the Adviser and Sub-Adviser believe that there exist
sufficient opportunities in the options market to meet the needs of the Fund's
investment program.

PUT OPTIONS
Put options are contracts that give the holder of the option, in return for a
premium, the right to sell to the writer of the option the security/index
underlying the option at a specified exercise price at any time during the term
of the option. As discussed above, the Fund may in certain circumstances
purchase put options on the S&P 500, S&P MidCap 400, any other broad-based
securities index deemed suitable for this purpose, and/or on individual stocks
held in the portfolio to help protect against a decline in the value of the
Fund's portfolio securities. The premiums paid to acquire put options will
reduce amounts available for distribution from the Fund's options activity.

ADDITIONAL INVESTMENT PRACTICES

In addition to its primary investment policies, the Fund may engage in the
following investment practices to a limited extent. Under normal market
conditions, the Fund will invest at least 80% of its total assets in common
stocks, including stocks of foreign issuers. The Fund may invest in the
aggregate up to 20% of its total assets in all investments described below.

PREFERRED STOCKS
Preferred stock, like common stock, represents an equity ownership in an issuer.
Generally, preferred stock has a priority of claim over common stock in dividend
payments and upon liquidation of the issuer. Unlike common stock, preferred
stock does not usually have voting rights. Preferred stock in some instances is
convertible into common stock. Although they are equity securities, preferred
stocks have certain characteristics of both debt and common stock. They are
debt-like in that their promised income is contractually fixed. They are common
stock-like in that they do not have rights to precipitate bankruptcy proceedings
or collection activities in the event of missed payments. Furthermore, they have
many of the key characteristics of equity due to their subordinated position in
an issuer's capital structure and because their quality and value are heavily
dependent on the profitability of the issuer rather than on any legal claims to
specific assets or cash flows. The Fund will only invest in preferred stocks
that are rated investment grade at the time of investment or, if unrated,
determined by the Adviser to be of comparable quality. Standard & Poor's Ratings
Group and Fitch

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INVESTMENT OBJECTIVES, POLICIES AND RISKS
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Ratings consider securities rated BBB -- and above to be investment grade and
Moody's Investors Service, Inc. considers securities rated Baa3 and above to be
investment grade.

WARRANTS
The Fund may invest in equity and index warrants of domestic and international
issuers. Equity warrants are securities that give the holder the right, but not
the obligation, to subscribe for equity issues of the issuing company or a
related company at a fixed price either on a certain date or during a set
period. Changes in the value of a warrant do not necessarily correspond to
changes in the value of its underlying security. The price of a warrant may be
more volatile than the price of its underlying security, and a warrant may offer
greater potential for capital appreciation as well as capital loss. Warrants do
not entitle a holder to dividends or voting rights with respect to the
underlying security and do not represent any rights in the assets of the issuing
company. A warrant ceases to have value if it is not exercised prior to its
expiration date. These factors can make warrants more speculative than other
types of investments. The sale of a warrant results in a long- or short-term
capital gain or loss depending on the period for which a warrant is held.

CONVERTIBLE SECURITIES AND BONDS WITH WARRANTS ATTACHED
The Fund may invest in preferred stocks and fixed-income obligations that are
convertible into common stocks of domestic and foreign issuers, and bonds issued
as a unit with warrants. Convertible securities in which the Fund may invest,
comprised of both convertible debt and convertible preferred stock, may be
converted at either a stated price or at a stated rate into underlying shares of
common stock. Because of this feature, convertible securities generally enable
an investor to benefit from increases in the market price of the underlying
common stock. Convertible securities often provide higher yields than the
underlying equity securities, but generally offer lower yields than
non-convertible securities of similar quality. The value of convertible
securities fluctuates in relation to changes in interest rates like bonds, and,
in addition, fluctuates in relation to the underlying common stock.

SHORT SALES
The Fund may sell a security short if it owns at least an equal amount of the
security sold short or another security convertible or exchangeable for an equal
amount of the security sold short without payment of further compensation (a
short sale against-the-box). In a short sale against-the-box, the short seller
is exposed to the risk of being forced to deliver stock that it holds to close
the position if the borrowed stock is called in by the lender, which would cause
gain or loss to be recognized on the delivered stock. The Fund expects normally
to close its short sales against-the-box by delivering newly acquired stock.

The ability to use short sales against-the-box, certain equity swaps and certain
equity collar strategies as a tax-efficient management technique with respect to
holdings of appreciated securities is limited to circumstances in which the
hedging transaction is closed out not later than thirty days after the end of
the Fund's taxable year in which the transaction was initiated, and the
underlying appreciated securities position is held unhedged for at least the
next sixty days after the hedging transaction is closed. Not meeting these
requirements would trigger the recognition of gain on the underlying appreciated
securities position under the federal tax laws applicable to constructive sales.

TEMPORARY INVESTMENTS
Cash equivalents are highly liquid, short-term securities such as commercial
paper, time deposits, certificates of deposit, short-term notes and short-term
U.S. government obligations. During unusual market circumstances, the Fund may
temporarily invest a substantial portion of its assets in cash or cash
equivalents, which may be inconsistent with the Fund's investment objectives. In
moving to a substantial temporary investments position and in transitioning from
such a position back into full conformity with the Fund's normal investment
objectives and policies, the Fund may incur transaction

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costs that would not be incurred if the Fund had remained fully invested in
accordance with such normal policies. The transition to and back from a
substantial temporary investments position may also result in the Fund having to
sell common stocks and/or close out options positions and then later purchase
common stocks and open new options positions in circumstances that might not
otherwise be optimal.

WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS
Securities may be purchased on a "forward commitment" or "when-issued" basis
(meaning securities are purchased or sold with payment and delivery taking place
in the future) in order to secure what is considered to be an advantageous price
and yield at the time of entering into the transaction. However, the return on a
comparable security when the transaction is consummated may vary from the return
on the security at the time that the forward commitment or when-issued
transaction was made. From the time of entering into the transaction until
delivery and payment is made at a later date, the securities that are the
subject of the transaction are subject to market fluctuations. In forward
commitment or when-issued transactions, if the seller or buyer, as the case may
be, fails to consummate the transaction, the counterparty may miss the
opportunity of obtaining a price or yield considered to be advantageous. Forward
commitment or when-issued transactions may occur a month or more before delivery
is due. However, no payment or delivery is made until payment is received or
delivery is made from the other party to the transaction. Forward commitment or
when-issued transactions will not be entered into for the purpose of investment
leverage.

ILLIQUID SECURITIES
The Fund may invest up to 15% of its total assets in securities for which there
is no readily available trading market or are otherwise illiquid. Illiquid
securities include securities legally restricted as to resale, such as
commercial paper issued pursuant to Section 4(2) of the Securities Act of 1933,
as amended, and securities eligible for resale pursuant to Rule 144A thereunder.
Section 4(2) and Rule 144A securities may, however, be treated as liquid by the
Adviser pursuant to procedures adopted by the Board, which require consideration
of factors such as trading activity, availability of market quotations and
number of dealers willing to purchase the security. If the Fund invests in Rule
144A securities, the level of portfolio illiquidity may be increased to the
extent that eligible buyers become uninterested in purchasing such securities.

It may be difficult to sell illiquid securities at a price representing their
fair value until such time as such securities may be sold publicly. Where
registration is required, a considerable period may elapse between a decision to
sell the securities and the time when it would be permitted to sell. Thus, the
Fund may not be able to obtain as favorable a price as that prevailing at the
time of the decision to sell. The Fund may also acquire securities through
private placements under which it may agree to contractual restrictions on the
resale of such securities. Such restrictions might prevent their sale at a time
when such sale would otherwise be desirable.

OTHER DERIVATIVE INSTRUMENTS
In addition to the intended strategy of selling covered call options, the Fund
may invest up to 20% of its total assets in derivative instruments (which are
instruments that derive their value from another instrument, security or index)
acquired for hedging, risk management and investment purposes (to gain exposure
to securities, securities markets, markets indices and/or currencies consistent
with its investment objectives and policies), provided that no more than 10% of
the Fund's total assets may be invested in such derivative instruments acquired
for non-hedging purposes. These strategies may be executed through the use of
derivative contracts in the United States or abroad. In the course of pursuing
these investment strategies, the Fund may purchase and sell equity and
fixed-income indices and other instruments, purchase and sell futures contracts
and options thereon, and enter into various transactions such as swaps, caps,
floors or collars. In addition, derivatives may also include new

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techniques, instruments or strategies that are permitted as regulatory changes
occur. Derivative instruments may be used by the Fund to enhance returns or as a
substitute for the purchase or sale of securities.

SWAPS
Swap contracts may be purchased or sold to hedge against fluctuations in
securities prices, interest rates or market conditions, to mitigate non-payment
or default risk, or to gain exposure to particular securities, baskets of
securities, indices or currencies. In a standard "swap" transaction, two parties
agree to exchange the returns (or differentials in rates of return) to be
exchanged or "swapped" between the parties, which returns are calculated with
respect to a "notional amount," i.e., the return on or increase in value of a
particular dollar amount invested at a particular interest rate, or in a
particular security, "basket" of securities or index. The Fund will enter into
swaps only on a net basis, i.e., the two payment streams are netted out, with
the Fund receiving or paying, as the case may be, only the net amount of the two
payments. If the other party to a swap defaults, the Fund's risk of loss
consists of the net amount of payments that the Fund is contractually entitled
to receive. The net amount of the excess, if any, of the Fund's obligations over
its entitlements will be maintained in a segregated account by the Fund's
custodian. The Fund will not enter into any swap unless the claims-paying
ability of the other party thereto is considered to be investment grade by the
Adviser. If there is a default by the other party to such a transaction, the
Fund will have contractual remedies pursuant to the agreements related to the
transaction. Swaps are traded in the over-the-counter market. The use of swaps
is a highly specialized activity, which involves investment techniques and risks
different from those associated with ordinary portfolio securities transactions.
If the Adviser is incorrect in its forecasts of market values, interest rates
and other applicable factors, the investment performance of the Fund would be
unfavorably affected.

Total return swaps. Total return swaps are contracts in which one party agrees
to make payments of the total return from the underlying asset(s), which may
include securities, baskets of securities, or securities indices during the
specified period, in return for payments equal to a fixed or floating rate of
interest or the total return from other underlying asset(s).

Interest rate swaps. Interest rate swaps involve the exchange by the Fund with
another party of their respective commitments to pay or receive interest (e.g.,
an exchange of fixed rate payments for floating rate payments).

FUTURES AND OPTIONS ON FUTURES
The Fund may purchase and sell various kinds of financial futures contracts and
options thereon to seek to hedge against changes in stock prices or interest
rates, for other risk management purposes or to gain exposure to certain
securities, indices and currencies. Futures contracts may be based on various
securities indices and securities. Such transactions involve a risk of loss or
depreciation due to adverse changes in securities prices, which may exceed the
Fund's initial investment in these contracts. The Fund will only purchase or
sell futures contracts or related options in compliance with the rules of the
Commodity Futures Trading Commission. These transactions involve transaction
costs. Sales of futures contracts and related options generally result in
realization of short-term or long-term capital gain depending on the period for
which the investment is held. To the extent that any futures contract or options
on futures contract held by the Fund is a "Section 1256 contract" under the
Internal Revenue Code of 1986, as amended (the "Code"), the contract will be
marked-to-market annually and any gain or loss will be treated as 60% long-term
and 40% short-term, regardless of the holding period for such contract.

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SECURITIES LENDING
The Fund may seek to earn income by lending portfolio securities to
broker-dealers or other institutional borrowers. As with other extensions of
credit, there are risks of delay in recovery or even loss of rights in the
securities loaned if the borrower of the securities fails financially. Loans
will be made only to organizations whose credit quality or claims paying ability
is considered by the Adviser to be at least investment grade and when the
expected returns, net of administrative expenses and any finders' fees,
justifies the attendant risk. Securities loans currently are required to be
secured continuously by collateral in cash, cash equivalents (such as money
market instruments) or other liquid securities held by the custodian and
maintained in an amount at least equal to the market value of the securities
loaned. The financial condition of the borrower will be monitored by the Adviser
on an ongoing basis. The Fund will not lend portfolio securities subject to a
written covered call contract.

BORROWINGS
The Fund may borrow money to the extent permitted under the 1940 Act as
interpreted, modified or otherwise permitted by the regulatory authority having
jurisdiction. Although there is no current intention to do so, the Fund may in
the future from time to time borrow money to add leverage to the portfolio. The
Fund may also borrow money for temporary administrative purposes.

REVERSE REPURCHASE AGREEMENTS
The Fund may enter into reverse repurchase agreements. Under a reverse
repurchase agreement, the Fund temporarily transfers possession of a portfolio
instrument to another party, such as a bank or broker-dealer, in return for
cash. At the same time, the Fund agrees to repurchase the instrument at an
agreed upon time (normally within seven days) and price, which reflects an
interest payment. The Fund may enter into such agreements when it is able to
invest the cash acquired at a rate higher than the cost of the agreement, which
would increase earned income. Income realized on reverse repurchase agreements
will be taxable as ordinary income.

When the Fund enters into a reverse repurchase agreement, any fluctuations in
the market value of either the securities transferred to another party or the
securities in which the proceeds may be invested would affect the market value
of the Fund's assets. As a result, such transactions may increase fluctuations
in the market value of the Fund's assets. While there is a risk that large
fluctuations in the market value of the Fund's assets could affect net asset
value, this risk is not significantly increased by entering into reverse
repurchase agreements, in the opinion of the Adviser. Because reverse repurchase
agreements may be considered to be the practical equivalent of borrowing funds,
they constitute a form of leverage and may be subject to leverage risks. Such
agreements will be treated as subject to investment restrictions regarding
"borrowings." If the Fund reinvests the proceeds of a reverse repurchase
agreement at a rate lower than the cost of the agreement, entering into the
agreement will lower the Fund's yield.

PORTFOLIO TURNOVER
The Fund will buy and sell securities to seek to accomplish it investment
objectives. Portfolio turnover generally involves some expense to the Fund,
including brokerage commissions and other transaction costs on the sale of
securities and reinvestment in other securities. Higher portfolio turnover may
decrease the after-tax return to Common Shareholders to the extent it results in
a decrease of the long-term capital gains portion of distributions to Common
Shareholders. Although the Fund cannot accurately predict its portfolio turnover
rate, under normal market conditions it expects to maintain relatively low core
turnover of its stock portfolio, not considering purchases and sales of stock
and options in connection with the Fund's options program. On an overall basis,
the Fund's annual turnover rate may exceed 100%. A high turnover rate (100% or
more) necessarily involves greater trading costs to the Fund and may result in
greater realization of taxable capital gains.

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RISK CONSIDERATIONS

NO OPERATING HISTORY
The Fund is a closed-end investment company with no history of operations and is
designed for long-term investors and not as a trading vehicle.

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required to fulfill its obligation as a writer of the option. Once an option
writer has received an exercise notice, it cannot effect a closing purchase
transaction in order to terminate its obligation under the option and must
deliver the underlying security at the exercise price. Thus, the use of options
may require the Fund to sell portfolio securities at inopportune times or for
prices other than current market values, will limit the amount of appreciation
the Fund can realize above the exercise price of an option on a common stock, or
may cause the Fund to hold a security that it might otherwise sell.

The value of options may be adversely affected if the market for such options
becomes less liquid or smaller. There can be no assurance that a liquid market
will exist when the Fund seeks to close out an option position either, in the
case of a call option written, by buying the option, or, in the case of a
purchased put option, by selling the option. Reasons for the absence of a liquid
secondary market on an exchange include the following: (i) there may be
insufficient trading interest in certain options; (ii) restrictions may be
imposed by an exchange on opening transactions or closing transactions or both;
(iii) trading halts, suspensions or other restrictions may be imposed with
respect to particular classes or series of options; (iv) unusual or unforeseen
circumstances may interrupt normal operations on an exchange; (v) the facilities
of an exchange or the OCC may not at all times be adequate to handle current
trading volume; or (vi) one or more exchanges could, for economic or other
reasons, decide or be compelled to discontinue the trading of options (or a
particular class or series of options) at some future date. If trading were
discontinued, the secondary market on that exchange (or in that class or series
of options) would cease to exist. However, outstanding options on that exchange
that had been issued by the OCC as a result of trades on that exchange would
continue to be exercisable in accordance with their terms. The Fund's ability to
terminate over-the-counter options will be more limited than with
exchange-traded options and may involve the risk that broker-dealers
participating in such transactions will not fulfill their obligations. If the
Fund were unable to close out a covered call option that it had written on a
security, it would not be able to sell the underlying security unless the option
expired without exercise.

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INVESTMENT OBJECTIVES, POLICIES AND RISKS
--------------------------------------------------------------------------------

Adviser or Sub-Adviser. An exchange, board of trade or other trading facility
may order the liquidation of positions found to be in excess of these limits,
and may impose certain other sanctions. The Fund will not write "naked" or
uncovered call options.

If the Fund purchases put options for hedging or risk management purposes, the
Fund will be subject to the following additional risks. A put option acquired by
the Fund and not sold prior to expiration will expire worthless if the price of
the stock or index at expiration exceeds the exercise price of the option,
thereby causing the Fund to lose its entire investment in the option. If
restrictions on exercise were imposed, the Fund might be unable to exercise an
option it had purchased. If the Fund were unable to close out an option that it
had purchased, it would have to exercise the option in order to realize any
profit or the option may expire worthless. Stock market indices on which the
Fund may purchase options positions likely will not mirror the Fund's actual
portfolio holdings. The effectiveness of index put options as hedges against
declines in the Fund's stock portfolio will be limited to the extent that the
performance of the underlying index does not correlate with that of the Fund's
holdings.

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27

INVESTMENT OBJECTIVES, POLICIES AND RISKS
--------------------------------------------------------------------------------

FOREIGN SECURITY RISK
The Fund may have substantial exposure to foreign securities. The value of
foreign securities is affected by changes in currency rates, foreign tax laws
(including withholding tax), government policies (in this country or abroad),
relations between nations and trading, settlement, custodial and other
operational risks. In addition, the costs of investing abroad are generally
higher than in the United States, and foreign securities markets may be less
liquid, more volatile and less subject to governmental supervision than markets
in the United States. Foreign investments also could be affected by other
factors not present in the United States, including expropriation, armed
conflict, confiscatory taxation, lack of uniform accounting and auditing
standards, less publicly available financial and other information and potential
difficulties in enforcing contractual obligations. As an alternative to holding
foreign-traded securities, the Fund may invest in dollar-denominated securities
of foreign companies that trade on U.S. exchanges or in the U.S.
over-the-counter market (including depositary receipts, which evidence ownership
in underlying foreign securities). Since the Fund may invest in securities
denominated or quoted in currencies other than the U.S. dollar, the Fund will be
affected by changes in foreign currency exchange rates (and exchange control
regulations) which affect the value of investments in the Fund and the accrued
income and appreciation or depreciation of the investments in U.S. dollars.
Changes in foreign currency exchange rates relative to the U.S. dollar will
affect the U.S. dollar value of the Fund's assets denominated in that currency
and the Fund's return on such assets as well as any temporary uninvested
reserves in bank deposits in foreign currencies. In addition, the Fund will
incur costs in connection with conversions between various currencies.

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INVESTMENT OBJECTIVES, POLICIES AND RISKS
--------------------------------------------------------------------------------

may be extended because of slower than expected payments. This may lock in a
below market yield, increase the security's duration, and reduce the value of
the security. This is known as extension risk. The value of the Fund's common
stock investments may also be influenced by changes in interest rates.

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29

INVESTMENT OBJECTIVES, POLICIES AND RISKS
--------------------------------------------------------------------------------

earned by Common Shareholders who purchased their Common Shares in this offering
and sell their Common Shares below net asset value will be reduced.

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30

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Management of the Fund

BOARD OF TRUSTEES

The management of the Fund, including general supervision of the duties
performed by the Adviser under the Advisory Agreement (as defined below) and the
Sub-Adviser under the Sub-Advisory Agreement (as defined below), is the
responsibility of the Fund's Board under the laws of The Commonwealth of
Massachusetts and the 1940 Act.

THE ADVISER

Eaton Vance acts as the Fund's investment adviser under an Investment Advisory
Agreement (the "Advisory Agreement"). The Adviser's principal office is located
at The Eaton Vance Building, 255 State Street, Boston, Massachusetts 02109.
Eaton Vance, its affiliates and predecessor companies have been managing assets
of individuals and institutions since 1924 and of investment funds since 1931.
Eaton Vance (or its affiliates) currently serves as the investment adviser to
investment funds and various individual and institutional clients with combined
assets under management of approximately $94.5 billion as of October 31, 2004,
including approximately $55.8 billion in equity assets. Eaton Vance is a direct,
wholly-owned subsidiary of Eaton Vance Corp., a publicly-held holding company,
which through its subsidiaries and affiliates engages primarily in investment
management, administration and marketing activities.

