Form N-CSR EATON VANCE SERIES TRUST For: Jun 30
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act File Number: 811-02258
Eaton Vance Series Trust II
(Exact Name of Registrant as Specified in Charter)
Two International Place, Boston, Massachusetts 02110
(Address of Principal Executive Offices)
Maureen A. Gemma
Two International Place, Boston, Massachusetts 02110
(Name and Address of Agent for Services)
(617) 482-8260
(Registrant’s Telephone Number)
June 30
Date of Fiscal Year End
June 30, 2018
Date of Reporting Period
Item 1. Reports to Stockholders
Parametric Tax-Managed Emerging Markets Fund
Annual Report
June 30, 2018
Commodity Futures Trading Commission Registration. Effective December 31, 2012, the Commodity Futures Trading Commission (“CFTC”) adopted certain regulatory changes that subject registered investment companies and advisers to regulation by the CFTC if a fund invests more than a prescribed level of its assets in certain CFTC-regulated instruments (including futures, certain options and swap agreements) or markets itself as providing investment exposure to such instruments. The Fund has claimed an exclusion from the definition of the term “commodity pool operator” under the Commodity Exchange Act. Accordingly, neither the Fund nor the adviser with respect to the operation of the Fund is subject to CFTC regulation. Because of its management of other strategies, the Fund’s adviser is registered with the CFTC as a commodity pool operator and a commodity trading advisor.
Fund shares are not insured by the FDIC and are not deposits or other obligations of, or guaranteed by, any depository institution. Shares are subject to investment risks, including possible loss of principal invested.
This report must be preceded or accompanied by a current summary prospectus or prospectus. Before investing, investors should consider carefully the investment objective, risks, and charges and expenses of a mutual fund. This and other important information is contained in the summary prospectus and prospectus, which can be obtained from a financial advisor. Prospective investors should read the prospectus carefully before investing. For further information, please call 1-800-260-0761.
Annual Report June 30, 2018
Parametric Tax-Managed Emerging Markets Fund
Table of Contents
| Management’s Discussion of Fund Performance |
2 | |||
| Performance |
3 | |||
| Fund Profile |
4 | |||
| Endnotes and Additional Disclosures |
5 | |||
| Fund Expenses |
6 | |||
| Financial Statements |
7 | |||
| Report of Independent Registered Public Accounting Firm |
40 | |||
| Federal Tax Information |
41 | |||
| Board of Trustees’ Contract Approval |
42 | |||
| Management and Organization |
45 | |||
| Important Notices |
47 | |||
Parametric Tax-Managed Emerging Markets Fund
June 30, 2018
Management’s Discussion of Fund Performance1
See Endnotes and Additional Disclosures in this report.
Past performance is no guarantee of future results. Returns are historical and are calculated by determining the percentage change in net asset value (NAV) or offering price (as applicable) with all distributions reinvested. Investment return and principal value will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Performance less than or equal to one year is cumulative. Performance is for the stated time period only; due to market volatility, the Fund’s current performance may be lower or higher than quoted. Returns are before taxes unless otherwise noted. For performance as of the most recent month-end, please refer to eatonvance.com.
| 2 |
Parametric Tax-Managed Emerging Markets Fund
June 30, 2018
Performance2,3
Portfolio Managers Thomas C. Seto and Timothy W. Atwill, Ph.D., CFA, each of Parametric Portfolio Associates LLC
| % Average Annual Total Returns | Class Inception Date |
Performance Inception Date |
One Year | Five Years | Ten Years | |||||||||||||||
| Institutional Class at NAV |
06/30/1998 | 06/30/1998 | 3.63 | % | 3.08 | % | 2.01 | % | ||||||||||||
| MSCI Emerging Markets Index |
— | — | 8.20 | % | 5.01 | % | 2.26 | % | ||||||||||||
| % After-Tax Returns |
Class Inception Date |
Performance Inception Date |
One Year | Five Years | Ten Years | |||||||||||||||
| After Taxes on Distributions |
06/30/1998 | 06/30/1998 | 3.32 | % | 2.80 | % | 1.83 | % | ||||||||||||
| After Taxes on Distributions and Sales of Fund Shares |
— | — | 2.63 | 2.56 | 1.76 | |||||||||||||||
| % Total Annual Operating Expense Ratio4 | Institutional Class |
|||||||||||||||||||
| 0.95 | % | |||||||||||||||||||
Growth of $50,000
This graph shows the change in value of a hypothetical investment of $50,000 in Institutional Class of the Fund for the period indicated. For comparison, the same investment is shown in the indicated index.
See Endnotes and Additional Disclosures in this report.
Past performance is no guarantee of future results. Returns are historical and are calculated by determining the percentage change in net asset value (NAV) or offering price (as applicable) with all distributions reinvested. Investment return and principal value will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Performance less than or equal to one year is cumulative. Performance is for the stated time period only; due to market volatility, the Fund’s current performance may be lower or higher than quoted. Returns are before taxes unless otherwise noted. For performance as of the most recent month-end, please refer to eatonvance.com.
| 3 |
Parametric Tax-Managed Emerging Markets Fund
June 30, 2018
Fund Profile
See Endnotes and Additional Disclosures in this report.
| 4 |
Parametric Tax-Managed Emerging Markets Fund
June 30, 2018
Endnotes and Additional Disclosures
| 5 |
Parametric Tax-Managed Emerging Markets Fund
June 30, 2018
Fund Expenses
Example: As a Fund shareholder, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchases and redemption fees (if applicable); and (2) ongoing costs, including management fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of Fund investing and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (January 1, 2018 – June 30, 2018).
Actual Expenses: The first section of the table below provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes: The second section of the table below provides information about hypothetical account values and hypothetical expenses based on the actual Fund expense ratio and an assumed rate of return of 5% per year (before expenses), which is not the actual Fund return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in your Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) or redemption fees (if applicable). Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would be higher.
| Beginning Account Value (1/1/18) |
Ending Account Value (6/30/18) |
Expenses Paid During Period* (1/1/18 – 6/30/18) |
Annualized Expense Ratio |
|||||||||||||
| Actual |
||||||||||||||||
| Institutional Class |
$ | 1,000.00 | $ | 929.20 | $ | 4.54 | 0.95 | % | ||||||||
| Hypothetical |
|
|||||||||||||||
| (5% return per year before expenses) |
||||||||||||||||
| Institutional Class |
$ | 1,000.00 | $ | 1,020.10 | $ | 4.76 | 0.95 | % | ||||||||
| * | Expenses are equal to the Fund’s annualized expense ratio for the indicated Class, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). The Example assumes that the $1,000 was invested at the net asset value per share determined at the close of business on December 31, 2017. |
| 6 |
Parametric Tax-Managed Emerging Markets Fund
June 30, 2018
Portfolio of Investments
| 7 | See Notes to Financial Statements. |
Parametric Tax-Managed Emerging Markets Fund
June 30, 2018
Portfolio of Investments — continued
| 8 | See Notes to Financial Statements. |
Parametric Tax-Managed Emerging Markets Fund
June 30, 2018
Portfolio of Investments — continued
| 9 | See Notes to Financial Statements. |
Parametric Tax-Managed Emerging Markets Fund
June 30, 2018
Portfolio of Investments — continued
| 10 | See Notes to Financial Statements. |
Parametric Tax-Managed Emerging Markets Fund
June 30, 2018
Portfolio of Investments — continued
| 11 | See Notes to Financial Statements. |
Parametric Tax-Managed Emerging Markets Fund
June 30, 2018
Portfolio of Investments — continued
| 12 | See Notes to Financial Statements. |
Parametric Tax-Managed Emerging Markets Fund
June 30, 2018
Portfolio of Investments — continued
| 13 | See Notes to Financial Statements. |
Parametric Tax-Managed Emerging Markets Fund
June 30, 2018
Portfolio of Investments — continued
| 14 | See Notes to Financial Statements. |
Parametric Tax-Managed Emerging Markets Fund
June 30, 2018
Portfolio of Investments — continued
| 15 | See Notes to Financial Statements. |
Parametric Tax-Managed Emerging Markets Fund
June 30, 2018
Portfolio of Investments — continued
| 16 | See Notes to Financial Statements. |
Parametric Tax-Managed Emerging Markets Fund
June 30, 2018
Portfolio of Investments — continued
| 17 | See Notes to Financial Statements. |
Parametric Tax-Managed Emerging Markets Fund
June 30, 2018
Portfolio of Investments — continued
| 18 | See Notes to Financial Statements. |
Parametric Tax-Managed Emerging Markets Fund
June 30, 2018
Portfolio of Investments — continued
| 19 | See Notes to Financial Statements. |
Parametric Tax-Managed Emerging Markets Fund
June 30, 2018
Portfolio of Investments — continued
| 20 | See Notes to Financial Statements. |
Parametric Tax-Managed Emerging Markets Fund
June 30, 2018
Portfolio of Investments — continued
| 21 | See Notes to Financial Statements. |
