<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 21, 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. 61 [X]
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 63 [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)
H. DAY BRIGHAM, JR., 24 FEDERAL STREET, BOSTON, MASSACHUSETTS 02110
-------------------------------------------------------------------
(NAME AND ADDRESS OF AGENT FOR SERVICE)
It is proposed that this filing will become effective pursuant to rule 485
(check appropriate box):
[ ] immediately upon filing [ ] on (date) pursuant
pursuant to paragraph (b) to paragraph (a)(1)
[X] on December 1, 1996 [ ] 75 days after filing
pursuant to paragraph (b) pursuant to paragraph (a)(2)
[ ] 60 days after filing [ ] on (date) pursuant
pursuant to paragraph (a)(1) to paragraph (a)(2).
If appropriate, check the following box:
[ ] this post effective amendment designates a new effective date for a
previously filed post-effective amendment.
Arizona Municipals Portfolio, Colorado Municipals Portfolio, Connecticut
Municipals Portfolio, Michigan Municipals Portfolio, Minnesota Municipals
Portfolio, New Jersey Municipals Portfolio, Pennsylvania Municipals Portfolio
and Texas Municipals Portfolio have also executed this Registration Statement.
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
===================================================================================================
AMOUNT OF PROPOSED MAXIMUM PROPOSED AGGREGATE AMOUNT OF
TITLE OF SECURITIES SHARES BEING OFFERING PRICE MAXIMUM REGISTRATION
BEING REGISTERED REGISTERED PER SHARE OFFERING PRICE FEE
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares of Beneficial Interest 14,261,231 10.50(1) $149,742,925(2) $100
===================================================================================================
<FN>
(1) Computed under Rule 457(d) on the basis of the maximum aggregate offering price per share at the
close of business on November 11, 1996.
(2) Registrant elects to calculate the maximum aggregate offering price pursuant to Rule 24e-2 for
those series with a fiscal year end of July 31, 1996. $267,578,970 of shares were redeemed
during the fiscal year ended July 31, 1996. $118,166,037 of shares were used for reductions
pursuant to Paragraph (c) of Rule 24f-2 during such fiscal year. $149,412,933 of shares redeemed
are being used for the reduction of the registration fee in this Amendment. While no fee is
required for the $149,412,933 of shares, the Registrant has elected to register, for $100, an
additional $330,000 of shares.
</TABLE>
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 13, 1995 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 Combined Prospectuses of:
EV Marathon Arizona Municipals Fund
EV Marathon Colorado Municipals Fund
EV Marathon Connecticut Municipals Fund
EV Marathon Michigan Municipals Fund
EV Marathon Minnesota Municipals Fund
EV Marathon New Jersey Municipals Fund
EV Marathon Pennsylvania Municipals Fund
EV Marathon Texas Municipals Fund
EV Traditional Arizona Municipals Fund
EV Traditional Colorado Municipals Fund
EV Traditional Connecticut Municipals Fund
EV Traditional Michigan Municipals Fund
EV Traditional Minnesota Municipals Fund
EV Traditional New Jersey Municipals Fund
EV Traditional Pennsylvania Municipals Fund
EV Traditional Texas Municipals Fund
Part B -- The Combined Statements of Additional Information of:
EV Marathon Arizona Municipals Fund
EV Marathon Colorado Municipals Fund
EV Marathon Connecticut Municipals Fund
EV Marathon Michigan Municipals Fund
EV Marathon Minnesota Municipals Fund
EV Marathon New Jersey Municipals Fund
EV Marathon Pennsylvania Municipals Fund
EV Marathon Texas Municipals Fund
EV Traditional Arizona Municipals Fund
EV Traditional Colorado Municipals Fund
EV Traditional Connecticut Municipals Fund
EV Traditional Michigan Municipals Fund
EV Traditional Minnesota Municipals Fund
EV Traditional New Jersey Municipals Fund
EV Traditional Pennsylvania Municipals Fund
EV Traditional Texas 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.
Effective November 29, 1996, the Registrant will terminate the operations of
the following series, the shares of which are registered pursuant to this
Registration Statement: EV Classic Connecticut Municipals Fund; EV Classic New
Jersey Municipals Fund; and EV Classic Pennsylvania Municipals Fund.
<PAGE>
<TABLE>
EATON VANCE MUNICIPALS TRUST
CROSS REFERENCE SHEET
ITEMS REQUIRED BY FORM N-1A
---------------------------
<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 Funds' Financial Highlights; Performance
Information
4. ..................... General Description of Registrant The Funds' Investment Objectives; Investment
Policies and Risks; Organization of the
Funds and the Portfolios
5. ..................... Management of the Fund Management of the Funds and the Portfolios
5A...................... Management's Discussion of Fund Not Applicable
Performance
6. ..................... Capital Stock and Other Securities Organization of the Funds and the Portfolios;
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; Distribution Plans (for Marathon
Funds) or Service Plans (for Traditional
Funds); The Eaton Vance Exchange Privilege;
Eaton Vance Shareholder Services; Statement
of Intention and Escrow Agreement
(Traditional Funds only)
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;
Services Distribution Plan (for Marathon Funds) or
Service Plan (for Traditional Funds);
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 (for Traditional
Funds only); Distribution Plan (for
Marathon Funds) or Service Plan (for
Traditional Funds); 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 Financial Statements
</TABLE>
<PAGE>
PART A
INFORMATION REQUIRED IN A PROSPECTUS
EV MARATHON
MUNICIPAL FUNDS
- --------------------------------------------------------------------------------
EV MARATHON ARIZONA MUNICIPALS FUND EV MARATHON MINNESOTA MUNICIPALS FUND
EV MARATHON COLORADO MUNICIPALS FUND EV MARATHON NEW JERSEY MUNICIPALS FUND
EV MARATHON CONNECTICUT MUNICIPALS FUND EV MARATHON PENNSYLVANIA MUNICIPALS FUND
EV MARATHON MICHIGAN MUNICIPALS FUND EV MARATHON TEXAS MUNICIPALS FUND
THE EV MARATHON MUNICIPAL FUNDS (THE "FUNDS") ARE MUTUAL FUNDS SEEKING TO
PROVIDE CURRENT INCOME EXEMPT FROM REGULAR FEDERAL INCOME TAX AND THE STATE
TAXES (IF ANY) DESCRIBED UNDER "THE FUNDS" INVESTMENT OBJECTIVES'' IN THIS
PROSPECTUS. EACH FUND INVESTS ITS ASSETS IN A CORRESPONDING NON-DIVERSIFIED
OPEN-END INVESTMENT COMPANY (A "PORTFOLIO") HAVING THE SAME INVESTMENT
OBJECTIVE AS THE FUND, RATHER THAN BY DIRECTLY INVESTING IN AND MANAGING ITS
OWN PORTFOLIO OF SECURITIES. EACH FUND IS A SERIES OF EATON VANCE MUNICIPALS
TRUST (THE "TRUST").
Shares of the Funds 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 Funds involve
investment risks, including fluctuations in value and the possible loss of
some or all of the principal investment.
This combined Prospectus is designed to provide you with information you
should know before investing. Please retain this document for future
reference. A combined Statement of Additional Information dated December 1,
1996 for the Funds, 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
Funds' principal underwriter, Eaton Vance Distributors, Inc. (the "Principal
Underwriter"), 24 Federal Street, Boston, MA 02110 (telephone (800) 225-6265).
The Portfolios' 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
Funds. The offices of the Investment Adviser and the Administrator are located
at 24 Federal Street, Boston, MA 02110.
AS OF THE DATE OF THIS COMBINED PROSPECTUS, A FUND MAY NOT BE AVAILABLE FOR
PURCHASE IN CERTAIN STATES. PLEASE CONTACT THE PRINCIPAL UNDERWRITER OR YOUR
BROKER FOR FURTHER INFORMATION.