Under the general supervision of the Fund's Board, the Adviser will carry out
the investment and reinvestment of the assets of the Fund, will furnish
continuously an investment program with respect to the Fund, will determine
which securities should be purchased, sold or exchanged, and will implement such
determinations. The Adviser will furnish to the Fund investment advice and
office facilities, equipment and personnel for servicing the investments of the
Fund. The Adviser will compensate all Trustees and officers of the Fund who are
members of the Adviser's organization and who render investment services to the
Fund, and will also compensate all other Adviser personnel who provide research
and investment services to the Fund. In return for these services, facilities
and payments, the Fund has agreed to pay the Adviser as compensation under the
Advisory Agreement an annual fee in the amount of 1.00% of the average daily
gross assets of the Fund. Gross assets of the Fund means total assets of the
Fund, including any form of investment leverage that the Fund may in the future
determine to utilize, minus all accrued expenses incurred in the normal course
of operations, but not excluding any liabilities or obligations attributable to
any future investment leverage obtained through (i) indebtedness of any type
(including, without limitation, borrowing through a credit facility/commercial
paper program or the issuance debt securities), (ii) the issuance of preferred
shares or other similar preference securities, (iii) the reinvestment of
collateral received for securities loaned in accordance with the Fund's
investment objectives and policies, and/or (iv) any other means. During any
future periods in which the Fund is using leverage, the fees paid to Eaton Vance
for investment advisory services will be higher than if the Fund did not use
leverage because the fees paid will be calculated on the basis of the Fund's
gross assets, including proceeds from any borrowings and from the issuance of
preferred shares.

Walter A. Row, Lewis R. Piantedosi and other Eaton Vance investment
professionals comprise the investment team responsible for the overall
management of the Fund's investments. Mr. Row and Mr. Piantedosi are the
portfolio managers responsible for the day-to-day management of the Fund's
investment portfolio.

Mr. Row is a Vice President and the Director of Equity Research at Eaton Vance.
He is a member of Eaton Vance's Equity Strategy Committee, manages another Eaton
Vance registered investment

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31

MANAGEMENT OF THE FUND
--------------------------------------------------------------------------------

company and has been an equity analyst and member of Eaton's Vance's equity
research team since 1996.

Mr. Piantedosi is a Vice President of Eaton Vance. He is a member of Eaton
Vance's Equity Strategy Committee and co-manager of another Eaton Vance
registered investment company. He first joined Eaton Vance's equity group in
1996.

THE SUB-ADVISER

Eaton Vance has engaged Rampart Investment Management Company, Inc. to serve as
a sub-adviser to the Fund to provide advice on and execution of the Fund's
options strategy. The Sub-Adviser's principal office is located at One
International Place, Boston, Massachusetts 02110. Rampart Investment Management
Company, Inc. was founded in 1983 by its current principals Ronald M. Egalka and
David R. Fraley. The Sub-Adviser provides customized investment management
services within its core competency in options program management to a spectrum
of institutional and high net worth clients. Since its inception, the
Sub-Adviser has continuously expanded its computer modeling and analytical
capabilities and created tools to identify and capitalize on opportunities in
the options markets. Rampart managed approximately $1.8 billion in assets as of
November 30, 2004.

Mr. Egalka and Mr. Fraley are responsible for the development and implementation
of Rampart's options strategy utilized in managing the Fund.

Mr. Egalka is President and CEO of Rampart. He is also President of Rampart
Securities, Inc., an affiliate of the Sub-Adviser and a NASD member
broker/dealer. Mr. Egalka oversees the development and implementation of
investment strategies and tactics for Rampart. He has created a variety of
analytical and management tools including the Rampart Time Premium Index,
published each week in Barron's, the Rampart Volatility Indexes and the Rampart
Options Management System (ROMS), the technological platform from which
Rampart's portfolio managers deliver the company's equity options management
expertise.

As one of the early pioneers in personal computers and quantitative hedging, Mr.
Egalka was a founding director of the Boston Computer Society, charter member of
the National Options and Futures Society, a founder of the Boston Options
Society and a guest lecturer on derivatives at Boston College. From 1973 to
1981, he was a portfolio manager and senior research officer at The Boston
Company, specializing in hedged equity strategies. In 1981, Mr. Egalka joined
Colonial Management Associates where he developed and managed a corporate cash
management mutual fund and many of the company's portfolio hedging capabilities.

A long time proponent of hedged equities as an asset class, Mr. Egalka has
focused on helping create an industry benchmark for options programs. The
creation and subsequent launch of the CBOE/ S&P 500 BuyWrite Index (BXM) in 2002
was the realization of that objective. In 2003, the CBOE announced that it had
licensed the BXM to Rampart as the strategic basis for new options investment
vehicles.

Mr. Fraley is Managing Director/Manager of Marketing and Client Service at
Rampart. He manages Rampart's new product development and customization of
existing investment strategies for specific client needs. Prior to joining
Rampart, Mr. Fraley served in a number of management roles with Merrill Lynch
Capital Markets in Boston from 1975 through 1983.

Under the terms of the Sub-Advisory Agreement (the "Sub-Advisory Agreement")
between Eaton Vance and the Sub-Adviser, Eaton Vance (and not the Fund) will pay
the Sub-Adviser a fee at a annual rate equal to 0.235% of the average daily
gross assets of the Fund. Pursuant to the terms of the Advisory Agreement, Eaton
Vance, upon approval by the Board, may terminate the Sub-Advisory Agreement and
Eaton Vance may assume full responsibility for the services provided by the

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32

MANAGEMENT OF THE FUND
--------------------------------------------------------------------------------

Sub-Adviser without the need for approval by shareholders of the Fund. Rampart
has agreed to reimburse Eaton Vance for a portion of the payments that Eaton
Vance makes to UBS Securities LLC under a shareholder servicing agreement. See
"Underwriting."

The Fund, the Adviser and the Sub-Adviser have adopted codes of ethics relating
to personal securities transactions (the "Codes of Ethics"). The Codes of Ethics
permit Adviser and Sub-Adviser personnel to invest in securities (including
securities that may be purchased or held by the Fund) for their own accounts,
subject to certain pre-clearance, reporting and other restrictions and
procedures contained in such Codes of Ethics.

THE ADMINISTRATOR

Eaton Vance serves as administrator of the Fund, but currently receives no
compensation for providing administrative services to the Fund. Under an
Administration Agreement with the Fund (the "Administration Agreement"), Eaton
Vance is responsible for managing the business affairs of the Fund, subject to
the supervision of the Fund's Board. Eaton Vance will furnish to the Fund all
office facilities, equipment and personnel for administering the affairs of the
Fund. Eaton Vance's administrative services include recordkeeping, preparation
and filing of documents required to comply with federal and state securities
laws, supervising the activities of the Fund's custodian and transfer agent,
providing assistance in connection with the Board and shareholders' meetings,
providing service in connection with any repurchase offers and other
administrative services necessary to conduct the Fund's business.

Distributions

To the extent that that Fund's net investment income and net capital gain (which
is the excess of net long-term capital gain over net short-capital loss) for any
taxable year exceed the total monthly income distributions paid during the year,
the Fund will make a special distribution at or near year-end of such excess
amount as may be required to maintain its qualification as a regulated
investment company or to avoid income and excise taxes. If the Fund's total
monthly distributions in any taxable year exceed the amount of its net
investment income and net capital gain for the year, any such excess would be
characterized as a return of capital. Under the 1940 Act, for any distribution
that includes

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33

DISTRIBUTIONS
--------------------------------------------------------------------------------

amounts from sources other than net income, the Fund is required to provide
Common Shareholders a written statement regarding the components of such
distribution.

If, for any taxable year, as discussed above, the total distributions made under
the Fund's policy exceed the Fund's current and accumulated earnings and
profits, the excess will be treated as a tax-free return of capital to each
Common Shareholder (up to the amount of the Common Shareholder's basis in his or
her Common Shares) and thereafter as gain from the sale of Common Shares. The
amount treated as a tax-free return of capital will reduce the Common
Shareholder's adjusted basis in his or her Common Shares, thereby increasing his
or her potential gain or reducing his or her potential loss on the subsequent
sale of his or her Common Shares. To the extent the Fund's distribution policy
results in distributions in excess of its net investment taxable income and net
capital gain, such distributions will decrease its total assets and increase its
expense ratio to a greater extent than would have been the case if distributions
were limited to these amounts. Distributions in any year may or may not include
a substantial return of capital component.

Common Shareholders may elect automatically to reinvest some or all of their
distributions in additional Common Shares under the Fund's dividend reinvestment
plan. See "Dividend reinvestment plan."

The Fund has applied for an order from the SEC granting exemption from Section
19(b) of the Investment Company Act, and Rule 19b-1 thereunder to permit the
Fund to include realized long-term capital gains as a part of its regular
distributions to Common Shareholders more frequently than would otherwise be
permitted by the Investment Company Act. The Fund will not pursue this
distribution policy until it receives such an exemptive order. There is no
guarantee that the SEC will grant such exemptive relief. However, if the Fund
fails to receive the requested relief and the Fund is unable to include realized
capital gains in regular distributions more frequently than would otherwise be
permitted by the Investment Company Act, the Adviser does not believe that the
distribution policy, as set forth above, will otherwise be adversely affected.

FEDERAL INCOME TAX MATTERS

The following discussion of federal income tax matters is based on the advice of
Kirkpatrick & Lockhart Nicholson Graham LLP, counsel to the Fund. The Fund
intends to elect to be treated and to qualify each year as a regulated
investment company under the Code. Accordingly, the Fund intends to satisfy
certain requirements relating to sources of its income and diversification of
its assets and to distribute substantially all of its net income and net
short-term and long-term capital gains (after reduction by any available capital
loss carryforwards) in accordance with the timing requirements imposed by the
Code, so as to maintain its regulated investment company status and to avoid
paying any federal income or excise tax. To the extent it qualifies for
treatment as a regulated investment company and satisfies the above-mentioned
distribution requirements, the Fund will not be subject to federal income tax on
income paid to its shareholders in the form of dividends or capital gains
distributions.

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34

DISTRIBUTIONS
--------------------------------------------------------------------------------

The Fund's transactions in options are subject to special and complex federal
income tax provisions that may, among other things, (i) convert dividends that
would otherwise constitute qualified dividend income into higher taxed
short-term capital gain or ordinary income, (ii) treat dividends that would
otherwise be eligible for the corporate dividends received deduction as
ineligible for such treatment, (iii) disallow, suspend or otherwise limit the
allowance of certain losses or deductions, (iv) convert long-term capital gain
into short-term capital gain or ordinary income, (v) convert an ordinary loss or
deduction into a capital loss (the deductibility of which is more limited) and
(vi) cause the Fund to recognize income or gain without a corresponding receipt
of cash.

The taxation of equity options such as the Fund expects to write and purchase is
governed by Code Section 1234. Pursuant to Code Section 1234, the premium
received by the Fund for writing a call option is not included in income at the
time of receipt. If the option expires, the premium is short-term capital gain
to the Fund. If the Fund enters into a closing transaction, the difference
between the amount paid to close out its position and the premium received for
writing the option is short-term capital gain or loss. If a call option written
by the Fund is exercised, thereby requiring the Fund to sell the underlying
security, the premium will increase the amount realized upon the sale of the
security and any resulting gain or loss will be long-term or short-term,
depending upon the Fund's holding period of the security. With respect to a put
on a stock that is purchased by the Fund, if the option is sold, any resulting
gain or loss will be a capital gain or loss, and will be short-term or
long-term, depending upon the Fund's holding period for the option. If the
option expires, the resulting loss is a capital loss and is short-term or
long-term, depending upon the Fund's holding period for the option. If the
option is exercised, the amount paid to acquire the put option reduces the
amount realized on the underlying security in determining gain or loss. Because
the Fund does not have control over the exercise of the call options it writes,
such exercise or other required sales of the underlying securities may cause the
Fund to realize capital gains or losses at inopportune times.

In the case of Fund transactions in so-called "Section 1256 Contracts," such as
many listed index options and any listed non-equity options, Code Section 1256
generally will require any gain or loss arising from the lapse, closing out or
exercise of such positions to be treated as 60% long-term and 40% short-term
capital gain or loss, although foreign currency gains or losses arising from
certain of these positions may be treated as ordinary income or loss. In
addition, the Fund generally will be required to "mark to market" (i.e., treat
as sold for fair market value) each such position which it holds at the close of
each taxable year. If a Section 1256 Contract held by the Fund at the end of a
taxable year is sold in the following year, the amount of any gain or loss
realized on such sale will be adjusted to reflect the gain or loss previously
taken into account under the "mark to market" rules. Section 1256 Contracts
include certain options contracts, certain regulated futures contracts, and
certain other financial contracts.

Notwithstanding any of the foregoing, the Fund may recognize gain (but not loss)
from a constructive sale of certain "appreciated financial positions" if the
Fund enters into a short sale, offsetting notional principal contract, or
forward contract transaction with respect to the appreciated position or
substantially identical property. Appreciated financial positions subject to
this constructive sale treatment are interests (including options and forward
contracts and short sales) in stock and certain other instruments. Constructive
sale treatment does not apply to certain transactions closed before the end of
the 30th day after the close of the taxable year, if certain conditions are met.

The Code contains special rules that apply to "straddles," defined generally as
the holding of "offsetting positions with respect to personal property." For
example, the straddle rules normally apply when a taxpayer holds stock and an
offsetting option with respect to such stock or substantially identical stock or
securities. In general, investment positions will be offsetting if there is a
substantial diminution in the risk of loss from holding one position by reason
of holding one or more other positions. The Fund expects that the call options
it writes on portfolio securities will generally be

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35

DISTRIBUTIONS
--------------------------------------------------------------------------------

"qualified covered calls" that are exempt from the straddle rules. To meet the
qualified covered call option exemption, a stock-plus-covered-call position
cannot be part of a larger straddle and must meet a number of other conditions,
including that the option is written more than 30 days prior to expiration and
is not "deep-in-the-money" as defined in the Code. The Fund may enter into
certain investments that may constitute positions in a straddle. If two or more
positions constitute a straddle, recognition of a realized loss from one
position must be deferred to the extent of unrecognized gain in an offsetting
position. In addition, long-term capital gain may be recharacterized as
short-term capital gain, or short-term capital loss as long-term capital loss.
Interest and other carrying charges allocable to personal property that is part
of a straddle are not currently deductible but must instead be capitalized.
Similarly, "wash sale" rules apply to prevent the recognition of loss by the
Fund from the disposition of stock or securities at a loss in a case in which
identical or substantially identical stock or securities (or an option to
acquire such property) is or has been acquired within a prescribed period.

The Code allows a taxpayer to elect to offset gains and losses from positions
that are part of a "mixed straddle." A "mixed straddle" is any straddle in which
one or more but not all positions are Section 1256 Contracts. The Fund may be
eligible to elect to establish one or more mixed straddle accounts for certain
of its mixed straddle trading positions. The mixed straddle account rules
require a daily "marking to market" of all open positions in the account and a
daily netting of gains and losses from positions in the account. At the end of a
taxable year, the annual net gains or losses from the mixed straddle account are
recognized for tax purposes. The application of the mixed straddle account rules
is not entirely clear. Therefore, there is no assurance that a mixed straddle
account election by the Fund will be accepted by the Internal Revenue Service
(the "IRS").

Gain or loss from a short sale of property is generally considered as capital
gain or loss to the extent the property used to close the short sale constitutes
a capital asset in the Fund's hands. Except with respect to certain situations
where the property used to close a short sale has a long-term holding period on
the date the short sale is entered into, gains on short sales generally are
short-term capital gains. A loss on a short sale will be treated as a long-term
capital loss if, on the date of the short sale, "substantially identical
property" has been held by the Fund for more than one year. In addition, these
rules may also terminate the running of the holding period of "substantially
identical property" held by the Fund.

Gain or loss on a short sale will generally not be realized until such time as
the short sale is closed. However, as described above in the discussion of
constructive sales, if the Fund holds a short sale position that would result in
gain if it were closed, and it then acquires property that is the same as or
substantially identical to the property sold short, the Fund generally will
recognize gain on the date it acquires such property as if the short sale were
closed on such date with such property. Similarly, if the Fund holds an
appreciated financial position with respect to securities and then enters into a
short sale with respect to the same or substantially identical property, the
Fund generally will recognize gain as if the appreciated financial position were
sold at its fair market value on the date it enters into the short sale. The
subsequent holding period for any appreciated financial position that is subject
to these constructive sale rules will be determined as if such position were
acquired on the date of the constructive sale.

The Fund intends to make regular monthly distributions to Common Shareholders
based upon its projected annual cash available from option premiums and
dividends. The Fund expects that over time it will distribute all of its
investment company taxable income. The Fund intends to distribute annually any
net capital gain (which is the excess of net long-term capital gain over net
short-term capital loss). Distributions of the Fund's net capital gain ("capital
gain distributions"), if any, are taxable to Common Shareholders as long-term
capital gain, regardless of the length of time Common Shares have been held by
Common Shareholders. All other distributions paid by the Fund (including
dividends from short-term capital gains) from its current or accumulated
earnings and profits are generally

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36

DISTRIBUTIONS
--------------------------------------------------------------------------------

subject to tax as ordinary income. If, for any taxable year, the total
distributions exceed the Fund's current and accumulated earnings and profits,
the excess will be treated as a tax-free return of capital to each Common
Shareholder (up to the amount of the Common Shareholder's basis in his or her
Common Shares) and thereafter as gain from the sale of Shares (assuming the
Common Shares are held as a capital asset). The amount treated as a tax-free
return of capital will reduce the Common Shareholder's adjusted basis in his or
her Shares, thereby increasing his or her potential gain or reducing his or her
potential loss on the subsequent sale or other disposition of his or her Common
Shares. See below for a summary of the maximum tax rates applicable to capital
gain (including capital gain distributions). A corporation that owns Fund shares
generally will not be entitled to the dividends received deduction with respect
to all (or any prescribed percentage) of the distributions it receives from the
Fund.

Under the Jobs and Growth Tax Relief Reconciliation Act of 2003 (the "Tax Act"),
certain dividend distributions paid by the Fund (whether paid in cash or
reinvested in additional Fund shares) to individual taxpayers are taxed at rates
applicable to net long-term capital gains (15%, or 5% for individuals in the 10%
or 15% tax brackets). This tax treatment applies only if certain holding period
and other requirements are satisfied by the Common Shareholder with respect to
his or her Common Shares and the dividends are attributable to qualified
dividend income received by the Fund itself. For this purpose, "qualified
dividend income" means dividends received by the Fund from United States
corporations and "qualified foreign corporations," provided that the Fund
satisfies certain holding period and other requirements in respect of the stock
of such corporations. Dividends received on shares of stock that are subject to
a covered call option that is not a qualified covered call option, will not
constitute qualified dividend income. Gains on option positions and other
short-term gains, interest income and non-qualified dividends are not eligible
for the lower tax rate. The special rules relating to the taxation of ordinary
income dividends paid by the Fund generally apply to taxable years beginning
before January 1, 2009. Thereafter, the Fund's distributions that are
characterized as dividends, other than capital gain distributions, will be fully
taxable at ordinary income tax rates unless further Congressional action is
taken. There can be no assurance as to what portion of the Fund's dividend
distributions will qualify for favorable treatment under the Tax Act.

Common Shareholders receiving dividends or distributions in the form of
additional Common Shares pursuant to the Plan will be treated for U.S. federal
income tax purposes as receiving a distribution in an amount equal to the amount
of money that the shareholders receiving cash dividends or distributions will
receive, and will have a cost basis in the Common Shares received equal to such
amount. The Fund will inform Common Shareholders of the source and tax status of
all distributions promptly after the close of each calendar year.

Selling Common Shareholders will generally recognize gain or loss in an amount
equal to the difference between the Common Shareholder's adjusted tax basis in
the Common Shares sold and the amount received. If the Common Shares are held as
a capital asset, the gain or loss will be a capital gain or loss. The maximum
tax rate applicable to net capital gains recognized by individuals and other
non-corporate taxpayers is (i) the same as the maximum ordinary income tax rate
for gains recognized on the sale of capital assets held for one year or less, or
(ii) 15% for gains recognized on the sale of capital assets held for more than
one year (as well as certain capital gain distributions) (5% for individuals in
the 10% or 15% tax brackets). Any loss on a disposition of Common Shares held
for six months or less will be treated as a long-term capital loss to the extent
of any capital gain distributions received with respect to those Common Shares.
For purposes of determining whether Common Shares have been held for six months
or less, the holding period is suspended for any periods during which the Common
Shareholder's risk of loss is diminished as a result of holding one or more
other positions in substantially similar or related property, or through certain
options or short sales. Any loss realized on a sale or exchange of Common Shares
will be disallowed to the extent those

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37

DISTRIBUTIONS
--------------------------------------------------------------------------------

Common Shares are replaced by other Common Shares within a period of 61 days
beginning 30 days before and ending 30 days after the date of disposition of the
Common Shares (whether through the reinvestment of distributions, which could
occur, for example, if the Common Shareholder is a participant in the Plan (as
defined below) or otherwise). In that event, the basis of the replacement Common
Shares will be adjusted to reflect the disallowed loss.

