<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 25, 1996
1933 ACT FILE NO. 33-572
1940 ACT FILE NO. 811-4409
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933 [X]
POST-EFFECTIVE AMENDMENT NO. 62 [X]
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 64 [X]
EATON VANCE MUNICIPALS TRUST
--------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
24 FEDERAL STREET, BOSTON, MASSACHUSETTS 02110
----------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
617-482-8260
-------------------------------------
(REGISTRANT'S TELEPHONE NUMBER)
ALAN R. DYNNER, 24 FEDERAL STREET, BOSTON, MASSACHUSETTS 02110
--------------------------------------------------------
(NAME AND ADDRESS OF AGENT FOR SERVICE)
<TABLE>
It is proposed that this filing will become effective pursuant to rule 485 (check appropriate box):
<C> <C>
[ ] immediately upon filing pursuant to paragraph (b) [X] on February 1, 1997 pursuant to paragraph (a)(1)
[ ] on December 1, 1996 pursuant to paragraph (b) [ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] 60 days after filing pursuant to paragraph (a)(1) [ ] on (date) pursuant to paragraph (a)(2).
</TABLE>
If appropriate, check the following box:
[ ] this post effective amendment designates a new effective date for a
previously filed post- effective amendment.
National Municipals Portfolio has also executed this Registration
Statement.
The Registrant has filed a Declaration pursuant to Rule 24f-2. On
September 4, 1996, Registrant filed its "Notice" as required by that Rule for
the series of the Registrant with the fiscal year end of July 31, 1996, on
October 15, 1996 filed its "Notice" for the series of the Registrant with the
fiscal year end of August 31, 1996, and on November 21, 1996 filed its
"Notice" for the series of the Registrant with the fiscal year end of
September 30, 1995. Registrant continues its election to register an
indefinite number of shares of beneficial interest pursuant to Rule 24f-2.
================================================================================
<PAGE>
This Amendment to the registration statement on Form N-1A consists of the
following documents and papers:
Cross Reference Sheets required by Rule 481(a) under Securities Act of
1933
Part A -- The Prospectus of:
EV Traditional National Municipals Fund
Part B -- The Statement of Additional Information of:
EV Traditional National Municipals Fund
Part C -- Other Information
Signatures
Exhibit Index Required by Rule 483(b) under the Securities Act of 1933
Exhibits
This Amendment is not intended to amend the Prospectuses and Statements of
Additional Information of any other Series of the Registrant not identified
above.
<PAGE>
EATON VANCE MUNICIPALS TRUST
EV TRADITIONAL NATIONAL MUNICIPALS FUND
CROSS REFERENCE SHEET
ITEMS REQUIRED BY FORM N-1A
<TABLE>
<CAPTION>
PART A
ITEM NO. ITEM CAPTION PROSPECTUS CAPTION
- ------ -------- ---------------------------------------------
<S> <C> <C>
1. ..................... Cover Page Cover Page
2. ..................... Synopsis Shareholder and Fund Expenses
3. ..................... Condensed Financial Information The Fund's Financial Highlights; Performance
Information
4. ..................... General Description of Registrant The Fund's Investment Objectives; Investment
Policies and Risks; Organization of the
Fund and the Portfolio
5. ..................... Management of the Fund Management of the Fund and the Portfolio
5A...................... Management's Discussion of Fund Not Applicable
Performance
6. ..................... Capital Stock and Other Securities Organization of the Fund and the Portfolio;
Reports to Shareholders; The Lifetime
Investing Account/Distribution Options;
Distributions and Taxes
7. ..................... Purchase of Securities Being Offered Valuing Fund Shares; How to Buy Fund Shares;
The Lifetime Investing Account/Distribution
Options; Service Plan; The Eaton Vance
Exchange Privilege; Eaton Vance Shareholder
Services
8. ..................... Redemption or Repurchase How to Redeem Fund Shares
9. ..................... Pending Legal Proceedings Not Applicable
<CAPTION>
PART B
ITEM NO. ITEM CAPTION STATEMENT OF ADDITIONAL INFORMATION CAPTION
- ------ -------- ---------------------------------------------
<S> <C> <C>
10. ..................... Cover Page Cover Page
11. ..................... Table of Contents Table of Contents
12. ..................... General Information and History Other Information
13. ..................... Investment Objectives and Policies Additional Information about Investment
Policies; Investment Restrictions
14. ..................... Management of the Fund Trustees and Officers; Fees and Expenses
15. ..................... Control Persons and Principal Holders of Control Persons and Principal Holders of
Securities Securities
16. ..................... Investment Advisory and Other Investment Adviser and Administrator; Service
Services Plan; Custodian; Independent Certified
Public Accountants; Fees and Expenses
17. ..................... Brokerage Allocation and Other Portfolio Security Transactions; Fees and
Practices Expenses
18. ..................... Capital Stock and Other Securities Other Information
19. ..................... Purchase, Redemption and Pricing of Determination of Net Asset Value; Principal
Securities Being Offered Underwriter; Service for Withdrawal;
Services for Accumulation; Service Plan;
Fees and Expenses
20. ..................... Tax Status Taxes; Tax Equivalent Yield Table
21. ..................... Underwriters Principal Underwriter; Fees and Expenses
22. ..................... Calculation of Performance Data Investment Performance; Performance
Information
23. ..................... Financial Statements Not applicable
</TABLE>
<PAGE>
PART A
INFORMATION REQUIRED IN A PROSPECTUS
EV TRADITIONAL
NATIONAL MUNICIPALS FUND
- ------------------------------------------------------------------------------
EV TRADITIONAL NATIONAL MUNICIPALS FUND (THE "FUND") IS A MUTUAL FUND SEEKING TO
PROVIDE CURRENT INCOME EXEMPT FROM THE REGULAR FEDERAL INCOME TAX. THE FUND
INVESTS ITS ASSETS IN NATIONAL MUNICIPALS PORTFOLIO (THE "PORTFOLIO"), A
DIVERSIFIED OPEN-END INVESTMENT COMPANY HAVING THE SAME INVESTMENT OBJECTIVE AS
THE FUND, RATHER THAN BY DIRECTLY INVESTING IN AND MANAGING ITS OWN PORTFOLIO OF
SECURITIES. THE FUND IS A SERIES OF EATON VANCE MUNICIPALS TRUST (THE "TRUST").
Shares of the Fund are not deposits or obligations of, or guaranteed or endorsed
by, any bank or other insured depository institution, and are not federally
insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board
or any other government agency. Shares of the Fund involve investment risks,
including fluctuations in value and the possible loss of some or all of the
principal investment.
This Prospectus is designed to provide you with information you should know
before investing. Please retain this document for future reference. A Statement
of Additional Information for the Fund dated February 1, 1997, as supplemented
from time to time, has been filed with the Securities and Exchange Commission
and is incorporated herein by reference. This Statement of Additional
Information is available without charge from the Fund's principal underwriter,
Eaton Vance Distributors, Inc. (the "Principal Underwriter"), 24 Federal Street,
Boston, MA 02110 (telephone (800) 225-6265). The Portfolio's investment adviser
is Boston Management and Research (the "Investment Adviser"), a wholly-owned
subsidiary of Eaton Vance Management, and Eaton Vance Management is the
administrator (the "Administrator") of the Fund. The offices of the Investment
Adviser and the Administrator are located at 24 Federal Street, Boston, MA
02110.
- ------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE PAGE
<S> <C> <C> <C>
Shareholder and Fund Expenses ......................... 2 How to Redeem Fund Shares ......................... 13
The Fund's Financial Highlights ....................... 3 Reports to Shareholders ........................... 14
The Fund's Investment Objective ....................... 4 The Lifetime Investing Account/
Investment Policies and Risks ......................... 4 Distribution Options ............................ 14
Organization of the Fund and the Portfolio ............ 7 The Eaton Vance Exchange Privilege ................ 15
Management of the Fund and the Portfolio .............. 8 Eaton Vance Shareholder Services .................. 16
Service Plan .......................................... 9 Distributions and Taxes ........................... 16
Valuing Fund Shares ................................... 10 Performance Information ........................... 17
How to Buy Fund Shares ................................ 10 Appendix .......................................... 19
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
PROSPECTUS DATED FEBRUARY 1, 1997
<PAGE>
SHAREHOLDER AND FUND EXPENSES
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
-----------------------------------------------------------------------------------------------------------
CLASS A CLASS I
SHARES SHARES
------ ------
<S> <C> <C>
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) 3.75% None
Sales Charges Imposed on Reinvested Distributions None None
Fees to Exchange Shares None None
<CAPTION>
ANNUAL FUND AND ALLOCATED PORTFOLIO OPERATING EXPENSES (as a percentage of average daily net assets)
-----------------------------------------------------------------------------------------------------------
CLASS A CLASS I
SHARES SHARES
------ ------
<S> <C> <C>
Investment Advisory Fee 0.44% 0.44%
Service Plan Fees 0.07 0.00
Other Fees 0.35 0.35
---- ----
Total Operating Expenses 0.86% 0.79%
<CAPTION>
EXAMPLE
-------
An investor would pay the following expenses and, in the case of Class A
shares, maximum initial sales charge on a $1,000 investment, assuming (a) 5% CLASS A CLASS I
annual return and (b) redemption at the end of each time period: SHARES SHARES
------ ------
<S> <C> <C>
1 Year $ 46 $ 8
3 Years 64 25
5 Years 83 44
10 Years 140 98
</TABLE>
NOTES:
- ------
The table and Example summarize the aggregate expenses of each class of shares
of the Fund and the Portfolio and are designed to help investors understand the
costs and expenses they will bear, directly or indirectly, by investing in the
Fund. Information for Class A shares is based on expenses for the most recent
fiscal year and information for Class I shares is estimated for the current
fiscal year.
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. Federal regulations
require the Example to assume a 5% annual return, but actual return will vary.
For further information regarding the expenses of the Fund and the Portfolio see
"The Fund's Financial Highlights," "Management of the Fund and the Portfolio"
and "Service Plan."
The Fund offers two classes of shares. Class A shares are available to all
investors and are sold subject to a sales charge and a service fee. Class I
shares are offered only through financial intermediaries who charge their
clients a fee for services. See "How to Buy Fund Shares" and "Service Plan."
No sales charge is payable at the time of purchase on investments in Class A
shares of $1 million or more. However, a contingent deferred sales charge of
0.50% will be imposed on such investments in the event of certain redemptions
within 12 months of purchase. See "How to Buy Fund Shares," "How to Redeem Fund
Shares" and "Eaton Vance Shareholder Services."
The Portfolio's monthly advisory fee has two components, a fee based on daily
net assets and a fee based on daily gross income, as set forth in the fee
schedule on page 9.
The Fund invests exclusively in the Portfolio. Other investment companies with
different distribution arrangements and fees are investing in the Portfolio and
others may do so in the future. See "Organization of the Fund and the
Portfolio."
<PAGE>
THE FUND'S FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------
The following information should be read in conjunction with the audited
financial statements included in the Fund's annual report to shareholders in
reliance upon the report of Deloitte & Touche LLP, independent certified public
accountants, as experts in accounting and auditing. Further information
regarding the performance of the Fund is contained in its annual report to
shareholders which may be obtained without charge by contacting the Principal
Underwriter. The following information relates to Class A shares only.
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------------------
1996 1995 1994*
------ ------ ------
<S> <C> <C> <C>
NET ASSET VALUE, beginning of year $10.000 $10.000
------ ------ ------
INCOME FROM OPERATIONS:
Net investment income $ 0.691 $ 0.334
Net realized and unrealized gain on investments 0.471 0.002++
------ ------ ------
Total income from operations $ 1.162 $ 0.336
------ ------ ------
LESS DISTRIBUTIONS:
From net investment income $(0.691) $(0.334)
In excess of net investment income(3) (0.001) (0.002)
------ ------ ------
Total distributions $(0.692) $(0.336)
------ ------ ------
NET ASSET VALUE, end of year $10.470 $10.000
====== ======= =======
TOTAL RETURN(2) 12.10% 3.34%
RATIOS/SUPPLEMENTAL DATA**:
Net assets, end of period (000 omitted) $26,524 $ 4,281
Ratio of net expenses to average daily net
assets(1) 0.66% 0.43%+
Ratio of net investment income to average daily
net assets 6.60% 5.97%+
**For the period from the start of business, April 5, 1994, to September 30, 1994, and for the
year ended September 30, 1995, the operating expenses of the Fund reflect an allocation of
expenses to the Administrator. Had such action not been taken, net investment income per share
and the ratios would have been as follows:
NET INVESTMENT INCOME PER SHARE $ 0.646 $ 0.255
====== ======= =======
RATIOS (As a percentage of average daily net assets):
Expenses (1) 1.09% 1.84%+
Net investment income 6.17% 4.56%+
<FN>
+Annualized.
++The per share amount is not in accord with the net realized and unrealized gains and losses
for the period because of the timing of sales of Fund shares and the amount of per share
realized and unrealized gains and losses at such time.
(1)Includes the Fund's share of the Portfolio's allocated expenses.
(2)Total return is calculated assuming a purchase at the net asset value on the first day and a
sale at the net asset value on the last day of each period reported. Distributions, if any,
are assumed to be reinvested at the net asset value on the payable date. Total return is
computed on a non-annualized basis.
(3)The Fund has followed the Statement of Position (SOP) 93-2: Determination, Disclosure and
Financial Statement Presentation of Income, Capital Gain, and Return of Capital Distributions
by Investment Companies. The SOP requires that differences in the recognition or
classification of income between the financial statements and tax earnings and profits that
result in temporary over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or accumulated net realized gains.
*For the period from the start of business, April 5, 1994, to September 30, 1994.
</TABLE>
<PAGE>
THE FUND'S INVESTMENT OBJECTIVE
- -------------------------------------------------------------------------------
THE FUND'S INVESTMENT OBJECTIVE IS TO PROVIDE CURRENT INCOME EXEMPT FROM REGULAR
FEDERAL INCOME TAX. It currently seeks to meet its investment objective by
investing its assets in the National Municipals Portfolio (the "Portfolio"), a
separate registered investment company which invests primarily in municipal
obligations (described below) which are rated at least investment grade by a
major rating agency or, if unrated, determined to be of at least investment
grade quality by the Investment Adviser.
INVESTMENT POLICIES AND RISKS
- ------------------------------------------------------------------------------
THE FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY INVESTING EITHER DIRECTLY
OR INDIRECTLY THROUGH ANOTHER OPEN-END MANAGEMENT INVESTMENT COMPANY PRIMARILY
(I.E., AT LEAST 80% OF ITS ASSETS DURING PERIODS OF NORMAL MARKET CONDITIONS) IN
DEBT OBLIGATIONS ISSUED BY OR ON BEHALF OF STATES, TERRITORIES AND POSSESSIONS
OF THE UNITED STATES, AND THE DISTRICT OF COLUMBIA AND THEIR POLITICAL
SUBDIVISIONS, AGENCIES OR INSTRUMENTALITIES, THE INTEREST ON WHICH IS EXEMPT
FROM REGULAR FEDERAL INCOME TAX. The foregoing policy is a fundamental policy of
both the Fund and the Portfolio, and may not be changed unless authorized by a
vote of the shareholders of the Fund or the investors in the Portfolio, as the
case may be.
At least 65% of the net assets of the Portfolio will normally be invested in
obligations rated at least investment grade at the time of investment (which are
those rated Baa or higher by Moody's Investors Service, Inc. ("Moody's") or BBB
or higher by either Standard & Poor's Ratings Group ("S&P") or by Fitch
Investors Service, Inc. ("Fitch")), or, if unrated, determined by the Investment
Adviser to be of at least investment grade quality. The Portfolio may invest
less than 35% of its net assets in municipal obligations rated below investment
grade (but not lower than B by Moody's, S&P or Fitch) and unrated municipal
obligations considered to be of comparable quality by the Investment Adviser.
Municipal obligations rated Baa or BBB may have speculative characteristics.
Also, changes in economic conditions or other circumstances are more likely to
lead to a weakened capacity to make principal and interest payments than in the
case of higher rated obligations. Securities rated below BBB or Baa are commonly
known as "junk bonds". The Portfolio may retain an obligation whose rating drops
below B after its acquisition if such retention is considered desirable by the
Investment Adviser. See "Additional Risk Considerations." For a description of
municipal obligation ratings, see the Statement of Additional Information.
MUNICIPAL OBLIGATIONS. Municipal obligations include bonds, notes and commercial
paper issued by a municipality for a wide variety of both public and private
purposes, the interest on which is, in the opinion of bond counsel, exempt from
regular federal income tax. Public purpose municipal bonds include general
obligation and revenue bonds. General obligation bonds are backed by the taxing
power of the issuing municipality. Revenue bonds are backed by the revenues of a
project or facility, or from the proceeds of a specific revenue source. Some
revenue bonds are payable solely or partly from funds which are subject to
annual appropriations by a State's legislature and the availability of monies
for such payments. Municipal notes include bond anticipation, tax anticipation
and revenue anticipation notes, which are short-term obligations that will be
retired with the proceeds of an anticipated bond issue, tax revenue or facility
revenue, respectively.
Interest on certain types of municipal obligations may be subject to the federal
alternative minimum tax (the "AMT") for individual investors. As at September
30, 1996, the Portfolio had _____ % of its net assets invested in such
obligations. Distributions to corporate investors of certain interest income may
also be subject to the AMT. The Fund may not be suitable for investors subject
to the AMT.
CONCENTRATION. The Portfolio may invest 25% or more of its total assets in
municipal obligations of issuers located in the same state or in municipal
obligations of the same type, including without limitation the following: lease
rental obligations of state and local authorities; obligations dependent on
annual appropriations by a state's legislature for payment; obligations of state
and local housing finance authorities, municipal utilities systems or public
housing authorities; obligations of hospitals or life care facilities; or
industrial development or pollution control bonds issued for electric utility
systems, steel companies, paper companies or other purposes. This may make the
Portfolio more susceptible to adverse economic, political, or regulatory
occurrences affecting a particular category of issuers. For example, health-care
related issuers are susceptible to medicaid reimbursement policies, and national
and state health care legislation. As the Portfolio's concentration increases,
so does the potential for fluctuation in the value of the Fund's shares.
DIVERSIFIED STATUS. The Portfolio is a "diversified" investment company under
the Investment Company Act of 1940 (the "1940 Act"). This means that with
respect to 75% of its total assets (1) the Portfolio may not invest more than 5%
of its total assets in the securities of any one issuer (except U.S. Government
obligations) and (2) the Portfolio may not own more than 10% of the outstanding
voting securities of any one issuer. Since municipal obligations are not voting
securities, there is no limit on the percentage of a single issuer's obligations
which the Portfolio may own so long as it does not invest more than 5% of its
total assets in the securities of that issuer. Consequently, the Portfolio may
invest in a greater percentage of the outstanding securities of a single issuer
than would an investment company which invests in voting securities. There is no
diversification requirement with respect to the remaining 25% of the Portfolio's
total assets, so that all of such assets may be invested in the securities of
any one issuer. To the extent that the Portfolio is less diversified than that
of other investment companies, it may be subject to an increased risk of loss if
the issuer is unable to make interest or principal payments or if the market
value of such securities declines.
OTHER INVESTMENT PRACTICES
The Portfolio may engage in the following investment practices, some of which
may be considered to involve "derivative" instruments because they derive their
value from another instrument, security or index. In addition, the Portfolio may
temporarily borrow up to 5% of the value of its total assets to satisfy
redemption requests or settle securities transactions.
WHEN-ISSUED SECURITIES. The Portfolio may purchase securities on a "when-issued"
basis, which means that payment and delivery occur on a future settlement date.
The price and yield of such securities are generally fixed on the date of
commitment to purchase. However, the market value of the securities may
fluctuate prior to delivery and upon delivery the securities may be worth more
or less than the Portfolio agreed to pay for them. The Portfolio may also
purchase instruments that give the Portfolio the option to purchase a municipal
obligation when and if issued.
INVERSE FLOATERS. The Portfolio may invest in municipal securities whose
interest rates bear an inverse relationship to the interest rate on another
security or the value of an index ("inverse floaters"). An investment in inverse
floaters may involve greater risk than an investment in a fixed rate bond.
Because changes in the interest rate on the other security or index inversely
affect the residual interest paid on the inverse floater, the value of an
inverse floater is generally more volatile than that of a fixed rate bond.
Inverse floaters have interest rate adjustment formulas which generally reduce
or, in the extreme, eliminate the interest paid to the Portfolio when short-term
interest rates rise, and increase the interest paid to the Portfolio when
short-term interest rates fall. Inverse floaters have varying degrees of
liquidity, and the market for these securities is new and relatively volatile.
These securities tend to underperform the market for fixed rate bonds in a
rising interest rate environment, but tend to outperform the market for fixed
rate bonds when interest rates decline. Shifts in long-term interest rates may,
however, alter this tendency. Although volatile, inverse floaters typically
offer the potential for yields exceeding the yields available on fixed rate
bonds with comparable credit quality and maturity. These securities usually
permit the investor to convert the floating rate to a fixed rate (normally
adjusted downward), and this optional conversion feature may provide a partial
hedge against rising rates if exercised at an opportune time. Inverse floaters
are leveraged because they provide two or more dollars of bond market exposure
for every dollar invested.
FUTURES TRANSACTIONS. The Portfolio may purchase and sell varous kinds of
financial futures contracts and options thereon to hedge against changes in
interest rates. Futures contracts may be based on various debt securities (such
as U.S. Government securities) and securities indices (such as the Municipal
Bond Index traded on the Chicago Board of Trade). Such transactions involve a
risk of loss or depreciation due to unanticipated adverse changes in securities
prices, which may exceed the Portfolio's initial investment in these contracts.
The Portfolio may not purchase or sell futures contracts or related options,
except for closing purchase or sale transactions, if immediately thereafter the
sum of the amount of margin deposits and premiums paid on the Portfolio's
outstanding positions would exceed 5% of the market value of the Portfolio's net
assets. These transactions involve transaction costs. There can be no assurance
that the Investment Adviser's use of futures will be advantageous to the
Portfolio. Distributions by the Fund of any gains realized on the Portfolio's
transactions in futures and options on futures will be taxable.
INSURED OBLIGATIONS. The Portfolio may purchase municipal bonds that are
additionally secured by insurance, bank credit agreements, or escrow accounts.
The credit quality of companies which provide such credit enhancements will
affect the value of those securities. Although the insurance feature reduces
certain financial risks, the premiums for insurance and the higher market price
paid for insured obligations may reduce the Fund's current yield. Insurance
generally will be obtained from insurers with a claims-paying ability rated Aaa
by Moody's or AAA by S&P or Fitch. The insurance does not guarantee the market
value of the insured obligations or the net asset value of the Fund's shares.
ADDITIONAL RISK CONSIDERATIONS
Many municipal obligations offering current income are in the lowest investment
grade category (Baa or BBB), lower categories or may be unrated. As indicated
above, the Portfolio may invest in municipal obligations rated below investment
grade (but not lower than B by Moody's, S&P or Fitch) and comparable unrated
obligations. See the Appendix to this Prospectus for the asset composition of
the Portfolio for the fiscal year ended September 30, 1996. The lowest
investment grade, lower rated and comparable unrated municipal obligations in
which the Portfolio may invest will have speculative characteristics in varying
degrees. While such obligations may have some quality and protective
characteristics, these characteristics can be expected to be offset or
outweighed by uncertainties or major risk exposures to adverse conditions. Lower
rated and comparable unrated municipal obligations are subject to the risk of an
issuer's inability to meet principal and interest payments on the obligations
(credit risk) and may also be subject to greater price volatility due to such
factors as interest rate sensitivity, market perception of the creditworthiness
of the issuer and general market liquidity (market risk). Lower rated or unrated
municipal obligations are also more likely to react to real or perceived
developments affecting market and credit risk than are more highly rated
obligations, which react primarily to movements in the general level of interest
rates. The Investment Adviser seeks to minimize the risks of investing in below
investment grade securities through professional investment analysis and
attention to current developments in interest rates and economic conditions.
When the Portfolio invests in lower rated or unrated municipal obligations, the
achievement of the Portfolio's goals is more dependent on the Investment
Adviser's ability than would be the case if the Portfolio were investing in
municipal obligations in the higher rating categories.
The Portfolio may retain defaulted obligations in its portfolio when such
retention is considered desirable by the Investment Adviser. In the case of a
defaulted obligation, the Portfolio may incur additional expense seeking
recovery of its investment. Municipal obligations held by the Portfolio which
are rated below investment grade but which, subsequent to the assignment of such
rating, are backed by escrow accounts containing U.S. Government obligations may
be determined by the Investment Adviser to be of investment grade quality for
purposes of the Portfolio's investment policies. The Portfolio may retain in its
portfolio an obligation whose rating drops below B after its acquisition, if
such retention is considered desirable by the Investment Adviser; provided,
however, that holdings of obligations rated below Baa or BBB will be less than
35% of net assets. In the event the rating of an obligation held by the
Portfolio is downgraded, causing the Portfolio to exceed this limitation, the
Investment Adviser will (in an orderly fashion within a reasonable period of
time) dispose of such obligations as it deems necessary in order to comply with
the Portfolio's credit quality limitations.
The net asset value of shares of the Fund will change in response to
fluctuations in prevailing interest rates and changes in the value of the
securities held by the Portfolio. When interest rates decline, the value of
securities held by the Portfolio can be expected to rise. Conversely, when
interest rates rise, the value of most portfolio security holdings can be
expected to decline. Changes in the credit quality of the issuers of municipal
obligations held by the Portfolio will affect the principal value of (and
possibly the income earned on) such obligations. In addition, the values of such
securities are affected by changes in general economic conditions and business
conditions affecting the specific industries of their issuers. Changes by
recognized rating services in their ratings of a security and in the ability of
the issuer to make payments of principal and interest may also affect the value
of the Portfolio's investments. The amount of information about the financial
condition of an issuer of municipal obligations may not be as extensive as that
made available by corporations whose securities are publicly traded. An
investment in shares of the Fund will not constitute a complete investment
program.
At times, a substantial portion of the Portfolio's assets may be invested in
securities as to which the Portfolio, by itself or together with other accounts
managed by the Investment Adviser and its affiliates, holds a major portion or
all of such securities. Under adverse market or economic conditions or in the
event of adverse changes in the financial condition of the issuer, the Portfolio
could find it more difficult to sell such securities when the Investment Adviser
believes it advisable to do so or may be able to sell such securities only at
prices lower than if such securities were more widely held. Under such
circumstances, it may also be more difficult to determine the fair value of such
securities for purposes of computing the Portfolio's net asset value.
The secondary market for some municipal obligations (including issues which are
privately placed with the Portfolio) is less liquid than that for taxable debt
obligations or other more widely traded municipal obligations. The Portfolio
will not invest in illiquid securities if more than 15% of its net assets would
be invested in securities that are not readily marketable. No established resale
market exists for certain of the municipal obligations in which the Portfolio
may invest. The market for obligations rated below investment grade is also
likely to be less liquid than the market for higher rated obligations. As a
result, the Portfolio may be unable to dispose of these municipal obligations at
times when it would otherwise wish to do so at the prices at which they are
valued.
Certain securities held by the Portfolio may permit the issuer at its option to
"call," or redeem, its securities. If an issuer redeems securities held by the
Portfolio during a time of declining interest rates, the Portfolio may not be
able to reinvest the proceeds providing the same investment return as the
securities redeemed.
Some of the securities in which the Portfolio invests may include so-called
"zero-coupon" bonds, whose values are subject to greater fluctuation in response
to changes in market interest rates than bonds which pay interest currently.