- --------------------------------------------------------------------------------
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 .............................. 22
The Funds' Financial Highlights ............................ 4 Reports to Shareholders ................................ 23
The Funds' Investment Objectives .......................... 12 The Lifetime Investing Account/Distribution
Investment Policies and Risks ............................. 12 Options .............................................. 24
Organization of the Funds and the Portfolios ............... 16 The Eaton Vance Exchange Privilege ..................... 24
Management of the Funds and the Portfolios ................. 17 Eaton Vance Shareholder Services ....................... 25
Distribution Plans ......................................... 19 Distributions and Taxes ................................ 26
Valuing Fund Shares ........................................ 20 Performance Information ................................ 27
How to Buy Fund Shares ..................................... 21 Appendix -- State Specific Information ................. 28
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
PROSPECTUS DATED DECEMBER 1, 1996
<PAGE>
SHAREHOLDER AND FUND EXPENSES
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
---------------------------------------------------------------------------------------------------------
<S> <C>
Sales Charges Imposed on Purchases of Shares None
Sales Charges Imposed on Reinvested Distributions None
Fees to Exchange Shares None
Range of Declining Contingent Deferred Sales Charges Imposed on Redemption during
the First Seven Years (as a percentage of redemption proceeds exclusive of all
reinvestments and capital appreciation in the account) 5.00%-0%
<CAPTION>
ANNUAL FUND AND ALLOCATED PORTFOLIO OPERATING EXPENSES (as a percentage of average daily net assets)
---------------------------------------------------------------------------------------------------------
ARIZONA COLORADO CONNECTICUT MICHIGAN
FUND FUND FUND FUND
------- -------- ----------- --------
<S> <C> <C> <C> <C>
Investment Adviser Fee (after any applicable
fee reduction) 0.41% 0.26% 0.43% 0.43%
Rule 12b-1 Distribution (and Service) Fees 0.91 0.92 0.93 0.93
Other Expenses 0.24 0.31 0.22 0.25
---- ---- ---- ----
Total Operating Expenses
(after any applicable reduction) 1.56% 1.49% 1.58% 1.61%
==== ==== ==== ====
<CAPTION>
EXAMPLE
---------------------------------------------------------------------------------------------------------
An investor would pay the following contingent deferred sales charge and expenses on a $1,000 investment,
assuming (a) 5% annual return and (b) redemption at the end of each period:
ARIZONA COLORADO CONNECTICUT MICHIGAN
FUND FUND FUND FUND
------- -------- ----------- --------
<S> <C> <C> <C> <C>
1 Year $ 66 $ 65 $ 66 $ 66
3 Years 89 87 90 91
5 Years 105 101 106 108
10 Years 186 178 188 191
<CAPTION>
An investor would pay the following expenses on the same investment, assuming (a) 5% annual return and
(b) no redemptions:
<S> <C> <C> <C> <C>
1 Year $ 16 $ 15 $ 16 $ 16
3 Years 49 47 50 51
5 Years 85 81 86 88
10 Years 186 178 188 191
<CAPTION>
ANNUAL FUND AND ALLOCATED PORTFOLIO OPERATING EXPENSES (as a percentage of average daily net assets)
---------------------------------------------------------------------------------------------------------
MINNESOTA NEW JERSEY PENNSYLVANIA TEXAS
FUND FUND FUND FUND
--------- ---------- ------------ -----
<S> <C> <C> <C> <C>
Investment Adviser Fee (after any applicable
fee reduction) 0.36% 0.47% 0.47% 0.10%
Rule 12b-1 Distribution (and Service) Fees 0.92 0.92 0.92 0.92
Other Expenses 0.28 0.18 0.19 0.41
---- ---- ---- ----
Total Operating Expenses
(after any applicable reduction) 1.56% 1.57% 1.58% 1.43%
==== ==== ==== ====
EXAMPLE
---------------------------------------------------------------------------------------------------------
An investor would pay the following contingent deferred sales charge and expenses on a $1,000 investment,
assuming (a) 5% annual return and (b) redemption at the end of each period:
MINNESOTA NEW JERSEY PENNSYLVANIA TEXAS
FUND FUND FUND FUND
--------- ---------- ------------ -----
<S> <C> <C> <C> <C>
1 Year $ 66 $ 66 $ 66 $ 65
3 Years 89 90 90 85
5 Years 105 106 106 98
10 Years 186 187 188 171
<CAPTION>
An investor would pay the following expenses on the same investment, assuming (a) 5% annual return and
(b) no redemptions:
<S> <C> <C> <C> <C>
1 Year $ 16 $ 16 $ 16 $ 15
3 Years 49 50 50 45
5 Years 85 86 86 78
10 Years 186 187 188 171
</TABLE>
NOTES:
The tables and Examples summarize the aggregate expenses of the Funds and the
Portfolios and are designed to help investors understand the costs and
expenses they will bear, directly or indirectly, by investing in a Fund.
Information for each Fund is based on its expenses for the most recent fiscal
year. Absent a fee reduction, the Investment Adviser Fee and Total Operating
Expenses would have been 0.28% and 1.51%, respectively, for the Colorado Fund;
and 0.20% and 1.53%, respectively, for the Texas Fund.
The Examples 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 Examples to assume a 5% annual return, but actual
return will vary. For further information regarding the expenses of the Funds
and the Portfolios, see "The Funds" Financial Highlights'', "Management of the
Funds and the Portfolios" and "How to Redeem Fund Shares". A long-term
shareholder in a Fund may pay more than the economic equivalent of the maximum
front-end sales charge permitted by a rule of the National Association of
Securities Dealers, Inc. See "Distribution Plans."
No contingent deferred sales charge is imposed on (a) shares purchased more
than six years prior to redemption, (b) shares acquired through the
reinvestment of distributions or (c) any appreciation in value of other shares
in the account (see "How to Redeem Fund Shares") and no such charge is imposed
on exchanges of Fund shares for shares of one or more other funds listed under
"The Eaton Vance Exchange Privilege."
Each 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 18.
Each Fund invests exclusively in its corresponding Portfolio. Other investment
companies with different distribution arrangements and fees are investing in
the Portfolios and others may do so in the future. See "Organization of the
Funds and the Portfolios".
<PAGE>
THE FUNDS' FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------
The following information should be read in conjunction with the audited
financial statements included in the Funds' annual report to shareholders
which is incorporated by reference into the Statement of Additional
Information 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 a Fund is contained in its annual
report to shareholders which may be obtained without charge by contacting the
Principal Underwriter.
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ARIZONA FUND
--------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
JULY 31, SEPTEMBER 30,
------------------------------------ ------------------------------------
1996 1995 1994** 1993 1992 1991++
-------- -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of year $ 10.530 $ 10.390 $ 11.570 $ 10.700 $10.320 $10.000
-------- -------- -------- -------- ------- -------
INCOME (LOSS) FROM OPERATIONS:
Net investment income $ 0.482 $ 0.492 $ 0.404 $ 0.496 $ 0.526 $ 0.088
Net realized and unrealized gain (loss)
on investments 0.161 0.164 (0.862) 1.076 0.520 0.339+++
-------- -------- -------- -------- ------- -------
Total income (loss) from operations $ 0.643 $ 0.656 $ (0.458) $ 1.572 $ 1.046 $ 0.427
-------- -------- -------- -------- ------- -------
LESS DISTRIBUTIONS:
From net investment income $ (0.488) $ (0.492) $ (0.404) $ (0.496) $(0.526) $(0.088)
In excess of net investment income(5) (0.005) (0.024) (0.074) (0.127) (0.120) (0.019)
From net realized gain on investment
transactions -- -- (0.233) (0.079) (0.020) --
In excess of net realized gain on
investment transactions -- -- (0.011) -- -- --
-------- -------- -------- -------- ------- -------
Total distributions $ (0.493) $ (0.516) $ (0.722) $ (0.702) $(0.666) $(0.107)
-------- -------- -------- -------- ------- -------
NET ASSET VALUE, end of year $ 10.680 $ 10.530 $ 10.390 $ 11.570 $10.700 $10.320
======== ======== ======== ======== ======= =======
TOTAL RETURN(3) 6.17% 6.64% (4.16)% 15.29% 10.43% 4.03%
RATIOS/SUPPLEMENTAL DATA*:
Net assets, end of year (000 omitted) $127,681 $141,859 $150,879 $135,524 $62,498 $11,501
Ratio of net expenses to average daily
net assets(1)(4) 1.56% 1.53% 1.46%+ 1.53% 1.52% 1.37%+
Ratio of net expenses to average daily
net assets after custodian fee
reduction(1) 1.55% -- -- -- -- --
Ratio of net investment income to
average daily net assets 4.49% 4.81% 4.47%+ 4.42% 4.83% 4.33%+
PORTFOLIO TURNOVER(2) -- -- -- 39% 133% 8%
*For the periods indicated, the operating expenses of the Arizona Fund reflect an allocation of expenses to the Administrator
and/or the Investment Adviser. Had such actions not been taken, net investment income per share and the ratios would have been
as follows:
NET INVESTMENT INCOME PER SHARE $ 0.513 $ 0.082
======= =======
RATIOS (As a percentage of average daily net assets):
Expenses 1.64% 1.65%+
Net investment income 4.71% 4.05%+
</TABLE>
(See footnotes on page 11.)
<PAGE>
THE FUNDS' FINANCIAL HIGHLIGHTS (CONTINUED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COLORADO FUND
------------------------------------------------------------------
YEAR ENDED YEAR ENDED
JULY 31, SEPTEMBER 30,
----------------------------------- ----------------------
1996 1995 1994** 1993 1992++
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of year $10.020 $10.010 $10.960 $10.060 $10.000
------- ------- ------- ------- -------
INCOME (LOSS) FROM OPERATIONS:
Net investment income $ 0.480 $ 0.494 $ 0.403 $ 0.484 $ 0.026
Net realized and unrealized gain (loss)
on investments 0.162 0.033 (0.880) 0.996 0.082+++
------- ------- ------- ------- -------
Total income (loss) from operations $ 0.642 $ 0.527 $ (0.477) $ 1.480 $ 0.108
------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
From net investment income $(0.492) $(0.494) $(0.403) $(0.484) $(0.026)
In excess of net investment income(5) -- (0.023) (0.070) (0.096) (0.022)
------- ------- ------- ------- -------
Total distributions $(0.492) $(0.517) $(0.473) $(0.580) $(0.048)
------- ------- ------- ------- -------
NET ASSET VALUE, end of year $10.170 $10.020 $10.010 $10.960 $10.060
======= ======= ======= ======= =======
TOTAL RETURN(3) 6.46% 5.58% (4.46)% 15.52% 0.60%
RATIOS/SUPPLEMENTAL DATA*:
Net assets, end of year (000 omitted) $42,972 $43,900 $42,085 $24,847 $ 2,464
Ratio of net expenses to average daily
net assets(1)(4) 1.49% 1.28% 1.09%+ 1.00% 1.00%+
Ratio of net expenses to average daily
net assets after custodian fee
reduction(1) 1.45% -- -- -- --
Ratio of net investment income to
average daily net assets 4.69% 5.03% 4.59%+ 4.49% 2.26%+
PORTFOLIO TURNOVER(2) -- -- -- 3% 0%
*For the periods indicated, the operating expenses of the Colorado Fund reflect an allocation of expenses to the Administrator
and/or the Investment Adviser. Had such actions not been taken, net investment income per share and the ratios would have been
as follows:
NET INVESTMENT INCOME PER SHARE $ 0.478 $ 0.479 $ 0.373 $ 0.387 $ 0.011
======= ======= ======= ======= =======
RATIOS (As a percentage of average daily
net assets):
Expenses(1)(4) 1.51% 1.43% 1.42%+ 1.90% 2.34%+
Expenses after custodian fee reduction(1) 1.46% -- -- -- --
Net investment income 4.67% 4.88% 4.26%+ 3.60% 0.92%+
</TABLE>
(See footnotes on page 11.)