Parametric Tax-Managed Emerging Markets Fund
June 30, 2018
Portfolio of Investments — continued
| 22 | See Notes to Financial Statements. |
Parametric Tax-Managed Emerging Markets Fund
June 30, 2018
Portfolio of Investments — continued
| 23 | See Notes to Financial Statements. |
Parametric Tax-Managed Emerging Markets Fund
June 30, 2018
Portfolio of Investments — continued
| 24 | See Notes to Financial Statements. |
Parametric Tax-Managed Emerging Markets Fund
June 30, 2018
Portfolio of Investments — continued
| 25 | See Notes to Financial Statements. |
Parametric Tax-Managed Emerging Markets Fund
June 30, 2018
Portfolio of Investments — continued
| 26 | See Notes to Financial Statements. |
Parametric Tax-Managed Emerging Markets Fund
June 30, 2018
Portfolio of Investments — continued
| 27 | See Notes to Financial Statements. |
Parametric Tax-Managed Emerging Markets Fund
June 30, 2018
Portfolio of Investments — continued
| 28 | See Notes to Financial Statements. |
Parametric Tax-Managed Emerging Markets Fund
June 30, 2018
Portfolio of Investments — continued
| 29 | See Notes to Financial Statements. |
Parametric Tax-Managed Emerging Markets Fund
June 30, 2018
Portfolio of Investments — continued
| 30 | See Notes to Financial Statements. |
Parametric Tax-Managed Emerging Markets Fund
June 30, 2018
Statement of Assets and Liabilities
| Assets | June 30, 2018 | |||
| Unaffiliated investments, at value (identified cost, $2,653,213,893) |
$ | 3,249,182,343 | ||
| Cash |
349,299 | |||
| Foreign currency, at value (identified cost, $9,823,611) |
9,754,299 | |||
| Dividends and interest receivable |
10,824,864 | |||
| Receivable for Fund shares sold |
1,174,057 | |||
| Tax reclaims receivable |
211,323 | |||
| Total assets |
$ | 3,271,496,185 | ||
| Liabilities |
| |||
| Payable for investments purchased |
$ | 174,911 | ||
| Payable for Fund shares redeemed |
7,766,829 | |||
| Payable to affiliates: |
||||
| Investment adviser fee |
1,238,673 | |||
| Administration fee |
1,376,303 | |||
| Accrued foreign capital gains taxes |
3,155,038 | |||
| Accrued expenses |
11,386 | |||
| Total liabilities |
$ | 13,723,140 | ||
| Net Assets |
$ | 3,257,773,045 | ||
| Sources of Net Assets | ||||
| Paid-in capital |
$ | 2,688,765,845 | ||
| Accumulated distributions in excess of net investment income |
(114,522 | ) | ||
| Accumulated net realized loss |
(23,517,176 | ) | ||
| Net unrealized appreciation |
592,638,898 | |||
| Total |
$ | 3,257,773,045 | ||
| Institutional Class Shares |
| |||
| Net Assets |
$ | 3,257,773,045 | ||
| Shares Outstanding |
67,047,118 | |||
| Net Asset Value, Offering Price and Redemption Price Per Share |
||||
| (net assets ÷ shares of beneficial interest outstanding) |
$ | 48.59 | ||
| 31 | See Notes to Financial Statements. |
Parametric Tax-Managed Emerging Markets Fund
June 30, 2018
Statement of Operations
| Investment Income | Year Ended June 30, 2018 |
|||
| Dividends (net of foreign taxes, $11,102,249) |
$ | 101,735,831 | ||
| Interest |
16,665 | |||
| Total investment income |
$ | 101,752,496 | ||
| Expenses | ||||
| Investment adviser fee |
$ | 16,255,960 | ||
| Administration fee |
18,062,178 | |||
| Interest expense |
93,977 | |||
| Total expenses |
$ | 34,412,115 | ||
| Net investment income |
$ | 67,340,381 | ||
| Realized and Unrealized Gain (Loss) | ||||
| Net realized gain (loss) — |
||||
| Investment transactions (net of foreign capital gains taxes of $175,987) |
$ | 63,949,542 | ||
| Foreign currency transactions |
(1,319,764 | ) | ||
| Net realized gain |
$ | 62,629,778 | ||
| Change in unrealized appreciation (depreciation) — |
||||
| Investments (including net increase in accrued foreign capital gains taxes of $606,906) |
$ | 10,903,401 | ||
| Foreign currency |
128,651 | |||
| Net change in unrealized appreciation (depreciation) |
$ | 11,032,052 | ||
| Net realized and unrealized gain |
$ | 73,661,830 | ||
| Net increase in net assets from operations |
$ | 141,002,211 | ||
| 32 | See Notes to Financial Statements. |
Parametric Tax-Managed Emerging Markets Fund
June 30, 2018
Statements of Changes in Net Assets
| Year Ended June 30, | ||||||||
| Increase (Decrease) in Net Assets | 2018 | 2017 | ||||||
| From operations — |
||||||||
| Net investment income |
$ | 67,340,381 | $ | 54,297,351 | ||||
| Net realized gain (loss) |
62,629,778 | (31,929,481 | ) | |||||
| Net change in unrealized appreciation (depreciation) |
11,032,052 | 467,166,183 | ||||||
| Net increase in net assets from operations |
$ | 141,002,211 | $ | 489,534,053 | ||||
| Distributions to shareholders — |
||||||||
| From net investment income |
$ | (64,914,501 | ) | $ | (47,871,238 | ) | ||
| Total distributions to shareholders |
$ | (64,914,501 | ) | $ | (47,871,238 | ) | ||
| Transactions in shares of beneficial interest — |
||||||||
| Proceeds from sale of shares |
$ | 384,045,332 | $ | 804,065,920 | ||||
| Net asset value of shares issued to shareholders in payment of distributions declared |
59,165,671 | 39,655,320 | ||||||
| Cost of shares redeemed |
(672,980,908 | ) | (729,821,183 | ) | ||||
| Redemption fees |
756,888 | 4,166,207 | ||||||
| Net increase (decrease) in net assets from Fund share transactions |
$ | (229,013,017 | ) | $ | 118,066,264 | |||
| Net increase (decrease) in net assets |
$ | (152,925,307 | ) | $ | 559,729,079 | |||
| Net Assets |
| |||||||
| At beginning of year |
$ | 3,410,698,352 | $ | 2,850,969,273 | ||||
| At end of year |
$ | 3,257,773,045 | $ | 3,410,698,352 | ||||
| Accumulated undistributed (distributions in excess of) net investment income included in net assets |
| |||||||
| At end of year |
$ | (114,522 | ) | $ | 2,829,734 | |||
| 33 | See Notes to Financial Statements. |
Parametric Tax-Managed Emerging Markets Fund
June 30, 2018
Financial Highlights
| Institutional Class | ||||||||||||||||||||
| Year Ended June 30, | ||||||||||||||||||||
| 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||
| Net asset value — Beginning of year |
$ | 47.740 | $ | 41.370 | $ | 46.230 | $ | 52.430 | $ | 45.870 | ||||||||||
| Income (Loss) From Operations | ||||||||||||||||||||
| Net investment income(1) |
$ | 0.967 | $ | 0.777 | $ | 0.799 | $ | 0.838 | $ | 0.805 | ||||||||||
| Net realized and unrealized gain (loss) |
0.811 | 6.232 | (5.019 | ) | (6.134 | ) | 6.518 | |||||||||||||
| Total income (loss) from operations |
$ | 1.778 | $ | 7.009 | $ | (4.220 | ) | $ | (5.296 | ) | $ | 7.323 | ||||||||
| Less Distributions | ||||||||||||||||||||
| From net investment income |
$ | (0.939 | ) | $ | (0.699 | ) | $ | (0.802 | ) | $ | (0.981 | ) | $ | (0.854 | ) | |||||
| Total distributions |
$ | (0.939 | ) | $ | (0.699 | ) | $ | (0.802 | ) | $ | (0.981 | ) | $ | (0.854 | ) | |||||
| Redemption fees(1)(2) |
$ | 0.011 | $ | 0.060 | $ | 0.162 | $ | 0.077 | $ | 0.091 | ||||||||||
| Net asset value — End of year |
$ | 48.590 | $ | 47.740 | $ | 41.370 | $ | 46.230 | $ | 52.430 | ||||||||||
| Total Return(3) |
3.63 | % | 17.34 | % | (8.64 | )% | (9.93 | )% | 16.30 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of year (000’s omitted) |
$ | 3,257,773 | $ | 3,410,698 | $ | 2,850,969 | $ | 3,697,968 | $ | 3,886,328 | ||||||||||
| Ratios (as a percentage of average daily net assets): |
||||||||||||||||||||
| Expenses |
0.95 | % | 0.95 | % | 0.95 | % | 0.95 | % | 0.95 | % | ||||||||||
| Net investment income |
1.86 | % | 1.75 | % | 1.99 | % | 1.71 | % | 1.65 | % | ||||||||||
| Portfolio Turnover |
6 | % | 8 | % | 2 | % | 10 | % | 6 | % | ||||||||||
| (1) | Computed using average shares outstanding. |
| (2) | Redemption fees were discontinued as of September 1, 2016. |
| (3) | Returns are historical and are calculated by determining the percentage change in net asset value with all distributions reinvested. |
| 34 | See Notes to Financial Statements. |
Parametric Tax-Managed Emerging Markets Fund
June 30, 2018
Notes to Financial Statements
1 Significant Accounting Policies
Parametric Tax-Managed Emerging Markets Fund (the Fund) is a diversified series of Eaton Vance Series Trust II (the Trust). The Trust is a Massachusetts business trust registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company. The Fund’s investment objective is to seek long-term, after-tax returns for its shareholders. The Fund offers Institutional Class shares, which are sold at net asset value and are not subject to a sales charge.
The following is a summary of significant accounting policies of the Fund. The policies are in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP). The Fund is an investment company and follows accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946.
A Investment Valuation — The following methodologies are used to determine the market value or fair value of investments.
Equity Securities. Equity securities listed on a U.S. securities exchange generally are valued at the last sale or closing price on the day of valuation or, if no sales took place on such date, at the mean between the closing bid and asked prices therefore on the exchange where such securities are principally traded. Equity securities listed on the NASDAQ Global or Global Select Market generally are valued at the NASDAQ official closing price. Unlisted or listed securities for which closing sales prices or closing quotations are not available are valued at the mean between the latest available bid and asked prices. Equity-linked securities are generally valued based on the value of the underlying equity security or instrument.