An investor should be aware that, if Common Shares are purchased shortly before
the record date for any taxable distribution (including a capital gain
distribution), the purchase price likely will reflect the value of the
distribution and the investor then would receive a taxable distribution likely
to reduce the trading value of such Common Shares, in effect resulting in a
taxable return of some of the purchase price.

The Fund may be required to withhold, for U.S. federal backup withholding tax
purposes, a portion of the dividends, distributions and redemption proceeds
payable to Common Shareholders who fail to provide the Fund (or its agent) with
their correct taxpayer identification number or to make required certifications,
or who have been notified by the IRS that they are subject to backup
withholding. Certain Common Shareholders are exempt from backup withholding.
Backup withholding is not an additional tax and any amount withheld may be
credited against a Common Shareholder's U.S. federal income tax liability.

An investor should also be aware that the benefits of the reduced tax rate
applicable to long-term capital gains and qualified dividend income may be
impacted by the application of the alternative minimum tax to individual
shareholders.

The foregoing briefly summarizes some of the important federal income tax
consequences to Common Shareholders of investing in Common Shares, reflects the
federal tax law as of the date of this Prospectus, and does not address special
tax rules applicable to certain types of investors, such as corporate and
foreign investors. Unless otherwise noted, this discussion assumes that an
investor is a U.S. person and holds Common Shares as a capital asset. This
discussion is based upon current provisions of the Code, the regulations
promulgated thereunder, and judicial and administrative ruling authorities, all
of which are subject to change or differing interpretations by the courts or the
IRS retroactively or prospectively. Investors should consult their tax advisors
regarding the federal, state or local tax considerations that may be applicable
in their particular circumstances.

Dividend reinvestment plan

Pursuant to the Fund's dividend reinvestment plan (the "Plan"), a Common
Shareholder may elect to have all distributions (including all capital gain
dividends) automatically reinvested in Common Shares. Common Shareholders may
elect to participate in the Plan by completing the dividend reinvestment plan
application form. Common Shareholders electing not to participate in the Plan
will receive all distributions in cash paid by check mailed directly to them by
PFPC Inc., as dividend paying agent.

PFPC Inc. (the "Plan Agent") serves as agent for the Common Shareholders in
administering the Plan. Common Shareholders who elect not to participate in the
Plan will receive all Fund distributions in cash paid by check mailed directly
to the Common Shareholder of record (or if the Common Shares are held in street
or other nominee name, then to the nominee) by PFPC Inc., as disbursing agent.
Participation in the Plan is completely voluntary and may be terminated or
resumed at any time without penalty by written notice if received by the Plan
Agent prior to any distribution record date.

Common Shares will be acquired by the Plan Agent or an independent broker-dealer
for the participants' accounts, depending upon the circumstances described
below, either (i) through receipt of additional previously authorized but
unissued Common Shares from the Fund ("newly issued Common

--------------------------------------------------------------------------------
38

DIVIDEND REINVESTMENT PLAN
--------------------------------------------------------------------------------

Shares") or (ii) by purchase of outstanding Common Shares on the open market
("open-market purchases") on the New York Stock Exchange or elsewhere. If, on
the payment date for the distribution, the net asset value per Common Share is
equal to or less than the market price per Common Share plus estimated brokerage
commissions (such condition being referred to herein as "market premium"), the
Plan Agent will invest the distribution amount in newly issued Common Shares on
behalf of the participants. The number of newly issued Common Shares to be
credited to each participant's account will be determined by dividing the dollar
amount of the distribution by the net asset value per Common Share on the date
the Common Shares are issued, provided that the maximum discount from the then
current market price per Common Share on the date of issuance may not exceed 5%.
If on the distribution payment date the net asset value per Common Share is
greater than the market value plus estimated brokerage commissions (such
condition being referred to herein as "market discount"), the Plan Agent will
invest the distribution amount in Common Shares acquired on behalf of the
participants in open-market purchases.

In the event of a market discount on the distribution payment date, the Plan
Agent will have up to 30 days after the distribution payment date to invest the
distribution amount in Common Shares acquired in open-market purchases. If,
before the Plan Agent has completed its open-market purchases, the market price
of a Common Share exceeds the net asset value per Common Share, the average per
Common Share purchase price paid by the Plan Agent may exceed the net asset
value of the Fund's Common Shares, resulting in the acquisition of fewer Common
Shares than if the distribution had been paid in newly issued Common Shares on
the distribution payment date. Therefore, the Plan provides that if the Plan
Agent is unable to invest the full distribution amount in open-market purchases
during the purchase period or if the market discount shifts to a market premium
during the purchase period, the Plan Agent will cease making open-market
purchases and will invest the uninvested portion of the distribution amount in
newly issued Common Shares.

The Plan Agent maintains all Common Shareholders' accounts in the Plan and
furnishes written confirmation of all transactions in the accounts, including
information needed by Common Shareholders for tax records. Common Shares in the
account of each Plan participant will be held by the Plan Agent on behalf of the
Plan participant, and each Common Shareholder proxy will include those Common
Shares purchased or received pursuant to the Plan. The Plan Agent will forward
all proxy solicitation materials to participants and vote proxies for Common
Shares held pursuant to the Plan in accordance with the instructions of the
participants. In the case of Common Shareholders such as banks, brokers or
nominees that hold Common Shares for others who are the beneficial owners, the
Plan Agent will administer the Plan on the basis of the number of Common Shares
certified from time to time by the record Common Shareholder's name and held for
the account of beneficial owners who participate in the Plan.

There will be no brokerage charges with respect to Common Shares issued directly
by the Fund as a result of distributions payable either in Common Shares or in
cash. However, each participant will pay a pro rata share of brokerage
commissions incurred with respect to the Plan Agent's open-market purchases in
connection with the reinvestment of distributions.

Common Shareholders participating in the Plan may receive benefits not available
to Common Shareholders not participating in the Plan. If the market price (plus
commissions) of the Fund's Common Shares is above their net asset value,
participants in the Plan will receive Common Shares of the Fund at less than
they could otherwise purchase them and will have Common Shares with a cash value
greater than the value of any cash distribution they would have received on
their Common Shares. If the market price plus commissions is below the net asset
value, participants will receive distributions in Common Shares with a net asset
value greater than the per Common Share value of any cash distribution they
would have received on their Common Shares. However, there may be insufficient
Common Shares available in the market to make distributions in Common Shares at
prices

--------------------------------------------------------------------------------
39

DIVIDEND REINVESTMENT PLAN
--------------------------------------------------------------------------------

below the net asset value. Also, since the Fund does not redeem its Common
Shares, the price on resale may be more or less than the net asset value.

Experience under the Plan may indicate that changes are desirable. Accordingly,
upon 30 days' notice to Plan participants, the Fund reserves the right to amend
or terminate the Plan. A Plan participant will be charged a $5.00 service charge
and pay brokerage charges whenever he or she directs the Plan Agent to sell
Common Shares held in a dividend reinvestment account.

All correspondence concerning the Plan should be directed to the Plan Agent at
PFPC Inc., P.O. Box 43027, Providence, Rhode Island 02940-3027. Please call
1-800-331-1710 between the hours of 9:00 a.m. and 5:00 p.m. Eastern Standard
Time if you have questions regarding the Plan.

Description of capital structure

The Fund is an unincorporated business trust established under the laws of The
Commonwealth of Massachusetts by an Agreement and Declaration of Trust dated
November 8, 2004 and filed with the Secretary of The Commonwealth on November 9,
2004 (the "Declaration of Trust"). The Declaration of Trust provides that the
Board may authorize separate classes of shares of beneficial interest. The Board
has authorized an unlimited number of Common Shares. The Fund intends to hold
annual meetings of Common Shareholders in compliance with the requirements of
the New York Stock Exchange.

COMMON SHARES

The Declaration of Trust permits the Fund to issue an unlimited number of full
and fractional common shares of beneficial interest, $0.01 par value per share.
Each Common Share represents an equal proportionate interest in the assets of
the Fund with each other Common Share in the Fund. Holders of Common Shares will
be entitled to the payment of distributions when, as and if declared by the
Board. The 1940 Act or the terms of any future borrowings or issuance of
preferred shares may limit the payment of distributions to the holders of Common
Shares. Each whole Common Share shall be entitled to one vote as to matters on
which it is entitled to vote pursuant to the terms of the Declaration of Trust
on file with the SEC. Upon liquidation of the Fund, after paying or adequately
providing for the payment of all liabilities of the Fund and the liquidation
preference with respect to any outstanding preferred shares, and upon receipt of
such releases, indemnities and refunding agreements as they deem necessary for
their protection, the Board may distribute the remaining assets of the Fund
among the holders of the Common Shares. The Declaration of Trust provides that
Common Shareholders are not liable for any liabilities of the Fund, and permits
inclusion of a clause to that effect in agreements entered into by the Fund and
in coordination with the Fund's By-laws indemnifies shareholders against any
such liability. Although shareholders of an unincorporated business trust
established under Massachusetts law, in certain limited circumstances, may be
held personally liable for the obligations of the business trust as though they
were general partners, the provisions of the Fund's Declaration of Trust and
By-laws described in the foregoing sentence make the likelihood of such personal
liability remote.

The Fund has no current intention to issue preferred shares or to borrow money.
However, if at some future time, there are any borrowings or preferred shares
outstanding, the Fund may not be permitted to declare any cash distribution on
its Common Shares, unless at the time of such declaration, (i) all accrued
distributions on preferred shares or accrued interest on borrowings have been
paid and (ii) the value of the Fund's total assets (determined after deducting
the amount of such distribution), less all liabilities and indebtedness of the
Fund not represented by senior securities, is at least 300% of the aggregate
amount of such securities representing indebtedness and at least 200% of the
aggregate amount of securities representing indebtedness plus the aggregate
liquidation value of the outstanding preferred shares (expected to equal the
aggregate original purchase price of the outstanding preferred

--------------------------------------------------------------------------------
40

DESCRIPTION OF CAPITAL STRUCTURE
--------------------------------------------------------------------------------

shares plus redemption premium, if any, together with any accrued and unpaid
distributions thereon, whether or not earned or declared and on a cumulative
basis). In addition to the requirements of the 1940 Act, the Fund may be
required to comply with other asset coverage requirements as a condition of the
Fund obtaining a rating of preferred shares from a nationally recognized
statistical rating agency (a "Rating Agency"). These requirements may include an
asset coverage test more stringent than under the 1940 Act. This limitation on
the Fund's ability to make distributions on its Common Shares could in certain
circumstances impair the ability of the Fund to maintain its qualification for
taxation as a regulated investment company for federal income tax purposes. If
the Fund were in the future to issue preferred shares or borrow money, it would
intend, however, to the extent possible to purchase or redeem preferred shares
or reduce borrowings from time to time to maintain compliance with such asset
coverage requirements and may pay special distributions to the holders of the
preferred shares in certain circumstances in connection with any potential
impairment of the Fund's status as a regulated investment company. See
"Distributions-Federal income tax matters." Depending on the timing of any such
redemption or repayment, the Fund may be required to pay a premium in addition
to the liquidation preference of the preferred shares to the holders thereof.

The Fund has no present intention of offering additional Common Shares, except
as described herein. Other offerings of its Common Shares, if made, will require
approval of the Board. Any additional offering will not be sold at a price per
Common Share below the then current net asset value (exclusive of underwriting
discounts and commissions) except in connection with an offering to existing
Common Shareholders or with the consent of a majority of the Fund's outstanding
Common Shares. The Common Shares have no preemptive rights.

The Fund generally will not issue Common Share certificates. However, upon
written request to the Fund's transfer agent, a share certificate will be issued
for any or all of the full Common Shares credited to an investor's account.
Common Share certificates that have been issued to an investor may be returned
at any time.

REPURCHASE OF COMMON SHARES AND OTHER DISCOUNT MEASURES

Because shares of closed-end management investment companies frequently trade at
a discount to their net asset values, the Board has determined that from time to
time it may be in the interest of Common Shareholders for the Fund to take
corrective actions. The Board, in consultation with Eaton Vance, will review at
least annually the possibility of open market repurchases and/or tender offers
for the Common Shares and will consider such factors as the market price of the
Common Shares, the net asset value of the Common Shares, the liquidity of the
assets of the Fund, the effect on the Fund's expenses, whether such transactions
would impair the Fund's status as a regulated investment company or result in a
failure to comply with applicable asset coverage requirements, general economic
conditions and such other events or conditions, which may have a material effect
on the Fund's ability to consummate such transactions. There are no assurances
that the Board will, in fact, decide to undertake either of these actions or, if
undertaken, that such actions will result in the Common Shares trading at a
price equal to or approximates their net asset value. In recognition of the
possibility that the Common Shares might trade at a discount to net asset value
and that any such discount may not be in the interest of Common Shareholders,
the Board, in consultation with Eaton Vance, from time to time may review
possible actions to reduce any such discount.

PREFERRED SHARES

The Fund has no current intention of issuing any shares other than the Common
Shares. However, the Declaration of Trust authorizes the issuance of an
unlimited number of shares of beneficial interest with preference rights (the
"preferred shares") in one or more series, with rights as determined by the
Board, by action of the Board without the approval of the Common Shareholders.

--------------------------------------------------------------------------------
41

DESCRIPTION OF CAPITAL STRUCTURE
--------------------------------------------------------------------------------

Under the requirements of the 1940 Act, the Fund must, immediately after the
issuance of any preferred shares, have an "asset coverage" of at least 200%.
Asset coverage means the ratio which the value of the total assets of the Fund,
less all liability and indebtedness not represented by senior securities (as
defined in the 1940 Act), bears to the aggregate amount of senior securities
representing indebtedness of the Fund, if any, plus the aggregate liquidation
preference of the preferred shares. If the Fund seeks a rating of preferred
shares, asset coverage requirements, in addition to those set forth in the 1940
Act, may be imposed. The liquidation value of any preferred shares would be
expected to equal their aggregate original purchase price plus redemption
premium, if any, together with any accrued and unpaid distributions thereon (on
a cumulative basis), whether or not earned or declared. The terms of any
preferred shares, including their distribution rate, voting rights, liquidation
preference and redemption provisions, will be determined by the Board (subject
to applicable law and the Fund's Declaration of Trust) if and when it authorizes
preferred shares. The Fund may issue preferred shares that provide for the
periodic redetermination of the dividend rate at relatively short intervals
through an auction or remarketing procedure, although the terms of such
preferred shares may also enable the Fund to lengthen such intervals. At times,
the distribution rate as redetermined on any preferred shares could approach or
exceed the Fund's return after expenses on the investment of proceeds from the
preferred shares and the Fund's leveraged capital structure would result in a
lower rate of return to Common Shareholders than if the Fund were not so
structured.

In the event of any voluntary or involuntary liquidation, dissolution or winding
up of the Fund, the terms of any preferred shares may entitle the holders of
preferred shares to receive a preferential liquidating distribution (expected to
equal the original purchase price per share plus redemption premium, if any,
together with accrued and unpaid dividends, whether or not earned or declared
and on a cumulative basis) before any distribution of assets is made to holders
of Common Shares. After payment of the full amount of the liquidating
distribution to which they are entitled, the preferred shareholders would not be
entitled to any further participation in any distribution of assets by the Fund.
Holders of preferred shares, voting as a class, shall be entitled to elect two
of the Fund's Trustees, if any preferred shares are issued. Under the 1940 Act,
if at any time dividends on the preferred shares are unpaid in an amount equal
to two full years' dividends thereon, the holders of all outstanding preferred
shares, voting as a class, will be allowed to elect a majority of the Board
until all dividends in default have been paid or declared and set apart for
payment. In addition, if required by a Rating Agency rating the preferred shares
or if the Board determines it to be in the best interests of the Common
Shareholders, issuance of the preferred shares may result in more restrictive
provisions than required by the 1940 Act being imposed. In this regard, holders
of the preferred shares may be entitled to elect a majority of the Fund's Board
in other circumstances, for example, if one payment on the preferred shares is
in arrears.

In the event of any future issuance of preferred shares, the Fund likely would
seek a credit rating for such preferred shares from a Rating Agency. In such
event, as long as preferred shares are outstanding, the composition of its
portfolio will reflect guidelines established by such Rating Agency. Based on
previous guidelines established by such Rating Agencies for the securities of
other issuers, the Fund anticipates that the guidelines with respect to any
preferred shares would establish a set of tests for portfolio composition and
asset coverage that supplement (and in some cases are more restrictive than) the
applicable requirements under the 1940 Act. Although, at this time, no assurance
can be given as to the nature or extent of the guidelines, which may be imposed
in connection with obtaining a rating of any preferred shares, the Fund
anticipates that such guidelines would include asset coverage requirements that
are more restrictive than those under the 1940 Act, restrictions on certain
portfolio investments and investment practices, requirements that the Fund
maintain a portion of its assets in short-term, high-quality, fixed-income
securities and certain mandatory redemption requirements relating to any
preferred shares. No assurance can be given that the guidelines actually imposed
with

--------------------------------------------------------------------------------
42

DESCRIPTION OF CAPITAL STRUCTURE
--------------------------------------------------------------------------------

respect to any preferred shares by such Rating Agency would be more or less
restrictive than as described in this Prospectus.

CREDIT FACILITY/COMMERCIAL PAPER PROGRAM

The Fund has no current intention to borrow money for the purpose of obtaining
investment leverage. In the event the Fund in the future determines to engage in
investment leverage, in whole or in part, through borrowings, the Fund may enter
into definitive agreements with respect to a credit facility/ commercial paper
program or other borrowing program. The Fund may negotiate with commercial banks
to arrange a credit facility/commercial paper program pursuant to which the Fund
would expect to be entitled to borrow up to a specified amount. Any such
borrowings would constitute financial leverage. Such a facility/commercial paper
program would not be expected to be convertible into any other securities of the
Fund, outstanding amounts would be expected to be prepayable by the Fund prior
to final maturity without significant penalty and there are not expected to be
any sinking fund or mandatory retirement provisions. Outstanding amounts would
be payable at maturity or such earlier times as required by the agreement. The
Fund may be required to prepay outstanding amounts under the facility/program or
incur a penalty rate of interest in the event of the occurrence of certain
events of default. The Fund would be expected to indemnify the lenders under the
facility/program against liabilities they may incur in connection with the
facility/program.

In addition, the Fund expects that any such credit facility/program would
contain covenants that, among other things, likely would limit the Fund's
ability to pay distributions in certain circumstances, incur additional debt,
change its fundamental investment policies and engage in certain transactions,
including mergers and consolidations, and may require asset coverage ratios in
addition to those required by the 1940 Act. The Fund may be required to pledge
its assets and to maintain a portion of its assets in cash or high-grade
securities as a reserve against interest or principal payments and expenses. The
Fund expects that any credit facility/program would have customary covenant,
negative covenant and default provisions. There can be no assurance that the
Fund will enter into an agreement for a credit facility/program on terms and
conditions representative of the foregoing, or that additional material terms
will not apply. In addition, if entered into, any such credit facility/program
may in the future be replaced or refinanced by one or more credit facilities
having substantially different terms or by the issuance of preferred shares or
debt securities.

EFFECTS OF POSSIBLE FUTURE LEVERAGE

As discussed above, the Fund has no current intention to issue preferred shares
or to borrow money for the purpose of obtaining investment leverage. In the
event that the Fund determines in the future to utilize investment leverage,
there can be no assurance that such a leveraging strategy would be successful
during any period in which it is employed. Leverage creates risks for Common
Shareholders, including the likelihood of greater volatility of net asset value
and market price of the Common Shares and the risk that fluctuations in
distribution rates on any preferred shares or fluctuations in borrowing costs
may affect the return to Common Shareholders. To the extent the amounts
available for distribution derived from securities purchased with proceeds
received from leverage exceed the cost of leverage, the Fund's distributions
would be greater than if leverage had not been used. Conversely, if the amounts
available for distribution derived from securities purchased with such proceeds
are not sufficient to cover the cost of leverage, distributions to Common
Shareholders would be less than if leverage had not been used. In the latter
case, Eaton Vance, in its best judgment, may nevertheless determine to maintain
the Fund's leveraged position if it deems such action to be appropriate. The
costs of an offering of preferred shares and/or a borrowing program would be
borne by Common Shareholders and consequently would result in a reduction of the
net asset value of Common Shares.