<PAGE>
THE FUNDS' FINANCIAL HIGHLIGHTS (CONTINUED)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CONNECTICUT FUND
---------------------------------------------------------------------
YEAR ENDED YEAR ENDED
JULY 31, SEPTEMBER 30,
-------------------------------------- -----------------------
1966 1995 1994** 1993 1992++
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of year $ 9.970 $ 10.050 $ 11.030 $ 10.270 $ 10.000
-------- -------- -------- -------- --------
INCOME (LOSS) FROM OPERATIONS:
Net investment income $ 0.452 $ 0.465 $ 0.388 $ 0.471 $ 0.192
Net realized and unrealized gain (loss)
on investments 0.169 (0.037) (0.883) 0.885 0.331+++
-------- -------- -------- -------- --------
Total income (loss) from operations $ 0.621 $ 0.428 $ (0.495) $ 1.356 $ 0.523
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
From net investment income $ (0.452) $ (0.465) $ (0.388) $ (0.471) $ (0.192)
In excess of net investment income(5) (0.019) (0.043) (0.079) (0.120) (0.161)
From net realized gain on investment
transactions -- -- (0.018) (0.005) --
-------- -------- -------- -------- --------
Total distributions $ (0.471) $ (0.508) $ (0.485) $ (0.596) $ (0.253)
-------- -------- -------- -------- --------
NET ASSET VALUE, end of year $ 10.120 $ 9.970 $ 10.050 $ 11.030 $ 10.270
======== ======== ======== ======== ========
TOTAL RETURN(3) 6.30% 4.55% (4.61)% 13.62% 5.00%
RATIOS/SUPPLEMENTAL DATA*:
Net assets, end of year (000 omitted) $181,608 $188,900 $188,453 $160,790 $ 50,031
Ratio of net expenses to average daily
net assets(1)(4) 1.58% 1.55% 1.43%+ 1.56% 1.35%+
Ratio of net expenses to average daily
net assets after custodian fee
reduction(1) 1.57% -- -- -- --
Ratio of net investment income to
average daily net assets 4.45% 4.77% 4.42%+ 4.33% 4.13%+
PORTFOLIO TURNOVER(2) -- -- -- 14% 16%
*For the period indicated, the operating expenses of the Connecticut Fund reflect an allocation of expenses to the
Administrator and/or the Investment Adviser. Had such actions not been taken, net investment income per share and
the ratios would have been as follows:
NET INVESTMENT INCOME PER SHARE $ 0.184
=======
RATIOS (As a percentage of average daily net assets):
Expenses(1)(4) 1.52%+
Net investment income 3.96%+
</TABLE>
(See footnotes on page 11.)
<PAGE>
THE FUNDS' FINANCIAL HIGHLIGHTS (CONTINUED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MICHIGAN FUND
------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
JULY 31, SEPTEMBER 30,
------------------------------------- ----------------------------------
1996 1995 1994** 1993 1992 1991++
-------- -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of year $ 10.250 $ 10.210 $ 11.110 $ 10.570 $10.220 $10.000
-------- -------- -------- -------- ------- -------
INCOME (LOSS) FROM OPERATIONS:
Net investment income $ 0.464 $ 0.486 $ 0.398 $ 0.480 $ 0.499 $ 0.247
Net realized and unrealized gain
(loss) on investments 0.195 0.059 (0.794) 0.745 0.507 0.267
-------- -------- -------- -------- ------- -------
Total income (loss) from operations $ 0.659 $ 0.545 $(0.396) $ 1.225 $ 1.006 $ 0.514
-------- -------- -------- -------- ------- -------
LESS DISTRIBUTIONS:
From net investment income $(0.481) $(0.486) $(0.398) $(0.480) $(0.499) $(0.247)
In excess of net investment income(5) (0.008) (0.019) (0.062) (0.114) (0.144) (0.047)
From net realized gain on investment
transactions -- -- (0.028) (0.058) (0.013) --
In excess of net realized gain on
investment transactions -- -- (0.016) (0.033) -- --
-------- -------- -------- -------- ------- -------
Total distributions $(0.489) $(0.505) $(0.504) $(0.685) $(0.656) $(0.294)
-------- -------- -------- -------- ------- -------
NET ASSET VALUE, end of year $ 10.420 $ 10.250 $ 10.210 $ 11.110 $10.570 $10.220
======== ======== ======== ======== ======= =======
TOTAL RETURN(3) 6.50% 5.61% (3.66)% 12.06% 10.13% 4.98%
RATIOS/SUPPLEMENTAL DATA*:
Net assets, end of year (000 omitted) $171,067 $186,363 $197,082 $188,290 $107,034 $31,222
Ratio of net expenses to average daily
net assets(1)(4) 1.61% 1.51% 1.49%+ 1.54% 1.61% 1.29%+
Ratio of net expenses to average daily
net assets after custodian fee
reduction(1) 1.60% -- -- -- -- --
Ratio of net investment income to
average daily net assets 4.44% 4.84% 4.49%+ 4.40% 4.65% 5.12%+
PORTFOLIO TURNOVER(2) -- -- -- 28% 72% 5%
*For the period indicated, the operating expenses of the Michigan Fund reflect an allocation of expenses to the Administrator
and/or the Investment Adviser. Had such actions not been taken, net investment income per share and the ratios would have been
as follows:
NET INVESTMENT INCOME PER SHARE $ 0.229
RATIOS (As a percentage of average daily net assets):
Expenses 1.66%+
Net investment income 4.75%+
</TABLE>
(See footnotes on page 11.)
<PAGE>
THE FUNDS' FINANCIAL HIGHLIGHTS (CONTINUED)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MINNESOTA FUND
------------------------------------------------------------------------------
YEAR ENDED JULY 31, YEAR ENDED SEPTEMBER 30,
----------------------------------- -----------------------------------
1996 1995 1994** 1993 1992 1991++
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of year $ 9.950 $10.040 $10.910 $10.310 $10.080 $10.000
------- ------- ------- ------- ------- -------
INCOME (LOSS) FROM OPERATIONS:
Net investment income $ 0.468 $ 0.470 $ 0.383 $ 0.473 $ 0.505 $ 0.051
Net realized and unrealized gain (loss)
on investments 0.123 (0.053) (0.788) 0.749 0.361 0.129+++
------- ------- ------- ------- ------- -------
Total income (loss) from operations $ 0.591 $ 0.417 $(0.405) $ 1.222 $ 0.866 $ 0.180
------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
From net investment income $(0.468) $(0.470) $(0.383) $(0.473) $(0.505) $(0.051)
In excess of net investment income(5) (0.003) (0.037) (0.073) (0.125) (0.131) (0.049)
From net realized gain on investment
transactions -- -- (0.009) -- -- --
In excess of net realized gain on
investment transactions -- -- -- (0.024) -- --
------- ------- ------- ------- ------- -------
Total distributions $(0.471) $(0.507) $(0.465) $(0.622) $(0.636) $(0.100)
------- ------- ------- ------- ------- -------
NET ASSET VALUE, end of year $10.070 $ 9.950 $10.040 $10.910 $10.310 $10.080
======= ======= ======= ======= ======= =======
TOTAL RETURN(3) 6.00% 4.41% (3.81)% 12.28% 8.82% 1.56%
RATIOS/SUPPLEMENTAL DATA*:
Net assets, end of year (000 omitted) $74,374 $78,970 $79,223 $68,004 $26,670 $ 2,467
Ratio of net expenses to average daily
net assets(1)(4) 1.56% 1.52% 1.54%+ 1.59% 1.42% 1.71%+
Ratio of net expenses to average daily
net assets after custodian fee
reduction(1) 1.54% -- -- -- -- --
Ratio of net investment income to
average daily net assets 4.63% 4.80% 4.38%+ 4.38% 4.74% 2.59%+
PORTFOLIO TURNOVER(2) -- -- -- 16% 25% 3%
*For the periods indicated, the operating expenses of the Minnesota Fund reflect an allocation of expenses to the Administrator
and/or the Investment Adviser. Had such actions not been taken, net investment income per share and the ratios would have been
as follows:
NET INVESTMENT INCOME PER SHARE $ 0.472 $ 0.438 $ 0.031
======= ======= =======
RATIOS (As a percentage of average daily net assets):
Expenses(1) 1.61% 2.05% 2.72%+
Net investment income 4.37% 4.11% 1.58%+
</TABLE>
(See footnotes on page 11.)