Debt Obligations. Debt obligations are generally valued on the basis of valuations provided by third party pricing services, as derived from such services’ pricing models. Inputs to the models may include, but are not limited to, reported trades, executable bid and asked prices, broker/dealer quotations, prices or yields of securities with similar characteristics, interest rates, anticipated prepayments, benchmark curves or information pertaining to the issuer, as well as industry and economic events. The pricing services may use a matrix approach, which considers information regarding securities with similar characteristics to determine the valuation for a security. Short-term obligations purchased with a remaining maturity of sixty days or less for which a valuation from a third party pricing service is not readily available may be valued at amortized cost, which approximates fair value.
Foreign Securities and Currencies. Foreign securities and currencies are valued in U.S. dollars, based on foreign currency exchange rate quotations supplied by a third party pricing service. The pricing service uses a proprietary model to determine the exchange rate. Inputs to the model include reported trades and implied bid/ask spreads. The daily valuation of exchange-traded foreign securities generally is determined as of the close of trading on the principal exchange on which such securities trade. Events occurring after the close of trading on foreign exchanges may result in adjustments to the valuation of foreign securities to more accurately reflect their fair value as of the close of regular trading on the New York Stock Exchange. When valuing foreign equity securities that meet certain criteria, the Fund’s Trustees have approved the use of a fair value service that values such securities to reflect market trading that occurs after the close of the applicable foreign markets of comparable securities or other instruments that have a strong correlation to the fair-valued securities.
Fair Valuation. Investments for which valuations or market quotations are not readily available or are deemed unreliable are valued at fair value using methods determined in good faith by or at the direction of the Trustees of the Fund in a manner that fairly reflects the security’s value, or the amount that the Fund might reasonably expect to receive for the security upon its current sale in the ordinary course. Each such determination is based on a consideration of relevant factors, which are likely to vary from one pricing context to another. These factors may include, but are not limited to, the type of security, the existence of any contractual restrictions on the security’s disposition, the price and extent of public trading in similar securities of the issuer or of comparable companies or entities, quotations or relevant information obtained from broker/dealers or other market participants, information obtained from the issuer, analysts, and/or the appropriate stock exchange (for exchange-traded securities), an analysis of the company’s or entity’s financial condition, and an evaluation of the forces that influence the issuer and the market(s) in which the security is purchased and sold.
B Investment Transactions — Investment transactions for financial statement purposes are accounted for on a trade date basis. Realized gains and losses on investments sold are determined on the basis of identified cost.
C Income — Dividend income is recorded on the ex-dividend date for dividends received in cash and/or securities. However, if the ex-dividend date has passed, certain dividends from foreign securities are recorded as the Fund is informed of the ex-dividend date. Withholding taxes on foreign dividends and capital gains have been provided for in accordance with the Fund’s understanding of the applicable countries’ tax rules and rates. In consideration of recent decisions rendered by European courts, the Fund has filed additional tax reclaims for previously withheld taxes on dividends earned in certain European Union countries. These filings are subject to various administrative and judicial proceedings within these countries. Due to the uncertainty as to the ultimate resolution of these proceedings, the likelihood of receipt of these reclaims, and the potential timing of payment, no amounts are reflected in the financial statements for such outstanding reclaims. Interest income is recorded on the basis of interest accrued, adjusted for amortization of premium or accretion of discount.
D Federal and Other Taxes — The Fund’s policy is to comply with the provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute to shareholders each year substantially all of its net investment income, and all or substantially all of its net realized capital gains. Accordingly, no provision for federal income or excise tax is necessary.
In addition to the requirements of the Internal Revenue Code, the Fund may also be subject to local taxes on the recognition of capital gains in certain countries. In determining the daily net asset value, the Fund estimates the accrual for such taxes, if any, based on the unrealized appreciation on certain
| 35 |
Parametric Tax-Managed Emerging Markets Fund
June 30, 2018
Notes to Financial Statements — continued
portfolio securities and the related tax rates. Taxes attributable to unrealized appreciation are included in the change in unrealized appreciation (depreciation) on investments. Capital gains taxes on securities sold are included in net realized gain (loss) on investments.
As of June 30, 2018, the Fund had no uncertain tax positions that would require financial statement recognition, de-recognition, or disclosure. The Fund files a U.S. federal income tax return annually after its fiscal year-end, which is subject to examination by the Internal Revenue Service for a period of three years from the date of filing.
E Expenses — The majority of expenses of the Trust are directly identifiable to an individual fund. Expenses which are not readily identifiable to a specific fund are allocated taking into consideration, among other things, the nature and type of expense and the relative size of the funds.
F Foreign Currency Translation — Investment valuations, other assets, and liabilities initially expressed in foreign currencies are translated each business day into U.S. dollars based upon current exchange rates. Purchases and sales of foreign investment securities and income and expenses denominated in foreign currencies are translated into U.S. dollars based upon currency exchange rates in effect on the respective dates of such transactions. Recognized gains or losses on investment transactions attributable to changes in foreign currency exchange rates are recorded for financial statement purposes as net realized gains and losses on investments. That portion of unrealized gains and losses on investments that results from fluctuations in foreign currency exchange rates is not separately disclosed.
G Equity-Linked Securities — Equity-linked securities are primarily used as an alternative means to more efficiently and effectively access the securities markets of emerging market countries and may also be known as participation notes, equity swaps, and zero strike calls and warrants. Equity-linked securities are privately issued securities whose investment results are designed to correspond generally to the performance of a specified stock index or “basket” of stocks, or a single stock. The Fund deposits an amount of cash with its custodian (or broker, if legally permitted) in an amount near or equal to the selling price of the underlying security in exchange for an equity-linked security. Upon sale, the Fund receives cash from the broker or custodian equal to the current value of the underlying security, less transactional costs. Aside from market risk of the underlying security, there is the risk that the issuer of an equity-linked security may default on its obligation under the security. In addition, the Fund may be unable to close out such a transaction with the other party or obtain an offsetting position with any other party, at any time prior to the end of the term of the underlying agreement. Income received on equity-linked securities is recorded as dividend income.
H Use of Estimates — The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expense during the reporting period. Actual results could differ from those estimates.
I Indemnifications — Under the Trust’s organizational documents, its officers and Trustees may be indemnified against certain liabilities and expenses arising out of the performance of their duties to the Fund. Under Massachusetts law, if certain conditions prevail, shareholders of a Massachusetts business trust (such as the Trust) could be deemed to have personal liability for the obligations of the Trust. However, the Trust’s Declaration of Trust contains an express disclaimer of liability on the part of Fund shareholders and the By-laws provide that the Trust shall assume the defense on behalf of any Fund shareholders. Moreover, the By-laws also provide for indemnification out of Fund property of any shareholder held personally liable solely by reason of being or having been a shareholder for all loss or expense arising from such liability. Additionally, in the normal course of business, the Fund enters into agreements with service providers that may contain indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred.
J Redemption Fees — Fund shares acquired on or after April 1, 2005 were subject to a redemption fee, at the time of exchange or redemption, equal to 2% of the net asset value of the shares exchanged or redeemed. Fund shares purchased prior to April 1, 2005 were subject to a redemption fee equal to 1% of the net asset value of the shares exchanged or redeemed, and were subject to a purchase fee of 1% of the net asset value of the shares purchased at the time they were purchased. Shares acquired on or before June 30, 1998 were not subject to a redemption fee. The redemption fee was accounted for as an addition to paid-in capital. Effective September 1, 2016, Fund shares are no longer subject to a redemption fee.
2 Distributions to Shareholders and Income Tax Information
It is the present policy of the Fund to make at least one distribution annually (normally in December) of all or substantially all of its net investment income and to distribute annually all or substantially all of its net realized capital gains (reduced by available capital loss carryforwards from prior years). Distributions to shareholders are recorded on the ex-dividend date. Shareholders may reinvest income and capital gain distributions in additional shares of the Fund at the net asset value as of the ex-dividend date or, at the election of the shareholder, receive distributions in cash. Distributions to shareholders are determined in accordance with income tax regulations, which may differ from U.S. GAAP. As required by U.S. GAAP, only distributions in excess of tax basis earnings and profits are reported in the financial statements as a return of capital. Permanent differences between book and tax accounting relating to distributions are reclassified to paid-in capital. For tax purposes, distributions from short-term capital gains are considered to be from ordinary income.
| 36 |
Parametric Tax-Managed Emerging Markets Fund
June 30, 2018
Notes to Financial Statements — continued
The tax character of distributions declared for the years ended June 30, 2018 and June 30, 2017 was as follows:
| Year Ended June 30, | ||||||||
| 2018 | 2017 | |||||||
| Distributions declared from: |
||||||||
| Ordinary income |
$ | 64,914,501 | $ | 47,871,238 | ||||
During the year ended June 30, 2018, accumulated net realized loss was increased by $204,578, accumulated undistributed net investment income was decreased by $5,370,136 and paid-in capital was increased by $5,574,714 due to expired capital loss carryforwards, the Fund’s use of equalization accounting and differences between book and tax accounting, primarily for foreign currency gain (loss), foreign capital gains taxes and investments in passive foreign investment companies (PFICs). Tax equalization accounting allows the Fund to treat as a distribution that portion of redemption proceeds representing a redeeming shareholder’s portion of undistributed taxable income and net capital gains. These reclassifications had no effect on the net assets or net asset value per share of the Fund.
