Edgar Filing: EATON VANCE INSURED NEW YORK MUNICIPAL BOND FUND II

As filed with the Securities and Exchange Commission on October 25, 2002

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM N-2

| | REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
FILE NO. 333-100422

|X| PRE-EFFECTIVE AMENDMENT NO. 1

| | POST-EFFECTIVE AMENDMENT NO.

AND/OR

| | REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
FILE NO. 811-21218

|X| AMENDMENT NO. 1

EATON VANCE INSURED NEW YORK
MUNICIPAL BOND FUND II
EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER

THE EATON VANCE BUILDING, 255 STATE STREET, BOSTON, MASSACHUSETTS 02109
ADDRESS OF PRINCIPAL EXECUTIVE OFFICES (NUMBER, STREET, CITY, STATE, ZIP CODE)

(617) 482-8260
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE

ALAN R. DYNNER
THE EATON VANCE BUILDING, 255 STATE STREET, BOSTON, MASSACHUSETTS 02109
NAME AND ADDRESS (NUMBER, STREET, CITY, STATE, ZIP CODE) OF AGENT FOR SERVICE

COPIES OF COMMUNICATIONS TO:

MARK P. GOSHKO, ESQ. THOMAS A. HALE, ESQ.
KIRKPATRICK & LOCKHART LLP SKADDEN, ARPS, SLATE,
75 STATE STREET MEAGHER & FLOM, LLP (ILLINOIS)
BOSTON, MASSACHUSETTS 02109 333 WACKER DRIVE
CHICAGO, ILLINOIS 60606

APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: As soon as practicable after
the effective date of this Registration Statement.

If any of the securities being registered on this form are to be offered on
a delayed or continuous basis in reliance on Rule 415 under the Securities Act
of 1933, other than securities offered in connection with a dividend
reinvestment plan, check the following box. |__|

It is proposed that this filing will become effective (check appropriate
box):
|X| when declared effective pursuant to Section 8(c)

CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933

======================================= ================= =================== ================ ====================
PROPOSED PROPOSED
AMOUNT BEING MAXIMUM MAXIMUM AMOUNT OF
REGISTERED OFFERING AGGREGATE REGISTRATION FEES
TITLE OF SECURITIES BEING REGISTERED (1) PRICE PER UNIT OFFERING PRICE (1)(2)(3)
(1) (1)
--------------------------------------- ----------------- ------------------- ---------------- --------------------

Common Shares of Beneficial Interest, 66,667 $15.00 $1,000,000 $92
$.01 par value

======================================= ================= =================== ================ ====================

(1) Estimated solely for purposes of calculating the registration fee, pursuant
to Rule 457(o) under the Securities Act of 1933.
(2) Includes shares that may be offered by the Underwriters pursuant to an
option to cover over-allotments.

(3) A registration fee of $92 was previously paid in connection with the
initial filing.

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

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATES AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.

The information in this Prospectus is incomplete and may be changed. We may not
sell these securities until the registration statement filed with the Securities
and Exchange Commission is effective. This Prospectus is not an offer to sell
these securities, and we are not soliciting offers to buy these securities, in
any state where the offer or sale is not permitted.

PRELIMINARY PROSPECTUS Subject to completion October 28, 2002

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EATON VANCE INSURED

NEW YORK MUNICIPAL BOND FUND II

COMMON SHARES
[EATON VANCE LOGO]

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INVESTMENT OBJECTIVE. Eaton Vance Insured New York Municipal Bond Fund II (the
"Fund") is a newly organized, non-diversified, closed-end management investment
company. The Fund's investment objective is to provide current income exempt
from federal income tax, including alternative minimum tax, and New York State
and New York City personal income taxes.

PORTFOLIO CONTENTS. The Fund will seek to achieve its investment objective by
investing primarily in high grade New York municipal obligations that are
insured as to the timely payment of principal and interest and are not subject
to alternative minimum tax. The Fund's net asset value and distribution rate
will vary and may be affected by several factors, including changes in interest
rates and the credit quality of municipal issuers. Fluctuations in net asset
value may be magnified as a result of the Fund's use of leverage, which is a
speculative investment technique. An investment in the Fund may not be
appropriate for all investors, particularly those that are not subject to
federal and New York income taxes. There is no assurance that the Fund will
achieve its investment objective.

INVESTMENT ADVISER. The Fund's investment adviser is Eaton Vance Management
("Eaton Vance" or the "Adviser"). Eaton Vance and certain of its subsidiaries
manage 55 different municipal bond funds with combined assets of about $8.9
billion, including 4 New York municipal bond funds with combined assets of about
$784.9 million.

EXCHANGE LISTING. The Fund has applied for the listing of its common shares on
the American Stock Exchange under the symbol "NYH." 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. This risk may be greater for investors expecting to sell
their shares in a relatively short period after completion of the public
offering.

INVESTING IN SHARES INVOLVES CERTAIN RISKS. SEE "INVESTMENT OBJECTIVE, POLICIES
AND RISKS" BEGINNING AT PAGE 9.

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 PROCEEDS TO FUND
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Per share $15.000 $0.675 $14.325
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Total $ $ $
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In addition to the sales load, the Fund will pay organizational and offering
expenses of up to $0.03 per share, estimated to total $ , 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 organizational
expenses and all offering costs (other than the sales load) exceeds $0.03 per
share.

The underwriters are offering the shares subject to various conditions and
expect to deliver the shares to purchasers on or about , 2002.

UBS WARBURG MERRILL LYNCH & CO.
A.G. EDWARDS & SONS, INC. CIBC WORLD MARKETS PRUDENTIAL SECURITIES
RBC CAPITAL MARKETS WACHOVIA SECURITIES MCDONALD INVESTMENTS INC.

QUICK & REILLY, INC.

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(continued from previous page)

The Fund expects to use financial leverage through the issuance of preferred
shares, initially equal to approximately 38% of its gross assets (including the
amount obtained through leverage). The Fund intends to use leverage if it is
expected to result in higher income to shareholders over time. Use of financial
leverage creates an opportunity for increased income but, at the same time,
creates special risks. There can be no assurance that a leveraging strategy will
be successful. SEE "INVESTMENT OBJECTIVE, POLICIES AND RISKS--USE OF LEVERAGE
AND RELATED RISKS" AT PAGE 16 AND "DESCRIPTION OF CAPITAL STRUCTURE" AT PAGE 27.

This Prospectus sets forth concisely information you should know before
investing in the common shares of the Fund. Please read and retain this
Prospectus for future reference. A Statement of Additional Information dated
, 2002, 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 36 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); 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 additional
shares from the Fund under certain circumstances.

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. You should not assume that the
information contained in this Prospectus is accurate as of any date other than
the date on the front of this Prospectus.

Until , 2002 (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.

TABLE OF CONTENTS
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Prospectus summary.................... 1
Summary of Fund expenses.............. 7
The Fund.............................. 9
Use of proceeds....................... 9
Investment objective, policies and
risks............................... 9
Management of the Fund................ 22
Distributions and taxes............... 24
Dividend reinvestment plan............ 26
Description of capital structure...... 27
Underwriting.......................... 32
Shareholder Servicing Agent, custodian
and transfer agent.................. 34
Legal opinions........................ 34
Reports to stockholders............... 35
Independent auditors.................. 35
Additional information................ 35
Table of contents for the Statement of
Additional Information.............. 36

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Prospectus summary

This is only a summary. You should review the more detailed information
contained in this Prospectus and in the Statement of Additional Information.

THE FUND

Eaton Vance Insured New York Municipal Bond Fund II (the "Fund") is a newly
organized, non-diversified, closed-end management investment company. The Fund
offers investors the opportunity to receive current income exempt from federal
income tax, including alternative minimum tax and New York State and New York
City personal income taxes, through a professionally managed portfolio of
municipal obligations. Investments are based on Eaton Vance Management's ("Eaton
Vance" or the "Adviser") research and ongoing credit analysis, the underlying
materials for which are generally not available to individual investors. An
investment in the Fund may not be appropriate for all investors, particularly
those that are not subject to federal and New York income taxes. There is no
assurance that the Fund will achieve its investment objective.

THE OFFERING

The Fund is offering common shares of beneficial interest, par value
$0.01 per share (the "Shares"), through a group of underwriters (the
"Underwriters") led by UBS Warburg LLC and Merrill Lynch, Pierce, Fenner & Smith
Incorporated. The Underwriters have been granted an option to purchase up to
additional Shares solely to cover over-allotments, if any. The initial
public offering price is $15.00 per share. The minimum purchase in this offering
is 100 Shares ($1,500). See "Underwriting." Eaton Vance, or an affiliate, has
agreed to pay (i) all organizational expenses and (ii) offering costs (other
than sales loads) that exceed $0.03 per Share.

INVESTMENT OBJECTIVE AND POLICIES

The Fund's investment objective is to provide current income exempt from federal
income tax, including alternative minimum tax, and New York State and New York
City personal income taxes. Securities will be purchased and sold in an effort
to maintain a competitive yield and to enhance return based upon the relative
value of the securities available in the marketplace. There is no assurance that
the Fund will achieve its investment objective.

During normal market conditions, at least 80% of the Fund's net assets will be
invested in municipal obligations, the interest on which is exempt from federal
income tax, including alternative minimum tax, and New York State and New York
City personal income taxes ("municipal obligations"), and that are insured as to
principal and interest payments. Such insurance will be from insurers having a
claims-paying ability rated Aaa by Moody's Investors Service, Inc. ("Moody's")
or AAA by Standard & Poor's Ratings Group ("S&P") or Fitch Ratings ("Fitch").
This insurance does not protect the market value of such obligations or the net
asset value of the Fund. The value of a municipal obligation will be affected by
the credit standing of its insurer.

The Fund primarily invests in high grade municipal obligations. At least 80% of
the Fund's total assets will normally be invested in municipal obligations rated
in the highest category at the time of investment (which is Aaa by Moody's or
AAA by S&P or Fitch or, if unrated, determined to be of comparable quality by
the Adviser). Up to 20% of the Fund's total assets may be invested in
obligations rated below Aaa or AAA (but not lower than BBB or Baa) and
comparable unrated obligations. Accordingly, the Fund does not intend to invest
any of its assets in obligations rated below investment grade or in comparable
unrated obligations. Under normal market conditions, the Fund expects to be
fully invested (at least 95% of its net assets) in accordance with its
investment objective.

The Fund will not invest in an obligation if the interest on that obligation is
subject to the federal alternative minimum tax.

The Fund will not invest in municipal obligations that are collateralized by the
proceeds from class action or other litigation against the tobacco industry.

The Fund may invest up to 10% of its total assets in residual interest municipal
obligations known as inverse floaters. Compared to similar fixed rate municipal
obligations, the value of these obligations will fluctuate to a greater extent
in response to changes in prevailing long-term interest rates. Moreover, the
income earned on residual interest municipal obligations will fluctuate in
response to changes in prevailing short-term interest rates. Thus, when such
obligations are held by the Fund, an increase in short or long-term market
interest rates will adversely affect the income received from such obligations
or the net asset value of Fund shares. To the extent the Fund has preferred
shares outstanding, an increase in short-term rates would also result in an
increased cost of leverage, which would adversely affect the Fund income
available for distribution.

The Fund may purchase and sell various kinds of financial futures contracts and
related options, including futures contracts and related options based on
various debt securities and securities indices, and may enter into interest rate
swaps and forward rate contracts to seek to hedge against changes in interest
rates or for other risk management purposes. Distributions by the Fund of any
income or gains realized on the Fund's transactions in such instruments
generally will be taxable. Guidelines of any rating organization that rates any
preferred shares issued by the Fund may limit the Fund's ability to engage in
such transactions.

LISTING

The Fund has applied for the listing of its common shares on the American Stock
Exchange under the symbol "NYH."

LEVERAGE

The Fund expects to use financial leverage through the issuance of preferred
shares. The Fund intends initially to use financial leverage of approximately
38% of its gross assets (including the amount obtained through leverage). The
Fund generally will not use leverage if it anticipates that it would result in a
lower return to holders of the Shares ("Shareholders") over time. Use of
financial leverage creates an opportunity for increased income for Shareholders
but, at the same time, creates special risks (including the likelihood of
greater volatility of net asset value and market price of the Shares), and there
can be no assurance that a leveraging strategy will be successful during any
period in which it is employed. The Fund intends to issue preferred shares
approximately one to three months after completion of this offering, subject to
market conditions and to the Fund's receipt of a AAA/Aaa credit rating on such
preferred shares from a nationally recognized statistical rating organization
("Rating Agency") (typically, Moody's, S&P or Fitch). See "Investment objective,
policies and risks--Use of leverage and related risks."

INVESTMENT ADVISER AND ADMINISTRATOR

Eaton Vance, an indirect wholly-owned subsidiary of Eaton Vance Corp., is the
Fund's investment adviser and administrator. The Adviser and certain of its
subsidiaries manage 5 national municipal funds, 41 single state municipal funds,
8 limited maturity municipal funds and 1 money market municipal fund with
combined assets of about $8.9 billion as of September 30, 2002. Thirteen of the
funds are closed-end. See "Management of the Fund."

DISTRIBUTIONS

Commencing with the Fund's first dividend, the Fund intends to make regular
monthly cash distributions to Shareholders at a level rate based on the
projected performance of the Fund. The Fund's ability to maintain a level Share
dividend rate will depend on a number of factors, including dividends payable on
the preferred shares. As portfolio and market conditions change, the rate of
dividends on the Shares and the Fund's dividend policy could change. Over time,
the Fund will distribute all of its net investment income (after it pays accrued
dividends on any outstanding preferred shares). In addition, at least annually,
the Fund intends to distribute net capital gain and taxable

ordinary income, if any, to Shareholders so long as the net capital gain and
taxable ordinary income are not included in distributions made with respect to
preferred shares. The initial distribution is expected to be declared
approximately 45 days and paid approximately 60 to 90 days after the completion
of this offering, depending on market conditions. Shareholders may elect to
automatically reinvest some or all of your distributions in additional Shares
under the Fund's dividend reinvestment Plan. See "Distributions and taxes" and
"Dividend reinvestment plan."

DIVIDEND REINVESTMENT PLAN

The Fund has established a dividend reinvestment plan (the "Plan"). Under the
Plan, a Shareholder may elect to have all dividend and capital gain
distributions automatically reinvested in additional Shares either purchased in
the open market, or newly issued by the Fund if the Shares are trading at or
above their net asset value. Shareholders may elect to participate in the Plan
by completing the dividend reinvestment plan application form. If Shareholders
do not participate, such Shareholders will receive all distributions in cash
paid by check mailed directly to them by PFPC Inc., as dividend paying agent.
Shareholders who intend to hold their 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 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
redeemable at net asset value at the option of the shareholder and typically
engage in a continuous offering of their shares. Mutual funds are subject to
continuous asset in-flows and out-flows that can complicate portfolio
management, whereas closed-end funds generally can stay more fully invested in
securities consistent with the closed-end fund's investment objective and
policies. In addition, in comparison to open-end funds, closed-end funds have
greater flexibility in the employment of financial leverage and in the ability
to make certain types of investments, including investments in illiquid
securities. However, shares of closed-end funds frequently trade at a discount
from their net asset value. In recognition of the possibility that the Shares
might trade at a discount to net asset value and that any such discount may not
be in the interest of 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 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 Shares trading at a price equal to or close to net
asset value per 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 objective 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. 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.

INTEREST RATE AND MARKET RISK

The prices of municipal obligations tend to fall as interest rates rise.
Securities that have longer maturities or durations tend to fluctuate more in
price in response to changes in market interest rates. A decline in the prices
of the municipal obligations owned by the Fund would cause a decline in the net
asset value of the Fund, which could adversely affect the trading price of the
Fund's Shares. This risk is usually greater among municipal obligations with
longer maturities or durations or when the Fund holds residual interest
municipal obligations. Although the Fund has no policy governing the

maturities or durations of its investments, the Fund expects that it will invest
in a portfolio of longer-term securities. This means that the Fund will be
subject to greater market risk (other things being equal) than a fund investing
solely in shorter-term securities. Market risk is often greater among certain
types of debt securities, such as zero-coupon bonds, which do not make regular
interest payments. As interest rates change, these bonds often fluctuate in
price more than coupon bonds that make regular interest payments. Because the
Fund may invest in these types of debt securities, it may be subject to greater
market risk than a fund that invests only in current interest paying securities.

INCOME RISK

The income investors receive from the Fund is based primarily on the interest it
earns from its investments, which can vary widely over the short and long-term.
If long-term interest rates drop, investors' income from the Fund over time
could drop as well if the Fund purchases securities with lower interest coupons.
This risk is magnified when prevailing short-term interest rates increase and
the Fund is utilizing leverage or holds residual interest municipal obligations.

CALL AND OTHER REINVESTMENT RISKS
If interest rates fall, it is possible that issuers of callable bonds with high
interest coupons will "call" (or prepay) their bonds before their maturity date.
If a call were exercised by the issuer during a period of declining interest
rates, the Fund is likely to replace such called security with a lower yielding
security. If that were to happen, it could decrease the Fund's dividends and
could affect the market price of Shares. Similar risks exist when the Fund
invests the proceeds from matured or traded municipal obligations at market
interest rates that are below the Fund's current earnings rate.

LIQUIDITY RISK
Although the Fund does not currently intend to, at times, the Fund may invest in
securities for which there is no readily available trading market or which are
otherwise illiquid. The Fund may not be able to readily 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 and ability to make dividend distributions.

MUNICIPAL BOND MARKET
Certain obligations in which the Fund will invest will not be registered with
the Securities and Exchange Commission or any state securities commission and
will not be listed on any national securities exchange. Therefore, the amount of
public information available about portfolio securities will be limited, and the
performance of the Fund is more dependent on the analytical abilities of Eaton
Vance than would be the case for an investment company that invests primarily in
registered or exchange-listed securities.

MUNICIPAL BOND INSURANCE
In the event Moody's, S&P or Fitch (or all of them) should downgrade its
assessment of the claims-paying ability of a particular insurer, it (or they)
could also be expected to downgrade the ratings assigned to municipal bonds
insured by such insurer, and municipal bonds insured under Portfolio Insurance
(as defined below) issued by such insurer also would be of reduced quality in
the portfolio of the Fund. Any such downgrade could have an adverse impact on
the net asset value and market price of the Shares.

In addition, to the extent the Fund employs Portfolio Insurance, the Fund may be
subject to certain restrictions on investments imposed by guidelines of the
insurance companies issuing such Portfolio

Insurance. The Fund does not expect these guidelines to prevent Eaton Vance from
managing the Fund's portfolio in accordance with the Fund's investment objective
and policies.

NEW YORK CONCENTRATION
The Fund's policy of investing primarily in municipal obligations of issuers
located in New York makes the Fund more susceptible to adverse economic,
political or regulatory occurrences affecting such issuers.

SECTOR AND TERRITORY CONCENTRATION

The Fund may invest 25% or more of its total assets in municipal obligations of
issuers located in the same U.S. territory or in the same economic sector,
including, without limitation, the following: lease rental obligations of state
and local authorities; obligations dependent on annual appropriations by a
state's legislature for payment; obligations of state and local housing finance
authorities, municipal utilities systems or public housing authorities;
obligations of hospitals; and obligations of the education and transportation
sectors. This may make the Fund more susceptible to adverse economic, political
or regulatory occurrences affecting a particular territory or economic sector.

EFFECTS OF LEVERAGE
The use of leverage through issuance of preferred shares by the Fund creates an
opportunity for increased net income, but, at the same time, creates special
risks. There can be no assurance that a leveraging strategy will be successful
during any period in which it is employed. The Fund intends to use leverage to
provide the holders of Shares with a potentially higher return. Leverage creates
risks for holders of Shares, including the likelihood of greater volatility of
net asset value and market price of the Shares and the risk that fluctuations in
dividend rates on any preferred shares may affect the return to Shareholders. It
is anticipated that preferred share dividends will be based on the yields of
short-term municipal obligations, while the proceeds of any preferred share
offering will be invested in longer-term municipal obligations, which typically
have higher yields. To the extent the income derived from securities purchased
with funds received from leverage exceeds the cost of leverage, the Fund's
return will be greater than if leverage had not been used. Conversely, if the
income from the securities purchased with such funds is not sufficient to cover
the cost of leverage, the return to the Fund will be less than if leverage had
not been used, and therefore the amount available for distribution to
Shareholders as dividends and other distributions will be reduced. 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.

Investment by the Fund in residual interest municipal obligations may amplify
the effects of leverage and, during periods of rising short-term interest rates,
may adversely affect the Fund's income and distribution to Shareholders. In
addition, under current federal income tax law, the Fund is required to allocate
a portion of any net realized capital gains or other taxable income to holders
of preferred shares. The terms of any preferred shares are expected to require
the Fund to pay to any preferred shareholders additional dividends intended to
compensate the preferred shareholders for taxes payable on any capital gains or
other taxable income allocated to the preferred shares. Any such additional
dividends will reduce the amount available for distribution to the Shareholders.
As discussed under "Management of the Fund," the fee paid to Eaton Vance will be
calculated on the basis of the Fund's gross assets, including proceeds from the
issuance of preferred shares, so the fees will be higher when leverage is
utilized. See "Investment objective, policies and risks--Use of leverage and
related risks."

The Fund currently intends to seek a Aaa/AAA grade rating on any preferred
shares from a Rating Agency. The Fund may be subject to investment restrictions
of the Rating Agency as a result. These restrictions may impose asset coverage
or portfolio composition requirements that are more stringent than those imposed
on the Fund by the Investment Company Act of 1940, as amended (the "Investment
Company Act" or "1940 Act"). It is not anticipated that these covenants or
guidelines will impede Eaton Vance in managing the Fund's portfolio in
accordance with its investment objective and policies. See "Description of
capital structure--Preferred shares."

Financial leverage may also be achieved through the purchase of certain
derivative instruments. The Fund's use of residual interest municipal
obligations and other derivative instruments exposes the Fund to special risks.
Such transactions may result in the Fund earning taxable income or gains. See
"Investment objective, policies and risks--Additional investment practices" and
"--Additional risk considerations."

MARKET PRICE OF SHARES
The shares of closed-end investment companies often trade at a discount from
their net asset value, and the Fund's Shares may likewise trade at a discount
from net asset value. The trading price of the Fund's Shares may be less than
the public offering price. This risk may be greater for investors who sell their
Shares in a relatively short period after completion of the public offering.

NON-DIVERSIFICATION
The Fund has registered as a "non-diversified" investment company under the 1940
Act. For federal income tax purposes, the Fund, with respect to up to 50% of its
total assets, will be able to invest more than 5% (but not more than 25%) of the
value of its total assets in the obligations of any single issuer. To the extent
the Fund invests a relatively high percentage of its assets in obligations of a
limited number of issuers, the Fund may be more susceptible than a more widely
diversified investment company to any single economic, political or regulatory
occurrence.

CERTAIN TAX CONSIDERATIONS

Distributions of any taxable net investment income and net short-term capital
gain are taxable as ordinary income. See "Distributions and taxes."

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 Shareholder, would bear directly or indirectly. The following
table assumes the issuance of preferred shares in an amount equal to 38% of the
Fund's total assets (after issuance), and shows Fund expenses as a percentage of
net assets attributable to common shares.

Shareholder transaction expenses
Sales load paid by you (as a percentage of offering
price)................................................. 4.50%
Offering expenses borne by the Fund..................... 0.20%(1)(2)
Dividend reinvestment plan fees......................... None(3)

PERCENTAGE OF NET ASSETS
ATTRIBUTABLE
TO COMMON SHARES
(ASSUMING THE ISSUANCE
OF PREFERRED SHARES)(4)
------------------------------------------------------------------------

Annual expenses
Investment advisory fee................................. 0.89%
Other expenses.......................................... 0.31%
----------
Total annual expenses................................... 1.20%
Fee and expense reimbursements (years 1-5).............. (0.24)%(5)
----------
Total net annual expenses (years 1-5)................... 0.96%(5)
----------

------------
(1) Eaton Vance or an affiliate has agreed to bear all offering and
organizational expenses (other than sales load) that exceed $0.03 per
Share.

(2) If the Fund offers preferred shares, costs of that offering, estimated to
be slightly more than 1% of the total amount of the preferred share
offering, will effectively be borne by common shareholders and result in
the reduction of the net asset value of the common shares. Assuming the
issuance of preferred shares in an amount equal to 38% of the Fund's total
assets (after issuance), those offering costs are estimated to be not more
than approximately $1,310,000 or $0.098 per common share (0.65% of the
offering price).

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

(4) Stated as percentages of net assets attributable to common shares assuming
no issuance of preferred shares or borrowings, the Fund's expenses would be
estimated to be as follows:

PERCENTAGE OF NET ASSETS
ATTRIBUTABLE
TO COMMON SHARES
(ASSUMING NO PREFERRED SHARES
ARE ISSUED OR OUTSTANDING)
------------------------------------------------------------------------

Annual expenses
Investment advisory fee................................. 0.55%
Other expenses.......................................... 0.13%
----------
Total annual expenses................................... 0.68%
Fees and expense reimbursements (years 1-5)............. (0.15)%(5)
----------
Total net annual expenses (years 1-5)................... 0.53%(5)
----------

(5) Eaton Vance has contractually agreed to reimburse the Fund for fees and
other expenses in the amount of 0.15% of average weekly total assets of the
Fund for the first 5 full years of the Fund's operations 0.10% of average
weekly total assets of the Fund in year 6, and 0.05% in year 7. For this
purpose, total assets (and gross assets in "Management of the Fund--The
Adviser") 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. Without the
reimbursement, Total net annual expenses would be estimated to be 1.20% of
average weekly net assets (or, assuming no issuance of preferred shares or
borrowing, 0.68% of average weekly net assets) attributable to common
shares.

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
13,333,333 common shares. See "Management of the Fund" and "Dividend
reinvestment plan."

The following example illustrates the expenses that you would pay on a $1,000
investment in common shares (including the sales load of $45.00, estimated
offering expenses of this offering of $2 and the estimated preferred share
offering costs assuming preferred shares are issued representing 38% of the
Fund's total assets (after issuance) of $6.50), assuming (1) total net annual
expenses of 0.96% of net assets attributable to common shares in years 1 through
5, increasing to 1.20% in years 8, 9, and 10 and (2) a 5% annual return(1):

1 YEAR 3 YEARS 5 YEARS 10 YEARS (2)
--------------------------------------------

$63 $82 $104 $177

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, that fees and expenses increase as
described in note 2 below 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.

(2) Assumes reimbursement of fees and expenses of 0.10% of average weekly total
assets of the Fund in year 6, 0.05% in year 7 and no reimbursement of fees
or expenses in years 8, 9, and 10. Eaton Vance has not agreed to reimburse
the Fund for any portion of its fees and expenses beyond November 30, 2009.

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

The Fund

The Fund is a newly organized, non-diversified, closed-end management investment
company registered under the 1940 Act. The Fund was organized as a Massachusetts
business trust on October 3, 2002 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 "Shares"). See
"Underwriting."

Use of proceeds

The net proceeds of this offering of Shares will be approximately $ (or
$ 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 objective 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 municipal debt securities. Eaton Vance or
an affiliate has agreed to pay all offering and organizational expenses of the
Fund that exceed $0.03 per Share.

Investment objective, policies and risks

INVESTMENT OBJECTIVE

The Fund's investment objective is to provide current income exempt from federal
income tax, including alternative minimum tax, and New York State and New York
City personal income taxes. This income will be earned by investing primarily in
high grade municipal obligations (as defined below) that are insured as to the
timely payment of principal and interest. Securities will be purchased and sold
in an effort to maintain a competitive yield and to enhance return based upon
the relative value of the securities available in the marketplace. Investments
are based on Eaton Vance's research and ongoing credit analysis, the underlying
materials for which are generally not available to individual investors.

Eaton Vance seeks to find municipal obligations of high quality that have been
undervalued in the marketplace. Eaton Vance's team of research analysts, traders
and portfolio managers are devoted exclusively to analyzing municipal
securities. The team's goal is to find municipal bonds of high quality that have
been undervalued in the marketplace due to differing dynamics in individual
sectors of the municipal bond market, municipal bond supply, and the structure
of individual bonds, especially in regard to maturities, coupons, and call
dates. Eaton Vance's team of professionals monitors historical and current yield
spreads to find relative value in the marketplace. This research capability is
key to identifying trends that impact the yield-spread relationship of all
bonds, including those in the insured sector.

PRIMARY INVESTMENT POLICIES

GENERAL COMPOSITION OF THE FUND

During normal market conditions, at least 80% of the Fund's net assets will be
invested in municipal obligations, the interest on which is exempt from federal
income tax, including alternative minimum tax and New York State and New York
City personal income taxes ("municipal obligations" or "municipal bonds") and
that are insured as to principal and interest payments. Such insurance will be
from insurers having a claims-paying ability rated Aaa by Moody's Investors
Service, Inc. ("Moody's") or AAA by Standard & Poor's Ratings Group ("S&P") or
Fitch Ratings ("Fitch"). This insurance does

--------------------------------------------------------------------------------
9

INVESTMENT OBJECTIVE, POLICIES AND RISKS
--------------------------------------------------------------------------------

not protect the market value of such obligations or the net asset value of the
Fund. The value of an insured municipal obligation will be affected by the
credit standing of its insurer. The Fund primarily invests in high grade
municipal obligations. At least 80% of the Fund's total assets will normally be
invested in municipal obligations rated in the highest category at the time of
investment (which is Aaa by Moody's or AAA by S&P or Fitch or, if unrated,
determined to be of comparable quality by the Adviser). Up to 20% of the Fund's
total assets may be invested in obligations rated below Aaa or AAA (but not
lower than BBB or Baa) and comparable unrated obligations. Accordingly, the Fund
does not intend to invest any of its assets in obligations rated below
investment grade or in comparable unrated obligations. Under normal market
conditions, the Fund expects to be fully invested (at least 95% of its net
assets) in accordance with its investment objective.