<PAGE>
THE FUNDS' FINANCIAL HIGHLIGHTS (CONTINUED)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NEW JERSEY FUND
------------------------------------------------------------------------------
YEAR ENDED JULY 31, YEAR ENDED SEPTEMBER 30,
------------------------------------ -----------------------------------
1996 1995 1994** 1993 1992 1991++
-------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of year $ 10.360 $ 10.410 $ 11.350 $ 10.680 $ 10.380 $10.000
-------- -------- -------- -------- -------- -------
INCOME (LOSS) FROM OPERATIONS:
Net investment income $ 0.505 $ 0.505 $ 0.421 $ 0.514 $ 0.516 $ 0.363
Net realized and unrealized gain (loss)
on investments 0.084 (0.009) (0.836) 0.841 0.452 0.487+++
-------- -------- -------- -------- -------- -------
Total income (loss) from operations $ 0.589 $ 0.496 $ (0.415) $ 1.355 $ 0.968 $ 0.850
-------- -------- -------- -------- -------- -------
LESS DISTRIBUTIONS:
From net investment income $ (0.505) $ (0.505) $ (0.421) $ (0.514) $ (0.516) $ (0.363)
In excess of net investment income(5) (0.004) (0.035) (0.075) (0.112) (0.124) (0.107)
From net realized gain on investment
transactions -- -- (0.029) (0.059) (0.028) --
In excess of net realized gain on
investment transactions -- (0.006) -- -- -- --
-------- -------- -------- -------- -------- -------
Total distributions $ (0.509) $ (0.546) $ (0.525) $ (0.685) $ (0.668) $ (0.470)
-------- -------- -------- -------- -------- -------
NET ASSET VALUE, end of year $ 10.440 $ 10.360 $ 10.410 $ 11.350 $ 10.680 $10.380
======== ======== ======== ======== ======== =======
TOTAL RETURN(3) 5.74% 5.04% (3.77)% 13.15% 9.64% 8.47%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000 omitted) $378,649 $404,861 $420,117 $395,421 $235,324 $99,590
Ratio of net expenses to average daily
net assets(1)(4) 1.57% 1.53% 1.48%+ 1.56% 1.63% 1.78%+
Ratio of net expenses to average daily
net assets after custodian
fee reduction(1) 1.56% -- -- -- -- --
Ratio of net investment income to
average daily net assets 4.80% 4.97% 4.64%+ 4.66% 4.83% 4.82%+
PORTFOLIO TURNOVER(2) -- -- -- 20% 74% 68%
</TABLE>
(See footnotes on page 11.)
<PAGE>
THE FUNDS' FINANCIAL HIGHLIGHTS (CONTINUED)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PENNSYLVANIA FUND
----------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
JULY 31, SEPTEMBER 30,
--------------------------------------- ------------------------------------
1996 1995 1994** 1993 1992 1991++
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of year $ 10.320 $ 10.340 $ 11.310 $ 10.650 $ 10.350 $ 10.000
-------- -------- -------- -------- -------- --------
INCOME (LOSS) FROM OPERATIONS:
Net investment income $ 0.512 $ 0.507 $ 0.422 $ 0.520 $ 0.531 $ 0.378
Net realized and unrealized gain
(loss) on investments 0.108 0.004+++ (0.841) 0.794 0.430 0.466+++
-------- -------- -------- -------- -------- --------
Total income (loss) from operations $ 0.620 $ 0.511 $ (0.419) $ 1.314 $ 0.961 $ 0.844
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
From net investment income $ (0.510) $ (0.507) $ (0.422) $ (0.520) $ (0.531) $ (0.378)
In excess of net investment income(5) -- (0.024) (0.069) (0.115) (0.130) (0.116)
From net realized gain on investment
transactions -- -- (0.042) (0.019) -- --
In excess of net realized gain on
investment transactions -- -- (0.018) -- -- --
-------- -------- -------- -------- -------- --------
Total distributions $ (0.510) $ (0.531) $ (0.551) $ (0.654) $ (0.661) $ (0.494)
-------- -------- -------- -------- -------- --------
NET ASSET VALUE, end of year $ 10.430 $ 10.320 $ 10.340 $ 11.310 $ 10.650 $ 10.350
======== ======== ======== ======== ======== ========
TOTAL RETURN(3) 6.08% 5.24% (3.84)% 12.76% 9.56% 8.37%
RATIOS/SUPPLEMENTAL DATA*:
Net assets, end of year (000 omitted) $441,104 $495,856 $530,115 $499,601 $280,193 $100,211
Ratio of net expenses to average daily
net assets(1)(4) 1.58% 1.51% 1.46%+ 1.56% 1.64% 1.56%+
Ratio of net expenses to average daily
net assets after custodian fee
reduction(1) 1.54% -- -- -- -- --
Ratio of net investment income to
average daily net assets 4.89% 5.04% 4.68%+ 4.70% 4.92% 4.93%+
PORTFOLIO TURNOVER(2) -- -- -- 6% 15% 2%
*For the period indicated, the operating expenses of the Pennsylvania Fund reflect an allocation of expenses to the Administrator
and/or the Investment Adviser. Had such actions not been taken, net investment income per share and the ratios would have been
as follows:
NET INVESTMENT INCOME PER SHARE $ 0.375
========
RATIOS (As a percentage of average daily net assets):
Expenses 1.60%+
Net investment income 4.89%+
</TABLE>
(See footnotes on page 11.)
<PAGE>
THE FUNDS' FINANCIAL HIGHLIGHTS (CONTINUED)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TEXAS FUND
----------------------------------------------------------------
YEAR ENDED YEAR ENDED
JULY 31, SEPTEMBER 30,
----------------------------------- ---------------------
1996 1995 1994** 1993 1992++
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of year $10.280 $10.210 $11.110 $10.450 $10.000
------- ------- ------- ------- -------
INCOME (LOSS) FROM OPERATIONS:
Net investment income $ 0.492 $ 0.532 $ 0.436 $ 0.515 $ 0.255
Net realized and unrealized gain (loss)
on investments 0.177 0.084 (0.824) 0.787 0.516
------- ------- ------- ------- -------
Total income (loss) from operations $ 0.669 $ 0.616 $(0.388) $ 1.302 $ 0.771
------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
From net investment income $(0.509) $(0.532) $(0.436) $(0.515) $(0.255)
In excess of net investment income(5) -- (0.014) (0.076) (0.106) (0.066)
From net realized gain on investment
transactions -- -- -- -- --
In excess of net realized gain on
investment transactions -- -- -- (0.021) --
------- ------- ------- ------- -------
Total distributions $(0.509) $(0.546) $(0.512) $(0.642) $(0.321)
------- ------- ------- ------- -------
NET ASSET VALUE, end of year $10.440 $10.280 $10.210 $11.110 $10.450
======= ======= ======= ======= =======
TOTAL RETURN(3) 6.60% 6.36% (3.65)% 12.90% 7.51%
RATIOS/SUPPLEMENTAL DATA*:
Net assets, end of year (000 omitted) $23,996 $27,762 $26,677 $16,338 $ 4,020
Ratio of net expenses to average daily
net assets(1)(4) 1.43% 0.99% 0.82%+ 1.06% 1.00%+
Ratio of net expenses to average daily
net assets after custodian fee
reduction(1) 1.39% -- -- -- --
Ratio of net investment income to
average daily net assets 4.70% 5.29% 4.81%+ 4.67% 4.61%+
PORTFOLIO TURNOVER(2) -- -- -- 7% 11%
*For the periods indicated, the operating expenses of the Texas Fund reflect an allocation of expenses to the Administrator
and/or the Investment Adviser. Had such actions not been taken, net investment income per share and the ratios would have been
as follows:
NET INVESTMENT INCOME PER SHARE $ 0.482 $ 0.487 $ 0.359 $ 0.350 $ 0.180
======= ======= ======= ======= =======
RATIOS (As a percentage of average daily net assets):
Expenses(1)(4) 1.53% 1.44% 1.67%+ 2.55% 2.35%+
Expenses after custodian fee reduction(1) 1.49% -- -- -- --
Net investment income 4.60% 4.84% 3.96%+ 3.18% 3.26%+
<FN>
**For the ten months ended July 31, 1994.
+Annualized.
++For the period from the start of business, July 25, 1991, July 29, 1991 and April 19, 1991, to September 30, 1991 for the
Arizona, Minnesota and Michigan Funds, respectively, and for the period from the start of business, August 25, 1992, May 1,
1992 and March 24, 1992, to September 30, 1992 for the Colorado, Connecticut and Texas Funds, respectively, and for the period
from the start of business, January 8, 1991, to September 30, 1991 for the New Jersey and Pennsylvania Funds.
+++The per share amount is not in accord with the net realized and unrealized gain (loss) for the period because of the timing of
sales of the Fund shares and the amount of per share realized and unrealized gains and losses at such time.
(1)Includes the Fund's share of its corresponding Portfolio's allocated expenses subsequent to February 1, 1993.
(2)Portfolio turnover represents the rate of portfolio activity for the period while the Fund was making investments directly in
securities. The portfolio turnover rate for the period since the Fund transferred substantially all of its investable assets to
a Portfolio is shown in the Portfolio's financial statements which are included in the Fund's annual report.
(3)Total return is calculated assuming a purchase at the net asset value on the first day and a sale at the net asset value on the
last day of the 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.