Zero-coupon bonds are issued at a significant discount from face value and pay
interest only at maturity rather than at intervals during the life of the
security. The Portfolio is required to accrue income from zero-coupon bonds on a
current basis, even though it does not receive that income currently in cash,
and the Fund is required to distribute its share of the Portfolio's income for
each taxable year. Thus, the Portfolio may have to sell other investments to
obtain cash needed to make income distributions.
The Portfolio may invest in municipal leases, and participations in municipal
leases. The obligation of the issuer to meet its obligations under such leases
is often subject to the appropriation by the appropriate legislative body, on an
annual or other basis, of funds for the payment of the obligations. Investments
in municipal leases are thus subject to the risk that the legislative body will
not make the necessary appropriation and the issuer will not otherwise be
willing or able to meet its obligation.
THE FUND AND PORTFOLIO HAVE ADOPTED CERTAIN FUNDAMENTAL INVESTMENT
RESTRICTIONS WHICH ARE ENUMERATED IN DETAIL IN THE STATEMENT OF ADDITIONAL
INFORMATION AND WHICH MAY NOT BE CHANGED UNLESS AUTHORIZED BY A SHAREHOLDER
VOTE AND AN INVESTOR VOTE, RESPECTIVELY. EXCEPT FOR SUCH ENUMERATED
RESTRICTIONS AND AS OTHERWISE INDICATED IN THIS PROSPECTUS, THE INVESTMENT
OBJECTIVE AND POLICIES OF THE FUND AND PORTFOLIO ARE NOT FUNDAMENTAL POLICIES
AND ACCORDINGLY MAY BE CHANGED BY THE TRUSTEES OF THE TRUST AND THE PORTFOLIO
WITHOUT OBTAINING THE APPROVAL OF THE FUND'S SHAREHOLDERS OR THE INVESTORS IN
THE PORTFOLIO, AS THE CASE MAY BE. IF ANY CHANGES WERE MADE IN THE FUND'S
INVESTMENT OBJECTIVE, THE FUND MIGHT HAVE INVESTMENT OBJECTIVES DIFFERENT FROM
THE OBJECTIVE WHICH AN INVESTOR CONSIDERED APPROPRIATE AT THE TIME THE
INVESTOR BECAME A SHAREHOLDER IN THE FUND.
ORGANIZATION OF THE FUND AND THE PORTFOLIO
- ------------------------------------------------------------------------------
THE FUND IS A SERIES OF EATON VANCE MUNICIPALS TRUST (THE "TRUST"), A BUSINESS
TRUST ESTABLISHED UNDER MASSACHUSETTS LAW PURSUANT TO A DECLARATION OF TRUST
DATED SEPTEMBER 30, 1985, AS AMENDED. THE TRUST IS A MUTUAL FUND -- AN OPEN-END
MANAGEMENT INVESTMENT COMPANY. The Trustees of the Trust are responsible for the
overall management and supervision of its affairs. The Trust may issue an
unlimited number of shares of beneficial interest (no par value per share) in
one or more series (such as the Fund). The Trustees of the Trust have divided
the shares of the Fund into two classes, Class A shares and Class I shares. Each
class represents an interest in the Fund, but is subject to different expenses,
rights and privileges. See "Service Plan" and "How to Buy Fund Shares." The
Trustees have the authority under the Declaration of Trust to create additional
classes of shares with rights and privileges different from those applicable to
the existing classes of shares.
When issued and outstanding, the shares are fully paid and nonassessable by the
Trust and redeemable as described under "How to Redeem Fund Shares".
Shareholders are entitled to one vote for each full share held. Fractional
shares may be voted proportionately. Shares have no preemptive or conversion
rights and are freely transferable. In the event of the liquidation of the Fund,
shareholders of each class are entitled to share pro rata in the net assets of
the Fund attributable to that class available for distribution to shareholders.
THE PORTFOLIO IS ORGANIZED AS A TRUST UNDER THE LAWS OF THE STATE OF NEW YORK
AND INTENDS TO BE TREATED AS A PARTNERSHIP FOR FEDERAL TAX PURPOSES. The
Portfolio, as well as the Trust, intends to comply with all applicable federal
and state securities laws. The Portfolio's Declaration of Trust provides that
the Fund and other entities permitted to invest in the Portfolio (e.g., other
U.S. and foreign investment companies, and common and commingled trust funds)
will each be liable for all obligations of the Portfolio. However, the risk of
the Fund incurring financial loss on account of such liability is limited to
circumstances in which both inadequate insurance exists and the Portfolio itself
is unable to meet its obligations. Accordingly, the Trustees of the Trust
believe that neither the Fund nor its shareholders will be adversely affected by
reason of the Fund investing in the Portfolio.
The Trustees of the Trust have considered the advantages and disadvantages of
investing the assets of the Fund in the Portfolio, as well as the advantages and
disadvantages of the two-tier format. The Trustees believe that the structure
offers opportunities for substantial growth in the assets of the Portfolio,
affords the potential for economies of scale for the Fund (at least when the
assets of the Portfolio exceed $500 million) and may over time result in lower
expenses for the Fund.
In addition to selling an interest to the Fund, the Portfolio may sell interests
to other affiliated and non-affiliated mutual funds or institutional investors.
Such investors will invest in the Portfolio on the same terms and conditions and
will pay a proportionate share of the Portfolio's expenses. However, the other
investors investing in the Portfolio are not required to sell their shares at
the same public offering price as the Fund due to variations in sales
commissions and other operating expenses. Therefore, investors in the Fund
should be aware that these differences may result in differences in returns
experienced by investors in the various funds that invest in the Portfolio. Such
differences in returns are also present in other mutual fund structures,
including funds that have multiple classes of shares. Information regarding
other pooled investment entities or funds which invest in the Portfolio may be
obtained by contacting the Principal Underwriter, 24 Federal Street, Boston, MA
02110 (617) 482-8260.
Whenever the Fund as an investor in the Portfolio is requested to vote on
matters pertaining to the Portfolio (other than the termination of the
Portfolio's business, which may be determined by the Trustees of the Portfolio
without investor approval), the Fund will hold a meeting of Fund shareholders
and will vote its interest in the Portfolio for or against such matters
proportionately to the instructions to vote for or against such matters received
from Fund shareholders. The Fund shall vote shares for which it receives no
voting instructions in the same proportion as the shares for which it receives
voting instructions. Other investors in the Portfolio may alone or collectively
acquire sufficient voting interests in the Portfolio to control matters relating
to the operation of the Portfolio, which may require the Fund to withdraw its
investment in the Portfolio or take other appropriate action. Any such
withdrawal could result in a distribution "in kind" of portfolio securities (as
opposed to a cash distribution from the Portfolio). If securities are
distributed, the Fund could incur brokerage, tax or other charges in converting
the securities to cash. In addition, the distribution in kind may result in a
less diversified portfolio of investments or adversely affect the liquidity of
the Fund. Notwithstanding the above, there are other means for meeting
shareholder redemption requests, such as borrowing.
The Fund may withdraw (completely redeem) all its assets from the Portfolio at
any time if the Board of Trustees of the Trust determines that it is in the best
interest of the Fund to do so. In the event the Fund withdraws all of its assets
from the Portfolio, or the Board of Trustees of the Trust determines that the
investment objective of the Portfolio is no longer consistent with the
investment objective of the Fund, the Board of Trustees of the Trust would
consider what action might be taken, including investing the assets of the Fund
in another pooled investment entity or retaining an investment adviser to manage
the Fund's assets in accordance with its investment objective. The Fund's
investment performance may be affected by a withdrawal of all its assets from
the Portfolio.
MANAGEMENT OF THE FUND AND THE PORTFOLIO
- ------------------------------------------------------------------------------
THE PORTFOLIO ENGAGES BOSTON MANAGEMENT AND RESEARCH ("BMR"), A WHOLLY-OWNED
SUBSIDIARY OF EATON VANCE MANAGEMENT ("EATON VANCE"), AS ITS INVESTMENT ADVISER.
EATON VANCE, ITS AFFILIATES AND ITS PREDECESSOR COMPANIES HAVE BEEN MANAGING
ASSETS OF INDIVIDUALS AND INSTITUTIONS SINCE 1924 AND MANAGING INVESTMENT
COMPANIES SINCE 1931.
Acting under the general supervision of the Board of Trustees of the Portfolio,
BMR manages the Portfolio's investments and affairs. BMR also furnishes for the
use of the Portfolio office space and all necessary office facilities, equipment
and personnel for servicing the investments of the Portfolio. Under its
investment advisory agreement with the Portfolio, BMR receives a monthly
advisory fee equal to the aggregate of
(a) a daily asset based fee computed by applying the annual asset rate
applicable to that portion of the total daily net assets in each Category as
indicated below, plus
(b) a daily income based fee computed by applying the daily income rate
applicable to that portion of the total daily gross income (which portion
shall bear the same relationship to the total daily gross income on such day
as that portion of the total daily net assets in the same Category bears to
the total daily net assets on such day) in each Category as indicated below:
<TABLE>
<CAPTION>
ANNUAL DAILY
CATEGORY DAILY NET ASSETS ASSET RATE INCOME RATE
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 up to $500 million 0.300% 3.00%
2 $500 million but less than $1 billion 0.275% 2.75%
3 $1 billion but less than $1.5 billion 0.250% 2.50%
4 $1.5 billion but less than $2 billion 0.225% 2.25%
5 $2 billion but less than $3 billion 0.200% 2.00%
6 $3 billion and over 0.175% 1.75%
</TABLE>
As at September 30, 1996, the Portfolio had net assets of $ _____________ . For
the fiscal year ended September 30, 1996, the Portfolio paid BMR advisory fees
equivalent to 0.44% of the Portfolio's average net assets for such year.
BMR OR EATON VANCE ACTS AS INVESTMENT ADVISER TO INVESTMENT COMPANIES AND
VARIOUS INDIVIDUAL AND INSTITUTIONAL CLIENTS WITH ASSETS UNDER MANAGEMENT OF
OVER $16 BILLION. Eaton Vance is a wholly-owned subsidiary of Eaton Vance Corp.,
a publicly-held holding company which through its subsidiaries and affiliates
engages primarily in investment management, administration and marketing
activities. The Principal Underwriter is a wholly-owned subsidiary of Eaton
Vance.
Thomas M. Metzold has acted as the portfolio manager of the Portfolio since
December 17, 1993. He has been a Vice President of Eaton Vance since 1991 and of
BMR since 1992, and an employee of Eaton Vance since 1987.
Municipal obligations are normally traded on a net basis (without commission)
through broker-dealers and banks acting for their own account. Such firms
attempt to profit from such transactions by buying at the bid price and selling
at the higher asked price of the market, and the difference is customarily
referred to as the spread. In selecting firms which will execute portfolio
transactions BMR judges their professional ability and quality of service and
uses its best efforts to obtain execution at prices which are advantageous to
the Portfolio and at reasonably competitive spreads. Subject to the foregoing,
BMR may consider sales of shares of the Fund or of other investment companies
sponsored by BMR or Eaton Vance as a factor in the selection of firms to execute
portfolio transactions. The Fund, the Portfolio and BMR have adopted Codes of
Ethics relating to personal securities transactions. The Codes permit Eaton
Vance personnel to invest in securities (including securities that may be
purchased or held by the Portfolio) for their own accounts, subject to certain
reporting and other restrictions and procedures contained in such Codes.
The Trust has retained the services of Eaton Vance to act as administrator of
the Fund. The Trust has not retained the services of an investment adviser since
the Trust seeks to achieve the investment objective of the Fund by investing its
assets in the Portfolio. As Administrator, Eaton Vance provides the Fund with
general office facilities and supervises the overall administration of the Fund.
For these services Eaton Vance currently receives no compensation. The Trustees
of the Trust may determine, in the future, to compensate Eaton Vance for such
services.
The Portfolio and the Fund, as the case may be, will each be responsible for all
respective costs and expenses not expressly stated to be payable by BMR under
the investment advisory agreement, by Eaton Vance under the administrative
services agreement, or by the Principal Underwriter under the distribution
agreement.
SERVICE PLAN
- -------------------------------------------------------------------------------
In addition to advisory fees and other expenses, Class A shares of the Fund pay
service fees pursuant to a Service Plan (the "Plan") designed to meet the
service fee requirements of the revised sales charge rule of the National
Association of Securities Dealers, Inc. THE PLAN PROVIDES THAT THE FUND MAY MAKE
SERVICE FEE PAYMENTS FOR PERSONAL SERVICES AND/OR THE MAINTENANCE OF SHAREHOLDER
ACCOUNTS TO THE PRINCIPAL UNDERWRITER, FINANCIAL SERVICE FIRMS ("AUTHORIZED
FIRMS") AND OTHER PERSONS IN AMOUNTS NOT EXCEEDING .25% OF THE AVERAGE DAILY NET
ASSETS OF THE FUND ATTRIBUTABLE TO CLASS A SHARES FOR ANY FISCAL YEAR. The
Trustees of the Trust have initially implemented the Plan by authorizing the
Fund to make service fee payments to the Principal Underwriter and Authorized
Firms in amounts not expected to exceed .25% of the average daily net assets for
any fiscal year which is atrributable to Class A shares of the Fund sold by such
persons and remaining outstanding for at least twelve months. For the fiscal
year ended September 30, 1996, the Fund paid or accrued service fees under the
Plan equivalent to 0.07% of its average daily net assets for such year. The Plan
is further described in the Statement of Additional Information.
VALUING FUND SHARES
- ------------------------------------------------------------------------------
THE FUND VALUES ITS SHARES ONCE ON EACH DAY THE NEW YORK STOCK EXCHANGE (THE
"EXCHANGE") IS OPEN FOR TRADING, as of the close of regular trading on the
Exchange (normally 4:00 p.m. New York time). The Fund's net asset value per
share is determined by its custodian, Investors Bank & Trust Company ("IBT"),
(as agent for the Fund) in the manner authorized by the Trustees of the Trust.
Net asset value of each class of shares is computed by dividing the value of the
Fund's total assets attributable to that class, less its liabilities
attributable to that class, by the number of shares of that class outstanding.
Because the Fund invests its assets in an interest in the Portfolio, the Fund's
net asset value will reflect the value of its interest in the Portfolio (which,
in turn, reflects the underlying value of the Portfolio's assets and
liabilities).
Authorized Firms must communicate an investor's order to the Principal
Underwriter prior to the close of the Principal Underwriter's business day to
receive that day's net asset value per share and in the case of Class A shares
the public offering price based thereon. It is the Authorized Firms'
responsibility to transmit orders promptly to the Principal Underwriter.
The Portfolio's net asset value is also determined as of the close of regular
trading on the Exchange by IBT (as custodian and agent for the Portfolio) based
on market or fair value in the manner authorized by the Trustees of the
Portfolio. Net asset value is computed by subtracting the liabilities of the
Portfolio from the value of its total assets. Municipal obligations will
normally be valued on the basis of valuations furnished by a pricing service.
For further information regarding the valuation of the Portfolio's assets, see
"Determination of Net Asset Value" in the Statement of Additional Information.
SHAREHOLDERS MAY DETERMINE THE VALUE OF THEIR INVESTMENT BY MULTIPLYING THE
NUMBER OF FUND SHARES OWNED BY THE CURRENT NET ASSET VALUE PER SHARE.
HOW TO BUY FUND SHARES
- ------------------------------------------------------------------------------
SHARES OF THE FUND MAY BE PURCHASED FOR CASH OR MAY BE ACQUIRED IN EXCHANGE FOR
SECURITIES. Investors may purchase shares of the Fund through Authorized Firms.
The Principal Underwriter will furnish the names of Authorized Firms to an
investor upon request. An Authorized Firm may charge its customers a fee in
connection with transactions executed by that Firm. The Fund may suspend the
offering of shares at any time and may refuse an order for the purchase of
shares.
CLASS A SHARES may be purchased through Authorized Firms at the effective public
offering price, which price is based on the effective net asset value per share
plus the applicable sales charge. The Fund receives the net asset value, while
the sales charge is divided between the Authorized Firm and the Principal
Underwriter.
The sales charge may vary depending on the size of the purchase and the number
of shares of Eaton Vance funds the investor may already own, any arrangement to
purchase additional shares during a 13-month period or special purchase
programs. Complete details of how investors may purchase shares at reduced sales
charges under a Statement of Intention, Right of Accumulation, are available
from Authorized Firms or the Principal Underwriter.
The current sales charges and dealer commissions on purchases of Class A shares
are:
<TABLE>
<CAPTION>
SALES CHARGE SALES CHARGE DEALER COMMISSION
AS PERCENTAGE OF AS PERCENTAGE OF AS PERCENTAGE OF
AMOUNT OF PURCHASE AMOUNT INVESTED OFFERING PRICE OFFERING PRICE
------------------ --------------- -------------- --------------
<S> <C> <C> <C>
Less than $50,000 3.90% 3.75% 4.00%
$50,000 but less than $100,000 2.83% 2.75% 3.00%
$100,000 but less than $250,000 2.30% 2.25% 2.50%
$250,000 but less than $500,000 1.78% 1.75% 2.00%
$500,000 but less than $1,000,000 1.27% 1.25% 1.50%
$1,000,000 or more 0.00%* 0.00%* 0.50%
</TABLE>
*No sales charge is payable at the time of purchase on investments of $1 million
or more or where the amount invested represents redemption proceeds from a
mutual fund unaffiliated with Eaton Vance, if the redemption occurred no more
than 60 days prior to the purchase of Fund shares and the redeemed shares were
subject to a sales charge. A contingent deferred sales charge ("CDSC") of 0.50%
will be imposed on such investments (as described below) in the event of
certain redemptions within 12 months of purchase. Such purchases made before
March 27, 1995 will be subject to a CDSC of 1% in the event of certain
redemptions within 18 months of purchase.
The Principal Underwriter may at times allow discounts up to the full sales
charge. During periods when the discount includes the full sales charge,
Authorized Firms may be deemed to be underwriters as that term is defined in the
Securities Act of 1933. The Principal Underwriter may, from time to time, at its
own expense, provide additional incentives to Authorized Firms which employ
registered representatives who sell Fund shares and/or shares of other funds
distributed by the Principal Underwriter. In some instances, such additional
incentives may be offered only to certain Authorized Firms whose representatives
sell or are expected to sell significant amounts of shares.
An initial investment in Class A shares of the Fund must be at least $1,000.
Once an account has been established the investor may send investments of $50
or more at any time directly to the Fund's transfer agent (the "Transfer
Agent") as follows: First Data Investor Services Group, P.O. Box 5123,
Westborough, MA 01581-5123. The $1,000 minimum initial investment is waived
for Bank Automated Investing accounts, which may be established with an
investment of $50 or more. See "Eaton Vance Shareholder Services."
Class A shares of the Fund may be sold at net asset value to current and retired
Directors and Trustees of Eaton Vance funds, including the Portfolio; to clients
and current and retired officers and employees of Eaton Vance, its affiliates
and other investment advisers of Eaton Vance sponsored funds; to registered
representatives and employees of Authorized Firms; to bank employees who refer
customers to registered representatives of Authorized Firms; and to such
persons' spouses and children under the age of 21 and their beneficial accounts.
Class A shares may also be issued at net asset value (1) in connection with the
merger of an investment company with the Fund, (2) to investors making an
investment as part of a fixed fee program whereby an entity unaffiliated with
the investment adviser provides multiple investment services, such as
management, brokerage and custody, and (3) to investment advisors, financial
planners or other intermediaries who place trades for their own accounts or the
accounts of their clients and who charge a management, consulting or other fee
for their services; clients of such investment advisors, financial planners or
other intermediaries who place trades for their own accounts if the accounts are
linked to the master account of such investment advisor, financial planner or
other intermediary on the books and records of the broker or agent; and
retirement and deferred compensation plans and trusts used to fund those plans,
including, but not limited to, those defined in Section 401(a), 403(b) or 457 of
the Internal Revenue Code of 1986, as amended (the "Code") and "rabbi trusts."
CLASS I SHARES are offered through certain Authorized Firms that charge their
customers transaction or other fees with respect to their customers' investment
in the Fund. Class I shares may also be sold to certain persons and entities
affiliated with Eaton Vance. An initial investment in Class I shares of the Fund
must be at least $250,000 and the minimum subsequent investment is $10,000. The
minimum investment amounts are waived for persons and entities affiliated with
Eaton Vance.
ACQUIRING FUND SHARES IN EXCHANGE FOR SECURITIES. IBT, as escrow agent, will
receive securities acceptable to Eaton Vance, as Administrator, in exchange for
Fund shares at the applicable public offering price as determined above. The
minimum value of securities (or securities and cash) accepted for deposit is
$5,000. Securities accepted will be sold on the day of their receipt or as soon
thereafter as possible. The number of Fund shares to be issued in exchange for
securities will be the aggregate proceeds from the sale of such securities,
divided by the applicable public offering price per Fund share on the day such
proceeds are received. Eaton Vance will use reasonable efforts to obtain the
current market price for such securities but does not guarantee the best
available price. Eaton Vance will absorb any transaction costs, such as
commissions, on the sale of the securities.
Securities determined to be acceptable should be transferred via book entry or
physically delivered, in proper form for transfer, through an Authorized Firm,
together with a completed and signed Letter of Transmittal in approved form
(available from Authorized Firms), as follows:
IN THE CASE OF BOOK ENTRY:
Deliver through Depository Trust Co.
Broker #2212
Investors Bank & Trust Company
For A/C EV Traditional National Municipals Fund
IN THE CASE OF PHYSICAL DELIVERY:
Investors Bank & Trust Company
Attention: EV Traditional National Municipals Fund
Physical Securities Processing Settlement Area
89 South Street
Boston, MA 02111
Investors who are contemplating an exchange of securities for shares of the
Fund, or their representatives, must contact Eaton Vance to determine whether
the securities are acceptable before forwarding such securities. Eaton Vance
reserves the right to reject any securities. Exchanging securities for Fund
shares may create a taxable gain or loss. Each investor should consult his or
her tax adviser with respect to the particular federal, state and local tax
consequences of exchanging securities for Fund shares.
STATEMENT OF INTENTION AND ESCROW AGREEMENT FOR CLASS A SHARES. If the investor
in Class A shares of the Fund, on an application, makes a Statement of Intention
to invest a specified amount over a thirteen-month period, then out of the
initial purchase (or subsequent purchases if necessary) 5% of the dollar amount
specified on the application shall be held in escrow by the escrow agent in the
form of shares (computed to the nearest full share at the public offering price
applicable to the initial purchase hereunder) registered in the investor's name.
All income dividends and capital gains distributions on escrowed shares will be
paid to the investor or to the investor's order. When the minimum investment so
specified is completed, the escrowed shares will be delivered to the investor.
If the investor has an accumulation account the shares will remain on deposit
under the investor's account.
If total purchases under this Statement of Intention are less than the amount
specified, the investor will promptly remit to the Principal Underwriter any
difference between the sales charge on the amount specified and on the amount
actually purchased. If the investor does not within 20 days after written
request by the Principal Underwriter or the Authorized Firm pay such difference
in sales charge, the escrow agent will redeem an appropriate number of the
escrowed shares in order to realize such difference. Full shares remaining after
any such redemption together with any excess cash proceeds of the shares so
redeemed will be delivered to the investor or to the investor's order by the
escrow agent.
If total purchases made under this Statement are large enough to qualify for a
lower sales charge than that applicable to the amount specified, all
transactions will be computed at the expiration date of this Statement to give
effect to the lower charge. Any difference in sales charge will be refunded to
the investor in cash, or applied to the purchase of additional shares at the
lower charge if specified by the investor. This refund will be made by the
Authorized Firm and by the Principal Underwriter. If at the time of the
recomputation a firm other than the original firm is placing the orders, the
adjustment will be made only on those shares purchased through the firm then
handling the investor's account.
IF YOU DON'T HAVE AN AUTHORIZED FIRM, EATON VANCE CAN RECOMMEND ONE.
HOW TO REDEEM FUND SHARES
- -------------------------------------------------------------------------------
A SHAREHOLDER MAY REDEEM FUND SHARES IN ONE OF THREE WAYS -- BY MAIL, BY
TELEPHONE OR THROUGH AN AUTHORIZED FIRM. The redemption price will be based on
the net asset value per Fund share next computed after a redemption request is
received in the proper form as described below.
REDEMPTION BY MAIL: Shares may be redeemed by delivering to the Transfer Agent,
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123,
during its business hours a written request for redemption in good order, plus
any share certificates with executed stock powers. Good order means that all
relevant documents must be endorsed by the record owner(s) exactly as the shares
are registered and the signature(s) must be guaranteed by a member of either the
Securities Transfer Association's STAMP program or the New York Stock Exchange's
Medallion Signature Program, or certain banks, savings and loan institutions,
credit unions, securities dealers, securities exchanges, clearing agencies and
registered securities associations as required by a regulation of the Securities
and Exchange Commission (the "Commission") and acceptable to the Transfer Agent.
In addition, in some cases, good order may require the furnishing of additional
documents such as where shares are registered in the name of a corporation,
partnership or fiduciary.
REDEMPTION BY TELEPHONE: Shares may be redeemed by telephone provided the
investor has not disclaimed in writing the use of the privilege. Such
redemptions can be effected by calling the Transfer Agent at 800-262-1122,
Monday through Friday, 9:00 a.m. to 4:00 p.m. (Eastern Standard Time). The
proceeds of a telephone redemption may be no greater than the maximum amount
established by the Principal Underwriter (currently $50,000) and may be mailed
only to the account address of record. Shares held by corporations, trusts or
certain other entities, or subject to fiduciary arrangements, may not be
redeemed by telephone. Neither the Fund, the Principal Underwriter nor the
Transfer Agent will be responsible for the authenticity of redemption
instructions received by telephone, provided that reasonable procedures to
confirm that instructions communicated by telephone are genuine have been
followed. Telephone instructions will be tape recorded. In times of drastic
economic or market changes, a telephone redemption may be difficult to
implement.
REDEMPTION THROUGH AN AUTHORIZED FIRM: To sell shares at their net asset value
through an Authorized Firm (a repurchase), a shareholder can place a repurchase
order with the Authorized Firm, which may charge a fee. The value of those
shares is based upon the net asset value calculated after the Principal
Underwriter, as the Fund's agent, receives the order. It is the Authorized
Firm's responsibility to transmit promptly repurchase orders to the Principal
Underwriter. Throughout this Prospectus, the word "redemption" is generally
meant to include a repurchase.
Within seven days after receipt of a redemption request in good order by the
Transfer Agent, the Fund will make payment in cash for the shares as of the date
determined above, reduced by the amount of any federal income tax required to be
withheld. Although the Fund normally expects to make payment in cash for
redeemed shares, the Trust, subject to compliance with applicable regulations,
has reserved the right to pay the redemption price of shares of the Fund, either
totally or partially, by a distribution in kind of readily marketable securities
withdrawn by the Fund from the Portfolio. The securities so distributed would be
valued pursuant to the Portfolio's valuation procedures. If a shareholder
received a distribution in kind, the shareholder could incur brokerage or other
charges in converting the securities to cash.
If shares were recently purchased, the proceeds of a redemption will not be sent
until the check (including a certified or cashier's check) received for the
shares purchased has cleared. Payment for shares tendered for redemption may be
delayed up to 15 days from the purchase date when the purchase check has not yet
cleared. Redemptions may result in a taxable gain or loss.
Due to the high cost of maintaining small accounts, the Fund reserves the right
to redeem Fund accounts with balances of less than $750. Prior to such a
redemption, shareholders will be given 60 days' written notice to make an
additional purchase. However, no such redemption would be required by the Fund
if the cause of the low account balance was a reduction in the net asset value
of Fund shares.