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
that a Rating Agency downgrades its assessment of the credit characteristics of
a particular issue or withdraws its assessment. In determining whether to retain
or sell such a security, Eaton Vance may consider such factors as Eaton Vance's
assessment of the credit quality of the issuer of such security, the price at
which such security could be sold and the rating, if any, assigned to such
security by other Rating Agencies.

The Fund has adopted certain fundamental investment restrictions set forth in
the Statement of Additional Information which may not be changed without a
Shareholder vote. Except for such restrictions and the 80% requirement
pertaining to investment in municipal and insured municipal obligations set
forth above, the investment objective and policies of the Fund may be changed by
the Board without Shareholder action.

The Fund will not invest in an obligation if the interest on that obligation is
subject to the federal alternative minimum tax.

The Fund will not invest in municipal obligations that are collaterized by the
proceeds from class action or other litigation against the tobacco industry.

MUNICIPAL OBLIGATIONS

Municipal obligations include bonds, notes and commercial paper issued by a
municipality for a wide variety of both public and private purposes, the
interest on which is, in the opinion of issuer's counsel (or on the basis of
other reliable authority), exempt from federal income tax. The municipal
obligations in which the Fund will invest are generally issued by New York
municipal issuers and pay interest that is, in the opinion of issuer's counsel
(or on the basis of other reliable authority), exempt from New York State and
New York City personal income taxes, and federal income tax, including
alternative minimum tax. The Fund may also invest in municipal obligations
issued by United States territories (such as Puerto Rico or Guam) the interest
on which is exempt from federal income tax and New York State and New York City
personal income taxes.

Public purpose municipal bonds include general obligation and revenue bonds.
General obligation bonds are backed by the taxing power of the issuing
municipality. Revenue bonds are backed by the revenues of a project or facility
or from the proceeds of a specific revenue source. Some revenue bonds are
payable solely or partly from funds that are subject to annual appropriations by
a state's legislature. Municipal notes include bond anticipation, tax
anticipation and revenue anticipation notes. Bond, tax and revenue anticipation
notes are short-term obligations that will be retired with the proceeds of an
anticipated bond issue, tax revenue or facility revenue, respectively.

The Fund may invest up to 10% of its total assets in residual interest municipal
obligations whose interest rates bear an inverse relationship to the interest
rate on another security or the value of an index ("inverse floaters"). An
investment in inverse floaters may involve greater risk than an investment in a
fixed-rate bond. Because changes in the interest rate on the other security or
index inversely affect the residual interest paid on the inverse floater, the
value of an inverse floater is

--------------------------------------------------------------------------------
10

INVESTMENT OBJECTIVE, POLICIES AND RISKS
--------------------------------------------------------------------------------

generally more volatile than that of a fixed-rate bond. Inverse floaters have
interest rate adjustment formulas which generally reduce or, in the extreme,
eliminate the interest paid to the Fund when short-term interest rates rise, and
increase the interest paid to the Fund when short-term interest rates fall.
Inverse floaters have varying degrees of liquidity, and the market for these
securities is relatively new and volatile. These securities tend to underperform
the market for fixed-rate bonds in a rising interest rate environment, but tend
to outperform the market for fixed-rate bonds when interest rates decline.
Shifts in long-term interest rates may, however, alter this tendency. Although
volatile, inverse floaters typically offer the potential for yields exceeding
the yields available on fixed-rate bonds with comparable credit quality, coupon,
call provisions and maturity. These securities usually permit the investor to
convert the floating rate to a fixed rate (normally adjusted downward), and this
optional conversion feature may provide a partial hedge against rising rates if
exercised at an opportune time. Investment in inverse floaters may amplify the
effects of the Fund's use of leverage. Should short-term interest rates rise,
the combination of the Fund's investment in inverse floaters and the use of
leverage likely will adversely affect the Fund's income and distributions to
Shareholders.

Some of the securities in which the Fund invests may include so-called
"zero-coupon" bonds, whose values are subject to greater fluctuation in response
to changes in market interest rates than bonds that pay interest currently.
Zero-coupon bonds are issued at a significant discount from face value and pay
interest only at maturity rather than at intervals during the life of the
security. The Fund is required to take into account income from zero-coupon
bonds on a current basis, even though it does not receive that income currently
in cash, and the Fund is required to distribute substantially all of its income
for each taxable year. Thus, the Fund may have to sell other investments to
obtain cash needed to make income distributions.

MUNICIPAL OBLIGATION INSURANCE GENERALLY

Insured municipal obligations held by the Fund will be insured as to their
scheduled payment of principal and interest under (i) an insurance policy
obtained by the issuer or underwriter of the municipal obligation at the time of
its original issuance ("Original Issue Insurance"), (ii) an insurance policy
obtained by the Fund or a third party subsequent to the municipal obligation's
original issuance ("Secondary Market Insurance") or (iii) another municipal
insurance policy purchased by the Fund ("Portfolio Insurance"). This insurance
does not protect the market value of such obligations or the net asset value of
the Fund. The Fund expects initially to emphasize investments in municipal bonds
insured under bond-specific insurance policies (i.e., Original Issue or
Secondary Market Insurance). The Fund may obtain Portfolio Insurance from the
insurers described in Appendix D to the Statement of Additional Information. As
a non-fundamental policy that can be changed by the Fund's Board of Trustees
(the "Board"), the Fund will only obtain policies of Portfolio Insurance issued
by insurers whose claims-paying ability is rated "Aaa" by Moody's or "AAA" by
S&P or Fitch. There is no limit on the percentage of the Fund's assets that may
be invested in municipal bonds insured by any one insurer.

Municipal bonds covered by Original Issue Insurance or Secondary Market
Insurance are themselves typically assigned a rating of "Aaa" or "AAA", as the
case may be, by virtue of the rating of the "Aaa" or "AAA" claims-paying ability
of the insurer and would generally be assigned a lower rating if the ratings
were based primarily upon the credit characteristics of the issuer without
regard to the insurance feature. By way of contrast, the ratings, if any,
assigned to municipal bonds insured under Portfolio Insurance will be based
primarily upon the credit characteristics of the issuer, without regard to the
insurance feature, and generally will carry a rating that is below "Aaa" or
"AAA." While in the portfolio of the Fund, however, a municipal bond backed by
Portfolio Insurance will effectively be of the same credit quality as a
municipal bond issued by an issuer of comparable credit characteristics that is
backed by Original Issue Insurance or Secondary Market Insurance.

--------------------------------------------------------------------------------
11

INVESTMENT OBJECTIVE, POLICIES AND RISKS
--------------------------------------------------------------------------------

The Fund's policy of investing in municipal bonds insured by insurers whose
claims-paying ability is rated "Aaa" or "AAA" applies only at the time of
purchase of a security, and the Fund will not be required to dispose of the
securities in the event Moody's, S&P or Fitch, as the case may be, downgrades
its assessment of the claims-paying ability of a particular insurer or the
credit characteristics of a particular issuer or withdraws its assessment. In
this connection, it should be noted that in the event Moody's, S&P or Fitch (or
all of them) should downgrade its assessment of the claims-paying ability of a
particular insurer, it (or they) could also be expected to downgrade the ratings
assigned to municipal bonds insured by such insurer, and municipal bonds insured
under Portfolio Insurance issued by such insurer also would be of reduced
quality in the portfolio of the Fund. Moody's, S&P and Fitch continually assess
the claims-paying ability of insurers and the credit characteristics of issuers,
and there can be no assurance that they will not downgrade or withdraw their
assessments subsequent to the time the Fund purchases securities.

The value of municipal bonds covered by Portfolio Insurance that are in default
or in significant risk of default will be determined by separately establishing
a value for the municipal bond and a value for the Portfolio Insurance.

ORIGINAL ISSUE INSURANCE

Original Issue Insurance is purchased with respect to a particular issue of
municipal bonds by the issuer thereof or a third party in conjunction with the
original issuance of such municipal bonds. Under this insurance, the insurer
unconditionally guarantees to the holder of the municipal bond the timely
payment of principal and interest on such obligations when and as these payments
become due but not paid by the issuer, except that in the event of the
acceleration of the due date of the principal by reason of mandatory or optional
redemption (other than acceleration by reason of a mandatory sinking fund
payment), default or otherwise, the payments guaranteed may be made in the
amounts and at the times as payment of principal would have been due had there
not been any acceleration. The insurer is responsible for these payments less
any amounts received by the holder from any trustee for the municipal bond
issuer or from any other source. Original Issue Insurance does not guarantee
payment on an accelerated basis, the payment of any redemption premium (except
with respect to certain premium payments in the case of certain small issue
industrial development and pollution control municipal bonds), the value of the
Fund's shares, the market value of municipal bonds, or payments of any tender
purchase price upon the tender of the municipal bonds. Original Issue Insurance
also does not insure against nonpayment of principal or interest on municipal
bonds resulting from the insolvency, negligence or any other act or omission of
the trustee or other paying agent for these bonds. Original Issue Insurance
remains in effect as long as the municipal bonds it covers remain outstanding
and the insurer remains in business, regardless of whether the Fund ultimately
disposes of these municipal bonds. Consequently, Original Issue Insurance may be
considered to represent an element of market value with respect to the municipal
bonds so insured, but the exact effect, if any, of this insurance on the market
value cannot be estimated.

SECONDARY MARKET INSURANCE

Subsequent to the time of original issuance of a municipal bond, the Fund or a
third party may, upon the payment of a single premium, purchase insurance on
that security. Secondary Market Insurance generally provides the same type of
coverage as Original Issue Insurance and, as with Original Issue Insurance,
Secondary Market Insurance remains in effect as long as the municipal bonds it
covers remain outstanding and the insurer remains in business, regardless of
whether the Fund ultimately disposes of these municipal bonds.

One of the purposes of acquiring Secondary Market Insurance with respect to a
particular municipal bond would be to enable the Fund to enhance the value of
the security. The Fund, for example, might seek to purchase a particular
municipal bond and obtain Secondary Market Insurance for it if, in the Adviser's
opinion, the market value of the security, as insured, less the cost of the
Secondary Market

--------------------------------------------------------------------------------
12

INVESTMENT OBJECTIVE, POLICIES AND RISKS
--------------------------------------------------------------------------------

Insurance, would exceed the current value of the security without insurance.
Similarly, if the Fund owns but wishes to sell a municipal bond that is then
covered by Portfolio Insurance, the Fund might seek to obtain Secondary Market
Insurance for it if, in the Adviser's opinion, the net proceeds of the Fund's
sale of the security, as insured, less the cost of the Secondary Market
Insurance, would exceed the current value of the security. In determining
whether to insure municipal bonds the Fund owns, an insurer will apply its own
standards, which correspond generally to the standards the insurer has
established for determining the insurability of new issues of municipal bonds.
See "Original Issue Insurance" above.

PORTFOLIO INSURANCE

Portfolio Insurance guarantees the payment of principal and interest on
specified eligible municipal bonds purchased by the Fund and presently held by
the Fund. Except as described below, Portfolio Insurance generally provides the
same type of coverage as is provided by Original Issue Insurance or Secondary
Market Insurance. Municipal bonds insured under a Portfolio Insurance policy
would generally not be insured under any other policy. A municipal bond is
eligible for coverage under a policy if it meets certain requirements of the
insurer. Portfolio Insurance is intended to reduce financial risk, but the cost
thereof and compliance with investment restrictions imposed under the policy
will reduce the yield to shareholders of the Fund.

If a municipal obligation is already covered by Original Issue Insurance or
Secondary Market Insurance, then the security is not required to be additionally
insured under any Portfolio Insurance that the Fund may purchase. All premiums
respecting municipal bonds covered by Original Issue Insurance or Secondary
Market Insurance are paid in advance by the issuer or other party obtaining the
insurance.

Portfolio Insurance policies are effective only as to municipal bonds owned by
and held by the Fund, and do not cover municipal bonds for which the contract
for purchase fails. A "when-issued" municipal obligation will be covered under a
Portfolio Insurance policy upon the settlement date of the issue of such
"when-issued" municipal bond.

In determining whether to insure municipal bonds held by the Fund, an insurer
will apply its own standards, which correspond generally to the standards it has
established for determining the insurability of new issues of municipal bonds.
See "Original Issue Insurance" above.

Each Portfolio Insurance policy will be noncancellable and will remain in effect
so long as the Fund is in existence, the municipal bonds covered by the policy
continue to be held by the Fund, and the Fund pays the premiums for the policy.
Each insurer will generally reserve the right at any time upon 90 days' written
notice to the Fund to refuse to insure any additional bonds purchased by the
Fund after the effective date of such notice. The Fund's Board generally will
reserve the right to terminate each policy upon seven days' written notice to an
insurer if it determines that the cost of such policy is not reasonable in
relation to the value of the insurance to the Fund.

Each Portfolio Insurance policy will terminate as to any municipal bond that has
been redeemed from or sold by the Fund on the date of redemption or the
settlement date of sale, and an insurer will not have any liability thereafter
under a policy for any municipal bond, except that if the redemption date or
settlement date occurs after a record date and before the related payment date
for any municipal bond, the policy will terminate for that municipal bond on the
business day immediately following the payment date. Each policy will terminate
as to all municipal bonds covered thereby on the date on which the last of the
covered municipal bonds mature, are redeemed or are sold by the Fund.

One or more Portfolio Insurance policies may provide the Fund, pursuant to an
irrevocable commitment of the insurer, with the option to exercise the right to
obtain permanent insurance ("Permanent Insurance") for a municipal bond that is
sold by the Fund. The Fund would exercise the right to obtain Permanent
Insurance upon payment of a single, predetermined insurance premium

--------------------------------------------------------------------------------
13

INVESTMENT OBJECTIVE, POLICIES AND RISKS
--------------------------------------------------------------------------------

payable from the sale proceeds of the municipal bond. The Fund expects to
exercise the right to obtain Permanent Insurance for a municipal bond only if,
in the Adviser's opinion, upon its exercise the net proceeds from the sale of
the municipal bond, as insured, would exceed the proceeds from the sale of the
security without insurance.

The Portfolio Insurance premium for each municipal bond is determined based upon
the insurability of each security as of the date of purchase and will not be
increased or decreased for any change in the security's creditworthiness unless
the security is in default as to payment of principal or interest, or both. If
such event occurs, the Permanent Insurance premium will be subject to an
increase predetermined at the date of the Fund's purchase.

Because each Portfolio Insurance policy will terminate for municipal bonds sold
by the Fund on the date of sale, in which event the insurer will be liable only
for those payments of principal and interest that are then due and owing (unless
Permanent Insurance is obtained by the Fund), the provision for this insurance
will not enhance the marketability of the Fund's obligations, whether or not the
obligations are in default or in significant risk of default. On the other hand,
because Original Issue Insurance and Secondary Market Insurance generally will
remain in effect as long as the municipal bonds they cover are outstanding,
these insurance policies may enhance the marketability of these bonds even when
they are in default or in significant risk of default, but the exact effect, if
any, on marketability, cannot be estimated. Accordingly, the Fund may determine
to retain or, alternatively, to sell municipal bonds covered by Original Issue
Insurance or Secondary Market Insurance that are in default or in significant
risk of default.

Premiums for a Portfolio Insurance policy are paid monthly, and are adjusted for
purchases and sales of municipal bonds covered by the policy during the month.
The yield on the Fund is reduced to the extent of the insurance premiums it
pays. Depending upon the characteristics of the municipal bonds held by the
Fund, the annual premium rate for policies of Portfolio Insurance is estimated
to range from 12 to 18 basis points of the value of the municipal bonds covered
under the policy.

Although the insurance feature reduces certain financial risks, the premiums for
insurance and the higher market price paid for insured obligations may reduce
the Fund's current yield. Insurance generally will be obtained from insurers
with a claims-paying ability rated Aaa by Moody's or AAA by S&P or Fitch. The
insurance does not guarantee the market value of the insured obligation or the
net asset value of the Fund's Shares.

OTHER TYPES OF CREDIT SUPPORT

The Fund may also invest in uninsured municipal obligations that are secured by
an escrow or trust account that contains securities issued or guaranteed by the
U.S. Government, its agencies or instrumentalities, that are backed by the full
faith and credit of the United States, and that are sufficient in amount, in
combination with available trustee-held funds, to ensure the payment of interest
on and principal of the secured obligation ("collateralized obligations"). These
collateralized obligations generally will not be insured and will include, but
are not limited to, municipal bonds that have been advance refunded where the
proceeds of the refunding have been used to buy U.S. Government or U.S.
Government agency securities that are placed in escrow and whose interest or
maturing principal payments, or both, are sufficient to cover the remaining
scheduled debt service on that municipal bond. Collateralized obligations
generally are regarded as having the credit characteristics of the underlying
U.S. Government, U.S. Government agency or instrumentality securities. These
obligations will not be subject to Original Issue Insurance, Secondary Market
Insurance or Portfolio Insurance. Accordingly, despite the existence of these
credit support characteristics, these obligations will not be considered to be
insured obligations for purposes of the Fund's policy of investing at least 80%
of its net assets in insured obligations. The credit quality of companies that
provide such credit enhancements will affect the value of those securities.

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

INVESTMENT OBJECTIVE, POLICIES AND RISKS
--------------------------------------------------------------------------------

ADDITIONAL INVESTMENT PRACTICES

WHEN-ISSUED SECURITIES
The Fund may purchase securities on a "when-issued" basis, which means that
payment and delivery occur on a future settlement date. The price and yield of
such securities are generally fixed on the date of commitment to purchase.
However, the market value of the securities may fluctuate prior to delivery and
upon delivery the securities may be worth more or less than what the Fund agreed
to pay for them. The Fund may be required to maintain a segregated account of
liquid assets equal to outstanding purchase commitments. The Fund may also
purchase instruments that give the Fund the option to purchase a municipal
obligation when and if issued.

FUTURES TRANSACTIONS
The Fund may purchase and sell various kinds of financial futures contracts and
options thereon to seek to hedge against changes in interest rates or for other
risk management purposes. Futures contracts may be based on various debt
securities and securities indices (such as the Municipal Bond Index traded on
the Chicago Board of Trade). Such transactions involve a risk of loss or
depreciation due to unanticipated adverse changes in securities prices, which
may exceed the 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. There can be no assurance that Eaton Vance's use of futures
will be advantageous to the Fund. Distributions by the Fund of any gains
realized on the Fund's transactions in futures and options on futures will be
taxable. Rating Agency guidelines on any preferred shares issued by the Fund may
limit use of these transactions.

INTEREST RATE SWAPS AND FORWARD RATE CONTRACTS

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). The Fund will only enter into
interest rate swaps 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). The Fund may also enter forward rate contracts. Under these
contracts, the buyer locks in an interest rate at a future settlement date. If
the interest rate on the settlement date exceeds the lock rate, the buyer pays
the seller the difference between the two rates. If the lock rate exceeds the
interest rate on the settlement date, the seller pays the buyer the difference
between the two rates. Any such gain received by the Fund would be taxable.

If the other party to an interest rate swap or forward rate contract 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 interest rate
swap or forward rate contract 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. These
instruments are traded in the over-the-counter market.

INVESTMENT COMPANY SECURITIES
The Fund may purchase common shares of closed-end investment companies that have
a similar investment objective and policies to the Fund. In addition to
providing tax-exempt income, such securities may provide capital appreciation.
Such investments, which may also be leveraged and subject to the same risks as
the Fund, will not exceed 10% of total assets, and no such company will be
affiliated with Eaton Vance. These companies bear fees and expenses that the
Fund will incur indirectly.

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15

INVESTMENT OBJECTIVE, POLICIES AND RISKS
--------------------------------------------------------------------------------

MUNICIPAL LEASES
The Fund may invest in municipal leases and participations therein. Municipal
leases are obligations in the form of a lease or installment purchase
arrangement which is issued by the state or local government to acquire
equipment and facilities.

USE OF LEVERAGE AND RELATED RISKS

The Fund expects to use leverage through the issuance of preferred shares. The
Fund initially intends to use leverage of approximately 38% of its gross assets
(including the amount obtained from leverage). The Fund generally will not use
leverage if the Adviser anticipates that it would result in a lower return to
Shareholders for any significant amount of time. The Fund also 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.

Leverage creates risks for holders of the Shares, including the likelihood of
greater volatility of net asset value and market price of the Shares. There is a
risk that fluctuations in the dividend rates on any preferred shares may
adversely affect the return to the holders of the Shares. If the income from the
securities purchased with such funds is not sufficient to cover the cost of
leverage, the return on the Fund will be less than if leverage had not been
used, and therefore the amount available for distribution to Shareholders as
dividends and other distributions will be reduced. The Adviser in its best
judgment nevertheless may determine to maintain the Fund's leveraged position if
it deems such action to be appropriate in the circumstances. During 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 the issuance of preferred shares. As discussed under
"Description of capital structure," the Fund's issuance of preferred shares may
alter the voting power of common shareholders.

Capital raised through leverage will be subject to dividend payments, which may
exceed the income and appreciation on the assets purchased. The issuance of
preferred shares involves offering expenses and other costs and may limit the
Fund's freedom to pay dividends on Shares or to engage in other activities. The
issuance of a class of preferred shares having priority over the Fund's Shares
creates an opportunity for greater return per Share, but at the same time such
leveraging is a speculative technique in that it will increase the Fund's
exposure to capital risk. Unless the income and appreciation, if any, on assets
acquired with offering proceeds exceed the cost of issuing additional classes of
securities (and other Fund expenses), the use of leverage will diminish the
investment performance of the Fund's Shares compared with what it would have
been without leverage.

The Fund may be subject to certain restrictions on investments imposed by
guidelines of one or more Rating Agencies that may issue ratings for any
preferred shares issued by the Fund. These guidelines may impose asset coverage
or Fund composition requirements that are more stringent than those imposed on
the Fund by the 1940 Act. It is not anticipated that these covenants or
guidelines will impede the Adviser from managing the Fund's portfolio in
accordance with the Fund's investment objective and policies.

Under the Investment Company Act, the Fund is not permitted to issue preferred
shares unless immediately after such issuance the net asset value of the Fund's
portfolio is at least 200% of the liquidation value of the outstanding preferred
shares (i.e., such liquidation value may not exceed 50% of the Fund's total
assets). In addition, the Fund is not permitted to declare any cash dividend or
other distribution on its Shares unless, at the time of such declaration, the
net asset value of the Fund's portfolio (determined after deducting the amount
of such dividend or other distribution) is at least 200% of such liquidation
value. If preferred shares are issued, the Fund intends, to the extent possible,
to purchase or redeem preferred shares, from time to time, to maintain coverage
of any preferred shares of at least 200%. In addition, under current federal
income tax law, the Fund is required to

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INVESTMENT OBJECTIVE, POLICIES AND RISKS
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allocate a portion of any net realized capital gains or other taxable income to
holders of preferred shares. The terms of any preferred shares are expected to
require the Fund to pay to any preferred shareholders additional dividends
intended to compensate the preferred shareholders for taxes payable on any
capital gains or other taxable income allocated to the preferred shares. Any
such additional dividends will reduce the amount available for distribution to
the Shareholders. Normally, holders of the Shares will elect five of the
Trustees of the Fund and holders of any preferred shares will elect two. In the
event the Fund failed to pay dividends on its preferred shares for two years,
preferred shareholders would be entitled to elect a majority of the Trustees
until the dividends are paid.

To qualify for federal income taxation as a "regulated investment company," the
Fund must distribute in each taxable year at least 90% of its net investment
income (including net tax-exempt interest income and net short-term gain). The
Fund also will be required to distribute annually substantially all of its
taxable income and capital gain net income, if any, to avoid imposition of a
nondeductible 4% federal excise tax. If the Fund is precluded from making
distributions on the Shares because of any applicable asset coverage
requirements, the terms of the preferred shares may provide that any amounts so
precluded from being distributed, but required to be distributed for the Fund to
meet the distribution requirements for qualification as a regulated investment
company, will be paid to the holders of the preferred shares as a special
dividend. This dividend can be expected to decrease the amount that holders of
preferred shares would be entitled to receive upon redemption or liquidation of
the shares.

The Fund's willingness to issue new securities for investment purposes, and the
amount the Fund will issue, will depend on many factors, the most important of
which are market conditions and interest rates. Successful use of a leveraging
strategy may depend on the Adviser's ability to predict correctly interest rates
and market movements, and there is no assurance that a leveraging strategy will
be successful during any period in which it is employed.

Assuming the utilization of leverage in the amount of 38% of the Fund's gross
assets and an annual dividend rate on preferred shares of 1.50% payable on such
leverage based on market rates as of the date of this Prospectus, the additional
income that the Fund must earn (net of expenses) in order to cover such dividend
payments is 0.57%. The Fund's actual cost of leverage will be based on market
rates at the time the Fund undertakes a leveraging strategy, and such actual
cost of leverage may be higher or lower than that assumed in the previous
example.

The following table is designed to illustrate the effect on the return to a
holder of the Fund's Shares of leverage in the amount of approximately 38% of
the Fund's gross assets, assuming hypothetical annual returns of the Fund's
portfolio of minus 10% to plus 10%. As the table shows, leverage generally
increases the return to Shareholders when portfolio return is positive and
greater than the cost of leverage and decreases the return when the portfolio
return is negative or less than the cost of leverage. The figures appearing in
the table are hypothetical and actual returns may be greater or less than those
appearing in the table.

Assumed portfolio return (net of
expenses)................................ (10)% (5)% 0% 5% 10%
Corresponding Share return assuming 38%
leverage................................. (17.05)% (8.98)% (0.92)% 7.15% 15.21%

Until the Fund issues preferred shares, the Shares will not be leveraged, and
the risks and special considerations related to leverage described in this
Prospectus will not apply. Such leveraging of the Shares cannot be achieved
until the proceeds resulting from the use of leverage have been invested in
accordance with the Fund's investment objective and policies.

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17

INVESTMENT OBJECTIVE, POLICIES AND RISKS
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ADDITIONAL 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.

INTEREST RATE AND MARKET RISK
The prices of municipal obligations tend to fall as interest rates rise.
Securities that have longer maturities tend to fluctuate more in price in
response to changes in market interest rates. A decline in the prices of the
municipal obligations owned by the Fund would cause a decline in the net asset
value of the Fund, which could adversely affect the trading price of the Fund's
Shares. This risk is usually greater among municipal obligations with longer
maturities or durations. Although the Fund has no policy governing the
maturities or durations of its investments, the Fund expects that it will invest
in a portfolio of longer-term securities. This means that the Fund will be
subject to greater market risk (other things being equal) than a fund investing
solely in shorter-term securities. Market risk is often greater among certain
types of income securities, such as zero-coupon bonds, which do not make regular
interest payments. As interest rates change, these bonds often fluctuate in
price more than coupon bonds that make regular interest payments. Because the
Fund may invest in these types of income securities, it may be subject to
greater market risk than a fund that invests only in current interest paying
securities.

The Fund may invest to a significant extent in residual interest municipal bonds
known as inverse floaters. Compared to similar fixed-rate municipal bonds, the
value of these bonds will fluctuate to a greater extent in response to changes
in prevailing long-term interest rates. Moreover, the income earned on residual
interest municipal bonds will fluctuate in response to changes in prevailing
short-term interest rates. Thus, when such bonds are held by the Fund, an
increase in short or long-term market interest rates will adversely affect the
income received from such bonds or the net asset value of Fund shares. To the
extent that the Fund has preferred shares outstanding, an increase in short-term
rates would also result in an increase cost of leverage, which would adversely
affect the Fund's income available for distribution.

INCOME RISK

CALL AND OTHER REINVESTMENT RISKS
If interest rates fall, it is possible that issuers of callable bonds with high
interest coupons will "call" (or prepay) their bonds before their maturity date.
If a call were exercised by the issuer during a period of declining interest
rates, the Fund is likely to replace such called security with a lower yielding
security. If that were to happen, it could decrease the Fund's dividends and
possibly could affect the market price of Shares. Similar risks exist when the
Fund invests the proceeds from matured or traded municipal obligations at market
interest rates that are below the Fund's current earnings rate.

CREDIT RISK
Credit risk is the risk that one or more municipal bonds in the Fund's portfolio
will decline in price, or fail to pay interest or principal when due, because
the issuer of the bond experiences a decline in its financial status. In
general, lower rated municipal bonds carry a greater degree of risk that the
issuer will lose its ability to make interest and principal payments, which
could have a negative impact on the Fund's net asset value or dividends.
Securities rated in the fourth highest category are considered investment grade
but they also may have some speculative characteristics.

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INVESTMENT OBJECTIVE, POLICIES AND RISKS
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Changes in the credit quality of the issuers of municipal obligations held by
the Fund will affect the principal value of (and possibly the income earned on)
such obligations. In addition, the value of such securities are affected by
changes in general economic conditions and business conditions affecting the
relevant economic sectors. Changes by Rating Agencies in their ratings of a
security and in the ability of the issuer to make payments of principal and
interest may also affect the value of the Fund's investments. The amount of
information about the financial condition of an issuer of municipal obligations
may not be as extensive as that made available by corporations whose securities
are publicly traded.

The Fund may invest in municipal leases and participations in municipal leases.
The obligation of the issuer to meet its obligations under such leases is often
subject to the appropriation by the appropriate legislative body, on an annual
or other basis, of funds for the payment of the obligations. Investments in
municipal leases are thus subject to the risk that the legislative body will not
make the necessary appropriation and the issuer will not otherwise be willing or
able to meet its obligation.