(4)The expense ratios for the year ended July 31, 1996 have been adjusted to reflect a change in reporting requirements. The new
reporting guidelines require the Fund to increase its expense ratio by the effect of any expense offset arrangements with its
service providers or those of the Portfolio. The expense ratios for each of the periods on or before July 31, 1995 have not
been adjusted to reflect this change.
(5)The Funds have followed the Statement of Position (SOP) 93-2: Determination, Disclosure and Financial Statement Presentation of
Income, Capital Gain, and Return of Capital Distribution 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.
</FN>
</TABLE>
<PAGE>
THE FUNDS' INVESTMENT OBJECTIVES
- ------------------------------------------------------------------------------
The investment objective of each Fund is set forth below. Each Fund currently
seeks to meet its investment objective by investing its assets in a separate
corresponding open-end management investment company (a "Portfolio"). Each
Portfolio invests primarily in municipal obligations (as 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.
Each Portfolio has the same investment objective as its corresponding Fund.
EV MARATHON ARIZONA MUNICIPALS FUND (the "Arizona Fund") seeks to provide
current income exempt from regular federal income tax and Arizona State personal
income taxes. The Arizona Fund seeks to meet its objective by investing its
assets in the Arizona Municipals Portfolio (the "Arizona Portfolio").
EV MARATHON COLORADO MUNICIPALS FUND (the "Colorado Fund") seeks to provide
current income exempt from regular federal income tax and Colorado State
personal income taxes. The Colorado Fund seeks to meet its objective by
investing its assets in the Colorado Municipals Portfolio (the "Colorado
Portfolio").
EV MARATHON CONNECTICUT MUNICIPALS FUND (the "Connecticut Fund") seeks to
provide current income exempt from regular federal income tax and Connecticut
State personal income taxes. The Connecticut Fund seeks to meet its objective by
investing its assets in the Connecticut Municipals Portfolio (the "Connecticut
Portfolio").
EV MARATHON MICHIGAN MUNICIPALS FUND (the "Michigan Fund") seeks to provide
current income exempt from regular federal income tax and Michigan State and
City income and single business taxes in the form of an investment exempt from
Michigan intangibles tax. The Michigan Fund seeks to meet its objective by
investing its assets in the Michigan Municipals Portfolio (the "Michigan
Portfolio").
EV MARATHON MINNESOTA MUNICIPALS FUND (the "Minnesota Fund") seeks to provide
current income exempt from regular federal income tax and regular Minnesota
State personal income taxes. The Minnesota Fund seeks to meet its objective by
investing its assets in the Minnesota Municipals Portfolio (the "Minnesota
Portfolio").
EV MARATHON NEW JERSEY MUNICIPALS FUND (the "New Jersey Fund") seeks to provide
current income exempt from regular federal income tax and New Jersey State
personal income taxes. The New Jersey Fund seeks to meet its objective by
investing its assets in the New Jersey Municipals Porfolio (the "New Jersey
Portfolio").
EV MARATHON PENNSYLVANIA MUNICIPALS FUND (the "Pennsylvania Fund") seeks to
provide current income exempt from regular federal income tax and Pennsylvania
State and local taxes in the form of an investment exempt from Pennsylvania
personal property taxes. The Pennsylvania Fund seeks to meet its objective by
investing its assets in the Pennsylvania Municipals Portfolio (the "Pennsylvania
Portfolio").
EV MARATHON TEXAS MUNICIPALS FUND (the "Texas Fund") seeks to provide current
income exempt from regular federal income taxes. The Texas Fund seeks to meet
its objective by investing its assets in the Texas Municipals Portfolio (the
"Texas Portfolio"). The State of Texas does not impose a State income tax on
individuals.
INVESTMENT POLICIES AND RISKS
- ------------------------------------------------------------------------------
EACH 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 NET ASSETS DURING PERIODS OF NORMAL MARKET
CONDITIONS) IN MUNICIPAL OBLIGATIONS, THE INTEREST ON WHICH IS EXEMPT FROM
REGULAR FEDERAL INCOME TAX AND FROM THE STATE TAXES WHICH, IN ACCORDANCE WITH
THE FUND'S INVESTMENT OBJECTIVE, THE FUND SEEKS TO AVOID. The foregoing policy
is a fundamental policy of each Fund and its corresponding Portfolio, which may
not be changed unless authorized by a vote of the Fund's shareholders or that
Portfolio's investors, as the case may be. The Minnesota Portfolio intends to
invest its assets so as to comply with the requirement that, in order for exempt
interest dividends that are derived from interest income from specified
Minnesota sources to be exempt from regular Minnesota State personal income
taxes, 95% or more of the exempt interest dividends that are paid to all
shareholders by the Minnesota Fund must be derived from such specified Minnesota
sources.
At least 80% of the net assets of the New Jersey Portfolio, at least 75% of the
net assets of the Colorado Portfolio, Connecticut Portfolio and Texas Portfolio,
and at least 70% of the net assets of the Arizona Portfolio, Michigan Portfolio,
Minnesota Portfolio and Pennsylvania 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 Fitch Investors
Service, Inc. ("Fitch")) or, if unrated, determined by the Investment Adviser to
be of at least investment grade quality. The balance of each Portfolio's net
assets may be invested 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 Baa or BBB are commonly
known as "junk bonds". A 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. Bond, tax and revenue anticipation notes are
short-term obligations that will be retired with the proceeds of an anticipated
bond issue, tax revenue or facility revenue, respectively. Under normal market
conditions, a Portfolio will invest at least 65% (in the case of the Minnesota
Portfolio, generally 95% or more) of its total assets in obligations issued by
its respective State or its political subdivisions.
Interest income from certain types of municipal obligations may be subject to
the federal alternative minimum tax (the "AMT") for individual investors. As at
July 31, 1996, the Portfolios had invested in such obligations as follows (as a
percentage of net assets): Arizona Portfolio (8.0%); Colorado Portfolio (22.5%);
Connecticut Portfolio (17.2%); Michigan Portfolio (6.3%); Minnesota Portfolio
(15.6%); New Jersey Portfolio (21.2%); Pennsylvania Portfolio (20.9%); and Texas
Portfolio (30.2%). Distributions to corporate investors of certain interest
income may also be subject to the AMT. For corporate shareholders of the
Minnesota Fund, exempt interest dividends attributable to interest on all
municipal obligations (whenever issued) eligible for exemption from regular
Minnesota State personal income taxes are included in taxable income and in
alternative minimum taxable income for purposes of determining the Minnesota
franchise tax imposed on corporations subject to Minnesota taxation. The Funds
may not be suitable for investors subject to the AMT.
CONCENTRATION. Each Portfolio will concentrate its investments in municipal
obligations issued by its respective State and that State's political
subdivisions. Each Portfolio is, therefore, more susceptible to factors
adversely affecting issuers in one State than mutual funds which do not
concentrate in a specific State. Municipal obligations of issuers in a single
State may be adversely effected by economic developments (including insolvency
of an issuer) and by legislation and other governmental activities in that
State. Municipal obligations that rely on an annual appropriation of funds by a
State's legislature for payment are also subject to the risk that the
legislature will not appropriate the necessary amounts or take other action
needed to permit the issuer of such obligations to make required payments. To
the extent that a Portfolio's assets are concentrated in municipal obligations
of issuers of a single State, that Portfolio may be subject to an increased risk
of loss. Each Portfolio may also invest in obligations issued by the governments
of Puerto Rico, the U.S. Virgin Islands and Guam. See the Appendix to this
Prospectus for a description of some of the economic and other factors relating
to the States and Puerto Rico.
In addition, each Portfolio may invest 25% or more of its total assets 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 a Portfolio more susceptible to adverse economic, political, or
regulatory occurrences affecting a particular category of issuer. For example,
health care-related issuers are susceptible to medicaid reimbursement policies,
and national and State health care legislation. As a Portfolio's concentration
increases, so does the potential for fluctuation in the value of the
corresponding Fund's shares.
NON-DIVERSIFIED STATUS. As "non-diversified" investment companies, each
Portfolio may invest, with respect to 50% of its total assets, more than 5% (but
not more than 25%) of its total assets in the securities of any issuer. A
Portfolio is likely to invest a greater percentage of its assets in the
securities of a single issuer than would a diversified fund. Therefore, a
Portfolio is more susceptible to any single adverse economic or political
occurrence or development affecting issuers of the relevant State's municipal
obligations.
OTHER INVESTMENT PRACTICES
Each 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, each Portfolio
may also temporarily borrow up to 5% of the value of its total assets to satisfy
redemption requests or settle securities transactions.
WHEN-ISSUED SECURITIES. Each 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 a Portfolio agreed to pay for them. Each Portfolio may also
purchase instruments that give the Portfolio the option to purchase a municipal
obligation when and if issued.
INVERSE FLOATERS. Each 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 a 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. Each Portfolio may purchase and sell various 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 municipal obligations) 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 a Portfolio's initial investment
in these contracts. A 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 a Portfolio. Distributions by a Fund of any gains
realized on its corresponding Portfolio's transactions in futures and options on
futures will be taxable.
INSURED OBLIGATIONS. Each 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 a 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 a 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, each 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. The lowest investment grade, lower rated and comparable unrated
municipal obligations in which a 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 a 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.