As of June 30, 2018, the components of distributable earnings (accumulated losses) on a tax basis were as follows:
| Undistributed ordinary income |
$ | 32,852,416 | ||
| Deferred capital losses |
$ | (20,119,829 | ) | |
| Net unrealized appreciation |
$ | 556,274,613 |
The differences between components of distributable earnings (accumulated losses) on a tax basis and the amounts reflected in the Statement of Assets and Liabilities are primarily due to wash sales and investments in PFICs.
At June 30, 2018, the Fund, for federal income tax purposes, had deferred capital losses of $20,119,829 which would reduce its taxable income arising from future net realized gains on investment transactions, if any, to the extent permitted by the Internal Revenue Code, and thus would reduce the amount of distributions to shareholders, which would otherwise be necessary to relieve the Fund of any liability for federal income or excise tax. The deferred capital losses are treated as arising on the first day of the Fund’s next taxable year and retain the same short-term or long-term character as when originally deferred. Of the deferred capital losses at June 30, 2018, $8,424,903 are short-term and $11,694,926 are long-term.
The cost and unrealized appreciation (depreciation) of investments of the Fund at June 30, 2018, as determined on a federal income tax basis, were as follows:
| Aggregate cost |
$ | 2,689,578,178 | ||
| Gross unrealized appreciation |
$ | 977,935,576 | ||
| Gross unrealized depreciation |
(418,331,411 | ) | ||
| Net unrealized appreciation |
$ | 559,604,165 | ||
3 Investment Adviser Fee and Other Transactions with Affiliates
The investment adviser fee is earned by Eaton Vance Management (EVM) as compensation for management and investment advisory services rendered to the Fund. The fee is computed at an annual rate of 0.45% of the Fund’s average daily net assets and is payable monthly. For the year ended June 30, 2018, the investment adviser fee amounted to $16,255,960. Pursuant to a sub-advisory agreement, EVM has delegated the investment management of the Fund to Parametric Portfolio Associates LLC (Parametric), a majority-owned subsidiary of Eaton Vance Corp. EVM pays Parametric a portion of its investment adviser fee for sub-advisory services provided to the Fund. The administration fee is earned by EVM for administering the business affairs of the Fund and is computed at an annual rate of 0.50% of the Fund’s average daily net assets. For the year ended June 30, 2018, the administration fee amounted to $18,062,178. Pursuant to a sub-administrative services agreement with Parametric, EVM pays Parametric a portion of its administration fee for sub-administrative services provided to the Fund. EVM also pays all ordinary operating expenses of the Fund (excluding the investment adviser and administration fees). EVM serves as the sub-transfer agent of the Fund, at no additional cost to the Fund.
EVM identified certain shareholder redemption transactions for which redemption fees, which were discontinued effective September 1, 2016, were inadvertently not charged that related to the year ended June 30, 2017 and prior years. Redemption fees identified during the year ended June 30, 2018
| 37 |
Parametric Tax-Managed Emerging Markets Fund
June 30, 2018
Notes to Financial Statements — continued
aggregated $756,888, which were paid to the Fund by EVM. Redemption fees identified during the year ended June 30, 2017 aggregated $3.365 million, of which EVM paid $765,000 and a third party paid $2.6 million. Such payments have been included in redemption fees in the Statements of Changes in Net Assets.
Trustees and officers of the Fund who are members of EVM’s organization receive remuneration for their services to the Fund out of the investment adviser fee. Trustees of the Fund who are not affiliated with EVM may elect to defer receipt of all or a percentage of their annual fees in accordance with the terms of the Trustees Deferred Compensation Plan. For the year ended June 30, 2018, no significant amounts have been deferred. Trustees’ fees incurred by the Fund are paid by EVM. Certain officers and Trustees of the Fund are officers of EVM.
4 Purchases and Sales of Investments
Purchases and sales of investments, other than short-term obligations, aggregated $206,041,851 and $405,855,338, respectively, for the year ended June 30, 2018.
5 Shares of Beneficial Interest
The Fund’s Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest (without par value). Transactions in Fund shares were as follows:
| Year Ended June 30, | ||||||||
| 2018 | 2017 | |||||||
| Sales |
7,355,274 | 18,114,199 | ||||||
| Issued to shareholders electing to receive payments of distributions in Fund shares |
1,143,077 | 957,395 | ||||||
| Redemptions |
(12,887,177 | ) | (16,556,946 | ) | ||||
| Net increase (decrease) |
(4,388,826 | ) | 2,514,648 | |||||
For the years ended June 30, 2018 and June 30, 2017, the Fund received $756,888 and $4,166,207, respectively, in redemption fees (see Note 3).
6 Line of Credit
The Fund participates with other portfolios and funds managed by EVM and its affiliates in a $625 million unsecured line of credit agreement with a group of banks, which is in effect through October 30, 2018. Borrowings are made by the Fund solely to facilitate the handling of unusual and/or unanticipated short-term cash requirements. Interest is charged to the Fund based on its borrowings at an amount above either the Eurodollar rate or Federal Funds rate. In addition, a fee computed at an annual rate of 0.15% on the daily unused portion of the line of credit is allocated among the participating portfolios and funds at the end of each quarter. Because the line of credit is not available exclusively to the Fund, it may be unable to borrow some or all of its requested amounts at any particular time. The Fund did not have any significant borrowings or allocated fees during the year ended June 30, 2018.
7 Risks Associated with Foreign Investments
Investing in securities issued by companies whose principal business activities are outside the United States may involve significant risks not present in domestic investments. For example, there is generally less publicly available information about foreign companies, particularly those not subject to the disclosure and reporting requirements of the U.S. securities laws. Certain foreign issuers are generally not bound by uniform accounting, auditing, and financial reporting requirements and standards of practice comparable to those applicable to domestic issuers. Investments in foreign securities also involve the risk of possible adverse changes in investment or exchange control regulations, expropriation or confiscatory taxation, limitation on the removal of funds or other assets of the Fund, political or financial instability or diplomatic and other developments which could affect such investments. Foreign securities markets, while growing in volume and sophistication, are generally not as developed as those in the United States, and securities of some foreign issuers (particularly those located in developing countries) may be less liquid and more volatile than securities of comparable U.S. companies. In general, there is less overall governmental supervision and regulation of foreign securities markets, broker/dealers and issuers than in the United States. The foregoing risks of foreign investing can be more significant in less developed countries characterized as emerging market countries.
| 38 |
Parametric Tax-Managed Emerging Markets Fund
June 30, 2018
Notes to Financial Statements — continued
8 Fair Value Measurements
Under generally accepted accounting principles for fair value measurements, a three-tier hierarchy to prioritize the assumptions, referred to as inputs, is used in valuation techniques to measure fair value. The three-tier hierarchy of inputs is summarized in the three broad levels listed below.
| • | Level 1 – quoted prices in active markets for identical investments |
| • | Level 2 – other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.) |
| • | Level 3 – significant unobservable inputs (including a fund’s own assumptions in determining the fair value of investments) |
In cases where the inputs used to measure fair value fall in different levels of the fair value hierarchy, the level disclosed is determined based on the lowest level input that is significant to the fair value measurement in its entirety. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
At June 30, 2018, the hierarchy of inputs used in valuing the Fund’s investments, which are carried at value, were as follows:
| Asset Description | Level 1 | Level 2 | Level 3* | Total | ||||||||||||
| Common Stocks |
||||||||||||||||
| Asia/Pacific |
$ | 30,627,329 | $ | 1,460,486,158 | $ | 2,975,152 | $ | 1,494,088,639 | ||||||||
| Emerging Europe |
27,202,630 | 547,545,859 | 244,306 | 574,992,795 | ||||||||||||
| Latin America |
601,785,754 | 918,956 | 192,790 | 602,897,500 | ||||||||||||
| Middle East/Africa |
4,430,969 | 540,705,036 | 0 | 545,136,005 | ||||||||||||
| Total Common Stocks |
$ | 664,046,682 | $ | 2,549,656,009 | $ | 3,412,248 | $ | 3,217,114,939 | ||||||||
| Equity-Linked Securities — Saudi Arabia |
$ | — | $ | 25,909,709 | $ | — | $ | 25,909,709 | ||||||||
| Rights |
36,187 | — | — | 36,187 | ||||||||||||
| Warrants |
2,169 | 0 | — | 2,169 | ||||||||||||
| Short-Term Investments |
— | 6,119,339 | — | 6,119,339 | ||||||||||||
| Total Investments |
$ | 664,085,038 | $ | 2,581,685,057 | $ | 3,412,248 | $ | 3,249,182,343 | ||||||||
| * | None of the unobservable inputs for Level 3 assets, individually or collectively, had a material impact on the Fund. |
| ** | Includes foreign equity securities whose values were adjusted to reflect market trading of comparable securities or other correlated instruments that occurred after the close of trading in their applicable foreign markets. |
Level 3 investments at the beginning and/or end of the period in relation to net assets were not significant and accordingly, a reconciliation of Level 3 assets for the year ended June 30, 2018 is not presented. At June 30, 2018, the value of investments transferred between Level 1 and Level 2 during the year then ended was not significant.
| 39 |
Parametric Tax-Managed Emerging Markets Fund
June 30, 2018
Report of Independent Registered Public Accounting Firm
To the Trustees of Eaton Vance Series Trust II and Shareholders of Parametric Tax-Managed Emerging Markets Fund:
Opinion on the Financial Statements and Financial Highlights
We have audited the accompanying statement of assets and liabilities of Parametric Tax-Managed Emerging Markets Fund (the “Fund”) (one of the funds constituting Eaton Vance Series Trust II), including the portfolio of investments, as of June 30, 2018, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of June 30, 2018, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of June 30, 2018, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
/s/ Deloitte & Touche LLP
Boston, Massachusetts
August 17, 2018
We have served as the auditor of one or more Eaton Vance investment companies since 1959.
| 40 |
Parametric Tax-Managed Emerging Markets Fund
June 30, 2018
Federal Tax Information (Unaudited)
The Form 1099-DIV you receive in February 2019 will show the tax status of all distributions paid to your account in calendar year 2018. Shareholders are advised to consult their own tax adviser with respect to the tax consequences of their investment in the Fund. As required by the Internal Revenue Code and/or regulations, shareholders must be notified regarding the status of qualified dividend income for individuals and the foreign tax credit.