In addition, the fee paid to Eaton Vance will be calculated on the basis of the
Fund's average daily gross assets, including proceeds from the issuance of
preferred shares and/or borrowings, so the fees

--------------------------------------------------------------------------------
43

DESCRIPTION OF CAPITAL STRUCTURE
--------------------------------------------------------------------------------

would be higher if leverage is utilized. In this regard, holders of preferred
shares would not bear the investment advisory fee. Rather, Common Shareholders
would bear the portion of the investment advisory fee attributable to the assets
purchased with the proceeds of the preferred shares offering.

ANTI-TAKEOVER PROVISIONS IN THE DECLARATION OF TRUST

The Declaration of Trust includes provisions that could have the effect of
limiting the ability of other entities or persons to acquire control of the Fund
or to change the composition of its Board and could have the effect of depriving
Common Shareholders of an opportunity to sell their Common Shares at a premium
over prevailing market prices by discouraging a third party from seeking to
obtain control of the Fund. These provisions may have the effect of discouraging
attempts to acquire control of the Fund, which attempts could have the effect of
increasing the expenses of the Fund and interfering with the normal operation of
the Fund. The Board is divided into three classes, with the term of one class
expiring at each annual meeting of Common Shareholders. At each annual meeting,
one class of Trustees is elected to a three-year term. This provision could
delay for up to two years the replacement of a majority of the Board. A Trustee
may be removed from office only for cause by a written instrument signed by the
remaining Trustees or by a vote of the holders of at least two-thirds of the
class of shares of the Fund that elected such Trustee and are entitled to vote
on the matter.

In addition, the Declaration of Trust requires the favorable vote of the holders
of at least 75% of the outstanding shares of each class of the Fund, voting as a
class, then entitled to vote to approve, adopt or authorize certain transactions
with 5%-or-greater holders of a class of shares and their associates, unless the
Board shall by resolution have approved a memorandum of understanding with such
holders, in which case normal voting requirements would be in effect. For
purposes of these provisions, a 5%-or-greater holder of a class of shares (a
"Principal Shareholder") refers to any person who, whether directly or
indirectly and whether alone or together with its affiliates and associates,
beneficially owns 5% or more of the outstanding shares of any class of
beneficial interest of the Fund. The transactions subject to these special
approval requirements are: (i) the merger or consolidation of the Fund or any
subsidiary of the Fund with or into any Principal Shareholder; (ii) the issuance
of any securities of the Fund to any Principal Shareholder for cash; (iii) the
sale, lease or exchange of all or any substantial part of the assets of the Fund
to any Principal Shareholder (except assets having an aggregate fair market
value of less than $1,000,000, aggregating for the purpose of such computation
all assets sold, leased or exchanged in any series of similar transactions
within a twelve-month period); or (iv) the sale, lease or exchange to the Fund
or any subsidiary thereof, in exchange for securities of the Fund, of any assets
of any Principal Shareholder (except assets having an aggregate fair market
value of less than $1,000,000, aggregating for the purposes of such computation
all assets sold, leased or exchanged in any series of similar transactions
within a twelve-month period).

The Board has determined that provisions with respect to the Board and the 75%
voting requirements described above, which voting requirements are greater than
the minimum requirements under Massachusetts law or the 1940 Act, are in the
best interest of Common Shareholders generally. Reference should be made to the
Declaration of Trust on file with the SEC for the full text of these provisions.

CONVERSION TO OPEN-END FUND

The Fund may be converted to an open-end management investment company at any
time if approved by the lesser of (i) two-thirds or more of the Fund's then
outstanding Common Shares and preferred shares (if any), each voting separately
as a class, or (ii) more than 50% of the then outstanding Common Shares and
preferred shares (if any), voting separately as a class if such conversion is
recommended by at least 75% of the Trustees then in office. If approved in the
foregoing manner, conversion of the Fund could not occur until 90 days after the
shareholders' meeting at which such conversion was approved and would also
require at least 30 days' prior notice to all shareholders. Conversion of the
Fund to an open-end management investment company also would require the

--------------------------------------------------------------------------------
44

DESCRIPTION OF CAPITAL STRUCTURE
--------------------------------------------------------------------------------

redemption of any outstanding preferred shares and could require the repayment
of borrowings, which would eliminate any future leveraged capital structure of
the Fund with respect to the Common Shares. In the event of conversion, the
Common Shares would cease to be listed on the New York Stock Exchange or other
national securities exchange or market system. The Board believes that the
closed-end structure is desirable, given the Fund's investment objectives and
policies. Investors should assume, therefore, that it is unlikely that the Board
would vote to convert the Fund to an open-end management investment company.
Shareholders of an open-end management investment company may require the
company to redeem their shares at any time (except in certain circumstances as
authorized by or under the 1940 Act) at their net asset value, less such
redemption charge, if any, as might be in effect at the time of a redemption. If
the Fund were to convert to an open-end investment company, the Fund expects it
would pay all such redemption requests in cash, but would likely reserve the
right to pay redemption requests in a combination of cash or securities. If such
partial payment in securities were made, investors may incur brokerage costs in
converting such securities to cash. If the Fund were converted to an open-end
fund, it is likely that new Common Shares would be sold at net asset value plus
a sales load.

--------------------------------------------------------------------------------
45

--------------------------------------------------------------------------------

Underwriting

The underwriters named below (the "Underwriters"), acting through UBS Securities
LLC, 299 Park Avenue, New York, New York, Merrill Lynch, Pierce, Fenner & Smith
Incorporated, 4 World Financial Center, New York, New York, and Wachovia Capital
Markets, LLC, 7 St. Paul Street, 1st Floor, Baltimore, Maryland, as lead
managers and A.G. Edwards & Sons, Inc., H&R Block Financial Advisors, Inc.,
J.J.B. Hilliard, W.L. Lyons, Inc., Oppenheimer & Co. Inc., Raymond James &
Associates, Inc., RBC Capital Markets Corporation and Wells Fargo Securities,
LLC, as their representatives (together with the lead managers, the
"Representatives"), have severally agreed, subject to the terms and conditions
of the Underwriting Agreement with the Fund, Eaton Vance and Rampart (the
"Underwriting Agreement"), to purchase from the Fund the number of Common Shares
set forth opposite their respective names. The Underwriters are committed to
purchase and pay for all of such Common Shares (other than those covered by the
over-allotment option described below) if any are purchased.

NUMBER OF
UNDERWRITERS COMMON SHARES
---------------------------------------------------------------------------

UBS Securities LLC.......................................... 9,400,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................... 9,400,000
Wachovia Capital Markets, LLC............................... 9,400,000
A.G. Edwards & Sons, Inc. .................................. 2,800,000
H&R Block Financial Advisors, Inc. ......................... 1,000,000
J.J.B. Hilliard, W.L. Lyons, Inc. .......................... 650,000
Oppenheimer & Co. Inc. ..................................... 500,000
Raymond James & Associates, Inc. ........................... 2,000,000
RBC Capital Markets Corporation............................. 2,000,000
Wells Fargo Securities, LLC................................. 2,000,000
Piper Jaffray & Co. ........................................ 600,000
Advest, Inc. ............................................... 300,000
Robert W. Baird & Co. Incorporated.......................... 300,000
Legg Mason Wood Walker, Incorporated........................ 300,000
Brookstreet Securities Corp................................. 200,000
KeyBanc Capital Markets, a division of McDonald Investments,
Inc. ..................................................... 200,000
Morgan Keegan & Company, Inc. .............................. 200,000
SunTrust Capital Markets, Inc. ............................. 200,000
Crowell, Weedon & Co. ...................................... 100,000
FBT Investments, Inc. ...................................... 100,000
Ferris, Baker Watts, Incorporated........................... 100,000
J.B. Hanauer & Co. ......................................... 100,000
Royal Alliance Associates, Inc., a SunAmerica Company....... 100,000
Ryan, Beck & Co., Inc. ..................................... 100,000
SouthTrust Securities Inc. ................................. 100,000
Stone & Youngberg LLC....................................... 100,000
TD Waterhouse Investor Services, Inc. ...................... 100,000
Wedbush Morgan Securities Inc. ............................. 100,000
B.C. Ziegler and Company.................................... 100,000

--------------------------------------------------------------------------------
46

UNDERWRITING
--------------------------------------------------------------------------------

NUMBER OF
UNDERWRITERS COMMON SHARES
---------------------------------------------------------------------------

Axiom Capital Management, Inc. ............................. 50,000
BB&T Capital Markets, a division of Scott & Stringfellow,
Inc. ..................................................... 50,000
Cadaret, Grant & Co., Inc. ................................. 50,000
D.A. Davidson & Co. Inc. ................................... 50,000
Finance 500, Inc. .......................................... 50,000
First Southwest Company..................................... 50,000
Gunnallen Financial, Inc. .................................. 50,000
J.P. Turner & Company, L.L.C. .............................. 50,000
Mesirow Financial, Inc. .................................... 50,000
David A. Noyes & Company.................................... 50,000
Parker/Hunter Incorporated.................................. 50,000
Paulson Investment Company, Incorporated.................... 50,000
Peacock, Hislop, Staley & Given, Inc. ...................... 50,000
Sanders Morris Harris Inc. ................................. 50,000
Smith Hayes Financial Services Corporation.................. 50,000
Southwest Securities, Inc. ................................. 50,000
Spelman & Co., Inc. ........................................ 50,000
Stanford Group Company...................................... 50,000
Stephens Inc. .............................................. 50,000
M.L. Stern & Co., LLC....................................... 50,000
Sterne, Agee & Leach, Inc. ................................. 50,000
Strand, Atkinson, Williams & York, Inc. .................... 50,000
Trubee, Collins & Co., Inc. ................................ 50,000
Wunderlich Securities, Inc. ................................ 50,000
-------------
Total..................................................... 43,750,000
=============

The Fund has granted to the Underwriters an option, exercisable for 45 days from
the date of this Prospectus, to purchase up to an additional 6,562,500 Common
Shares to cover over-allotments, if any, at the initial offering price. The
Underwriters may exercise such option solely for the purpose of covering
underwriting over-allotments incurred in the sale of the Common Shares offered
hereby. To the extent that the Underwriters exercise this option, each of the
Underwriters will have a firm commitment, subject to certain conditions, to
purchase an additional number of Common Shares proportionate to such
Underwriter's initial commitment.

The Fund has agreed to pay a commission to the Underwriters in the amount of
$0.90 per Common Share (4.50% of the public offering price per Common Share).
The Representatives have advised the Fund that the Underwriters may pay up to
$0.60 per Common Share from such commission to selected dealers who sell the
Common Shares and that such dealers may reallow a concession of up to $0.10 per
Common Share to certain other dealers who sell Common Shares. Eaton Vance or an
affiliate has agreed to (i) reimburse all organizational costs and (ii) pay all
offering costs of the Fund (other than sales loads) that exceed $0.04 per Common
Share. Investors must pay for any Common Shares purchased on or before January
31, 2005.

Prior to this offering, there has been no public market for the Common Shares or
any other securities of the Fund. Consequently, the offering price for the
Common Shares was determined by negotiation among the Fund and the
Representatives. There can be no assurance, however, that the price at which
Common Shares sell after this offering will not be lower than the price at which
they are sold by the

--------------------------------------------------------------------------------
47

UNDERWRITING
--------------------------------------------------------------------------------

Underwriters or that an active trading market in the Common Shares will develop
and continue after this offering. The minimum investment requirement is 100
Common Shares ($2,000).

The Fund, Eaton Vance and Rampart have each agreed to indemnify the several
Underwriters for or to contribute to the losses arising out of certain
liabilities, including liabilities under the Securities Act of 1933, as amended.

The Fund has agreed not to offer, sell or register with the Securities and
Exchange Commission any additional equity securities of the Fund, other than
issuances of Common Shares, including pursuant to the Fund's Plan, and issuances
in connection with any preferred shares, each as contemplated in this
Prospectus, for a period of 180 days after the date of the Underwriting
Agreement without the prior written consent of the Representatives.

The Representatives have informed the Fund that the Underwriters do not intend
to confirm sales to any accounts over which they exercise discretionary
authority.

In connection with this offering, the Underwriters may purchase and sell Common
Shares in the open market. These transactions may include over-allotment and
stabilizing transactions and purchases to cover syndicate short positions
created in connection with this offering. Stabilizing transactions consist of
certain bids or purchases for the purpose of preventing or retarding a decline
in the market price of the Common Shares and syndicate short positions involve
the sale by the Underwriters of a greater number of Common Shares than they are
required to purchase from the Fund in this offering. The Underwriters also may
impose a penalty bid, whereby selling concessions allowed to syndicate members
or other broker-dealers in respect of the Common Shares sold in this offering
for their account may be reclaimed by the syndicate if such Common Shares are
repurchased by the syndicate in stabilizing or covering transactions. These
activities may stabilize, maintain or otherwise affect the market price of the
Common Shares, which may be higher than the price that might otherwise prevail
in the open market; and these activities, if commenced, may be discontinued at
any time without notice. These transactions may be effected on the New York
Stock Exchange or otherwise.

The Fund anticipates that the Representatives and certain other Underwriters may
from time to time act as brokers or dealers in connection with the execution of
its portfolio transactions after they have ceased to be Underwriters and,
subject to certain restrictions, may act as such brokers while they are
Underwriters.

In connection with the offering, certain of the Underwriters or selected dealers
may distribute prospectuses electronically.

Eaton Vance (and not the Fund) has agreed pursuant to an additional compensation
agreement (the "Additional Compensation Agreement") to pay to certain qualifying
Underwriters who meet specified sales targets ("Qualifying Underwriters"),
quarterly in arrears, an annual fee of up to 0.15% of the Fund's average daily
gross assets attributable to Common Shares sold by such Qualifying Underwriters
(including a proportionate share of assets that may in the future be acquired
using leverage). Such sales targets may be waived or lowered with respect to any
Underwriter in the sole discretion of Eaton Vance. These fee payments will
remain in effect only so long as the Advisory Agreement remains in effect
between the Fund and Eaton Vance or any successor in interest or affiliate of
Eaton Vance, as and to the extent that such Advisory Agreement is renewed
periodically in accordance with the 1940 Act. The sum of the additional
compensation payable to the Qualifying Underwriters will not exceed 1.619% of
the aggregate initial offering price of the Common Shares offered hereby.
Merrill Lynch, Pierce, Fenner & Smith Incorporated will receive additional
compensation which will not exceed 0.802% of the aggregate initial offering
price of the Common Shares offered hereby. Wachovia Capital Markets, LLC will
receive additional compensation which will not exceed 0.655% of the aggregate
initial offering price of the Common Shares offered hereby. A.G. Edwards & Sons,
Inc. will receive

--------------------------------------------------------------------------------
48

UNDERWRITING
--------------------------------------------------------------------------------

additional compensation which will not exceed 0.162% of the aggregate initial
offering price of the Common Shares offered hereby.

Pursuant to a shareholder servicing agreement (the "Shareholder Servicing
Agreement") between UBS Securities LLC (the "Shareholder Servicing Agent") and
Eaton Vance, the Shareholder Servicing Agent will (i) at the request of and as
specified by Eaton Vance, undertake to make available public information
pertaining to the Fund on an ongoing basis and to communicate to investors and
prospective investors the Fund's features and benefits (including arranging
periodic seminars or conference calls for Eaton Vance to communicate to
investors, responding to questions from current or prospective shareholders and
contacting specific shareholders, where appropriate), provided that services
shall not include customary market research information provided by the
Shareholder Servicing Agent or its registered broker-dealer affiliates in the
ordinary course of their business; (ii) at the request of and as specified by
Eaton Vance, make available to investors and prospective investors market price,
net asset value, yield and other information regarding the Fund (provided that
services shall not include customary market research information provided by the
Shareholder Servicing Agent or its registered broker-dealer affiliates in the
ordinary course of their business), if reasonably obtainable, for the purpose of
maintaining the visibility of the Fund in the investor community; (iii) at the
request of Eaton Vance or the Fund, provide certain economic research and
statistical information and reports, if reasonably obtainable, to Eaton Vance or
the Fund and consult with representatives of Eaton Vance and/or the Board in
connection therewith, which information and reports shall include: (a)
statistical and financial market information with respect to the Fund's market
performance; and (b) comparative information regarding the Fund and other
closed-end management investment companies with respect to (1) the net asset
value of their respective shares, (2) the respective market performance of the
Fund and such other companies, and (3) other relevant performance indicators.
Except as legally required, such information and reports may not be quoted or
referred to, orally or in writing, reproduced or disseminated by the Fund or any
of its affiliates or any of their agents, without the prior written consent of
the Shareholder Servicing Agent, which consent will not be unreasonably
withheld; and (iv) at the request of Eaton Vance or the Fund, provide
information to and consult with Eaton Vance and/or the Board with respect to
applicable strategies designed to address market value discounts, which may
include share repurchases, tender offers, modifications to dividend policies or
capital structure, repositioning or restructuring of the Fund, conversion of the
Fund to an open-end investment company, liquidation or merger; including
providing information concerning the use and impact of the above strategic
alternatives by other market participants; provided, however, that under the
terms of the Shareholder Servicing Agreement, the Shareholder Servicing Agent is
not obligated to render any opinions, valuations or recommendations of any kind
or to perform any such similar services. For these services, Eaton Vance will
pay the Shareholder Servicing Agent a fee computed daily and payable quarterly
equal, on an annual basis, to 0.10% of the Fund's average daily gross assets.
The total of all of the payments payable to the Shareholder Servicing Agent
under the Shareholder Servicing Agreement will not exceed 2.881% of the
aggregate initial offering price of the Common Shares offered hereby. Under the
terms of the Shareholder Servicing Agreement, the Shareholder Servicing Agent is
relieved from liability to Eaton Vance, or the Fund for any act or omission to
act in the course of its performance under the Shareholder Servicing Agreement
in the absence of bad faith, gross negligence or willful misconduct on the part
of the Shareholder Servicing Agent. The Shareholder Servicing Agreement will
continue so long as the Advisory Agreement remains in effect between the Fund
and the Adviser or any successor in interest or affiliate of the Adviser, as and
to the extent that such Advisory Agreement is renewed periodically in accordance
with the 1940 Act.

The total compensation received by the Underwriters will not exceed 9.00% of the
aggregate initial offering price of the Common Shares offered hereby.

--------------------------------------------------------------------------------
49

--------------------------------------------------------------------------------

Shareholder Servicing Agent, custodian and transfer agent

As described above under "Underwriting," UBS Securities LLC will provide
shareholder services to the Fund pursuant to the Shareholder Servicing Agreement
with Eaton Vance.

Investors Bank & Trust Company ("IBT"), 200 Clarendon Street, Boston,
Massachusetts 02116 is the custodian of the Fund and will maintain custody of
the securities and cash of the Fund. IBT maintains the Fund's general ledger and
computes net asset value per share daily. IBT also attends to details in
connection with the sale, exchange, substitution, transfer and other dealings
with the Fund's investments and receives and disburses all funds. IBT also
assists in preparation of shareholder reports and the electronic filing of such
reports with the SEC.

PFPC Inc., P.O. Box 43027, Providence, Rhode Island 02940-3027 is the transfer
agent and dividend disbursing agent of the Fund.

Legal opinions

Certain legal matters in connection with the Common Shares will be passed upon
for the Fund by Kirkpatrick & Lockhart Nicholson Graham LLP, Boston,
Massachusetts, and for the Underwriters by Skadden, Arps, Slate, Meagher & Flom
LLP, Chicago, Illinois.

Reports to shareholders

The Fund will send to Common Shareholders unaudited semi-annual and audited
annual reports, including a list of investments held.

Independent registered public accounting firm

Deloitte & Touche, LLP, Boston, Massachusetts are the independent registered
public accounting firm for the Fund and will audit the Fund's financial
statements.

Additional information

The Prospectus and the Statement of Additional Information do not contain all of
the information set forth in the Registration Statement that the Fund has filed
with the SEC. The complete Registration Statement may be obtained from the SEC
upon payment of the fee prescribed by its rules and regulations. The Statement
of Additional Information can be obtained without charge by calling 1-800-
225-6265.

Statements contained in this Prospectus as to the contents of any contract or
other documents referred to are not necessarily complete, and, in each instance,
reference is made to the copy of such contract or other document filed as an
exhibit to the Registration Statement of which this Prospectus forms a part,
each such statement being qualified in all respects by such reference.