NEW YORK CONCENTRATION
As described above, the Fund will invest substantially all of its net assets in
municipal obligations that are exempt from New York State ("State") and New York
City ("City") personal income taxes. The Fund is therefore susceptible to
political, economic or regulatory factors affecting issuers of State and City
municipal obligations. The information set forth below and the related
information in the Statement of Additional Information is derived from sources
that are generally available to investors. The information is intended to give a
recent historical description and is not intended to indicate future or
continuing trends in the financial or other positions of the State and the City.
It should be noted that the creditworthiness of obligations issued by local New
York issuers may be unrelated to the creditworthiness of obligations issued by
the State and the City, and that there is no obligation on the part of the State
to make payment on such local obligations in the event of default.

The events of September 11, 2001 had a significant impact upon the State economy
generally and more directly on that of the City. The City and State expect,
based on actions of the U.S. Congress and the President, that they will be fully
reimbursed for the cost to recover from clean up and repair the consequences of
the World Trade Center attack. However, prior to September 11, the nation's and
the State's economies had been weakening and the loss of approximately one
hundred thousand jobs in the City as a direct result of September 11 will
produce material budgetary pressures including increases to later year budget
gaps for the City and reductions to State surpluses. The State has not
quantified the impact of expected reductions in receipts and increased
expenditures for unemployment and economic revitalization resulting from
September 11. The City's Financial Plan for Fiscal Years 2002-2006 released by
the Mayor of the City on June 26, 2002 (the "City Financial Plan"), projects
revenues and expenditures for the 2002 and 2003 fiscal years, balanced in
accordance with GAAP, and projects gaps of $3.7 billion, $4.2 billion, and $4.6
billion for fiscal years 2004 through 2006, respectively.

The State has historically been one of the wealthiest states in the nation. For
decades, however, the State's economy grew more slowly than that of the nation
as a whole, gradually eroding the State's relative economic affluence, as urban
centers lost the more affluent to suburbs and people and business migrated to
the South and West. However, since 1999, prior to the impact of September 11,
the growth of the State's economy has equaled or exceeded national trends. The
State has for many years had a very high state and local tax burden relative to
other states. The burden of state and local taxation, in combination with the
many other causes of regional economic dislocation, has contributed to the
decisions of some businesses and individuals to relocate outside, or to not
locate within, the State and remains an impediment to growth and job creation.
The State's and the City's economies remain more reliant on the securities
industry than is the national economy. As a result, the downturn in that
industry prior to September 11 resulted in adverse changes in wage and
employment levels.

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19

INVESTMENT OBJECTIVE, POLICIES AND RISKS
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The State ended its 2001-2002 fiscal year on March 31, 2002 in balance on a cash
basis, with a reported closing balance in the General Fund of $1.03 billion. The
State adopted the debt service portion of the State budget for the 2002-2003
fiscal year on March 26, 2002. The State Legislature adopted the remainder of
the budget for the State's 2002-2003 fiscal year on May 16, 2002, and the State
released a revised State Financial Plan on May 22, 2002 and its first quarterly
Financial Plan update on July 12, 2002. There were no changes to the State
Financial Plan projections in the update. The revised State Financial Plan
projects balance on a cash basis for the 2002-2003 fiscal year. General Fund
disbursements, including transfers to other funds, are projected to total $40.22
billion for 2002-2003. The projected General Fund closing balance is $716
million. The State Financial Plan accompanying the Governor's 2002-2003 amended
Executive Budget projected General Fund budget gaps of $2.8 billion in the
2003-2004 fiscal year and $3.3 billion in the 2004-2005 fiscal year. The State
has noted that there are significant risk factors that could result in a
reduction in economic activity statewide such as greater job losses, weaker
financial markets and smaller bonus payments by Wall Street firms.

The City's expense and capital budgets were adopted on June 21, 2002. The City
has outlined a gap-closing program for fiscal years 2004 through 2006 to
eliminate the $3.7 billion, $4.2 billion and $4.6 billion projected budget gaps
for the 2004 through 2006 fiscal years, respectively. This program, which is not
specified in detail, assumes for the additional agency programs to reduce
expenditures or increase revenues by $2.4 billion and $2.5 billion 2004 through
2006 fiscal years, respectively; initiatives requiring State and Federal action
of $625 million in each year; increased State education aid of $425 million in
each fiscal year; savings from transportation policy innovations, including
congestion pricing and E-Z Pass initiatives of $100 million, $500 million and
$800 million in fiscal years 2004 through 2006 respectively; savings from
management and procurement efficiencies of $50 million, $75 million and $100
million in fiscal years 2004 through 2006, respectively; savings from
restructuring sanitation resources of $50 million, $75 million and $100 million
in fiscal years 2004 through 2006 respectively; savings from tort reform through
local law of $25 million, $50 million, and $75 million in fiscal years 2004
through 2006 respectively; and increased revenues of $60 million in each year
from the sale of Taxi Medallions.

The City depends on aid from the State and federal governments to both enable
the City to balance its budget and to meet its cash requirements. The City
Financial Plan provides for an additional $800 million in State and federal aid
in fiscal year 2003 alone. If State or federal aid for fiscal year 2003 or
thereafter is less than the level projected in the Mayor's proposal, projected
savings may be negatively impacted and the Mayor may be required to proposes
significant additional spending reductions or tax increases to balance the
City's budget. If the State, the State agencies, the City, other municipalities
or school districts were to suffer serious financial difficulties jeopardizing
their respective access to the public credit markets, or increasing the risk of
default, the market price of municipal bonds issued by such entities could be
adversely affected.

As of May 23, 2002, Moody's rated the City's outstanding general obligation
bonds A2, Standard and Poor's rated such bonds A and Fitch rated such bonds A+.
Such ratings reflect only the view of Moody's, Standard and Poor's and Fitch,
from which an explanation of the significance of such ratings may be obtained.
There is no assurance that such ratings will continue for any given periods of
time or that they will not be revised downward or withdrawn entirely. Any such
downward revision or withdrawal could have an adverse effect on the market
prices of City bonds and could increase the City's borrowing costs. See "Factors
pertaining to New York" in the Statement of Additional Information for more
information about New York.

The foregoing information constitutes only a brief summary of some of the
general factors which may impact certain issuers of New York municipal
obligations and does not purport to be a complete or exhaustive description of
all adverse conditions to which issuers of New York municipal obligations

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20

INVESTMENT OBJECTIVE, POLICIES AND RISKS
--------------------------------------------------------------------------------

held by the Fund are subject. Additionally, many factors including national
economic, social and environmental policies and conditions, which are not within
the control of the issuers of New York municipal obligations, could have an
adverse impact on the financial condition of the issuers. The Fund is unable to
predict whether or to what extent such factors or other factors may affect the
issuers of New York municipal obligations, the market value or marketability of
New York municipal obligations or the ability of the respective issuers of the
New York municipal obligations acquired by the Fund to pay the principal of or
interest on municipal obligations. This information has not been independently
verified. See the Statement of Additional Information for a further discussion
of factors affecting municipal obligations in New York.

SECTOR AND TERRITORY CONCENTRATION

The Fund may invest 25% or more of its total assets in municipal obligations of
issuers located in the same U.S. territory or in municipal obligations in the
same economic sector, including, without limitation, the following: lease rental
obligations of state and local authorities; obligations dependent on annual
appropriations by a territory's legislature for payment; obligations of state
and local housing finance authorities, municipal utilities systems or public
housing authorities; obligations of hospitals; and obligations of the education
and transportation sectors. This may make the Fund more susceptible to adverse
economic, political, or regulatory occurrences affecting a particular state or
economic sector. For example, health care related issuers are susceptible to
Medicaid reimbursement policies and national and state health care legislation.
As concentration increases, so does the potential for fluctuation in the net
asset value of Fund Shares.

LIQUIDITY RISK

At times, a portion of the Fund's assets may be invested in securities as to
which the Fund, by itself or together with other accounts managed by Eaton Vance
and its affiliates, holds a major portion of all of such securities. The
secondary market for some municipal obligations is less liquid than that for
taxable debt obligations or other more widely traded municipal obligations. No
established resale market exists for certain of the municipal obligations in
which the Fund may invest. The Fund has no limitation on the amount of its
assets that may be invested in securities which are not readily marketable or
are subject to restrictions on resale. In certain situations, the Fund could
find it more difficult to sell such securities at desirable times and/or prices.

MUNICIPAL BOND MARKET RISK
Investing in the municipal bond market involves certain risks. The amount of
public information available about the municipal obligations in the Fund's
portfolio is generally less than for corporate equities or bonds, and the
investment performance of the Fund may therefore be more dependent on the
analytical abilities of Eaton Vance than if the Fund were a stock fund or
taxable bond fund.

The ability of municipal issuers to make timely payments of interest and
principal may be diminished during general economic downturns and as
governmental cost burdens are reallocated among federal, state and local
governments. In addition, laws enacted in the future by Congress or state
legislatures or referenda could extend the time for payment of principal and/or
interest, or impose other constraints on enforcement of such obligations, or on
the ability of municipalities to levy taxes. Issuers of municipal securities
might seek protection under the bankruptcy laws. In the event of bankruptcy of
such an issuer, the Fund could experience delays in collecting principal and
interest to which it is entitled. To enforce its rights in the event of default
in the payment of interest or repayment of principal, or both, the Fund may take
possession of and manage the assets securing the issuer's obligations on such
securities, which may increase the Fund's operating expenses. Any income derived
from the Fund's ownership or operation of such assets may not be tax-exempt.

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21

INVESTMENT OBJECTIVE, POLICIES AND RISKS
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MUNICIPAL BOND INSURANCE

In the event Moody's, S&P or Fitch (or all of them) should downgrade its
assessment of the claims-paying ability of a particular insurer, it (or they)
could also be expected to downgrade the ratings assigned to municipal
obligations insured by such insurer, and municipal obligations insured under
Portfolio Insurance issued by such insurer also would be of reduced quality in
the portfolio of the Fund. Any such downgrade could have an adverse impact on
the net asset value and market price of the Shares. See "Primary investment
policies--Municipal obligation insurance generally" above.

In addition, to the extent the Fund employs Portfolio Insurance, the Fund may be
subject to certain restrictions on investments imposed by guidelines of the
insurance companies issuing such Portfolio Insurance. The Fund does not expect
these guidelines to prevent Eaton Vance from managing the Fund's portfolio in
accordance with the Fund's investment objective and policies.

MARKET PRICE OF SHARES
The Fund is a closed-end investment company with no history of operations and is
designed primarily for long-term investors and not as a trading vehicle. The
shares of closed-end investment companies often trade at a discount from their
net asset value, and the Shares may likewise trade at a discount from net asset
value. The trading price of the Fund's Shares may be less than the initial
public offering price, creating a risk of loss for investors purchasing in the
initial public offering of the Shares. This market price risk may be greater for
investors who sell their Shares within a relatively short period after
completion of this offering.

INFLATION RISK

Inflation risk is the risk that the value 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 Shares and distributions thereon can
decline. In addition, during any periods of rising inflation, dividend rates of
preferred shares would likely increase, which would tend to further reduce
returns to Shareholders.

NON-DIVERSIFICATION
The Fund has registered as a "non-diversified" investment company under the 1940
Act so that, subject to its investment restrictions and applicable federal
income tax diversification requirements, with respect to 50% of its total
assets, it will be able to invest more than 5% (but not more than 25%) of the
value of its total assets in the obligations of any single issuer. To the extent
the Fund invests a relatively high percentage of its assets in obligations of a
limited number of issuers, the Fund will be more susceptible than a more widely
diversified investment company to any single corporate, economic, political or
regulatory occurrence.

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), is the
responsibility of the Fund's Board of Trustees under the laws of The
Commonwealth of Massachusetts and the Investment Company 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 companies since
1931. Eaton Vance (or its affiliates) currently serves as the investment adviser
to investment companies and various individual and institutional clients with
combined assets under management of

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

approximately $53 billion as of September 30, 2002. Eaton Vance is an indirect,
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.

Eaton Vance employs 25 personnel in its municipal bond department, including
five portfolio managers, three traders and nine credit analysts. Eaton Vance was
one of the first advisory firms to manage a registered municipal bond investment
company, and has done so continuously since 1978. Eaton Vance and certain of its
subsidiaries currently manage 5 national municipal investment companies, 41
single state municipal investment companies, 8 limited maturity municipal
investment companies and 1 money market municipal investment company, with
assets of about $8.9 billion. Thirteen of those funds are closed-end and 4 are
New York funds with about $784.9 million in assets.

Under the general supervision of the Fund's Board of Trustees, 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 a fee in the amount of
0.55% of the average weekly 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. During 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 the
issuance of preferred shares.

Thomas J. Fetter is the portfolio manager of the Fund and is responsible for
day-to-day management of the Fund's investments. Mr. Fetter also manages other
Eaton Vance portfolios, has been an Eaton Vance portfolio manager for more than
5 years, and is a Vice President of Eaton Vance.

The Fund and the Adviser have adopted a Code of Ethics relating to personal
securities transactions. The Code permits 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 Code.

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 ("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 Trustees' and shareholders' meetings,
providing service in connection with any repurchase offers and other
administrative services necessary to conduct the Fund's business.

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23

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Distributions and taxes

The Fund intends to make monthly distributions of net investment income, after
payment of any dividends on any outstanding preferred shares. The Fund will
distribute annually any net short-term capital gain and any net capital gain
(which is the excess of net long-term capital gain over net short-term capital
loss). Distributions to Shareholders cannot be assured, and the amount of each
monthly distribution is likely to vary. Initial distributions to Shareholders
are expected to be declared approximately 45 days and paid approximately 60 to
90 days after the completion of this offering, depending on market conditions.
While there are any preferred shares outstanding, the Fund might not be
permitted to declare any cash dividend or other distribution on its Shares in
certain circumstances. See "Description of capital structure."

FEDERAL INCOME TAX

The following discussion of federal tax matters is based on the advice of
Kirkpatrick & Lockhart LLP, counsel to the Fund.

The Fund intends to invest a sufficient portion of its assets in tax-exempt
municipal securities so that it will be permitted to pay "exempt-interest
dividends" (as defined under applicable federal income tax law). Each
distribution of exempt-interest dividends, whether paid in cash or reinvested in
additional Shares, ordinarily will constitute income exempt from regular federal
income tax. However, exempt-interest dividends are included in determining what
portion, if any, of a person's social security and railroad retirement benefits
will be includible in gross income subject to regular federal income tax.
Although the Fund does not seek to realize taxable income or capital gains, the
Fund may realize and distribute taxable income or capital gains from time to
time as a result of the Fund's normal investment activities. The Fund will
distribute at least annually any taxable income or realized capital gains.
Distributions of any taxable net investment income and net short-term capital
gain are taxable as ordinary income. Distributions of the Fund's net capital
gains ("capital gain dividends"), if any, are taxable to Shareholders as
long-term capital gains, regardless of the length of time Shares have been held
by Shareholders. Distributions, if any, in excess of the Fund's earnings and
profits will first reduce the adjusted tax basis of a holder's Shares and, after
that basis has been reduced to zero, will constitute capital gains to the
Shareholder (assuming the Shares are held as a capital asset). See below for a
summary of the maximum tax rates applicable to capital gains (including capital
gain dividends). Dividends will not qualify for a dividends received deduction
generally available to corporate Shareholders. Interest on indebtedness incurred
or continued by a Shareholder to purchase or carry Shares is not deductible for
federal income tax purposes if the Fund distributes exempt-interest dividends
during the Shareholder's taxable year.

The Fund will inform Shareholders of the source and tax status of all
distributions promptly after the close of each calendar year.

Selling Shareholders will generally recognize gain or loss in an amount equal to
the difference between the Shareholder's adjusted tax basis in the Shares sold
and the amount received. If the 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, (ii) 20% for gains recognized
on the sale of capital assets held for more than one year (as well as certain
capital gain dividends) (10% for individuals in the 10% or 15% tax bracket) or
(iii) 18% for gains on the sale of certain capital assets held more than 5 years
(as well as certain capital gain dividends) (8% for individuals in the 10% or
15% tax bracket). Any loss on a disposition of Shares held for six months or
less will be treated as a long-term capital loss to the extent of any capital
gain dividends received with respect to those Shares, and will be disallowed to
the extent of any exempt-interest dividends received with respect to those
Shares. For purposes of determining whether Shares

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24

DISTRIBUTIONS AND TAXES

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

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

Distributions by the Fund of net tax-exempt interest income that are properly
designated as "exempt-interest dividends" may be treated by Shareholders as
interest excludable from gross income under Section 103(a) of the Code. In order
for the Fund to be entitled to pay the net tax-exempt interest income as
exempt-interest dividends to its Shareholders, the Fund must and intends to
satisfy certain requirements, including the requirement that, at the close of
each quarter of its taxable year, at least 50% of the value of its total assets
consists of obligations the interest on which is exempt from regular federal
income tax under Code Section 103(a). Interest on certain municipal obligations
is treated as a tax preference item for purposes of the alternative minimum tax.
Shareholders of the Fund are required to report tax-exempt interest on their
federal income tax returns.

An investor should be aware that if Shares are purchased shortly before the
record date for any taxable dividend (including a capital gain dividend), the
purchase price likely will reflect the value of the dividend and the investor
then would receive a taxable distribution likely to reduce the trading value of
such Shares, in effect resulting in a taxable return of some of the purchase
price. Taxable distributions to individuals and certain other non-corporate
Shareholders, including those who have not provided their correct taxpayer
identification number and other required certifications, may be subject to
"backup" federal income tax withholding at the fourth lowest rate of tax
applicable to single individuals (in 2002 and 2003, 30%) on dividends from the
Fund and/or gross proceeds from the sale of shares.

NEW YORK TAXES

In the opinion of special New York tax counsel, Sidley, Austin, Brown & Wood
LLP, under New York law, dividends paid by the Fund are exempt from New York
State and New York City personal income tax applicable to individuals who reside
in New York State and New York City to the extent such dividends are excluded
from gross income for federal income tax purposes and are derived from interest
payment on tax-exempt obligations issued by or on behalf of New York State and
its political subdivisions and agencies, and the governments of Puerto Rico, the
U.S. Virgin Islands, Guam and other U.S. territories. Other distributions from
the Fund, including distributions derived from taxable ordinary income and net
short-term and long-term capital gains, are generally not exempt from New York
State and New York City personal income taxes. Distributions to a corporate
shareholder will be subject to New York State corporate franchise tax and New
York City general corporation tax.

The foregoing briefly summarizes some of the important federal and New York
State and New York City personal income tax consequences to Shareholders of
investing in Shares, reflects the federal and New York State and New York City
income tax laws 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. Investors should consult their tax advisors regarding other
federal, state or local tax considerations that may be applicable in their
particular circumstances, including state alternative minimum tax as well as any
proposed tax law changes.

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25

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

Dividend reinvestment plan

Pursuant to the Fund's dividend reinvestment plan (the "Plan"), a Shareholder
may elect to have all distributions of dividends (including all capital gain
dividends) automatically reinvested in Shares. Shareholders may elect to
participate in the Plan by completing the dividend reinvestment plan application
form. If Shareholders do not participate, such Shareholders 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 Shareholders in
administering the Plan. Shareholders who elect not to participate in the Plan
will receive all distributions of dividends in cash paid by check mailed
directly to the Shareholder of record (or if the 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 not less than 10 days prior to any dividend record date.

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

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

The Plan Agent maintains all Shareholders' accounts in the Plan and furnishes
written confirmation of all transactions in the accounts, including information
needed by Shareholders for tax records. Shares in the account of each Plan
participant will be held by the Plan Agent on behalf of the Plan participant,
and each Shareholder proxy will include those Shares purchased or received
pursuant to the Plan. The Plan Agent will forward all proxy solicitation
materials to participants and vote proxies for Shares held pursuant to the Plan
in accordance with the instructions of the participants.

In the case of Shareholders such as banks, brokers or nominees that hold Shares
for others who are the beneficial owners, the Plan Agent will administer the
Plan on the basis of the number of Shares certified from time to time by the
record Shareholder's name and held for the account of beneficial owners who
participate in the Plan.

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26

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

There will be no brokerage charges with respect to Shares issued directly by the
Fund as a result of dividends payable either in 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 dividends.

Shareholders participating in the Plan may receive benefits not available to
Shareholders not participating in the Plan. If the market price (plus
commissions) of the Fund's Shares is above their net asset value, participants
in the Plan will receive Shares of the Fund at less than they could otherwise
purchase them and will have Shares with a cash value greater than the value of
any cash distribution they would have received on their Shares. If the market
price plus commissions is below the net asset value, participants will receive
distributions in Shares with a net asset value greater than the per Share value
of any cash distribution they would have received on their Shares. However,
there may be insufficient Shares available in the market to make distributions
in Shares at prices below the net asset value. Also, since the Fund does not
redeem its 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. Shareholders will be charged a $5.00 service charge and
pay brokerage charges if such Shareholder directs the Plan Agent to sell 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, RI 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
October 3, 2002 and filed with the Secretary of the Commonwealth on October 7,
2002 (the "Declaration of Trust"). The Declaration of Trust provides that the
Trustees of the Fund may authorize separate classes of shares of beneficial
interest. The Trustees have authorized an unlimited number of Shares. The Fund
intends to hold annual meetings of Shareholders in compliance with the
requirements of the American Stock Exchange.

SHARES
The Declaration of Trust permits the Fund to issue an unlimited number of full
and fractional Shares of beneficial interest, $0.01 par value per Share. Each
Share represents an equal proportionate interest in the assets of the Fund with
each other Share in the Fund. Holders of Shares will be entitled to the payment
of dividends when, as and if declared by the Board. The 1940 Act or the terms of
any borrowings or preferred shares may limit the payment of dividends to the
holders of Shares. Each whole 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 Trustees may distribute the remaining assets
of the Fund among the holders of the Shares. The Declaration of Trust provides
that Shareholders are not liable for any liabilities of the Fund, requires
inclusion of a clause to that effect in every agreement entered into by the Fund
and 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 Fund as though they were general partners, the provisions of the
Declaration of Trust described in the foregoing sentence make the likelihood of
such personal liability remote.

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27

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

While there are any borrowings or preferred shares outstanding, the Fund may not
be permitted to declare any cash dividend or other distribution on its Shares,
unless at the time of such declaration, (i) all accrued dividends 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 dividend
or other 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 shares plus redemption
premium, if any, together with any accrued and unpaid dividends 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 the
preferred shares from 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 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. The
Fund intends, however, to the extent possible to purchase or redeem preferred
shares from time to time to maintain compliance with such asset coverage
requirements and may pay special dividends to the holders of the preferred
shares in certain circumstances in connection with any such impairment of the
Fund's status as a regulated investment company. See "Investment objective,
policies and risks" and "Distributions and taxes." 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 Shares, except as
described herein. Other offerings of its Shares, if made, will require approval
of the Board. Any additional offering will not be sold at a price per Share
below the then current net asset value (exclusive of underwriting discounts and
commissions) except in connection with an offering to existing Shareholders or
with the consent of a majority of the Fund's outstanding Shares. The Shares have
no preemptive rights.

The Fund generally will not issue 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 Shares credited to an investor's account. Share certificates
that have been issued to an investor may be returned at any time.

REPURCHASE OF 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 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
Shares and will consider such factors as the market price of the Shares, the net
asset value of the Shares, the liquidity of the assets of the Fund, 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 Fund's Shares trading at a price which is equal to or
approximates their net asset value. In recognition of the possibility that the
Shares might trade at a discount to net asset value and that any such discount
may not be in the interest of Shareholders, the Board, in consultation with
Eaton Vance, from time to time may review possible actions to reduce any such
discount.

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28

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

PREFERRED SHARES

The Declaration of Trust authorizes the issuance of an unlimited number of
shares of beneficial interest with preference rights, including preferred shares
(the "preferred shares"), having a par value of $0.01 per share, in one or more
series, with rights as determined by the Board, by action of the Board without
the approval of the Shareholders.

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 the preferred
shares, asset coverage requirements, in addition to those set forth in the 1940
Act, may be imposed. The liquidation value of the preferred shares is expected
to equal their aggregate original purchase price plus redemption premium, if
any, together with any accrued and unpaid dividends thereon (on a cumulative
basis), whether or not earned or declared. The terms of the preferred shares,
including their dividend 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 the 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 the preferred shares may
also enable the Fund to lengthen such intervals. At times, the dividend rate as
redetermined on the Fund's preferred shares may approach or exceed the Fund's
return after expenses on the investment of proceeds from the preferred shares
and the Fund's leverage structure would result in a lower rate of return to
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 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. 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 Fund's Trustees until all dividends
in default have been paid or declared and set apart for payment. In addition, if
required by the Rating Agency rating the preferred shares or if the Board
determines it to be in the best interests of the 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.

The Fund currently intends to seek a Aaa/AAA grade rating for the preferred
shares from a Rating Agency. The Fund intends that, as long as preferred shares
are outstanding, the composition of its portfolio will reflect guidelines
established by such Rating Agency. Although, as of the date hereof, no such
Rating Agency has established guidelines relating to the preferred shares, based
on previous guidelines established by such Rating Agencies for the securities of
other issuers, the Fund anticipates that the guidelines with respect to the
preferred shares will 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 the preferred shares, the Fund
currently anticipates that such guidelines will include asset coverage

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29

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

requirements which 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 the preferred shares. No assurance can be given that
the guidelines actually imposed with respect to the preferred shares by such
Rating Agency will be more or less restrictive than as described in this
Prospectus.

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 Shareholders of an opportunity to sell their 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 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 2/3 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 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 investment company at any time if
approved by the lesser of (i) 2/3 or more of the Fund's then outstanding Shares
and preferred shares (if any), each voting separately as a class, or (ii) more
than 50% of the then outstanding 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

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30

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

require at least 30 days' prior notice to all shareholders. The composition of
the Fund's portfolio likely would prohibit the Fund from complying with
regulations of the SEC applicable to open-end investment companies. Accordingly,
conversion likely would require significant changes in the Fund's investment
policies and liquidation of a substantial portion of its relatively illiquid
portfolio. Conversion of the Fund to an open-end investment company also would
require the redemption of any outstanding preferred shares and could require the
repayment of borrowings, which would eliminate the leveraged capital structure
of the Fund with respect to the Shares. In the event of conversion, the Shares
would cease to be listed on the American Stock Exchange or other national
securities exchange or market system. The Board believes, however, that the
closed-end structure is desirable, given the Fund's investment objective and
policies. Investors should assume, therefore, that it is unlikely that the Board
would vote to convert the Fund to an open-end investment company. Shareholders
of an open-end 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. The Fund expects to pay all such
redemption requests in cash, but intends to 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 Shares would be sold at net asset value plus a sales load.

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31

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

Underwriting

The underwriters named below (the "Underwriters"), acting through UBS Warburg
LLC, 299 Park Avenue, New York, New York, and Merrill Lynch, Pierce, Fenner &
Smith Incorporated, 4 World Financial Center, New York, New York as lead
managers, and A.G. Edwards & Sons, Inc., CIBC World Markets Corp., Prudential
Securities Incorporated, RBC Dain Rauscher Incorporated, Wachovia Securities,
Inc., McDonald Investments Inc. and Quick & Reilly, Inc. as their
representatives (together with UBS Warburg LLC and Merrill Lynch, Pierce, Fenner
& Smith Incorporated, the "Representatives"), have severally agreed, subject to
the terms and conditions of the Underwriting Agreement with the Fund and Eaton
Vance (the "Underwriting Agreement"), to purchase from the Fund the number of
Shares set forth opposite their respective names. The Underwriters are committed
to purchase and pay for all of such Shares (other than those covered by the
over-allotment option described below) if any are purchased.

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

UBS Warburg LLC.............................................
Merrill Lynch, Pierce, Fenner & Smith Incorporated..........
A.G. Edwards & Sons, Inc. ..................................
CIBC World Markets Corp.....................................
Prudential Securities Incorporated..........................
RBC Dain Rauscher Incorporated .............................
Wachovia Securities, Inc. ..................................
McDonald Investments Inc. ..................................
Quick & Reilly, Inc. .......................................
----------------
Total..................................................
================

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 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 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 Shares proportionate to such Underwriter's
initial commitment.

The Fund has agreed to pay a commission to the Underwriters in the amount of
$0.675 per Share (4.50% of the public offering price per Share). The
Representatives have advised the Fund that the Underwriters may pay up to $
per Share from such commission to selected dealers who sell the Shares and that
such dealers may reallow a concession of up to $ per Share to certain other
dealers who sell Shares. Eaton Vance or an affiliate has agreed to pay all
offering and organizational expenses of the Fund that exceed $0.03 per Share.
Investors must pay for any Shares purchased on or before , 2002.

Prior to this offering, there has been no public market for the Shares or any
other securities of the Fund. Consequently, the offering price for the Shares
was determined by negotiation among the Fund and the Representatives. There can
be no assurance, however, that the price at which Shares sell after this
offering will not be lower than the price at which they are sold by the
Underwriters or that an active trading market in the Shares will develop and
continue after this offering. The minimum investment requirement is 100 Shares
($1,500).

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32

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

The Fund and Eaton Vance 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 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 sale to any accounts over which they exercise discretionary
authority.

In connection with this offering, the Underwriters may purchase and sell 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 Shares and syndicate short positions involve the sale
by the Underwriters of a greater number of 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 Shares sold in this offering for their account
may be reclaimed by the syndicate if such Shares are repurchased by the
syndicate in stabilizing or covering transactions. These activities may
stabilize, maintain or otherwise affect the market price of the 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 American 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.