If Class A shares have been purchased at net asset value with no initial sales
charge by virtue of the purchase having been in the amount of $1 million or more
and are redeemed within 12 months of purchase, a CDSC of 0.50% will be imposed
on such redemption. (Such purchases made before March 27, 1995 will be subject
to a CDSC of 1% in the event of certain redemptions made within 18 months of
purchase.) The CDSC will be retained by the Principal Underwriter. The CDSC will
be imposed on an amount equal to the lesser of the current market value or the
original purchase price of the Class A shares redeemed. Accordingly, no CDSC
will be imposed on increases in account value above the initial purchase price,
including any distributions that have been reinvested in additional shares. In
determining whether a CDSC is applicable to a redemption, the calculation will
be made in a manner that results in the lowest possible rate being charged. It
will be assumed that redemptions are made first from any shares in the
shareholder's account that are not subject to a CDSC.
The CDSC is waived for redemptions involving certain liquidation, merger or
acquisition transactions involving other investment companies. If a shareholder
reinvests redemption proceeds within a 60-day period and in accordance with the
conditions set forth under "Eaton Vance Shareholder Services -- Reinvestment
Privilege," the shareholder's account will be credited with the amount of any
CDSC paid on such redeemed shares.
REPORTS TO SHAREHOLDERS
- ------------------------------------------------------------------------------
THE FUND WILL ISSUE TO ITS SHAREHOLDERS SEMI-ANNUAL AND ANNUAL REPORTS
CONTAINING FINANCIAL STATEMENTS. Financial statements included in annual reports
are audited by the Fund's independent certified public accountants. Shortly
after the end of each calendar year, the Fund will furnish all shareholders with
information necessary for preparing federal and state income tax returns.
Consistent with applicable law, duplicate mailings of shareholder reports and
certain other Fund information to shareholders residing at the same address may
be eliminated.
THE LIFETIME INVESTING ACCOUNT/DISTRIBUTION OPTIONS
- ------------------------------------------------------------------------------
AFTER AN INVESTOR MAKES AN INITIAL PURCHASE OF FUND SHARES, THE TRANSFER AGENT
WILL SET UP A LIFETIME INVESTING ACCOUNT FOR THE INVESTOR ON THE FUND'S RECORDS.
This account is a complete record of all transactions between the investor and
the Fund which at all times shows the balance of shares owned. The Fund will not
issue share certificates except upon request.
At least quarterly, the shareholder will receive a statement showing complete
details of any transaction and the current share balance in the account.
Any questions concerning a shareholder's account or services available may be
directed by telephone to EATON VANCE SHAREHOLDER SERVICES at 800-225-6265,
extension 2, or in writing to the Transfer Agent, First Data Investor Services
Group, P.O. Box 5123, Westborough, MA 01581-5123 (please provide the name of the
shareholder, the Fund and the account number).
THE FOLLOWING DISTRIBUTION OPTIONS WILL BE AVAILABLE TO ALL LIFETIME INVESTING
ACCOUNTS and may be changed as often as desired by written notice to the Fund's
dividend disbursing agent, First Data Investor Services Group, P.O. Box 5123,
Westborough, MA 01581-5123. The currently effective option will appear on each
account statement.
Share Option -- Dividends and capital gains will be reinvested in additional
shares of the same class.
Income Option -- Dividends will be paid in cash and capital gains will be
reinvested in additional shares of the same class.
Cash Option -- Dividends and capital gains will be paid in cash.
The Share Option will be assigned if no other option is specified.
Distributions, including those reinvested, will be reduced by any withholding
required under the federal income tax laws.
If the Income Option or Cash Option has been selected, dividend and/or capital
gains distribution checks which are returned by the United States Postal Service
as not deliverable or which remain uncashed for six months or more will be
reinvested in the account in shares of the same class at the then current net
asset value. Furthermore, the distribution option on the account will be
automatically changed to the Share Option until such time as the shareholder
selects a different option.
DISTRIBUTION INVESTMENT OPTION. In addition to the distribution options set
forth above, dividends and/or capital gains may be invested in additional shares
of another Eaton Vance fund. Before selecting this option, a shareholder should
obtain a prospectus of the other Eaton Vance fund and consider its objectives
and policies carefully.
"STREET NAME" ACCOUNTS. If shares of the Fund are held in a "street name"
account with an Authorized Firm, all recordkeeping, transaction processing and
payments of distributions relating to the beneficial owner's account will be
performed by the Authorized Firm, and not by the Fund and its Transfer Agent.
Since the Fund will have no record of the beneficial owner's transactions, a
beneficial owner should contact the Authorized Firm to purchase, redeem or
exchange shares, to make changes in or give instructions concerning the account,
or to obtain information about the account. The transfer of shares in a "street
name" account to an account with another dealer or to an account directly with
the Fund involves special procedures and will require the beneficial owner to
obtain historical purchase information about the shares in the account from the
Authorized Firm. Before establishing a "street name" account with an investment
firm, or transferring the account to another investment firm, an investor
wishing to reinvest distributions should determine whether the firm which will
hold the shares allows reinvestment of distributions in "street name" accounts.
THE EATON VANCE EXCHANGE PRIVILEGE
- ------------------------------------------------------------------------------
Shares of the Fund currently may be exchanged for shares of the same class of
any of the following funds: Eaton Vance Cash Management Fund, Eaton Vance Income
Fund of Boston, Eaton Vance Municipal Bond Fund L.P., Eaton Vance Tax Free
Reserves and any fund in the Eaton Vance Traditional Group of Funds on the basis
of the net asset value per share of each fund at the time of the exchange (plus,
in the case of an exchange made within six months of the date of purchase of
Class A shares subject to an initial sales charge, an amount equal to the
difference, if any, between the sales charge previously paid on the shares being
exchanged and the sales charge payable on the shares being acquired). In the
event the fund to be acquired does not offer Class I shares, Class I shares of
the Fund may be exchanged for the existing class of the fund to be acquired.
Such exchange offers are available only in states where shares of the fund being
acquired may be legally sold.
Each exchange must meet the minimum investment amount required by the Fund to be
acquired. The exchange privilege may be changed or discontinued without penalty.
Shareholders will be given sixty (60) days' notice prior to any termination or
material amendment of the exchange privilege. The Fund does not permit the
exchange privilege to be used for "Market Timing" and may terminate the exchange
privilege for any shareholder account engaged in Market Timing activity. Any
shareholder account for which more than two round-trip exchanges are made within
any twelve month period will be deemed to be engaged in Market Timing.
Furthermore, a group of unrelated accounts for which exchanges are entered
contemporaneously by a financial intermediary will be considered to be engaged
in Market Timing.
Class A shares of the Fund which are subject to a CDSC may be exchanged into any
of the above funds without incurring the CDSC. The shares acquired in an
exchange may be subject to a CDSC upon redemption. For purposes of computing the
CDSC payable upon redemption of shares acquired in an exchange, the holding
period of the original shares is added to the holding period of the shares
acquired in the exchange.
The Transfer Agent makes exchanges at the next determined net asset value after
receiving an exchange request in good order (see "How to Redeem Fund Shares").
Consult the Transfer Agent for additional information concerning the exchange
privilege. Applications and prospectuses of the other funds are available from
Authorized Firms or from the Principal Underwriter. The prospectus for each fund
describes its investment objectives and policies, and shareholders should obtain
a prospectus and consider these objectives and policies carefully before
requesting an exchange.
Shares of certain other funds for which Eaton Vance acts as investment adviser
or administrator may be exchanged for Fund shares on the basis of the net asset
value per share of each fund at the time of the exchange (plus, in the case of
an exchange made within six months of the date of purchase of Class A shares
subject to an initial sales charge, an amount equal to the difference, if any,
between the sales charge previously paid on the shares being exchanged and the
sales charge payable on the shares being acquired). Any such exchange is subject
to any restrictions or qualifications set forth in the current prospectus of any
such fund.
Telephone exchanges are accepted by the Transfer Agent provided that the
investor has not disclaimed in writing the use of the privilege. To effect such
exchanges, call the Transfer Agent at 800-262-1122, Monday through Friday, 9:00
a.m. to 4:00 p.m. (Eastern Standard Time). Shares acquired by telephone exchange
must be registered in the same name(s) and with the same address as the shares
being exchanged. Neither the Fund, the Principal Underwriter nor the Transfer
Agent will be responsible for the authenticity of exchange instructions received
by telephone, provided that reasonable procedures to confirm that instructions
communicated are genuine have been followed. Telephone instructions will be tape
recorded. In times of drastic economic or market changes, a telephone exchange
may be difficult to implement. An exchange may result in a taxable gain or loss.
EATON VANCE SHAREHOLDER SERVICES
- ------------------------------------------------------------------------------
THE FUND OFFERS THE FOLLOWING SERVICES WHICH ARE VOLUNTARY, INVOLVE NO EXTRA
CHARGE, AND MAY BE CHANGED OR DISCONTINUED WITHOUT PENALTY AT ANY TIME. Full
information on each of the services described below and an application, where
required, are available from Authorized Firms or the Principal Underwriter. The
cost of administering such services for the benefit of shareholders who
participate in them is borne by the Fund as an expense to all shareholders.
INVEST-BY-MAIL -- FOR PERIODIC CLASS A SHARE ACCUMULATION: Once the $1,000
minimum investment in Class A shares has been made, checks of $50 or more
payable to the order of EV Traditional National Municipals Fund may be mailed
directly to the Transfer Agent, First Data Investor Services Group, P.O. Box
5123, Westborough, MA 01581-5123 at any time -- whether or not distributions are
reinvested. The name of the shareholder, the Fund and the account number should
accompany each investment.
BANK AUTOMATED INVESTING -- FOR REGULAR CLASS A SHARE ACCUMULATION: Cash
investments in Class A shares of $50 or more may be made automatically each
month or quarter from a shareholder's bank account. The $1,000 minimum initial
investment and small account redemption policy are waived for these accounts.
STATEMENT OF INTENTION: Purchases of $50,000 or more of Class A shares made
over a 13-month period are eligible for reduced sales charges. See "How to Buy
Fund Shares -- Statement of Intention and Escrow Agreement."
RIGHT OF ACCUMULATION: Purchases of Class A shares may qualify for reduced sales
charges when the current market value of holdings (shares at current offering
price), plus new purchases, reaches $50,000 or more. Shares of the Eaton Vance
funds listed under "The Eaton Vance Exchange Privilege" may be combined under
the Statement of Intention and Right of Accumulation.
WITHDRAWAL PLAN: A shareholder may draw on shareholdings systematically with
monthly or quarterly checks in an amount specified by the shareholder. A minimum
deposit of $5,000 in shares is required. The maintenance of a withdrawal plan
concurrently with purchases of additional Class A shares would be
disadvantageous because of the sales charge included in such purchases.
REINVESTMENT PRIVILEGE: A shareholder who has redeemed Class A shares may
reinvest at net asset value, any portion or all of the redemption proceeds (plus
that amount necessary to acquire a fractional share to round off the purchase to
the nearest full share) in shares of the Fund, or, provided that the shares
redeemed have been held for at least 60 days, in shares of any of the other
funds offered by the Principal Underwriter subject to an initial sales charge,
provided that the reinvestment is effected within 60 days after such redemption
and the privilege has not been used more than once in the prior 12 months. Class
A Shares are sold to a reinvesting shareholder at the next determined net asset
value following timely receipt of a written purchase order by the Principal
Underwriter or by the fund the shares of which are to be purchased (or by such
fund's transfer agent). The privilege is also available to shareholders of the
Funds listed under "The Eaton Vance Exchange Privilege" who wish to reinvest
such redemption proceeds in shares of the Fund. To the extent that any shares of
the Fund are sold at a loss and the proceeds are reinvested in shares of the
Fund (or other shares of the Fund are acquired) within the period beginning 30
days before and ending 30 days after the date of redemption, some or all of the
loss generally will not be allowed as a tax deduction. Shareholders should
consult their tax advisers concerning the tax consequences of reinvestments.
DISTRIBUTIONS AND TAXES
- ------------------------------------------------------------------------------
SUBSTANTIALLY ALL OF THE INVESTMENT INCOME ALLOCATED TO THE FUND BY THE
PORTFOLIO, LESS THE FUND'S DIRECT AND ALLOCATED EXPENSES (AND, WITH RESPECT TO
EACH CLASS, ANY CLASS EXPENSES), WILL BE DECLARED DAILY AS A DISTRIBUTION TO
FUND SHAREHOLDERS OF RECORD AT THE TIME OF DECLARATION. Such distributions,
whether taken in cash or reinvested in additional shares, will ordinarily be
paid monthly on the last day of each month or the next business day thereafter.
The Fund anticipates that for tax purposes, the entire distribution, whether
paid in cash or additional shares of the Fund, will constitute tax-exempt income
to shareholders, except for the proportionate part of the distribution that may
be considered taxable income if the Fund has taxable income during the calendar
year. Shareholders reinvesting the monthly distribution should treat the amount
of the entire distribution as the tax cost basis of the additional shares
acquired by reason of such reinvestment. Daily distribution crediting will
commence on the day that collected funds for the purchase of Fund shares are
available at the Transfer Agent. Shareholders will receive timely federal income
tax information as to the tax-exempt or taxable status of all distributions made
by the Fund during the calendar year. The Fund's net realized capital gains, if
any, consist of the net realized capital gains allocated to the Fund by the
Portfolio for tax purposes, after taking into account any available capital loss
carryovers; the Fund's net realized capital gains, if any, will be distributed
at least once a year, usually in December.
Sales charges paid upon a purchase of Fund shares cannot be taken into account
for purposes of determining gain or loss on a redemption or exchange of the
shares before the 91st day after their purchase to the extent a sales charge is
reduced or eliminated in a subsequent acquisition of shares of the Fund or of
another fund pursuant to the Fund's reinvestment or exchange privilege. Any
disregarded amounts will result in an adjustment to the shareholder's tax basis
in some or all of any other shares acquired.
The Fund intends to qualify as a regulated investment company under the Code and
to satisfy certain requirements relating to the sources of its income, the
distribution of its income, and the diversification of its assets. In satisfying
these requirements, the Fund will treat itself as owning its proportionate share
of each of the Portfolio's assets and as entitled to the income of the Portfolio
properly attributable to such share.
As a regulated investment company under the Code, the Fund does not pay federal
income or excise taxes to the extent that it distributes to shareholders its net
investment income and net realized capital gains in accordance with the timing
requirements imposed by the Code. As a partnership under the Code, the Portfolio
also does not pay federal income or excise taxes.
Distributions of interest on certain municipal obligations constitute a tax
preference item under the alternative minimum tax provisions applicable to
individuals and corporations. Distributions of taxable income (including a
portion of any original issue discount with respect to certain stripped
municipal obligations and stripped coupons and accretion of certain market
discount) and net short-term capital gains will be taxable to shareholders as
ordinary income. Distributions of long-term capital gains included therein are
taxable to shareholders as such for federal income tax purposes, regardless of
the length of time Fund shares have been owned by the shareholder. If shares are
purchased shortly before the record date of such a distribution, the shareholder
will pay the full price for the shares and then receive some portion of the
price back as a taxable distribution. Distributions are taxed in the manner
described above whether paid in cash or reinvested in additional shares of the
Fund. Tax-exempt distributions received from the Fund are includable in the tax
base for determining the taxability of social security and railroad retirement
benefits.
Interest on indebtedness incurred or continued by a shareholder to purchase or
carry shares of the Fund is not deductible. Further, entities or persons who are
"substantial users" (or persons related to "substantial users") of facilities
financed by industrial development or private activity bonds should consult
their tax advisers before purchasing shares of the Fund. "Substantial user " is
defined in applicable Treasury regulations to include a "non-exempt person" who
regularly uses in trade or business a part of a facility financed from the
proceeds of industrial development bonds and would likely be interpreted to
include private activity bonds issued to finance similar facilities.
Shareholders should consult with their tax advisers concerning the applicability
of state, local and other taxes to an investment in the Fund.
PERFORMANCE INFORMATION
- ------------------------------------------------------------------------------
FROM TIME TO TIME, THE FUND MAY ADVERTISE THE YIELD AND/OR AVERAGE ANNUAL TOTAL
RETURN FOR EACH CLASS OF SHARES. Current yield is calculated by dividing the net
investment income per class share earned during a recent 30-day period by the
maximum offering price per share (net asset value) of that class on the last day
of the period and annualizing the resulting figure. A taxable-equivalent yield
is computed by using the tax-exempt yield figure and dividing by 1 minus the tax
rate. The Fund's average annual total return is determined by the average annual
percentage change in value of $1,000 invested at the maximum public offering
price (which in the case of Class A shares includes the maximum sales charge)
for specified periods, assuming reinvestment of all distributions. The Fund may
publish annual and cumulative total return figures from time to time. The Fund
may also quote total return for the period prior to commencement of operations
which would reflect the Portfolio's total return (or that of its predecessor)
adjusted to reflect any applicable Fund sales charge.
The Fund may also furnish total return calculations based on investments at
various sales charge levels or at net asset value. Any performance data which is
based on the Fund's net asset value per share would be lower if a sales charge
were taken into account. The Fund's performance may be compared in publications
to the performance of various indices and investments for which reliable data is
available, and to averages, performance rankings, or other information prepared
by recognized mutual fund statistical services.
Investors should note that the investment results of the Fund will fluctuate
over time, and any presentation of the Fund's current yield or total return for
any prior period should not be considered a representation of what an investment
may earn or what the Fund's yield or total return may be in any future period.
If the expenses of the Fund or the Portfolio are paid by Eaton Vance, the Fund's
performance will be higher.
<PAGE>
APPENDIX
<TABLE>
NATIONAL MUNICIPALS PORTFOLIO
ASSET COMPOSITION INFORMATION
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1996
RATINGS OF RATINGS OF
MUNICIPAL BONDS MUNICIPAL BONDS
BY MOODY'S BY S&P
PERCENT OF PERCENT OF
NET ASSETS NET ASSETS
---------- ----------
<S> <C> <C> <C>
Aaa ....................................... AAA ...................................
Aa2 ....................................... AA+ ...................................
Aa3 ....................................... AA ....................................
A1 ........................................ AA- ...................................
A2 ........................................ A+ ....................................
Baa1 ...................................... A .....................................
Baa2 ...................................... A- ....................................
Baa3 ...................................... BBB+ ..................................
Ba1 ....................................... BBB ...................................
Ba2 ....................................... BBB- ..................................
B1 ........................................ BB+ ...................................
B2 ........................................ BB ....................................
Unrated ................................... B .....................................
------ Unrated ............................... ------
100.00% 100.00%
</TABLE>
The chart above indicates the weighted average composition of the securities
held by the Portfolio for the period ended September 30, 1996, with the debt
securities rated by Moody's and S&P separated into the indicated categories. The
above was calculated on a dollar weighted basis and was computed as at the end
of each month during the fiscal year. The chart does not necessarily indicate
what the composition of the securities held by the Portfolio's will be in the
current and subsequent fiscal years. Securities that are rated by one rating
agency may be "unrated" by the other.
For a description of Moody's and S&P's municipal bond ratings, see the Appendix
to the Statement of Additional Information.
<PAGE>
[LOGO: EATON VANCE]
EV TRADITIONAL
NATIONAL
MUNICIPALS FUND
PROSPECTUS
FEBRUARY 1, 1997
EV TRADITIONAL NATIONAL
MUNICIPALS FUND
24 FEDERAL STREET
BOSTON, MA 02110
- --------------------------------------------------------------------------------
PORTFOLIO INVESTMENT ADVISER
Boston Management and Research, 24 Federal Street, Boston, MA 02110
FUND ADMINISTRATOR
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111
TRANSFER AGENT
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123
(800) 262-1122
AUDITORS
Deloitte & Touche LLP, 125 Summer Street, Boston, MA 02110
T-HMP
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
February 1, 1997
EV TRADITIONAL NATIONAL MUNICIPALS FUND
24 Federal Street
Boston, Massachusetts 02110
(800) 225-6265
This Statement of Additional Information consists of two parts. Part I
provides information about EV Traditional National Municipals Fund (the
"Fund"), National Municipals Portfolio (the "Portfolio") and certain other
series of Eaton Vance Municipals Trust (the "Trust"). Part II provides
information solely about the Fund. Where appropriate, Part I includes cross-
references to the relevant sections of Part II that provide additional Fund-
specific information. This Statement of Additional Information is sometimes
referred to herein as the "SAI."
TABLE OF CONTENTS Page
PART I
Additional Information about Investment Policies .................. 1
Investment Restrictions ........................................... 6
Trustees and Officers ............................................. 8
Investment Adviser and Administrator .............................. 10
Custodian ......................................................... 12
Service for Withdrawal ............................................ 13
Determination of Net Asset Value .................................. 13
Investment Performance ............................................ 14
Taxes ............................................................. 15
Portfolio Security Transactions ................................... 17
Other Information ................................................. 19
Independent Certified Public Accountants .......................... 20
Tax Equivalent Yield Table ........................................ 21
Appendix .......................................................... 22
PART II
Fees and Expenses ................................................. a-1
Services for Accumulation ......................................... a-1
Principal Underwriter ............................................. a-2
Service Plan ...................................................... a-3
Performance Information ........................................... a-3
Control Persons and Principal Holders of Securities ............... a-4
Other Information ................................................. a-4
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY THE FUND'S PROSPECTUS DATED FEBRUARY 1, 1997, AS SUPPLEMENTED
FROM TIME TO TIME, WHICH IS INCORPORATED HEREIN BY REFERENCE. THIS STATEMENT
OF ADDITIONAL INFORMATION SHOULD BE READ IN CONJUNCTION WITH SUCH PROSPECTUS,
A COPY OF WHICH MAY BE OBTAINED WITHOUT CHARGE BY CONTACTING EATON VANCE
DISTRIBUTORS, INC. (THE "PRINCIPAL UNDERWRITER") (SEE BACK COVER FOR ADDRESS
AND PHONE NUMBER).
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART I
This Part I provides information about the Fund, certain other series of the
Trust and the Portfolio. Capitalized terms used in this SAI and not otherwise
defined have the meanings given them in the Fund's Prospectus. The Fund is
subject to the same investment policies as those of the Portfolio. The Fund
currently seeks to achieve its objective by investing in the Portfolio.
ADDITIONAL INFORMATION ABOUT INVESTMENT POLICIES
MUNICIPAL OBLIGATIONS
Municipal obligations are issued to obtain funds for various public and
private purposes. Such obligations include bonds as well as tax-exempt
commercial paper, project notes and municipal notes such as tax, revenue and
bond anticipation notes of short maturity, generally less than three years. In
general, there are three categories of municipal obligations, the interest of
which is exempt from federal income tax and is not a tax preference item for
purposes of the federal alternative minimum tax: (i) certain "public purpose"
obligations (whenever issued), which include obligations issued directly by
state and local governments or their agencies to fulfill essential governmental
functions; (ii) certain obligations issued before August 8, 1986 for the benefit
of non-governmental persons or entities; and (iii) certain "private activity
bonds" issued before August 7, 1986, which include "qualified Section 501(c)(3)
bonds" or refundings of certain obligations included in the second category. In
assessing the federal income tax treatment of interest on any municipal
obligation, the Portfolio will generally rely on an opinion of the issuer's
counsel (when available) and will not undertake any independent verification of
the basis for the opinion. The two principal classifications of municipal bonds
are "general obligation" and "revenue" bonds.
Interest on certain "private activity bonds" issued after August 7, 1986 is
exempt from regular federal income tax but such interest (including a
distribution by the Fund derived from such interest) is treated as a tax
preference item which could subject the recipient to or increase the recipient's
liability for the federal alternative minimum tax. For corporate shareholders,
the Fund's distributions derived from interest on all municipal obligations
(whenever issued) is included in "adjusted current earnings" for purposes of the
federal alternative minimum tax as applied to corporations (to the extent not
already included in alternative minimum taxable income as income attributable to
private activity bonds).
Any recognized gain or income attributable to market discount on long-term
tax-exempt municipal obligations (i.e., obligations with a term of more than one
year) purchased in the secondary market after April 30, 1993 other than, in
general, at their original issue is taxable as ordinary income. A long-term debt
obligation is generally treated as acquired at a market discount if purchased
after its original issue at a price less than (i) the stated principal amount
payable at maturity, in the case of an obligation that does not have original
issue discount or (ii) in the case of an obligation that does have original
issue discount, the sum of the issue price and any original issue discount that
accrued before the obligation was purchased, subject to a de minimis exclusion.
Issuers of general obligation bonds include states, counties, cities, towns
and regional districts. The proceeds of these obligations are used to fund a
wide range of public projects including the construction or improvement of
schools, highways and roads, water and sewer systems and a variety of other
public purposes. The basic security of general obligation bonds is the issuer's
pledge of its faith, credit, and taxing power for the payment of principal and
interest. The taxes that can be levied for the payment of debt service may be
limited or unlimited as to rate and amount.
The principal security for a revenue bond is generally the net revenues
derived from a particular facility or group of facilities or, in some cases,
from the proceeds of a special excise or other specific revenue source. Revenue
bonds have been issued to fund a wide variety of capital projects including:
electric, gas, water, sewer and solid waste disposal systems; highways, bridges
and tunnels; port, airport and parking facilities; transportation systems;
housing facilities, colleges and universities and hospitals. Although the
principal security behind these bonds varies widely, many provide additional
security in the form of a debt service reserve fund whose monies may be used to
make principal and interest payments on the issuer's obligations. Housing
finance authorities have a wide range of security including partially or fully
insured, rent subsidized and/or collateralized mortgages, and/or the net
revenues from housing or other public projects. In addition to a debt service
reserve fund, some authorities provide further security in the form of a state's
ability (without legal obligation) to make up deficiencies in the debt service
reserve fund. Lease rental revenue bonds issued by a state or local authority
for capital projects are normally secured by annual lease rental payments from
the state or locality to the authority sufficient to cover debt service on the
authority's obligations. Such payments are usually subject to annual
appropriations by the state or locality.
Industrial development and pollution control bonds are in most cases revenue
bonds and are generally not secured by the taxing power of the municipality, but
are usually secured by the revenues derived by the authority from payments of
the industrial user or users.
The Portfolio may on occasion acquire revenue bonds which carry warrants or
similar rights covering equity securities. Such warrants or rights may be held
indefinitely, but if exercised, the Portfolio anticipates that it would, under
normal circumstances, dispose of any equity securities so acquired within a
reasonable period of time.
While most municipal bonds pay a fixed rate of interest semi-annually in
cash, there are exceptions. Some bonds pay no periodic cash interest, but rather
make a single payment at maturity representing both principal and interest.
Bonds may be issued or subsequently offered with interest coupons materially
greater or less than those then prevailing, with price adjustments reflecting
such deviation.
The obligations of any person or entity to pay the principal of and interest
on a municipal obligation are subject to the provisions of bankruptcy,
insolvency and other laws affecting the rights and remedies of creditors, such
as the Federal Bankruptcy Act, and laws, if any, which may be enacted by
Congress or state legislatures extending the time for payment of principal or
interest, or both, or imposing other constraints upon enforcement of such
obligations. There is also the possibility that as a result of litigation or
other conditions the power or ability of any person or entity to pay when due
principal of and interest on a municipal obligation may be materially affected.