Qualified Dividend Income. For the fiscal year ended June 30, 2018, the Fund designates approximately $66,102,238, or up to the maximum amount of such dividends allowable pursuant to the Internal Revenue Code, as qualified dividend income eligible for the reduced tax rate of 15%.
Foreign Tax Credit. For the fiscal year ended June 30, 2018, the Fund paid foreign taxes of $11,008,657 and recognized foreign source income of $112,591,009.
| 41 |
Parametric Tax-Managed Emerging Markets Fund
June 30, 2018
Board of Trustees’ Contract Approval
Overview of the Contract Review Process
The Investment Company Act of 1940, as amended (the “1940 Act”), provides, in substance, that each investment advisory agreement between a fund and its investment adviser will continue in effect from year to year only if its continuation is approved at least annually by the fund’s board of trustees, including by a vote of a majority of the trustees who are not “interested persons” of the fund (“Independent Trustees”), cast in person at a meeting called for the purpose of considering such approval.
At a meeting of the Boards of Trustees (each a “Board”) of the registered investment companies advised by either Eaton Vance Management or its affiliate, Boston Management and Research, (the “Eaton Vance Funds”) held on April 24, 2018, the Board, including a majority of the Independent Trustees, voted to approve continuation of existing investment advisory and sub-advisory agreements for the Eaton Vance Funds for an additional one-year period. In voting its approval, the Board relied upon the affirmative recommendation of its Contract Review Committee, which is a committee comprised exclusively of Independent Trustees. Prior to making its recommendation, the Contract Review Committee reviewed information furnished by each adviser to the Eaton Vance Funds (including information specifically requested by the Board) for a series of meetings of the Contract Review Committee held between February and April 2018. The Contract Review Committee also considered information received at prior meetings of the Board and its committees, as relevant to its annual evaluation of the investment advisory and sub-advisory agreements.
The information that the Board considered included, among other things, the following (for funds that invest through one or more underlying portfolio(s), references to “each fund” in this section may include information that was considered at the portfolio-level):
Information about Fees, Performance and Expenses
| • | A report from an independent data provider comparing the advisory and related fees paid by each fund with fees paid by comparable funds as identified by the independent data provider (“comparable funds”); |
| • | A report from an independent data provider comparing each fund’s total expense ratio and its components to comparable funds; |
| • | A report from an independent data provider comparing the investment performance of each fund (including, where relevant, yield data, Sharpe ratios and information ratios) to the investment performance of comparable funds over various time periods; |
| • | Data regarding investment performance in comparison to benchmark indices, as well as customized groups of peer funds and blended indices identified by the adviser in consultation with the Board; |
| • | For each fund, comparative information concerning the fees charged and the services provided by each adviser in managing other accounts (including mutual funds, other collective investment funds and institutional accounts) using investment strategies and techniques similar to those used in managing such fund; |
| • | Profitability analyses for each adviser with respect to each fund; |
Information about Portfolio Management and Trading
| • | Descriptions of the investment management services provided to each fund, including the fund’s investment strategies and policies; |
| • | The procedures and processes used to determine the fair value of fund assets and actions taken to monitor and test the effectiveness of such procedures and processes; |
| • | Information about each adviser’s policies and practices with respect to trading, including each adviser’s processes for monitoring best execution of portfolio transactions; |
| • | Information about the allocation of brokerage transactions and the benefits received by each adviser as a result of brokerage allocation, including information concerning the acquisition of research through client commission arrangements and policies with respect to “soft dollars”; |
| • | Data relating to portfolio turnover rates of each fund; |
Information about each Adviser
| • | Reports detailing the financial results and condition of each adviser; |
| • | Descriptions of the qualifications, education and experience of the individual investment professionals whose responsibilities include portfolio management and investment research for the funds, and information relating to their responsibilities with respect to managing other mutual funds and investment accounts; |
| • | The Code of Ethics of each adviser and its affiliates, together with information relating to compliance with and the administration of such codes; |
| • | Policies and procedures relating to proxy voting and the handling of corporate actions and class actions; |
| • | Information concerning the resources devoted to compliance efforts undertaken by each adviser and its affiliates (including descriptions of various compliance programs) and their record of compliance; |
| • | Information concerning the business continuity and disaster recovery plans of each adviser and its affiliates; |
| • | A description of Eaton Vance Management’s procedures for overseeing third party advisers and sub-advisers, including with respect to regulatory and compliance issues, investment management and other matters; |
| 42 |
Parametric Tax-Managed Emerging Markets Fund
June 30, 2018
Board of Trustees’ Contract Approval — continued
Other Relevant Information
| • | Information concerning the nature, cost and character of the administrative and other non-investment advisory services provided by Eaton Vance Management and its affiliates; |
| • | Information concerning management of the relationship with the custodian, subcustodians and fund accountants by each adviser or the funds’ administrator; and |
| • | The terms of each investment advisory agreement. |
Over the course of the twelve-month period ended April 30, 2018, with respect to one or more funds, the Board met seven times and the Contract Review Committee, the Audit Committee, the Governance Committee, the Portfolio Management Committee and the Compliance Reports and Regulatory Matters Committee, each of which is a Committee comprised solely of Independent Trustees, met seven, thirteen, six, eight and nine times, respectively. At such meetings, the Trustees participated in investment and performance reviews with the portfolio managers and other investment professionals of each investment adviser relating to each fund, and considered various investment and trading strategies used in pursuing each fund’s investment objective, such as the use of derivative instruments, as well as risk management techniques. The Board and its Committees also evaluated issues pertaining to industry and regulatory developments, compliance procedures, fund governance and other issues with respect to the funds, and received and participated in reports and presentations provided by Eaton Vance Management and other fund advisers with respect to such matters. In addition to the formal meetings of the Board and its Committees, the Independent Trustees hold regular teleconferences in between meetings to discuss, among other topics, matters relating to the continuation of investment advisory and sub-advisory agreements.
For funds that invest through one or more underlying portfolios, the Board considered similar information about the portfolio(s) when considering the approval of investment advisory agreements. In addition, in cases where the fund’s investment adviser has engaged a sub-adviser, the Board considered similar information about the sub-adviser when considering the approval of any sub-advisory agreement.
The Contract Review Committee was assisted throughout the contract review process by Goodwin Procter LLP, independent legal counsel for the Independent Trustees. The members of the Contract Review Committee relied upon the advice of such counsel and their own business judgment in determining the material factors to be considered in evaluating each investment advisory and sub-advisory agreement and the weight to be given to each such factor. The conclusions reached with respect to each investment advisory and sub-advisory agreement were based on a comprehensive evaluation of all the information provided and not any single factor. Moreover, each member of the Contract Review Committee may have placed varying emphasis on particular factors in reaching conclusions with respect to each investment advisory and sub-advisory agreement. In evaluating each investment advisory and sub-advisory agreement, including the specific fee structures and other terms of the agreements, the Contract Review Committee was informed by multiple years of analysis and discussion among the Independent Trustees and the Eaton Vance Funds’ advisers and sub-advisers.
Results of the Process
Based on its consideration of the foregoing, and such other information as it deemed relevant, including the factors and conclusions described below, the Contract Review Committee concluded that the continuation of the investment advisory agreement of Parametric Tax-Managed Emerging Markets Fund (the “Fund”) with Eaton Vance Management (the “Adviser”) and the sub-advisory agreement with Parametric Portfolio Associates LLC (the “Sub-adviser”), an affiliate of the Adviser, including their fee structures, is in the interests of shareholders and, therefore, the Contract Review Committee recommended to the Board approval of each agreement. The Board accepted the recommendation of the Contract Review Committee based on the material factors considered and conclusions reached by the Contract Review Committee with respect to the agreements. Accordingly, the Board, including a majority of the Independent Trustees, voted to approve continuation of the investment advisory agreement and the sub-advisory agreement for the Fund.
Nature, Extent and Quality of Services
In considering whether to approve the investment advisory agreement and the sub-advisory agreement of the Fund, the Board evaluated the nature, extent and quality of services provided to the Fund by the Adviser and the Sub-adviser.
The Board considered the Adviser’s and the Sub-adviser’s management capabilities and investment process with respect to the types of investments held by the Fund, including the education, experience and number of its investment professionals and other personnel who provide portfolio management, investment research, and similar services to the Fund. With respect to the Adviser, the Board considered the Adviser’s responsibilities overseeing the Sub-adviser. The Board noted the Adviser’s in-house equity research capabilities and experience in managing funds that seek to maximize after-tax returns. With respect to the Sub-adviser, the Board considered the abilities and experience of the Sub-adviser’s investment professionals in analyzing factors such as special considerations relevant to investing in emerging markets. The Board took into account the resources available to the Sub-adviser in fulfilling its duties under the sub-advisory agreement and the experience of the Sub-adviser’s investment professionals in managing equity portfolios. The Board also took into account the resources dedicated to portfolio management and other services, as well as the compensation methods of the Adviser and other factors, such as the reputation and resources of the Adviser to recruit and retain highly qualified research, advisory and supervisory investment professionals. In addition, the Board considered the time and attention devoted to the Eaton Vance Funds, including the Fund, by senior management, as well as the infrastructure, operational capabilities and support staff in place to assist in the portfolio management and operations of the Fund, including the provision of administrative services. The Board also considered the business-related and other risks to which the Adviser or its affiliates may be subject in managing the Fund.
| 43 |
Parametric Tax-Managed Emerging Markets Fund
June 30, 2018
Board of Trustees’ Contract Approval — continued
The Board considered the compliance programs of the Adviser and relevant affiliates thereof, including the Sub-adviser. Among other matters, the Board considered compliance and reporting matters relating to personal trading by investment professionals, selective disclosure of portfolio holdings, late trading, frequent trading, portfolio valuation, business continuity and the allocation of investment opportunities. The Board also considered the responses of the Adviser and its affiliates to requests in recent years from regulatory authorities such as the Securities and Exchange Commission and the Financial Industry Regulatory Authority.