UBS Warburg LLC will pay to Underwriters that meet certain minimum sales
thresholds during this offering or in combination with other contemporaneous
offerings an annual fee equal to 0.10% of the average weekly gross assets of the
Fund (including assets attributable to any preferred shares of the Fund that may
be outstanding) multiplied by the percentage of the Shares sold by the
qualifying Underwriter. Such minimum sales thresholds may be waived in the sole
discretion of UBS Warburg LLC. These fee payments will remain in effect only 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. UBS Warburg LLC will limit the amount of such fee payments such
that the total amount of such fee payments and the sales loads paid to such
qualifying Underwriters will not exceed any sales charge limits (which the
Underwriters currently understand to be 9.0%) under the rules of the National
Association of Securities Dealers, Inc., as then in effect.

As described below under "Shareholder Servicing Agent, custodian and transfer
agent," UBS Warburg LLC will provide shareholder services to the Fund pursuant
to a Shareholder Servicing Agreement with Eaton Vance. Eaton Vance will pay a
monthly fee for such services on an annual basis equal to 0.10% of the average
weekly gross assets of the Fund.

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Shareholder Servicing Agent, custodian and transfer agent

Pursuant to a Shareholder Servicing Agreement between UBS Warburg LLC (the
"Shareholder Servicing Agent") and Eaton Vance, the Shareholder Servicing Agent
will (i) undertake to make 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 periodic seminars or conference calls,
responses to questions from current or prospective shareholders and specific
shareholder contact where appropriate); (ii) make available to investors and
prospective investors market price, net asset value, yield and other information
regarding the Fund, if reasonably obtainable, for the purpose of maintaining the
visibility of the Fund in the investor community; (iii) at the request of Eaton
Vance, provide certain economic research and statistical information and
reports, if reasonably obtainable, on behalf of the Fund, and consult with
representatives and Trustees of the Fund 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; and (iv) at the request of Eaton
Vance, provide information to and consult with the Board of Trustees with
respect to applicable 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; 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 equal on an
annual basis to 0.10% of the Fund's average weekly gross assets, payable in
arrears at the end of each calendar month. Under the terms of the Shareholder
Servicing Agreement, the Shareholder Servicing Agent is relieved from liability
to Eaton Vance for any act or omission in the course of its performances under
the Shareholder Servicing Agreement in the absence of gross negligence or
willful misconduct by the Shareholder Servicing Agent. The Shareholder Servicing
Agreement will continue for an initial term of two years and thereafter for
successive one-year periods unless terminated by either party upon 60 days
written notice.

Investors Bank & Trust Company ("IBT"), 200 Clarendon Street, Boston, MA 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 at least weekly. 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, RI 02940-3027 is the transfer agent and
dividend disbursing agent of the Fund.

Legal opinions

Certain legal matters in connection with the Shares will be passed upon for the
Fund by Kirkpatrick & Lockhart LLP, Boston, Massachusetts, and for the
Underwriters by Skadden, Arps, Slate, Meagher & Flom (Illinois), Chicago,
Illinois and its affiliated entities. Skadden, Arps, Slate, Meagher & Flom
(Illinois) and its affiliated entities may rely as to certain matters of
Massachusetts law on the opinion of Kirkpatrick & Lockhart LLP.

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34

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Reports to stockholders

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

Independent auditors

Deloitte & Touche LLP, Boston, Massachusetts, are the independent accountants
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.

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35

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Table of contents for the
Statement of Additional Information

Additional investment information and restrictions.......... 2
Trustees and officers....................................... 11
Investment advisory and other services...................... 16
Determination of net asset value............................ 18
Portfolio trading........................................... 18
Taxes....................................................... 20
Other information........................................... 24
Independent auditors........................................ 24
Independent auditors' report................................ 25
Financial statements........................................ 26
Appendix A: Ratings of municipal bonds...................... 28
Appendix B: Tax equivalent yield table...................... 34
Appendix C: New York and U.S. territory information......... 36
Appendix D: Description of insurers......................... 43
Appendix E: Performance related and comparative
information............................................... 46

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36

[EATON VANCE LOGO]

The information in this Statement of Additional Information is not complete and
may be changed. These securities may not be sold until the registration
statement filed with the Securities and Exchange Commission is effective. This
Statement of Additional Information, which is not a prospectus, is not an offer
to sell these securities and is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted.

PRELIMINARY STATEMENT OF ADDITIONAL INFORMATION Subject to completion October
28, 2002

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STATEMENT OF ADDITIONAL INFORMATION

, 2002

EATON VANCE INSURED NEW YORK MUNICIPAL BOND FUND II

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

TABLE OF CONTENTS
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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 INSURED NEW YORK MUNICIPAL BOND
FUND II (THE "FUND") DATED , 2002, 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

MUNICIPAL OBLIGATIONS
Municipal obligations are issued to obtain funds for various public and private
purposes. Municipal obligations include long-term obligations, which are often
called municipal bonds, as well as tax-exempt commercial paper, project notes
and municipal notes such as tax, revenue and bond anticipation notes of short
maturity, generally less than three years. Market rates of interest available
with respect to municipal obligations may be lower than those available with
respect to taxable securities, although such differences may be partially or
wholly offset by the effects of federal income tax on income derived from such
taxable securities. While most municipal bonds pay a fixed rate of interest
semi-annually in cash, some bonds pay no periodic cash interest but instead make
a single payment at maturity representing both principal and interest. Municipal
obligations may be issued or subsequently offered with interest coupons
materially greater or less than those then prevailing, with price adjustments
reflecting such deviation.

In general, there are three categories of municipal obligations the interest on
which is exempt from federal income tax and is not a tax preference item for
purposes of the federal alternative minimum tax ("AMT"): (i) certain "public
purpose" obligations (whenever issued), which include obligations issued
directly by state and local governments or their agencies to fulfill essential
governmental functions; (ii) certain obligations issued before August 8, 1986
for the benefit of non-governmental persons or entities; and (iii) certain
"private activity bonds" issued after August 7, 1986, which include "qualified
Section 501(c)(3) bonds" or refundings of certain obligations included in the
second category.

Interest on certain "private activity bonds" issued after August 7, 1986 is
exempt from regular federal income tax, but is treated as a tax preference item
that could subject the recipient to or increase the recipient's liability for
the AMT. For corporate shareholders, the Fund's distributions derived from
interest on all municipal obligations (whenever issued) is included in "adjusted
current earnings" for purposes of the AMT as applied to corporations (to the
extent not already included in federal alternative minimum taxable income as
income attributable to private activity bonds). In assessing the federal income
tax treatment of interest on any such obligation, the Fund will rely on an
opinion of the issuer's counsel (when available) obtained by the issuer or other
reliable authority and will not undertake any independent verification thereof.

The two principal classifications of municipal bonds are "general obligation"
and "revenue" bonds. Issuers of general obligation bonds include states,
counties, cities, towns and regional districts. The proceeds of these
obligations are used to fund a wide range of public projects including the
construction or improvement of schools, highways and roads, water and sewer
systems and a variety of other public purposes. The basic security of general
obligation bonds is the issuer's pledge of its faith, credit, and taxing power
for the payment of principal and interest. The taxes that can be levied for the
payment of debt service may be limited or unlimited as to rate and amount.

Revenue bonds are generally secured by the net revenues derived from a
particular facility or group of facilities or, in some cases, from the proceeds
of a special excise or other specific revenue source. Revenue bonds have been
issued to fund a wide variety of capital projects including: electric, gas,
water, sewer and solid waste disposal systems; highways, bridges and tunnels;
port, airport and parking facilities; transportation systems; housing
facilities, colleges and universities and hospitals. Although the principal
security behind these bonds varies widely, many provide additional security in
the form of a debt service reserve fund whose monies may be used to make
principal and interest payments on the issuer's obligations. Housing finance
authorities have a wide range of security including partially or fully insured,
rent subsidized and/or collateralized mortgages, and/or the net

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revenues from housing or other public projects. In addition to a debt service
reserve fund, some authorities provide further security in the form of a state's
ability (without legal obligation) to make up deficiencies in the debt service
reserve fund. Lease rental revenue bonds issued by a state or local authority
for capital projects are normally secured by annual lease rental payments from
the state or locality to the authority sufficient to cover debt service on the
authority's obligations. Such payments are usually subject to annual
appropriations by the state or locality. Industrial development and pollution
control bonds, although nominally issued by municipal authorities, are in most
cases revenue bonds and are generally not secured by the taxing power of the
municipality, but are usually secured by the revenues derived by the authority
from payments of the industrial user or users. The Fund may on occasion acquire
revenue bonds which carry warrants or similar rights covering equity securities.
Such warrants or rights may be held indefinitely, but if exercised, the Fund
anticipates that it would, under normal circumstances, dispose of any equity
securities so acquired within a reasonable period of time.

The obligations of any person or entity to pay the principal of and interest on
a municipal obligation are subject to the provisions of bankruptcy, insolvency
and other laws affecting the rights and remedies of creditors, such as the
Federal Bankruptcy Act, and laws, if any, which may be enacted by Congress or
state legislatures extending the time for payment of principal or interest, or
both, or imposing other constraints upon enforcement of such obligations. There
is also the possibility that as a result of litigation or other conditions the
power or ability of any person or entity to pay when due principal of and
interest on a municipal obligation may be materially affected. There have been
recent instances of defaults and bankruptcies involving municipal obligations
which were not foreseen by the financial and investment communities. The Fund
will take whatever action it considers appropriate in the event of anticipated
financial difficulties, default or bankruptcy of either the issuer of any
municipal obligation or of the underlying source of funds for debt service. Such
action may include retaining the services of various persons or firms (including
affiliates of the Adviser) to evaluate or protect any real estate, facilities or
other assets securing any such obligation or acquired by the Fund as a result of
any such event, and the Fund may also manage (or engage other persons to manage)
or otherwise deal with any real estate, facilities or other assets so acquired.
The Fund anticipates that real estate consulting and management services may be
required with respect to properties securing various municipal obligations in
its portfolio or subsequently acquired by the Fund. The Fund will incur
additional expenditures in taking protective action with respect to portfolio
obligations in default and assets securing such obligations. To enforce its
rights in the event of a default in the payment of interest or repayment of
principal, or both, the Fund may take possession of and manage the assets or
have a receiver appointed to collect and disburse pledged revenues securing the
issuer's obligations on such securities, which may increase the operating
expenses and adversely affect the net asset value of the Fund. Any income
derived from the ownership or operation of such assets may not be tax-exempt. In
addition, the Fund's intention to qualify as a "regulated investment company"
("RIC") under the Internal Revenue Code of 1986, as amended (the "Code") may
limit the extent to which the Fund may exercise its rights by taking possession
of such assets, because as a regulated investment company, the Fund is subject
to certain limitations on its investments and on the nature of its income.

The yields on municipal obligations are dependent on a variety of factors,
including purposes of issue and source of funds for repayment, general money
market conditions, general conditions of the municipal bond market, size of a
particular offering, maturity of the obligation and rating of the issue. The
ratings of Moody's, S&P and Fitch represent their opinions as to the quality of
the municipal obligations which they undertake to rate. It should be emphasized,
however, that ratings are based on judgment and are not absolute standards of
quality. Consequently, municipal obligations with the same maturity, coupon and
rating may have different yields while obligations of the same maturity and
coupon with different ratings may have the same yield. In addition, the market
price of municipal obligations will normally fluctuate with changes in interest
rates, and therefore the net asset value of the Fund will be affected by such
changes.

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The Fund also may invest up to 20% of the net assets in uninsured municipal
bonds that are entitled to the benefit of an escrow or trust account that
contains securities issued or guaranteed by the U.S. Government or U.S.
Government agencies, backed by the full faith and credit of the United States,
and sufficient in the amount to ensure the payment of interest and principal on
the original interest payment and maturity dates ("collateralized obligations").
These collateralized obligations generally will not be insured and will include,
but are not limited to, municipal bonds that have been advance refunded where
the proceeds of the refunding have been used to buy U.S. Government or U.S.
Government agency securities that are placed in escrow and whose interest or
maturing principal payments, or both, are sufficient to cover the remaining
scheduled debt service on that municipal bond.

STATE CONCENTRATION
The Fund may invest 25% or more of its total assets in municipal obligations of
issuers located in New York or the U.S. territories. When the Fund does so, it
will be sensitive to factors affecting New York or the U.S. Territory, such as
changes in the economy, decreases in tax collection or the tax base, legislation
which limits taxes and changes in issuer credit ratings. Factors pertaining to
New York and U.S. territories are set forth in Appendix C.

ECONOMIC SECTOR CONCENTRATION
The Fund may invest 25% or more of its total assets in municipal obligations of
issuers in the same economic sector. There could be economic, business or
political developments which might affect all municipal obligations in a
particular economic sector. In particular, investments in the industrial revenue
bonds listed above might involve (without limitation) the following risks.

Hospital bond ratings are often based on feasibility studies which contain
projections of expenses, revenues and occupancy levels. Among the influences
affecting a hospital's gross receipts and net income available to service its
debt are demand for hospital services, the ability of the hospital to provide
the services required, management capabilities, economic developments in the
service area, efforts by insurers and government agencies to limit rates and
expenses, confidence in the hospital, service area economic developments,
competition, availability and expense of malpractice insurance, Medicaid and
Medicare funding and possible federal legislation limiting the rates of increase
of hospital charges.

Electric utilities face problems in financing large construction programs in an
inflationary period, cost increases and delay occasioned by safety and
environmental considerations (particularly with respect to nuclear facilities),
difficulty in obtaining fuel at reasonable prices and in achieving timely and
adequate rate relief from regulatory commissions, effects of energy conservation
and limitations on the capacity of the capital market to absorb utility debt.

Bonds to finance life care facilities are normally secured only by the revenues
of each facility and not by state or local government tax payments, they are
subject to a wide variety of risks. Primarily, the projects must maintain
adequate occupancy levels to be able to provide revenues sufficient to meet debt
service payments. Moreover, since a portion of housing, medical care and other
services may be financed by an initial deposit, it is important that the
facility maintain adequate financial reserves to secure estimated actuarial
liabilities. The ability of management to accurately forecast inflationary cost
pressures is an important factor in this process. The facilities may also be
affected adversely by regulatory cost restrictions applied to health care
delivery in general, particularly state regulations or changes in Medicare and
Medicaid payments or qualifications, or restrictions imposed by medical
insurance companies. They may also face competition from alternative health care
or conventional housing facilities in the private or public sector.

CREDIT QUALITY
While municipal obligations rated investment grade or below and comparable
unrated municipal obligations may have some quality and protective
characteristics, these characteristics can be expected

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ADDITIONAL INVESTMENT INFORMATION AND RESTRICTIONS
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to be offset or outweighed by uncertainties or major risk exposures to adverse
conditions. Lower rated and comparable unrated municipal obligations are subject
to the risk of an issuer's inability to meet principal and interest payments on
the obligations (credit risk) and may also be subject to greater price
volatility due to such factors as interest rate sensitivity, market perception
of the creditworthiness of the issuer and general market liquidity (market
risk). Lower rated or unrated municipal obligations are also more likely to
react to real or perceived developments affecting market and credit risk than
are more highly rated obligations, which react primarily to movements in the
general level of interest rates.

MUNICIPAL LEASES
The Fund may invest in municipal leases and participations therein, which
arrangements frequently involve special risks. Municipal leases are obligations
in the form of a lease or installment purchase arrangement which is issued by
state or local governments to acquire equipment and facilities. Interest income
from such obligations is generally exempt from local and state taxes in the
state of issuance. "Participations" in such leases are undivided interests in a
portion of the total obligation. Participations entitle their holders to receive
a pro rata share of all payments under the lease. The obligation of the issuer
to meet its obligations under such leases is often subject to the appropriation
by the appropriate legislative body, on an annual or other basis, of funds for
the payment of the obligations. Investments in municipal leases are thus subject
to the risk that the legislative body will not make the necessary appropriation
and the issuer will not otherwise be willing or able to meet its obligation.
Certain municipal lease obligations are illiquid.

ZERO COUPON BONDS
Zero coupon bonds are debt obligations which do not require the periodic payment
of interest and are issued at a significant discount from face value. The
discount approximates the total amount of interest the bonds will accrue and
compound over the period until maturity at a rate of interest reflecting the
market rate of the security at the time of issuance. The Fund is required to
accrue income from zero coupon bonds on a current basis, even though it does not
receive that income currently in cash and the Fund is required to distribute its
income for each taxable year. Thus, the Fund may have to sell other investments
to obtain cash needed to make income distributions.

WHEN-ISSUED SECURITIES
New issues of municipal obligations are sometimes offered on a "when-issued"
basis, that is, delivery and payment for the securities normally take place
within a specified number of days after the date of the Fund's commitment and
are subject to certain conditions such as the issuance of satisfactory legal
opinions. The Fund may also purchase securities on a when-issued basis pursuant
to refunding contracts in connection with the refinancing of an issuer's
outstanding indebtedness. Refunding contracts generally require the issuer to
sell and the Fund to buy such securities on a settlement date that could be
several months or several years in the future. The Fund may also purchase
instruments that give the Fund the option to purchase a municipal obligation
when and if issued.

The Fund will make commitments to purchase when-issued securities only with the
intention of actually acquiring the securities, but may sell such securities
before the settlement date if it is deemed advisable as a matter of investment
strategy. The payment obligation and the interest rate that will be received on
the securities are fixed at the time the Fund enters into the purchase
commitment. When the Fund commits to purchase a security on a when-issued basis
it records the transaction and reflects the value of the security in determining
its net asset value. Securities purchased on a when-issued basis and the
securities held by the Fund are subject to changes in value based upon the
perception of the creditworthiness of the issuer and changes in the level of
interest rates (i.e. appreciation when interest rates decline and depreciation
when interest rates rise). Therefore, to the extent that the Fund remains
substantially fully invested at the same time that it has purchased securities
on a when-issued basis, there will be greater fluctuations in the Fund's net
asset value than if it set aside cash to pay for when-issued securities.

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ADDITIONAL INVESTMENT INFORMATION AND RESTRICTIONS
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REDEMPTION, DEMAND AND PUT FEATURES AND PUT OPTIONS
Issuers of municipal obligations reserve the right to call (redeem) the bond. If
an issuer redeems securities held by the Fund during a time of declining
interest rates, the Fund may not be able to reinvest the proceeds in securities
providing the same investment return as the securities redeemed. Also, some
bonds may have "put" or "demand" features that allow early redemption by the
bondholder. Longer term fixed-rate bonds may give the holder a right to request
redemption at certain times (often annually after the lapse of an intermediate
term). These bonds are more defensive than conventional long term bonds because
they may protect to some degree against a rise in interest rates.

VARIABLE RATE OBLIGATIONS
The Fund may purchase variable rate obligations. Variable rate instruments
provide for adjustments in the interest rate at specified intervals (weekly,
monthly, semi-annually, etc.). The revised rates are usually set at the issuer's
discretion in which case the investor normally enjoys the right to "put" the
security back to the issuer or his agent. Rate revisions may alternatively be
determined by formula or in some other contractual fashion. Variable rate
obligations normally provide that the holder can demand payment of the
obligation on short notice at par with accrued interest and which are frequently
secured by letters of credit or other support arrangements provide by banks. To
the extent that such letters of credit or other arrangements constitute an
unconditional guarantee of the issuer's obligations, a bank may be treated as
the issuer of a security for the purposes of complying with the diversification
requirements set forth in Section 5(b) of the 1940 Act and Rule 5b-2 thereunder.
The Fund would anticipate using these bonds as cash equivalents pending longer
term investment of its funds.

INVERSE FLOATERS
The Fund may invest in municipal securities whose interest rates bear an inverse
relationship to the interest rate on another security or the value of an index
("inverse floaters"). An investment in inverse floaters may involve greater risk
than an investment in a fixed rate bond. Because changes in the interest rate on
the other security or index inversely affect the residual interest paid on the
inverse floater, the value of an inverse floater is generally more volatile than
that of a fixed rate bond. Inverse floaters have interest rate adjustment
formulas which generally reduce or, in the extreme, eliminate the interest paid
to a portfolio when short-term interest rates rise, and increase the interest
paid to the Fund when short-term interest rates fall. Inverse floaters have
varying degrees of liquidity, and the market for these securities is relatively
volatile. These securities tend to underperform the market for fixed rate bonds
in a rising interest rate environment, but tend to outperform the market for
fixed rate bonds when interest rates decline. Shifts in long-term interest rates
may, however, alter this tendency. Although volatile, inverse floaters typically
offer the potential for yields exceeding the yields available on fixed rate
bonds with comparable credit quality and maturity. These securities usually
permit the investor to convert the floating rate to a fixed rate (normally
adjusted downward), and this optional conversion feature may provide a partial
hedge against rising rates if exercised at an opportune time. Inverse floaters
are leveraged because they provide two or more dollars of bond market exposure
for every dollar invested.

INTEREST RATE SWAPS AND FORWARD RATE CONTRACTS
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. The Fund will only enter into interest
rate swaps 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. The Fund may also enter forward rate contracts. Under these contracts,
the buyer locks in an interest rate at a future settlement date. If the interest
rate on the settlement date exceeds the lock rate, the buyer pays the seller the
difference between the two rates. If the lock rate exceeds the

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interest rate on the settlement date, the seller pays the buyer the difference
between the two rates. Any such gain received by the Fund would be taxable.

If the other party to an interest rate swap or forward rate contract 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 interest rate
swap or forward rate contract unless the claims-paying ability of the other
party thereto is considered to be investment grade by the investment 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.
These instruments are traded in the over-the-counter market.

LIQUIDITY AND PROTECTIVE PUT OPTIONS
The Fund may also enter into a separate agreement with the seller of a security
or some other person granting the Fund the right to put the security to the
seller thereof or the other person at an agreed upon price. Such agreements are
subject to the risk of default by the other party, although the Fund intends to
limit this type of transaction to institutions (such as banks or securities
dealers) which the Adviser believes present minimal credit risks. The Fund would
engage in this type of transaction to facilitate portfolio liquidity or (if the
seller so agrees) to hedge against rising interest rates. There is no assurance
that this kind of put option will be available to the Fund or that selling
institutions will be willing to permit the Fund to exercise a put to hedge
against rising interest rates. The Fund does not expect to assign any value to
any separate put option which may be acquired to facilitate portfolio liquidity,
inasmuch as the value (if any) of the put will be reflected in the value
assigned to the associated security; any put acquired for hedging purposes would
be valued in good faith under methods or procedures established by the Trustees
of the Fund after consideration of all relevant factors, including its
expiration date, the price volatility of the associated security, the difference
between the market price of the associated security and the exercise price of
the put, the creditworthiness of the issuer of the put and the market prices of
comparable put options. Interest income generated by certain bonds having put or
demand features may be taxable.

ILLIQUID OBLIGATIONS
At times, a substantial portion of the Fund's assets may be invested in
securities as to which the Fund, by itself or together with other accounts
managed by the Adviser and its affiliates, holds a major portion or all of such
securities. Under adverse market or economic conditions or in the event of
adverse changes in the financial condition of the issuer, the Fund could find it
more difficult to sell such securities when the Adviser believes it advisable to
do so or may be able to sell such securities only at prices lower than if such
securities were more widely held. Under such circumstances, it may also be more
difficult to determine the fair value of such securities for purposes of
computing the Fund's net asset value.

The secondary market for some municipal obligations issued within a state
(including issues which are privately placed with the Fund) is less liquid than
that for taxable debt obligations or other more widely traded municipal
obligations. No established resale market exists for certain of the municipal
obligations in which the Fund may invest. The market for obligations rated below
investment grade is also likely to be less liquid than the market for higher
rated obligations. As a result, the Fund may be unable to dispose of these
municipal obligations at times when it would otherwise wish to do so at the
prices at which they are valued.

SECURITIES LENDING
The Fund may seek to increase its income by lending portfolio securities to
broker-dealers or other institutional borrowers. Distributions by the Fund of
any income realized by the Fund from securities loans will be taxable. If the
management of the Fund decides to make securities loans, it is intended

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that the value of the securities loaned would not exceed 30% of the Fund's total
assets. Securities lending involves risks of delay in recovery or even loss of
rights on the securities loaned if the borrower fails financially. The Fund has
no present intention of engaging in securities lending.

FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
A change in the level of interest rates may affect the value of the securities
held by the Fund (or of securities that the Fund expects to purchase). To hedge
against changes in rates or as a substitute for the purchase of securities, the
Fund may enter into (i) futures contracts for the purchase or sale of debt
securities and (ii) futures contracts on securities indices. All futures
contracts entered into by the Fund are traded on exchanges or boards of trade
that are licensed and regulated by the Commodity Futures Trading Commission
("CFTC") and must be executed through a futures commission merchant or brokerage
firm which is a member of the relevant exchange. The Fund may purchase and write
call and put options on futures contracts which are traded on a United States or
foreign exchange or board of trade. The Fund will be required, in connection
with transactions in futures contracts and the writing of options on futures, to
make margin deposits, which will be held by the Fund's custodian for the benefit
of the futures commission merchant through whom the Fund engages in such futures
and options transactions.

Some futures contracts and options thereon may become illiquid under adverse
market conditions. In addition, during periods of market volatility, a commodity
exchange may suspend or limit transactions in an exchange-traded instrument,
which may make the instrument temporarily illiquid and difficult to price.
Commodity exchanges may also establish daily limits on the amount that the price
of a futures contract or futures option can vary from the previous day's
settlement price. Once the daily limit is reached, no trades may be made that
day at a price beyond the limit. This may prevent the Fund from closing out
positions and limiting its losses.

The Fund will engage in futures and related options transactions for bona fide
hedging purposes or non-hedging purposes as defined in or permitted by CFTC
regulations. The Fund will determine that the price fluctuations in the futures
contracts and options on futures used for hedging purposes are substantially
related to price fluctuations in securities held by the Fund or which it expects
to purchase. The Fund will engage in transactions in futures and related options
contracts only to the extent such transactions are consistent with the
requirements of the Code for maintaining its qualification as a RIC for federal
income tax purposes.

ASSET COVERAGE REQUIREMENTS
Transactions involving when-issued securities, futures contracts and options
(other than options that the Fund has purchased), interest rate swaps or forward
rate contracts may expose the Fund to an obligation to another party. The Fund
will not enter into any such transactions unless it owns either (1) an
offsetting ("covered") position in securities or other options or futures
contracts, or (2) cash or liquid securities (such as readily marketable
obligations and money market instruments) with a value sufficient at all times
to cover its potential obligations not covered as provided in (1) above. The
Fund will comply with SEC guidelines regarding cover for these instruments and,
if the guidelines so require, set aside cash or liquid securities in a
segregated account with its custodian in the prescribed amount. The securities
in the segregated account will be marked to market daily.

Assets used as cover or held in a segregated account maintained by the custodian
cannot be sold while the position requiring coverage or segregation is
outstanding unless they are replaced with other appropriate assets. As a result,
the commitment of a large portion of the Fund's assets to segregated accounts or
to cover could impede portfolio management or the Fund's ability to meet
redemption requests or other current obligations.

--------------------------------------------------------------------------------
8

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

TEMPORARY INVESTMENTS
Under unusual market conditions, the Fund may invest temporarily in cash or cash
equivalents. Cash equivalents are highly liquid, short-term securities such as
commercial paper, certificates of deposit, short-term notes and short-term U.S.
Government obligations. These securities may be subject to federal income, state
income and/or other taxes.

PORTFOLIO TURNOVER
The Fund may sell (and later purchase) securities in anticipation of a market
decline (a rise in interest rates) or purchase (and later sell) securities in
anticipation of a market rise (a decline in interest rates). In addition, a
security may be sold and another purchased at approximately the same time to
take advantage of what the Fund believes to be a temporary disparity in the
normal yield relationship between the two securities. Yield disparities may
occur for reasons not directly related to the investment quality of particular
issues or the general movement of interest rates, such as changes in the overall
demand for or supply of various types of municipal obligations or changes in the
investment objectives of investors. Such trading may be expected to increase the
portfolio turnover rate, which may increase capital gains and the expenses
incurred in connection with such trading. The Fund cannot accurately predict its
portfolio turnover rate, but it is anticipated that the annual portfolio
turnover rate will generally not exceed 100% (excluding turnover of securities
having a maturity of one year or less). A 100% annual turnover rate could occur,
for example, if all the securities held by the Fund were replaced once in a
period of one year. A high turnover rate (100% or more) necessarily involves
greater expenses to the Fund.

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 1940 Act;

(2) Issue senior securities, as defined in the 1940 Act, other than (i)
preferred shares which immediately after issuance will have asset coverage
of at least 200%, (ii) indebtedness which immediately after issuance will
have asset coverage of at least 300%, or (iii) the borrowings permitted by
investment restriction (1) above;

(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
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 objective 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

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9

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

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 or other financial
instruments; or

(8) Invest more than 25% of its total assets in issuers in any one industry.

For purposes of the Fund's investment restrictions, the determination of the
"issuer" of a municipal obligation which is not a general obligation bond will
be made by the Adviser on the basis of the characteristics of the obligation and
other relevant factors, the most significant of which is the source of funds
committed to meeting interest and principal payments of such obligation.

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 (8), securities of the U.S. Government,
its agencies, or instrumentalities are not considered to represent industries.
Municipal obligations backed by the credit of a governmental entity are also not
considered to represent industries. However, municipal obligations backed only
by the assets and revenues of non-governmental users may for this purpose be
deemed to be issued by such non-governmental users. The foregoing 25% limitation
would apply to these issuers. As discussed in the Prospectus and this SAI, the
Fund may invest more than 25% of its total assets in certain economic sectors,
such as revenue bonds, housing, hospitals and other health care facilities, and
industrial development bonds. The Fund reserves the right to invest more than
25% of total assets in each of these sectors.