--------------------------------------------------------------------------------
50

--------------------------------------------------------------------------------

Table of contents for the
Statement of Additional Information

Additional investment information and restrictions.......... 2
Trustees and officers....................................... 7
Investment advisory and other services...................... 15
Determination of net asset value............................ 18
Portfolio trading........................................... 20
Taxes....................................................... 22
Other information........................................... 27
Independent registered public accounting firm............... 27
Statement of assets and liabilities......................... 29
Notes to financial statements............................... 30

The Fund's privacy policy

The Fund is committed to ensuring your financial privacy. This notice is being
sent to comply with privacy regulations of the Securities and Exchange
Commission. The Fund has in effect the following policy with respect to
nonpublic personal information about its customers:

- Only such information received from you, through application forms or
otherwise, and information about your Fund transactions will be collected.

- None of such information about you (or former customers) will be disclosed to
anyone, except as permitted by law (which includes disclosure to employees
necessary to service your account).

- Policies and procedures (including physical, electronic and procedural
safeguards) are in place that are designed to protect the confidentiality of
such information.

For more information about the Fund's privacy policies call 1-800-262-1122.

--------------------------------------------------------------------------------
51

[EATON VANCE LOGO]

CE-EEIF2FP

STATEMENT OF ADDITIONAL INFORMATION
--------------------------------------------------------------------------------

STATEMENT OF ADDITIONAL INFORMATION
January 26, 2005

EATON VANCE ENHANCED EQUITY INCOME FUND II

THE EATON VANCE BUILDING
255 STATE STREET
BOSTON, MASSACHUSETTS 02109
(800) 225-6265

TABLE OF CONTENTS
--------------------------------------------------------------------------------

PAGE
----

THIS STATEMENT OF ADDITIONAL INFORMATION ("SAI") IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY THE PROSPECTUS OF EATON VANCE ENHANCED EQUITY INCOME FUND II (THE
"FUND") DATED JANUARY 26, 2005 (THE "PROSPECTUS"), AS SUPPLEMENTED FROM TIME TO
TIME, WHICH IS INCORPORATED HEREIN BY REFERENCE. THIS SAI SHOULD BE READ IN
CONJUNCTION WITH SUCH PROSPECTUS, A COPY OF WHICH MAY BE OBTAINED WITHOUT CHARGE
BY CONTACTING YOUR FINANCIAL INTERMEDIARY OR CALLING THE FUND AT 1-800-225-6265.

Capitalized terms used in this SAI and not otherwise defined have the meanings
given them in the Fund's Prospectus.

Additional investment information and restrictions

Primary investment strategies are described in the Prospectus. The following is
a description of the various investment policies that may be engaged in, whether
as a primary or secondary strategy, and a summary of certain attendant risks.
Eaton Vance may not buy any of the following instruments or use any of the
following techniques unless it believes that doing so will help to achieve the
Fund's investment objectives.

Equity investments. As described in the Prospectus, the Fund invests primarily
in common stocks.

Emerging Markets. The Fund may invest up to 5% of its total assets in
securities of issuers located in emerging markets. The risks of foreign
investments described in the prospectus apply to an even greater extent to
investments in emerging markets. The securities markets of emerging countries
are generally smaller, less developed, less liquid, and more volatile than the
securities markets of the U.S. and developed foreign markets. Disclosure and
regulatory standards in many respects are less stringent than in the U.S. and
developed foreign markets. There also may be a lower level of monitoring and
regulation of securities markets in emerging market countries and the activities
of investors in such markets and enforcement of existing regulations has been
extremely limited. Many emerging countries have experienced substantial, and in
some periods extremely high, rates of inflation for many years. Inflation and
rapid fluctuations in inflation rates have had and may continue to have very
negative effects on the economies and securities markets of certain emerging
countries. Economies in emerging markets generally are heavily dependent upon
international trade and, accordingly, have been and may continue to be affected
adversely by trade barriers, exchange controls, managed adjustments in relative
currency values, and other protectionist measures imposed or negotiated by the
countries with which they trade. The economies of these countries also have been
and may continue to be adversely affected by economic conditions in the
countries in which they trade. The economies of countries with emerging markets
may also be predominantly based on only a few industries or dependent on
revenues from particular commodities. In addition, custodial services and other
costs relating to investment in foreign markets may be more expensive in
emerging markets than in many developed foreign markets, which could reduce the
Fund's income from such securities.

In many cases, governments of emerging countries continue to exercise
significant control over their economies, and government actions relative to the
economy, as well as economic developments generally, may affect the Fund's
investments in those countries. In addition, there is a heightened possibility
of expropriation or confiscatory taxation, imposition of withholding taxes on
interest payments, or other similar developments that could affect investments
in those countries. There can be no assurance that adverse political changes
will not cause the Fund to suffer a loss of any or all of its investments.

Preferred Stocks. The Fund may invest in preferred stocks of both domestic and
foreign issuers. Under normal market conditions, the Fund expects, with respect
to that portion of its total assets invested in preferred stocks, to invest only
in preferred stocks of investment grade quality as determined by S&P, Fitch or
Moody's or, if unrated, determined to be of comparable quality by Eaton Vance.
The foregoing credit quality policies apply only at the time a security is
purchased, and the Fund is not required to dispose of a security in the event of
a downgrade of an assessment of credit quality or the withdrawal of a rating.
Preferred stocks involve credit risk, which is the risk that a preferred stock
will decline in price, or fail to pay dividends when expected, because the
issuer experiences a decline in its financial status. In addition to credit
risk, investment in preferred stocks involves certain other risks as more fully
described in the Prospectus.

Derivative instruments. Derivative instruments (which are instruments that
derive their value from another instrument, security or index) may be purchased
or sold to enhance return (which may be

--------------------------------------------------------------------------------
2

ADDITIONAL INVESTMENT INFORMATION AND RESTRICTIONS
--------------------------------------------------------------------------------

considered speculative), to hedge against fluctuations in securities prices or
market conditions, or as a substitute for the purchase or sale of securities or
currencies. These strategies may be executed through the use of derivative
contracts in the United States. or abroad. In the course of pursuing these
investment strategies, the Fund may purchase and sell exchange-listed and
over-the-counter put and call options on securities, equity and fixed-income
indices and other instruments, purchase and sell futures contracts and options
thereon, and enter into various transactions such as swaps, caps, floors or
collars. In addition, derivatives may also include new techniques, instruments
or strategies that are permitted as regulatory changes occur. Transactions in
derivative instruments involve a risk of loss or depreciation due to:
unanticipated adverse changes in securities prices, interest rates, indices, or
the other financial instruments' prices; the inability to close out a position;
default by the counterparty; imperfect correlation between a position and the
desired hedge; tax constraints on closing out positions; and portfolio
management constraints on securities subject to such transactions. The loss on
derivative instruments (other than purchased options) may substantially exceed
an investment in these instruments. In addition, the entire premium paid for
purchased options may be lost before they can be profitably exercised.
Transaction costs are incurred in opening and closing positions. Derivative
instruments may sometimes increase or leverage exposure to a particular market
risk, thereby increasing price volatility. Over-the-counter ("OTC") derivative
instruments, equity swaps and forward sales of stocks involve an enhanced risk
that the issuer or counterparty will fail to perform its contractual
obligations. Some derivative instruments are not readily marketable or may
become illiquid under adverse market conditions. In addition, during periods of
market volatility, a commodity exchange may suspend or limit trading in an
exchange-traded derivative instrument, which may make the contract temporarily
illiquid and difficult to price. Commodity exchanges may also establish daily
limits on the amount that the price of a futures contract or futures option can
vary from the previous day's settlement price. Once the daily limit is reached,
no trades may be made that day at a price beyond the limit. This may prevent the
closing out of positions to limit losses. The staff of the SEC takes the
position that certain purchased OTC options, and assets used as cover for
written OTC options, are illiquid. The ability to terminate OTC derivative
instruments may depend on the cooperation of the counterparties to such
contracts. For thinly traded derivative instruments, the only source of price
quotations may be the selling dealer or counterparty. In addition, certain
provisions of the Internal Revenue Code of 1986, as amended (the "Code") limit
the use of derivative instruments. The Fund has claimed an exclusion from the
definition of a Commodity Pool Operator ("CPO") under the Commodity Exchange Act
and therefor is not subject to registration or regulation as a CPO. There can be
no assurance that the use of derivative instruments will be advantageous.

Foreign exchange traded futures contracts and options thereon may be used only
if the Adviser determines that trading on such foreign exchange does not entail
risks, including credit and liquidity risks, that are materially greater than
the risks associated with trading on CFTC-regulated exchanges.

Purchasing securities to close out the short position can itself cause the price
of the securities to rise further, thereby exacerbating the loss. Short-selling
exposes the Fund to unlimited risk with respect to that security due to the lack
of an upper limit on the price to which an instrument can rise. Although the
Fund reserves the right to utilize short sales, the Adviser is under no
obligation to utilize short sales at all.

SECURITIES LENDING
As described in the Prospectus, the Fund may lend a portion of its portfolio
securities to broker-dealers or other institutional borrowers. Loans will be
made only to organizations whose credit quality or

--------------------------------------------------------------------------------
3

ADDITIONAL INVESTMENT INFORMATION AND RESTRICTIONS
--------------------------------------------------------------------------------

claims paying ability is considered by the Adviser to be at least investment
grade. All securities loans will be collateralized on a continuous basis by cash
or U.S. government securities having a value, marked to market daily, of at
least 100% of the market value of the loaned securities. The Fund may receive
loan fees in connection with loans that are collateralized by securities or on
loans of securities for which there is special demand. The Fund may also seek to
earn income on securities loans by reinvesting cash collateral in securities
consistent with its investment objectives and policies, seeking to invest at
rates that are higher than the "rebate" rate that it normally will pay to the
borrower with respect to such cash collateral. Any such reinvestment will be
subject to the investment policies, restrictions and risk considerations
described in the Prospectus and in this SAI.

Securities loans may result in delays in recovering, or a failure of the
borrower to return, the loaned securities. The defaulting borrower ordinarily
would be liable to the Fund for any losses resulting from such delays or
failures, and the collateral provided in connection with the loan normally would
also be available for that purpose. Securities loans normally may be terminated
by either the Fund or the borrower at any time. Upon termination and the return
of the loaned securities, the Fund would be required to return the related cash
or securities collateral to the borrower and it may be required to liquidate
longer term portfolio securities in order to do so. To the extent that such
securities have decreased in value, this may result in the Fund realizing a loss
at a time when it would not otherwise do so. The Fund also may incur losses if
it is unable to reinvest cash collateral at rates higher than applicable rebate
rates paid to borrowers and related administrative costs. These risks are
substantially the same as those incurred through investment leverage, and will
be subject to the investment policies, restrictions and risk considerations
described in the Prospectus and in this SAI.

The Fund will receive amounts equivalent to any interest or other distributions
paid on securities while they are on loan, and the Fund will not be entitled to
exercise voting or other beneficial rights on loaned securities. The Fund will
exercise its right to terminate loans and thereby regain these rights whenever
the Adviser considers it to be in the Fund's interest to do so, taking into
account the related loss of reinvestment income and other factors.

TEMPORARY INVESTMENTS
The Fund may invest temporarily in cash or cash equivalents. Cash equivalents
are highly liquid, short-term securities such as commercial paper, time
deposits, certificates of deposit, short-term notes and short-term U.S.
government obligations.

INVESTMENT RESTRICTIONS
The following investment restrictions of the Fund are designated as fundamental
policies and as such cannot be changed without the approval of the holders of a
majority of the Fund's outstanding voting securities, which as used in this SAI
means the lesser of (a) 67% of the shares of the Fund present or represented by
proxy at a meeting if the holders of more than 50% of the outstanding shares are
present or represented at the meeting or (b) more than 50% of outstanding shares
of the Fund. As a matter of fundamental policy the Fund may not:

(1) Borrow money, except as permitted by the Investment Company Act of 1940, as
amended (the "1940 Act"). The 1940 Act currently requires that any
indebtedness incurred by a closed-end investment company have an asset
coverage of at least 300%;

(2) Issue senior securities, as defined in the 1940 Act, other than (a)
preferred shares which immediately after issuance will have asset coverage
of at least 200%, (b) indebtedness which immediately after issuance will
have asset coverage of at least 300%, or (c) the borrowings permitted by
investment restriction (1) above. The 1940 Act currently defines "senior
security" as any bond, debenture, note or similar obligation or instrument
constituting a security and evidencing indebtedness and any stock of a class
having priority over any other class as to distribution of assets or payment
of dividends. Debt and equity securities issued by a closed-end

--------------------------------------------------------------------------------
4

ADDITIONAL INVESTMENT INFORMATION AND RESTRICTIONS
--------------------------------------------------------------------------------

investment company meeting the foregoing asset coverage provisions are
excluded from the general 1940 Act prohibition on the issuance of senior
securities;

(3) Purchase securities on margin (but the Fund may obtain such short-term
credits as may be necessary for the clearance of purchases and sales of
securities). The purchase of investment assets with the proceeds of a
permitted borrowing or securities offering will not be deemed to be the
purchase of securities on margin;

(4) Underwrite securities issued by other persons, except insofar as it may
technically be deemed to be an underwriter under the Securities Act of 1933,
as amended, in selling or disposing of a portfolio investment;

(5) Make loans to other persons, except by (a) the acquisition of loan
interests, debt securities and other obligations in which the Fund is
authorized to invest in accordance with its investment objectives and
policies, (b) entering into repurchase agreements, and (c) lending its
portfolio securities;

(6) Purchase or sell real estate, although it may purchase and sell securities
which are secured by interests in real estate and securities of issuers
which invest or deal in real estate. The Fund reserves the freedom of action
to hold and to sell real estate acquired as a result of the ownership of
securities;

(7) Purchase or sell physical commodities or contracts for the purchase or sale
of physical commodities. Physical commodities do not include futures
contracts with respect to securities, securities indices, currencies,
interest or other financial instruments;

(8) With respect to 75% of its total assets, invest more than 5% of its total
assets in the securities of a single issuer or purchase more than 10% of the
outstanding voting securities of a single issuer, except obligations issued
or guaranteed by the U.S. government, its agencies or instrumentalities and
except securities of other investment companies; and

(9) Invest 25% or more of its total assets in any single industry or group of
industries (other than securities issued or guaranteed by the U.S.
government or its agencies or instrumentalities).

The Fund may borrow money as a temporary measure for extraordinary or emergency
purposes, including the payment of dividends and the settlement of securities
transactions which otherwise might require untimely dispositions of Fund
securities. The 1940 Act currently requires that the Fund have 300% asset
coverage with respect to all borrowings other than temporary borrowings.

For purposes of construing restriction (9), a large economic or market sector
shall not be construed as a group of industries.

The Fund has adopted the following nonfundamental investment policy which may be
changed by the Board without approval of the Fund's shareholders. As a matter of
nonfundamental policy, the Fund may not make short sales of securities or
maintain a short position, unless at all times when a short position is open it
either owns an equal amount of such securities or owns securities convertible
into or exchangeable, without payment of any further consideration, for
securities of the same issue as, and equal in amount to, the securities sold
short.

Upon the Board's approval, the Fund may invest more than 10% of its total assets
in one or more other management investment companies (or may invest in
affiliated investment companies) to the extent permitted by the 1940 Act and
rules thereunder.

Whenever an investment policy or investment restriction set forth in the
Prospectus or this SAI states a maximum percentage of assets that may be
invested in any security or other assets or describes a policy regarding quality
standards, such percentage limitation or standard shall be determined
immediately after and as a result of the Fund's acquisition of such security or
asset. Accordingly, any

--------------------------------------------------------------------------------
5

ADDITIONAL INVESTMENT INFORMATION AND RESTRICTIONS
--------------------------------------------------------------------------------

later increase or decrease resulting from a change in values, assets or other
circumstances or any subsequent rating change made by a rating service (or as
determined by the Adviser if the security is not rated by a rating agency) will
not compel the Fund to dispose of such security or other asset. Notwithstanding
the foregoing, the Fund must always be in compliance with the borrowing policies
set forth above.

--------------------------------------------------------------------------------
6

--------------------------------------------------------------------------------

Trustees and officers

The Trustees of the Fund are responsible for the overall management and
supervision of the affairs of the Fund. The Trustees and officers of the Fund
are listed below. Except as indicated, each individual has held the office shown
or other offices in the same company for the last five years. The "noninterested
Trustees" consist of those Trustees who are not "interested persons" of the
Fund, as that term is defined under the 1940 Act. The business address of each
Trustee and officer is The Eaton Vance Building, 255 State Street, Boston,
Massachusetts 02109. As used in this SAI, "EVC" refers to Eaton Vance Corp.,
"EV" refers to Eaton Vance, Inc., "BMR" refers to Boston Management and
Research, and "EVD" refers to Eaton Vance Distributors Inc. EVC and EV are the
corporate parent and trustee, respectively, of Eaton Vance and BMR. Eaton Vance
has engaged Rampart Investment Management Company, Inc. ("Rampart" or the
"Sub-Adviser") to serve as sub-adviser to the Fund to provide advice on and
execution of the construction of the Fund's equity portfolio and options
strategy, pursuant to an investment sub-advisory agreement (the "Sub-Advisory
Agreement") among the Fund, the Adviser and Rampart.

NUMBER OF
PORTFOLIOS IN
TERM OF OFFICE FUND COMPLEX OTHER
NAME AND POSITION(S) AND LENGTH PRINCIPAL OCCUPATION(S) OVERSEEN BY DIRECTORSHIPS
DATE OF BIRTH WITH THE FUND OF SERVICE DURING PAST FIVE YEARS TRUSTEE(1) HELD
----------------------------------------------------------------------------------------------------------------

INTERESTED TRUSTEE
James B. Hawkes Trustee(2) and Since 11/8/04 Chairman, President and 194 Director of EVC
11/9/41 Vice President Three Years Chief Executive Officer
of BMR, Eaton Vance,
EVC and EV; Director of
EV; Vice President and
Director of EVD.
Trustee and/or officer
of 194 registered
investment companies in
the Eaton Vance Fund
Complex. Mr. Hawkes is
an interested person
because of his
positions with BMR,
Eaton Vance, EVC and
EV, which are
affiliates of the Fund.
NONINTERESTED TRUSTEES
Samuel L. Hayes, III Trustee(2) Since 12/17/04 Jacob H. Schiff 194 Director of
2/23/35 Three Years Professor of Investment Tiffany & Co.
Banking Emeritus, (specialty
Harvard University retailer) and
Graduate School of Telect, Inc.
Business (telecommunication
Administration. services company)
William H. Park Trustee(3) Since 12/17/04 President and Chief 194 None
9/19/47 Three Years Executive Officer,
Prizm Capital
Management, LLC
(investment management
firm) (since 2002).
Executive Vice
President and Chief
Financial Officer,
United Asset Management
Corporation (a holding
company owning
institutional
investment management
firms) (1982-2001).

--------------------------------------------------------------------------------
7

TRUSTEES AND OFFICERS
--------------------------------------------------------------------------------

Ronald A. Pearlman Trustee(3) Since 12/17/04 Professor of Law, 194 None
7/10/40 Three Years Georgetown University
Law Center (since
1999). Tax Partner,
Covington & Burling,
Washington, DC (1991-
2000).
Norton H. Reamer Trustee(4) Since 12/17/04 President, Chief 194 None
9/21/35 Three Years Executive Officer and a
Director of Asset
Management Finance
Corp. (a specialty
finance company serving
the investment
management industry)
(since October 2003).
President, Unicorn
Corporation (an
investment and
financial advisory
services company)
(since September 2000).
Formerly, Chairman and
Chief Operating
Officer, Hellman,
Jordan Management Co.,
Inc. (an investment
management company)
(2000-2003). Formerly,
Advisory Director of
Berkshire Capital
Corporation (investment
banking firm) (2002-
2003). Formerly,
Chairman of the Board,
United Asset Management
Corporation (a holding
company owning
institutional
investment management
firms) and Chairman,
President and Director,
UAM Funds (mutual
funds) (1980-2000).
Lynn A. Stout Trustee(4) Since 12/17/04 Professor of Law, 194 None
9/14/57 Three Years University of
California at Los
Angeles School of Law
(since July 2001).
Formerly, Professor of
Law, Georgetown
University Law Center.

------------
(1) Includes both master and feeder funds in master-feeder structure.
(2) Class I Trustees whose term expires in 2005.
(3) Class II Trustees whose term expires in 2006.
(4) Class III Trustees whose term expires in 2007.