The Board considered shareholder and other administrative services provided or managed by Eaton Vance Management and its affiliates, including transfer agency and accounting services. The Board evaluated the benefits to shareholders of investing in a fund that is a part of a large fund complex offering exposure to a variety of asset classes and investment disciplines, as well as the ability, in many cases, to exchange an investment among different funds without incurring additional sales charges.
After consideration of the foregoing factors, among others, the Board concluded that the nature, extent and quality of services provided by the Adviser and the Sub-adviser, taken as a whole, are appropriate and consistent with the terms of the investment advisory agreement and the sub-advisory agreement.
Fund Performance
The Board compared the Fund’s investment performance to that of comparable funds and appropriate benchmark indices. The Board’s review included comparative performance data for the one-, three-, five- and ten-year periods ended September 30, 2017 for the Fund. In this regard, the Board noted that the performance of the Fund was lower than the median performance of the Fund’s peer group for the three-year period. The Board also noted that the performance of the Fund was lower than its primary benchmark index for the three-year period. In considering the Fund’s performance, the Board noted that the Fund’s underperformance relative to its benchmark was primarily attributable to underweights in certain larger emerging market countries as a result of the Fund’s systematic rules-based approach.
Management Fees and Expenses
The Board considered contractual fee rates payable by the Fund for advisory and administrative services (referred to collectively as “management fees”). As part of its review, the Board considered the Fund’s management fees and total expense ratio for the one year period ended September 30, 2017, as compared to those of comparable funds, before and after giving effect to any undertaking to waive fees or reimburse expenses. The Board noted that the Adviser pays all ordinary operating expenses of the Fund (except for management fees). The Board also received and considered information about the services offered and the fee rates charged by the Adviser and/or Sub-adviser to other types of clients with investment objectives and strategies that are substantially similar to and/or managed in a similar investment style as the Fund. In this regard, the Board received information about the differences in the nature and scope of services the Adviser and/or Sub-adviser provide to the Fund as compared to other types of clients and the material differences in compliance, reporting and other legal burdens and risks to the Adviser and/or Sub-adviser as between the Fund and other types of clients.
After considering the foregoing information, and in light of the nature, extent and quality of the services provided by the Adviser and the Sub-adviser, the Board concluded that the management fees charged for advisory and related services are reasonable.
Profitability and Other “Fall-Out” Benefits
The Board considered the level of profits realized by the Adviser and relevant affiliates thereof, including the Sub-adviser, in providing investment advisory and administrative services to the Fund and to all Eaton Vance Funds as a group. The Board considered the level of profits realized without regard to marketing support or other payments by the Adviser and its affiliates to third parties in respect of distribution services. The Board also considered other direct or indirect fall-out benefits received by the Adviser and its affiliates, including the Sub-adviser, in connection with their relationships with the Fund, including the benefits of research services that may be available to the Adviser or the Sub-adviser as a result of securities transactions effected for the Fund and other investment advisory clients.
The Board concluded that, in light of the foregoing factors and the nature, extent and quality of the services rendered, the profits realized by the Adviser and its affiliates, including the Sub-adviser, are deemed not to be excessive.
Economies of Scale
In reviewing management fees and profitability, the Board also considered the extent to which the Adviser and its affiliates, on the one hand, and the Fund, on the other hand, can expect to realize benefits from economies of scale as the assets of the Fund increase. The Board acknowledged the difficulty in accurately measuring the benefits resulting from economies of scale, if any, with respect to the management of any specific fund or group of funds. The Board reviewed data summarizing the increases and decreases in the assets of the Fund and of all Eaton Vance Funds as a group over various time periods, and evaluated the extent to which the total expense ratio of the Fund and the profitability of the Adviser and its affiliates may have been affected by such increases or decreases. Based upon the foregoing, the Board concluded that the Fund currently shares in any benefits from economies of scale. The Board also concluded that, assuming reasonably foreseeable increases in the assets of the Fund, and in light of the level of the Adviser’s 2017 profits with respect to the Fund, the implementation of breakpoints in the advisory fee schedule is not warranted at this time.
| 44 |
Parametric Tax-Managed Emerging Markets Fund
June 30, 2018
Management and Organization
Fund Management. The Trustees of Eaton Vance Series Trust II (the Trust) are responsible for the overall management and supervision of the Trust’s affairs. The Trustees and officers of the Trust 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. Trustees and officers of the Trust hold indefinite terms of office. The “Noninterested Trustees” consist of those Trustees who are not “interested persons” of the Trust, as that term is defined under the 1940 Act. The business address of each Trustee and officer is Two International Place, Boston, Massachusetts 02110. As used below, “EVC” refers to Eaton Vance Corp., “EV” refers to Eaton Vance, Inc., “EVM” refers to Eaton Vance Management, “BMR” refers to Boston Management and Research and “EVD” refers to Eaton Vance Distributors, Inc. EVC and EV are the corporate parent and trustee, respectively, of EVM and BMR. EVD is the Fund’s principal underwriter and a wholly-owned subsidiary of EVC. Each officer affiliated with Eaton Vance may hold a position with other Eaton Vance affiliates that is comparable to his or her position with EVM listed below. Each Trustee oversees 173 portfolios in the Eaton Vance Complex (including all master and feeder funds in a master feeder structure). Each officer serves as an officer of certain other Eaton Vance funds. Each Trustee and officer serves until his or her successor is elected.
| Name and Year of Birth | Position(s) with the Trust |
Trustee Since(1) |
Principal Occupation(s) and Directorships During Past Five Years and Other Relevant Experience | |||
| Interested Trustee | ||||||
| Thomas E. Faust Jr. 1958 |
Trustee | 2007 | Chairman, Chief Executive Officer and President of EVC, Director and President of EV, Chief Executive Officer and President of EVM and BMR, and Director of EVD. Trustee and/or officer of 173 registered investment companies. Mr. Faust is an interested person because of his positions with EVM, BMR, EVD, EVC and EV, which are affiliates of the Trust. Directorships in the Last Five Years.(2) Director of EVC and Hexavest Inc. (investment management firm). | |||
| Noninterested Trustees | ||||||
| Mark R. Fetting 1954 |
Trustee | 2016 | Private investor. Formerly held various positions at Legg Mason, Inc. (investment management firm) (2000-2012), including President, Chief Executive Officer, Director and Chairman (2008-2012), Senior Executive Vice President (2004-2008) and Executive Vice President (2001-2004). Formerly, President of Legg Mason family of funds (2001-2008). Formerly, Division President and Senior Officer of Prudential Financial Group, Inc. and related companies (investment management firm) (1991-2000). Directorships in the Last Five Years. None. | |||
| Cynthia E. Frost 1961 |
Trustee | 2014 | Private investor. Formerly, Chief Investment Officer of Brown University (university endowment) (2000-2012); Formerly, Portfolio Strategist for Duke Management Company (university endowment manager) (1995-2000); Formerly, Managing Director, Cambridge Associates (investment consulting company) (1989-1995); Formerly, Consultant, Bain and Company (management consulting firm) (1987-1989); Formerly, Senior Equity Analyst, BA Investment Management Company (1983-1985). Directorships in the Last Five Years. None. | |||
| George J. Gorman 1952 |
Trustee | 2014 | Principal at George J. Gorman LLC (consulting firm). Formerly, Senior Partner at Ernst & Young LLP (a registered public accounting firm) (1974-2009). Directorships in the Last Five Years. Formerly, Trustee of the BofA Funds Series Trust (11 funds) (2011-2014) and of the Ashmore Funds (9 funds) (2010-2014). | |||
| Valerie A. Mosley 1960 |
Trustee | 2014 | Chairwoman and Chief Executive Officer of Valmo Ventures (a consulting and investment firm). Former Partner and Senior Vice President, Portfolio Manager and Investment Strategist at Wellington Management Company, LLP (investment management firm) (1992-2012). Former Chief Investment Officer, PG Corbin Asset Management (1990-1992). Formerly worked in institutional corporate bond sales at Kidder Peabody (1986-1990). Directorships in the Last Five Years.(2) Director of Dynex Capital, Inc. (mortgage REIT) (since 2013). | |||
| William H. Park 1947 |
Chairperson of the Board and Trustee |
2016 (Chairperson) and 2003 (Trustee) | Private investor. Formerly, Consultant (management and transactional) (2012-2014). Formerly, Chief Financial Officer, Aveon Group L.P. (investment management firm) (2010-2011). Formerly, Vice Chairman, Commercial Industrial Finance Corp. (specialty finance company) (2006-2010). Formerly, President and Chief Executive Officer, Prizm Capital Management, LLC (investment management firm) (2002-2005). Formerly, Executive Vice President and Chief Financial Officer, United Asset Management Corporation (investment management firm) (1982-2001). Formerly, Senior Manager, Price Waterhouse (now PricewaterhouseCoopers) (a registered public accounting firm) (1972-1981). Directorships in the Last Five Years.(2) None. | |||