Each 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, a Portfolio may incur additional expense seeking recovery
of its investment. Municipal obligations held by a 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. A 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 a 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 a Fund will change in response to fluctuations
in prevailing interest rates and changes in the value of the securities held by
its corresponding Portfolio. When interest rates decline, the value of
securities held by a 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 a 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 a 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 a 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 issued within a State
(including issues which are privately placed with a Portfolio) is less liquid
than that for taxable debt obligations or other more widely traded municipal
obligations. No Portfolio will 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 a 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, a 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 in securities providing the same investment return
as the securities redeemed.
Some of the securities in which a 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. Each 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 each Fund is required to distribute its share of the Portfolio's income for
each taxable year. Thus, a Portfolio may have to sell other investments to
obtain cash needed to make income distributions.
Each 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.
EACH 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 EACH 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 A FUND'S SHAREHOLDERS OR THE INVESTORS IN
THE CORRESPONDING PORTFOLIO, AS THE CASE MAY BE. IF ANY CHANGES WERE MADE IN A
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 FUNDS AND THE PORTFOLIOS
- ------------------------------------------------------------------------------
EACH FUND IS A NON-DIVERSIFIED SERIES OF EATON VANCE MUNICIPALS 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 Funds). Each share represents an equal
proportionate beneficial interest in a Fund. When issued and outstanding, each
Fund's 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 a Fund, shareholders of that Fund are entitled
to share pro rata in the net assets available for distribution to shareholders.
EACH 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
Portfolios, as well as the Trust, intend to comply with all applicable federal
and state securities laws. Each Portfolio's Declaration of Trust provides that
its corresponding Fund and other entities permitted to invest in that 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 a 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 Funds nor their shareholders will be
adversely affected by reason of the Funds investing in the Portfolios.
The Trustees of the Trust have considered the advantages and disadvantages of
investing the assets of each Fund in its corresponding 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
Portfolios, affords the potential for economies of scale for each Fund, (at
least when the assets of its corresponding Portfolio exceed $500 million) and
may over time result in lower expenses for a Fund.
In addition to selling an interest to its corresponding Fund, a Portfolio may
sell interests to other affiliated and non-affiliated mutual funds or
institutional investors. Such investors will invest in a Portfolio on the same
terms and conditions and will pay a proportionate share of the Portfolio's
expenses. However, the other investors investing in a Portfolio are not required
to sell their shares at the same public offering price as the corresponding Fund
due to variations in sales commissions and other operating expenses. Therefore,
investors in a Fund should be aware that these differences may result in
differences in returns experienced by investors in the various funds that invest
in its corresponding 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 a Portfolio may be obtained by contacting the Principal Underwriter,
24 Federal Street, Boston, MA 02110, (617) 482-8260.
Whenever a Fund as an investor in a 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. A 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 a 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 corresponding 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, a 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 a
Fund. Notwithstanding the above, there are other means for meeting shareholder
redemption requests, such as borrowing.
A Fund may withdraw (completely redeem) all its assets from its corresponding
Portfolio at any time if the Board of Trustees of the Trust determines that it
is in the best interest of that Fund to do so. In the event a Fund withdraws all
of its assets from its corresponding Portfolio, or the Board of Trustees of the
Trust determines that the investment objective of such Portfolio is no longer
consistent with the investment objective of the Fund, such Trustees would
consider what action might be taken, including investing the assets of such Fund
in another pooled investment entity or retaining an investment adviser to manage
the Fund's assets in accordance with its investment objective. A Fund's
investment performance may be affected by a withdrawal of all its assets from
its corresponding Portfolio.
Although each Fund offers only its own shares of beneficial interest, it is
possible that a Fund might become liable for a misstatement or omission in this
Prospectus regarding another Fund because the Funds use this combined
Prospectus. The Trustees of the Trust have considered this factor in approving
the use of a combined Prospectus.
MANAGEMENT OF THE FUNDS AND THE PORTFOLIOS
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EACH 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 each Portfolio,
BMR manages each Portfolio's investments and affairs. BMR also furnishes for the
use of each Portfolio office space and all necessary office facilities,
equipment and personnel for servicing the investments of the Portfolios. Under
its investment advisory agreement with a 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 $20 million 0.100% 1.00%
2 $20 million but less than $40 million 0.200% 2.00%
3 $40 million but less than $500 million 0.300% 3.00%
4 $500 million but less than $1 billion 0.275% 2.75%
5 $1 billion but less than $1.5 billion 0.250% 2.50%
6 $1.5 billion but less than $2 billion 0.225% 2.25%
7 $2 billion but less than $3 billion 0.200% 2.00%
8 $3 billion and over 0.175% 1.75%
<CAPTION>
For the fiscal year ended July 31, 1996, each Portfolio paid advisory fees equivalent to the percentage of
average daily net assets stated below.
NET ASSETS AS OF
PORTFOLIO JULY 31, 1996 ADVISORY FEE
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
Arizona $129,861,547 0.41%
Colorado 45,415,574 0.26%(1)
Connecticut 187,616,885 0.43%
Michigan 173,464,608 0.43%
Minnesota 76,090,073 0.36%
New Jersey 386,244,341 0.47%
Pennsylvania 448,181,861 0.47%
Texas 24,366,836 0.10%(2)
<FN>
(1) Absent a fee reduction, the Colorado Portfolio would have paid BMR advisory fees equivalent to 0.28%
of average daily net asssets.
(2) Absent a fee reduction, the Texas Portfolio would have paid BMR advisory fees equivalent to 0.20% of
average daily net asssets.
</TABLE>
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.
Nicole Anderes has acted as the portfolio manager of the Connecticut Portfolio
since January, 1994 and the Texas Portfolio since December 1, 1995. She joined
Eaton Vance and BMR as a Vice President in January 1994. Prior to joining Eaton
Vance, she was a Vice President and portfolio manager at Lazard Freres Asset
Management (1992-1994) and a Vice President and Manager -- Municipal Research at
Roosevelt & Cross (1987-1992).
Timothy T. Browse has acted as the portfolio manager of the Michigan Portfolio
since it commenced operations and the Pennsylvania Portfolio since December 1,
1995. He has been a Vice President of Eaton Vance and of BMR since 1993 and an
employee of Eaton Vance since 1992. Prior to joining Eaton Vance, he was a
municipal bond trader at Fidelity Management & Research Company (1987-1992).
Cynthia J. Clemson has acted as the portfolio manager of the Arizona Portfolio
since January 1, 1994 and the Colorado Portfolio since November 1, 1996. Ms.
Clemson has been a Vice President of Eaton Vance and BMR since 1993 and an
employee of Eaton Vance since 1985.
Robert B. MacIntosh has acted as the portfolio manager of the New Jersey
Portfolio since it commenced operations and the Minnesota Portfolio since
November 1, 1996. Mr. MacIntosh has been a Vice President of Eaton Vance since
1991 and of BMR since 1992.
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 Portfolios and at reasonably competitive spreads. Subject to the foregoing,
BMR may consider sales of shares of the Funds or of other investment companies
sponsored by BMR or Eaton Vance as a factor in the selection of firms to execute
portfolio transactions. Each Fund, each 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 a Portfolio) for their own accounts, subject to certain
pre-clearance, 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 Funds. The Trust has not retained the services of an investment adviser
since the Trust seeks to achieve the investment objective of each Fund by
investing its assets in the corresponding Portfolio. As Administrator, Eaton
Vance provides the Funds 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 Portfolios and the Funds, 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.
DISTRIBUTION PLANS
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EACH FUND FINANCES DISTRIBUTION ACTIVITIES AND HAS ADOPTED A DISTRIBUTION PLAN
(A "PLAN") PURSUANT TO RULE 12B-1 UNDER THE INVESTMENT COMPANY ACT OF 1940 (THE
"1940 ACT"). Rule 12b-1 permits a mutual fund, such as a Fund, to finance
distribution activities and bear expenses associated with the distribution of
its shares provided that any payments made by the fund are made pursuant to a
written plan adopted in accordance with the Rule. Each Plan is subject to, and
complies with, the sales charge rule of the National Association of Securities
Dealers, Inc. (the "NASD Rule"). Each Fund's Plan is described further in the
Statement of Additional Information, and the following is a description of the
salient features of the Plans. Each Fund's Plan provides that the Fund, subject
to the NASD Rule, will pay sales commissions and distribution fees to the
Principal Underwriter only after and as a result of the sale of shares of the
Fund. On each sale of Fund shares (excluding reinvestment of distributions) a
Fund will pay the Principal Underwriter amounts representing (i) sales
commissions equal to 5% of the amount received by a Fund for each share sold and
(ii) distribution fees calculated by applying the rate of 1% over the prime rate
then reported in The Wall Street Journal to the outstanding balance of Uncovered
Distribution Charges (as described below) of the Principal Underwriter. The
Principal Underwriter currently expects to pay sales commissions (except on
exchange transactions and reinvestments) to a financial services firm (an
"Authorized Firm") at the time of sale equal to 4% of the purchase price of the
shares sold by such Firm. The Principal Underwriter will use its own funds
(which may be borrowed from banks) to pay such commissions. Because the payment
of the sales commissions and distribution fees to the Principal Underwriter is
subject to the NASD Rule described below, it will take the Principal Underwriter
a number of years to recoup the sales commissions paid by it to Authorized Firms
from the payments received by it from a Fund pursuant to a Plan.