The Fund has adopted the following nonfundamental investment policy which may be
changed by the Trustees 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 Board of Trustee 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 asset or describes a policy regarding quality
standards, such percentage limitation or standard shall be determined
immediately after and as a result of the Fund's acquisition of such security or
asset. Accordingly, any later increase or decrease resulting from a change in
values, assets or other circumstances 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.

--------------------------------------------------------------------------------
10

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

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 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 is the
corporate parent of Eaton Vance. EV is the corporate trustee of Eaton Vance.

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

INTERESTED TRUSTEES
Jessica J. Bibliowicz... Trustee(2) Since 10/16/02 President and Chief 185 None
DOB: 11/28/59 3 Years Executive Officer of
National Financial
Partners (financial
services company) (since
April 1999). President and
Chief Operating Officer of
John A. Levin & Co.
(registered investment
adviser) (July 1997 to
April 1999) and a Director
of Baker, Fentress &
Company which owns John A.
Levin & Co. (July 1997 to
April 1999). Ms.
Bibliowicz is an
interested person because
of her affiliation with a
brokerage firm.
James B. Hawkes......... Vice President Since 10/3/02 Chairman, President and 190 Director of EVC,
DOB: 11/9/41 and Trustee(3) 3 Years Chief Executive Officer of EV and EVD
BMR, Eaton Vance and their
corporate parent and
trustee (EVC and EV,
respectively); Vice
President of EVD.
President and/or officer
of 190 investment
companies in the Eaton
Vance Fund Complex. Mr.
Hawkes is an interested
person because of his
positions with BMR, Eaton
Vance and EVC, who are
affiliates of the Fund.
NONINTERESTED TRUSTEES
Donald R. Dwight........ Trustee(2) Since 10/16/02 President of Dwight 190 Trustee/Director
DOB: 3/26/31 3 Years Partners, Inc. (a of the Royce Funds
corporate relations and (consisting of 17
communications company). portfolios)
Samuel L. Hayes, III.... Trustee(3) Since 10/16/02 Jacob H. Schiff Professor 190 Director of
DOB: 2/23/35 3 Years of Investment Banking Tiffany & Co.
Emeritus, Harvard (specialty
University Graduate School retailer) and
of Business Telect, Inc.
Administration. (telecommunication
services company)

--------------------------------------------------------------------------------
11

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

Norton H. Reamer........ Trustee(4) Since 10/16/02 President, Unicorn 190 None
DOB: 9/21/35 3 Years Corporation (an investment
and financial advisory
services company) (since
September 2000). Chairman,
Hellman, Jordan Management
Co., Inc. (an investment
management company) (since
November 2000). Advisory
Director of Berkshire
Capital Corporation
(investment banking firm)
(since June 2002).
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).
Lynn A. Stout........... Trustee(4) Since 10/16/02 Professor of Law, 185 None
DOB: 9/14/56 3 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 Trustee whose term expires in 2003.

(3) Class II Trustee whose term expires in 2004.

(4) Class III Trustee whose term expires in 2005.

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

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

PRINCIPAL OFFICERS WHO ARE NOT TRUSTEES

TERM OF OFFICE
POSITION(S) AND LENGTH
NAME AND AGE WITH FUND OF SERVICE PRINCIPAL OCCUPATIONS DURING PAST FIVE YEARS
---------------------------------------------------------------------------------------------------------------

Thomas J. Fetter................ President Since 10/03/02 Vice President of Eaton Vance and BMR.
DOB: 8/20/43 Officer of 126 investment companies managed
by Eaton Vance or BMR.
Robert B. MacIntosh............. Vice President Since 10/03/02 Vice President of Eaton Vance and BMR.
DOB: 1/22/57 Officer of 125 investment companies managed
by Eaton Vance or BMR.
Alan R. Dynner.................. Secretary Since 10/03/02 Vice President, Secretary and Chief Legal
DOB: 10/10/40 Officer of BMR, Eaton Vance, EVD and EVC.
Officer of 190 investment companies managed
by Eaton Vance or BMR.
James L. O'Connor............... Treasurer Since 10/03/02 Vice President of BMR, Eaton Vance and EVD.
DOB: 4/1/45 Officer of 112 investment companies managed
by Eaton Vance or BMR.

The Nominating Committee of the Board of Trustees of the Fund is comprised of
the Trustees who are not "interested persons" of the Fund as that term is
defined under the 1940 Act ("noninterested Trustees"). The purpose of the
Committee is to recommend to the Board nominees for the position of
noninterested Trustee and to assure that at least a majority of the Board of
Trustees is comprised of noninterested Trustees of the Fund. The Trustees will,
when a vacancy exists or is anticipated, consider any nominee for Trustee
recommended by a shareholder if such recommendation is submitted to the Trustees
in writing and contains sufficient background information concerning the
individual to enable a proper judgment to be made as to such individual's
qualifications.

Messrs. Dwight (Chairman), Hayes and Reamer are members of the Audit Committee
of the Board of Trustees of the Fund. The Audit Committee's functions include
making recommendations to the Trustees regarding the selection and performance
of the independent accountants, and reviewing matters relative to accounting and
auditing practices and procedures, accounting records, and the internal
accounting controls, of the Fund, and certain service providers.

Messrs. Dwight, Hayes and Reamer and Ms. Stout are members of the Special
Committee of the Board of Trustees of the Fund. The purpose of the Special
Committee is to consider, evaluate and make recommendations to the full Board of
Trustees concerning (i) all contractual arrangements with service providers to
the Fund, including investment advisory, administrative, transfer agency,
custodial and fund accounting and distribution services, and (ii) all other
matters in which Eaton Vance or its affiliates has any actual or potential
conflict of interest with the Fund.

As of the date of this SAI, the Committees had not held any meetings.

In reviewing the approval of the investment advisory agreement between the Fund
and the investment adviser, the noninterested Trustees considered, among other
things, the following:

+ A report comparing the fees and expenses of the Fund to a peer group of
funds;

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

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

+ Eaton Vance's results and financial condition and the overall organization of
the investment adviser;

+ Arrangements regarding the distribution of Fund shares;

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13

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

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

+ The allocation of brokerage, 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;

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

+ Investment management staffing;

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

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

In addition to the factors mentioned above, the noninterested Trustees also
reviewed the level of the investment adviser's profits in respect of the
management of the Eaton Vance funds, including the Fund. The noninterested
Trustees considered the profits realized by Eaton Vance and its affiliates in
connection with the operation of the Fund. The noninterested Trustees also
considered Eaton Vance's profit margins in comparison with available industry
data.

The noninterested Trustees did not consider any single factor as controlling in
determining whether or not to approve the investment advisory agreement(s). Nor
are the items described herein all encompassing of the matters considered by the
noninterested Trustees. In assessing the information provided by Eaton Vance and
its affiliates, the noninterested Trustees also took into consideration the
benefits to shareholders of investing in a fund that is part of large family of
funds which provides a large variety of shareholder services.

Based on their consideration of all factors that it deemed material and assisted
by the advice of its independent counsel, the noninterested Trustees concluded
that the approval of the investment advisory agreement(s), including the fee
structure (described herein) is in the interests of shareholders.

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

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

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, 2001.

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 TRUSTEES
Jessica M. Bibliowicz..................... None $10,001--$50,000
James B. Hawkes........................... None over $100,000
NONINTERESTED TRUSTEES
Donald R. Dwight.......................... None over $100,000
Samuel L. Hayes, III...................... None over $100,000
Norton H. Reamer.......................... None over $100,000
Lynn A. Stout............................. None $10,001--$50,000

As of December 31, 2001, no noninterested Trustee or any of their immediate
family members owned beneficially or of record any class of securities of EVC,
EVD or any person controlling, controlled by or under common control with EVC or
EVD.

During the calendar years ended December 31, 2000 and December 31, 2001, no
noninterested Trustee (or their immediate family members) had:

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

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

3. Any direct or indirect relationship with (i) the Trust or any Fund; (ii)
another fund managed by EVC, distributed by EVD or a person controlling,
controlled by or under common control with EVC or EVD; (iii) EVC or EVD;
(iv) a person controlling, controlled by or under common control with EVC or
EVD; or (v) an officer of any of the above.

During the calendar years ended December 31, 2000 and December 31, 2001, no
officer of EVC, EVD or any person controlling, controlled by or under common
control with EVC or EVD 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.

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

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

The fees and expenses of the noninterested Trustees of the Fund are paid by the
Fund. (The Trustees of the Fund who are members of the Eaton Vance organization
receive no compensation from the Fund.) During the Fund's fiscal year ending
July 31, 2003, it is anticipated that the noninterested Trustees of the Fund
will earn the following compensation in their capacities as Trustees. For the
year ended December 31, 2001, the noninterested Trustees earned the compensation
set forth below in their capacities as Trustees from the funds in the Eaton
Vance fund complex(1).

JESSICA M. DONALD R. SAMUEL L. NORTON H. LYNN A.
SOURCE OF COMPENSATION BIBLIOWICZ DWIGHT HAYES, III REAMER STOUT
---------------------------------------------------------------------------------------------

Fund*........................... $ 200 $ 200 $ 200 $ 200 $ 200
-------- -------- -------- -------- --------
Fund Complex.................... $160,000 $162,500(2) $170,000 $160,000 $160,000(3)
-------- -------- -------- -------- --------

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

* Estimated

(1) As of October 18, 2002, the Eaton Vance fund complex consisted of 191
registered investment companies or series thereof.

(2) Includes $60,000 of deferred compensation.

(3) Includes $16,000 of deferred compensation.

Investment advisory and other services

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 and equity
investment professionals to service the needs of their clients. The fixed-income
division focuses on all kinds of taxable investment-grade and high-yield
securities, tax-exempt investment-grade and high-yield securities, and U.S.
Government securities. The equity division covers stocks ranging from blue chip
to emerging growth companies. Eaton Vance and its affiliates act as adviser to a
family of mutual funds, and individual and various institutional accounts,
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 March 31, 2004
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 interests 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

--------------------------------------------------------------------------------
16

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

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.

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 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 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. James B. Hawkes, Jeffrey P. Beale, Alan R. Dynner, Thomas E. Faust, Jr.,
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.

CODE OF ETHICS
The investment adviser and the Fund have adopted a Code of Ethics governing
personal securities transactions. Under the Code, Eaton Vance employees may
purchase and sell securities (including securities held by the Fund) subject to
certain pre-clearance and reporting requirements and other procedures.

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

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

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

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 quarterly repurchase offers and other administrative services
necessary to conduct the Fund's business.

Determination of net asset value

The net asset value per Share of the Fund is determined no less frequently than
weekly, generally on the last day of the week 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.

Inasmuch as the market for municipal obligations is a dealer market with no
central trading location or continuous quotation system, it is not feasible to
obtain last transaction prices for most municipal obligations held by the Fund,
and such obligations, including those purchased on a when-issued basis, will
normally be valued on the basis of valuations furnished by a pricing service.
The pricing service uses information with respect to transactions in bonds,
quotations from bond dealers, market transactions in comparable securities,
various relationships between securities, and yield to maturity in determining
value. Taxable obligations for which price quotations are readily available
normally will be valued at the mean between the latest available bid and asked
prices. Open futures positions on debt securities are valued at the most recent
settlement prices, unless such price does not reflect the fair value of the
contract, in which case the positions will be valued by or at the direction of
the Trustees. Other assets are valued at fair value using methods determined in
good faith by the Trustees.

Portfolio trading

Decisions concerning the execution of portfolio security transactions, including
the selection of the market and the executing firm, are made by the Adviser. The
Adviser is also responsible for the execution of transactions for all other
accounts managed by it. The Adviser places the portfolio security transactions
of the Fund and of all other accounts managed by it 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.

Municipal obligations, including state obligations, purchased and sold by the
Fund are generally traded in the over-the-counter market on a net basis (i.e.,
without commission) through broker-dealers and banks acting for their own
account rather than as brokers, or otherwise involve transactions directly with
the issuer of such obligations. Such firms attempt to profit from such
transactions by buying at the bid price and selling at the higher asked price of
the market for such obligations, and the difference between the bid and asked
price is customarily referred to as the spread. The Fund may also

--------------------------------------------------------------------------------
18

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

purchase municipal obligations from underwriters, and dealers in fixed price
offerings, the cost of which may include undisclosed fees and concessions to the
underwriters. On occasion it may be necessary or appropriate to purchase or sell
a security through a broker on an agency basis, in which case the Fund will
incur a brokerage commission. Although spreads or commissions on portfolio
security transactions will, in the judgment of the Adviser, be reasonable in
relation to the value of the services provided, spreads or commissions exceeding
those which another firm might charge may be paid to firms who were selected to
execute transactions on behalf of the Fund and the Adviser's other clients for
providing brokerage and research services to the Adviser.

As authorized in Section 28(e) of the Securities Exchange Act of 1934, a broker
or dealer who executes a portfolio transaction on behalf of the 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. In making any such
determination, the Adviser will not attempt to place a specific dollar value on
the brokerage and research services provided or to determine what portion of the
commission should be related to such services. Brokerage and research services
may include advice as to the value of securities, the advisability of investing
in, purchasing, or selling securities, and the availability of securities or
purchasers or sellers of securities; furnishing analyses and reports concerning
issuers, industries, securities, economic factors and trends, portfolio strategy
and the performance of accounts; effecting securities transactions and
performing functions incidental thereto (such as clearance and settlement); and
the "Research Services" referred to in the next paragraph.

It is a common practice of the investment advisory industry and of the advisers
of investment companies, institutions and other investors to receive research,
analytical, statistical and quotation services, data, information and other
services, products and materials which assist such advisers in the performance
of their investment responsibilities ("Research Services") from broker-dealer
firms which execute portfolio transactions for the clients of such advisers and
from third parties with which such broker-dealers have arrangements. Consistent
with this practice, 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. 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, data bases 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.

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19

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

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.

Subject to the requirement that the Adviser shall use its best efforts to seek
and execute portfolio 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
portfolio orders may be placed the fact that such firm has sold or is selling
shares of the Fund or of other investment companies sponsored by the Adviser.
This policy is not inconsistent with a rule of the National Association of
Securities Dealers, Inc. ("NASD"), which rule provides that no firm which is a
member of the NASD shall favor or disfavor the distribution of shares of any
particular investment company or group of investment companies on the basis of
brokerage commissions received or expected by such firm from any source.

Municipal obligations considered as investments for the 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

The following discussion of federal income tax matters is based on the advice of
Kirkpatrick & Lockhart LLP, counsel to the fund. The Fund intends to elect to be
treated and to qualify each year as a RIC 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 (including tax-exempt interest 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 RIC status and to avoid paying any federal 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 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

--------------------------------------------------------------------------------
20

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

the sum of (i) 98% of its ordinary income (not including tax-exempt income) for
such year, and (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,
plus 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 for federal income tax purposes, the Fund may be
required to recognize unrealized gains, pay substantial taxes and interest, and
make certain distributions.

The Fund's investment in zero coupon and certain other securities will cause it
to realize income prior to the receipt of cash payments with respect to these
securities. 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.

Insurance proceeds received by the Fund under any insurance policies in respect
of scheduled interest payments on defaulted municipal obligations, as described
herein, will generally be excludable from gross income under Section 103(a) of
the Code.

Distributions by the Fund of net tax-exempt interest income that are properly
designated as "exempt-interest dividends" may be treated by shareholders as
interest excludable from gross income under Section 103(a) of the Code. In order
for the Fund to be entitled to pay exempt-interest dividends to its
shareholders, the Fund must and intends to satisfy certain requirements,
including the requirement that, at the close of each quarter of its taxable
year, at least 50% of the value of its total assets consists of obligations the
interest on which is exempt from regular federal income tax under Code Section
103(a). Interest on certain municipal obligations is treated as a tax preference
item for purposes of the AMT. In addition, corporate shareholders must include
the full amount of exempt-interest dividends in computing the AMT. Shareholders
of the Fund are required to report tax-exempt interest on their federal income
tax returns.

Tax-exempt distributions received from the Fund are taken into account in
determining, and may increase, the portion of social security and certain
railroad retirement benefits that may be subject to federal income tax.

Interest on indebtedness incurred or continued by a shareholder to purchase or
carry shares of the Fund is not deductible to the extent it is deemed related to
the Fund's distributions of exempt-interest dividends. Further, entities or
persons who are "substantial users" (or persons related to "substantial users")
of facilities financed by industrial development or private activity bonds
should consult their tax advisers before purchasing shares of the Fund.
"Substantial user" is defined in applicable Treasury regulations to include a
"non-exempt person" who regularly uses in its trade or business a part of a

--------------------------------------------------------------------------------
21

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

facility financed from the proceeds of industrial development bonds, and the
same definition should apply in the case of private activity bonds.

Any recognized gain or income attributable to market discount on long-term
tax-exempt municipal obligations (i.e., obligations with a term of more than one
year) purchased after April 30, 1993 (except to the extent of a portion of the
discount attributable to original issue discount), 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.

From time to time proposals have been introduced before Congress for the purpose
of restricting or eliminating the federal income tax exemption for interest on
certain types of municipal obligations, and it can be expected that similar
proposals may be introduced in the future. Under federal tax legislation enacted
in 1986, the federal income tax exemption for interest on certain municipal
obligations was eliminated or restricted. As a result of such legislation, the
availability of municipal obligations for investment by the Fund and the value
of the securities held by it may be affected.

In the course of managing its investments, the Fund may realize some short-term
and long-term capital gains (and/or losses) as well as other taxable income. Any
distributions by the Fund of such capital gains (after reduction by any capital
loss carryforwards) or other taxable income would be taxable to shareholders of
the Fund. However, it is expected that such amounts, if any, would normally be
insubstantial in relation to the tax-exempt interest earned by the Fund.

The Fund's investments in options, futures contracts, hedging transactions,
forward contracts (to the extent permitted) and certain other transactions will
be subject to special tax rules (including mark-to-market, constructive sale,
straddle, wash sale, short sale and other rules), the effect of which may be to
accelerate income to the Fund, defer Fund losses, cause adjustments in the
holding periods of securities held by the Fund, convert capital gain into
ordinary income and convert short-term capital losses into long-term capital
losses. These rules could therefore affect the amount, timing and character of
distributions to Shareholders. The Fund may be required to limit its activities
in options and futures contracts in order to enable it to maintain its RIC
status.

Any loss realized upon the sale or exchange of Fund shares with a holding period
of 6 months or less will be disallowed to the extent of any exempt-interest
dividends received with respect to such shares, and if the loss exceeds the
disallowed amount, 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 redemption 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 the period beginning 30
days before the redemption of the loss shares and ending 30 days after such
date. 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

--------------------------------------------------------------------------------
22

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

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 4% 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.

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 Internal Revenue Service (the "IRS")
as well as shareholders with respect to whom the Fund has received certain
information from the IRS 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 up
to 30% for amounts paid during 2002 and 2003. 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 U.S. federal
income tax liability, if any, provided that the required information is
furnished to the IRS.

The foregoing discussion does not address the special tax rules applicable to
certain classes of investors, such as tax-exempt entities, foreign investors,
insurance companies and financial institutions. Shareholders should consult
their own tax advisers with respect to special tax rules that may apply in their
particular situations, as well as the state, local, and, where applicable,
foreign tax consequences of investing in the Fund.

If the Fund issues preferred shares, the Fund will designate dividends made to
holders of Shares and to holders of those preferred shares in accordance with
each class's proportionate share of each item of Fund income (such as tax-exempt
interest, net capital gains and other taxable income).

The Fund is not appropriate for non-U.S. investors or as a retirement plan
investment.

STATE AND LOCAL TAXES

The exemption of interest income for federal income tax purposes does not
necessarily result in exemption under the income or other tax laws of any state
or local taxing authority. Shareholders of the Fund may be exempt from state and
local taxes on distributions of net tax-exempt interest income derived from
obligations of the state and/or municipalities of the state in which they are
resident, but taxable generally on income derived from obligations of other
jurisdictions. The Fund will report annually to shareholders the percentages
representing the proportionate ratio of its net tax-exempt interest income
earned in each state.

In the opinion of special New York tax counsel, Sidley, Austin, Brown & Wood
LLP, distributions by the Fund that are attributable to interest on municipal
obligations of New York and its political subdivisions or to interest on
obligations of U.S. territories and possessions that are exempt from state
taxation under federal law will not be subject to New York State or City
personal income tax. All other distributions, including distributions
attributable to taxable ordinary income and capital gains, will be subject to
New York State and City personal income tax. Interest on indebtedness incurred
to purchase, or continued to carry, Common Shares generally will not be
deductible for New York State or New York City personal income tax purposes. All
distributions from the Fund, regardless of source, will increase the taxable
base of shareholders subject to New York State corporate franchise tax and the
New York City general corporation tax. Gain from the sale, exchange or other
disposition of

--------------------------------------------------------------------------------
23

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

Common Shares will be subject to New York State and City personal income tax and
the State corporate franchise tax and City general corporation tax.

These provisions are subject to change by legislative or administrative action,
and any such change may be retroactive with respect to Fund transactions. The
discussion is based on assumptions that the Fund will qualify for the special
tax treatment afforded RICs under the Code and that it will satisfy the
conditions necessary to pay exempt-interest dividends to shareholders.

The foregoing discussion does not address the special tax rules applicable to
certain classes of investors, such as insurance companies and financial
institutions.

Shareholders should consult their own tax advisers with respect to special tax
rules that may apply in their particular situations, as well as the state or
local tax consequences of investing in the Fund.

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 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 would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties involved in the
conduct of his office. 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 2/3 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 so to do 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 auditors

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

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

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

INDEPENDENT AUDITORS' REPORT

To the Trustees and Shareholder of

Eaton Vance Insured New York Municipal Bond Fund II:

We have audited the accompanying statement of assets and liabilities of Eaton
Vance Insured New York Municipal Bond Fund II (the "Fund") as of ,
2002. This financial statement is the responsibility of the Fund's management.
Our responsibility is to express an opinion on this financial statement based on
our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion such statement of assets and liabilities presents fairly, in all
material respects, the financial position of Eaton Vance Insured New York
Municipal Bond Fund II as of , 2002 in conformity with generally
accepted accounting principles.

Deloitte & Touche LLP

Boston, Massachusetts

, 2002

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

Eaton Vance Insured New York Municipal Bond Fund II

STATEMENT OF ASSETS AND LIABILITIES

, 2002

ASSETS:
Cash...................................................... $
Offering Costs............................................ $
------
Total assets.............................................. $
======
LIABILITIES:
Accrued Offering Costs.................................... $
------
Total Liabilities......................................... $
======
Net assets applicable to 6,666.67 common shares of
beneficial interests issued and outstanding............... $
======
NET ASSET VALUE AND OFFERING PRICE PER SHARE................ $15.00
======

Notes to financial statement

NOTE 1: ORGANIZATION

The Fund was organized as a Massachusetts business trust on October 3, 2002, and
has been inactive since that date except for matters relating to its
organization and registration as a non-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 common shares to
Eaton Vance Management, the Fund's Investment Adviser.

Eaton Vance Management, or an affiliate, has agreed to pay all organizational
expenses and offering costs (other than sales loads) that exceed $0.03 per
common share.

The Fund's investment objective is to provide current income exempt from federal
income tax, including alternative minimum tax, and New York State and New York
City personal income taxes.

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 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 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 0.55% of the average weekly gross assets of the
Fund. Gross assets of the Fund shall be calculated by deducting

--------------------------------------------------------------------------------
26

NOTES TO FINANCIAL STATEMENT
--------------------------------------------------------------------------------

accrued liabilities of the Fund not including the amount of any preferred shares
outstanding or the principal amount of any indebtedness for money borrowed.

In addition, Eaton Vance has contractually agreed to reimburse the Fund for fees
and other expenses in the amount of 0.15% of the average weekly gross assets for
the first 5 full years of the Fund's operations, 0.10% of average weekly gross
assets in year 6, and 0.05% in year 7.

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, if any, and tax-exempt income, including any net realized gain
on investments.

--------------------------------------------------------------------------------
27

APPENDIX A
--------------------------------------------------------------------------------

Description of securities ratings+
Moody's Investors Service, Inc.

MUNICIPAL BONDS

Aaa: Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.

Aa: Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long term risk appear somewhat larger than the Aaa securities.

A: Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.

Baa: Bonds which are rated Baa are considered as medium-grade obligations
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

Ba: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during other good and bad times over the future. Uncertainty of position
characterizes bonds in this class.

B: Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.

Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.

Ca: Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.

C: Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.

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

+ The ratings indicated herein are believed to be the most recent ratings
available at the date of this SAI for the securities listed. Ratings are
generally given to securities at the time of issuance. While the rating
agencies may from time to time revise such ratings, they undertake no
obligation to do so, and the ratings indicated do not necessarily represent
ratings which would be given to these securities on the date of the Fund's
fiscal year end.

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28

DESCRIPTION OF SECURITIES RATINGS
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Absence of Rating: Where no rating has been assigned or where a rating has been
suspended or withdrawn, it may be for reasons unrelated to the quality of the
issue.

Should no rating be assigned, the reason may be one of the following:

1. An application for rating was not received or accepted.

2. The issue or issuer belongs to a group of securities or companies that are
not rated as a matter of policy.

3. There is a lack of essential data pertaining to the issue or issuer.

4. The issue was privately placed, in which case the rating is not published in
Moody's publications.

Suspension or withdrawal may occur if new and material circumstances arise, the
effects of which preclude satisfactory analysis; if there is no longer available
reasonable up-to-date data to permit a judgment to be formed; if a bond is
called for redemption; or for other reasons.

Note: Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through B in its municipal bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.

MUNICIPAL SHORT-TERM OBLIGATIONS

MIG/VMIG RATINGS U.S. SHORT-TERM RATINGS: In municipal debt issuance, there are
three rating categories for short-term obligations that are considered
investment grade. These ratings are designated as Moody's Investment Grade (MIG)
and are divided into three levels--MIG 1 through MIG 3.

In addition, those short-term obligations that are of speculative quality are
designated SG, or speculative grade.

In the case of variable rate demand obligations (VRDOs), a two-component rating
is assigned. The first element represents Moody's evaluation of the degree of
risk associated with scheduled principal and interest payments. The second
element represents Moody's evaluation of the degree of risk associated with the
demand feature, using the MIG rating scale.

The short-term rating assigned to the demand feature of VRDOs is designated as
VMIG. When either the long- or short-term aspect of a VRDO is not rated, that
piece is designated NR, e.g., Aaa/NR or NR/VMIG 1.

MIG ratings expire at note maturity. By contrast, VMIG rating expirations will
be a function of each issue's specific structural or credit features.

MIG 1/VMIG 1: This designation denotes superior credit quality. Excellent
protection is afforded by established cash flows, highly reliable liquidity
support, or demonstrated broad-based access to the market for refinancing.

MIG 2/VMIG 2: This designation denotes strong credit quality. Margins of
protection are ample, although not as large as in the preceding group.

MIG 3/VMIG 3: This designation denotes acceptable credit quality. Liquidity and
cash-flow protection may be narrow, and market access for refinancing is likely
to be less well-established.

SG: This designation denotes speculative-grade credit quality. Debt instruments
in this category may lack sufficient margins of protection.

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29

DESCRIPTION OF SECURITIES RATINGS
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STANDARD & POOR'S RATINGS GROUP

INVESTMENT GRADE
AAA: Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.

AA: Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.

A: Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.

BBB: Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibit adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay interest and repay principal for debt in this
category than in higher rated categories.

SPECULATIVE GRADE
Debt rated BB, B, CCC, CC and C is regarded as having predominantly speculative
characteristics with respect to capacity to pay interest and repay principal. BB
indicates the least degree of speculation and C the highest. While such debt
will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major exposures to adverse conditions.

BB: Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB- rating.

B: Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB or BB-
rating.

CCC: Debt rated CCC has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The CCC rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
B or B- rating.

CC: The rating CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC debt rating.

C: The rating C is typically applied to debt subordinated to senior debt which
is assigned an actual or implied CCC- debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed, but debt service
payments are continued.

C1: The Rating C1 is reserved for income bonds on which no interest is being
paid.

D: Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The D rating also will be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.

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30

DESCRIPTION OF SECURITIES RATINGS
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PLUS (+) OR MINUS (-): The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.

P: The letter "p" indicates that the rating is provisional. A provisional
rating assumes the successful completion of the project being financed by the
debt being rated and indicates that payment of debt service requirements is
largely or entirely dependent upon the successful and timely completion of the
project. This rating, however, while addressing credit quality subsequent to
completion of the project, makes no comment on the likelihood of, or the risk of
default upon failure of such completion. The investor should exercise his own
judgment with respect to such likelihood and risk.

L: The letter "L" indicates that the rating pertains to the principal amount of
those bonds to the extent that the underlying deposit collateral is insured by
the Federal Deposit Insurance Corp. and interest is adequately collateralized.
In the case of certificates of deposit, the letter "L" indicates that the
deposit, combined with other deposits being held in the same right and capacity,
will be honored for principal and accrued pre-default interest up to the federal
insurance limits within 30 days after closing of the insured institution or, in
the event that the deposit is assumed by a successor insured institution, upon
maturity.

NR: NR indicates no rating has been requested, that there is insufficient
information on which to base a rating, or that S&P does not rate a particular
type of obligation as a matter of policy.

MUNICIPAL NOTES
S&P note ratings reflect the liquidity concerns and market access risks unique
to notes. Notes due in 3 years or less will likely receive a note rating. Notes
maturing beyond 3 years will most likely receive a long-term debt rating. The
following criteria will be used in making that assessment:

- Amortization schedule (the larger the final maturity relative to other
maturities the more likely it will be treated as a note).

- Sources of payment (the more dependent the issue is on the market for its
refinancing, the more likely it will be treated as a note).