There have been recent instances of defaults and bankruptcies involving
municipal obligations which were not foreseen by the financial and investment
communities. The Portfolio will take whatever action it considers appropriate in
the event of anticipated financial difficulties, default or bankruptcy of either
the issuer of any municipal obligation or of the underlying source of funds for
debt service. Such action may include retaining the services of various persons
or firms (including affiliates of the Investment Adviser) to evaluate or protect
any real estate, facilities or other assets securing any such obligation or
acquired by the Portfolio as a result of any such event, and the Portfolio may
also manage (or engage other persons to manage) or otherwise deal with any real
estate, facilities or other assets so acquired. The Portfolio anticipates that
real estate consulting and management services may be required with respect to
properties securing various municipal obligations in its portfolio or
subsequently acquired by the Portfolio. The Portfolio will incur additional
expenditures in taking protective action with respect to portfolio obligations
in default and assets securing such obligations.
The yields on municipal obligations are dependent on a variety of factors,
including purposes of issue and source of funds for repayment, general money
market conditions, general conditions of the municipal bond market, size of a
particular offering, maturity of the obligation and rating of the issue. The
ratings of Moody's, S&P and Fitch represent their opinions as to the quality of
the municipal obligations which they undertake to rate. It should be emphasized,
however, that ratings are based on judgment and are not absolute standards of
quality. Consequently, municipal obligations with the same maturity, coupon and
rating may have different yields while obligations of the same maturity and
coupon with different ratings may have the same yield. In addition, the market
price of municipal obligations will normally fluctuate with changes in interest
rates, and therefore the net asset value of the Portfolio will be affected by
such changes.
RISKS OF CONCENTRATION
The Portfolio may invest 25% or more of its total assets in municipal
obligations whose issuers are located in the same state or in municipal
obligations of the same type. There could be economic, business or political
developments which might affect all municipal obligations of a similar type. In
particular, investments in industrial revenue bonds might involve (without
limitation) the following risks.
Hospital bond ratings are often based on feasibility studies which contain
projections of expenses, revenues and occupancy levels. Among the influences
affecting a hospital's gross receipts and net income available to service its
debt are demand for hospital services, the ability of the hospital to provide
the services required, management capabilities, economic developments in the
service area, efforts by insurers and government agencies to limit rates and
expenses, confidence in the hospital, service area economic developments,
competition, availability and expense of malpractice insurance, Medicaid and
Medicare funding and possible Federal legislation limiting the rates of increase
of hospital charges.
Electric utilities face problems in financing large construction programs in
an inflationary period, cost increases and delay occasioned by safety and
environmental considerations (particularly with respect to nuclear facilities),
difficulty in obtaining fuel at reasonable prices and in achieving timely and
adequate rate relief from regulatory commissions, effect of energy conservation
and limitations on the capacity of the capital market to absorb utility debt.
Life care facilities are an alternative form of long-term housing for the
elderly which offer residents the independence of a condominium life style and,
if needed, the comprehensive care of nursing home services. Bonds to finance
these facilities have been issued by various state industrial development
authorities. Since the bonds are normally secured only by the revenues of each
facility and not by state or local government tax payments, they are subject to
a wide variety of risks. Primarily, the projects must maintain adequate
occupancy levels to be able to provide revenues sufficient to meet debt service
payments. Moreover, since a portion of housing, medical care and other services
may be financed by an initial deposit, it is important that the facility
maintain adequate financial reserves to secure estimated actuarial liabilities.
The ability of management to accurately forecast inflationary cost pressures is
an important factor in this process. The facilities may also be affected
adversely by regulatory cost restrictions applied to health care delivery in
general, particularly state regulations or changes in Medicare and Medicaid
payments or qualifications, or restrictions imposed by medical insurance
companies. They may also face competition from alternative health care or
conventional housing facilities in the private or public sector.
MUNICIPAL LEASES
The Portfolio may invest in municipal leases and participations therein,
which arrangements frequently involve special risks. Municipal leases are
obligations in the form of a lease or installment purchase arrangement which is
issued by state or local governments to acquire equipment and facilities.
Interest income from such obligations is generally exempt from local and state
taxes in the state of issuance. "Participations" in such leases are undivided
interests in a portion of the total obligation. Participations entitle their
holders to receive a pro rata share of all payments under the lease. A trustee
is usually responsible for administering the terms of the participation and
enforcing the participants' rights in the underlying lease. Leases and
installment purchase or conditional sale contracts (which normally provide for
title to the leased assets to pass eventually to the governmental issuer) have
evolved as a means for governmental issuers to acquire property and equipment
without meeting the constitutional and statutory requirements for the issuance
of debt. State debt-issuance limitations are deemed to be inapplicable to these
arrangements because of the inclusion in many leases or contracts of
"non-appropriation" clauses that provide that the governmental issuer has no
obligation to make future payments under the lease or contract unless money is
appropriated for such purpose by the appropriate legislative body on a yearly or
other periodic basis. Such arrangements are, therefore, subject to the risk that
the governmental issuer will not appropriate funds for lease payments.
Certain municipal lease obligations owned by the Portfolio may be deemed
illiquid for the purpose of the Portfolio's 15% limitation on investments in
illiquid securities, unless determined by the Investment Adviser, pursuant to
guidelines adopted by the Trustees of the Portfolio, to be liquid securities for
the purpose of such limitation. In determining the liquidity of municipal lease
obligations, the Investment Adviser will consider a variety of factors
including: (1) the willingness of dealers to bid for the security; (2) the
number of dealers willing to purchase or sell the obligation and the number of
other potential buyers; (3) the frequency of trades and quotes for the
obligation; and (4) the nature of the marketplace trades. In addition, the
Investment Adviser will consider factors unique to particular lease obligations
affecting the marketability thereof. These include the general creditworthiness
of the municipality, the importance of the property covered by the lease to the
municipality, and the likelihood that the marketability of the obligation will
be maintained throughout the time the obligation is held by the Portfolio. In
the event the Portfolio acquires an unrated municipal lease obligation, the
Investment Adviser will be responsible for determining the credit quality of
such obligation on an on-going basis, including an assessment of the likelihood
that the lease may or may not be cancelled.
ZERO COUPON BONDS
Zero coupon bonds are debt obligations which do not require the periodic
payment of interest and are issued at a significant discount from face value.
The discount approximates the total amount of interest the bonds will accrue and
compound over the period until maturity at a rate of interest reflecting the
market rate of the security at the time of issuance. Zero coupon bonds benefit
the issuer by mitigating its need for cash to meet debt service, but also
require a higher rate of return to attract investors who are willing to defer
receipt of such cash.
INSURANCE
Insured municipal obligations held by the Portfolio (if any) will be insured
as to their scheduled payment of principal and interest under either (i) an
insurance policy obtained by the issuer or underwriter of the obligation at the
time of its original issuance or (ii) an insurance policy obtained by the
Portfolio or a third party subsequent to the obligation's original issuance
(which may not be reflected in the obligation's market value. In either event,
such insurance may provide that in the event of non-payment of interest or
principal when due with respect to an insured obligation, the insurer is not
required to make such payment until a specified time has lapsed (which may be 30
days or more after notice).
CREDIT QUALITY
The Portfolio is dependent on the Investment Adviser's judgment, analysis
and experience in evaluating the quality of municipal obligations. In evaluating
the credit quality of a particular issue, whether rated or unrated, the
Investment Adviser will normally take into consideration, among other things,
the financial resources of the issuer (or, as appropriate, of the underlying
source of funds for debt service), its sensitivity to economic conditions and
trends, any operating history of and the community support for the facility
financed by the issue, the ability of the issuer's management and regulatory
matters. The Investment Adviser will attempt to reduce the risks of investing in
the lowest investment grade, below investment grade and comparable unrated
obligations through active portfolio management, credit analysis and attention
to current developments and trends in the economy and the financial markets.
See "Portfolio of Investments" in the "Financial Statements" incorporated by
reference into this SAI with respect to any defaulted obligations held by the
Portfolio.
SHORT-TERM TRADING
The Portfolio may sell securities in anticipation of a market decline (a
rise in interest rates) or purchase and later sell securities in anticipation of
a market rise (a decline in interest rates). In addition, a security may be sold
and another purchased at approximately the same time to take advantage of what
the Portfolio believes to be a temporary disparity in the normal yield
relationship between the two securities. Yield disparities may occur for reasons
not directly related to the investment quality of particular issues or the
general movement of interest rates, such as changes in the overall demand for or
supply of various types of municipal obligations or changes in the investment
objectives of investors. Such trading may be expected to increase the portfolio
turnover rate, which may increase capital gains and the expenses incurred in
connection with such trading. The Portfolio cannot accurately predict its
portfolio turnover rate, but it is anticipated that the annual turnover rate
will generally not exceed 100% (excluding turnover of securities having a
maturity of one year or less). A 100% annual turnover rate would occur, for
example, if all the securities held by the Portfolio were replaced once in a
period of one year. A high turnover rate (100% or more) necessarily involves
greater expenses to the Portfolio. The Portfolio engages in portfolio trading
(including short-term trading) if it believes that a transaction including all
costs will help in achieving its investment objective.
WHEN-ISSUED SECURITIES
New issues of municipal obligations are sometimes offered on a "when-issued"
basis, that is, delivery and payment for the securities normally taking place
within a specified number of days after the date of the Portfolio's commitment
and are subject to certain conditions such as the issuance of satisfactory legal
opinions. The Portfolio may also purchase securities on a when-issued basis
pursuant to refunding contracts in connection with the refinancing of an
issuer's outstanding indebtedness. Refunding contracts generally require the
issuer to sell and the Portfolio to buy such securities on a settlement date
that could be several months or several years in the future.
The Portfolio will make commitments to purchase when-issued securities only
with the intention of actually acquiring the securities, but may sell such
securities before the settlement date if it is deemed advisable as a matter of
investment strategy. The payment obligation and the interest rate that will be
received on the securities are fixed at the time the Portfolio enters into the
purchase commitment. When the Portfolio commits to purchase a security on a
when-issued basis it records the transaction and reflects the value of the
security in determining its net asset value. Securities purchased on a
when-issued basis and the securities held by the Portfolio are subject to
changes in value based upon the perception of the creditworthiness of the issuer
and changes in the level of interest rates (i.e., appreciation when interest
rates decline and depreciation when interest rates rise). Therefore, to the
extent that the Portfolio remains substantially fully invested at the same time
that it has purchased securities on a when-issued basis, there will be greater
fluctuations in the Portfolio's net asset value than if it solely set aside cash
to pay for when-issued securities.
VARIABLE RATE OBLIGATIONS
The Portfolio may purchase variable rate obligations. Variable rate
instruments provide for adjustments in the interest rate at specified intervals
(weekly, monthly, semi-annually, etc.). The revised rates are usually set at the
issuer's discretion, in which case the investor normally enjoys the right to
"put" the security back to the issuer or his agent. Rate revisions may
alternatively be determined by formula or in some other contractual fashion.
Variable rate obligations normally provide that the holder can demand payment of
the obligation on short notice at par with accrued interest and which are
frequently secured by letters of credit or other credit support arrangements
provided by banks. To the extent that such letters of credit or other
arrangements constitute an unconditional guarantee of the issuer's obligations,
a bank may be treated as the issuer of a security for the purpose of complying
with the diversification requirements set forth in Section 5(b) of the 1940 Act
and Rule 5b-2 thereunder. The Portfolio would anticipate using these obligations
as cash equivalents pending longer term investment of its funds.
REDEMPTION, DEMAND AND PUT FEATURES
Most municipal bonds have a fixed final maturity date. However, it is
commonplace for the issuer to reserve the right to call the bond earlier. Also,
some bonds may have "put" or "demand" features that allow early redemption by
the bondholder. Longer term fixed-rate bonds may give the holder a right to
request redemption at certain times (often annually after the lapse of an
intermediate term). These bonds are more defensive than conventional long term
bonds (protecting to some degree against a rise in interest rates) while
providing greater opportunity than comparable intermediate term bonds, because
the Portfolio may retain the bond if interest rates decline. By acquiring these
kinds of obligations the Portfolio obtains the contractual right to require the
issuer of the security or some other person (other than a broker or dealer) to
purchase the security at an agreed upon price, which right is contained in the
obligation itself rather than in a separate agreement with the seller or some
other person. Because this right is assignable with the security, which is
readily marketable and valued in the customary manner, the Portfolio will not
assign any separate value to such right.
LIQUIDITY AND PROTECTIVE PUT OPTIONS
The Portfolio may also enter into a separate agreement with the seller of
the security or some other person granting the Portfolio the right to put the
security to the seller thereof or the other person at an agreed upon price. The
Portfolio intends to limit this type of transaction to institutions (such as
banks or securities dealers) which the Investment Adviser believes present
minimal credit risks and would engage in this type of transaction to facilitate
portfolio liquidity or (if the seller so agrees) to hedge against rising
interest rates. There is no assurance that this kind of put option will be
available to the Portfolio or that selling institutions will be willing to
permit the Portfolio to exercise a put to hedge against rising interest rates. A
separate put option may not be marketable or otherwise assignable, and sale of
the security to a third party or lapse of time with the put unexercised may
terminate the right to exercise the put. The Portfolio does not expect to assign
any value to any separate put option which may be acquired to facilitate
portfolio liquidity, inasmuch as the value (if any) of the put will be reflected
in the value assigned to the associated security; any put acquired for hedging
purposes would be valued in good faith under methods or procedures established
by the Trustees of the Portfolio after consideration of all relevant factors,
including its expiration date, the price volatility of the associated security,
the difference between the market price of the associated security and the
exercise price of the put, the creditworthiness of the issuer of the put and the
market prices of comparable put options. Interest income generated by certain
bonds having put or demand features may not qualify as tax-exempt interest.
SECURITIES LENDING
The Portfolio may seek to increase its income by lending portfolio
securities to broker-dealers or other institutional borrowers. The Portfolio
would have the right to call a loan and obtain the securities loaned at any time
on up to five business days' notice. During the existence of a loan, the
Portfolio will continue to receive the equivalent of the interest paid by the
issuer on the securities loaned and will also receive a fee, or all or a portion
of the interest on investment of the collateral, if any. However, the Portfolio
may pay lending fees to such borrowers. The Portfolio would not have the right
to vote any securities having voting rights during the existence of the loan,
but would call the loan in anticipation of an important vote to be taken among
holders of the securities or the giving or withholding of their consent on a
material matter affecting the investment. As with other extensions of credit
there are risks of delay in recovery or even loss of rights in the securities
loaned if the borrower of the securities fails financially. However, the loans
will be made only to organizations deemed by the Portfolio's management to be of
good standing and when, in the judgment of the Portfolio's management, the
consideration which can be earned from securities loans of this type justifies
the attendant risk. Securities lending involves administration expenses,
including finders' fees. Distributions by the Fund of any income realized by the
Portfolio from securities loans will be taxable. If the management of the
Portfolio decides to make securities loans, it is intended that the value of the
securities loaned would not exceed 30% of the Portfolio's total assets. The
Portfolio has no present intention of engaging in securities lending.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
A change in the level of interest rates may affect the value of the
securities held by the Portfolio (or of securities that the Portfolio expects to
purchase). To hedge against changes in rates, the Portfolio may enter into (i)
futures contracts for the purchase or sale of debt securities, and (ii) futures
contracts on securities indices. All futures contracts entered into by the
Portfolio are traded on exchanges or boards of trade that are licensed and
regulated by the Commodity Futures Trading Commission ("CFTC") and must be
executed through a futures commission merchant or brokerage firm which is a
member of the relevant exchange. The Portfolio may purchase and write call and
put options on futures contracts which are traded on a United States or foreign
exchange or board of trade. The Portfolio will be required, in connection with
transactions in futures contracts and the writing of options on futures, to make
margin deposits, which will be held by the Portfolio's custodian for the benefit
of the futures commission merchant through whom the Portfolio engages in such
futures and options transactions.
Some futures contracts and options thereon may become illiquid under adverse
market conditions. In addition, during periods of market volatility, a commodity
exchange may suspend or limit transactions in an exchange-traded instrument,
which may make the instrument temporarily illiquid and difficult to price.
Commodity exchanges may also establish daily limits on the amount that the price
of a futures contract or futures option can vary from the previous day's
settlement price. Once the daily limit is reached, no trades may be made that
day at a price beyond the limit. This may prevent the Portfolio from closing out
positions and limiting its losses.
The Portfolio will engage in futures and related options transactions only
for bona fide hedging purposes as defined in or permitted by CFTC regulations.
The Portfolio will determine that the price fluctuations in the futures
contracts and options on futures are substantially related to price fluctuations
in securities held by the Portfolio or which it expects to purchase. The
Portfolio's futures transactions will be entered into for traditional hedging
purposes -- that is, futures contracts will be sold to protect against a decline
in the price of securities that the Portfolio owns, or futures contracts will be
purchased to protect the Portfolio against an increase in the price of
securities it intends to purchase. As evidence of this hedging intent, the
Portfolio expects that on 75% or more of the occasions on which it takes a long
futures (or option) position (involving the purchase of futures contracts), the
Portfolio will have purchased, or will be in the process of purchasing,
equivalent amounts of related securities in the cash market at the time when the
futures (or option) position is closed out. However, in particular cases, when
it is economically advantageous for the Portfolio to do so, a long futures
position may be terminated (or an option may expire) without the corresponding
purchase of securities. The Portfolio will engage in transactions in futures and
related options contracts only to the extent such transactions are consistent
with the requirements of the Internal Revenue Code for maintaining qualification
of the Fund as a regulated investment company for federal income tax purposes
(see "Taxes").
ASSET COVERAGE REQUIREMENTS
Transactions involving when-issued securities, the lending of Portfolio
securities or futures contracts and options (other than options that the
Portfolio has purchased) expose the Portfolio to an obligation to another party.
The Portfolio will not enter into any such transactions unless it owns either
(1) an offsetting ("covered") position in securities or other options or futures
contracts, or (2) cash or liquid securities with a value sufficient at all times
to cover its potential obligations not covered as provided in (1) above. The
Portfolio will comply with Commission guidelines regarding cover for these
instruments and, if the guidelines so require, set aside cash or liquid
securities in a segregated account with its custodian in the prescribed amount.
The securities in the segregated account will be marked to market daily.
Assets used as cover or held in a segregated account cannot be sold while
the position requiring coverage or segregation is outstanding unless they are
replaced with other appropriate assets. As a result, the commitment of a large
portion of the Portfolio's assets to segregated accounts or to cover could
impede portfolio management or the Portfolio's ability to meet redemption
requests or other current obligations.
INVESTMENT RESTRICTIONS
The following investment restrictions of the Fund are designated as
fundamental policies and as such cannot be changed without the approval of the
holders of a majority of the Fund's outstanding voting securities, which as used
in this SAI means the lesser of (a) 67% of the shares of the Fund present or
represented by proxy at a meeting if the holders of more than 50% of the shares
are present or represented at the meeting or (b) more than 50% of the shares of
the Fund. Accordingly, the Fund may not:
(1) Purchase any security (other than U.S. Government securities) if such
purchase, at the time thereof, would cause more than 5% of the total assets of
the Fund (taken at market value) to be invested in the securities of a single
issuer; provided, however, that the Fund may invest all or part of its
investable assets in an open-end management investment company with
substantially the same investment objective, policies and restrictions as the
Fund;
(2) Purchase securities on margin (but the Fund may obtain such short-term
credits as may be necessary for the clearance of purchases and sales of
securities). The deposit or payment by the Fund of initial or maintenance margin
in connection with futures contracts or related options transactions is not
considered the purchase of a security on margin;
(3) Make short sales of securities or maintain a short position, unless at
all times when a short position is open the Fund owns an equal amount of such
securities or securities convertible into or exchangeable, without payment of
any further consideration, for securities of the same issue as, and equal in
amount to, the securities sold short, and unless not more than 25% of the Fund's
net assets (taken at current value) is held as collateral for such sales at any
one time. (The Fund will make such sales only for the purpose of deferring
realization of gain or loss for federal income tax purposes);
(4) Purchase securities of any issuer if such purchase, at the time thereof,
would cause more than 10% of the total outstanding voting securities of such
issuer to be held by the Fund; provided, however, that the Fund may invest all
or part of its investable assets in an open-end management investment company
with substantially the same investment objective, policies and restrictions as
the Fund;
(5) Purchase securities issued by any other open-end investment company or
investment trust; provided, however, that the Fund may invest all or part of its
investable assets in an open-end management investment company with
substantially the same investment objective, policies and restrictions as the
Fund;
(6) Purchase or retain in its portfolio any securities issued by an issuer
any of whose officers, directors, trustees or security holders is an officer or
Trustee of the Trust or is a member, officer, director or trustee of any
investment adviser of the Fund, if after the purchase of the securities of such
issuer by the Fund one or more of such persons owns beneficially more than 1/2
of 1% of the shares or securities or both (all taken at market value) of such
issuer and such persons owning more than 1/2 of 1% of such shares or securities
together own beneficially more than 5% of such shares or securities or both (all
taken at market value);
(7) Underwrite or participate in the marketing of securities of others,
except insofar as it may technically be deemed to be an underwriter in selling a
portfolio security under circumstances which may require the registration of the
same under the Securities Act of 1933, or participate on a joint or a joint and
several basis in any trading account in securities;
(8) Lend any of its funds or other assets to any person, directly or
indirectly, except (i) through repurchase agreements and (ii) through the loan
of a portfolio security; (The purchase of a portion of an issue of debt
obligations, whether or not the purchase is made on the original issuance, is
not considered the making of a loan);
(9) Borrow money or pledge its assets in excess of 1/3 of the value of its
net assets (excluding the amount borrowed) and then only if such borrowing is
incurred as a temporary measure for extraordinary or emergency purposes or to
facilitate the orderly sale of portfolio securities to accommodate redemption
requests; or issue securities other than its shares of beneficial interest,
except as appropriate to evidence indebtedness, including reverse repurchase
agreements, which the Fund is permitted to incur. The Fund will not purchase
securities while outstanding temporary bank borrowings exceed 5% of its total
assets; provided, however, that the Fund may increase its interest in an
open-end management investment company with substantially the same investment
objective, policies and restrictions as the Fund while such borrowings are
outstanding. The deposit of cash, cash equivalents and liquid debt securities in
a segregated account with the custodian and/or with a broker in connection with
futures contracts or related options transactions and the purchase of securities
on a "when-issued" basis is not deemed to be a pledge;
(10) Invest for the purpose of exercising control or management of other
companies; provided, however, that the Fund may invest all or part of its
investable assets in an open-end management investment company with
substantially the same investment objective, policies and restrictions as the
Fund;
(11) Purchase or sell real estate, although it may purchase and sell
securities which are secured by real estate and securities of companies which
invest or deal in real estate;
(12) Purchase or sell physical commodities or contracts for the purchase
or sale of physical commodities;
(13) Buy investment securities from or sell them to any of the officers or
Trustees of the Trust, its investment adviser or its underwriter, as principal;
however, any such person or concerns may be employed as a broker upon customary
terms; or
(14) Purchase oil, gas or other mineral leases or purchase partnership
interests in oil, gas or other mineral exploration or development programs.
The Portfolio has adopted substantially the same fundamental investment
restrictions as the foregoing investment restrictions adopted by the Fund; such
restrictions cannot be changed without the approval of a "majority of the
outstanding voting securities" of the Portfolio.
The Fund and the Portfolio have adopted the following investment policies
which may be changed by the Trust with respect to the Fund without approval by
the Fund's shareholders or by the Portfolio with respect to the Portfolio
without approval by the Fund or its other investors. Neither the Fund nor the
Portfolio may invest more than 15% of net assets in investments which are not
readily marketable, including restricted securities and repurchase agreements
maturing in more than seven days. Restricted securities for the purposes of this
limitation do not include securities eligible for resale pursuant to Rule 144A
of the Securities Act of 1933 and commercial paper issued pursuant to Section
4(2) of said Act that the Board of Trustees of the Trust or the Portfolio, or
its delegate, determine to be liquid; provided, however, that the Fund may
invest without limitation in the Portfolio or in another investment company with
substantially the same investment objective. Neither the Fund nor the Portfolio
may engage in options, futures or forward transactions if more than 5% of its
net assets, as measured by the aggregate of the premiums paid by the Fund or the
Portfolio, would be so invested. The Fund and the Portfolio may purchase put
options on municipal obligations only if after such purchase not more than 5% of
its net assets, as measured by the aggregate of the premiums paid for such
options held by it would be so invested. In addition, neither the Fund nor the
Portfolio will purchase any put options, long futures contracts, or call options
on a futures contract if at the date of such purchase realized net losses from
such transactions during the fiscal year to date exceed 5% of its average net
assets during such period. Neither the Fund nor the Portfolio intend to invest
in reverse repurchase agreements during the current fiscal year.
For purposes of the Portfolio's investment restrictions, the determination
of the "issuer" of a municipal obligation which is not a general obligation bond
will be made by the Portfolio's Investment Adviser on the basis of the
characteristics of the obligation and other relevant factors, the most
significant of which is the source of funds committed to meeting interest and
principal payments of such obligation.
Whenever an investment policy or investment restriction set forth in the
Prospectus or this SAI states a maximum percentage of assets that may be
invested in any security or other asset, or describes a policy regarding quality
standards, such percentage limitation or standard shall be determined
immediately after and as a result of the Fund's or the Portfolio's acquisition
of such security or asset. Accordingly, any later increase or decrease resulting
from a change in values, assets or other circumstances, other than a subsequent
rating change below investment grade made by a rating service, will not compel
the Fund or the Portfolio, as the case may be, to dispose of such security or
other asset. Notwithstanding the foregoing, the Fund and Portfolio must always
be in compliance with the borrowing policies set forth above.
TRUSTEES AND OFFICERS
The Trustees and officers of the Trust and the Portfolio are listed below.
Except as indicated, each individual has held the office shown or other offices
in the same company for the last five years. Unless otherwise noted, the
business address of each Trustee and officer is 24 Federal Street, Boston,
Massachusetts 02110, which is also the address of the Portfolio's investment
adviser, Boston Management and Research ("BMR"), a wholly-owned subsidiary of
Eaton Vance Management ("Eaton Vance"); Eaton Vance's parent, Eaton Vance Corp.
("EVC"); and of BMR's and Eaton Vance's trustee, Eaton Vance, Inc. ("EV"). Eaton
Vance and EV are both wholly-owned subsidiaries of EVC. Those Trustees who are
"interested persons" of the Trust, the Portfolio, BMR, Eaton Vance, EVC or EV,
as defined in the 1940 Act, by virtue of their affiliation with any one or more
of the Trust, the Portfolio, BMR, Eaton Vance, EVC or EV, are indicated by an
asterisk(*).
TRUSTEES OF THE TRUST AND THE PORTFOLIO
DONALD R. DWIGHT (65), Trustee
President of Dwight Partners, Inc. (a corporate relations and communications
company) founded in 1988; Chairman of the Board of Newspapers of New England,
Inc., since 1983. Director or Trustee of various investment companies managed
by Eaton Vance or BMR.
Address: Clover Mill Lane, Lyme, New Hampshire 03768
JAMES B. HAWKES (55), Vice President and Trustee*
President and Chief Executive Officer of BMR, Eaton Vance, EVC and EV, and a
Director of EVC and EV. Director, Trustee and officer of various investment
companies managed by Eaton Vance or BMR.
SAMUEL L. HAYES, III (61), Trustee
Jacob H. Schiff, Professor of Investment Banking at Harvard University Graduate
School of Business Administration. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: Harvard University Graduate School of Business Administration,
Soldiers Field Road, Boston, Massachusetts 02163
NORTON H. REAMER (61), Trustee
President and Director, United Asset Management Corporation, a holding company
owning institutional investment management firms. Chairman, President and
Director, UAM Funds (mutual funds). Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: One International Place, Boston, Massachusetts 02110
JOHN L. THORNDIKE (70), Trustee
Director, Fiduciary Company Incorporated. Director or Trustee of various
investment companies managed by Eaton Vance or BMR.