THE NASD RULE REQUIRES EACH FUND TO LIMIT ITS ANNUAL PAYMENTS OF SALES
COMMISSIONS AND DISTRIBUTION FEES TO AN AMOUNT NOT EXCEEDING .75% OF THE FUND'S
AVERAGE DAILY NET ASSETS FOR EACH FISCAL YEAR. Under its Plan, a Fund accrues
daily an amount at the rate of 1/365 of .75% of the Fund's net assets, and pays
such accrued amounts monthly to the Principal Underwriter. Each Plan requires
such accruals to be automatically discontinued during any period in which there
are no outstanding Uncovered Distribution Charges under the Plan. Uncovered
Distribution Charges are calculated daily and, briefly, are equivalent to all
unpaid sales commissions and distribution fees to which the Principal
Underwriter is entitled under a Plan less all contingent deferred sales charges
theretofore paid to the Principal Underwriter. The Eaton Vance organization may
be considered to have realized a profit under a Fund's Plan if at any point in
time the aggregate amounts of all payments received by the Principal Underwriter
from the Fund, pursuant to the Plan, including any contingent deferred sales
charges, have exceeded the total expenses theretofore incurred by such
organization in distributing shares of the Fund. Total expenses for this purpose
will include an allocable portion of the overhead costs of such organization and
its branch offices.
Because of the NASD Rule limitation on the amount of sales commissions and
distribution fees paid during any fiscal year, a high level of sales of Fund
shares during the initial years of a Fund's operations would cause a large
portion of the sales commissions attributable to a sale of Fund shares to be
accrued and paid by the Fund to the Principal Underwriter in fiscal years
subsequent to the year in which such shares were sold. This spreading of sales
commissions payments under each Fund's Plan over an extended period would result
in the incurrence and payment of increased distribution fees under the Plan.
During the fiscal year ended July 31, 1996, each Fund paid or accrued sales
commissions under its Plan equivalent to .75% of such Fund's average daily net
assets. As at July 31, 1996, the outstanding Uncovered Distribution Charges of
the Principal Underwriter on such day calculated under each Fund's Plan amounted
to approximately $4,265,000 (equivalent to 3.3% of net assets on such day) in
the case of the Arizona Fund, $1,766,000 (equivalent to 4.1% of net assets on
such day) in the case of the Colorado Fund, $6,538,000 (equivalent to 3.6% of
net assets on such day) in the case of the Connecticut Fund, $5,075,000
(equivalent to 3.0% of net assets on such day) in the case of the Michigan Fund,
$2,539,000 (equivalent to 3.4% of net assets on such day) in the case of the
Minnesota Fund, $11,266,000 (equivalent to 3.0% of net assets on such day) in
the case of the New Jersey Fund, $13,539,000 (equivalent to 3.1% of net assets
on such day) in the case of the Pennsylvania Fund, and $757,000 (equivalent to
3.2% of net assets on such day) in the case of the Texas Fund.
EACH PLAN ALSO AUTHORIZES A FUND TO MAKE PAYMENTS OF SERVICE FEES TO THE
PRINCIPAL UNDERWRITER, AUTHORIZED FIRMS AND OTHER PERSONS IN AMOUNTS NOT
EXCEEDING .25% OF THE FUND'S AVERAGE DAILY NET ASSETS FOR EACH FISCAL YEAR. The
Trustees of the Trust have initially implemented this provision of each Fund's
Plan by authorizing the Fund to make quarterly payments of service fees to the
Principal Underwriter and Authorized Firms in amounts not expected to exceed
.20% of the Fund's average daily net assets for each fiscal year based on the
value of Fund shares sold by such persons and remaining outstanding for at least
twelve months. However, each Fund's Plan authorizes the Trustees of the Trust on
behalf of the Fund to increase payments to the Principal Underwriter, Authorized
Firms and other persons from time to time without further action by shareholders
of the Fund, provided that the aggregate amount of payments made to such persons
under the Plan in any fiscal year of the Fund does not exceed .25% of the Fund's
average daily net assets. As permitted by the NASD Rule, such payments are made
for personal services and/or the maintenance of shareholder accounts. Service
fees are separate and distinct from the sales commissions and distribution fees
payable by a Fund to the Principal Underwriter, and as such are not subject to
automatic discontinuance when there are no outstanding Uncovered Distribution
Charges of the Principal Underwriter. For the fiscal year ended July 31, 1996,
each Fund paid or accrued service fees as follows (as an annualized percentage
of average daily net assets): Arizona Fund (0.16%); Colorado Fund (0.17%);
Connecticut Fund (0.18%); Michigan Fund (0.18%); Minnesota Fund (0.17%); New
Jersey Fund (0.17%); Pennsylvania Fund (0.17%); and Texas Fund (0.17%).
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. In addition, the Principal
Underwriter may from time to time increase or decrease the sales commissions
payable to Authorized Firms.
Each Fund may, in its absolute discretion, suspend, discontinue or limit the
offering of its shares at any time. In determining whether any such action
should be taken, the Funds' management intends to consider all relevant factors,
including without limitation the size of a Fund, the investment climate and
market conditions, the volume of sales and redemptions of Fund shares, and the
amount of Uncovered Distribution Charges of the Principal Underwriter. Each Plan
may continue in effect and payments may be made under the Plan following any
such suspension, discontinuance or limitation of the offering of Fund shares;
however, no Fund is contractually obligated to continue its Plan for any
particular period of time. Suspension of the offering of Fund shares would not,
of course, affect a shareholder's ability to redeem shares.
VALUING FUND SHARES
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EACH 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). Each 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 is computed by dividing the value of a Fund's total assets, less
its liabilities, by the number of shares outstanding. Because each Fund invests
its assets in an interest in its corresponding 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 Fund share. It is the Authorized Firms'
responsibility to transmit orders promptly to the Principal Underwriter.
Each 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 a
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 Portfolios' 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
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SHARES OF A FUND MAY BE PURCHASED FOR CASH OR MAY BE ACQUIRED IN EXCHANGE FOR
SECURITIES. Investors may purchase shares of a Fund through Authorized Firms at
the net asset value per share of the Fund next determined after an order is
effective. An Authorized Firm may charge its customers a fee in connection with
transactions executed by that Firm. A Fund may suspend the offering of shares at
any time and may refuse an order for the purchase of shares. Shares of each Fund
are offered for sale only in States where such shares may be legally sold.
An initial investment in a 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 Funds' 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."
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 their net asset value 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 net asset value per Fund share on the day such proceeds are received.
Eaton Vance will use reasonable efforts to obtain the then 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 Marathon [State name] Municipals Fund
IN THE CASE OF PHYSICAL DELIVERY:
Investors Bank & Trust Company
Attention: EV Marathon [State name] Municipals Fund
Physical Securities Processing Settlement Area
89 South Street
Boston, MA 02111
Investors who are contemplating an exchange of securities for shares of a 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.
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 such shares
is based upon the net asset value calculated after the Principal Underwriter, as
the Funds' 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, a Fund will make payment in cash for the net asset value of the
shares as of the date determined above, reduced by the amount of any applicable
contingent deferred sales charges (described below) and federal income tax
required to be withheld. Although each 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 a
Fund, either totally or partially, by a distribution in kind of readily
marketable securities withdrawn by that Fund from its corresponding 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 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, each Fund reserves the right
to redeem 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 a Fund if the cause
of the low account balance was a reduction in the net asset value of Fund
shares. No contingent deferred sales charge will be imposed with respect to such
involuntary redemptions.
CONTINGENT DEFERRED SALES CHARGE. Shares redeemed within the first six years of
their purchase (except shares acquired through the reinvestment of
distributions) generally will be subject to a contingent deferred sales charge
("CDSC"). This CDSC is imposed on any redemption, the amount of which exceeds
the aggregate value at the time of redemption of (a) all shares in the account
purchased more than six years prior to the redemption, (b) all shares in the
account acquired through reinvestment of distributions, and (c) the increase, if
any, in the value of all other shares in the account (namely those purchased
within the six years preceding the redemption) over the purchase price of such
shares. Redemptions are processed in a manner to maximize the amount of
redemption proceeds which will not be subject to a CDSC. That is, each
redemption will be assumed to have been made first from the exempt amounts
referred to in clauses (a), (b) and (c) above, and second through liquidation of
those shares in the account referred to in clause (c) on a first-in-first-out
basis. As described under "Distribution Plans", the CDSC will be paid to the
Principal Underwriter or a Fund. Any CDSC which is required to be imposed on
share redemptions will be made in accordance with the following schedule:
YEAR OF
REDEMPTION
AFTER PURCHASE CDSC
----------------------------------------------------------------------------
First or Second 5%
Third 4%
Fourth 3%
Fifth 2%
Sixth 1%
Seventh and following 0%
In calculating the CDSC upon the redemption of Fund shares acquired in an
exchange of shares of a fund currently listed under "The Eaton Vance Exchange
Privilege," the CDSC schedule applicable to the shares at the time of purchase
will apply and the purchase of shares acquired in the exchange is deemed to have
occurred at the time of the original purchase of the exchanged shares.
No CDSC will be imposed on shares of a Fund which have been sold to Eaton Vance
or its affiliates, or to their respective employees or clients. The CDSC will
also be waived for shares redeemed (1) pursuant to a Withdrawal Plan (see "Eaton
Vance Shareholder Services"), (2) as part of a required distribution from a
tax-sheltered retirement plan or (3) following the death of all beneficial
owners of such shares, provided the redemption is requested within one year of
death (a death certificate and other applicable documents may be required). In
addition, shares acquired as a result of a merger or liquidation of another
Eaton Vance sponsored fund will have a CDSC imposed at the same rate as would
have been imposed in the prior fund.