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8

TRUSTEES AND OFFICERS
--------------------------------------------------------------------------------

PRINCIPAL OFFICERS WHO ARE NOT TRUSTEES

TERM OF OFFICE
POSITION(S) AND LENGTH
NAME AND DATE OF BIRTH WITH THE FUND OF SERVICE PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
----------------------------------------------------------------------------------------------------------

Duncan W. Richardson President and Since 11/8/04 Senior Vice President and Chief Equity
10/26/57 Chief Executive Investment Officer of Eaton Vance and BMR.
Officer Officer of 44 registered investment companies
managed by Eaton Vance or BMR.
Thomas E. Faust Jr. Vice President Since 11/8/04 Executive Vice President of Eaton Vance, BMR,
5/31/58 EVC and EV; Chief Investment Officer of Eaton
Vance and BMR and Director of EVC. Chief
Executive Officer of Belair Capital Fund LLC,
Belcrest Capital Fund LLC, Belmar Capital Fund
LLC; Belport Capital Fund LLC and Belrose
Capital Fund LLC (private investment companies
sponsored by Eaton Vance). Officer of 57
registered investment companies managed by
Eaton Vance or BMR.
Lewis R. Piantedosi Vice President Since 11/8/04 Vice President of Eaton Vance and BMR. Equity
8/10/65 Analyst at Eaton Vance since May 1999.
Previously, Partner, Portfolio Manager and
Equity Analyst for Freedom Capital Management
(1996-1999). Officer of 3 registered
investment companies managed by Eaton Vance or
BMR.
James L. O'Connor Treasurer and Since 11/8/04 Vice President of BMR, Eaton Vance and EVD.
4/1/45 Principal Officer of 116 registered investment companies
Financial and managed by Eaton Vance or BMR.
Accounting Officer
Alan R. Dynner Secretary Since 11/8/04 Vice President, Secretary And Chief Legal
10/10/40 Officer of BMR, Eaton Vance, EVD, EV and EVC.
Officer of 194 registered investment companies
managed by Eaton Vance or BMR.
Walter A. Row, III Vice President Since 11/8/04 Director of Equity Research and a Vice
7/20/57 President of Eaton Vance and BMR. Officer of
25 registered investment companies managed by
Eaton Vance or BMR.
Paul M. O'Neil Chief Compliance Since 1/14/05 Vice President of BMR and Eaton Vance. Officer
7/11/53 Officer of 194 registered investment companies managed
by Eaton Vance or BMR.

The Board of Trustees of the Fund has several standing Committees, including the
Governance Committee, the Audit Committee, and the Special Committee. Each such
Committee is comprised of only noninterested Trustees.

The Governance Committee of the Board of Trustees of the Fund is comprised of
the non-interested Trustees. Ms. Stout currently serves as chairperson of the
Governance Committee. The purpose of the Governance Committee is to consider,
evaluate and make recommendations to the Board of Trustees with respect to the
structure, membership and operation of the Board of Trustees and the Committees

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9

TRUSTEES AND OFFICERS
--------------------------------------------------------------------------------

thereof, including the nomination and selection of non-interested Trustees and
the compensation of non-interested Trustees.

The Governance Committee will, when a vacancy exists or is anticipated, consider
any nominee for noninterested Trustee recommended by a shareholder if such
recommendation is submitted to the Governance Committee, contains sufficient
background information concerning the candidate and is received in a
sufficiently timely manner.

Messrs. Reamer (Chairman), Hayes and Park and Ms. Stout are members of the Audit
Committee of the Board of Trustees of the Fund. The Board of Trustees has
designated Messrs. Hayes, Park and Reamer, each a non-interested Trustee, as
audit committee financial experts. The Audit Committee's purposes are to (i)
oversee the Fund's accounting and financial reporting processes, its internal
control over financial reporting, and, as appropriate, the internal control over
financial reporting of certain service providers; (ii) oversee or, as
appropriate, assist Board oversight of the quality and integrity of the Fund's
financial statements and the independent audit thereof; (iii) oversee, or, as
appropriate, assist Board oversight of, the Fund's compliance with legal and
regulatory requirements that relate to the Fund's accounting and financial
reporting, internal control over financial reporting and independent audits;
(iv) approve prior to appointment the engagement and, when appropriate,
replacement of the independent registered public accounting firm, and, if
applicable, nominate the independent registered public accounting firm to be
proposed for shareholder ratification in any proxy statement of the Fund; (v)
evaluate the qualifications, independence and performance of the independent
registered public accounting firm and the audit partner in charge of leading the
audit; and (vi) prepare, as necessary, audit committee reports consistent with
the requirements of Rule 306 of Regulation S-K for inclusion in the proxy
statement of the Fund.

Messrs. Hayes (Chairman), Park, Pearlman, Reamer and Ms. Stout are currently
members of the Special Committee of the Board of Trustees of the Fund. The
purposes of the Special Committee are to consider, evaluate and make
recommendations to the Board of Trustees concerning the following matters: (i)
contractual arrangements with each service provider to the Fund, including
advisory, sub-advisory, transfer agency, custodial and fund accounting,
distribution services and administrative services; (ii) any and all other
matters in which any of the Fund service providers (including Eaton Vance or any
affiliated entity thereof) has an actual or potential conflict of interest with
the interests of the Fund, or investors therein; and (iii) any other matter
appropriate for review by the non-interested Trustees, unless the matter is
within the responsibilities of the Audit Committee or the Governance Committee
of the Fund.

As of the date of this SAI, the Governance Committee and the Audit Committee
have each met one time, the Special Committee has not met.

When considering approval of the Advisory Agreement between the Fund and the
Adviser, and the Sub-Advisory Agreement between the Adviser and Rampart, the
Special Committee considered, among other things, the following:

+ A report comparing the fees and expenses of the Fund and certain
profitability analyses prepared by Eaton Vance and Rampart;

+ Information on the relevant peer group(s) of funds;

+ The economic outlook and the general investment outlook in the relevant
investment markets;

+ Eaton Vance's and Rampart's results and financial condition and the overall
organization of the Adviser and the Sub-Adviser;

+ Arrangements regarding the distribution of Fund shares;

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10

TRUSTEES AND OFFICERS
--------------------------------------------------------------------------------

+ The procedures used to determine the fair value of the Fund's assets;

+ The allocation of brokerage and the benefits received by the Adviser as the
result of brokerage allocation; including allocations to soft dollar
brokerage and allocations to firms that sell Eaton Vance fund shares;

+ Eaton Vance's management of the relationship with the custodian,
subcustodians and fund accountants;

+ The resources devoted to Eaton Vance's compliance efforts undertaken on
behalf of the funds it manages and the record of compliance with the
investment policies and restrictions and with policies on personal securities
transactions;

+ Rampart's compliance efforts with respect to the accounts it manages;

+ The quality, nature, cost and character of the administrative and other
non-investment management services provided by Eaton Vance and its affiliates
and of Rampart;

+ The terms of the Advisory Agreement and the Sub-Advisory Agreement, and the
reasonableness and appropriateness of the particular fee paid by the Fund for
the services described therein;

+ Operating expenses (including transfer agency expenses) to be paid to third
parties; and

+ Information to be provided to investors, including the Fund's shareholders.

In evaluating the Advisory Agreement between the Fund and Eaton Vance, and the
Sub-Advisory Agreement between the Adviser and Rampart, the Special Committee
reviewed material furnished by Eaton Vance and Rampart at the initial Board
meeting held on December 20, 2004, including the above referenced considerations
and information relating to the education, experience and number of investment
professionals and other personnel who would provide services under the Advisory
Agreement and under the Sub-Advisory Agreement. The Special Committee also took
into account the time and attention to be devoted by senior management to the
Fund and the other funds in the complex. The Special Committee evaluated the
level of skill required to manage the Fund and concluded that the human
resources available at Eaton Vance were appropriate to fulfill effectively the
duties of the Adviser on behalf of the Fund. The Special Committee also
considered the business reputation of the Adviser, its financial resources and
professional liability insurance coverage and concluded that Eaton Vance would
be able to meet any reasonably foreseeable obligations under the Advisory
Agreement. The Special Committee also considered the business reputation of
Rampart and its options strategy and its past experience in implementing this
strategy.

The Special Committee received information concerning the investment philosophy
and investment process to be applied by Eaton Vance and Rampart in managing the
Fund. In this regard, the Special Committee considered Eaton Vance's in-house
research capabilities as well as other resources available to Eaton Vance
personnel, including research services that may be available to Eaton Vance as a
result of securities transactions effected for the Fund and other investment
advisory clients. The Special Committee concluded that Eaton Vance's and
Rampart's investment process, research capabilities and philosophy were well
suited to the Fund, given the Fund's investment objectives and policies.

In addition to the factors mentioned above, the Special Committee also reviewed
the level of the Adviser's profits in respect of the management of the Eaton
Vance funds, including the Fund. The Special Committee considered the other
profits realized by Eaton Vance and its affiliates in connection with the
operation of the Fund. The Special Committee also considered profit margins of
Eaton Vance in comparison with available industry data. In addition, the Special
Committee considered the fiduciary duty assumed by the Adviser in connection
with the service rendered to the Fund and the business reputation of the
Adviser, its financial resources and its professional liability insurance
coverage. In

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11

TRUSTEES AND OFFICERS
--------------------------------------------------------------------------------

evaluating the fees to be paid to Rampart, the Special Committee considered and
discussed fees paid to other investment sub-advisers in similar circumstances,
as well as fees charged by Rampart to other clients.

The Special Committee did not consider any single factor as controlling in
determining whether or not to approve the Advisory Agreement and the
Sub-Advisory Agreement. Nor are the items described herein all encompassing of
the matters considered by the Special Committee. In assessing the information
provided by Eaton Vance and its affiliates and Rampart, the Special Committee
also took into consideration the benefits to shareholders of investing in a fund
that is part of a large family of funds which provides a large variety of
shareholder services.

Based on its consideration of all factors that it deemed material and assisted
by the advice of its independent counsel, the Special Committee concluded that
the approval of the Advisory Agreement and the Sub-Advisory Agreement, including
the fee structure (described herein) is in the interests of shareholders. The
Special Committee also considered that the Adviser would enter into a
Shareholder Services Agreement with UBS Securities LLC, whereby the Adviser (and
not the Fund) would pay UBS Securities LLC to provide upon request certain
market data and reports to support shareholder services pursuant to the
agreement.

SHARE OWNERSHIP
The following table shows the dollar range of equity securities beneficially
owned by each Trustee in the Fund and all Eaton Vance Funds overseen by the
Trustee as of December 31, 2004.

AGGREGATE DOLLAR RANGE OF EQUITY
DOLLAR RANGE OF SECURITIES OWNED IN ALL REGISTERED
EQUITY SECURITIES FUNDS OVERSEEN BY TRUSTEE IN THE
NAME OF TRUSTEE OWNED IN THE FUND EATON VANCE FUND COMPLEX
-------------------------------------------------------------------------------------------------

INTERESTED TRUSTEE
James B. Hawkes....................... None Over $100,000
NON-INTERESTED TRUSTEES
Samuel L. Hayes, III.................. None Over $100,000
William H. Park....................... None Over $100,000
Ronald A. Pearlman.................... None Over $100,000
Norton H. Reamer...................... None Over $100,000

As of December 31, 2004, no noninterested Trustee or any of their immediate
family members owned beneficially or of record any class of securities of EVC,
EVD, Rampart or any person controlling, controlled by or under common control
with EVC, EVD or Rampart.

During the calendar years ended December 31, 2003 and December 31, 2004, no
noninterested Trustee (or their immediate family members) had:

1. Any direct or indirect interest in Eaton Vance, EVC, EVD, Rampart or any
person controlling, controlled by or under common control with EVC, EVD or
Rampart;

2. Any direct or indirect material interest in any transaction or series of
similar transactions with (i) the Fund; (ii) another fund managed by EVC or
Rampart, distributed by EVD or a person controlling, controlled by or under
common control with EVC, EVD or Rampart; (iii) EVC, EVD or Rampart; (iv) a
person controlling, controlled by or under common control with EVC, EVD or
Rampart; or (v) an officer of any of the above; or

3. Any direct or indirect relationship with (i) the Fund; (ii) another fund
managed by EVC or Rampart, distributed by EVD or a person controlling,
controlled by or under common control

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12

TRUSTEES AND OFFICERS
--------------------------------------------------------------------------------

with EVC, EVD or Rampart; (iii) EVC, EVD or Rampart; (iv) a person
controlling, controlled by or under common control with EVC, EVD or Rampart;
or (v) an officer of any of the above.

During the calendar years ended December 31, 2003 and December 31, 2004, no
officer of EVC, EVD, Rampart or any person controlling, controlled by or under
common control with EVC, EVD or Rampart served on the Board of Directors of a
company where a noninterested Trustee of the Fund or any of their immediate
family members served as an officer.

Trustees of the Fund who are not affiliated with the Adviser may elect to defer
receipt of all or a percentage of their annual fees in accordance with the terms
of a Trustees Deferred Compensation Plan (the "Trustees' Plan"). Under the
Trustees' Plan, an eligible Trustee may elect to have his deferred fees invested
by the Fund in the shares of one or more funds in the Eaton Vance Family of
Funds, and the amount paid to the Trustees under the Trustees' Plan will be
determined based upon the performance of such investments. Deferral of Trustees'
fees in accordance with the Trustees' Plan will have a negligible effect on the
Fund's assets, liabilities, and net income per share, and will not obligate the
Fund to retain the services of any Trustee or obligate the Fund to pay any
particular level of compensation to the Trustee. The Fund does not have a
retirement plan for its Trustees.

The fees and expenses of the Trustees of the Fund are paid by the Fund. (A
Trustee of the Fund who is a member of the Eaton Vance organization receives no
compensation from the Fund.) For the Fund's fiscal year ending December 31,
2005, it is anticipated that the Trustees of the Fund will earn the following
compensation in their capacities as Trustees. For the year ended December 31,
2004, the Trustees earned the compensation set forth below in their capacities
as Trustees from the funds in the Eaton Vance fund complex(1).

SAMUEL L. WILLIAM H. RONALD A. NORTON H. LYNN A.
SOURCE OF COMPENSATION HAYES, III PARK PEARLMAN REAMER STOUT
-------------------------------------------------------------------------------------------------

Trust*.......................... $ 4,700 $ 4,600 $ 4,350 $ 4,700 $ 4,600
Fund Complex.................... $200,000 $180,000(2) $180,000 $190,000 $190,000(3)

---------------

* Estimated

(1) As of January 14, 2005, the Eaton Vance fund complex consisted of 194
registered investment companies or series thereof.

(2) Includes $109,968 of deferred compensation.

(3) Includes $45,000 of deferred compensation.

PROXY VOTING POLICY. The Fund is subject to the Eaton Vance Funds Proxy Voting
Policy and Procedures (the "Fund Policy"), pursuant to which the Trustees have
delegated proxy voting responsibility to the Adviser and adopted the Adviser's
proxy voting policies and procedures (the "Policies") which are described below.
The Trustees will review the Fund's proxy voting records from time to time and
will annually consider approving the Policies for the upcoming year. In the
event that a conflict of interest arises between the Fund's shareholders and the
Adviser or any of its affiliates or any affiliate of the Fund, the Adviser will
generally refrain from voting the proxies related to the companies giving rise
to such conflict until it consults with the Board of the Fund, except as
contemplated under the Fund Policy. The Board's Special Committee will instruct
the Adviser on the appropriate course of action.

The Policies are designed to promote accountability of a company's management to
its shareholders and to align the interests of management with those
shareholders. The Adviser will generally support company management on proposals
relating to environmental and social policy issues, on matters regarding the
state of organization of the company and routine matters related to corporate
administration which are not expected to have a significant economic impact on
the company or its shareholders. On all other matters, the Adviser will review
each matter on a case-by-case basis and reserves the right to deviate from the
Policies' guidelines when it believes the situation warrants such a

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13

TRUSTEES AND OFFICERS
--------------------------------------------------------------------------------

deviation. The Policies include voting guidelines for matters relating to, among
other things, the election of directors, approval of independent auditors,
executive compensation, corporate structure and anti-takeover defenses. The
Adviser may abstain from voting from time to time where it determines that the
costs associated with voting a proxy outweigh the benefits derived from
exercising the right to vote.

In addition, the Adviser will monitor situations that may result in a conflict
of interest between the Fund's shareholders and the Adviser or any of its
affiliates or any affiliate of the Fund by maintaining a list of significant
existing and prospective corporate clients. The Adviser's personnel responsible
for reviewing and voting proxies on behalf of the Fund will report any proxy
received or expected to be received from a company included on that list to
members of senior management of the Adviser identified in the Policies. Such
members of senior management will determine if a conflict exists. If a conflict
does exist, the proxy will either be voted strictly in accordance with the
Policies or the Adviser will seek instruction on how to vote from the Special
Committee. Information on how the Fund voted proxies relating to portfolio
securities during the 12 month period ended June 30, 2005 will be available (1)
without charge, upon request, by calling 1-800-262-1122, and (2) on the
Securities and Exchange Commission's website at http://www.sec.gov.

--------------------------------------------------------------------------------
14

Investment advisory and other services

The Investment Adviser. Eaton Vance, its affiliates and its predecessor
companies have been managing assets of individuals and institutions since 1924
and of investment companies since 1931. They maintain a large staff of
experienced fixed-income, senior loan and equity investment professionals to
service the needs of their clients. The equity group covers stocks ranging from
blue chip to emerging growth companies. Eaton Vance and its affiliates act as
adviser to a family of mutual funds, and individual and various institutional
accounts. The fixed-income group focuses on all kinds of taxable
investment-grade and high-yield securities, tax-exempt investment-grade and
high-yield securities, and U.S. government securities. The senior loan group
focuses on senior floating rate loans, unsecured loans and other floating rate
debt securities such as notes, bonds and asset backed securities, including
corporations, hospitals, retirement plans, universities, foundations and trusts.

The Fund will be responsible for all of its costs and expenses not expressly
stated to be payable by Eaton Vance under the Advisory Agreement or
Administration Agreement. Such costs and expenses to be borne by the Fund
include, without limitation: custody and transfer agency fees and expenses,
including those incurred for determining net asset value and keeping accounting
books and records; expenses of pricing and valuation services; the cost of share
certificates; membership dues in investment company organizations; expenses of
acquiring, holding and disposing of securities and other investments; fees and
expenses of registering under the securities laws, stock exchange listing fees
and governmental fees; rating agency fees and preferred share remarketing
expenses; expenses of reports to shareholders, proxy statements and other
expenses of shareholders' meetings; insurance premiums; printing and mailing
expenses; interest, taxes and corporate fees; legal and accounting expenses;
compensation and expenses of Trustees not affiliated with Eaton Vance; expenses
of conducting repurchase offers for the purpose of repurchasing Fund shares; and
investment advisory and administration fees. The Fund will also bear expenses
incurred in connection with any litigation in which the Fund is a party and any
legal obligation to indemnify its officers and Trustees with respect thereto, to
the extent not covered by insurance.

The Advisory Agreement with the Adviser continues in effect to December 20, 2006
and from year to year so long as such continuance is approved at least annually
(i) by the vote of a majority of the noninterested Trustees of the Fund or of
the Adviser cast in person at a meeting specifically called for the purpose of
voting on such approval and (ii) by the Board of Trustees of the Fund or by vote
of a majority of the outstanding Shares of the Fund. The Fund's Administration
Agreement continues in effect from year to year so long as such continuance is
approved at least annually by the vote of a majority of the Fund's Trustees.
Each agreement may be terminated at any time without penalty on sixty (60) days'
written notice by the Trustees of the Fund or Eaton Vance, as applicable, or by
vote of the majority of the outstanding shares of the Fund. Each agreement will
terminate automatically in the event of its assignment. Each agreement provides
that, in the absence of willful misfeasance, bad faith, gross negligence or
reckless disregard of its obligations or duties to the Fund under such
agreements on the part of Eaton Vance, Eaton Vance shall not be liable to the
Fund for any loss incurred, to the extent not covered by insurance.

The Advisory Agreement provides that Eaton Vance may engage one or more
investment sub-advisers to assist with some or all aspects of the management of
the Fund's investments subject to such approvals as are required under the 1940
Act. Pursuant to these provisions, Eaton Vance has engaged Rampart as a
sub-adviser to provide assistance with the development, implementation and
execution of the Fund's options strategy. The Advisory Agreement provides that
Eaton Vance may terminate any sub-advisory agreement entered into and directly
assume any functions performed by the sub-adviser, upon approval of the Board of
Trustees, without the need for approval of the shareholders of the Fund.