Address: 175 Federal Street, Boston, Massachusetts 02110
JACK L. TREYNOR (66), Trustee
Investment Adviser and Consultant. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: 504 Via Almar, Palos Verdes Estates, California 90274
OFFICERS OF THE TRUST AND THE PORTFOLIO
THOMAS J. FETTER (53), President
Vice President of BMR, Eaton Vance and EV. Mr. Fetter was elected a Vice
President of the Trust on December 17, 1990 and then elected President of the
Trust and the Portfolio on December 13, 1993. Officer of various investment
companies managed by Eaton Vance or BMR.
ROBERT B. MACINTOSH (40), Vice President
Vice President of Eaton Vance and EV, and BMR (since August 11, 1992), employee
of Eaton Vance since March 8, 1991. Fidelity Investments -- Portfolio Manager
(1986-1991). Officer of various investment companies managed by Eaton Vance or
BMR. Mr. MacIntosh was elected Vice President of the Trust on March 22, 1993.
THOMAS M. METZOLD (38), Vice President
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR. Mr. Metzold was elected Vice
President of the Portfolio on June 19, 1995.
JAMES L. O'CONNOR (51), Treasurer
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
THOMAS OTIS (65), Secretary
Vice President and Secretary of BMR, Eaton Vance, EVC and EV. Officer of various
investment companies managed by Eaton Vance or BMR.
JANET E. SANDERS (61), Assistant Secretary
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
A. JOHN MURPHY (34), Assistant Secretary
Assistant Vice President of BMR, Eaton Vance and EV since March 1, 1994;
employee of Eaton Vance since March 1993. State Regulations Supervisor, The
Boston Company (1991-1993). Officer of various investment companies managed by
Eaton Vance or BMR. Mr. Murphy was elected Assistant Secretary of the Trust
and the Portfolio on March 27, 1995.
ERIC G. WOODBURY (39), Assistant Secretary
Vice President of Eaton Vance since February 1993; formerly, associate attorney
at Dechert, Price & Rhoads and Gaston & Snow. Officer of various investment
companies managed by Eaton Vance or BMR. Mr. Woodbury was elected Assistant
Secretary on June 19, 1995.
Messrs. Hayes (Chairman), Reamer and Thorndike are members of the Special
Committee of the Board of Trustees of the Trust and of the Portfolio. The
purpose of the Special Committee is to consider, evaluate and make
recommendations to the full Board of Trustees concerning (i) all contractual
arrangements with service providers to the Fund, including administrative
services, transfer agency, custodial and fund accounting and distribution
services, and (ii) all other matters in which Eaton Vance or its affiliates has
any actual or potential conflict of interest with the Fund or its shareholders.
The Nominating Committee is comprised of four Trustees who are not
"interested persons" as that term is defined under the 1940 Act ("noninterested
Trustees"). The Committee has four-year staggered terms, with one member
rotating off the Committee to be replaced by another noninterested Trustee of
the Trust. The purpose of the Committee is to recommend to the Board nominees
for the position of noninterested Trustee and to assure that at least a majority
of the Board of Trustees is independent of Eaton Vance and its affiliates.
Messrs. Treynor (Chairman) and Dwight are members of the Audit Committee of
the Board of Trustees of the Trust and of the Portfolio. The Audit Committee's
functions include making recommendations to the Trustees regarding the selection
of the independent certified public accountants, and reviewing with such
accountants and the Treasurer of the Trust and of the Portfolio matters relative
to trading and brokerage policies and practices, accounting and auditing
practices and procedures, accounting records, internal accounting controls, and
the functions performed by the custodian and transfer agent of the Trust and of
the Portfolio.
Trustees of the Portfolio who are not affiliated with the Investment Adviser
may elect to defer receipt of all or a percentage of their annual fees in
accordance with the terms of a Trustees Deferred Compensation Plan (the "Plan").
Under the Plan, an eligible Trustee may elect to have his deferred fees invested
by the Portfolio in the shares of one or more funds in the Eaton Vance Family of
Funds, and the amount paid to the Trustees under the Plan will be determined
based upon the performance of such investments. Deferral of Trustees' fees in
accordance with the Plan will have a negligible effect on the Portfolio's
assets, liabilities, and net income per share, and will not obligate the
Portfolio to retain the services of any Trustee or obligate the Portfolio to pay
any particular level of compensation to the Trustee. Neither the Trust nor the
Portfolio has a retirement plan for its Trustees.
The fees and expenses of those Trustees of the Trust and the Portfolio who
are not members of the Eaton Vance organization (the noninterested Trustees) are
paid by the Fund (and the other series of the Trust) and the Portfolio,
respectively. For the compensation received by the noninterested Trustees of the
Trust and the Portfolio, see "Fees and Expenses" in the Fund's Part II.
INVESTMENT ADVISER AND ADMINISTRATOR
The Portfolio engages BMR as investment adviser pursuant to an Investment
Advisory Agreement dated October 13, 1992. BMR or Eaton Vance acts as investment
adviser to investment companies and various individual and institutional clients
with combined assets under management of over $16 billion.
Eaton Vance, its affiliates and its predecessor companies have been managing
assets of individuals and institutions since 1924 and managing investment
companies since 1931. They maintain a large staff of experienced fixed-income
and equity investment professionals to service the needs of their clients. The
fixed-income division focuses on all kinds of taxable investment-grade and
high-yield securities, tax-exempt investment-grade and high-yield securities,
and U.S. Government securities. The equity division covers stocks ranging from
blue chip to emerging growth companies.
Eaton Vance and its affiliates act as adviser to over 150 mutual funds,
individual and various institutional accounts, including corporations,
hospitals, retirement plans, universities, foundations and trusts. Eaton Vance
mutual funds feature international equities, domestic equities, tax-free
municipal bonds, and U.S. government and corporate bonds. Lloyd George
Management has advised Eaton Vance's international equity funds since 1992.
Founded in 1991, Lloyd George is headquartered in Hong Kong with offices in
London and Mumbai, India. It has established itself as a leader in investment
management in Asian equities and other global markets. Lloyd George features an
experienced team of investment professionals that began working together in the
mid-1980s. Lloyd George analysts cover East Asia, the India subcontinent, Russia
and Eastern Europe, Latin America, Australia and New Zealand from offices in
Hong Kong, London and Bombay. Together Eaton Vance and Lloyd George manage over
$18 billion in assets. Eaton Vance mutual funds are distributed by Eaton Vance
Distributors both within the United States and offshore.
Eaton Vance Distributors believes that an investment professional can
provide valuable services to you to help you reach your investment goals.
Meeting investment goals requires time, objectivity and investment savvy. Before
making an investment recommendation, a representative can help you carefully
consider your short- and long-term financial goals, your tolerance for
investment risk, your investment time frame, and other investments you may
already own. Your professional investment representatives are knowledgeable
about financial markets, as well as the wide range of investment opportunities
available. A representative can help you decide when to buy, sell or persevere
with your investments. A professional investment representative can provide you
with tailored financial advice.
Eaton Vance offers single-state tax-free portfolios in more states than any
other sponsor of mutual funds. There are 32 long-term state portfolios, 5
national portfolios and 10 limited maturity portfolios, which serve as
investment vehicles for over 100 mutual funds with varying pricing options. A
staff of 32 (including 9 portfolio managers and 9 credit specialists) is
responsible for the day-to-day management of over 3,500 issues in 47 mutual fund
portfolios. Assets managed by the municipal investment group are currently over
$9.1 billion. The investment philosophy of the municipal investment group is to:
seek value by avoiding unnecessary credit risk; build portfolios one security at
a time; and take a long-term approach to managing market risk. Over the
long-term, the group seeks to maximize tax-free income by keeping portfolios
fully invested (rather than trying to "time the market" for short-term results)
and reduce potential capital losses due to poor credit quality. Diligent and
continuing research and analysis are a critical component of the municipal
investment group's investment philosophy and long-term strategy.
The following persons manage one or more of the Eaton Vance municipal
portfolios. For the identity of the Portfolio's portfolio manager, see the
Fund's current Prospectus.
Nicole Anderes is a Vice President of Eaton Vance and BMR. Ms. Anderes
graduated from Brown University with a B.A. in Women's Studies/Economics. She
has been an active member of MAGNY/National Federation of Municipal Analysts,
the Public Securities Association and the Municipal Forum, and served as the
General Secretary of MAGNY from 1992 to 1993.
Timothy T. Browse is a Vice President of Eaton Vance and BMR. Mr. Browse
graduated from St. Lawrence University in 1981 and received his M.B.A. degree
from Boston University in 1990.
Cynthia J. Clemson is a Vice President of Eaton Vance and BMR. Ms. Clemson
graduated from Mount Holyoke College with a B.A. in 1985 and received her
M.B.A., cum laude, from Boston University in 1990. She is a member of the
Boston Municipal Analysts Forum, the Boston Securities Analyst Society and the
Financial Analysts Federation.
Thomas J. Fetter is a Vice President of Eaton Vance and BMR, and Director
of Municipal Investments. Mr. Fetter graduated with a degree in Business
Administration from Kent State University. He is a Chartered Financial Analyst
and member of the Boston Security Analysts Society. He is also a member of the
Boston Municipal Analysts Forum.
Robert B. MacIntosh is a Vice President of Eaton Vance and BMR, and the
portfolio manager of single-state tax-exempt funds in six states: Hawaii,
Louisiana, Massachusetts, Minnesota, New Jersey and North Carolina. He also
serves as economic spokesman for the Eaton Vance organization.
Thomas M. Metzold is a Vice President of Eaton Vance and BMR. He is a
Chartered Financial Analyst and a member of the Boston Security Analysts
Society, the Association for Investment Management & Research, the Boston
Municipal Analysts Forum, and the National Federation of Municipal Analysts.
BMR manages the investments and affairs of the Portfolio subject to the
supervision of the Portfolio's Board of Trustees. BMR furnishes to the Portfolio
investment research, advice and supervision, furnishes an investment program and
determines what securities will be purchased, held or sold by the Portfolio and
what portion, if any, of the Portfolio's assets will be held uninvested. The
Investment Advisory Agreement requires BMR to pay the salaries and fees of all
officers and Trustees of the Portfolio who are members of the BMR organization
and all personnel of BMR performing services relating to research and investment
activities. The Portfolio is responsible for all expenses not expressly stated
to be payable by BMR under the Investment Advisory Agreement, including, without
implied limitation, (i) expenses of maintaining the Portfolio and continuing its
existence, (ii) registration of the Portfolio under the 1940 Act, (iii)
commissions, fees and other expenses connected with the acquisition, holding and
disposition of securities and other investments, (iv) auditing, accounting and
legal expenses, (v) taxes and interest, (vi) governmental fees, (vii) expenses
of issue, sale and redemption of interests in the Portfolio, (viii) expenses of
registering and qualifying the Portfolio and interests in the Portfolio under
Federal and state securities laws and of preparing and printing registration
statements or other offering statements or memoranda for such purposes and for
distributing the same to investors, and fees and expenses of registering and
maintaining registrations of the Portfolio and of the Portfolio's placement
agent as broker-dealer or agent under state securities laws, (ix) expenses of
reports and notices to investors and of meetings of investors and proxy
solicitations therefor, (x) expenses of reports to governmental officers and
commissions, (xi) insurance expenses, (xii) association membership dues, (xiii)
fees, expenses and disbursements of custodians and subcustodians for all
services to the Portfolio (including without limitation safekeeping of funds,
securities and other investments, keeping of books, accounts and records, and
determination of net asset values, book capital account balances and tax capital
account balances), (xiv) fees, expenses and disbursements of transfer agents,
dividend disbursing agents, investor servicing agents and registrars for all
services to the Portfolio, (xv) expenses for servicing the accounts of
investors, (xvi) any direct charges to investors approved by the Trustees of the
Portfolio, (xvii) compensation and expenses of Trustees of the Portfolio who are
not members of BMR's organization, and (xviii) such non-recurring items as may
arise, including expenses incurred in connection with litigation, proceedings
and claims and any legal obligation of the Portfolio to indemnify its Trustees,
officers and investors with respect thereto, to the extent not covered by
insurance.
For a description of the compensation that the Portfolio pays BMR under the
Investment Advisory Agreement, see the Fund's current Prospectus. As at
September 30, 1996, the Portfolio had net assets of $ _____________ . For the
fiscal years ended September 30, 1994, 1995 and 1996, the Portfolio paid BMR
advisory fees of $9,648,375, $9,944,026 and $ _________ , respectively,
(equivalent to 0.44%, 0.45% and 0.44% of the Portfolio's average net assets for
each such period).
The Investment Advisory Agreement with BMR remains in effect until February
28, 1997. It may be continued indefinitely thereafter so long as such
continuance after February 28, 1997 is approved at least annually (i) by the
vote of a majority of the Trustees of the Portfolio who are not interested
persons of the Portfolio or of BMR cast in person at a meeting specifically
called for the purpose of voting on such approval and (ii) by the Board of
Trustees of the Portfolio or by vote of a majority of the outstanding voting
securities of the Portfolio. The Agreement may be terminated at any time without
penalty on sixty (60) days' written notice by the Board of Trustees of either
party, or by vote of the majority of the outstanding voting securities of the
Portfolio, and the Agreement will terminate automatically in the event of its
assignment. The Agreement provides that BMR may render services to others. The
Agreement also provides that BMR shall not be liable for any loss incurred in
connection with the performance of its duties, or action taken or omitted under
that Agreement, in the absence of willful misfeasance, bad faith, gross
negligence in the performance of its duties or by reason of its reckless
disregard of its obligations and duties thereunder, or for any losses sustained
in the acquisition, holding or disposition of any security or other investment.
As indicated in the Prospectus, Eaton Vance serves as administrator of the
Fund, but currently receives no compensation for providing administrative
services to the Fund. Under its Administrative Services Agreement with the Fund,
Eaton Vance has been engaged to administer the Fund's affairs, subject to the
supervision of the Trustees of the Trust, and shall furnish for the use of the
Fund office space and all necessary office facilities, equipment and personnel
for administering the affairs of the Fund. For additional information about the
Administrator, see "Fees and Expenses" in the Fund's Part II.
The Fund pays all of its own expenses including, without limitation, (i)
expenses of maintaining the Fund and continuing its existence, (ii) its pro rata
share of registration of the Trust under the 1940 Act, (iii) commissions, fees
and other expenses connected with the purchase or sale of securities and other
investments, (iv) auditing, accounting and legal expenses, (v) taxes and
interest, (vi) governmental fees, (vii) expenses of issue, sale, repurchase and
redemption of shares, (viii) expenses of registering and qualifying the Fund and
its shares under federal and state securities laws and of preparing and printing
prospectuses for such purposes and for distributing the same to shareholders and
investors, and fees and expenses of registering and maintaining registrations of
the Fund and of the Fund's principal underwriter, if any, as broker-dealer or
agent under state securities laws, (ix) expenses of reports and notices to
shareholders and of meetings of shareholders and proxy solicitations therefor,
(x) expenses of reports to governmental officers and commissions, (xi) insurance
expenses, (xii) association membership dues (xiii) fees, expenses and
disbursements of custodians and subcustodians for all services to the Fund
(including without limitation safekeeping of funds, securities and other
investments, keeping of books and accounts and determination of net asset
values), (xiv) fees, expenses and disbursements of transfer agents, dividend
disbursing agents, shareholder servicing agents and registrars for all services
to the Fund, (xv) expenses for servicing shareholder accounts, (xvi) any direct
charges to shareholders approved by the Trustees of the Trust, (xvii)
compensation and expenses of Trustees of the Trust who are not members of the
Eaton Vance organization, and (xviii) such non-recurring items as may arise,
including expenses incurred in connection with litigation, proceedings and
claims and any legal obligation of the Trust to indemnify its Trustees and
officers with respect thereto, to the extent not covered by insurance.
BMR is a wholly-owned subsidiary of Eaton Vance. Eaton Vance and EV are both
wholly-owned subsidiaries of EVC. BMR and Eaton Vance are both Massachusetts
business trusts, and EV is the trustee of BMR and Eaton Vance. The Directors of
EV are Landon T. Clay, H. Day Brigham, Jr., M. Dozier Gardner, James B. Hawkes
and Benjamin A. Rowland, Jr. The Directors of EVC consist of the same persons
and John G.L. Cabot and Ralph Z. Sorenson. Mr. Clay is chairman and Mr. Hawkes
is president and chief executive officer of EVC, BMR, Eaton Vance and EV. All of
the issued and outstanding shares of Eaton Vance and EV are owned by EVC. All of
the issued and outstanding shares of BMR are owned by Eaton Vance. All shares of
the outstanding Voting Common Stock of EVC are deposited in a Voting Trust which
expires on December 31, 1996, the Voting Trustees of which are Messrs. Clay,
Brigham, Gardner, Hawkes and Rowland. The Voting Trustees have unrestricted
voting rights for the election of Directors of EVC. All of the outstanding
voting trust receipts issued under said Voting Trust are owned by certain of the
officers of BMR and Eaton Vance who are also officers and Directors of EVC and
EV. As of January 31, 1996, Messrs. Clay, Gardner and Hawkes each owned 24% of
such voting trust receipts, and Messrs. Rowland and Brigham owned 15% and 13%,
respectively, of such voting trust receipts. Messrs. Hawkes and Otis are
officers or Trustees of the Trust and the Portfolio and are members of the EVC,
BMR, Eaton Vance and EV organizations. Messrs. Fetter, MacIntosh, Metzold,
Murphy, O'Connor and Woodbury, and Ms. Sanders who are officers or Trustees of
the Trust and/or the Portfolio and are also members of the BMR, Eaton Vance and
EV organizations. BMR will receive the fees paid under the Investment Advisory
Agreement and Eaton Vance's wholly-owned subsidiary, Eaton Vance Distributors,
Inc., as Principal Underwriter, will receive its portion of the sales charge on
shares of the Fund sold through Authorized Firms.
EVC owns all of the stock of Energex Energy Corporation, which is engaged in
oil and gas exploration and development. In addition, Eaton Vance owns all of
the stock of Northeast Properties, Inc., which is engaged in real estate
investment. EVC owns all the stock of Fulcrum Management, Inc. and MinVen, Inc.,
which are engaged in precious metal mining, venture investment and management.
EVC also owns 24% of the Class A shares of Lloyd George Management (B.V.I.)
Limited, a registered investment adviser. Eaton Vance, BMR, EVC and EV may also
enter into other businesses.
EVC and its affiliates and their officers and employees from time to time
have transactions with various banks, including the custodian of the Fund and
the Portfolio, Investors Bank & Trust Company. It is Eaton Vance's opinion that
the terms and conditions of such transactions were not and will not be
influenced by existing or potential custodial or other relationships between the
Fund or the Portfolio and such banks.
CUSTODIAN
Investors Bank & Trust Company ("IBT"), 89 South Street, Boston,
Massachusetts acts as custodian for the Fund and the Portfolio. IBT has the
custody of all cash and securities representing the Fund's interest in the
Portfolio, has custody of all the Portfolio's assets, maintains the general
ledger of the Portoflio and the Fund and computes the daily net asset value of
interests in the Portfolio and the net asset value of shares of the Fund. In
such capacity it attends to details in connection with the sale, exchange,
substitution, transfer or other dealings with the Portfolio's investments,
receives and disburses all funds and performs various other ministerial duties
upon receipt of proper instructions from the Fund and the Portfolio. IBT charges
fees which are competitive within the industry. A portion of the fee relates to
custody, bookkeeping and valuation services and is based upon a percentage of
Fund and Portfolio net assets, and a portion of the fee relates to activity
charges, primarily the number of portfolio transactions. These fees are then
reduced by a credit for cash balances of the particular investment company at
the custodian equal to 75% of the 91-day, U.S. Treasury Bill auction rate
applied to the particular investment company's average daily collected balances
for the week. Landon T. Clay, a Director of EVC and an officer, Trustee or
Director of other entities in the Eaton Vance organization, owns approximately
13% of the voting stock of Investors Financial Services Corp., the holding
company parent of IBT. Management believes that such ownership does not create
an affiliated person relationship between the Fund or the Portfolio and IBT
under the 1940 Act.
IBT also provides services in connection with the preparation of shareholder
reports and the electronic filing of such reports with the Commission, for which
it receives a separate fee.
SERVICE FOR WITHDRAWAL
The Transfer Agent will send to the shareholder regular monthly or quarterly
payments of any permitted amount designated by the shareholder (see "Eaton Vance
Shareholder Services -- Withdrawal Plan" in the Fund's current Prospectus) based
upon the value of the shares held. The checks will be drawn from share
redemptions and hence, are a return of principal. Income dividends and capital
gain distributions in connection with withdrawal accounts will be credited at
net asset value as of the record date for each distribution. Continued
withdrawals in excess of current income will eventually use up principal,
particularly in a period of declining market prices. A shareholder may not have
a withdrawal plan in effect at the same time he or she has authorized Bank
Automated Investing or is otherwise making regular purchases of Fund shares. The
shareholder, the Transfer Agent or the Principal Underwriter will be able to
terminate the withdrawal plan at any time without penalty.
DETERMINATION OF NET ASSET VALUE
The net asset value of the shares of the Fund is determined by IBT (as agent
and custodian for the Fund) in the manner described under "Valuing Fund Shares"
in the Fund's current prospectus. The net asset value of the Portfolio is also
computed by IBT (as agent and custodian for the Portfolio) by subtracting the
liabilities of the Portfolio from the value of its total assets. Inasmuch as the
market for municipal obligations is a dealer market with no central trading
location or continuous quotation system, it is not feasible to obtain last
transaction prices for most municipal obligations held by the Portfolio, and
such obligations, including those purchased on a when-issued basis, will
normally be valued on the basis of valuations furnished by a pricing service.
The pricing services use information with respect to transactions in bonds,
quotations from bond dealers, market transactions in comparable securities,
various relationships between securities, and yield to maturity in determining
value. Taxable obligations for which price quotations are readily available
normally will be valued at the mean between the latest available bid and asked
prices. Open futures positions on debt securities are valued at the most recent
settlement prices, unless such price does not reflect the fair value of the
contract, in which case the positions will be valued by or at the direction of
the Trustees of the Portfolio. Other assets are valued at fair value using
methods determined in good faith by or at the direction of the Trustees of the
Portfolio. The Fund and the Portfolio will be closed for business and will not
price their respective shares or interests on the following business holidays:
New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day.
Each investor in the Portfolio, including the Fund, may add to or reduce its
investment in the Portfolio on each day the New York Stock Exchange (the
"Exchange") is open for trading ("Portfolio Business Day") as of the close of
regular trading on the Exchange (the "Portfolio Valuation Time"). The value of
each investor's interest in the Portfolio will be determined by multiplying the
net asset value of the Portfolio by the percentage, determined on the prior
Portfolio Business Day, which represented that investor's share of the aggregate
interests in the Portfolio on such prior day. Any additions or withdrawals for
the current Portfolio Business Day will then be recorded. Each investor's
percentage of the aggregate interest in the Portfolio will then be recomputed as
a percentage equal to a fraction (i) the numerator of which is the value of such
investor's investment in the Portfolio as of the Portfolio Valuation Time on the
prior Portfolio Business Day plus or minus, as the case may be, the amount of
any additions to or withdrawals from the investor's investment in the Portfolio
on the current Portfolio Business Day and (ii) the denominator of which is the
aggregate net asset value of the Portfolio as of the Portfolio Valuation Time on
the prior Portfolio Business Day plus or minus, as the case may be, the amount
of the net additions to or withdrawals from the aggregate investment in the
Portfolio on the current Portfolio Business Day by all investors in the
Portfolio. The percentage so determined will then be applied to determine the
value of the investor's interest in the Portfolio for the current Portfolio
Business Day.
INVESTMENT PERFORMANCE
Average annual total return is determined by multiplying a hypothetical
initial purchase order of $1,000 by the average annual compound rate of return
(including capital appreciation/depreciation, and dividends and distributions
paid and reinvested) for the stated period and annualizing the results. The
calculation assumes that all distributions are reinvested at net asset value on
the reinvestment dates during the period, and either (i) the deduction of the
maximum initial sales charge from the initial $1,000 purchase order or (ii) a
complete redemption of the investment and, if applicable, the deduction of the
contingent deferred sales charge at the end of the period. For further
information concerning the total return of the Fund, see "Performance
Information" in the Fund's Part II.
Yield is computed pursuant to a standardized formula by dividing net
investment income per share earned during a recent thirty-day period by the
maximum offering price (including, if applicable, the maximum initial sales
charge) per share on the last day of the period and annualizing the resulting
figure. Net investment income per share is calculated from the yields to
maturity of all debt obligations held by the Portfolio based on prescribed
methods, reduced by accrued Fund expenses for the period with the resulting
number being divided by the average daily number of Fund shares outstanding and
entitled to receive distributions during the period. This yield figure does not
reflect the deduction of any contingent deferred sales charges (if applicable)
imposed on certain redemptions at the rate set forth under "How to Redeem Fund
Shares" in the Fund's current prospectus. Yield calculations assume the current
maximum initial sales charge (if applicable) set forth under "How to Buy Fund
Shares" in the Fund's current Prospectus. (Actual yield may be affected by
variations in sales charges on investments.) A taxable-equivalent yield is
computed by dividing the tax-exempt yield by 1 minus a stated rate. For the
yield and taxable-equivalent yield of the Fund, see "Performance Information" in
the Fund's Part II.
The Principal Underwriter may publish to Authorized Firms the Fund's
distribution rate and/or its effective distribution rate. The Fund's
distribution rate is computed by dividing the most recent monthly distribution
per share annualized, by the current net asset value per share or, where
applicable, the maximum public offering price per share (which includes the
maximum initial sales charge). The Fund's effective distribution rate is
computed by dividing the distribution rate by the ratio (the days in a year
divided by the accrual days of the monthly period) used to annualize the most
recent monthly distribution and reinvesting the resulting amount for a full year
on the basis of such ratio. The effective distribution rate will be higher than
the distribution rate because of the compounding effect of the assumed
reinvestment. Investors should note that the Fund's yield is calculated using a
standardized formula, the income component of which is computed from the yields
to maturity of all debt obligations held by the Portfolio based on prescribed
methods (with all purchases and sales of securities during such period included
in the income calculation on a settlement date basis), whereas the distribution
rate is based on the Fund's last monthly distribution which tends to be
relatively stable and may be more or less than the amount of net investment
income and short-term capital gain actually earned by the Fund during the month.
The Fund's total return may be compared to relevant indices, such as the
Consumer Price Index, the Bond Buyer 25 Revenue Bond Index and the Lehman
Brothers Municipal Bond Index, which may be used in advertisements and in
information furnished to present or prospective shareholders. The Fund's
performance may differ from that of other investors in the Portfolio, including
other investment companies.
The Fund may provide investors with information on municipal bond investing,
which may include comparative performance information, evaluations of Fund
performance, charts and/or illustrations prepared by independent sources (such
as Lipper Analytical Services Inc., CDA/Wiesenberger, Morningstar, Inc., The
Bond Buyer, the Federal Reserve Board or The Wall Street Journal). The Fund may
also refer in investor publications to Tax Freedom Day, as computed by the Tax
Foundation, Washington, DC 20005, to help illustrate the value of tax free
investing, as well as other tax-related information. Information, charts and
illustrations showing the effects of inflation and taxes (including their
effects on the dollar and the return on various investments) and compounding
earnings may also be included in advertisements and materials furnished to
present and prospective investors.