Note rating symbols are as follows:

SP-1: Strong capacity to pay principal and interest. Those issues determined to
possess very strong characteristics will be given a plus (+) designation.

SP-2: Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse financial and economic changes over the term of the
notes.

SP-3: Speculative capacity to pay principal and interest.

FITCH RATINGS

INVESTMENT GRADE BOND RATINGS
AAA: Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.

AA: Bonds considered to be investment grade and of very high credit quality.
The obligor's ability to pay interest and repay principal is very strong,
although not quite as strong as bonds rated 'AAA'. Because bonds rated in the
'AAA' and 'AA' categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated 'F-1+'.

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31

DESCRIPTION OF SECURITIES RATINGS
--------------------------------------------------------------------------------

A: Bonds considered to be investment grade and of high credit quality. The
obligors ability to pay interest and repay principal is considered to be strong,
but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.

BBB: Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is considered
to be adequate. Adverse changes in economic conditions and circumstances,
however, are more likely to have adverse impact on these bonds, and therefore,
impair timely payment. The likelihood that the ratings of these bonds will fall
below investment grade is higher than for bonds with higher ratings.

HIGH YIELD BOND RATINGS
BB: Bonds are considered speculative. The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified that could assist the
obligor in satisfying its debt service requirements.

B: Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue.

CCC: Bonds have certain identifiable characteristics which, if not remedied,
may lead to default. The ability to meet obligations requires an advantageous
business and economic environment.

CC: Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.

C: Bonds are in imminent default in payment of interest or principal.

DDD, DD AND D: Bonds are in default on interest and/or principal payments. Such
bonds are extremely speculative and should be valued on the basis of their
ultimate recovery value in liquidation or reorganization of the obligor. 'DDD'
represents the highest potential for recovery on these bonds, and 'D' represents
the lowest potential for recovery.

PLUS (+) OR MINUS (-): The ratings from AA to C may be modified by the addition
of a plus or minus sign to indicate the relative position of a credit within the
rating category.

NR: Indicates that Fitch does not rate the specific issue.

CONDITIONAL: A conditional rating is premised on the successful completion of a
project or the occurrence of a specific event.

INVESTMENT GRADE SHORT-TERM RATINGS
Fitch's short-term ratings apply to debt obligations that are payable on demand
or have original maturities of generally up to three years, including commercial
paper, certificates of deposit, medium-term notes, and municipal and investment
notes.

F-1+: Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.

F-1: Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated
'F-1+'.

F-2: Good Credit Quality. Issues carrying this rating have a satisfactory
degree of assurance for timely payment, but the margin of safety is not as great
as the 'F-1+' and 'F-1' categories.

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32

DESCRIPTION OF SECURITIES RATINGS
--------------------------------------------------------------------------------

F-3: Fair Credit Quality. Issues carrying this rating have characteristics
suggesting that the degree of assurance for timely payment is adequate, however,
near-term adverse change could cause these securities to be rated below
investment grade.

* * * * * * * *

Notes: Bonds which are unrated expose the investor to risks with respect to
capacity to pay interest or repay principal which are similar to the risks of
lower-rated speculative bonds. The Fund is dependent on the Investment Adviser's
judgment, analysis and experience in the evaluation of such bonds.

Investors should note that the assignment of a rating to a bond by a rating
service may not reflect the effect of recent developments on the issuer's
ability to make interest and principal payments.

DESCRIPTION OF THE INSURANCE CLAIMS-PAYING ABILITY RATINGS OF STANDARD & POOR'S
RATINGS GROUP AND MOODY'S INVESTORS SERVICE, INC.

An S&P insurance claims-paying ability rating is an assessment of an operating
insurance company's financial capacity to meet obligations under an insurance
policy in accordance with the terms. An insurer with an insurance claims-paying
ability of AAA has the highest rating assigned by S&P. Capacity to honor
insurance contracts is adjudged by S&P to be extremely strong and highly likely
to remain so over a long period of time. A Moody's insurance claims-paying
ability rating is an opinion of the ability of an insurance company to repay
punctually senior policy holder obligations and claims. An insurer with an
insurance claims-paying ability rating of Aaa is adjudged by Moody's to be of
the best quality. In the opinion of Moody's, the policy obligations of an
insurance company with an insurance claims-paying ability rating of Aaa carry
the smallest degree of credit risk and, while the financial strength of the
these companies is likely to change, such changes as can be visualized are most
unlikely to impair the company's fundamentally strong position.

An insurance claims-paying ability rating by S&P or Moody's does not constitute
an opinion on an specific contract in that such an opinion can only be rendered
upon the review of the specific insurance contract. Furthermore, an insurance
claims-paying ability rating does not take in account deductibles, surrender or
cancellation penalties or the timeliness of payment; nor does it address the
ability of a company to meet nonpolicy obligations (i.e., debt contracts).

The assignment of ratings by S&P and Moody's to debt issues that are fully or
partially supported by insurance policies, contracts, or guarantees is a
separate process from the determination of claims-paying ability ratings. The
likelihood of a timely flow of funds from the insurer to the trustee for the
bondholders is a key element in the rating determination of such debt issues.

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33

APPENDIX B
--------------------------------------------------------------------------------

Tax equivalent yield table

The table below gives the approximate yield a taxable security must earn at
various income brackets to produce after-tax yields equivalent to those of
tax-exempt bonds yielding from 4% to 7% under the regular 2002 federal income
tax New York State and New York City personal income tax rates applicable to
individuals.

COMBINED FEDERAL AND
NEW YORK STATE TAX RATES A TAX EXEMPT YIELD OF
SINGLE RETURN JOINT RETURN FEDERAL STATE BLENDED 4.0% 4.5% 5.0% 5.5% 6.0% 6.5% 7.0%
----------------------------------------------------------------------------------------------------------------------
(TAXABLE INCOME)* IS EQUIVALENT TO A FULLY TAXABLE YIELD OF

$20,001-$27,950 $40,001-$46,700 15.0% 6.85% 20.82% 5.05% 5.69% 6.31% 6.95% 7.58% 8.21% 8.84%
$27,951-$67,700 $46,701-$112,850 27.0% 6.85% 32.00% 5.88% 6.62% 7.35% 8.09% 8.82% 9.56% 10.29%
$67,701-$141,250 $112,851-$171,950 30.0% 6.85% 34.80% 6.13% 6.90% 7.67% 8.43% 9.20% 9.97% 10.74%
$141,251-$307,050 $171,951-$307,050 35.0% 6.85% 39.45% 6.61% 7.43% 8.26% 9.08% 9.91% 10.74% 11.56%
Over $307,050 Over $307,050 38.6% 6.85% 42.81% 6.99% 7.87% 8.74% 9.62% 10.49% 11.36% 12.24%

COMBINED FEDERAL,
NEW YORK STATE AND CITY
TAX RATES
STATE A TAX EXEMPT YIELD OF
SINGLE RETURN JOINT RETURN FEDERAL AND CITY BLENDED 4.0% 4.5% 5.0% 5.5% 6.0% 6.5% 7.0%
-----------------------------------------------------------------------------------------------------------------------
(TAXABLE INCOME)* IS EQUIVALENT TO A FULLY TAXABLE YIELD OF

$20,001-$25,000 $40,001-$45,000 15.0% 10.38% 23.83% 5.25% 5.91% 6.56% 7.22% 7.88% 8.53% 9.19%
$25,001-$27,950 $45,001-$46,700 15.0% 10.44% 23.87% 5.25% 5.91% 6.57% 7.22% 7.88% 8.54% 9.20%
$27,951-$50,000 $46,701-$90,000 27.0% 10.44% 34.62% 6.12% 6.88% 7.65% 8.41% 9.18% 9.94% 10.71%
$50,001-$67,700 $90,001-$112,850 27.0% 10.50% 34.66% 6.12% 6.89% 7.65% 8.42% 9.18% 9.95% 10.71%
$67,701-$141,250 $112,851-$171,950 30.0% 10.50% 37.35% 6.38% 7.18% 7.98% 8.78% 9.58% 10.37% 11.17%
$141,251-$307,050 $171,951-$307,050 35.0% 10.50% 41.82% 6.88% 7.74% 8.59% 9.45% 10.31% 11.17% 12.03%
Over $307,050 Over $307,050 38.60% 10.50% 45.06% 7.28% 8.19% 9.10% 10.01% 10.92% 11.83% 12.74%

------------
* Net amount subject to federal personal income tax after deductions and
exemptions.

The above indicated federal income tax brackets do not take into account the
effect of a reduction in the deductibility of itemized deductions generally for
taxpayers with adjusted gross income in excess of $137,300. The tax brackets
also do not show the effects of phaseout of personal exemptions for single
filers with adjusted gross income in excess of $137,300 and joint filers with
adjusted gross income in excess of $206,000. The effective tax brackets and
equivalent taxable yields of those taxpayers will be higher than those indicated
above.

The combined federal, New York State and New York City tax brackets are
calculated using the highest New York tax rate applicable within each bracket.
Taxpayers may have lower combined tax brackets and taxable equivalent yields
than indicated above. The combined tax brackets assume that New York taxes are
itemized deductions for federal income tax purposes. Investors who do not
itemize deductions on their federal income tax return will have a higher
combined bracket and higher taxable equivalent yield than those indicated above.
The applicable federal tax rates within the brackets are 10%, 15%, 27%, 30%, 35%
and 38.6%. A supplemental New York State tax will also apply to filers with
adjusted gross income between $100,000 and $150,000 which phases out the benefit
of lower marginal brackets. The adjustment is not reflected above.

Yields shown are for illustration purposes only and are not meant to represent
the Fund's actual yield. No assurance can be given that the Fund will achieve
any specific tax-exempt yield. While it is expected that the Fund will invest
principally in obligations the interest from which is exempt from the regular
federal income tax and New York State and New York City (if applicable) personal
income taxes, other income received by the Fund may be taxable. The table does
not take into account state

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34

TAX EQUIVALENT YIELD TABLE
--------------------------------------------------------------------------------

or local taxes, if any, payable on Fund distributions. It should also be noted
that the interest earned on certain "private activity bonds", while exempt from
the regular federal income tax, is treated as a tax preference item which could
subject the recipient to the AMT. The illustrations assume that the AMT is not
applicable and do not take into account any tax credits that may be available.

The information set forth above is as of the date of this SAI. Subsequent tax
law changes could result in prospective or retroactive changes in the tax
brackets, tax rates, and tax-equivalent yields set forth above. Investors should
consult their tax advisers for additional information.

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35

APPENDIX C
--------------------------------------------------------------------------------

New York and U.S. territory information

The following is a summary of certain selected information relating to the
economy and finances of New York State, New York City and the U.S. territories
listed below. It is not a discussion of any specific factors that may affect any
particular issuer of municipal securities. The information is not intended to be
comprehensive and does not include all of the economic and financial
information, such as certain information pertaining to budgets, receipts and
disbursements, about New York State and New York City or such U.S. territories
that would ordinarily be included in various public documents issued thereby,
such as an official statement prepared in accordance with issuance of general
obligation bonds of New York or such U.S. territories. Such an official
statement, together with any updates or supplements thereto, generally may be
obtained upon request to the budget or equivalent office of New York State, New
York City or such U.S. territories. The information below is derived from
selected public documents of the type described above and has not been
independently verified by the Fund.

NEW YORK

The State ended its 2001-2002 fiscal year balanced on a cash basis, with a
reported closing balance in the General Fund of $1.03 billion. The State adopted
the debt service portion of the State budget for the 2002-2003 fiscal year on
March 26, 2002. The State Legislature adopted the remainder of the budget for
the State's 2002-2003 fiscal year on May 16, 2002, and the State released a
revised State Financial Plan on May 22, 2002 and its first quarterly Financial
Plan update on July 12, 2002. There were no changes to the State Financial Plan
projections in the update. The revised State Financial Plan projects balance on
a cash basis for the 2002-2003 fiscal year. General Fund disbursements,
including transfers to other funds are projected to total $40.22 billion for
2002-2003. The projected General Fund closing balance is $716 million. The State
Financial Plan accompanying the Governor's 2002-2003 amended Executive Budget
projected General Fund budget gaps of $2.8 billion in the 2003-2004 fiscal year
and $3.3 billion in the 2004-2005 fiscal year.

To permanently improve the State's reserve levels, the Executive Budget includes
proposed legislation to increase the maximum permissible size of the State Tax
Stabilization Reserve Fund from 2 percent to 5 percent of General Fund spending.

The most significant risks to the State's financial plan set forth in the
Executive Budget are the rate of layoffs related to September 11, and the impact
of the event upon the City and the personal income statewide. In addition, the
occurrence of other terrorist attacks whether within or outside of New York
could have a significant adverse effect on the State's economy. The volatility
of the financial markets even before September 11 and its impact upon financial
sector compensation and capital gains recognition by investors also represent a
significant risk to the State's financial plan, as set forth in the Executive
Budget.

Owing to these and other factors, the State may face substantial potential
budget gaps in future years resulting from a significant disparity between tax
revenues from lower receipts and the spending required to maintain State
programs at mandated levels. Any such recurring imbalance would be exacerbated
by the use by the State of nonrecurring resources to achieve budgetary balance
in a particular fiscal year. To correct any recurring budgetary imbalance, the
State would need to take significant actions to align recurring receipts and
disbursements in future fiscal years.

Under the State law, the Governor is required to submit a Five-Year Capital
Program and Financing Plan ("Capital Plan") annually. The proposed 2002-2003
through 2006-2007 fiscal year Capital Plan provides for capital spending of $5.0
billion in the 2002-2003 fiscal year to be financed through general obligation,
authority and state bonds and available resources. General obligation bonds are
backed by the full faith and credit of the State. The Executive Budget does not
currently provide for

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36

NEW YORK AND U.S. TERRITORY INFORMATION
--------------------------------------------------------------------------------

the issuance of general obligation bonds in 2002-2003. As of March 31, 2002,
$4.1 billion of State general obligation bonds were outstanding. Also as of such
date, $4.7 billion of bonds issued by the Local Governmental Assistance
Corporation, an entity established to fund assistance to localities in earlier
years when the State was running budget deficits, were outstanding. Various
state authorities had $27.9 billion of indebtedness outstanding in the form of
bonds, lease financings and other financing arrangements. This state authority
indebtedness is not backed by the full faith and credit of the State.

The State is currently a defendant in a significant number of lawsuits. Such
litigation includes, but is not limited to, claims asserted against the State
arising from alleged torts, alleged breaches of contracts, condemnation
proceedings and other alleged violations of State and Federal laws. State
programs, primarily Medicaid and mental health programs are frequently
challenged on State and Federal constitutional grounds. Several Native American
groups have commenced litigation against New York claiming the rights to
thousands of acres of land seized in the eighteenth and nineteenth centuries.
Adverse developments in legal proceedings or the initiation of new proceedings
could affect the ability of the State to maintain a balanced State Financial
Plan in any given fiscal year. There can be no assurance that an adverse
decision in one or more legal proceedings would not exceed the amount the State
reserves for the payment of judgments or materially impair the State's financial
operations. With respect to pending and threatened litigation, the State
reported in its October 9, 2002 update to its Annual Information Statement dated
June 3, 2002 $698 million for awarded and anticipated unfavorable judgments, of
which $91 million was expected to be paid within the 2002-2003 fiscal year.

The state legislature has enacted the Debt Reform Act of 2000, which applies to
new state-supported debt (i.e. general obligation debt of the state and
lease-purchase and contractual obligations of public authorities and
municipalities where debt service is paid from state appropriations) issued on
or after April 1, 2000. It imposes caps on new debt outstanding and new debt
service costs.

The fiscal stability of New York state relates, at least in part, to the fiscal
stability of its localities and authorities. Various state agencies, authorities
and localities have issued large amounts of bonds and notes supported by the
state. In some cases, the state has had to provide special assistance in recent
years to enable such agencies, authorities and localities to meet their
financial obligations and, in some cases, to prevent or cure defaults. The
extent to which state agencies and local governments require state assistance to
meet their financial obligations, may adversely affect the ability of the state
to meet its own obligations as they become due or to obtain additional
financing.

Fiscal difficulties experienced in Nassau County resulted in the creation of the
Nassau County Interim Finance Authority (the "Authority") in 2000. The Authority
is charged with oversight of the fiscal affairs of Nassau County. The State paid
$25 million in assistance to Nassau County for the 2001-2002 fiscal year and the
Governor has proposed assistance of $50 million in the Executive Budget. The
Authority as of January 22, 2002 had issued $436 million in bonds and $690
million in bond anticipation notes.

Moody's has given the State's general obligation bonds a rating of A2, Standard
& Poor's had given the bonds a rating of AA, and Fitch had given the bonds a
rating of AA. Such ratings reflect only the view of Moody's and Standard &
Poor's from which an explanation of the significance of such ratings may be
obtained. There is no assurance that such ratings will continue for any given
period of time or that they will not be revised downward or withdrawn entirely.
Any such downward revision or withdrawal could have an adverse effect on the
market prices of State bonds and could increase the State's borrowing costs.

For each of the 1981 through 2001 fiscal years, New York City's General Fund had
an operating surplus, before discretionary and other transfers, and achieved
balanced operating results as reported

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37

NEW YORK AND U.S. TERRITORY INFORMATION
--------------------------------------------------------------------------------

in accordance with generally accepted accounting principles ("GAAP"), after
discretionary and other transfers ("transfers"). For the 2001 fiscal year, the
City had an operating surplus of $2.949 billion, before transfers. General Fund
total revenues for the 2001 fiscal year were approximately $40.23 billion.
Historically, the City has been required to close substantial gaps between
forecast revenues and forecast expenditures in order to maintain balanced
operating results. Particularly given the uncertain impact of September 11 and
the expected reduction in economic activity in the City, there can be no
assurance that the City will continue to maintain balanced operating results as
required by State law without reductions in City services or entitlement
programs to tax or other revenue increases that could adversely affect the
City's economic base. The City's Financial Plan for the 2002 through 2006 fiscal
years projects revenues and expenditures for the 2002 and 2003 fiscal years,
balanced in accordance with GAAP, and projects gaps of $3.7 billion, $4.2
billion and $4.6 billion for fiscal years 2004 through 2006, respectively. New
York City has shown a pattern of consistently projecting and closing budget
gaps. The City has outlined a gap-closing program which anticipates additional
City agency programs to reduce expenditures or increase revenues and additional
federal and state actions such as intergovernmental aid to the City. There can
be no assurance that additional gap-closing measures, such as tax increases or
reductions in City services, will not be required.

Implementation of the City's four-year annual financial plan is also dependent
upon the City's ability to market its securities successfully in the public
credit markets including its ability to issue short term notes to finance its
seasonal working capital needs. The fiscal health of New York City, which has
been the largest issuer of municipal bonds in the country and is a leading
international commercial center, exerts a significant influence upon the fiscal
health and bond values of issues throughout the state. Bond values of the
Municipal Assistance Corporation, the state of New York, the New York Local
Government Assistance Corporation, the New York State Dormitory Authority, the
New York City Municipal Water Finance Authority, the New York City Transitional
Finance Authority and The Metropolitan Transportation Authority may be
particularly affected by serious financial difficulties encountered by New York
City. The Fund could be expected to hold bonds issued by many, if not all of
these issuers, at any given time.

The City's financing program for fiscal years 2002 through 2006 contemplates the
issuance of $13.6 billion of general obligation bonds, $3.9 billion of bonds and
$2.5 billion of Recovery Bonds and Recovery Notes described below to be issued
by the New York City Transitional Finance Authority (the "Transitional Finance
Authority"), $1.8 billion of bonds to be issued by TSASC, Inc., a not-for-profit
corporation empowered to issue tax-exempt debt backed by tobacco settlement
revenues, and $8.3 billion of bonds and notes to be issued by New York City
Municipal Water Finance Authority (the "Water Authority"). In 1997, the State
created the Transitional Finance Authority, to assist the City in keeping the
City's indebtedness within the forecast level of the constitutional restrictions
on the amount of debt the City is authorized to incur. The City had faced
limitations on its borrowing capacity after 1998 under the State's constitution
that would have prevented it from borrowing additional funds, as a result of the
decrease in real estate values within the City. The Transitional Finance
Authority is authorized to issue up to $11.5 billion of bonds. In addition, the
City issues revenue notes and tax anticipation notes to finance seasonal working
capital requirements. The success of projected public sales of these bonds and
notes will be subject to prevailing market conditions. The City's planned
capital and operating expenditures are dependent upon the sale of its general
obligation bonds and notes, and the Water Authority and Transitional Finance
Authority bonds. In September 2001, the state legislature granted the City an
additional $2.5 billion in debt-incurring capacity to pay costs related to
September 11 through bonds ("Recovery Bonds") and notes ("Recovery Notes")
issued by the Transitional Finance Authority. The Transitional Finance Authority
issued $1.026 billion of Recovery Bonds on September 27, 2002 to pay its
outstanding Recovery Notes.

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38

NEW YORK AND U.S. TERRITORY INFORMATION
--------------------------------------------------------------------------------

The 2001 fiscal year was the twenty-first year that the City has achieved an
operating surplus, before discretionary and other transfers, and balanced
operating results, after discretionary and other transfers.

Pursuant to the laws of the State, the Mayor is responsible for preparing the
City's financial plan, including the City's current financial plan for the 2002
through 2006 fiscal years, the City Financial Plan released on June 26, 2002.
The projections set forth in the City Financial Plan are based on various
assumptions and contingencies that are uncertain and may not materialize.
Changes in major assumptions could significantly affect the City's ability to
balance its budget as required by State law and to meet annual cash flow and
financing requirements.

To help finance the Fiscal Year 2003 budget and to narrow the out-year gaps, the
adopted budget for 2003 includes a gap-closing program that relies heavily on
assistance from Federal and State governments ($771 million) and the municipal
unions ($500 million); agency actions ($1.3 million); deficit financing ($1.5
million) and other non-recurring sources.

The City Financial Plan is based on numerous assumptions, including the impact
of September 11 on the City's economy, the general condition of the City's and
the region's economies and the receipt of economically sensitive tax revenues in
the amounts projected and reimbursement by the federal government and State of
expenditures necessitated by September 11. The City Financial Plan is subject to
various other uncertainties and contingencies relating to, among other factors:
(i) the extent, if any, to which wage increases for City employees exceed the
annual wage costs assumed for the 2002 through 2006 fiscal years; (ii) interest
earnings and wage projections underlying projections of the City's required
pension fund contributions; (iii) the willingness and ability of the State and
federal governments to provide the aid and enact the revenue enhancing or
expenditure relief initiatives contemplated by the City Financial Plan and to
take various other actions to assist the City in its gap closing actions; (iv)
the ability of Health and Hospitals Corporation, the Board of Education and
other agencies to maintain balanced budgets; (v) the impact on City revenues and
expenditures of Federal and State welfare reform and any future legislation
affecting Medicare or other entitlement programs; (vi) the ability of the City
to control expenditures and implement cost reduction and gap closing initiatives
identified in the City Financial Plan for the 2003 fiscal year and proposed but
unspecified for later years; (vii) the City's ability to market its securities
successfully in the public credit markets; (viii) the impact of conditions in
the real estate market on real estate revenues; (ix) the sale of OTB in fiscal
year 2004, which requires State legislative approval; and (x) unanticipated
expenditures that may be incurred as a result of the need to maintain the City's
infrastructure or future terrorist acts.

The City Financial Plan assumes a sudden economic downturn as the result of
September 11 in the last half of 2001 and job and income losses in the first
half of 2002 as the City economy shrinks by 4.6% for calendar year 2002. The
Plan forecasts a sluggish recovery thereafter. The City does not expect to
recover all of the jobs lost as a result of September 11 until fiscal year 2006.
Given the uncertain impact of September 11 on the City's economy, including the
loss of jobs and business, impact on tourism in the City and the slowdown in the
securities industry, there can be no assurance that the economic projections
included in the City Financial Plan are accurate or that the tax revenues
projected in the Financial Plan to be received will be received in the amounts
anticipated.

The Mayor's gap closing proposals in fiscal year 2003 include a slight reduction
of the City's workforce through attrition, severance and early retirement,
including a reduction of 2,400 in uniformed police officers that will be
partially offset by hiring of civilians by the Police Department. These police
department and other staff reduction proposals may require union consents. While
the City has established a Reserve for Collective Bargaining, the terms of wage
settlements could be determined through the impasse procedure in the New York
City Collective Bargaining Law, which can impose a binding settlement that
substantially increases reserves established by the City.

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39

NEW YORK AND U.S. TERRITORY INFORMATION
--------------------------------------------------------------------------------

The City depends on the State for aid both to enable the City to balance its
budget and to meet its cash requirements. There can be no assurance that State
aid to the City will be maintained at amounts currently projected or interim
appropriations enacted, or that the State will not reduce or delay aid any of
which could have adverse effects on the City's cash flow or expenditures. In
addition, the Federal budget negotiation process could result in reductions or
delays in the receipt of Federal grants which would have additional adverse
effects on the City's cash flow or revenues. The City is particularly dependent
upon the federal government and the State to reimburse it for expenditures
relating to September 11. While both the federal government and the State have
publicly supported the City and promised to make funds available to fund
recovery, clean-up and repairs relating to September 11, there can be no
assurance that budget constraints or the other priorities, including future
terrorist attacks will not interfere or prevent delivery of such aid.

As of March 31, 2002, the City and the Municipal Assistance Corporation for the
City of New York had respectively approximately $27.7 and $2.2 billion of net
outstanding long-term debt.

The City is currently a defendant in a significant number of lawsuits. While the
ultimate outcome and fiscal impact, if any, on the proceedings and claims are
not currently predictable, adverse determination in certain of them might have a
material adverse effect upon the City's ability to carry out the City Financial
Plan. As of June 30, 2001 claims were pending against the City, for which the
City has estimated it may potentially incur liability of $4.2 billion. The City
currently is a defendant in a proceeding relating to the New York City Teachers'
Retirement System in which damages in excess of $250 million are sought. In
fiscal year 2000-2001 the City paid $594.8 million with respect to judgments and
claims and projects such payments will total $409.6 million and $418.7 million
in fiscal years 2001-2002 and 2002-2003, respectively.

The financial condition of the state, City and other New York issuers may be
affected by many economic, social, political and international factors which
cannot be predicted with certainty. These factors include, but may not be
limited to, litigation, pension costs and pension fund earnings, collective
bargaining with governmental employees, changes resulting from entitlement
program reforms, the receipt of intergovernmental aid, and the performance of
the securities and financial sector which is more significant to the New York
economy than to the national economy. Factors particularly affecting New York
City also include its ability to meet its extensive infrastructure and other
capital needs in the face of limited funding capacity.

U.S. TERRITORIES

PUERTO RICO
Puerto Rico has a diversified economy dominated by the manufacturing and service
sectors. The North American Free Trade Agreement ("NAFTA"), which became
effective January 1, 1994, has led to loss of lower wage jobs such as textiles,
but economic growth in other areas, particularly tourism, pharmaceuticals,
construction and the high technology areas have compensated for that loss.

The Commonwealth of Puerto Rico differs from the states in its relationship with
the federal government. Most federal taxes, except those such as social security
taxes that are imposed by mutual consent, are not levied in Puerto Rico. Section
936 of the Code has provided a tax credit for certain qualified U.S.
corporations electing "possessions corporation" status. However, in 1993,
Section 936 was amended to provide for two alternative limitations on the
Section 936 credit attributable to certain active business income. The first
limitation was based on the economic activity of the Section 936 possessions
corporation. The second limited the credit to a specified percentage of the
credit allowed under prior law. In 1996, Section 936 credit was repealed except
that the credit attributable to possessions source business income with respect
to certain existing credit claimants was subjected to a phase out over a ten
year period (subject to additional caps).

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40

NEW YORK AND U.S. TERRITORY INFORMATION
--------------------------------------------------------------------------------

Also in 1996, a new Section 30A was added to the Code. Section 30A permits a
"qualifying domestic corporation" that meets certain gross income tests to claim
a credit against the federal income tax in an amount equal to the portion of the
tax which is attributable to the taxable income from sources outside of the
United States, from the active conduct of a trade or business in Puerto Rico or
from the sale of substantially all the assets used in such a trade or business.
Section 30A will be phased out by January 1, 2006. The Governor of Puerto Rico
proposed that Congress permanently extend Section 30A until the Puerto Rican
economy achieves certain economic improvements. To date, however, no action has
been taken.

During the mid and late 1990s the Commonwealth of Puerto Rico benefited from a
robust U.S. economy, more aggressive tax collections and low oil prices. This
created an expanded employment base, job growth, reduction in unemployment,
increase in tourism spending, real gross domestic product growth in the 3.1% to
3.5% range over the last 5 fiscal years and significant increases in General
Fund cash balances from fiscal year end 1997 to fiscal year end 1999. These
factors, combined with minimal negative impact to date from the 1996 federal
legislation phasing out Section 936 tax benefits to Puerto Rico subsidiaries of
U.S. corporations, created a positive outlook for the credit in the late 1990s.
Despite the fact that there have been some high profile U.S. companies that have
left the island partially due to the Section 936 phase out, many corporations
have elected to convert to controlled foreign corporation ("CFC") status, which
allows them to delay federal income taxes until the income is distributed to
U.S. shareholders.

In fiscal year 2000, the outlook on the credit turned negative due to the
slowdown in the U.S. economy (88% of Puerto Rico's exports go to the U.S.),
uncertainty regarding increasing oil prices, failure of the government to reign
in health care costs, expense overruns in education and a decreasing rate of
employment growth. As a result, the General Fund recorded a $268 million deficit
in fiscal year 2000 due to increased education and health care spending.