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Parametric Tax-Managed Emerging Markets Fund
June 30, 2018
Management and Organization — continued
| Name and Year of Birth | Position(s) with the Trust |
Trustee Since(1) |
Principal Occupation(s) and Directorships During Past Five Years and Other Relevant Experience | |||
| Noninterested Trustees (continued) | ||||||
| Helen Frame Peters 1948 |
Trustee | 2008 | Professor of Finance, Carroll School of Management, Boston College. Formerly, Dean, Carroll School of Management, Boston College (2000-2002). Formerly, Chief Investment Officer, Fixed Income, Scudder Kemper Investments (investment management firm) (1998-1999). Formerly, Chief Investment Officer, Equity and Fixed Income, Colonial Management Associates (investment management firm) (1991-1998). Directorships in the Last Five Years.(2) None. | |||
| Susan J. Sutherland 1957 |
Trustee | 2015 | Private investor. Formerly, Associate, Counsel and Partner at Skadden, Arps, Slate, Meagher & Flom LLP (law firm) (1982-2013). Directorships in the Last Five Years. Formerly, Director of Montpelier Re Holdings Ltd. (global provider of customized insurance and reinsurance products) (2013-2015). | |||
| Harriett Tee Taggart 1948 |
Trustee | 2011 | Managing Director, Taggart Associates (a professional practice firm). Formerly, Partner and Senior Vice President, Wellington Management Company, LLP (investment management firm) (1983-2006). Ms. Taggart has apprised the Board of Trustees that she intends to retire as a Trustee of all Eaton Vance Funds effective December 31, 2018. Directorships in the Last Five Years.(2) Director of Albemarle Corporation (chemicals manufacturer) (since 2007) and The Hanover Group (specialty property and casualty insurance company) (since 2009). | |||
| Scott E. Wennerholm 1959 |
Trustee | 2016 | Formerly, Trustee at Wheelock College (postsecondary institution) (2012-2018). Formerly, Consultant at GF Parish Group (executive recruiting firm) (2016-2017). Formerly, Chief Operating Officer and Executive Vice President at BNY Mellon Asset Management (investment management firm) (2005-2011). Formerly, Chief Operating Officer and Chief Financial Officer at Natixis Global Asset Management (investment management firm) (1997-2004). Formerly, Vice President at Fidelity Investments Institutional Services (investment management firm) (1994-1997). Directorships in the Last Five Years. None | |||
| Name and Year of Birth | Position(s) with the Trust |
Officer Since(3) |
Principal Occupation(s) During Past Five Years | |||
| Principal Officers who are not Trustees | ||||||
| Payson F. Swaffield 1956 |
President | 2003 | Vice President and Chief Income Investment Officer of EVM and BMR. Also Vice President of Calvert Research and Management (“CRM”). | |||
| Maureen A. Gemma 1960 |
Vice President, Secretary and Chief Legal Officer | 2005 | Vice President of EVM and BMR. Also Vice President of CRM. | |||
| James F. Kirchner 1967 |
Treasurer | 2007 | Vice President of EVM and BMR. Also Vice President of CRM. | |||
| Richard F. Froio 1968 |
Chief Compliance Officer | 2017 | Vice President of EVM and BMR since 2017. Formerly Deputy Chief Compliance Officer (Adviser/Funds) and Chief Compliance Officer (Distribution) at PIMCO (2012-2017) and Managing Director at BlackRock/Barclays Global Investors (2009-2012). | |||
| (1) | Year first appointed to serve as Trustee for a fund in the Eaton Vance family of funds. Each Trustee has served continuously since appointment unless indicated otherwise. |
| (2) | During their respective tenures, the Trustees (except for Mmes. Frost and Sutherland and Messrs. Fetting, Gorman and Wennerholm) also served as Board members of one or more of the following funds (which operated in the years noted): eUnitsTM 2 Year U.S. Market Participation Trust: Upside to Cap / Buffered Downside (launched in 2012 and terminated in 2014); and eUnitsTM 2 Year U.S. Market Participation Trust II: Upside to Cap / Buffered Downside (launched in 2012 and terminated in 2014). However, Ms. Mosley did not serve as a Board member of eUnitsTM 2 Year U.S. Market Participation Trust: Upside to Cap / Buffered Downside (launched in 2012 and terminated in 2014). |
| (3) | Year first elected to serve as officer of a fund in the Eaton Vance family of funds when the officer has served continuously. Otherwise, year of most recent election as an officer of a fund in the Eaton Vance family of funds. Titles may have changed since initial election. |
The SAI for the Fund includes additional information about the Trustees and officers of the Fund and can be obtained without charge on Eaton Vance’s website at www.eatonvance.com or by calling 1-800-260-0761.
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Eaton Vance Funds
IMPORTANT NOTICES
Privacy. The Eaton Vance organization is committed to ensuring your financial privacy. Each of the financial institutions identified below has in effect the following policy (“Privacy Policy”) with respect to nonpublic personal information about its customers:
| • | Only such information received from you, through application forms or otherwise, and information about your Eaton Vance fund transactions will be collected. This may include information such as name, address, social security number, tax status, account balances and transactions. |
| • | None of such information about you (or former customers) will be disclosed to anyone, except as permitted by law (which includes disclosure to employees necessary to service your account). In the normal course of servicing a customer’s account, Eaton Vance may share information with unaffiliated third parties that perform various required services such as transfer agents, custodians and broker-dealers. |
| • | Policies and procedures (including physical, electronic and procedural safeguards) are in place that are designed to protect the confidentiality of such information. |
| • | We reserve the right to change our Privacy Policy at any time upon proper notification to you. Customers may want to review our Privacy Policy periodically for changes by accessing the link on our homepage: www.eatonvance.com. |
Our pledge of privacy applies to the following entities within the Eaton Vance organization: the Eaton Vance Family of Funds, Eaton Vance Management, Eaton Vance Investment Counsel, Eaton Vance Distributors, Inc., Eaton Vance Trust Company, Eaton Vance Management (International) Limited, Eaton Vance Advisers International Ltd., Eaton Vance Management’s Real Estate Investment Group and Boston Management and Research. In addition, our Privacy Policy applies only to those Eaton Vance customers who are individuals and who have a direct relationship with us. If a customer’s account (i.e., fund shares) is held in the name of a third-party financial advisor/broker-dealer, it is likely that only such advisor’s privacy policies apply to the customer. This notice supersedes all previously issued privacy disclosures. For more information about Eaton Vance’s Privacy Policy, please call 1-800-262-1122.
Delivery of Shareholder Documents. The Securities and Exchange Commission (SEC) permits funds to deliver only one copy of shareholder documents, including prospectuses, proxy statements and shareholder reports, to fund investors with multiple accounts at the same residential or post office box address. This practice is often called “householding” and it helps eliminate duplicate mailings to shareholders. Eaton Vance, or your financial advisor, may household the mailing of your documents indefinitely unless you instruct Eaton Vance, or your financial advisor, otherwise. If you would prefer that your Eaton Vance documents not be householded, please contact Eaton Vance at 1-800-260-0761, or contact your financial advisor. Your instructions that householding not apply to delivery of your Eaton Vance documents will typically be effective within 30 days of receipt by Eaton Vance or your financial advisor.
Portfolio Holdings. Each Eaton Vance Fund and its underlying Portfolio(s) (if applicable) will file a schedule of portfolio holdings on Form N-Q with the SEC for the first and third quarters of each fiscal year. The Form N-Q will be available on the Eaton Vance website at www.eatonvance.com, by calling Eaton Vance at 1-800-260-0761 or in the EDGAR database on the SEC’s website at www.sec.gov. Form N-Q may also be reviewed and copied at the SEC’s public reference room in Washington, D.C. (call 1-800-732-0330 for information on the operation of the public reference room).
Proxy Voting. From time to time, funds are required to vote proxies related to the securities held by the funds. The Eaton Vance Funds or their underlying Portfolios (if applicable) vote proxies according to a set of policies and procedures approved by the Funds’ and Portfolios’ Boards. You may obtain a description of these policies and procedures and information on how the Funds or Portfolios voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, without charge, upon request, by calling 1-800-260-0761 and by accessing the SEC’s website at www.sec.gov.
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This Page Intentionally Left Blank
| * | FINRA BrokerCheck. Investors may check the background of their Investment Professional by contacting the Financial Industry Regulatory Authority (FINRA). FINRA BrokerCheck is a free tool to help investors check the professional background of current and former FINRA-registered securities firms and brokers. FINRA BrokerCheck is available by calling 1-800-289-9999 and at www.FINRA.org. The FINRA BrokerCheck brochure describing this program is available to investors at www.FINRA.org. |
2050 6.30.18
Item 2. Code of Ethics
The registrant has adopted a code of ethics applicable to its Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer. The registrant undertakes to provide a copy of such code of ethics to any person upon request, without charge, by calling 1-800-262-1122. The registrant has not amended the code of ethics as described in Form N-CSR during the period covered by this report. The registrant has not granted any waiver, including an implicit waiver, from a provision of the code of ethics as described in Form N-CSR during the period covered by this report.