Information about the portfolio allocation and holdings of the Portfolio at
a particular date (including ratings assigned by independent ratings services
such as Moody's, S&P and Fitch) may be included in advertisements and other
material furnished to present and prospective shareholders. Such information may
be stated as a percentage of the Portfolio's bond holdings on such date.
Comparative information about the yield or distribution rate of the Fund and
about average rates of return on certificates of deposit, bank money market
deposit accounts, money market mutual funds and other short-term investments may
also be included in advertisements, supplemental sales literature or
communications of the Fund. Such information may also compare the taxable
equivalent yield (or value) of the Fund to the after-tax yield (or value) of
such other investment vehicles. Such information may be in the form of
hypothetical illustrations. A bank certificate of deposit, unlike the Fund's
shares, pays a fixed rate of interest and entitles the depositor to receive the
face amount of the certificate of deposit at maturity. A bank money market
deposit account is a form of savings account which pays a variable rate of
interest. Unlike the Fund's shares, bank certificates of deposit and bank money
market deposit accounts are insured by the Federal Deposit Insurance
Corporation. A money market mutual fund is designed to maintain a constant value
of $1.00 per share and, thus, a money market fund's shares are subject to less
price fluctuation than the Fund's shares.
The average rates of return of money market mutual funds, certificates of
deposit and bank money market deposit accounts referred to in advertisements,
supplemental sales literature or communications of the Fund will be based on
rates published by the Federal Reserve Bank, Donoghues Money Fund Averages,
RateGram or The Wall Street Journal.
Information used in advertisements and materials furnished to present and
prospective investors may include statements or illustrations relating to the
appropriateness of certain types of securities and/or mutual funds to meet
specific financial goals. Such information may address:
- cost associated with aging parents;
- funding a college education (including its actual and estimated
cost);
- health care expenses (including actual and projected expenses);
- long-term disabilities (including the availability of, and coverage
provided by, disability insurance); and
- retirement (including the availability of social security benefits,
the tax treatment of such benefits and statistics and other
information relating to maintaining a particular standard of living
and outliving existing assets).
Such information may also address different methods for saving money and the
results of such methods, as well as the benefits of investing in municipal bond
funds. Such information may describe the following advantages of investing in a
municipal bond mutual fund versus individual municipal bonds: regular monthly
income; free reinvestment of distributions; potential for increased income; bond
diversification; liquidity; low-cost easy access; and active management and in
depth credit analysis by investment professionals. In addition, by investing in
a municipal bond fund instead of individual bonds, an investor can avoid dealing
with the complexities of the municipal bond market, while benefitting from the
market access and lower transactions costs enjoyed by municipal bond funds.
The Fund may provide information about Eaton Vance, its affiliates and other
investment advisers to the funds in the Eaton Vance Family of Funds in sales
material or advertisements provided to investors or prospective investors. Such
material or advertisements may also provide information on the use of investment
professionals by such investors.
TAXES
See "Distributions and Taxes" in the Fund's current Prospectus.
Each series of the Trust is treated as a separate entity for federal income
tax purposes. The Fund has elected to be treated, has qualified and intends to
continue to qualify each year as a regulated investment company under the
Internal Revenue Code (the "Code"). Accordingly, the Fund intends to satisfy
certain requirements relating to sources of its income and diversification of
its assets and to distribute its net investment income (including tax-exempt
income) and net realized capital gains in accordance with the timing
requirements imposed by the Code, so as to avoid any federal income or excise
tax on the Fund. The Fund so qualified for its fiscal year ended September 30,
1995 (see the Notes to the Financial Statements incorporated by reference into
this SAI). Because the Fund invests substantially all of its assets in the
Portfolio, the Portfolio normally must satisfy the applicable source of income
and diversification requirements in order for the Fund to satisfy them. The
Portfolio will allocate at least annually among its investors, including the
Fund, each investor's distributive share of the Portfolio's net taxable (if any)
and tax-exempt investment income, net realized capital gains, and any other
items of income, gain, loss, deduction or credit. For purposes of applying the
requirements of the Code regarding qualification as a regulated investment
company, the Fund will be deemed (i) to own its proportionate share of each of
the assets of the Portfolio and (ii) to be entitled to the gross income of the
Portfolio attributable to such share.
In order to avoid federal excise tax, the Code requires that the Fund
distribute by December 31 of each calendar year at least 98% of its ordinary
income (not including tax-exempt income) for such year, at least 98% of the
excess of its realized capital gains over its realized capital losses, generally
computed on the basis of the one-year period ending on October 31 of such year,
after reduction by any available capital loss carryforwards, and 100% of any
income from the prior year (as previously computed) that was not paid out during
such year and on which the Fund paid no federal income tax. Under current law,
provided that the Fund qualifies as a regulated investment company for federal
income tax purposes and the Portfolio is treated as a partnership for
Massachusetts and federal tax purposes, neither the Fund nor the Portfolio is
liable for any income, corporate excise or franchise tax in the Commonwealth of
Massachusetts.
The Portfolio's investment in zero coupon and certain other securities will
cause it to realize income prior to the receipt of cash payments with respect to
these securities. Such income will be allocated daily to interests in the
Portfolio, and in order to distribute its proportionate share of this income and
avoid a tax payable by the Fund, the Portfolio may be required to liquidate
portfolio securities that it might otherwise have continued to hold in order to
generate cash that the Fund may withdraw from the Portfolio for subsequent
distribution to Fund shareholders.
Investments in lower-rated or unrated securities may present special tax
issues for the Portfolio and hence for the Fund to the extent actual or
anticipated defaults may be more likely with respect to such securities. Tax
rules are not entirely clear about issues such as when the Portfolio may cease
to accrue interest, original issue discount, or market discount, when and to
what extent deductions may be taken for bad debts or worthless securities; how
payments received on obligations in default should be allocated between
principal and income; and whether exchanges of debt obligations in a workout
context are taxable.
Distributions of net tax-exempt interest income that are properly designated
as "exempt-interest dividends" may be treated by shareholders as interest
excludable from gross income under Section 103(a) of the Code. In order for the
Fund to be entitled to pay the tax-exempt interest income allocated to it by the
Portfolio as exempt-interest dividends to its shareholders, the Fund must and
intends to satisfy certain requirements, including the requirement that, at the
close of each quarter of its taxable year, at least 50% of the value of its
total assets consists of obligations, the interest on which is exempt from
regular federal income tax under Code Section 103(a). For purposes of applying
this 50% requirement, the Fund will be deemed to own its proportionate share of
each of the assets of the Portfolio, and the Portfolio currently intends to
invest its assets in a manner such that the Fund can meet this 50% requirement.
Interest on certain municipal obligations is treated as a tax preference item
for purposes of the federal alternative minimum tax. Shareholders of the Fund
are required to report tax-exempt interest on their federal income tax returns.
From time to time proposals have been introduced before Congress for the
purpose of restricting or eliminating the federal income tax exemption for
interest on certain types of municipal obligations, and it can be expected that
similar proposals may be introduced in the future. Under federal tax legislation
enacted in 1986, the federal income tax exemption for interest on certain
municipal obligations was eliminated or restricted. As a result of such
legislation, the availability of municipal obligations for investment by the
Portfolio and the value of the securities held by the Portfolio may be affected.
In the course of managing its investments, the Portfolio may realize some
short-term and long-term capital gains (and/or losses) as a result of market
transactions, including sales of portfolio securities and rights to when-issued
securities and options and futures transactions. The Portfolio may also realize
taxable income from certain short-term taxable obligations, securities loans, a
portion of discount with respect to certain stripped municipal obligations or
their stripped coupons and certain realized gains or income attributable to
accrued market discount. Any distributions by the Fund of its share of such
capital gains (after reduction by any capital loss carryforwards) or taxable
income would be taxable to shareholders of the Fund. However, it is expected
that such amounts, if any, would normally be insubstantial in relation to the
tax exempt interest earned by the Portfolio and allocated to the Fund. Certain
distributions if declared in October, November or December and paid the
following January may be taxed to shareholders as if received on December 31 of
the year in which they are declared.
The Portfolio's transactions in options and futures contracts will be
subject to special tax rules that may affect the amount, timing and character of
Fund distributions to shareholders. For example, certain positions held by the
Portfolio on the last business day of each taxable year will be marked to market
(i.e., treated as if closed out on such day), and any resulting gain or loss
will generally be treated as 60% long-term and 40% short-term capital gain or
loss. Certain positions held by the Portfolio that substantially diminish the
Portfolio's risk of loss with respect to other positions in its portfolio may
constitute "straddles," which are subject to tax rules that may cause deferral
of Portfolio losses, adjustments in the holding period of Portfolio securities
and conversion of short-term into long-term capital losses. The Portfolio may
have to limit its activities in options and futures contracts in order to enable
the Fund to maintain its qualification as a regulated investment company.
Any loss realized upon the sale or exchange of shares of the Fund with a tax
holding period of 6 months or less will be disallowed to the extent the
shareholder has received tax-exempt interest with respect to such shares and, to
the extent the loss exceeds the disallowed amount, will be treated as a
long-term capital loss to the extent of any distribution treated as net
long-term capital gains with respect to such shares. In addition, a loss
realized on a redemption or other disposition of Fund shares may be disallowed
to the extent the shareholder acquired other Fund shares (whether through the
reinvestment of distributions or otherwise) within the period beginning 30 days
before the redemption of the loss shares and ending 30 days after such date.
Amounts paid by the Fund to individuals and certain other shareholders who
have not provided the Fund with their correct taxpayer identification number and
certain certifications, required by the Internal Revenue Service (the "IRS"), as
well as shareholders with respect to whom the Fund has received notification
from the IRS or a broker, may be subject to "backup" withholding of federal
income tax from the Fund's taxable dividends and distributions and the proceeds
of redemptions (including repurchases and exchanges), at a rate of 31%. An
individual's taxpayer identification number is generally his or her social
security number.
Non-resident alien individuals, foreign corporations and certain other
foreign entities generally will be subject to a U.S. withholding tax at a rate
of 30% on the Fund's distributions from its ordinary income and the excess of
its net short-term capital gain over its net long-term capital loss, unless the
tax is reduced or eliminated by an applicable tax treaty. Distributions from the
excess of the Fund's net long-term capital gain over its net short-term capital
loss received by such shareholders and any gain from the sale or other
disposition of shares of the Fund generally will not be subject to U.S. federal
income taxation, provided that non-resident alien status has been certified by
the shareholder. Different U.S. tax consequences may result if the shareholder
is engaged in a trade or business in the United States, is present in the United
States for a sufficient period of time during a taxable year to be treated as a
U.S. resident, or fails to provide any required certifications regarding status
as a non-resident alien investor. Foreign shareholders should consult their tax
advisers regarding the U.S. and foreign tax consequences of an investment in the
Fund.
The foregoing discussion does not address the special tax rules applicable
to certain classes of investors, such as tax-exempt entities, insurance
companies and financial institutions. Shareholders should consult their own tax
advisers with respect to special tax rules that may apply in their particular
situations, as well as the state, local or foreign tax consequences of investing
in the Fund.
STATE AND LOCAL TAXES
The exemption of interest income for federal income tax purposes does not
necessarily result in exemption under the income or other tax laws of any state
or local taxing authority. Shareholders of the Fund may be exempt from state and
local taxes on distributions of tax-exempt interest income derived from
obligations of the state and/or municipalities of the state in which they are
resident, but taxable generally on income derived from obligations of other
jurisdictions. The Fund will report annually to shareholders, with respect to
net tax exempt income earned, the percentages representing the proportionate
ratio of such income earned in each state.
Shareholders should consult their own tax advisers with respect to the
state, local and foreign tax consequences of investing in the Fund.
PORTFOLIO SECURITY TRANSACTIONS
Decisions concerning the execution of Portfolio security transactions,
including the selection of the market and the executing firm, are made by BMR.
BMR is also responsible for the execution of transactions for all other accounts
managed by it.
BMR places the portfolio security transactions of the Portfolio and of all
other accounts managed by it for execution with many firms. BMR uses its best
efforts to obtain execution of portfolio security transactions at prices which
are advantageous to the Portfolio and at reasonably competitive spreads or (when
a disclosed commission is being charged) at reasonably competitive commission
rates. In seeking such execution, BMR will use its best judgment in evaluating
the terms of a transaction, and will give consideration to various relevant
factors, including without limitation the size and type of the transaction, the
nature and character of the market for the security, the confidentiality, speed
and certainty of effective execution required for the transaction, the general
execution and operational capabilities of the executing firm, the reputation,
reliability, experience and financial condition of the firm, the value and
quality of the services rendered by the firm in this and other transactions, and
the reasonableness of the spread or commission, if any. Municipal obligations,
including state obligations, purchased and sold by the Portfolio are generally
traded in the over-the-counter market on a net basis (i.e., without commission)
through broker-dealers and banks acting for their own account rather than as
brokers, or otherwise involve transactions directly with the issuer of such
obligations. Such firms attempt to profit from such transactions by buying at
the bid price and selling at the higher asked price of the market for such
obligations, and the difference between the bid and asked price is customarily
referred to as the spread. The Portfolio may also purchase municipal obligations
from underwriters, the cost of which may include undisclosed fees and
concessions to the underwriters. While it is anticipated that the Portfolio will
not pay significant brokerage commissions in connection with such portfolio
security transactions, on occasion it may be necessary or appropriate to
purchase or sell a security through a broker on an agency basis, in which case
the Portfolio will incur a brokerage commission. Although spreads or commissions
on portfolio security transactions will, in the judgment of BMR, be reasonable
in relation to the value of the services provided, spreads or commissions
exceeding those which another firm might charge may be paid to firms who were
selected to execute transactions on behalf of the Portfolio and BMR's other
clients for providing brokerage and research services to BMR.
As authorized in Section 28(e) of the Securities Exchange Act of 1934, a
broker or dealer who executes a portfolio transaction on behalf of the Portfolio
may receive a commission which is in excess of the amount of commission another
broker or dealer would have charged for effecting that transaction if BMR
determines in good faith that such commission was reasonable in relation to the
value of the brokerage and research services provided. This determination may be
made on the basis of either that particular transaction or on the basis of
overall responsibilities which BMR and its affiliates have for accounts over
which they exercise investment discretion. In making any such determination, BMR
will not attempt to place a specific dollar value on the brokerage and research
services provided or to determine what portion of the commission should be
related to such services. Brokerage and research services may include advice as
to the value of securities, the advisability of investing in, purchasing, or
selling securities, and the availability of securities or purchasers or sellers
of securities; furnishing analyses and reports concerning issuers, industries,
securities, economic factors and trends, portfolio strategy and the performance
of accounts; effecting securities transactions and performing functions
incidental thereto (such as clearance and settlement); and the "Research
Services" referred to in the next paragraph.
It is a common practice of the investment advisory industry and of the
advisers of investment companies, institutions and other investors to receive
research, statistical and quotation services, data, information and other
services, products and materials which assist such advisers in the performance
of their investment responsibilities ("Research Services") from broker-dealer
firms which execute portfolio transactions for the clients of such advisers and
from third parties with which such broker-dealers have arrangements. Consistent
with this practice, BMR receives Research Services from many broker-dealer firms
with which BMR places the Portfolio transactions and from third parties with
which these broker-dealers have arrangements. These Research Services include
such matters as general economic and market reviews, industry and company
reviews, evaluations of securities and portfolio strategies and transactions and
recommendations as to the purchase and sale of securities and other portfolio
transactions, financial, industry and trade publications, news and information
services, pricing and quotation equipment and services, and research oriented
computer hardware, software, data bases and services. Any particular Research
Service obtained through a broker-dealer may be used by BMR in connection with
client accounts other than those accounts which pay commissions to such
broker-dealer. Any such Research Service may be broadly useful and of value to
BMR in rendering investment advisory services to all or a significant portion of
its clients, or may be relevant and useful for the management of only one
client's account or of a few clients' accounts, or may be useful for the
management of merely a segment of certain clients' accounts, regardless of
whether any such account or accounts paid commissions to the broker-dealer
through which such Research Service was obtained. The advisory fee paid by the
Portfolio is not reduced because BMR receives such Research Services. BMR
evaluates the nature and quality of the various Research Services obtained
through broker-dealer firms and attempts to allocate sufficient commissions to
such firms to ensure the continued receipt of Research Services which BMR
believes are useful or of value to it in rendering investment advisory services
to its clients.
Subject to the requirement that BMR shall use its best efforts to seek and
execute portfolio security transactions at advantageous prices and at reasonably
competitive spreads or commission rates, BMR is authorized to consider as a
factor in the selection of any firm with whom Portfolio orders may be placed the
fact that such firm has sold or is selling shares of the Fund or of other
investment companies sponsored by BMR or Eaton Vance. This policy is not
inconsistent with a rule of the National Association of Securities Dealers,
Inc., which rule provides that no firm which is a member of the Association
shall favor or disfavor the distribution of shares of any particular investment
company or group of investment companies on the basis of brokerage commissions
received or expected by such firm from any source.
Municipal obligations considered as investments for the Portfolio may also
be appropriate for other investment accounts managed by BMR or its affiliates.
BMR will attempt to allocate in a manner it deems equitable portfolio security
transactions among the Portfolio and the portfolios of its other investment
accounts whenever decisions are made to purchase or sell securities by the
Portfolio and one or more of such other accounts simultaneously. In making such
allocations, the main factors to be considered are the respective investment
objectives of the Portfolio and such other accounts, the relative size of
portfolio holdings of the same or comparable securities, the availability of
cash for investment by the Portfolio and such accounts, the size of investment
commitments generally held by the Portfolio and such accounts and the opinions
of the persons responsible for recommending investments to the Portfolio and
such accounts. However, there may be instances when the Portfolio will not
participate in a securities transaction that is allocated among other accounts.
While these procedures could have a detrimental effect on the price or amount of
the securities available to the Portfolio from time to time, it is the opinion
of the Trustees of the Trust and the Portfolio that the benefits available from
the BMR organization outweigh any disadvantage that may arise from exposure to
simultaneous transactions. For the fiscal years ended September 30, 1996, 1995
and 1994, the Portfolio paid no brokerage commissions on portfolio transactions.
OTHER INFORMATION
The Trust is a Massachusetts business trust established in 1985. Eaton
Vance, pursuant to its agreement with the Trust, controls the use of the words
"Eaton Vance" and "EV" in the Fund's name and may use the words "Eaton Vance" or
"EV" in other connections and for other purposes.
As permitted by Massachusetts law, there will normally be no meetings of
shareholders for the purpose of electing Trustees unless and until such time as
less than a majority of the Trustees of the Trust holding office have been
elected by shareholders. In such an event, the Trustees then in office will call
a shareholders' meeting for the election of Trustees. Except for the foregoing
circumstances and unless removed by action of the shareholders in accordance
with the Trust's by-laws, the Trustees shall continue to hold office and may
appoint successor Trustees.
The Trust's by-laws provide that no person shall serve as a Trustee if
shareholders holding two-thirds of the outstanding shares have removed him from
that office either by a written declaration filed with the Trust's custodian or
by votes cast at a meeting called for that purpose. The by-laws further provide
that under certain circumstances the shareholders may call a meeting to remove a
Trustee and that the Trust is required to provide assistance in communication
with shareholders about such a meeting.
The Declaration of Trust may be amended by the Trustees when authorized by
vote of a majority of the outstanding voting securities of the Trust, the
financial interests of which are affected by the amendment. The Trustees may
also amend the Declaration of Trust without the vote or consent of shareholders
to change the name of the Trust or any series or to make such other changes as
do not have a materially adverse effect on the financial interests of
shareholders or if they deem it necessary to conform it to applicable federal or
state laws or regulations. The Trust or any series or class thereof may be
terminated by: (1) the affirmative vote of the holders of not less than
two-thirds of the Shares outstanding and entitled to vote at any meeting of
shareholders of the Trust or the appropriate series or class thereof, or by an
instrument or instruments in writing without a meeting, consented to by the
holders of two-thirds of the Shares of the Trust or a series or class thereof,
provided, however, that, if such termination is recommended by the Trustees, the
vote of a majority of the outstanding voting securities of the Trust or a series
or class thereof entitled to vote thereon shall be sufficient authorization; or
(2) by means of an instrument in writing signed by a majority of the Trustees,
to be followed by a written notice to shareholders stating that a majority of
the Trustees has determined that the continuation of the Trust or a series or a
class thereof is not in the best interest of the Trust, such series or class or
of their respective shareholders.
The Declaration of Trust further provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law; but nothing in the
Declaration of Trust protects a Trustee against any liability to which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
office. In addition, the By-Laws of the Trust provide that no natural person
shall serve as a Trustee of the Trust after the holders of record of not less
than two-thirds of the outstanding shares have declared that he be removed from
office either by declaration in writing filed with the custodian of the assets
of the Trust or by votes cast in person or by proxy at a meeting called for the
purpose.
In accordance with the Declaration of Trust of the Portfolio, there will
normally be no meetings of the investors for the purpose of electing Trustees
unless and until such time as less than a majority of the Trustees holding
office have been elected by investors. In such an event the Trustees of the
Portfolio then in office will call an investors' meeting for the election of
Trustees. Except for the foregoing circumstances and unless removed by action of
the investors in accordance with the Portfolio's Declaration of Trust, the
Trustees shall continue to hold office and may appoint successor Trustees.
The Declaration of Trust of the Portfolio provides that no person shall
serve as a Trustee if investors holding two-thirds of the outstanding interests
have removed him from that office either by a written declaration filed with the
Portfolio's custodian or by votes cast at a meeting called for that purpose. The
Declaration of Trust further provides that under certain circumstances the
investors may call a meeting to remove a Trustee and that the Portfolio is
required to provide assistance in communicating with investors about such a
meeting.
The Portfolio's Declaration of Trust provides that the Portfolio will
terminate 120 days after the complete withdrawal of the Fund or any other
investor in the Portfolio, unless either the remaining investors, by unanimous
vote at a meeting of such investors, or a majority of the Trustees of the
Portfolio, by written instrument consented to by all investors, agree to
continue the business of the Portfolio. This provision is consistent with
treatment of the Portfolio as a partnership for federal income tax purposes.
The right to redeem shares of the Fund can be suspended and the payment of
the redemption price deferred when the Exchange is closed (other than for
customary weekend and holiday closings), during periods when trading on the
Exchange is restricted as determined by the Commission, or during any emergency
as determined by the Commission which makes it impracticable for the Portfolio
to dispose of its securities or value its assets, or during any other period
permitted by order of the Commission for the protection of investors.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Deloitte & Touche LLP, 125 Summer Street, Boston, Massachusetts, are the
independent certified public accountants of the Fund and the Portfolio,
providing audit services, tax return preparation, and assistance and
consultation with respect to the preparation of filings with the Commission.
<PAGE>
TAX EQUIVALENT YIELD TABLE
The table below gives the approximate yield a taxable security must earn at
various income brackets to produce after-tax yields to those of tax-exempt bonds
yielding from 4% to 7% under the regular federal income tax laws and tax rates
applicable to 1996.
<TABLE>
<CAPTION>
MARGINAL
SINGLE RETURN JOINT RETURN INCOME TAX-EXEMPT YIELD
- --------------------- ------------------- TAX --------------------------------------------------------------------------
(TAXABLE INCOME)* BRACKET 4% 4.5% 5% 5.5% 6% 6.5% 7%
- ------------------------------------------ ----------- --------------------------------------------------------------------------
Equivalent Taxable Yield
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Up to $ 24,000 Up to $ 40,100 15.00% 4.71% 5.29% 5.88% 6.47% 7.06% 7.65% 8.24%
$ 24,001-$ 58,150 $ 40,101-$ 96,900 28.00 5.56 6.25 6.94 7.64 8.33 9.03 9.72
$ 58,151-$121,300 $ 96,901-$147,700 31.00 5.80 6.52 7.25 7.97 8.70 9.42 10.14
$121,301-$263,750 $147,701-$263,750 36.00 6.25 7.03 7.81 8.59 9.38 10.16 10.94
Over $263,750 Over $263,750 39.60 6.62 7.45 8.28 9.11 9.93 10.76 11.59
- ------------------------------------------ ----------- --------------------------------------------------------------------------
<FN>
*Net amount subject to federal personal income tax after deductions and exemptions.
</TABLE>
Note: The above indicated federal income tax brackets do not take into account
the effect of a reduction in the deductibility of itemized deductions for
taxpayers with adjusted gross income in excess of $117,950. The tax brackets
also do not show the effects of phase out of personal exemptions for single
filers with adjusted gross incomes in excess of $117,950 and joint filers with
adjusted gross income in excess of $176,950. The effective tax brackets and
equivalent taxable yields of such taxpayers will be higher than those indicated
above.
Yields shown are for illustration purposes only and are not meant to represent
the Fund's actual yield. No assurance can be given that the Fund will achieve
any specific tax exempt yield. While it is expected that the Portfolio will
invest principally in obligations, the interest from which is exempt from the
regular federal income tax, other income received by the Portfolio and allocated
to the Fund may be taxable. The table does not take into account state or local
taxes, if any, payable on Fund distributions. It should also be noted that the
interest earned on certain "private activity bonds" issued after August 7, 1986,
while exempt from the regular federal income tax, is treated as a tax preference
item which could subject the recipient to the federal alternative minimum tax.
The illustrations assume that the federal alternative minimum tax is not
applicable and do not take into account any tax credits that may be available.
The information set forth above is as of the date of this SAI. Subsequent tax
law changes could result in prospective or retroactive changes in the tax
brackets, tax rates, and tax equivalent yields set forth above. Investors should
consult their tax adviser for additional information.
<PAGE>
APPENDIX
DESCRIPTION OF SECURITIES RATINGS+
MOODY'S INVESTORS SERVICE, INC.
MUNICIPAL BONDS
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long term risk appear somewhat larger than the Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa: Bonds which are rated Baa are considered as medium-grade obligations (i.e.,
they are neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during other good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
or interest.
Ca: Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
- ----------
+The ratings indicated herein are believed to be the most recent ratings
available at the date of this Statement of Additional Information for the
securities listed. Ratings are generally given to securities at the time of
issuance. While the rating agencies may from time to time revise such ratings,
they undertake no obligation to do so, and the ratings indicated do not
necessarily represent ratings which would be given to these securities on the
date of the Portfolio's fiscal year end.
<PAGE>
ABSENCE OF RATING: Where no rating has been assigned or where a rating has
been suspended or withdrawn, it may be for reasons unrelated to the quality of
the issue.
Should no rating be assigned, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities or companies that
are not rated as a matter of policy.
3. There is a lack of essential data pertaining to the issue or issuer.
4. The issue was privately placed, in which case the rating is not
published in Moody's publications.
Suspension or withdrawal may occur if new and material circumstances arise, the
effects of which preclude satisfactory analysis; if there is no longer available
reasonable up-to-date data to permit a judgment to be formed; if a bond is
called for redemption; or for other reasons.
NOTE: Moody's applies numerical modifiers, 1, 2, and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
MUNICIPAL SHORT-TERM OBLIGATIONS
RATINGS: Moody's ratings for state and municipal short-term obligations will be
designated Moody's Investment Grade or (MIG). Such rating recognizes the
differences between short term credit risk and long term risk. Factors effecting
the liquidity of the borrower and short term cyclical elements are critical in
short term ratings, while other factors of major importance in bond risk, long
term secular trends for example, may be less important over the short run.
A short term rating may also be assigned on an issue having a demand feature,
variable rate demand obligation (VRDO). Such ratings will be designated as
VMIG1, SG or if the demand feature is not rated, NR. A short term rating on
issues with demand features are differentiated by the use of the VMIG1 symbol to
reflect such characteristics as payment upon periodic demand rather than fixed
maturity dates and payment relying on external liquidity. Additionally,
investors should be alert to the fact that the source of payment may be limited
to the external liquidity with no or limited legal recourse to the issuer in the
event the demand is not met.