A new administration, the Popular Democratic Party that favors Puerto Rico's
commonwealth status over a potential statehood status, took office in January
2001. It was not long before they realized the presence of continued fiscal
stress and estimated a fiscal year 2001 budget shortfall of $700 million. The
shortfall was stated to be caused by weakened revenue growth due to the slowing
pace of employment and a softening U.S. economy.

The major key to maintaining Puerto Rico's external ratings (Baa1/A- from
Moody's and S&P, respectively) is the ability of the government to balance
fiscal year 2002 performance after lackluster fiscal year 2001 results which
necessitated deficit financing. Complicating matters is the uncertainty
surrounding the negative effects on tourism caused by September 11th terrorist
attacks and the scope and duration of the continued slowdown in the U.S.
economy.

THE U.S. VIRGIN ISLANDS
The United States Virgin Islands ("USVI") is heavily reliant on the tourism
industry, with roughly 43% of non-agricultural employment in tourist-related
trade and services. The tourism industry is economically sensitive and would
likely be adversely affected by a recession in either the United States or
Europe. The attacks of September 11, 2001 will likely have an adverse affect on
tourism, the extent of which is unclear.

An important component of the USVI revenue base is the federal excise tax on rum
exports. Tax revenues rebated by the federal government to the USVI provide the
primary security of many outstanding USVI bonds. Since more than 90% of the rum
distilled in the USVI is distilled at one plant, any interruption in its
operations (as occurred after Hurricane Hugo in 1989) would adversely affect
these revenues. The last major hurricane to impact the USVI was Hurricane
Marilyn on September 15, 1995. Consequently, there can be no assurance that rum
exports to the United States

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41

NEW YORK AND U.S. TERRITORY INFORMATION
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and the rebate of tax revenues to the USVI will continue at their present
levels. The preferential tariff treatment the USVI rum industry currently enjoys
could be reduced under NAFTA. Increased competition from Mexican rum producers
could reduce USVI rum imported to the U.S., decreasing excise tax revenues
generated. The USVI is periodically hit by hurricanes. Several hurricanes have
caused extensive damage, which has had a negative impact on revenue collections.
There is currently no rated, unenhanced Virgin Islands debt outstanding
(although there is unrated debt outstanding). In addition, eventual elimination
of the Section 936 tax credit for those companies with operations in USVI may
lead to slower growth in the future.

GUAM
The U.S. territory of Guam derives a substantial portion of its economic base
from Japanese tourism. With a reduced U.S. military presence on the island, Guam
has relied more heavily on tourism in past years. During 1998, the Japanese
recession combined with the impact of typhoon Paka resulted in a budget deficit
of $21 million. With hotels alone accounting for 8.5% of Guam's employment and
Japanese tourists comprising 86% of total visitor arrivals, the Japanese
recession and depreciation of the yen versus the dollar earlier this year have
had a negative impact on the island's economy in 1998. Based on these factors,
S&P downgraded Guam's rating to BBB- from BBB with a negative outlook on May 26,
1999. Although total visitors improved in 1999 and 2000, they were weakened by
economic slowdowns and the effects of the September 11th terrorist attacks in
2001. These negative trends have had an unfavorable effect on Guam's financial
position with consistent general fund deficits from 1997-1999 and a small
surplus in 2000. Fiscal year 2001 is expected to be worse than fiscal year 2000.
Guam also has a high debt burden. These factors caused S&P to downgrade Guam's
rating to BB (below investment grade) from BBB- on March 25, 2002. Guam is not
rated by Moody's.

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42

APPENDIX D
--------------------------------------------------------------------------------

Description of insurers

The following information relates to the Fund and supplements the information
contained under "Additional Information about Investment Policies--Insurance."

IN GENERAL
Insured obligations held by the Fund will be insured as to their scheduled
payment of principal and interest under (i) an insurance policy obtained by the
issuer or underwriter of the obligation at the time of its original issuance
("Issue Insurance"), (ii) an insurance policy obtained by the Fund or a third
party subsequent to the obligation's original issuance ("Secondary Market
Insurance") or (iii) a municipal insurance policy purchased by the Fund
("Portfolio Insurance"). The Fund anticipates that all or substantially all of
its insured obligations will be subject to Issue Insurance or Secondary Market
Insurance. Although the insurance feature reduces certain financial risks, the
premiums for Portfolio Insurance (which, if purchased by the Fund, are paid from
the Fund's assets) and the higher market price paid for obligations covered by
Issue Insurance or Secondary Market Insurance reduce the Fund's current yield.

Insurance will cover the timely payment of interest and principal on obligations
and will be obtained from insurers with a claims-paying ability rated Aaa by
Moody's or AAA by S&P or Fitch. Obligations insured by any insurer with such a
claims-paying ability rating will generally carry the same rating or credit risk
as the insurer. See Appendix A for a brief description of Moody's, Fitch's and
S&P's claims-paying ability ratings. Such insurers must guarantee the timely
payment of all principal and interest on obligations as they become due. Such
insurance may, however, provide that in the event of non-payment of interest or
principal when due with respect to an insured obligation, the insurer is not
obligated to make such payment until a specified time period has lapsed (which
may be 30 days or more after it has been notified by the Fund that such
non-payment has occurred). For these purposes, a payment of principal is due
only at final maturity of the obligation and not at the time any earlier sinking
fund payment is due. While the insurance will guarantee the timely payment of
principal and interest, it does not guarantee the market value of the
obligations or the net asset value of the Fund.

Obligations are generally eligible to be insured under Portfolio Insurance if,
at the time of purchase by the Fund, they are identified separately or by
category in qualitative guidelines furnished by the mutual fund insurer and are
in compliance with the aggregate limitations on amounts set forth in such
guidelines. Premium variations are based, in part, on the rating of the
obligations being insured at the time the Fund purchases the obligations. The
insurer may prospectively withdraw particular obligations from the
classifications of securities eligible for insurance or change the aggregate
amount limitation of each issue or category of eligible obligations. The insurer
must, however, continue to insure the full amount of the obligations previously
acquired which the insurer has indicated are eligible for insurance, so long as
they continue to be held by the Fund. The qualitative guidelines and aggregate
amount limitations established by the insurer from time to time will not
necessarily be the same as those the Fund would use to govern selection of
obligations for the Fund. Therefore, from time to time such guidelines and
limitations may affect investment decisions in the event the Fund's securities
are insured by Portfolio Insurance.

For Portfolio Insurance that terminates upon the sale of the insured security,
the insurance does not have any effect on the resale value of such security.
Therefore, the Fund will generally retain any insured obligations which are in
default or, in the judgment of the Investment Adviser, are in significant risk
of default and place a value on the insurance. This value will be equal to the
difference between the market value of the defaulted insured obligations and the
market value of similar obligations which are not in default. As a result, the
Investment Adviser may be unable to manage the

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43

DESCRIPTION OF INSURERS
--------------------------------------------------------------------------------

securities held by the Fund to the extent the Fund holds defaulted insured
obligations, which will limit its ability in certain circumstances to purchase
other obligations. While a defaulted insured obligation is held by the Fund, the
Fund will continue to pay the insurance premium thereon but will also collect
interest payments from the insurer and retain the right to collect the full
amount of principal from the insurer when the insured obligation becomes due.
The Fund expects that the market value of a defaulted insured obligation covered
by Issue Insurance or Secondary Market Insurance will generally be greater than
the market value of an otherwise comparable defaulted obligation covered by
Portfolio Insurance.

The Fund may also invest in obligations that are secured by an escrow or trust
account which contains securities issued or guaranteed by the U.S. Government,
its agencies or instrumentalities, that are backed by the full faith and credit
of the United States, and sufficient in amount to ensure the payment of interest
on and principal of the secured New York obligation ("collateralized
obligations"). Collateralized obligations generally are regarded as having the
credit characteristics of the underlying U.S. Government, agency or
instrumentality securities. These obligations will not be subject to Issue
Insurance, Secondary Market Insurance or Portfolio Insurance. Accordingly,
despite the existence of these credit support characteristics, these obligations
will not be considered to be insured obligations for purposes of the Fund's
policy of investing at least 80% of its net assets in insured obligations.

PRINCIPAL INSURERS
Currently, Municipal Bond Investors Assurance Corporation ("MBIA"), Financial
Guaranty Insurance Company ("FGIC"), AMBAC Indemnity Corporation ("AMBAC"), ACA,
Radian Asset Assurance ("Radian"), XL Capital Assurance ("XL Capital"), CDC IXIS
Financial Guaranty North America, Inc. ("CIFG NA"), and Financial Security
Assurance Corp., together with its affiliated insurance companies--Financial
Security Assurance International Inc. and Financial Security Assurance of
Oklahoma, Inc. (collectively, "FSA"), are considered to have a high
claims-paying ability and, therefore, are eligible insurers for the Fund's
obligations. Additional insurers may be added without further notification. The
following information concerning these eligible insurers is based upon
information provided by such insurers or information filed with certain state
insurance regulators. Neither the Fund has independently verified such
information and make no representations as to the accuracy and adequacy of such
information or as to the absence of material adverse changes subsequent to the
date thereof.

MBIA is a monoline financial guaranty insurance company created from an
unincorporated association (the Municipal Bond Insurance Association), through
which its members wrote municipal bond insurance on a several and joint-basis
through 1986. On January 5, 1990, MBIA acquired all of the outstanding stock of
Bond Investors Group, Inc., the parent of Bond Investors Guaranty Insurance
Company ("BIG"), which has subsequently changed its name to MBIA Insurance Corp.
of Illinois. Through a reinsurance agreement, BIG ceded all of its net insured
risks, as well as its related unearned premium and contingency reserves, to
MBIA. MBIA issues municipal bond insurance policies guarantying the timely
payment of principal and interest on new municipal bond issues and leasing
obligations of municipal entities, secondary market insurance of such
instruments and insurance on such instruments held in unit investment trusts and
mutual funds. As of December 31, 2001, MBIA had total assets of approximately
$16.12 billion and qualified statutory capital of approximately $4.8 billion.
MBIA has a claims-paying ability rating of "AAA" by S&P and "Aaa" by Moody's.

Financial Guaranty Insurance Corporation, a wholly owned subsidiary of FGIC
Corporation, which is a wholly owned subsidiary of General Electric Capital
Corporation, is an insurer of municipal securities, including new issues,
securities held in unit investment trusts and mutual funds, and those traded on
secondary markets. The investors in FGIC Corporation are not obligated to pay
the debts of or claims against FGIC. As of December 31, 2000, FGIC had total
assets of approximately

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44

DESCRIPTION OF INSURERS
--------------------------------------------------------------------------------

$2.75 billion and qualified statutory capital of approximately $1.99 billion.
FGIC has a claims-paying ability rating of "AAA" by S&P and Fitch, and "Aaa" by
Moody's.

AMBAC, a wholly owned subsidiary of AMBAC Inc., is a monoline insurance company
whose policies guaranty the payment of principal and interest on municipal
obligations issues. As of December 31, 2001, AMBAC had assets of approximately
$12.26 billion and qualified statutory capital of approximately $3.26 billion.
AMBAC has a claims-paying ability rating of "AAA" by S&P and "Aaa" by Moody's.

ACA is a Maryland domiciled financial insurance company. ACA is the primary
subsidiary of American Access Capital Holding Inc. ACA carries a single A
rating. Total claims paying resources were $383 million in 2001, with total
statutory capital of $120.8 million. Soft capital totaled $135 million, though a
loss coverage agreement with ACE American Insurance Co., (rated A). ACA insures
primarily in the municipal and CDO market and acts as the manager/originator of
CDO issues.

Radian is a wholly owned subsidiary of Radian Group Inc. Radian is rated AA by
S&P and Fitch and provides financial guaranty insurance and reinsurance for debt
and asset backed securities. Radian was formerly known as Asset Guarantee
Company and was purchased by Radian Group for $518 million in February 2001. As
of December 31, 2001, Radian had assets of $381 million and statutory capital of
$169.8 million.

XL Capital is a new AAA rated financial guarantor and a wholly owned subsidiary
of property casualty insurer XL Capital Ltd. XL Capital began transactions in
January of 2001 and is rated AAA/ Aaa by Moody's and S&P respectively. It is
currently capitalized with $100 million and cedes 90% of its exposure to XL
Financial Assurance a Bermuda based subsidiary of XL Capital Ltd. XL Financial
Assurance has $274 million in hard capital and $100 million in stop loss
protection. Beyond this XL Financial Assurance further guarantees 100% of XL
Capital exposure with $2.7 billion in shareholders equity. XL Capital has $88
million in assets and through its parent and subsidiary agreements XL Capital
has $1 billion in qualified statutory capital.

CIFG NA is a new financial guarantor rated AAA from Fitch, Moody's and S&P. CIFG
NA is a subsidiary of CDC IXIS Financial Guaranty ("CIFG"), which is a
subsidiary of CIFG Holding, which is in turn owned by parent company CDC IXIS.
CDC IXIS is a French domiciled corporation with a broad spectrum of insurance
related businesses. CIFG recently entered the bond insurance business with two
companies, CIFG Europe and CIFG NA. CIFG is capitalized with $280 million in
cash, with CIFG NA holding $100 million in cash. CDC IXIS backs the two entities
with $220 million in the form of a subordinated loan agreement. Over 75% of CIFG
NA's business will be passed on through a reinsurance policy to CIFG. Combining
all capital, CIFG NA will have claims paying resources of $500 million.

FSA purchased Capital Guaranty Insurance Company including its book of business
and reserves effective December 20, 1995. FSA is a monoline insurer whose
policies guaranty the timely payment of principal and interest on new issue and
secondary market issue municipal securities transactions, among other financial
obligations. As of December 31, 2001 FSA had total assets of approximately $4.3
billion and qualified statutory capital of approximately $1.52 billion. FSA has
a claims-paying ability rating of "AAA" by S&P and "Aaa" by Moody's. On March
14, 2000, Dexia, Europe's largest municipal lender with assets in excess of $230
billion announced that it had signed a definitive agreement providing for the
acquisition of FSA Holdings, holding company for FSA, Inc. Dexia acquired the
company in the second quarter of 2000, for $2.6 billion in cash, or $76 per
share.

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45

APPENDIX E
--------------------------------------------------------------------------------

Performance related & comparative information

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

[EATON VANCE LOGO]

EATON VANCE INSURED MUNICIPAL BOND FUNDS

INSURED NATIONAL II (EIV*)

INSURED ARIZONA (EVZ*)

INSURED CALIFORNIA II (EIA*)

INSURED FLORIDA (EIF*)

INSURED MASSACHUSETTS (MAB*)

INSURED MICHIGAN (MIW*)

INSURED NEW JERSEY (EMJ*)

INSURED NEW YORK II (NYH*)

INSURED OHIO (EIO*)

INSURED PENNSYLVANIA (EIP*)

*Application with American Stock Exchange pending

- Attractive Monthly Income Exempt from Federal Income Tax, including
Alternative Minimum Tax, and, Where Applicable, State and Local Taxes

- Professionally Managed, 100% Investment-Grade Portfolios

_ At Least 80% of Assets Invested in Obligations AAA-Rated and Insured as to
Timely Payment of Interest and Principal

- Emphasis on Current Yield and on Seeking Undervalued Securities to Enhance
Total Return

- Quality Diversifier with Potential for Reducing Overall Portfolio Risk

- American Stock Exchange Listing Provides Daily Liquidity*

[BRIDGE GRAPHIC]

At Least 80% AAA-Rated & Insured 100% Exempt from AMT

INITIAL PUBLIC OFFERING
November 2002

WHY INVEST IN AN EATON VANCE INSURED MUNICIPAL BOND FUND NOW?

1
INSURED MUNICIPALS REPRESENT UNCOMMON VALUE IN THE CURRENT MARKET
ENVIRONMENT

Over the past 10 years, insured municipal bond yields have averaged
approximately 90% of yields on 30-year U.S. Treasury bonds. At September 30,
2002, a representative tax-exempt insured municipal bond was yielding more than
101% of the taxable yield of a 30-Year U.S. Treasury bond. With such exceptional
tax-free yields available, why pay taxes on your investment earnings?

Source: Municipal Market Data. The chart compares the yield of a 30-year,
AAA-rated general obligation insured municipal bond with that of a 30-year U.S.
Treasury bond. Unlike the Funds, these bonds carry no management fees, account
charges or other expenses. U.S. Treasury bonds offer a government guarantee as
to timely payment of interest and repayment of principal on maturity; income is
tax-exempt at the state and local level. Insured municipal bonds are not
guaranteed by the U.S. Government. In addition to general obligation bonds,
insured municipal obligations can include revenue bonds. Past performance is no
guarantee of future results.

YIELD RELATIONSHIP OF 30-YEAR GENERAL OBLIGATION
INSURED MUNICIPAL BOND TO 30-YEAR TREASURY BOND

CURRENT: 101.7%
AVERAGE: 90.5%
[LINE CHART]

MUNICIPAL MARKET DATA
BOSTON, MA
(617)856-2900

MMD Insured Scale
Month End 10 Year 30 Year

07/31/92 5.35 6.10
08/31/92 5.60 6.30
09/30/92 5.60 6.40
10/30/92 5.90 6.65
11/30/92 5.60 6.40
12/31/92 5.45 6.30
01/29/93 5.35 6.20
02/26/93 4.95 5.70
03/31/93 5.35 6.00
04/30/93 5.15 5.80
05/28/93 5.25 5.85
06/30/93 4.90 5.65
07/30/93 5.05 5.70
08/31/93 4.75 5.50
09/30/93 4.70 5.35
10/29/93 4.65 5.40
11/30/93 4.85 5.60
12/31/93 4.55 5.40
01/31/94 4.55 5.40
02/28/94 5.05 5.80
03/31/94 5.60 6.40
04/29/94 5.55 6.35
05/31/94 5.50 6.25
06/30/94 5.65 6.50
07/29/94 5.50 6.25
08/31/94 5.50 6.30
09/30/94 5.75 6.55
10/31/94 5.95 6.75
11/30/94 6.25 7.00
12/30/94 5.95 6.75
01/31/95 5.85 6.40
02/28/95 5.45 6.15
03/31/95 5.45 6.15
04/28/95 5.55 6.20
05/31/95 5.10 5.80
06/30/95 5.20 6.10
07/31/95 5.10 6.10
08/31/95 5.00 6.00
09/29/95 5.05 5.95
10/31/95 4.95 5.75
11/30/95 4.80 5.50
12/29/95 4.75 5.35
01/31/96 4.65 5.40
02/29/96 4.85 5.60
03/29/96 5.15 5.85
04/30/96 5.20 5.95
05/31/96 5.30 6.05
06/28/96 5.25 5.90
07/31/96 5.15 5.85
08/30/96 5.20 5.90
09/30/96 5.15 5.70
10/31/96 5.05 5.65
11/29/96 4.85 5.50
12/31/96 4.95 5.60
01/31/97 5.05 5.70
02/28/97 5.00 5.65
03/31/97 5.30 5.90
04/30/97 5.20 5.75
05/30/97 5.00 5.65
06/30/97 5.00 5.60
07/31/97 4.60 5.25
08/29/97 4.80 5.48
09/30/97 4.70 5.40
10/31/97 4.70 5.35
11/28/97 4.70 5.30
12/31/97 4.45 5.15
01/30/98 4.45 5.13
02/27/98 4.50 5.20
03/31/98 4.60 5.25
04/30/98 4.75 5.35
05/29/98 4.50 5.18
06/30/98 4.55 5.18
07/31/98 4.55 5.20
08/31/98 4.35 5.03
09/30/98 4.18 4.92
10/30/98 4.23 5.04
11/30/98 4.25 5.00
12/31/98 4.25 5.05
01/29/99 4.13 4.98
02/26/99 4.33 5.10
03/31/99 4.45 5.15
04/30/99 4.45 5.19
05/28/99 4.63 5.30
06/30/99 4.95 5.47
07/30/99 4.93 5.55
08/31/99 5.03 5.74
09/30/99 5.05 5.83
10/29/99 5.20 6.03
11/30/99 5.10 6.00
12/31/99 5.20 6.08
01/31/00 5.42 6.18
02/29/00 5.35 6.04
03/31/00 5.12 5.82
04/28/00 5.29 5.93
05/31/00 5.41 6.04
06/30/00 5.12 5.84
07/31/00 4.93 5.73
08/31/00 4.80 5.62
09/29/00 4.95 5.74
10/31/00 4.83 5.65
11/30/00 4.80 5.55
12/29/00 4.47 5.27
01/31/01 4.42 5.30
02/28/01 4.44 5.27
03/30/01 4.37 5.26
04/30/01 4.65 5.45
05/31/01 4.53 5.40
06/29/01 4.50 5.35
07/31/01 4.31 5.16
08/31/01 4.12 5.07
09/28/01 4.15 5.20
10/31/01 4.00 5.04
11/30/01 4.32 5.17
12/31/01 4.56 5.36
01/31/02 4.41 5.22
02/28/02 4.20 5.14
03/28/02 4.63 5.43
04/30/02 4.30 5.30
05/31/02 4.26 5.29
06/28/02 4.14 5.27
07/31/02 3.94 5.12
08/30/02 3.77 5.00
09/30/02 3.43 4.74

2
ATTRACTIVE TAXABLE EQUIVALENT YIELDS

- By investing in an Eaton Vance Insured Municipal Bond Fund, your after-tax
income can be higher because the income paid is largely free of regular
federal income tax and 100% exempt from federal alternative minimum tax.
For State Funds, income is largely free of state and local taxes, too, for
residents of the applicable state. Depending on your tax bracket, a
tax-free investment can make a significant difference, and it can be
especially important for people in higher brackets.

- For example, the current yield from a 30-year insured municipal bond is
4.74%, which is equivalent to a 7.72% taxable yield. The current yield
from a taxable 30-year U.S. Treasury Bond is 4.66%.

Consult your tax advisor.

Source: Municipal Market Data. As of 9/30/02. Based on maximum federal
income tax rate of 38.6%. The current yield of a 30-year insured municipal
bond is not indicative of the yield of any of the Eaton Vance Insured
Municipal Bond Funds. Past performance is no guarantee of future results.

DETERMINE YOUR TAX-FREE ADVANTAGE

FEDERAL TAX RATES

At a A tax-free yield of
tax 5.25% 5.50% 5.75% 6.00% 6.25% 6.50%
rate of... equals a taxable investment yielding...

10.00% 5.83% 6.11% 6.39% 6.67% 6.94% 7.22%
15.00 6.18 6.47 6.76 7.06 7.35 7.65
27.00 7.19 7.53 7.88 8.22 8.56 8.90
30.00 7.50 7.86 8.21 8.57 8.93 9.29
35.00 8.08 8.46 8.85 9.23 9.62 10.00
38.60 8.55 8.96 9.36 9.77 10.18 10.59

COMBINED FEDERAL AND STATE TAX RATES

LOWEST COMBINED RATES

At a A tax-free yield of
combined 5.25% 5.50% 5.75% 6.00% 6.25% 6.50%
State tax rate of... equals a taxable investment yielding...

AZ 12.58% 6.01% 6.29% 6.58% 6.86% 7.15% 7.44%
CA 13.60 6.08 6.37 6.66 6.94 7.23 7.52
FL 10.00 5.83 6.11 6.39 6.67 6.94 7.22
MA 14.77 6.16 6.45 6.75 7.04 7.33 7.63
MI 13.69 6.08 6.37 6.66 6.95 7.24 7.53
NJ 11.26 5.92 6.20 6.48 6.76 7.04 7.32
NY 13.60 6.08 6.37 6.66 6.94 7.23 7.52
OH 12.67 6.01 6.30 6.58 6.87 7.16 7.44
PA 12.52 6.00 6.29 6.57 6.86 7.14 7.43

HIGHEST COMBINED RATES

At a A tax-free yield of
combined 5.25% 5.50% 5.75% 6.00% 6.25% 6.50%
State tax rate of... equals a taxable investment yielding...

AZ 41.69% 9.00% 9.43% 9.86% 10.29% 10.72% 11.15%
CA 44.31 9.43 9.88 10.33 10.77 11.22 11.67
FL 38.60 8.55 8.96 9.36 9.77 10.18 10.59
MA 41.85 9.03 9.46 9.89 10.32 10.75 11.18
MI 41.12 8.92 9.34 9.77 10.19 10.61 11.04
NJ 42.51 9.13 9.57 10.00 10.44 10.87 11.31
NY 42.81 9.18 9.62 10.05 10.49 10.93 11.37
OH 43.21 9.24 9.68 10.13 10.57 11.01 11.45
PA 40.32 8.80 9.22 9.63 10.05 10.47 10.89

The tax rates shown are based on 2002 federal and state income tax rates. Actual
tax brackets may be higher due to the phaseout of personal exemptions and
limitations on the deductibility of itemized deductions over certain ranges of
income. The tables assume deductibility of state taxes on the federal return.
Your actual bracket will vary, depending on your income, exemptions and
deductions. Consult your tax advisor. Tax-free yields shown are for illustration
purposes only and are not meant to represent or predict actual results of an
investment in any of the Eaton Vance Insured Municipal Bond Funds. The lower
your combined federal and state tax rate, the less you can take advantage of
tax-free investing, which can be seen by comparing the taxable equivalent yields
in the table at left with those in the table at right. The tables do not take
into account the effects of capital gains taxes, and no city, excise or
intangible tax rates are included in the tax rates presented. In addition, the
Funds may invest in securities that are not exempt from federal or state income
taxes, although they do not intend to do so to a significant degree. Source:
Eaton Vance.

EATON VANCE INSURED MUNICIPAL BOND FUNDS

INVESTMENT-GRADE PORTFOLIOS 100% EXEMPT FROM FEDERAL ALTERNATIVE MINIMUM TAX

Airports - Schools - Roadways - Bridges - Medical Facilities

Insured municipal bond yields are over 101%* of those from long-term Treasuries.
Why pay taxes?

*At 9/30/02

KEY FEATURES

- ATTRACTIVE TAX-EXEMPT MONTHLY INCOME--EACH EATON VANCE INSURED MUNICIPAL
BOND FUND IS DESIGNED TO PROVIDE INCOME FREE FROM REGULAR FEDERAL INCOME
TAX, INCLUDING ALTERNATIVE MINIMUM TAX, AND, FOR STATE FUNDS, STATE AND
LOCAL TAXES FOR RESIDENTS OF THAT STATE.

- QUALITY OF PROFESSIONALLY MANAGED, INVESTMENT-GRADE PORTFOLIOS--EACH FUND
INVESTS AT LEAST 80% OF ITS ASSETS IN MUNICIPAL OBLIGATIONS OF THE HIGHEST
INVESTMENT-GRADE (AAA/Aaa).

- PREDOMINANTLY INSURED--EACH FUND INVESTS AT LEAST 80% OF ITS ASSETS IN
MUNICIPAL OBLIGATIONS INSURED AS TO THE TIMELY PAYMENT OF INTEREST AND
PRINCIPAL.

- EMPHASIS ON CURRENT YIELD AND VALUE INVESTING MAY MEAN ENHANCED TOTAL
RETURN-- TO ENHANCE PERFORMANCE, THE FUNDS SEEK MUNICIPAL BONDS THAT ARE
UNDERVALUED IN THE MARKETPLACE. THERE IS NO ASSURANCE THE FUNDS'
OBJECTIVES WILL BE ATTAINED.

- PREMIER ADVISER--EATON VANCE HAS BEEN MANAGING MUNICIPAL BOND FUNDS SINCE
1978.

- DAILY LIQUIDITY--THE FUNDS EXPECT TO BE LISTED ON THE AMERICAN STOCK
EXCHANGE. (APPLICATION PENDING)

OBJECTIVE: The Eaton Vance Insured Municipal Bond Funds are newly organized
closed-end investment companies that seek to provide current income exempt from
federal income tax, including alternative minimum tax, and, for state funds,
state and local taxes.* They invest primarily in the highest quality municipal
bonds of which are insured as to the payment of interest and principal.

Municipal bonds are debt obligations issued by or on behalf of the states,
territories and possessions of the U.S. and District of Columbia and their
political subdivisions, agencies, or instrumentalities, the interest on which is
exempt from federal income tax, including alternative minimum tax, and, where
applicable, state and local taxes. These securities are used to finance public
projects, like building schools, highways, hospitals and bridges. By investing
in municipal bonds, you invest in our nation's future and in a better quality of
life.

* A portion of income from each Eaton Vance Insured Municipal Bond Fund may
be subject to federal income and/or state and local taxes. Investors who
purchase the appropriate State Fund for their state of residency will
receive income exempt from both federal and respective state and, where
applicable, local taxes. Distributions of any taxable net investment
income and net short-term capital gains are taxable as ordinary income.

INVESTMENT APPROACH

- Under normal market conditions, at least 80% of each Fund's assets will be
invested in municipal debt obligations insured** as to principal and
interest payments by insurers having claims-paying ability rated Aaa/AAA.

- At least 80% of assets will be invested in municipal securities of the
highest investment grade at the time of investment (i.e., rated Aaa by
Moody's Investor Service, Inc., or AAA by either Standard & Poor's Ratings
Group or by Fitch Ratings) or, if unrated, determined by Eaton Vance to be
of comparable quality. The Funds' investments in unrated obligations will
be more dependent on the expertise and analytical abilities of Eaton Vance
than investments in rated obligations.

- Up to 20% of each Fund's assets will be invested in investment-grade
municipal obligations (i.e., rated below Aaa/AAA, but no lower than
Baa/BBB by Moody's, Standard & Poor's or Fitch; no lower than A for the
California Fund) and unrated municipal obligations considered to be of
comparable quality by Eaton Vance and/or municipal obligations that are
uninsured. The Funds may invest up to 10% initially in residual interest
bonds. See Risks. The Funds do not invest in tobacco bonds.