Item 3. Audit Committee Financial Expert
The registrant’s Board has designated George J. Gorman and William H. Park, each an independent trustee, as audit committee financial experts. Mr. Gorman is a certified public accountant who is the Principal at George J. Gorman LLC (a consulting firm). Previously, Mr. Gorman served in various capacities at Ernst & Young LLP (a registered public accounting firm), including as Senior Partner. Mr. Gorman also has experience serving as an independent trustee and audit committee financial expert of other mutual fund complexes. Mr. Park is a certified public accountant who is a private investor. Previously, he served as a consultant, as the Chief Financial Officer of Aveon Group, L.P. (an investment management firm), as the Vice Chairman of Commercial Industrial Finance Corp. (specialty finance company), as President and Chief Executive Officer of Prizm Capital Management, LLC (investment management firm), as Executive Vice President and Chief Financial Officer of United Asset Management Corporation (an institutional investment management firm) and as a Senior Manager at Price Waterhouse (now PricewaterhouseCoopers) (a registered public accounting firm).
Item 4. Principal Accountant Fees and Services
Parametric Tax-Managed Emerging Markets Fund (the “Fund”), is a series of Eaton Vance Series Trust II (the “Trust”), a Massachusetts business trust, which, including the Fund, contains a total of 2 series (the “Series”). The Trust is registered under the Investment Company Act of 1940 as an open-end management investment company. This Form N-CSR relates to the Fund’s annual reports.
(a)-(d)
The following table presents the aggregate fees billed to the Fund for the Fund’s fiscal years ended June 30, 2017 and June 30, 2018 by D&T, for professional services rendered for the audit of the Fund’s annual financial statements and fees billed for other services rendered by the principal accountant during those periods.
Parametric Tax-Managed Emerging Markets Fund
| Fiscal Years Ended |
6/30/2017 | 6/30/2018 | ||||||
| Audit Fees |
$ | 78,070 | $ | 78,070 | ||||
| Audit-Related Fees(1) |
$ | 0 | $ | 0 | ||||
| Tax Fees(2) |
$ | 14,854 | $ | 20,654 | ||||
| All Other Fees(3) |
$ | 0 | $ | 0 | ||||
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| Total(4) |
$ | 92,924 | $ | 98,724 | ||||
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| (1) | Audit-related fees consist of the aggregate fees billed for assurance and related services that are reasonably related to the performance of the audit of the registrant’s financial statements and are not reported under the category of audit fees. |
| (2) | Tax fees consist of the aggregate fees billed for professional services rendered by the principal accountant relating to tax compliance, tax advice, and tax planning and specifically include fees for tax return preparation and other related tax compliance/planning matters. |
| (3) | All other fees consist of the aggregate fees billed for products and services provided by the registrant’s principal accountant other than audit, audit-related, and tax services. |
| (4) | Fees are paid by the Fund’s administrator pursuant to the terms of its administrative services agreement. |
The Series comprising the Trust have varying fiscal year ends (June 30 and October 31). The following table presents the aggregate audit, audit-related, tax, and other fees billed to all of the Series in the Trust by D&T, for the last two fiscal years of each Series.
| Fiscal Years Ended |
10/31/16 | 6/30/17 | 10/31/17 | 6/30/18 | ||||||||||||
| Audit Fees |
$ | 26,520 | $ | 78,070 | $ | 26,520 | $ | 78,070 | ||||||||
| Audit-Related Fees(1) |
$ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||
| Tax Fees(2) |
$ | 13,815 | $ | 14,854 | $ | 14,022 | $ | 20,654 | ||||||||
| All Other Fees(3) |
$ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||
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| Total |
$ | 40,335 | $ | 92,924 | (4) | $ | 40,542 | $ | 98,724 | (4) | ||||||
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| (1) | Audit-related fees consist of the aggregate fees billed for assurance and related services that are reasonable related to the performance of the audit of financial statements and are not reported under the category of audit fees. |
| (2) | Tax fees consist of the aggregate fees billed for professional services rendered by the principal accountant relating to tax compliance, tax advice, and tax planning and specifically include fees for tax return preparation and other related tax compliance/planning matters. |
| (3) | All other fees consist of the aggregate fees billed for products and services provided by the principal accountant other than audit, audit-related, and tax services. |
| (4) | Fees are paid by the Fund’s administrator pursuant to the terms of its administrative services agreement. |
(e)(1) The registrant’s audit committee has adopted policies and procedures relating to the pre-approval of services provided by the registrant’s principal accountant (the “Pre-Approval Policies”). The Pre-Approval Policies establish a framework intended to assist the audit committee in the proper discharge of its pre-approval responsibilities. As a general matter, the Pre-Approval Policies (i) specify certain types of audit, audit-related, tax, and other services determined to be pre-approved by the audit committee; and (ii) delineate specific procedures governing the mechanics of the pre-approval process, including the approval and monitoring of audit and non-audit service fees. Unless a service is specifically pre-approved under the Pre-Approval Policies, it must be separately pre-approved by the Audit Committee.
The Pre-Approval Policies and the types of audit and non-audit services pre-approved therein must be reviewed and ratified by the registrant’s audit committee at least annually. The registrant’s audit committee maintains full responsibility for the appointment, compensation, and oversight of the work of the registrant’s principal accountant.
(e)(2) No services described in paragraphs (b)-(d) above were approved by the registrant’s audit committee pursuant to the “de minimis exception” set forth in Rule 2-01 (c)(7)(i)(C) of Regulation S-X.
(f) Not applicable.
(g) The following table presents (i) the aggregate non-audit fees (i.e., fees for audit-related, tax, and other services) billed to all of the Series in the Trust by each Series respective principal accountant for the last two fiscal years of each Series; and (ii) the aggregate non-audit fees (i.e., fees for audit-related, tax, and other services) billed to the Eaton Vance organization by each Series respective principal accountant for the last two fiscal years of each Series.
| Fiscal Years Ended |
10/31/16 | 6/30/17 | 10/31/17 | 6/30/18 | ||||||||||||
| Registrant(1) |
$ | 13,815 | $ | 14,854 | $ | 14,022 | $ | 20,654 | ||||||||
| Eaton Vance(2) |
$ | 56,434 | $ | 148,018 | $ | 148,018 | $ | 51,855 | ||||||||
| (1) | Includes all of the Series in the Trust. During the fiscal years reported above, certain of the Funds were “feeder” funds in a “master-feeder” fund structure or funds of funds. |
| (2) | Various subsidiaries of Eaton Vance Corp. act in either an investment advisory and/or service provider capacity with respect to the Series and/or their respective “master” funds (if applicable). |
(h) The registrant’s audit committee has considered whether the provision by the registrant’s principal accountant of non-audit services to the registrant’s investment adviser and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant that were not pre-approved pursuant to Rule 2-01(c)(7)(ii) of Regulation S-X is compatible with maintaining the principal accountant’s independence.
Item 5. Audit Committee of Listed Registrants
Not applicable.
Item 6. Schedule of Investments
Please see schedule of investments contained in the Report to Stockholders included under Item 1 of this Form N-CSR.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders
No material changes.
Item 11. Controls and Procedures
(a) It is the conclusion of the registrant’s principal executive officer and principal financial officer that the effectiveness of the registrant’s current disclosure controls and procedures (such disclosure controls and procedures having been evaluated within 90 days of the date of this filing) provide reasonable assurance that the information required to be disclosed by the registrant has been recorded, processed, summarized and reported within the time period specified in the Commission’s rules and forms and that the information required to be disclosed by the registrant has been accumulated and communicated to the registrant’s principal executive officer and principal financial officer in order to allow timely decisions regarding required disclosure.
(b) There have been no changes in the registrant’s internal controls over financial reporting during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
Item 12. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies
Not applicable.
Item 13. Exhibits
| (a)(1) | Registrant’s Code of Ethics – Not applicable (please see Item 2). | |
| (a)(2)(i) | Treasurer’s Section 302 certification. | |
| (a)(2)(ii) | President’s Section 302 certification. | |
| (b) | Combined Section 906 certification. | |
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Eaton Vance Series Trust II | ||
| By: | /s/ Payson F. Swaffield | |
| Payson F. Swaffield | ||
| President | ||
| Date: | August 21, 2018 | |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| By: | /s/ James F. Kirchner | |
| James F. Kirchner | ||
| Treasurer | ||
| Date: | August 21, 2018 | |
| By: | /s/ Payson F. Swaffield | |
| Payson F. Swaffield | ||
| President | ||
| Date: | August 21, 2018 | |
Eaton Vance Series Trust II
FORM N-CSR
Exhibit 13(a)(2)(i)
CERTIFICATION
I, James F. Kirchner, certify that:
1. I have reviewed this report on Form N-CSR of Eaton Vance Series Trust II;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: August 21, 2018 | /s/ James F. Kirchner | |||||
| James F. Kirchner | ||||||
| Treasurer |
Eaton Vance Series Trust II
FORM N-CSR
Exhibit 13(a)(2)(ii)
CERTIFICATION
I, Payson F. Swaffield, certify that:
1. I have reviewed this report on Form N-CSR of Eaton Vance Series Trust II;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: August 21, 2018 | /s/ Payson F. Swaffield | |||||
| Payson F. Swaffield | ||||||
| President |
Form N-CSR Item 13(b) Exhibit
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
The undersigned hereby certify in their capacity as Treasurer and President, respectively, of Eaton Vance Series Trust II (the “Trust”) that:
| (a) | The Annual Report of the Trust on Form N-CSR for the period ended June 30, 2018 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
| (b) | The information contained in the Report fairly presents, in all material respects, the financial condition and the results of operations of the Trust for such period. |
A signed original of this written statement required by section 906 has been provided to the Trust and will be retained by the Trust and furnished to the Securities and Exchange Commission or its staff upon request.
Eaton Vance Series Trust II
Date: August 21, 2018
| /s/ James F. Kirchner |
| James F. Kirchner |
| Treasurer |
Date: August 21, 2018
| /s/ Payson F. Swaffield |
| Payson F. Swaffield |
| President |
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