STANDARD & POOR'S RATINGS GROUP
INVESTMENT GRADE
AAA: Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the highest rated issues only in small degree.
A: Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB: Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibit adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay interest and repay principal for debt in this
category than in higher rated categories.
SPECULATIVE GRADE
Debt rated BB, B, CCC, CC, and C is regarded as having predominantly speculative
characteristics with respect to capacity to pay interest and repay principal. BB
indicates the least degree of speculation and C the highest. While such debt
will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major exposures to adverse conditions.
BB: Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB- rating.
B: Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB or BB-
rating.
CCC: Debt rated CCC has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The CCC rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
B or B- rating.
CC: The rating CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC debt rating.
C: The rating C is typically applied to debt subordinated to senior debt which
is assigned an actual or implied CCC- debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed, but debt service
payments are continued.
C1: The Rating C1 is reserved for income bonds on which no interest is being
paid.
D: Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The D rating also will be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.
PLUS (+) OR MINUS (-): The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
PROVISIONAL RATINGS: The letter "p" indicates that the rating is provisional. A
provisional rating assumes the successful completion of the project being
financed by the debt being rated and indicates that payment of debt service
requirements is largely or entirely dependent upon the successful and timely
completion of the project. This rating, however, while addressing credit quality
subsequent to completion of the project, makes no comment on the likelihood of,
or the risk of default upon failure of such completion. The investor should
exercise his own judgment with respect to such likelihood and risk.
L: The letter "L" indicates that the rating pertains to the principal amount of
those bonds to the extent that the underlying deposit collateral is insured by
the Federal Deposit Insurance Corp. and interest is adequately collateralized.
In the case of certificates of deposit, the letter "L" indicates that the
deposit, combined with other deposits being held in the same right and capacity,
will be honored for principal and accrued pre-default interest up to the federal
insurance limits within 30 days after closing of the insured institution or, in
the event that the deposit is assumed by a successor insured institution, upon
maturity.
NR: NR indicates no rating has been requested, that there is insufficient
information on which to base a rating, or that S&P does not rate a particular
type of obligation as a matter of policy.
MUNICIPAL NOTES
S&P note ratings reflect the liquidity concerns and market access risks unique
to notes. Notes due in 3 years or less will likely receive a note rating. Notes
maturing beyond 3 years will most likely receive a long-term debt rating. The
following criteria will be used in making that assessment:
-- Amortization schedule (the larger the final maturity relative to other
maturities the more likely it will be treated as a note).
-- Sources of payment (the more dependent the issue is on the market for its
refinancing, the more likely it will be treated as a note).
Note rating symbols are as follows:
SP-1: Strong capacity to pay principal and interest. Those issues determined
to possess very strong characteristics will be given a plus(+) designation.
SP-2: Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse financial and economic changes over the term of the
notes.
SP-3: Speculative capacity to pay principal and interest.
FITCH INVESTORS SERVICE, INC.
INVESTMENT GRADE BOND RATINGS
AAA: Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA: Bonds considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated "AAA". Because bonds rated in the "AAA" and
"AA" categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated "F-1+".
A: Bonds considered to be investment grade and of high credit quality. The
obligors ability to pay interest and repay principal is considered to be strong,
but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB: Bonds considered to be investment grade and of satisfactory credit quality.
The obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however, are
more likely to have adverse impact on these bonds, and therefore, impair timely
payment. The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.
HIGH YIELD BOND RATINGS
AAA: Bonds are considered speculative. The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified that could assist the
obligor in satisfying its debt service requirements.
B: Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue.
CCC: Bonds have certain identifiable characteristics which, if not remedied,
may lead to default. The ability to meet obligations requires an advantageous
business and economic environment.
CC: Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C: Bonds are in imminent default in payment of interest or principal.
DDD, DD, AND D: Bonds are in default on interest and/or principal payments. Such
bonds are extremely speculative and should be valued on the basis of their
ultimate recovery value in liquidation or reorganization of the obligor. "DDD"
represents the highest potential for recovery on these bonds, and "D" represents
the lowest potential for recovery.
PLUS (+) OR MINUS (-): The ratings from AA to C may be modified by the addition
of a plus or minus sign to indicate the relative position of a credit within the
rating category.
NR: Indicates that Fitch does not rate the specific issue.
CONDITIONAL: A conditional rating is premised on the successful completion of
a project or the occurrence of a specific event.
INVESTMENT GRADE SHORT-TERM RATINGS
Fitch's short-term ratings apply to debt obligations that are payable on demand
or have original maturities of generally up to three years, including commercial
paper, certificates of deposit, medium-term notes, and municipal and investment
notes.
F-1+: Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1: Very Stong Credit Quality. Issues assigned this rating reflect an assurance
of timely payment only slightly less in degree than issues rated "F-1+".
F-2: Good Credit Quality. Issues carrying this rating have a satisfactory
degree of assurance for timely payment, but the margin of safety is not as
great as the "F-1+" and "F-1" categories.
F-3: Fair Credit Quality. Issues carrying this rating have characteristics
suggesting that the degree of assurance for timely payment is adequate, however,
near-term adverse change could cause these securities to be rated below
investment grade.
* * * * * * * *
NOTES: Bonds which are unrated expose the investor to risks with respect to
capacity to pay interest or repay principal which are similar to the risks of
lower-rated speculative bonds. The Portfolio is dependent on the Investment
Adviser's judgment, analysis and experience in the evaluation of such bonds.
Investors should note that the assignment of a rating to a bond by a
rating service may not reflect the effect of recent developments on the issuer's
ability to make interest and principal payments.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EV TRADITIONAL NATIONAL MUNICIPALS
FUND.
FEES AND EXPENSES
ADMINISTRATOR
As stated under "Investment Adviser and Administrator" Part I of this
Statement of Additional Information, the Administrator receives no compensation
for providing administrative services to the Fund. For the period from the start
of business, April 5, 1994, to the fiscal year ended September 30, 1994 and for
the fiscal year ended September 30, 1995, $10,747 and $63,405, respectively, of
the Fund's expenses were allocated to the Administrator.
SERVICE PLAN
During the fiscal year ended September 30, 1996, the Fund made service fee
payments attributable to Class A shares under the Plan aggregating $ ________ of
which $ ________ was paid to Authorized Firms and the balance of which was
retained by the Principal Underwriter. The Service Plan relates to Class A
shares only.
PRINCIPAL UNDERWRITER
The total sales charges for sale of Class A shares of the Fund for the
fiscal years ended September 30, 1996 and 1995 was $ ________ and $562,644,
respectively, all of which was received by Authorized Firms and for the period
from the start of business, April 5, 1994, to the fiscal year ended September
30, 1994 total sales charges were $142,563 of which $139,068 was paid to
Authorized Firms and $3,494 was paid to the Principal Underwriter.
The Fund has authorized the Principal Underwriter to act as its agent in
repurchasing shares at the rate of $2.50 for each repurchase transaction handled
by the Principal Underwriter. The Principal Underwriter estimates that the
expenses incurred by it in acting as repurchase agent for the Fund will exceed
the amounts paid therefor by the Fund. For the fiscal year ended September 30,
1996, the Fund paid the Principal Underwriter $ _______ for repurchase
transactions handled by the Principal Underwriter.
TRUSTEES
The fees and expenses of those Trustees of the Trust and of the Portfolio
who are not members of the Eaton Vance organization (the noninterested Trustees)
are paid by the Fund (and the other series of the Trust) and the Portfolio,
respectively. (The Trustees of the Trust and of the Portfolio who are members of
the Eaton Vance organization receive no compensation from the Trust or the
Portfolio.) During the fiscal year ended September 30, 1996, the noninterested
Trustees of the Trust and the Portfolio earned the following compensation in
their capacities as Trustees from the Fund, the Portfolio, and the funds in the
Eaton Vance fund complex(1):
AGGREGATE AGGREGATE TOTAL COMPENSATION
COMPENSATION COMPENSATION FROM TRUST AND
NAME FROM FUND FROM PORTFOLIO FUND COMPLEX
---- --------- -------------- ------------
Donald R. Dwight .......... $ $ (2) $ (4)
Samuel L. Hayes, III ...... (3) (5)
Norton H. Reamer ..........
John L. Thorndike .........
Jack L. Treynor ...........
(1) The Eaton Vance fund complex consists of ___ registered investment
companies or series thereof.
(2) Includes $_____ of deferred compensation.
(3) Includes $_____ of deferred compensation.
(4) Includes $______ of deferred compensation.
(5) Includes $______ of deferred compensation.
SERVICES FOR ACCUMULATION
The following services relate to purchases of Class A shares and are
voluntary, involve no extra charge other than the sales charge included in the
offering price, and may be changed or discontinued without penalty at any time.
INTENDED QUANTITY INVESTMENT -- STATEMENT OF INTENTION. If it is anticipated
that $50,000 or more of Class A shares and shares of the other continuously
offered open-end funds listed under "The Eaton Vance Exchange Privilege" in the
current Prospectus of the Fund will be purchased within a 13-month period, a
Statement of Intention should be signed so that shares may be obtained at the
same reduced sales charge as though the total quantity were invested in one lump
sum. Shares held under Right of Accumulation (see below) as of the date of the
Statement will be included toward the completion of the Statement. The Statement
authorizes the Transfer Agent to hold in escrow sufficient shares (5% of the
dollar amount specified in the Statement) which can be redeemed to make up any
difference in sales charge on the amount intended to be invested and the amount
actually invested. Execution of a Statement does not obligate the shareholder to
purchase or the Fund to sell the full amount indicated in the Statement, and
should the amount actually purchased during the 13-month period be more or less
than that indicated on the Statement, price adjustments will be made. For sales
charges and other information on quantity purchases, see "How to Buy Fund
Shares" in the Fund's current Prospectus. Any investor considering signing a
Statement of Intention should read it carefully.
RIGHT OF ACCUMULATION -- CUMULATIVE QUANTITY DISCOUNT. The applicable sales
charge level for the purchase of Class A shares is calculated by taking the
dollar amount of the current purchase and adding it to the value (calculated at
the maximum current offering price) of the shares the shareholder owns in his
account(s) in the Fund and in the other continuously offered open-end funds
listed under "The Eaton Vance Exchange Privilege" in the current Prospectus of
the Fund for which Eaton Vance acts as investment adviser or administrator at
the time of purchase. The sales charge on the shares being purchased will then
be at the rate applicable to the aggregate. For example, if the shareholder
owned shares valued at $30,000 and purchased an additional $20,000 of shares,
the sales charge for the $20,000 purchase would be at the rate of 2.75% of the
offering price (2.83% of the net amount invested) which is the rate applicable
to single transactions of $50,000. For sales charges on quantity purchases, see
"How to Buy Fund Shares" in the Fund's current Prospectus. Shares purchased (i)
by an individual, his or her spouse and their children under the age of
twenty-one, and (ii) by a trustee, guardian or other fiduciary of a single trust
estate or a single fiduciary account, will be combined for the purpose of
determining whether a purchase will qualify for the Right of Accumulation and if
qualifying, the applicable sales charge level.
For any such discount to be made available, at the time of purchase a
purchaser or his or her Authorized Firm must provide the Principal Underwriter
(in the case of a purchase made through an Authorized Firm) or the Transfer
Agent (in the case of an investment made by mail) with sufficient information to
permit verification that the purchase order qualifies for the accumulation
privilege. Corfirmation of the order is subject to such verification. The Right
of Accumulation privilege may be amended or terminated at any time as to
purchases occurring thereafter.
PRINCIPAL UNDERWRITER
Shares of each class of the Fund may be continuously purchased at the public
offering price through Authorized Firms which have agreements with the Principal
Underwriter. The Principal Underwriter is a wholly-owned subsidiary of Eaton
Vance.
The public offering price is the net asset value next computed after receipt
of the order, plus, in the case of Class A shares and where applicable, a
variable percentage (sales charge) depending upon the amount of purchase as
indicated by the sales charge table set forth in the Fund's current Prospectus.
Such table is applicable to purchases of Class A shares alone or in combination
with purchases of the other funds offered by the Principal Underwriter, made at
a single time by (i) an individual, or an individual, his or her spouse and
their children under the age of twenty-one, purchasing shares for his or their
own account; and (ii) a trustee or other fiduciary purchasing shares for a
single trust estate or a single fiduciary account.
The table is also presently applicable to (1) purchases of Fund shares,
alone or in combination with purchases of any of the other funds offered by the
Principal Underwriter through one dealer aggregating $100,000 or more made by
any of the persons enumerated above within a thirteen-month period starting with
first purchase pursuant to a written Statement of Intention, in the form
provided by the Principal Underwriter, which includes provisions for a price
adjustment depending upon the amount actually purchased within such period (a
purchase not made pursuant to such Statement may be included thereunder if the
Statement is filed within 90 days of such purchase); or (2) purchases of Class A
shares pursuant to the Right of Accumulation and declared as such at the time of
purchase.
Subject to the applicable provisions of the 1940 Act, the Fund may issue
Class A shares at net asset value in the event that an investment company
(whether a regulated or private investment company or a personal holding
company) is merged or consolidated with or acquired by the Fund. Normally no
sales charges will be paid in connection with an exchange of Class A shares for
the assets of such investment company.
Class A shares may be sold at net asset value to any officer, director,
trustee, general partner or employee of the Fund, the Portfolio or any
investment company for which Eaton Vance or BMR acts as investment adviser, any
investment advisory, agency, custodial or trust account managed or administered
by Eaton Vance or by any parent, subsidiary or other affiliate of Eaton Vance,
or any officer, director or employee of any parent, subsidiary or other
affiliate of Eaton Vance. The terms "officer," "director," "trustee," "general
partner" or "employee" as used in this paragraph include any such person's
spouse and minor children, and also retired officers, directors, trustees,
general partners and employees and their spouses and minor children. Class A
shares of the Fund may also be sold at net asset value to registered
representatives and employees of certain Authorized Firms and to such persons'
spouses and children under the age of 21 and their beneficial accounts.
The Trust reserves the right to suspend or limit the offering of shares of
the Fund to the public at any time.
The Principal Underwriter acts as principal in selling shares of the Fund
under the distribution agreement with the Trust on behalf of the Fund. The
expenses of printing copies of prospectuses used to offer shares to Authorized
Firms or investors and other selling literature and of advertising are borne by
the Principal Underwriter. The fees and expenses of qualifying and registering
and maintaining qualifications and registrations of the Fund and its shares
under federal and state securities laws are borne by the Fund. The distribution
agreement is renewable annually by the Board of Trustees of the Trust (including
a majority of its Trustees who are not interested persons of the Principal
Underwriter or the Trust), may be terminated on six months' notice by either
party, and is automatically terminated upon assignment. The Principal
Underwriter distributes Fund shares on a "best efforts" basis under which it is
required to take and pay for only such shares as may be sold. In connection with
the sale of Class A shares, the Principal Underwriter allows Authorized Firms
discounts from the applicable public offering price which are alike for all
Authorized Firms. See "How to Buy Fund Shares" in the Fund's current Prospectus
for the discount allowed to Authorized Firms on the sale of Fund shares. The
Principal Underwriter may allow, upon notice to all Authorized Firms with whom
it has agreements, discounts up to the full sales charge during the periods
specified in the notice. During periods when the discount includes the full
sales charge, such Authorized Firms may be deemed to be underwriters as that
term is defined in the Securities Act of 1933. See "Fees and Expenses" for the
sales charge paid to the Principal Underwriter and Authorized Firms.
SERVICE PLAN
The Trust on behalf of the Fund has adopted a Service Plan (the "Plan") with
respect to Class A shares designed to meet the service fee requirements of the
NASD Rule. (Management believes service fee payments are not distribution
expenses governed by Rule 12b-1 under the 1940 Act, but has chosen to have the
Plan approved as if that Rule were applicable.) The following supplements the
discussion of the Plan contained in the Fund's Prospectus.
The Plan remains in effect through April 28, 1997, and from year to year
thereafter, provided such continuance is approved by a vote of the Board of
Trustees and by both a majority of (i) those Trustees who are not interested
persons of the Trust and who have no direct or indirect financial interest in
the operation of the Plan or any agreements related to it (the "Non-interested
Trustees") and (ii) all of the Trustees then in office, cast in person at a
meeting (or meetings) called for the purpose of voting on this Plan. The Plan
may be terminated any time by vote of the Non-interested Trustees or by a vote
of a majority of the outstanding Class A voting securities of the Fund. Pursuant
to such Rule, the Plan has been approved by the Fund's initial sole shareholder
(Eaton Vance) and by the Board of Trustees of the Trust, including the
Non-interested Trustees.
Under the Plan, the President or a Vice President of the Trust shall provide
to the Trustees for their review, and the Trustees shall review at least
quarterly, a written report of the amount expended under the Plan and the
purposes for which such expenditures were made. The Plan may not be amended to
increase materially the payments described herein without approval of the Class
A shareholders of the Fund, and all material amendments of the Plan must also be
approved by the Trustees of the Trust in the manner described above. So long as
the Plan is in effect, the selection and nomination of Trustees who are not
interested persons of the Trust shall be committed to the discretion of the
Trustees who are not such interested persons. The Trustees have determined that
in their judgment there is a reasonable likelihood that the Plan will benefit
the Fund and its shareholders. For the service fees paid by the Fund under the
Plan, see "Fees and Expenses" in this Part II.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return on
a hypothetical investment of $1,000 in Class A shares of the Fund from December
19, 1985 through September 30, 1996 and for the one-, five- and ten-year periods
ended September 30, 1996. The total return for the period prior to the Fund's
commencement of operations on April 5, 1994 reflects the Portfolio's total
return (or that of its predecessor) adjusted to reflect any applicable Fund
sales charge. The total return for such prior period has not been adjusted to
reflect the Fund's service fees and certain other expenses.
<TABLE>
VALUE OF A $1,000 INVESTMENT
<CAPTION>
TOTAL RETURN EXCLUDING TOTAL RETURN INCLUDING
VALUE OF VALUE OF MAXIMUM SALES CHARGE MAXIMUM SALES CHARGE
INVESTMENT INVESTMENT INITIAL INVESTMENT ------------------------------ ------------------------------
PERIOD DATE INVESTMENT* ON 9/30/95 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
---------- ---------- ----------- ---------- ---------- ---------- ---------- ----------
<C> <C> <C> <C> <C> <C> <C> <C>
10 Years
Ended
9/30/96** 9/30/86 $962.31 $1,930.57 100.63% 7.21% 93.06% 6.80%
5 Years
Ended
9/30/96** 9/30/90 $962.56 $1,419.08 47.42% 8.07% 41.91% 7.25%
1 Year
Ended
9/30/96 9/30/95 $962.32 $1,035.32 7.59% 7.59% 3.53% 3.53%
Past performance is not indicative of future results. Investment return and principal value will fluctuate; shares, when
redeemed, may be worth more or less than their original cost.
<FN>
- ----------
*Initial investment less the maximum sales charge of 3.75%.
**If a portion of the Fund's expenses had not been subsidized, the Fund would have had lower returns.
</FN>
</TABLE>
For the thirty-day period ended September 30, 1996, the yield of the Fund
was 5.62%. The yield required of a taxable security that would produce an
after-tax yield equivalent to that earned by the Fund of 5.62% would be 8.15%,
assuming a federal tax rate of 31%.
See the Tax Equivalent Yield Table in Part I for information concerning
applicable tax rates and income brackets.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As at October 31, 1996, the Trustees and officers of the Trust, as a group,
owned in the aggregate less than 1% of the outstanding shares of the Fund. As of
October 31, 1996, Merrill Lynch, Pierce, Fenner & Smith, Inc., Jacksonville, FL
32246 was the record owner of approximately 20.5% of the outstanding shares,
which were held on behalf of its customers who are the beneficial owners of such
shares, and as to which it had voting power under certain limited circumstances.
To the knowledge of the Trust, no other person owned of record or beneficially
5% or more of the Fund's outstanding shares as of such date.
OTHER INFORMATION
Effective February 1, 1997, the Fund began offering two classes of shares.
Prior thereto, all shares of the Fund were offered in the same manner as the
existing Class A shares of the Fund. Each Class may pay a different share of
other expenses (not including advisory or custodial fees or other expenses
related to the management of the Fund's assets) that are actually incurred in a
different amount by that Class or if the Class receives services of a different
kind or to a different degree than another Class. Such expenses include, but are
not limited to, the following (a) transfer agency costs (including entities
performing account maintenance, dividend disbursing or subaccounting activities
and administration of dividend reinvestment, systematic investment and
withdrawal plans) attributable to a Class, (b) the cost of preparing, printing
and mailing materials such as shareholder reports, prospectuses and proxy
materials to current shareholders of a Class, (c) any registration fees of the
SEC and state securities agencies, (d) the expense of administrative personnel
and services required to support the shareholders of a Class, (e) Trustees' fees
or expenses incurred as a result of issues or matters relating to a Class or (f)
legal, auditing and accounting expenses relating to a Class.
<PAGE>
[LOGO: EATON VANCE]
EV TRADITIONAL
NATIONAL
MUNICIPALS FUND
STATEMENT OF
ADDITIONAL INFORMATION
FEBRUARY 1, 1997
EV TRADITIONAL NATIONAL
MUNICIPALS FUND
24 FEDERAL STREET
BOSTON, MA 02110
- --------------------------------------------------------------------------------
INVESTMENT ADVISER OF NATIONAL MUNICIPALS PORTFOLIO
Boston Management and Research, 24 Federal Street, Boston, MA 02110
ADMINISTRATOR OF EV TRADITIONAL NATIONAL MUNICIPALS FUND
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111
TRANSFER AGENT
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123
(800) 262-1122
AUDITORS
Deloitte & Touche LLP, 125 Summer Street, Boston, MA 02110
T-HMSAI
<PAGE>
PART C
OTHER INFORMATION
ITEM 24: FINANCIAL STATEMENTS AND EXHIBITS
(A) FINANCIAL STATEMENTS
Not Applicable
<TABLE>
<CAPTION>
(B) EXHIBITS:
<S> <C>
(1)(a) Amended and Restated Declaration of Trust of Eaton Vance Municipals Trust dated
January 11, 1993, filed as Exhibit (1)(a) to Post-Effective Amendment No. 55 and
incorporated herein by reference.
(b) Amendment and Restatement of Establishment and Designation of Series dated October
18, 1996 filed as Exhibit (1)(b) to Post-Effective Amendment No. 61 and
incorporated herein by reference.
(c) Establishment and Designation of Classes of Shares of Beneficial Interest, without
Par Value dated November 18, 1996 filed herewith.
(2)(a) By-Laws as amended October 21, 1987 filed as Exhibit (2)(a) to Post-Effective
Amendment No. 55 and incorporated herein by reference.
(b) Amendment to By-Laws of Eaton Vance Municipals Trust dated December 13, 1993 filed
as Exhibit (2)(b) to Post-Effective Amendment No. 55 and incorporated herein by
reference.
(3) Not applicable
(4) Not applicable
(5) Not applicable
(6)(a)(1) Distribution Agreement between Eaton Vance Municipals Trust (on behalf of its
Classic Series) and Eaton Vance Distributors, Inc. effective November 1, 1996 with
attached Schedule A effective November 1, 1996) filed as Exhibit (6)(a)(1) to Post-
Effective Amendment No. 61 and incorporated herein by reference.
(2) Distribution Agreement between Eaton Vance Municipals Trust (on behalf of its
Marathon Series) and Eaton Vance Distributors, Inc. effective November 1, 1996 with
attached Schedule A effective November 1, 1996) filed as Exhibit (6)(a)(2) to Post-
Effective Amendment No. 61 and incorporated herein by reference.
(3) Distribution Agreement between Eaton Vance Municipals Trust (on behalf of its
Traditional Series) and Eaton Vance Distributors, Inc. effective November 1, 1996
with attached Schedule A effective November 1, 1996) filed as Exhibit (6)(a)(3) to
Post-Effective Amendment No. 61 and incorporated herein by reference.
(4) Distribution Agreement between Eaton Vance Municipals Trust on behalf of
Massachusetts Municipal Bond Portfolio and Eaton Vance Distributors, Inc. effective
November 1, 1996 filed as Exhibit (6)(a)(4) to Post-Effective Amendment No. 61 and
incorporated herein by reference.
(b) Selling Group Agreement between Eaton Vance Distributors, Inc. and Authorized
Dealers filed as Exhibit (6)(b) to Post-Effective Amendment No. 61 to the
Registration Statement of Eaton Vance Growth Trust (File Nos. 2-22019, 811-1241)
and incorporated herein by reference.
(c) Schedule of Dealer Discounts and Sales Charges filed as Exhibit (6)(c) to Post-
Effective Amendment No. 61 to the Registration Statement of Eaton Vance Growth
Trust (File Nos. 2-22019, 811-1241) and incorporated herein by reference.
(7) The Securities and Exchange Commission has granted the Registrant an exemptive
order that permits the Registrant to enter into deferred compensation arrangements
with its independent Trustees. See in the Matter of Capital Exchange Fund, Inc.,
Release No. IC-20671 (November 1, 1994).
(8)(a) Custodian Agreement with Investors Bank & Trust Company dated October 15, 1992
filed as Exhibit (8) to Post-Effective Amendment No. 55 and incorporated herein by
reference.
(b) Amendment to Custodian Agreement with Investors Bank & Trust Company dated October
23, 1995 filed as Exhibit (8)(b) to Post-Effective Amendment No. 57 and
incorporated herein by reference.
(9)(a) Amended Administrative Services Agreement between Eaton Vance Municipals Trust (on
behalf of each of its series) and Eaton Vance Management with attached schedules
(including Amended Schedule A dated September 29, 1995) filed as Exhibit (9)(a) to
Post-Effective Amendment No. 55 and incorporated herein by reference.
(b) Transfer Agency Agreement dated June 7, 1989 filed as Exhibit 9(d) to Post-
Effective Amendment No. 59 to the Registration Statement of Eaton Vance Growth
Trust (File Nos. 2-22019, 811-1241) and incorporated herein by reference.
(c) Amendment to Transfer Agency Agreement dated February 1, 1993 filed as Exhibit 9(e)
to Post-Effective Amendment No. 59 to the Registration Statement of Eaton Vance
Growth Trust (File Nos. 2-22019, 811-1241) and incorporated herein by reference.
(10) Not applicable
(11) Not applicable
(12) Not applicable
(13) Not applicable
(14) Not applicable
(15)(a) Amended Distribution Plan pursuant to Rule 12b-1 under the Investment Company Act
of 1940, as amended, for Eaton Vance Municipals Trust (on behalf of its Classic
Series) dated January 27, 1995 with attached schedules (including Amended Schedule
A dated February 1, 1996) filed as Exhibit (15)(a) to Post-Effective Amendment No.
55 and incorporated herein by reference.
(b) Amendment to Amended Distribution Plan for Eaton Vance Municipals Trust (on behalf
of its Classic Series) adopted June 24, 1996 filed as Exhibit (15)(b) to Post-
Effective Amendment No. 61 and incorporated herein by reference.
(c) Amended Distribution Plan pursuant to Rule 12b-1 under the Investment Company Act
of 1940, as amended, for Eaton Vance Municipals Trust (on behalf of its Marathon
series) dated June 19, 1995 with attached schedules (including Amended Schedule A
dated September 29, 1995) filed as Exhibit (15)(b) to Post-Effective Amendment No.
55 and incorporated herein by reference.
(d) Amendment to Amended Distribution Plan for Eaton Vance Municipals Trust (on behalf
of its Marathon Series) adopted June 24, 1996 filed as Exhibit (15)(d) to Post-
Effective Amendment No. 61 and incorporated herein by reference.