** Insurance does not protect the market value of such obligations or the net
asset value of a Fund.

ADVANTAGES OF A PROFESSIONALLY MANAGED MUNICIPAL FUND

Beyond providing ready access to a broad market of securities, professionally
managed funds, like the Eaton Vance Funds, offer investors many attractive
advantages over purchasing individual insured municipal bonds, including monthly
income, diversification among different issuers and daily liquidity.

Perhaps more important are the advantages of active management by dedicated
municipal bond specialists who concentrate full time on seeking opportunities in
the municipal bond market.

[PHOTO OF PLANE]

Investors should be aware that individual bonds, when held to maturity, offer
both a fixed principal value and rate of return. Conversely, a bond fund does
not offer a fixed rate of return and shares, when sold, may be worth more or
less than their original cost.

VALUE INVESTING

Eaton Vance has one of the strongest teams of research analysts, traders and
portfolio managers in the industry devoted exclusively to analyzing municipal
securities, including insured municipal bonds. The team's goal is to find
municipal bonds of high quality that have been undervalued in the marketplace
due to differing dynamics in individual sectors of the municipal bond market,
municipal bond supply, and the structure of individual bonds, especially in
regard to maturities, coupons, and call dates. The Eaton Vance team of
professionals constantly monitors historical and current yield spreads to find
relative value in the marketplace.

This research capability is key to identifying trends which impact the
yield-spread relationships of all bonds, including those in the insured sector.

EATON VANCE INSURED MUNICIPAL BOND FUNDS
INVESTMENT-GRADE PORTFOLIOS 100% EXEMPT FROM FEDERAL ALTERNATIVE MINIMUM TAX
Airports - Schools - Roadways - Bridges - Medical Facilities

A MANAGED FUND OR BONDS?

COMPARE THESE FEATURES

MANAGED INDIVIDUAL
TAX-FREE MUNICIPAL
FUND BONDS
---- -----

MONTHLY INCOME X NO
---- -----
PROFESSIONAL MANAGEMENT X NO
---- -----
IN-DEPTH MARKET ANALYSIS X NO
---- -----
LIQUIDITY X NOT ALWAYS
---- -----
DIVERSIFICATION AMONG
DIFFERENT ISSUERS* X NO
---- -----
FREE DIVIDEND &
CAPITAL GAIN REINVESTMENT X NO
---- -----
POTENTIAL FOR
INCREASED INCOME
THROUGH LEVERAGE X NO
---- -----
LOWER-COST ACCESS X NO
---- -----

*The Eaton Vance Insured Municipal Bond Funds are "non-diversified" for purposes
of the Investment Company Act of 1940. See Risks.

THE CLOSED-END FUND
ADVANTAGE

[PHOTO OF BRIDGE]

Closed-end funds have greater flexibility than open-end funds, including the
ability to remain more fully invested and to use financial leverage. The ability
to borrow at short-term tax-exempt rates and invest at generally higher
long-term tax-exempt rates enables closed-end funds, like the Eaton Vance
Insured Municipal Bond Funds, to offer investors enhanced yield potential
over other municipal investments. Investors searching for yield may find the
Funds' taxable-equivalent yield potential compelling. In addition, the Funds'
closed-end structure is a benefit because it protects the Funds from the
continuous inflow and outflow of assets that can complicate portfolio
management.

HIGHER YIELD POTENTIAL

Each Fund expects to utilize financial leverage by issuing preferred stock (on
which the Fund will pay a generally lower short-term tax-exempt yield) and
investing the proceeds at typically higher long-term tax-exempt yields.

Each Fund intends to utilize financial leverage initially of up to approximately
38% of its total assets (including the amount obtained through leverage). Each
may also utilize other transactions, such as purchasing when-issued securities,
residual interest bonds and futures contracts, which may have the effect of
leverage.

Although the Funds' leveraged capital structure offers the opportunity for
increased current income, it also involves risks. See Risks.

AMERICAN STOCK
EXCHANGE LISTING

To provide daily liquidity, the Funds have applied for listing of their shares
on the AMEX. (See proposed symbols on the front cover.) The shares of closed-end
funds frequently trade at a discount to net asset value. This risk may be
greater for investors selling their shares shortly after completion of the
public offering. See Risks.

EXPERIENCED
PORTFOLIO MANAGEMENT

[PHOTO OF FREEWAY]

Eaton Vance was one of the first municipal bond fund managers, having managed
such funds since 1978. Eaton Vance's 25-person municipal bond team includes five
portfolio managers, three traders and nine credit specialists, who are
responsible for managing approximately $8.9 billion in municipal securities.*
Eaton Vance has one of the strongest teams of research analysts in the industry
devoted exclusively to analyzing municipal securities. With 41 open-end and 13
closed-end municipal bond funds under supervision, the team has experience
managing a wide range of municipal securities. The emphasis on research and
continuing credit analysis on each portfolio holding enables Eaton Vance's
portfolio managers to take advantage of yield and capital appreciation
opportunities generated through investment research.

PREMIER
INVESTMENT ADVISER

Eaton Vance Management, a subsidiary of Eaton Vance Corp., is the Funds'
investment adviser. Eaton Vance, its affiliates and predecessor companies have
been managing assets of individuals and institutions since 1924 and managing
investment companies since 1931. Eaton Vance and it affiliates currently have
over $53 billion* in assets under management.

*At 9/30/02

WHY INVEST IN AN EATON VANCE
INSURED MUNICIPAL BOND FUND NOW?

3
HIGH-QUALITY INSURED PORTFOLIOS

Each Eaton Vance Insured Municipal Bond Fund invests 100% of its assets in
investment-grade municipal securities. At least 80% of assets are invested in
municipal obligations of the highest investment grade (Aaa/AAA) and insured as
to the timely payment of interest and principal. Insurance does not protect the
market value of such obligations or the net asset value of a Fund.

As rated by Moody's Investor Services, Inc., Standard & Poor's Ratings Group or
by Fitch Rating or, if unrated, determined by Eaton Vance to be of comparable
quality.

4
AVOID THE ALTERNATIVE MINIMUM TAX

The federal alternative minimum tax (AMT) was originally devised to reduce
certain deductions for high-income taxpayers and to make everyone with
significant income pay some federal income tax. Because it is not indexed for
inflation, over time, the AMT has affected more and more taxpayers. As a result,
an insured municipal bond portfolio 100% exempt from AMT may hold significant
appeal to a rising number of filers who are, or may be, subject to the AMT.

THE IMPACT OF THE ALTERNATIVE MINIMUM TAX (AMT)

Year Returns Filed Tax Paid
(Millions) (Billions of Nominal $)
---------- -----------------------

1990 0.1 $ 0.8
2001 1.5 $ 6.4
2010 17.0 $38.2

Sources: For historical data: Internal Revenue Service, Statistics of Income
Bulletin, various issues, and Economic Report of the President (2001); for
projections: Congressional Budget Office (2001); Rebelein and Tempalski (2001)
(AMT numbers); Zaffino (2000) (individual income tax total). Figures for 2001
and 2010 are projections.

5
THE CLOSED-END STRUCTURE PROVIDES AN EFFECTIVE
WAY OF INVESTING IN MUNICIPAL BONDS

Closed-end funds can remain fully invested, are not subject to inflows and
outflows of assets and can utilize a leveraged capital structure, which provides
greater flexibility in portfolio management than open-end mutual funds,
resulting in the potential for enhanced returns.

Sources: Thomson Wealth Management; Lipper Inc. Returns are as of 9/30/02.
Closed-end fund returns are based on the market returns of 118 national
leveraged and non-leveraged closed-end municipal funds. Open- end fund returns
are based on the NAV returns of 49 national, non-leveraged, open-end, insured
front-load funds. Past performance is no guarantee of future results. It is not
possible to invest directly in an index or average. Unlike the Funds, indices
carry no management fees, account charges or other expenses. The Eaton Vance
Insured Municipal Bond Funds will not seek to match the composition or
performance of any such indices or averages. Performance of the various indices
or averages should not be viewed as indicative of any of the Eaton Vance Insured
Municipal Bond Funds. Total return is affected by changes in current yield, net
asset value and market performance.

AVERAGE ANNUAL TOTAL RETURNS

[PLOT POINTS]

1 Year 3 Years 5 Years 10 Years

THOMSON CLOSED-END MUNICIPAL
NATIONAL INDEX 10.68% 10.59% 6.19% 6.76%

LIPPER OPEN-END INSURED
MUNICIPAL DEBT FUNDS AVERAGE 8.38% 7.81% 5.58% 6.19%

PORTFOLIO DIVERSIFIER WITH POTENTIAL FOR REDUCING RISK

Historically, when stocks have declined, insured municipal bonds have often
risen in value. Adding an insured municipal bond fund to an overall portfolio
may help lower overall investment risk.

Sources: Lehman Brothers; Lipper Inc. Returns are as of 9/30/02. Municipal bond
returns are those of the Lehman Brothers Insured Municipal Bond Index, an
unmanaged index that is a broad measure of performance of insured,
investment-grade municipal bonds with maturities of at least one year. The S&P
500 Composite Index is an unmanaged index commonly used as a measure of U.S.
stock market performance. It is not possible to invest directly in an index.
Unlike the Funds, indices carry no management fees, account charges or other
expenses. The Eaton Vance Insured Municipal Bond Funds will not seek to match
the composition or performance of any such indices. Performance of an index
should not be viewed as indicative of that of any of the Eaton Vance Insured
Municipal Bond Funds. Past performance is no guarantee of future results.

AVERAGE ANNUAL TOTAL RETURNS

[PLOT POINTS]

1 Year 3 Years 5 Years 10 Years

LEHMAN BROTHERS INSURED
MUNICIPAL BOND INDEX 9.66% 9.11% 6.89% 7.14%

S&P 500 COMPOSITE INDEX -20.47% -12.88% -1.62% 8.99%

Shares of the Eaton Vance Insured Municipal Bond Funds are not insured by the
FDIC and are not deposits or other obligations of, or guaranteed by, any
depository institution. Shares are subject to investment risks, including
possible loss of principal invested.

RISKS

Before investing, consult your investment representative about how the Funds
differ from other investment companies regarding credit risk, liquidity, charges
and expenses, and other issues of importance. Please read the prospectus
carefully, especially Investment Objective, Policies and Risks.

No Operating History -- Each Fund is a closed-end investment company with no
operating history and is designed for long-term investors, not as a trading
vehicle.

Interest Rate and Market Risk -- The prices of municipal obligations tend to
fall as interest rates rise. Securities with longer maturities or durations tend
to fluctuate more in price in response to changes in market interest rates. A
decline in the prices of the municipal obligations owned by a Fund would cause a
decline in the net asset value of the Fund, which could adversely affect the
trading price of the Fund's Shares. This risk is usually greater among municipal
obligations with longer maturities or durations. Although each Fund has no
policy governing the maturities or durations of its investments, each Fund
expects that it will invest in a portfolio of longer-term securities. This means
that each Fund will be subject to greater market risk (other things being equal)
than a fund investing solely in shorter-term securities. Market risk is often
greater among certain types of debt securities, such as zero-coupon bonds, which
do not make regular interest payments. As interest rates change, these bonds
often fluctuate in price more than coupon bonds that make regular interest
payments. Because each Fund may invest in these types of debt securities, it may
be subject to greater market risk than a fund investing only in current interest
paying securities.

Income Risk -- The income investors receive from a Fund is based primarily on
the interest it earns from its investments, which can vary widely over the short
and long term. If long-term interest rates drop, investors' income from the Fund
over time could drop as well if the Fund purchases securities with lower
interest coupons.

Call and Other Reinvestment Risks -- If interest rates fall, it is possible that
issuers of callable bonds with high interest coupons will call (or prepay) their
bonds before their maturity dates. If a call were exercised by the issuer during
a period of declining interest rates, a Fund is likely to replace such called
security with a lower-yielding security. If that were to happen, it could
decrease the Fund's dividends and could affect the market price of Shares.
Similar risks exist when a Fund invests the proceeds from matured or traded
municipal obligations at market interest rates that are below the Fund's current
earnings rate.

Credit Risk -- Credit risk is the risk that one or more municipal bonds in a
Fund's portfolio will decline in price, or fail to pay interest or principal
when due, because the issuer of the bond experiences a decline in its financial
status.

Liquidity Risk -- Although the Funds do not currently intend to do so, at times
each Fund may invest in securities for which there is no readily available
trading market or which are otherwise illiquid. A Fund may not be able to
readily dispose of such securities at prices approximating 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, limited liquidity could affect the market price of the securities,
thereby adversely affecting the Fund's net asset value and ability to make
dividend distributions.

Municipal Bond Market -- Certain obligations in which the Funds will invest will
not be registered with the Securities and Exchange Commission or any state
securities commission and will not be listed on any national securities
exchange. Therefore, the amount of public information available about portfolio
securities will be limited, and the performance of the Funds is more dependent
on the analytical abilities of Eaton Vance than would be the case for an
investment company that invests primarily in registered or exchange-listed
securities.

Municipal Bond Insurance -- In the event Moody's, S&P or Fitch (or all of them)
should downgrade its assessment of the claims-paying ability of a particular
insurer, it (or they) could also be expected to downgrade the ratings assigned
to municipal bonds insured by such insurer, and municipal bonds insured under
Portfolio Insurance issued by such insurer also would be of reduced quality in
the Fund's portfolio. Any such downgrade could have an adverse impact on the net
asset value and market price of a Fund's Shares. In addition, to the extent a
Fund employs Portfolio Insurance, the Fund may be subject to certain
restrictions on investments imposed by guidelines of the insurance companies
issuing such Portfolio Insurance. Each Fund does not expect these guidelines to
prevent Eaton Vance from managing the Fund's portfolio in accordance with the
Fund's investment objective and policies.

Concentration -- The National Fund may invest 25% or more of its total assets in
municipal obligations of issuers located in the same state (or in a U.S.
Territory) or in the same economic sector, including, without limitation, the
following: lease rental obligations of state and local authorities; obligations
dependent on annual appropriations by a state's legislature for payment;
obligations of state and local housing finance authorities, municipal utilities
systems or public housing authorities; obligations of hospitals, as well as
obligations of the education and transportation sectors. This may make the Fund
more susceptible to adverse economic, political or regulatory occurrences
affecting a particular state, territory or economic sector.

Each State Insured Municipal Bond Fund primarily invests in municipal
obligations of issuers located in its relevant state and may invest 25% or more
of its total assets in municipal obligations of issuers located in the same U.S.
territory or in the same economic sector, including, without limitation, the
following: lease rental obligations of state and local authorities; obligations
dependent on annual appropriations by a state's legislature for payment;
obligations of state and local housing finance authorities, municipal utilities
systems or public housing authorities; obligations of hospitals; and obligations
of the education and transportation sectors. This may make a Fund more
susceptible to adverse economic, political or regulatory occurrences affecting
that respective state, a particular territory or economic sector.

Effects of Leverage -- The use of leverage through issuance of preferred shares
by each Fund creates an opportunity for increased net income, but, at the same
time, creates special risks. There can be no assurance that a leveraging
strategy will be successful during any period in which it is employed. Each Fund
intends to use leverage to provide the holders of Shares with a potentially
higher return. Leverage creates risks for holders of Shares, including the
likelihood of greater volatility of net asset value and market price of the
Shares and the risk that fluctuations in dividend rates on any preferred shares
may affect the return to Shareholders. It is anticipated that preferred share
dividends will be based on the yields of short-term municipal obligations, while
the proceeds of any preferred share offering will be invested in longer-term
municipal obligations, which typically have higher yields. To the extent the
income derived from securities purchased with funds received from leverage
exceeds the cost of leverage, a Fund's return will be greater than if leverage
had not been used. Conversely, if the income from the securities purchased with
such funds is not sufficient to cover the cost of leverage, the return to a Fund
will be less than if leverage had not been used, and therefore the amount
available for distribution to Shareholders as dividends and other distributions
will be reduced. 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.

Investment by a Fund in residual interest municipal obligations may amplify the
effects of leverage and, during periods of rising short-term interest rates, may
adversely affect the Fund's income and distributions to Shareholders. In
addition, under current federal income tax law, each Fund is required to
allocate a portion of any net realized capital gains or other taxable income to
holders of preferred shares. The terms of any preferred shares are expected to
require the Fund to pay to any preferred shareholders additional dividends
intended to compensate the preferred shareholders for taxes payable on any
capital gains or other taxable income allocated to the preferred shares. Any
such additional dividends will reduce the amount available for distribution to
the Shareholders. The fee paid to Eaton Vance will be calculated on the basis of
the Fund's gross assets, including proceeds from the issuance of preferred
shares, so the fees will be higher when leverage is utilized.

Each Fund currently intends to seek a Aaa/AAA rating on any preferred shares
from a rating agency. The Fund may be subject to investment restrictions of the
rating agency as a result. These restrictions may impose asset coverage or
portfolio composition requirements that are more stringent than those imposed on
the Fund by the Investment Company Act of 1940, as amended (the "1940 Act"). It
is not anticipated that these covenants or guidelines will impede Eaton Vance in
managing the Fund's portfolio in accordance with its investment objective and
policies.

Financial leverage may also be achieved through the purchase of certain
derivative instruments. A Fund's use of residual interest municipal obligations
and other derivative instruments exposes the Fund to special risks. Such
transactions may result in the Fund earning taxable income or gains.

Market Price of Shares -- The shares of closed-end investment companies often
trade at a discount from their net asset value, and the Funds' shares may
likewise trade at a discount. The trading price of each Fund's shares may be
less than the public offering price. This risk may be greater for investors who
sell their shares in a relatively short period after completion of the public
offering.

Non-Diversification -- Each Fund has registered as a "non-diversified"
investment company under the 1940 Act. For federal income tax purposes, a Fund,
with respect to up to 50% of its assets, will be able to invest more than 5%
(but not more than 25%) of the value of its total assets in the obligations of
any single issuer. To the extent a Fund invests a relatively high percentage of
its assets in obligations of a limited number of issuers, the Fund may be more
susceptible than a more widely diversified investment company to any single
economic, political or regulatory occurrence.

Certain Tax Considerations -- Distributions of any taxable net investment income
and net short-term capital gains are taxable as ordinary income.

Anti-Takeover Provisions -- Each 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 such Fund or to change the composition
of its Board of Trustees.

Additional Investment Practices -- The Funds may use investment practices that
involve special considerations, including purchasing futures contracts and
shares of other closed-end funds and investing in residual interest bonds, known
as inverse floaters. Inverse floaters fluctuate to a greater extent in response
to changes in interest rates than similar fixed-rate municipal bonds. Inverse
floaters are volatile and may expose a Fund to leverage risk. The use of futures
contracts may result in the Fund earning taxable income or gains.

The information contained herein and in each preliminary prospectus is
incomplete and may be changed. We may not sell these securities until each of
the registration statements filed with the Securities and Exchange Commission is
effective. This document is not an offer to sell these securities and is not
soliciting offers to buy each of these securities in any state where the offer
or sale is not permitted. This is not an offering, which may only be made by a
final prospectus. The final prospectus for each Fund should be read carefully
before you invest or send money. The Funds involve a number of risks, including
the risk of leverage, trading discount and default. The Funds may differ from
other investment companies in terms of credit risk, liquidity, charges and
expenses, and other important issues.

Consult the preliminary prospectus for each Eaton Vance Insured Municipal Bond
Fund for more complete information, including risk considerations, charges and
expenses. Preliminary prospectuses are available on request from your financial
advisor, or you may obtain a copy from each Fund by calling 1-800-225-6265.

1458-10/02 CE-MBFCB

EATON VANCE INSURED NEW YORK MUNICIPAL BOND FUND II

STATEMENT OF ADDITIONAL INFORMATION

, 2002

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

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

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 AUDITORS

Deloitte & Touche LLP

200 Berkeley Street

Boston, MA 02116

PART C - OTHER INFORMATION

Item 24. Financial Statements and Exhibits

(1) Financial Statements:

Not applicable.

(2) Exhibits:

(a) (1) Agreement and Declaration of Trust dated October 3, 2002
is incorporated herein by reference to the Registrant's
initial Registration Statement on Form N-2 (File Nos.
333-100422 and 811-21218) as to the Registrant's common shares
of beneficial interest ("Common Shares") filed with the
Securities and Exchange Commission (the "Commission") on
October 8, 2002 (Accession No. 0000898432-02-000687) ("Initial
Common Shares Registration Statement").

(2) Amendment to Agreement and Declaration of Trust dated October
14, 2002 filed herewith.

(b) (1) By-Laws are incorporated herein by reference to the
Registrant's Initial Common Shares Registration Statement.

(2) Amendment to By-Laws dated October 14, 2002 filed herewith.

(d) Form of Specimen Certificate for Common Shares of Beneficial
Interest incorporated herein by reference to the Registrant's
Initial Common Shares Registration Statement.

(e) Dividend Reinvestment Plan filed herewith.

(f) Not applicable.

(g) Investment Advisory Agreement dated October 21, 2002 filed
herewith.

(h) (1) Form of Underwriting Agreement to be filed by amendment.

(2) Form of Master Agreement Among Underwriters to be filed by
amendment.

(3) Form of Master Selected Dealers Agreement to be filed by
amendment.

(i) The Securities and Exchange Commission has granted the
Registrant an exemptive order that permits the Registrant to
enter into deferred compensation arrangements with its
independent Trustees. See in the matter of Capital Exchange
Fund, Inc., Release No. IC-20671 (November 1, 1994).

(j) (1) Master Custodian Agreement with Investors Bank & Trust Company
dated October 21, 2002 filed herewith.

(2) Extension Agreement dated August 31, 2000 to Master Custodian
Agreement with Investors Bank & Trust Company filed as
Exhibit (g)(4) to Post-Effective Amendment No. 85 of Eaton
Vance Municipals Trust (File Nos. 33-572 and 811-4409) filed
with the Commission on January 23, 2001 (Accession No.
0000940394-01-500027) and incorporated herein by reference.

(3) Delegation Agreement dated December 11, 2000, with Investors
Bank & Trust Company filed as Exhibit (j)(e) to the Eaton
Vance Prime Rate Reserves N-2, Amendment No. 5 (File Nos.
333-32267

and 811-05808) filed April 3, 2002 (Accession No.
0000940394-01-500126) and incorporated herein by reference.

(k) (1) Amendment to the Transfer Agency and Services Agreement
dated October 21, 2002 filed herewith.

(2) Transfer Agency and Services Agreement dated December 21, 1998
filed as Exhibit (k)(2) to Pre-Effective Amendment No. 1 of
Eaton Vance Insured New York Municipal Bond Fund (File Nos.
333-92200 and 811-21148) filed July 26, 2002 (Accession No.
0000950135-02-003435) and incorporated herein by reference.

(3) Administration Agreement dated October 21, 2002 filed
herewith.

(4) Form of Shareholder Servicing Agreement dated November ,
2002 to be filed by amendment.

(l) Opinion and Consent of Kirkpatrick & Lockhart LLP to be filed
by amendment.

(m) Not applicable.

(n) Consent of Independent Auditors to be filed by amendment.

(o) Not applicable.

(p) Letter Agreement with Eaton Vance Management to be filed by
amendment.

(q) Not applicable.

(r) Code of Ethics adopted by Eaton Vance Corp., Eaton Vance
Management, Boston Management and Research, Eaton Vance
Distributors, Inc. and the Eaton Vance Funds effective
September 1, 2000, as revised June 4, 2002, filed as Exhibit
(p) to Post-Effective Amendment No. 45 of Eaton Vance
Investment Trust (File Nos. 33-1121 and 811-4443) filed July
24, 2002 (Accession No. 0000940394-02-000462) and incorporated
herein by reference.

(s) Power of Attorney filed herewith.

Item 25. Marketing Arrangements

See Form of Underwriting Agreement filed herewith.

Item 26. Other Expenses of Issuance and Distribution

The approximate expenses in connection with the offering, some of which will be
borne by the Adviser, are as follows:

Registration and Filing Fees........................... $
Listing Fees........................................... 5000
National Association of Securities Dealers, Inc. Fees..
Costs of Printing and Engraving........................
Accounting Fees and Expenses...........................
Legal Fees and Expenses................................
Total.................................................. $
-----
Item 27. Persons Controlled by or Under Common Control

None.

Item 28. Number of Holders of Securities

Set forth below is the number of record holders as of October , 2002 of
each class of securities of the Registrant:

Title of Class Number of Record Holders
-------------- ------------------------

Common Shares of beneficial interest, par 0
value $0.01 per share

Item 29. Indemnification

The Registrant's By-Laws filed in the Trust's Initial Common Shares
Registration Statement contain and the Underwriting Agreement to be filed is
expected to contain provisions limiting the liability, and providing for
indemnification, of the Trustees and officers under certain circumstances.

Registrant's Trustees and officers are insured under a standard
investment company errors and omissions insurance policy covering loss incurred
by reason of negligent errors and omissions committed in their official
capacities as such.

Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "Securities Act"), may be permitted to directors,
officers and controlling persons of the Registrant pursuant to the provisions
described in this Item 29, or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.

Item 30. Business and Other Connections of Investment Adviser

Reference is made to: (i) the information set forth under the caption
"Investment Advisory and Other Services" in the Statement of Additional
Information; (ii) the Eaton Vance Corp. 10-K filed under the Securities Exchange
Act of 1934 (File No. 1-8100); and (iii) the Form ADV of Eaton Vance Management
(File No. 801-15930) filed with the Commission, all of which are incorporated
herein by reference.

Item 31. Location of Accounts and Records

All applicable accounts, books and documents required to be maintained
by the Registrant by Section 31(a) of the Investment Company Act of 1940 and the
Rules promulgated thereunder are in the possession and custody of the
Registrant's custodian, Investors Bank & Trust Company, 200 Clarendon Street,
16th Floor, Boston, MA 02116, and its transfer agent, PFPC Inc., 4400 Computer
Drive, Westborough, MA 01581-5120, with the exception of certain corporate
documents and portfolio trading documents which are in the possession and
custody of Eaton Vance Management, The Eaton Vance Building, 255 State Street,
Boston, MA 02109. Registrant is informed that all applicable accounts, books and
documents required to be maintained by registered investment advisers are in the
custody and possession of Eaton Vance Management.

Item 32. Management Services

Not applicable.

Item 33. Undertakings

1. The Registrant undertakes to suspend offering of Preferred Shares until
the prospectus is amended if (1) subsequent to the effective date of
this Registration Statement, the net asset value declines more than 10
percent from its net asset value as of the effective date of this
Registration Statement or (2) the net asset value increases to an
amount greater than its net proceeds as stated in the prospectus.

2. Not applicable.

3. Not applicable.

4. Not applicable.

5. The Registrant undertakes that:

a. for the purpose of determining any liability under the
Securities Act, the information omitted from the form of
prospectus filed as part of this Registration Statement in
reliance upon Rule 430A and contained in the form of
prospectus filed by the Registrant pursuant to 497(h) under
the 1933 Act shall be deemed to be part of the Registration
Statement as of the time it was declared effective; and

b. for the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration
statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.

6. The Registrant undertakes to send by first class mail or other means
designed to ensure equally prompt delivery, within two business days of
receipt of an oral or written request, its Statement of Additional
Information.

NOTICE

A copy of the Agreement and Declaration of Trust of Eaton Vance Insured
New York Municipal Bond Fund II is on file with the Secretary of State of the
Commonwealth of Massachusetts and notice is hereby given that this instrument is
executed on behalf of the Registrant by an officer of the Registrant as an
officer and not individually and that the obligations of or arising out of this
instrument are not binding upon any of the Trustees, officers or shareholders
individually, but are binding only upon the assets and property of the
Registrant.

SIGNATURES

Pursuant to requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Pre-Effective Amendment to the Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized in the City of Boston and the
Commonwealth of Massachusetts, on the 25th day of October 2002.

EATON VANCE INSURED NEW YORK
MUNICIPAL BOND FUND II

By: /s/ Thomas J. Fetter*
----------------------------------
Thomas J. Fetter
President

Pursuant to the requirements of the Securities Act of 1933, this
Pre-Effective Amendment to the Registration Statement has been signed by the
following persons in the capacities and on the dates indicated.

Signature Title Date
--------- ----- ----

/s/ Thomas J. Fetter*
--------------------------- President (Principal Executive October 25, 2002
Thomas J. Fetter Officer) and Trustee

/s/ James L. O'Connor*
--------------------------- Treasurer (Principal Financial October 25, 2002
James L. O'Connor and Accounting Officer)

/s/ Jessica M. Bibliowicz* Trustee October 25, 2002
----------------------------
Jessica M. Bibliowicz

/s/ Donald R. Dwight* Trustee October 25, 2002
----------------------------
Donald R. Dwight

/s/ James B. Hawkes* Trustee
---------------------------- October 25, 2002
James B. Hawkes

/s/ Samuel L. Hayes* Trustee
---------------------------- October 25, 2002
Samuel L. Hayes

/s/ Norton H. Reamer*
---------------------------- Trustee October 25, 2002
Norton H. Reamer

/s/ Lynn A. Stout*
---------------------------- Trustee October 25, 2002
Lynn A. Stout

* By: /s/ Alan R. Dynner
--------------------------------------
Alan R. Dynner (As attorney in-fact)

INDEX TO EXHIBITS

(a)(2) Amendment to the Agreement and Declaration of Trust dated October
14, 2002.

(b)(2) Amendment to By-Laws dated October 14, 2002.

(e) Form of Dividend Reinvestment.

(g) Investment Advisory Agreement dated October 21, 2002.

(j)(1) Master Custodian Agreement with Investors Bank & Trust Company
dated October 21, 2002.

(k)(1) Amendment to the Transfer Agency and Services Agreement dated
October 21, 2002.

(3) Administration Agreement dated October 21, 2002.

(s) Power of Attorney.