Eaton Vance is a business trust organized under Massachusetts law. EV serves as
trustee of Eaton Vance. Eaton Vance and EV are subsidiaries of EVC, a Maryland
corporation and publicly-held

--------------------------------------------------------------------------------
15

INVESTMENT ADVISORY AND OTHER SERVICES
--------------------------------------------------------------------------------

holding company. EVC through its subsidiaries and affiliates engages primarily
in investment management, administration and marketing activities. The Directors
of EVC are James B. Hawkes, John G. L. Cabot, Thomas E. Faust Jr., Leo I.
Higdon, Jr., John M. Nelson, Vincent M. O'Reilly, Winthrop H. Smith, Jr., and
Ralph Z. Sorenson. All shares of the outstanding Voting Common Stock of EVC are
deposited in a voting trust, the voting trustees of which are Messrs. Hawkes,
Faust, Jeffrey P. Beale, Alan R. Dynner, Thomas J. Fetter, Scott H. Page, Duncan
W. Richardson, William M. Steul, Payson F. Swaffield, Michael W. Weilheimer and
Wharton P. Whitaker (all of whom are officers of Eaton Vance). The voting
trustees have unrestricted voting rights for the election of Directors of EVC.
All of the outstanding voting trust receipts issued under said voting trust are
owned by certain of the officers of BMR and Eaton Vance who are also officers,
or officers and Directors of EVC and EV. As indicated under "Trustees and
officers", all of the officers of the Fund (as well as Mr. Hawkes who is also a
Trustee) hold positions in the Eaton Vance organization.

EVC and its affiliates and their officers and employees from time to time have
transactions with various banks, including the custodian of the Fund, IBT. It is
Eaton Vance's opinion that the terms and conditions of such transactions were
not and will not be influenced by existing or potential custodial or other
relationships between the Fund and such banks.

The Sub-Adviser. Rampart acts as the Fund's investment sub-adviser and provides
advice and assistance in pursuing the Fund's options strategy pursuant to a
sub-advisory agreement between the Adviser and Rampart (the "Sub-Advisory
Agreement"). Rampart, a Massachusetts corporation, was founded in 1983 by its
current owners Ronald M. Egalka and David R. Fraley. The Sub-Adviser provides
customized investment management services within a core competency in options to
a spectrum of institutional clients. Since its inception, the Sub-Adviser has
continuously expanded its computer modeling and analytical capabilities and
created tools to capitalize on opportunities in the capital markets. Rampart's
principal office is located at One International Place, Boston, MA 02110. As of
November 30, 2004 Rampart had approximately $1.8 billion of assets under
management.

Under the terms of the Sub-Advisory Agreement, Rampart provides advice and
assistance with the development, implementation and execution of the Fund's
options strategy, all subject to the supervision and direction of the Fund's
Board of Trustees and the Adviser. For services rendered by Rampart under the
Sub-Advisory Agreement, Eaton Vance pays Rampart a fee, payable monthly, in an
annual amount equal to .235% of the average daily gross assets of the Fund.

The Sub-Advisory Agreement continues until December 20, 2006 and from year to
year thereafter if approved annually (i) by the Fund's Board of Trustees or by
the holders of a majority of its outstanding voting securities and (ii) by a
majority of the Trustees who are not "interested persons" (as defined in the
1940 Act) of any party to the Sub-Advisory Agreement, by vote cast in person at
a meeting called for the purpose of voting on such approval. The Sub-Advisory
Agreement terminates automatically on its assignment and may be terminated
without penalty on 60 days written notice at the option of either the Adviser,
by the Fund's Board of Trustees or by a vote of a majority (as defined in the
1940 Act) of the Fund's outstanding shares or by Rampart upon 3 months notice.
As discussed above, Eaton Vance may terminate the Sub-Advisory Agreement and
directly assume responsibility for the services provided by Rampart upon
approval by the Board of Trustees without the need for approval of the
shareholders of the Fund.

The Sub-Advisory Agreement provides that in the absence of willful misfeasance,
bad faith, gross negligence or reckless disregard for its obligations and duties
thereunder, the Rampart is not liable for any error or judgment or mistake of
law or for any loss suffered by the Fund.

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16

INVESTMENT ADVISORY AND OTHER SERVICES
--------------------------------------------------------------------------------

CODES OF ETHICS

The Adviser, Rampart and the Fund have adopted Codes of Ethics governing
personal securities transactions. Under the Codes of Ethics, Eaton Vance and
Rampart employees may purchase and sell securities (including securities held or
eligible for purchase by the Fund) subject to the provisions of the Codes of
Ethics and certain employees are also subject to pre-clearance, reporting
requirements and other procedures.

The Codes of Ethics can be reviewed and copied at the Securities and Exchange
Commission's public reference room in Washington, DC (call 1-202-942-8090 for
information on the operation of the public reference room); on the EDGAR
Database on the SEC's Internet site (http://www.sec.gov); or, upon payment of
copying fees, by writing the SEC's public reference section, Washington, DC
20549-0102, or by electronic mail at publicinfo@sec.gov.

INVESTMENT ADVISORY SERVICES

Under the general supervision of the Fund's Board of Trustees, Eaton Vance will
carry out the investment and reinvestment of the assets of the Fund, will
furnish continuously an investment program with respect to the Fund, will
determine which securities should be purchased, sold or exchanged, and will
implement such determinations. Eaton Vance will furnish to the Fund investment
advice and provide related office facilities and personnel for servicing the
investments of the Fund. Eaton Vance will compensate all Trustees and officers
of the Fund who are members of the Eaton Vance organization and who render
investment services to the Fund, and will also compensate all other Eaton Vance
personnel who provide research and investment services to the Fund.

ADMINISTRATIVE SERVICES

Under the Administration Agreement, Eaton Vance is responsible for managing the
business affairs of the Fund, subject to the supervision of the Fund's Board of
Trustees. Eaton Vance will furnish to the Fund all office facilities, equipment
and personnel for administering the affairs of the Fund. Eaton Vance will
compensate all Trustees and officers of the Fund who are members of the Eaton
Vance organization and who render executive and administrative services to the
Fund, and will also compensate all other Eaton Vance personnel who perform
management and administrative services for the Fund. Eaton Vance's
administrative services include recordkeeping, preparation and filing of
documents required to comply with federal and state securities laws, supervising
the activities of the Fund's custodian and transfer agent, providing assistance
in connection with the Trustees' and shareholders' meetings, providing services
in connection with repurchase offers, if any, and other administrative services
necessary to conduct the Fund's business.

--------------------------------------------------------------------------------
17

--------------------------------------------------------------------------------

Determination of net asset value

The net asset value per share of the Fund is determined no less frequently than
daily, on each day that the New York Stock Exchange (the "Exchange") is open for
trading, as of the close of regular trading on the Exchange (normally 4:00 p.m.
New York time). The Fund's net asset value per share is determined by IBT, in
the manner authorized by the Trustees of the Fund. Net asset value is computed
by dividing the value of the Fund's total assets, less its liabilities by the
number of shares outstanding.

The Trustees of the Fund have established the following procedures for fair
valuation of the Fund's assets under normal market conditions. Marketable
securities listed on foreign or U.S. securities exchanges generally are valued
at closing sale prices or, if there were no sales, at the mean between the
closing bid and asked prices therefor on the exchange where such securities are
principally traded (such prices may not be used, however, where an active
over-the-counter market in an exchange listed security better reflects current
market value). Marketable securities listed in the NASDAQ National Market System
are valued at the NASDAQ official closing price. Unlisted or listed securities
for which closing sale prices are not available are valued at the mean between
the latest bid and asked prices. An option is valued at the last sale price as
quoted on the principal exchange or board of trade on which such option or
contract is traded, or in the absence of a sale, at the mean between the last
bid and asked prices. When the Fund writes a call option it records the premium
as an asset and equivalent liability and thereafter adjusts the liability to the
market value of the option determined in accordance with the preceding sentence.

The Adviser and the Valuation Committee may implement new pricing methodologies
or expand mark-to-market valuation of debt securities whose market prices are
not readily available in the future, which may result in a change in the Fund's
net asset value per share. The Fund's net asset value per share will also be
affected by fair value pricing decisions and by changes in the market for such
debt securities. In determining the fair value of a debt security, the Adviser
will consider relevant factors, data, and information, including: (i) the
characteristics of and fundamental analytical data relating to the debt
security, including the cost, size, current interest rate, period until next
interest rate reset, maturity and base lending rate of the debt security, the
terms and conditions of the debt security and any related agreements, and the
position of the debt security in the borrower's debt structure; (ii) the nature,
adequacy and value of the collateral, including the Fund's rights, remedies and
interests with respect to the collateral; (iii) the creditworthiness of the
borrower, based on an evaluation of its financial condition, financial
statements and information about the borrower's business, cash flows, capital
structure and future prospects; (iv) information relating to the market for the
debt security, including price quotations for and trading in the debt security
and interests in similar debt securities and the market environment and investor
attitudes towards the debt security and interests in similar debt securities;
(v) the experience, reputation, stability and financial condition of the agent
and any intermediate participants in the debt security; and (vi) general
economic and market conditions affecting the fair value of the debt security.
The fair value of each debt security is reviewed and approved by the Adviser's
Valuation Committee and the Fund's Trustees.

Debt securities for which the over-the-counter market is the primary market are
normally valued on the basis of prices furnished by one or more pricing services
at the mean between the latest available bid and asked prices. OTC options are
valued at the mean between the bid and asked prices provided by dealers.
Financial futures contracts listed on commodity exchanges and exchange-traded
options are valued at closing settlement prices. Short-term obligations having
remaining maturities of less than 60 days are valued at amortized cost, which
approximates value, unless the Trustees determine that under particular
circumstances such method does not result in fair value. As authorized by the
Trustees, debt securities (other than short-term obligations) may be valued on
the basis of valuations furnished by a pricing service which determines
valuations based upon market transactions for normal,

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18

DETERMINATION OF NET ASSET VALUE
--------------------------------------------------------------------------------

institutional-size trading units of such securities. Securities for which there
is no such quotation or valuation and all other assets are valued at fair value
as determined in good faith by or at the direction of the Fund's Trustees
considering relevant factors, data and information, including the market value
of freely tradable securities of the same class in the principal market on which
such securities are normally traded.

All other securities are valued at fair value as determined in good faith by or
at the direction of the Trustees.

The daily valuation of foreign equity securities held by the Fund generally is
determined as of the close of trading on the principal exchange on which such
securities trade. Events occurring after the close of trading on foreign
exchanges may result in adjustments to the valuation of foreign securities to
more accurately reflect their fair value as of the close of regular trading on
the Exchange. The Fund may rely on an independent fair valuation service in
making any such adjustment. Foreign securities held by the Fund will be valued
in U.S. dollars; such values will be computed by the custodian based on foreign
currency exchange rate quotations supplied by an independent quotation service.

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19

--------------------------------------------------------------------------------

Portfolio trading

Decisions concerning the execution of portfolio security transactions, including
the selection of the market and the executing firm, are made by Eaton Vance, the
Fund's Adviser or, Rampart as the Sub-Adviser. As used below, "Adviser" refers
to Eaton Vance and Rampart, as applicable. The Adviser is also responsible for
the execution of transactions for all other accounts managed by it. The Adviser
places the portfolio security transactions for execution with many firms. The
Adviser uses its best efforts to obtain execution of portfolio security
transactions at prices which are advantageous to the Fund and at reasonably
competitive spreads or (when a disclosed commission is being charged) at
reasonably competitive commission rates. In seeking such execution, the Adviser
will use its best judgment in evaluating the terms of a transaction, and will
give consideration to various relevant factors, including without limitation the
full range and quality of the executing firm's services, the value of the
brokerage and research services provided, the responsiveness of the firm to the
Adviser, the size and type of the transaction, the nature and character of the
market for the security, the confidentiality, speed and certainty of effective
execution required for the transaction, the general execution and operational
capabilities of the executing firm, the reputation, reliability, experience and
financial condition of the firm, the value and quality of the services rendered
by the firm in this and other transactions, and the reasonableness of the spread
or commission, if any.

Transactions on stock exchanges and other agency transactions involve the
payment of negotiated brokerage commissions. Such commissions vary among
different broker-dealer firms, and a particular broker-dealer may charge
different commissions according to such factors as the difficulty and size of
the transaction and the volume of business done with such broker-dealer.
Transactions in foreign securities often involve the payment of brokerage
commissions, which may be higher than those in the United States. There is
generally no stated commission in the case of securities traded in the over-the-
counter markets, but the price paid or received usually includes an undisclosed
dealer markup or markdown. In an underwritten offering the price paid often
includes a disclosed fixed commission or discount retained by the underwriter or
dealer.

Although spreads or commissions paid on portfolio security transactions will, in
the judgment of the Adviser, be reasonable in relation to the value of the
services provided, commissions exceeding those which another firm might charge
may be paid to broker-dealers who were selected to execute transactions on
behalf of the Adviser's clients in part for providing brokerage and research
services to the Adviser.

As authorized in Section 28(e) of the Securities Exchange Act of 1934, as
amended, a broker or dealer who executes a portfolio transaction on behalf of
the Fund may receive a commission which is in excess of the amount of commission
another broker or dealer would have charged for effecting that transaction if
the Adviser determines in good faith that such compensation was reasonable in
relation to the value of the brokerage and research services provided. This
determination may be made on the basis of that particular transaction or on the
basis of overall responsibilities which the Adviser and its affiliates have for
accounts over which they exercise investment discretion. Brokerage and research
services may include advice as to the value of securities, the advisability of
investing in, purchasing, or selling securities, and the availability of
securities or purchasers or sellers of securities; furnishing analyses and
reports concerning issuers, industries, securities, economic factors and trends,
portfolio strategy and the performance of accounts; effecting securities
transactions and performing functions incidental thereto (such as clearance and
settlement); and the "Research Services" referred to in the next paragraph.

It is a common practice of the investment advisory industry and of the advisers
of investment companies, institutions and other investors to receive research,
analytical, statistical and quotation

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20

PORTFOLIO TRADING
--------------------------------------------------------------------------------

services, data, information and other services, products and materials which
assist such advisers in the performance of their investment responsibilities
("Research Services") from broker-dealer firms which execute portfolio
transactions for the clients of such advisers and from affiliates of executing
broker-dealers. Advisers also commonly receive Research Services from research
providers that are not affiliated with an executing broker-dealer, but which
have entered into payment arrangements involving an executing broker-dealer
("Third Party Research Services"). Under a typical Third Party Research Services
payment arrangement, the research provider agrees to provide services to an
Adviser in exchange for specified payments to the research provider by a
broker-dealer that executes portfolio transactions for clients of the Adviser.
The Adviser and the executing broker-dealer enter into a related agreement
specifying the amount of brokerage business the Adviser will direct to the
executing broker-dealer to offset payments made by the executing broker-dealer
for Third Party Research Services received by the Adviser. For example, the
Adviser may agree to direct brokerage business generating $45,000 in commissions
on portfolio transactions to a broker-dealer firm as consideration for the
executing broker-dealer making payments of $30,000 to a provider of Third Party
Research Services. The ratio of the commissions to be paid to an executing
broker-dealer as consideration for Third Party Research Services over the cost
borne by the executing broker-dealer in connection with providing such services
to the Adviser is referred to herein as the "Third Party Research Services
Payment Ratio."

Consistent with the foregoing practices, the Adviser receives Research Services
from many broker-dealer firms with which the Adviser places the Fund's
transactions and from third parties with which these broker-dealers have
arrangements. The Fund and the Adviser may also receive Research Services from
underwriters and dealers in fixed-price offerings, which Research Services are
reviewed and evaluated by the Adviser in connection with its investment
responsibilities.

These Research Services include such matters as general economic, political,
business and market information, industry and company reviews, evaluations of
securities and portfolio strategies and transactions, proxy voting data and
analysis services, technical analysis of various aspects of the securities
market, recommendations as to the purchase and sale of securities and other
portfolio transactions, financial, industry and trade publications, news and
information services, pricing and quotation equipment and services, and research
oriented computer hardware, software, databases and services. Any particular
Research Service obtained through a broker-dealer may be used by the Adviser in
connection with client accounts other than those accounts which pay commissions
to such broker-dealer. Any such Research Service may be broadly useful and of
value to the Adviser in rendering investment advisory services to all or a
significant portion of its clients, or may be relevant and useful for the
management of only one client's account or of a few clients' accounts, or may be
useful for the management of merely a segment of certain clients' accounts,
regardless of whether any such account or accounts paid commissions to the
broker-dealer through which such Research Service was obtained. The advisory fee
paid by the Fund is not reduced because the Adviser receives such Research
Services. The Adviser evaluates the nature and quality of the various Research
Services obtained through broker-dealer firms and attempts to allocate
sufficient portfolio security transactions to such firms to ensure the continued
receipt of Research Services which the Adviser believes are useful or of value
to it in rendering investment advisory services to its clients.

In the event that the Adviser executes Fund securities transactions with a
broker-dealer and the associated commission is consideration for Third Party
Research Services (as described above), the Adviser has agreed to reduce the
advisory fee payable by the Fund by an amount equal to the commission payment
associated with the transaction divided by the applicable Third Party Research
Services Payment Ratio.

Some executing broker-dealers develop and make available directly to their
brokerage customers proprietary Research Services ("Proprietary Research
Services"). As a general matter, broker-dealers bundle the cost of Proprietary
Research Services with trade execution services rather than charging separately
for each. In such circumstances, the cost or other value of the Proprietary
Research Services

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21

PORTFOLIO TRADING
--------------------------------------------------------------------------------

cannot be determined. The advisory fee paid by the Fund will not be reduced in
connection with the receipt of Proprietary Research Services by the Adviser.

The investment companies sponsored by the Adviser or its affiliates may allocate
brokerage commissions to acquire information relating to the performance, fees
and expenses of such companies and other mutual funds, which information is used
by the Trustees of such companies to fulfill their responsibility to oversee the
quality of the services provided by various entities, including the Adviser.
Such companies may also pay cash for such information.

Subject to the requirement that the Adviser shall use its best efforts to seek
and execute Fund security transactions at advantageous prices and at reasonably
competitive spreads or commission rates, the Adviser is authorized to consider
as a factor in the selection of any broker-dealer firm with whom Fund orders may
be placed the fact that such firm has sold or is selling Fund shares or shares
of other investment companies sponsored by the Adviser or its affiliates. This
policy is not inconsistent with a rule of the NASD, which rule provides that no
firm which is a member of the NASD shall favor or disfavor the distribution of
shares of any particular investment company or group of investment companies on
the basis of brokerage commissions received or expected by such firm from any
source.

The Fund and the Adviser may also receive Research Services from underwriters
and dealers in fixed-price offerings, which Research Services are reviewed and
evaluated by the Adviser in connection with its investment responsibilities. The
investment companies sponsored by the Adviser or its affiliates may allocate
trades in such offerings to acquire information relating to the performance,
fees and expenses of such companies and other mutual funds, which information is
used by the Trustees of such companies to fulfill their responsibility to
oversee the quality of the services provided by various entities, including the
Adviser, to such companies. Such companies may also pay cash for such
information.

Securities considered as investments for the Fund may also be appropriate for
other investment accounts managed by the Adviser or its affiliates. Whenever
decisions are made to buy or sell securities by the Fund and one or more of such
other accounts simultaneously, the Adviser will allocate the security
transactions (including "hot" issues) in a manner which it believes to be
equitable under the circumstances. As a result of such allocations, there may be
instances where the Fund will not participate in a transaction that is allocated
among other accounts. If an aggregated order cannot be filled completely,
allocations will generally be made on a pro rata basis. An order may not be
allocated on a pro rata basis where, for example: (i) consideration is given to
portfolio managers who have been instrumental in developing or negotiating a
particular investment; (ii) consideration is given to an account with
specialized investment policies that coincide with the particulars of a specific
investment; (iii) pro rata allocation would result in odd-lot or de minimis
amounts being allocated to a portfolio or other client; or (iv) where the
Adviser reasonably determines that departure from a pro rata allocation is
advisable. While these aggregation and allocation policies could have a
detrimental effect on the price or amount of the securities available to the
Fund from time to time, it is the opinion of the Trustees of the Fund that the
benefits from the Adviser's organization outweigh any disadvantage that may
arise from exposure to simultaneous transactions.

Taxes

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22

TAXES
--------------------------------------------------------------------------------

income or excise tax. To the extent it qualifies for treatment as a RIC and
satisfies the above-mentioned distribution requirements, the Fund will not be
subject to federal income tax on income paid to its shareholders in the form of
dividends or capital gain distributions.

In order to avoid incurring a nondeductible 4% federal excise tax obligation,
the Code requires that the Fund distribute (or be deemed to have distributed) by
December 31 of each calendar year an amount at least equal to the sum of (i) 98%
of its ordinary income for such year, (ii) 98% of its capital gain net income
(which is the excess of its realized net long-term capital gain over its
realized net short-term capital loss), generally computed on the basis of the
one-year period ending on October 31 of such year, after reduction by any
available capital loss carryforwards, and (iii) 100% of any ordinary income and
capital gain net income from the prior year (as previously computed) that were
not paid out during such year and on which the Fund paid no federal income tax.
Under current law, provided that the Fund qualifies as a RIC for federal income
tax purposes, the Fund should not be liable for any income, corporate excise or
franchise tax in The Commonwealth of Massachusetts.