(e) Amended Service Plan pursuant to Rule 12b-1 under the Investment Company Act of
1940, as amended, for Eaton Vance Municipals Trust (on behalf of its Traditional
series) dated June 19, 1995 with attached schedules (including Amended Schedule A
dated February 1, 1996) filed as Exhibit (15)(c) to Post-Effective Amendment No. 55
and incorporated herein by reference.
(f) Amendment to Amended Service Plan for Eaton Vance Municipals Trust (on behalf of
its Traditional Series) adopted June 24, 1996 filed as Exhibit (15)(f) to Post-
Effective Amendment No. 61 and incorporated herein by reference.
(16) Schedule for Computation of Performance Quotations filed herewith.
(17)(a) Power of Attorney for Eaton Vance Municipals Trust dated December 29, 1993 filed as
Exhibit (17)(a) to Post-Effective Amendment No. 55 and incorporated herein by
reference.
(b) Power of Attorney for Alabama Tax Free Portfolio, Arizona Tax Free Portfolio,
Arkansas Tax Free Portfolio, Colorado Tax Free Portfolio, Connecticut Tax Free
Portfolio, Florida Tax Free Portfolio, Georgia Tax Free Portfolio, Kentucky Tax
Free Portfolio, Louisiana Tax Free Portfolio, Maryland Tax Free Portfolio,
Massachusetts Tax Free Portfolio, Michigan Tax Free Portfolio, Minnesota Tax Free
Portfolio, Mississippi Tax Free Portfolio, Missouri Tax Free Portfolio, National
Municipals Portfolio, New Jersey Tax Free Portrfolio, New York Tax Free Portfolio,
North Carolina Tax Free Portfolio, Ohio Tax Free Portfolio, Oregon Tax Free
Portfolio, Pennsylvania Tax Free Portfolio, Rhode Island Tax Free Portfolio, South
Carolina Tax Free Portfolio, Tennessee Tax Free Portfolio, Texas Tax Free
Portfolio, Virginia Tax Free Portfolio and West Virginia Tax Free Portfolio dated
December 29, 1993 filed as Exhibit (17)(b) to Post-Effective Amendment No. 55 and
incorporated herein by reference.
(c) Power of Attorney for California Tax Free Portfolio dated June 19, 1995 filed as
Exhibit (17)(c) to Post-Effective Amendment No. 55 and incorporated herein by
reference.
(18) Multiple Class Plan for Institutional Shares dated November 18, 1996 filed
herewith.
</TABLE>
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not applicable
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
<TABLE>
<CAPTION>
(1) (2)
TITLE OF CLASS NUMBER OF RECORD HOLDERS
Shares of beneficial interest as of October 31, 1996
<S> <C>
EV Classic California Municipals Fund 37
EV Classic Connecticut Municipals Fund 79
EV Classic Florida Municipals Fund 54
EV Classic National Municipals Fund 1,806
EV Classic New Jersey Municipals Fund 94
EV Classic New York Municipals Fund 141
EV Classic Pennsylvania Municipals Fund 80
EV Classic Rhode Island Municipals Fund 38
EV Marathon Alabama Municipals Fund 1,892
EV Marathon Arizona Municipals Fund 2,765
EV Marathon Arkansas Municipals Fund 1,978
EV Marathon California Municipals Fund 6,920
EV Marathon Colorado Municipals Fund 1,097
EV Marathon Connecticut Municipals Fund 4,229
EV Marathon Florida Municipals Fund 12,117
EV Marathon Georgia Municipals Fund 2,555
EV Marathon Kentucky Municipals Fund 2,337
EV Marathon Louisiana Municipals Fund 582
EV Marathon Maryland Municipals Fund 2,929
EV Marathon Massachusetts Municipals Fund 6,563
EV Marathon Michigan Municipals Fund 4,016
EV Marathon Minnesota Municipals Fund 2,321
EV Marathon Mississippi Municipals Fund 618
EV Marathon Missouri Municipals Fund 2,526
EV Marathon National Municipals Fund 41,439
EV Marathon New Jersey Municipals Fund 9,994
EV Marathon New York Municipals Fund 14,153
EV Marathon North Carolina Municipals Fund 4,263
EV Marathon Ohio Municipals Fund 7,024
EV Marathon Oregon Municipals Fund 3,389
EV Marathon Pennsylvania Municipals Fund 12,415
EV Marathon Rhode Island Municipals Fund 813
EV Marathon South Carolina Municipals Fund 1,312
EV Marathon Tennessee Municipals Fund 1,467
EV Marathon Texas Municipals Fund 432
EV Marathon Virginia Municipals Fund 4,663
EV Marathon West Virginia Municipals Fund 1,139
EV Traditional Alabama Municipals Fund 54
EV Traditional Arizona Municipals Fund 49
EV Traditional Arkansas Municipals Fund 33
EV Traditional California Municipals Fund 51
EV Traditional Colorado Municipals Fund 83
EV Traditional Connecticut Municipals Fund 58
EV Traditional Florida Municipals Fund 102
EV Traditional Georgia Municipals Fund 51
EV Traditional Kentucky Municipals Fund 30
EV Traditional Louisiana Municipals Fund 32
EV Traditional Maryland Municipals Fund 49
EV Traditional Massachusetts Municipals Fund 70
EV Traditional Michigan Municipals Fund 39
EV Traditional Minnesota Municipals Fund 71
EV Traditional Mississippi Municipals Fund 29
EV Traditional Missouri Municipals Fund 90
EV Traditional National Municipals Fund 713
EV Traditional New Jersey Municipals Fund 108
EV Traditional New York Municipals Fund 175
EV Traditional North Carolina Municipals Fund 93
EV Traditional Ohio Municipals Fund 40
EV Traditional Oregon Municipals Fund 43
EV Traditional Pennsylvania Municipals Fund 110
EV Traditional South Carolina Municipals Fund 24
EV Traditional Tennessee Municipals Fund 29
EV Traditional Texas Municipals Fund 8
EV Traditional Virginia Municipals Fund 39
EV Traditional West Virginia Municipals Fund 42
Massachusetts Municipal Bond Portfolio 33
</TABLE>
ITEM 27. INDEMNIFICATION
Article IV of the Trust's Amended and Restated Declaration of Trust, dated
January 11, 1993, permits Trustee and officer indemnification by By-law,
contract and vote. Article XI of the By-laws contains indemnification
provisions. Registrant's Trustees and officers are insured under a standard
mutual fund errors and omissions insurance policy covering insured by reason
of negligent errors and omissions committed in their capacities as such.
The distribution agreements of the Trust also provide for reciprocal
indemnity of the principal underwriter, on the one hand, and the Trustees and
officers, on the other.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Reference is made to the information set forth under the caption
"Investment Adviser and Administrator" in the Statements of Additional
Information, which information is incorporated herein by reference.
ITEM 29. PRINCIPAL UNDERWRITERS
(A) Registrant's principal underwriter, Eaton Vance Distributors, Inc., a
wholly-owned subsidiary of Eaton Vance Management, is the principal
underwriter for each of the investment companies named below:
<TABLE>
<C> <C>
EV Classic California Municipals Fund EV Marathon High Income Fund
EV Classic Connecticut Municipals Fund EV Marathon High Yield Municipals Fund
EV Classic Florida Insured Municipals Fund EV Marathon Information Age Fund
EV Classic Florida Limited Maturity EV Marathon Investors Fund
Municipals Fund EV Marathon Kansas Municipals Fund
EV Classic Florida Municipals Fund EV Marathon Kentucky Municipals Fund
EV Classic Government Obligations Fund EV Marathon Louisiana Municipals Fund
EV Classic Greater China Growth Fund EV Marathon Maryland Municipals Fund
EV Classic Growth Fund EV Marathon Massachusetts Limited Maturity
EV Classic High Income Fund Municipals Fund
EV Classic Information Age Fund EV Marathon Massachusetts Municipals Fund
EV Classic Investors Fund EV Marathon Michigan Limited Maturity
EV Classic Massachusetts Limited Maturity Municipals Fund
Municipals Fund EV Marathon Michigan Municipals Fund
EV Classic National Limited Maturity EV Marathon Minnesota Municipals Fund
Municipals Fund EV Marathon Mississippi Municipals Fund
EV Classic National Municipals Fund EV Marathon Missouri Municipals Fund
EV Classic New Jersey Municipals Fund EV Marathon National Limited Maturity
EV Classic New York Limited Maturity Municipals Fund
Municipals Fund EV Marathon National Municipals Fund
EV Classic New York Municipals Fund EV Marathon New Jersey Limited Maturity
EV Classic Pennsylvania Municipals Fund Municipals Fund
EV Classic Senior Floating-Rate Fund EV Marathon New Jersey Municipals Fund
EV Classic Strategic Income Fund EV Marathon New York Limited Maturity
EV Classic Special Equities Fund Municipals Fund
EV Classic Stock Fund EV Marathon New York Municipals Fund
EV Classic Total Return Fund EV Marathon North Carolina Municipals Fund
EV Marathon Alabama Municipals Fund EV Marathon Ohio Limited Maturity
EV Marathon Arizona Municipals Fund Municipals Fund
EV Marathon Arkansas Municipals Fund EV Marathon Ohio Municipals Fund
EV Marathon Asian Small Companies Fund EV Marathon Oregon Municipals Fund
EV Marathon California Limited Maturity EV Marathon Pennsylvania Limited Maturity
Municipals Fund Municipals Fund
EV Marathon California Municipals Fund EV Marathon Pennsylvania Municipals Fund
EV Marathon Colorado Municipals Fund EV Marathon Rhode Island Municipals Fund
EV Marathon Connecticut Limited Maturity EV Marathon Strategic Income Fund
Municipals Fund EV Marathon South Carolina Municipals Fund
EV Marathon Connecticut Municipals Fund EV Marathon Special Equities Fund
EV Marathon Emerging Markets Fund EV Marathon Stock Fund
EV Marathon Florida Insured Municipals Fund EV Marathon Tax-Managed Growth Fund
EV Marathon Florida Limited Maturity EV Marathon Tennessee Municipals Fund
Municipals Fund EV Marathon Texas Municipals Fund
EV Marathon Florida Municipals Fund EV Marathon Total Return Fund
EV Marathon Georgia Municipals Fund EV Marathon Virginia Municipals Fund
EV Marathon Gold & Natural Resources Fund EV Marathon West Virginia Municipals Fund
EV Marathon Government Obligations Fund EV Marathon Worldwide Health Sciences Fund
EV Marathon Greater China Growth Fund EV Traditional Alabama Municipals Fund
EV Marathon Greater India Fund EV Traditional Arizona Municipals Fund
EV Marathon Growth Fund EV Traditional Arkansas Municipals Fund
EV Marathon Hawaii Municipals Fund EV Traditional Asian Small Companies Fund
<PAGE>
EV Traditional California Limited Maturity EV Traditional National Limited Maturity
Municipals Fund Municipals Fund
EV Traditional California Municipals Fund EV Traditional National Municipals Fund
EV Traditional Colorado Municipals Fund EV Traditional New Jersey Limited Maturity
EV Traditional Connecticut Limited Maturity Municipals Fund
Municipals Fund EV Traditional New Jersey Municipals Fund
EV Traditional Connecticut Municipals Fund EV Traditional New York Limited Maturity
EV Traditional Emerging Markets Fund Municipals Fund
EV Traditional Florida Insured Municipals Fund EV Traditional New York Municipals Fund
EV Traditional Florida Limited Maturity EV Traditional North Carolina Municipals Fund
Municipals Fund EV Traditional Ohio Limited
EV Traditional Florida Municipals Fund Maturity Municipals Fund
EV Traditional Georgia Municipals Fund EV Traditional Ohio Municipals Fund
EV Traditional Government Obligations Fund EV Traditional Oregon Municipals Fund
EV Traditional Greater China Growth Fund EV Traditional Pennsylvania Municipals Fund
EV Traditional Greater India Fund EV Traditional Rhode Island Municipals Fund
EV Traditional Growth Fund EV Traditional South Carolina Municipals Fund
EV Traditional Hawaii Municipals Fund EV Traditional Special Equities Fund
EV Traditional High Yield Municipals Fund EV Traditional Stock Fund
Eaton Vance Income Fund of Boston EV Traditional Tax-Managed Growth Fund
EV Traditional Information Age Fund EV Traditional Tennessee Municipals Fund
EV Traditional Investors Fund EV Traditional Texas Municipals Fund
EV Traditional Kansas Municipals Fund EV Traditional Total Return Fund
EV Traditional Kentucky Municipals Fund EV Traditional Virginia Municipals Fund
EV Traditional Louisiana Municipals Fund EV Traditional West Virginia Municipals Fund
EV Traditional Maryland Municipals Fund EV Traditional Worldwide Health
EV Traditional Massachusetts Municipals Fund Sciences Fund, Inc.
EV Traditional Michigan Limited Maturity Eaton Vance Cash Management Fund
Municipals Fund Eaton Vance Liquid Assets Fund
EV Traditional Michigan Municipals Fund Eaton Vance Money Market Fund
EV Traditional Minnesota Municipals Fund Eaton Vance Prime Rate Reserves
EV Traditional Mississippi Municipals Fund Eaton Vance Short-Term Treasury Fund
EV Traditional Missouri Municipals Fund Eaton Vance Tax Free Reserves
Eaton Vance Municipal Bond Fund L.P. Massachusetts Municipal Bond Portfolio
</TABLE>
<TABLE>
<CAPTION>
(b)
(1) (2) (3)
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICE
BUSINESS ADDRESS WITH PRINCIPAL UNDERWRITER WITH REGISTRANT
------------------ -------------------------- --------------------
<C> <C> <C>
James B. Hawkes* Vice President and Director Vice President and
Trustee
William M. Steul* Vice President and Director None
Wharton P. Whitaker* President and Director None
Chris Berg* Vice President None
H. Day Brigham, Jr.* Vice President None
Kate B. Bradshaw* Vice President None
Susan W. Bukima* Vice President None
Jeffrey W. Butterfield* Vice President None
David B. Carle* Vice President None
James S. Comforti* Vice President None
Raymond Cox* Vice President None
Mark P. Doman* Vice President None
James Foley* Vice President None
Michael A. Foster* Vice President None
William M. Gillen* Vice President None
Hugh S. Gilmartin* Vice President None
Perry D. Hooker* Vice President None
Brian Jacobs* Senior Vice President None
Thomas P. Luka* Vice President None
Timothy D. McCarthy* Vice President None
Joseph T. McMenamin* Vice President None
Morgan C. Mohrman* Senior Vice President None
James A. Naughton* Vice President None
Mark D. Nelson* Vice President None
Linda D. Newkirk* Vice President None
James L. O'Connor* Vice President Treasurer
Thomas Otis* Secretary and Clerk Secretary
George D. Owen II* Vice President None
F. Anthony Robinson* Vice President None
Jay S. Rosoff Vice President None
Benjamin A. Rowland, Jr.* Vice President, None
Treasurer and Director
John P. Rynne* Vice President None
Kevin Schrader Vice President None
George V.F. Schwab, Jr.* Vice President None
Cornelius J. Sullivan* Vice President None
David M. Thill* Vice President None
Chris Volf* Vice President None
Sue Wilder* Vice President None
- ----------
*Address is 24 Federal Street, Boston, MA 02110
</TABLE>
(c) Not applicable
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All applicable accounts, books and documents required to be maintained by
the Registrant by Section 31(a) of the Investment Company Act of 1940 and the
Rules promulgated thereunder are in the possession and custody of the
Registrant's custodian, Investors Bank & Trust Company, 89 South Street,
Boston, MA 02111 and its transfer agent, First Data Investor Services Group,
4400 Computer Drive, Westborough, MA 01581-5123, with the exception of certain
corporate documents and portfolio trading documents which are in the
possession and custody, Eaton Vance Management, 24 Federal Street, Boston, MA
02110. Registrant is informed that all applicable accounts, books and
documents required to be maintained by registered investment advisers are in
the custody and possession of Eaton Vance Management and Boston Management and
Research.
ITEM 31. MANAGEMENT SERVICES
Not applicable
ITEM 32. UNDERTAKINGS
The Registrant undertakes to furnish to each person to whom a prospectus
is delivered a copy of the latest annual report to shareholders, upon request
and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, and the
Investment Company Act of 1940, the Registrant has duly caused this Amendment
to its Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized in the City of Boston, and the Commonwealth of
Massachusetts, on the 22nd day of November, 1996.
EATON VANCE MUNICIPALS TRUST
By /s/THOMAS J. FETTER
------------------------------
THOMAS J. FETTER, President
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment to the Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <C> <C>
President, (Chief
/s/THOMAS J. FETTER Executive Officer) November 22, 1996
- -----------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and Accounting
/s/JAMES L. O'CONNOR Officer November 22, 1996
- -----------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee November 22, 1996
- -----------------------------
DONALD R. DWIGHT
/s/JAMES B. HAWKES Trustee November 22, 1996
- -----------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee November 22, 1996
- -----------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee November 22, 1996
- -----------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee November 22, 1996
- -----------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee November 22, 1996
- -----------------------------
JACK L. TREYNOR
*By: /s/ H. DAY BRIGHAM, JR.
- -----------------------------
H. DAY BRIGHAM, JR.
As attorney-in-fact
</TABLE>
<PAGE>
SIGNATURES
National Municipals Portfolio has duly caused this Amendment to the
Registration Statement on Form N-1A of Eaton Vance Municipals Trust (File No.
33-572) to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Boston and the Commonwealth of Massachusetts on the
22nd day of November, 1996.
NATIONAL MUNICIPALS PORTFOLIO
By /s/THOMAS J. FETTER
------------------------------
THOMAS J. FETTER, President
This Amendment to the Registration Statement on Form N-1A of Eaton Vance
Municipals Trust (File No. 33-572) has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <C> <C>
President, (Chief
/s/THOMAS J. FETTER Executive Officer) November 22, 1996
- -----------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and Accounting
/s/JAMES L. O'CONNOR Officer November 22, 1996
- -----------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee November 22, 1996
- -----------------------------
DONALD R. DWIGHT
/s/JAMES B. HAWKES Trustee November 22, 1996
- -----------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee November 22, 1996
- -----------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee November 22, 1996
- -----------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee November 22, 1996
- -----------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee November 22, 1996
- -----------------------------
JACK L. TREYNOR
*By: /s/ H. DAY BRIGHAM, JR.
- -----------------------------
H. DAY BRIGHAM, JR.
As attorney-in-fact
</TABLE>
<PAGE>
EXHIBIT INDEX
The following exhibits are filed as part of this amendment to the
Registration Statement pursuant to General Instructions E of Form N-1A.
<TABLE>
<CAPTION>
PAGE IN
SEQUENTIAL
NUMBERING
EXHIBIT NO. DESCRIPTION SYSTEM
- ----------- ----------- ----------
<S> <C>
(1)(c) Establishment and Designation of Classes of Shares of Beneficial
Interest, without Par Value dated November 18, 1996.
(16) Schedule for Computation of Performance Quotations.
(18) Multiple Class Plan for Institutional Shares dated November 18, 1996.
</TABLE>
<PAGE>
EXHIBIT 99.(1)(c)
EATON VANCE MUNICIPALS TRUST
----------------------------
Establishment and Designation of Classes of Shares
of Beneficial Interest, Without Par Value
WHEREAS, the Trustees of Eaton Vance Municipals Trust, a Massachusetts
business trust (the "Trust"), have previously designated a series known as EV
Traditional National Municipals Fund (the "Fund); and
WHEREAS, the Trustees now desire to designate Classes of the Fund
pursuant to Section 5.1 of Article V of the Trust's Amended and Restated
Declaration of Trust dated January 11, 1993 (the "Declaration of Trust");
NOW, THEREFORE, the undersigned, being at least a majority of the duly
elected and qualified Trustees presently in office of the Trust, hereby
establish two Classes of shares of the Fund, each Class to have the following
special and relative rights:
1. The Classes shall be designated as "Class A" and "Class I".
Each existing share of beneficial interest of the Fund shall be designated as a
Class A share of the Fund.
2. In addition to the provisions of Section 5.5 of Article V of
the Declaration of Trust, each Class shall be subject to the terms and
conditions set forth in the Multiple Class Plan for Institutional Shares adopted
by the Board of Trustees of the Trust, as amended from time to time.
Dated: November 18, 1996
/s/ Donald R. Dwight /s/ Norton H. Reamer
- ----------------------------- -----------------------------
Donald R. Dwight Norton H. Reamer
/s/ James B. Hawkes /s/ John L. Thorndike
- ----------------------------- -----------------------------
James B. Hawkes John L. Thorndike
/s/ Samuel L. Hayes, III /s/ Jack L. Treynor
- ----------------------------- -----------------------------
Samuel L. Hayes, III Jack L. Treynor
<PAGE>
EXHIBIT 99.16
<TABLE>
INVESTMENT PERFORMANCE -- EV TRADITIONAL NATIONAL MUNICIPALS FUND
The table below indicates the total return (capital changes plus reinvestment of all distributions) on a hypothetical investment of
$1,000 in the Fund covering the 1, 5, and 10 year periods ended September 30, 1996. Total return for the period prior to the
Fund's commencement of operations is for the Portfolio (or its predecessor) adjusted for the Fund's sales charge.
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT INITIAL INVESTMENT EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
PERIOD DATE INVESTMENT* ON 09/30/96 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
10 YEARS ENDED
09/30/96 09/30/86 $962.31 $1,930.57 100.63% 7.21% 93.06% 6.80%
5 YEARS ENDED
09/30/96 09/30/91 $962.56 $1,419.08 47.42% 8.07% 41.91% 7.25%
1 YEAR ENDED
09/30/96 09/30/95 $962.32 $1,035.32 7.59% 7.59% 3.53% 3.53%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000 **
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period
P = an initial investment of $1,000 ***
* Initial investment less the current maximum sales charge of 3.75%.
** The average annual total return including the sales charge is calculated based on an initial investment of $1,000 less the
maximum initial sales charge of 3.75%.
*** The cumulative total return including the sales charge is calculated based on an initial investment of $1,000 less
maximum initial sales charge of 3.75%.
</TABLE>
<PAGE>
EV TRADITIONAL NATIONAL MUNICIPALS FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 9/30/96:
Interest Income Earned: $197,193
Plus Dividend Income Earned:
------
Equal Gross Income: $197,193
Minus Expenses: $29,936
------
Equal Net Investment Income: $167,257
Divided b Average daily number of shares
outstanding that were entitled
to receive dividends: 3,287,590
------
Equal Net Investment Income Earned Per Share: $0.0509
Net Asset Value Per Share 9/30/96: $10.99
30 Day Yield*: 5.62%
Divided by One minus the Tax Rate of 31%: 0.69
------
Equal Tax Equivalent Yield **: 8.14%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0509/$10.99)+1)-1]
** Assuming a tax rate of 31%
<PAGE>
EXHIBIT 99.(18)
MULTIPLE CLASS PLAN FOR INSTITUTIONAL SHARES
Dated November 18, 1996
WHEREAS, each trust or corporation (each a "Trust") listed on Schedule
A engages in business as an open-end investment company and is registered as
such under the Investment Company Act of 1940, as amended (the "Act");
WHEREAS, the Trustees or Directors (hereafter the "Trustees") of each
Trust have established two classes of shares of the series of the Trust (each a
"Fund") which are listed on Schedule A hereto or, in the case of EV Traditional
Worldwide Health Sciences Fund, Inc., have established two classes of the Trust
(the term "Fund" as used herein shall also refer to EV Traditional Worldwide
Health Sciences Fund, Inc.); such classes having been designated Class A and
Class I (the "Classes");
WHEREAS, each Fund is established in accordance with Section 18(f)(2)
of the Act (except for EV Traditional Worldwide Health Sciences Fund, Inc.), its
shares are registered on Form N-1A under the Securities Act of 1933, and it is
entitled to have a multiple class plan adopted on its behalf by the Trust
pursuant to Rule 18f-3 under the Act;
WHEREAS, the Trustees of the Trust desire to set forth herein the
separate arrangements, expense allocations, and any related conversion features
or exchange privileges of the Classes; and
WHEREAS, the Trustees of the Trust (including a majority of those
Trustees who are not interested persons of the Trust) have determined that
adoption of this Multiple Class Plan, including the expense allocations set
forth herein, is in the best interests of each Class individually and each Fund
as a whole.
NOW, THEREFORE, the Trust hereby adopts this Multiple Class Plan for
Institutional Shares (the "Plan") on behalf each Fund in accordance with Rule
18f-3 under the Act and containing the following terms and conditions:
1. Pursuant to the Fund's Service Plan and pursuant to various actions
taken by the Trustees, Class A and Class I shares are subject to different
distribution arrangements and accordingly are subject to different expenses
related thereto, including shareholder service expenses. As set forth in the
Fund's prospectus, Class A shares are offered subject to a sales charge and are
subject to service fee payments in amounts not exceeding .25% of the average
daily net assets attributable to such Class for each fiscal year of the Fund.
Class I shares are offered at net asset value to the types of investors
described in the prospectus and are not subject to service fee payments.
2. At the discretion of the Treasurer of the Trust, each Class may pay
a different share of other expenses (not including advisory or custodial fees or
other expenses related to the management of the Fund's assets) that are actually
incurred in a different amount by that Class or if the Class receives services
of a different kind or to a different degree than another Class. Such expenses
include, but are not limited to, the following (a) transfer agency costs
(including entities performing account maintenance, dividend disbursing or
subaccounting activities and administration of dividend reinvestment, systematic
investment and withdrawal plans) attributable to a Class, (b) the cost of
preparing, printing and mailing materials such as shareholder reports,
prospectuses and proxy materials to current shareholders of a Class, (c) any
registration fees of the Securities and Exchange Commission and state securities
agencies, (d) the expense of administrative personnel and services required to
support the shareholders of a Class, (e) Trustees' fees or expenses incurred as
a result of issues or matters relating to a Class, or (f) legal, auditing and
accounting expenses relating to a Class. Such expense allocation is subject to
the continuing availability of a revenue procedure of the Internal Revenue
Service or an opinion of counsel to the effect that the payments made under a
Fund's Service Plan or Distribution Plan and other Class specific expenses with
respect to a Class of shares do not result in such Fund's dividends or
distributions constituting "preferential dividends" under the Internal Revenue
Code.
3. Income, realized and unrealized capital gains and losses, and
expenses of the Fund not allocated to a particular Class pursuant to the
foregoing shall be allocated to each Class on the basis of the net asset value
of that Class in relation to the net asset value of the Fund.
4. Class A and Class I shares may be exchanged for shares of other
funds in the Eaton Vance Traditional family of funds, which may change from time
to time, subject to terms, conditions and limitations set forth in the relevant
prospectus.
5. This Plan shall not take effect until after it has been approved by
both a majority of Trustees and a majority of those Trustees who are not
interested persons of the Trust.
6. This Plan shall continue indefinitely, unless terminated or amended.
All material amendments to this Plan shall be approved in the manner provided
for Trustee approval of this Plan in Section 6. Additional series of a Trust
with Classes of shares may become subject to this Plan upon Trustee approval as
provided for in Section 6 and amendment of Schedule A hereto.
* * *
<PAGE>
Schedule A
Eaton Vance Mutual Funds Trust
EV Traditional Tax-Managed Growth Fund
Eaton Vance Municipals Trust
EV Traditional National Municipals Fund
Eaton Vance Municipals Trust II
EV Traditional High Yield Municipals Fund
EV Traditional Worldwide Health Sciences Fund, Inc.