If the Fund does not qualify as a RIC for any taxable year, the Fund's taxable
income will be subject to corporate income taxes, and all distributions from
earnings and profits, including distributions of net capital gain (if any), will
be taxable to the shareholder as ordinary income. In addition, in order to
requalify for taxation as a RIC, the Fund may be required to recognize
unrealized gains, pay substantial taxes and interest, and make certain
distributions.

The taxation of equity options that the Fund expects to write is governed by
Code Section 1234. Pursuant to Code Section 1234, the premium received by the
Fund for selling a call option is not included in income at the time of receipt.
If the option expires, the premium is short-term capital gain to the Fund. If
the Fund enters into a closing transaction, the difference between the amount
paid to close out its position and the premium received is short-term capital
gain or loss. If a call option written by the Fund is exercised, thereby
requiring the Fund to sell the underlying security, the premium will increase
the amount realized upon the sale of the security and any resulting gain or loss
will be long-term or short-term, depending upon the holding period of the
security. With respect to a put or call option that is purchased by the Fund, if
the option is sold, any resulting gain or loss will be a capital gain or loss,
and will be short-term or long-term, depending upon the holding period for the
option. If the option expires, the resulting loss is a capital loss and is
short-term or long-term, depending upon the holding period for the option. If
the option is exercised, the cost of the option, in the case of a call option,
is added to the basis of the purchased security and, in the case of a put
option, reduces the amount realized on the underlying security in determining
gain or loss. Because the Fund does not have control over the exercise of the
call options it writes, such exercise or other required sales of the underlying
securities may cause the Fund to realize capital gains or losses at inopportune
times.

Under the Jobs and Growth Tax Relief Reconciliation Act of 2003 (the "Tax Act"),
certain income distributions paid by the Fund (whether paid in cash or
reinvested in additional Fund Shares) to individual taxpayers are taxed at rates
applicable to net long-term capital gains (15%, or 5% for individuals in the 10%
or 15% tax brackets). This tax treatment applies only if certain holding period
requirements and other requirements are satisfied by the Common Shareholder with
respect to his or her Common Shares and the dividends are attributable to
qualified dividend income received by the Fund itself. For this purpose,
"qualified dividend income" means dividends received by the Fund from U.S.
corporations and "qualified foreign corporations," provided that the Fund
satisfies certain holding period and other requirements in respect of the stock
of such corporations. These special rules relating to the taxation of ordinary
income dividends paid by RICs generally applies to taxable years beginning
before January 1, 2009. Thereafter, the Fund's dividends, other than capital
gain dividends, will be fully taxable at ordinary income tax rates unless
further Congressional action is taken. There can be no assurance as to what
portion of the Fund's dividend distributions will qualify for favorable
treatment under the Tax Act.

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23

TAXES
--------------------------------------------------------------------------------

Common Shareholders receiving dividends or distributions in the form of
additional Common Shares pursuant to the Plan will be treated for U.S. federal
income tax purposes as receiving a distribution in an amount equal to the amount
of money that the shareholders receiving cash dividends or distributions will
receive, and will have a cost basis in the Common Shares received equal to such
amount. The Fund will inform shareholders of the source and tax status of all
distributions promptly after the close of each calendar year.

The benefits of the reduced tax rates applicable to long-term capital gains and
qualified dividend income may be impacted by the application of the alternative
minimum tax to individual shareholders.

The Fund's investment in zero coupon, payment in kind and certain other
securities will cause it to realize income prior to the receipt of cash payments
with respect to these securities. Such income will be accrued daily by the Fund
and, in order to avoid a tax payable by the Fund, the Fund may be required to
liquidate securities that it might otherwise have continued to hold in order to
generate cash so that the Fund may make required distributions to its
shareholders.

Investments in lower rated or unrated securities may present special tax issues
for the Fund to the extent that the issuers of these securities default on their
obligations pertaining thereto. The Code is not entirely clear regarding the
federal income tax consequences of the Fund's taking certain positions in
connection with ownership of such distressed securities.

Any recognized gain or income attributable to market discount on long-term debt
obligations (i.e., obligations with a term of more than one year except to the
extent of a portion of the discount attributable to original issue discount)
purchased by the Fund is taxable as ordinary income. A long-term debt obligation
is generally treated as acquired at a market discount if purchased after its
original issue at a price less than (i) the stated principal amount payable at
maturity, in the case of an obligation that does not have original issue
discount or (ii) in the case of an obligation that does have original issue
discount, the sum of the issue price and any original issue discount that
accrued before the obligation was purchased, subject to a de minimis exclusion.

The Fund's transactions in futures contracts and options will be subject to
special provisions of the Code that, among other things, may affect the
character of gains and losses realized by the Fund (i.e., may affect whether
gains or losses are ordinary or capital, or short-term or long-term), may
accelerate recognition of income to the Fund and may defer Fund losses. These
rules could, therefore, affect the character, amount and timing of distributions
to shareholders. These provisions also (a) will require the Fund to
mark-to-market certain types of the positions in its portfolio (i.e., treat them
as if they were closed out), and (b) may cause the Fund to recognize income
without receiving cash with which to make distributions in amounts necessary to
satisfy the 90% distribution requirement for qualifying to be taxed as a
regulated investment company and the 98% distribution requirement for avoiding
excise taxes. The Fund will monitor its transactions, will make the appropriate
tax elections and will make the appropriate entries in its books and records
when it acquires any futures contract, option or hedged investment in order to
mitigate the effect of these rules and prevent disqualification of the Fund from
being taxed as a regulated investment company.

In particular, the Fund expects to write call options with respect to certain
securities held by the Fund. Depending on whether such options are exercised or
lapse, or whether the securities or options are sold, the existence of these
options will affect the amount and timing of the recognition of income and
whether the income qualifies as long-term capital gain.

Further, the Fund's transactions in options are subject to special and complex
federal income tax provisions that may, among other things, (i) convert
dividends that would otherwise constitute qualified dividend income into
short-term capital gain or ordinary income taxed at the higher rate applicable
to ordinary income, (ii) treat dividends that would otherwise be eligible for
the corporate

--------------------------------------------------------------------------------
24

TAXES
--------------------------------------------------------------------------------

dividends received deduction as ineligible for such treatment, (iii) disallow,
suspend or otherwise limit the allowance of certain losses or deductions, (iv)
convert long-term capital gain into short-term capital gain or ordinary income,
(v) convert an ordinary loss or deduction into a capital loss (the deductibility
of which is more limited) and (vi) cause the Fund to recognize income or gain
without a corresponding receipt of cash.

Any loss realized upon the sale or exchange of Fund shares with a holding period
of six months or less will be treated as a long-term capital loss to the extent
of any capital gain distributions received with respect to such shares. In
addition, all or a portion of a loss realized on a sale or other disposition of
Fund shares may be disallowed under "wash sale" rules to the extent the
shareholder acquires other shares of the same Fund (whether through the
reinvestment of distributions or otherwise) within a period of 61 days beginning
30 days before and ending 30 days after the date of disposition of the Common
Shares. Any disallowed loss will result in an adjustment to the shareholder's
tax basis in some or all of the other shares acquired.

Sales charges paid upon a purchase of shares cannot be taken into account for
purposes of determining gain or loss on a sale of the shares before the 91st day
after their purchase to the extent a sales charge is reduced or eliminated in a
subsequent acquisition of shares of the Fund (or of another fund) pursuant to
the reinvestment or exchange privilege. Any disregarded amounts will result in
an adjustment to the shareholder's tax basis in some or all of any other shares
acquired.

Dividends and distributions on the Fund's shares are generally subject to
federal income tax as described herein to the extent they do not exceed the
Fund's realized income and gains, even though such dividends and distributions
may economically represent a return of a particular shareholder's investment.
Such distributions are likely to occur in respect of shares purchased at a time
when the Fund's net asset value reflects gains that are either unrealized, or
realized but not distributed. Such realized gains may be required to be
distributed even when the Fund's net asset value also reflects unrealized
losses. Certain distributions declared in October, November or December and paid
in the following January will be taxed to shareholders as if received on
December 31 of the year in which they were declared. In addition, certain other
distributions made after the close of a taxable year of the Fund may be "spilled
back" and treated as paid by the Fund (except for purposes of the non-
deductible 4% federal excise tax) during such taxable year. In such case,
shareholders will be treated as having received such dividends in the taxable
year in which the distributions were actually made.

Dividends and interest received, and gains realized, by the Fund on foreign
securities may be subject to income, withholding or other taxes imposed by
foreign countries and U.S. possessions (collectively "foreign taxes") that would
reduce the return on its securities. Tax conventions between certain countries
and the United States, however, may reduce or eliminate foreign taxes, and many
foreign countries do not impose taxes on capital gains in respect of investments
by foreign investors. If more than 50% of the value of the Fund's total assets
at the close of its taxable year consists of securities of foreign issuers, the
Fund will be eligible to, and may, file an election with the Internal Revenue
Service (the "Service") that will enable its shareholders, in effect, to receive
the benefit of the foreign tax credit with respect to any foreign taxes paid by
it. Pursuant to the election, the Fund would treat those taxes as dividends paid
to its shareholders and each shareholder (1) would be required to include in
gross income, and treat as paid by such shareholder, a proportionate share of
those taxes, (2) would be required to treat such share of those taxes and of any
dividend paid by the Fund that represents income from foreign or U.S.
possessions sources as such shareholder's own income from those sources, and (3)
could either deduct the foreign taxes deemed paid in computing taxable income
or, alternatively, use the foregoing information in calculating the foreign tax
credit against federal income tax. The Fund will report to its shareholders
shortly after each taxable year their respective shares of foreign taxes paid
and the income from sources within, and taxes paid to, foreign countries and
U.S. possessions if it makes this election. An individual who has no more than
$300 ($600 for married

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25

TAXES
--------------------------------------------------------------------------------

persons filing jointly) of creditable foreign taxes included on Forms 1099 and
all of whose foreign source income is "qualified passive income" may elect each
year to be exempt from the complicated foreign tax credit limitation, in which
event such individual would be able to claim a foreign tax credit without
needing to file the detailed Form 1116 that otherwise is required.

The Fund may invest in the stock of "passive foreign investment companies"
("PFICs"). A PFIC is any foreign corporation (with certain exceptions) that, in
general, meets either of the following tests: (1) at least 75% of its gross
income is passive or (2) an average of at least 50% of its assets produce, or
are held for the production of, passive income. Under certain circumstances, the
Fund will be subject to federal income tax on a portion of any "excess
distribution" received on the stock of a PFIC or of any gain from disposition of
that stock (collectively "PFIC income"), plus interest thereon, even if the Fund
distributes the PFIC income as a taxable dividend to its shareholders. The
balance of the PFIC income will be included in the Fund's investment company
taxable income and, accordingly, will not be taxable to it to the extent it
distributes that income to its shareholders.

If the Fund invests in a PFIC and elects to treat the PFIC as a "qualified
electing fund" ("QEF"), then in lieu of the foregoing tax and interest
obligation, the Fund will be required to include in income each year its pro
rata share of the QEF's annual ordinary earnings and net capital gain--which it
may have to distribute to satisfy the distribution requirement and avoid
imposition of the excise tax--even if the QEF does not distribute those earnings
and gain to the Fund. In most instances it will be very difficult, if not
impossible, to make this election because of certain of its requirements.

The Fund may elect to "mark to market" its stock in any PFIC.
"Marking-to-market," in this context, means including in ordinary income each
taxable year the excess, if any, of the fair market value of a PFIC's stock over
the Fund's adjusted basis therein as of the end of that year. Pursuant to the
election, the Fund also would be allowed to deduct (as an ordinary, not capital,
loss) the excess, if any, of its adjusted basis in PFIC stock over the fair
market value thereof as of the taxable year-end, but only to the extent of any
net mark-to-market gains (reduced by any prior deductions) with respect to that
stock included by the Fund for prior taxable years under the election. The
Fund's adjusted basis in each PFIC's stock with respect to which it has made
this election will be adjusted to reflect the amounts of income included and
deductions taken thereunder.

Amounts paid by the Fund to individuals and certain other shareholders who have
not provided the Fund with their correct taxpayer identification number ("TIN")
and certain certifications required by the Service as well as shareholders with
respect to whom the Fund has received certain information from the Service or a
broker may be subject to "backup" withholding of federal income tax arising from
the Fund's taxable dividends and other distributions as well as the gross
proceeds of sales of shares, at a rate of 28% for amounts paid during 2005. An
individual's TIN is generally his or her social security number. Backup
withholding is not an additional tax. Any amounts withheld under the backup
withholding rules from payments made to a shareholder may be refunded or
credited against such shareholder's federal income tax liability, if any,
provided that the required information is furnished to the Service.

The foregoing briefly summarizes some of the important federal income tax
consequences to Common Shareholders of investing in Common Shares, reflects the
federal tax law as of the date of this Statement of Additional Information, and
does not address special tax rules applicable to certain types of investors,
such as corporate and foreign investors. Unless otherwise noted, this discussion
assumes that an investor is a U.S. shareholder and holds Common Shares as a
capital asset. This discussion is based upon current provisions of the Code, the
regulations promulgated thereunder, and judicial and administrative ruling
authorities, all of which are subject to change or differing interpretations by
the courts or the Service retroactively or prospectively. Investors should
consult their tax advisors regarding the federal, state or local tax
considerations that may be applicable to their particular circumstances.

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26

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Other information

The Fund is an organization of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders of such a trust may, in
certain circumstances, be held personally liable as partners for the obligations
of the trust. The Declaration of Trust contains an express disclaimer of
shareholder liability in connection with the Fund property or the acts,
obligations or affairs of the Fund. The Declaration of Trust in coordination
with the Fund's By-laws also provides for indemnification out of the Fund
property of any shareholder held personally liable for the claims and
liabilities to which a shareholder may become subject by reason of being or
having been a shareholder. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is limited to circumstances in which
the Fund itself is unable to meet its obligations. The Fund has been advised by
its counsel that the risk of any shareholder incurring any liability for the
obligations of the Fund is remote.

The Declaration of Trust provides that the Trustees will not be liable for
errors of judgment or mistakes of fact or law; but nothing in the Declaration of
Trust protects a Trustee against any liability to the Fund or its shareholders
to which he or she would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence, or reckless disregard of the duties involved in the
conduct of his or her office. Voting rights are not cumulative, which means that
the holders of more than 50% of the shares voting for the election of Trustees
can elect 100% of the Trustees and, in such event, the holders of the remaining
less than 50% of the shares voting on the matter will not be able to elect any
Trustees.

The Declaration of Trust provides that no person shall serve as a Trustee if
shareholders holding two-thirds of the outstanding shares have removed him from
that office either by a written declaration filed with the Fund's custodian or
by votes cast at a meeting called for that purpose. The Declaration of Trust
further provides that the Trustees of the Fund shall promptly call a meeting of
the shareholders for the purpose of voting upon a question of removal of any
such Trustee or Trustees when requested in writing to do so by the record
holders of not less than 10 per centum of the outstanding shares.

The Fund's Prospectus and this SAI do not contain all of the information set
forth in the Registration Statement that the Fund has filed with the SEC. The
complete Registration Statement may be obtained from the SEC upon payment of the
fee prescribed by its Rules and Regulations.

Independent registered public accounting firm

Deloitte & Touche LLP, Boston, Massachusetts are the independent registered
public accounting firm for the Fund, providing audit services, tax return
preparation, and assistance and consultation with respect to the preparation of
filings with the SEC.

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27

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
--------------------------------------------------------------------------------

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Trustees and Shareholder of
Eaton Vance Enhanced Equity Income Fund II:

We have audited the accompanying statement of assets and liabilities of Eaton
Vance Enhanced Equity Income Fund II (the "Fund") as of January 5, 2005 and the
related statement of operations for the period from November 8, 2004 (date of
organization) through January 5, 2005. These financial statements are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements based on our audit.

We conducted our audit in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Fund's internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Eaton Vance Enhanced Equity
Income Fund II as of January 5, 2005, and the results of its operations for the
period from November 8, 2004 (date of organization) through January 5, 2005 in
conformity with accounting principles generally accepted in the United States of
America.

DELOITTE & TOUCHE LLP

Boston, Massachusetts
January 13, 2005

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28

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Eaton Vance Enhanced Equity Income Fund II

STATEMENT OF ASSETS AND LIABILITIES
JANUARY 5, 2005

ASSETS
Cash...................................................... $100,000
Offering costs............................................ 500,000
Receivable from Adviser................................... 15,000
--------
Total assets.............................................. $615,000
========
LIABILITIES
Accrued offering costs.................................... $500,000
Accrued organizational costs.............................. 15,000
Total liabilities......................................... $515,000
========
Net assets applicable to 5,000 common shares of beneficial
interest issued and outstanding........................... $100,000
========
NET ASSET VALUE AND OFFERING PRICE PER SHARE................ $ 20.00
========

STATEMENT OF OPERATIONS
PERIOD FROM NOVEMBER 8, 2004 (DATE OF ORGANIZATION) THROUGH JANUARY 5, 2005

INVESTMENT INCOME........................................... $ --
--------
EXPENSES
Organization costs........................................ $ 15,000
Expense reimbursement..................................... (15,000)
--------
Net expenses........................................... $ --
--------
NET INVESTMENT INCOME....................................... $ --
========

See notes to financial statements.

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29

Notes to financial statements

NOTE 1: ORGANIZATION

The Eaton Vance Enhanced Equity Income Fund II (the "Fund") was organized as a
Massachusetts business trust on November 8, 2004, and has been inactive since
that date except for matters relating to its organization and registration as a
diversified, closed-end management investment company under the Investment
Company Act of 1940, as amended, and the Securities Act of 1933, as amended, and
the sale of 5,000 common shares to Eaton Vance Management, the Fund's Investment
Adviser.

Eaton Vance Management, or an affiliate, has agreed to reimburse all
organizational costs, estimated at approximately $15,000. Eaton Vance
Management, or an affiliate, directly provided certain other organizational
services to the Fund at no expense. The costs of such services are not material.

Eaton Vance Management, or an affiliate, has agreed to pay all offering costs
(other than sales loads) that exceed $0.04 per common share. Based on an
offering size of $250,000,000 the Fund has estimated the cost of the offering to
be approximately $500,000 all of which would be paid by the Fund. Any amount in
excess of $500,000 would be paid by Eaton Vance Management. The total estimated
fund offering costs are $609,950. Eaton Vance Management would pay $109,950
based on such estimate.

The Fund's primary investment objective is to provide current income, with a
secondary objective of capital appreciation. The Fund will pursue its investment
objectives by investing primarily in a portfolio of mid- and
large-capitalization common stocks, seeking to invest primarily in components
with above-average growth and financial strength. Under normal market
conditions, the Fund will seek to generate current earnings from option premiums
by selling covered call options on a substantial portion of its portfolio
securities. There can be no assurance that the Fund will achieve its investment
objectives.

NOTE 2: ACCOUNTING POLICIES

The Fund's financial statements are prepared in accordance with accounting
principles generally accepted in the United States of America which require the
use of management estimates. Actual results may differ from those estimates.

The Fund's share of offering costs will be recorded within paid in capital as a
reduction of the proceeds from the sale of common shares upon the commencement
of Fund operations. The offering costs reflected above assume the sale of
12,500,000 common shares.

NOTE 3: INVESTMENT MANAGEMENT AGREEMENT

Pursuant to an investment advisory agreement between the Adviser and the Fund,
the Fund has agreed to pay an investment advisory fee, payable on a monthly
basis, at an annual rate of 1.00% of the average daily gross assets of the Fund.
Gross assets of the Fund shall be calculated by deducting accrued liabilities of
the Fund not including the amount of any preferred shares outstanding or the
principal amount of any indebtedness for money borrowed.

Pursuant to a sub-advisory agreement among the Fund, the Adviser and Rampart
Investment Management Company, Inc., the Adviser has agreed to pay Rampart a
sub-advisory fee, in an annual amount equal to 0.235% of the average daily gross
assets of the Fund.

NOTE 4: FEDERAL INCOME TAXES

The Fund intends to comply with the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
taxable income, including any net realized gain on investments.

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30

EATON VANCE ENHANCED EQUITY INCOME FUND II

STATEMENT OF ADDITIONAL INFORMATION
JANUARY 26, 2005

---------------------

INVESTMENT ADVISER AND ADMINISTRATOR
Eaton Vance Management
255 State Street
Boston, MA 02109

SUB-ADVISER
Rampart Investment Management Company, Inc.
One International Place
Boston, MA 02110

CUSTODIAN
Investors Bank & Trust Company
200 Clarendon Street
Boston, MA 02116

TRANSFER AGENT
PFPC Inc.
P.O. Box 43027
Providence, RI 02940-3027
(800) 331-1710

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
200 Berkeley Street
Boston, MA 02116