THE FOLLOWING EXAMPLE ILLUSTRATES THE OPERATION OF THE CDSC. ASSUME THAT AN
INVESTOR PURCHASES $10,000 OF A FUND'S SHARES AND THAT 16 MONTHS LATER THE
VALUE OF THE ACCOUNT HAS GROWN THROUGH INVESTMENT PERFORMANCE AND REINVESTMENT
OF DIVIDENDS TO $12,000. THE INVESTOR THEN MAY REDEEM UP TO $2,000 OF SHARES
WITHOUT INCURRING A CDSC. IF THE INVESTOR SHOULD REDEEM $3,000 OF SHARES, A
CHARGE WOULD BE IMPOSED ON $1,000 OF THE REDEMPTION. THE RATE WOULD BE 5%
BECAUSE IT WAS IN THE SECOND YEAR AFTER THE PURCHASE WAS MADE AND THE CHARGE
WOULD BE $50.
REPORTS TO SHAREHOLDERS
- ------------------------------------------------------------------------------
EACH FUND WILL ISSUE TO ITS SHAREHOLDERS SEMI-ANNUAL AND ANNUAL REPORTS
CONTAINING FINANCIAL STATEMENTS. Financial statements included in annual reports
are audited by the Funds' independent certified public accountants. Shortly
after the end of each calendar year, each Fund will furnish its shareholders
with information necessary for preparing federal and State tax returns.
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 APPLICABLE
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.
A Fund will not issue share certificates except upon request.
At least quarterly, shareholders will receive a statement showing complete
details of any transaction and the current share balance in the account. THE
LIFETIME INVESTING ACCOUNT ALSO PERMITS A SHAREHOLDER TO MAKE ADDITIONAL
INVESTMENTS IN SHARES BY SENDING A CHECK FOR $50 OR MORE to the Transfer Agent.
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 Funds'
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.
Income Option -- Dividends will be paid in cash, and capital gains will be
reinvested in additional shares.
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 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 a 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 a 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 each Fund currently may be exchanged for shares of one or more other
funds in the Eaton Vance Marathon Group of Funds (including Class I shares of
any EV Marathon Limited Maturity Fund) or Eaton Vance Money Market Fund, which
are distributed subject to a CDSC. Shares of each Fund may also be exchanged for
shares of Eaton Vance Prime Rate Reserves, which are subject to an early
withdrawal charge, and shares of a money market fund sponsored by an Authorized
Firm and approved by the Principal Underwriter (an "Authorized Firm fund"). Any
such exchange will be made on the basis of the net asset value per share of each
fund at the time of the exchange, provided that such exchange offers are
available only in States where shares of the fund being acquired may be legally
sold.
Each exchange must involve shares which have a net asset value of at least
$1,000. 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 Funds do 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.
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 other funds are available from
Authorized Firms or 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.
No CDSC is imposed on exchanges. For purposes of calculating the CDSC upon
redemption of shares acquired in an exchange, the CDSC schedule applicable to
the shares at the time of purchase will apply and the purchase of shares
acquired in one or more exchanges is deemed to have occurred at the time of the
original purchase of the exchanged shares, except that time during which shares
are held in an Authorized Firm fund will not be credited toward completion of
the CDSC period. For the CDSC schedule applicable to the Eaton Vance Marathon
Group of Funds (except EV Marathon Strategic Income Fund, Eaton Vance Prime Rate
Reserves and Class I shares of any EV Marathon Limited Maturity Fund), see "How
to Redeem Fund Shares." The CDSC or early withdrawal charge schedule applicable
to EV Marathon Strategic Income Fund, Eaton Vance Prime Rate Reserves and Class
I shares of any EV Marathon Limited Maturity Fund is 3%, 2.5%, 2% or 1% in the
event of a redemption occurring in the first, second, third or fourth year,
respectively, after the original share purchase.
Shares of the funds listed above may be exchanged for Fund shares on the basis
of the net asset value per share of each fund at the time of exchange, but
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 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 Funds, 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 FUNDS OFFER 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 applicable Fund as an expense to all
shareholders.
INVEST-BY-MAIL -- FOR PERIODIC SHARE ACCUMULATION: Once the $1,000 minimum
investment has been made, checks of $50 or more payable to the order of the Fund
being purchased 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 dividends are reinvested. The name of the shareholder, the
Fund and the account number should accompany each investment.
BANK AUTOMATED INVESTING -- FOR REGULAR SHARE ACCUMULATION: Cash investments 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.
WITHDRAWAL PLAN: A shareholder may draw on shareholdings systematically with
monthly or quarterly checks in an aggregate amount that does not exceed
annually 12% of the account balance at the time the plan is established. Such
amount will not be subject to a CDSC. See "How to Redeem Fund Shares". A
minimum deposit of $5,000 in shares is required.
REINVESTMENT PRIVILEGE: A shareholder who has redeemed shares may reinvest, with
credit for any CDSC paid on the redeemed shares, 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 a Fund, 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. 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 a Fund (or by the Fund's Transfer Agent). To the extent that
any shares of a Fund are sold at a loss and the proceeds are reinvested in
shares of a Fund (or other shares of the Fund are acquired) within the period
beginning 30 days before and ending 30 days after the date of the 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 A FUND BY ITS
CORRESPONDING PORTFOLIO (LESS THE FUND'S DIRECT AND ALLOCATED 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 on the fifteenth day of each month or
the next business day thereafter. Each Fund anticipates that for tax purposes
the entire distribution, whether paid in cash or reinvested in 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 of a Fund 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. A Fund's net realized capital gains, if any, consist
of the net realized capital gains allocated to the Fund by its corresponding
Portfolio for tax purposes, after taking into account any available capital loss
carryovers; a Fund's net realized capital gains, if any, will be distributed at
least once a year, usually in December.
Each Fund intends to qualify as a regulated investment company under the
Internal Revenue Code of 1986, as amended, (the "Code") and to satisfy all
requirements necessary to be relieved of federal taxes on income and gains it
distributes to shareholders. In satisfying these requirements, each Fund will
treat itself as owning its proportionate share of each of its corresponding
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, each 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 partnerships under the Code, the Portfolios
do 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 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 a Fund. Tax-exempt
distributions received from a 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 a Fund is not deductible to the extent it is deemed related to
the Fund's distributions of tax-exempt interest. 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 a 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.
SEE THE APPENDIX TO THIS PROSPECTUS FOR INFORMATION CONCERNING STATE TAXES.
Shareholders should consult with their tax advisers concerning the applicability
of State, local and other taxes to an investment in a Fund.
PERFORMANCE INFORMATION
- ------------------------------------------------------------------------------
FROM TIME TO TIME, EACH FUND MAY ADVERTISE ITS YIELD AND/OR AVERAGE ANNUAL TOTAL
RETURN. Each Fund's current yield is calculated by dividing the net investment
income per share earned during a recent 30-day period by the maximum offering
price per share (net asset value) of the Fund 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. Each
Fund's average annual total return is determined by computing the average annual
percentage change in value of $1,000 invested at the maximum public offering
price (net asset value) for specified periods, assuming reinvestment of all
distributions. The average annual total return calculation assumes a complete
redemption of the investment and the deduction of any applicable CDSC at the end
of the period. Each Fund may publish annual and cumulative total return figures
from time to time.
Each Fund may also publish total return figures which do not take into account
any CDSC which may be imposed upon redemptions at the end of the specified
period. Any performance figure which does not take into account the CDSC would
be reduced to the extent such charge is imposed upon a redemption.
Investors should note that the investment results of a Fund will fluctuate over
time, and any presentation of a Fund's 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 a Fund or its corresponding Portfolio are allocated to Eaton Vance,
the Fund's performance will be higher.
<PAGE>
APPENDIX
STATE SPECIFIC INFORMATION
Because each Portfolio will normally invest at least 65% of its assets (and, in
the case of the Minnesota Portfolio, generally 95% or more) in the obligations
of issuers in its corresponding State, it is susceptible to factors affecting
that State. Each Portfolio may also invest up to 5% of its net assets in
obligations issued by the governments of Guam and the U.S. Virgin Islands and up
to 35% of its assets in obligations issued by the government of Puerto Rico. The
Minnesota Portfolio has no intention of investing in such obligations. The
Connecticut Portfolio may invest in municipal obligations of Puerto Rico, the
U.S. Virgin Islands and Guam, the interest on which cannot be taxed by any State
under federal law. Set forth below is certain economic and tax information
concerning the States in which the Portfolios invest and Puerto Rico.
The bond ratings provided below are current as of the date of this Prospectus
and are based on economic conditions which may not continue; moreover, there can
be no assurance that particular bond issues may not be adversely affected by
changes in economic, political or other conditions. Unless stated otherwise, the
ratings indicated are for obligations of the State. A State's political
subdivisions may have different ratings which are unrelated to the ratings
assigned to State obligations.
ARIZONA. Arizona's economy is primarily based on the service, high-tech
manufacturing, construction and tourism industries, as well as the military. The
State experienced rapid economic and population growth in the 1980s, which has
slowed somewhat in the 1990s. The problems associated with such growth (air
quality, transportation and public infrastructure) continue to be addressed by
the State legislature. The State's unemployment rate in June 1996 was 5.3%,
below the national rate of 5.4%.
The State's ability to raise revenues is limited by Constitutional and
legislative restrictions on property tax increases. There is also a limit on
annual spending. The State does not issue general obligation bonds, but relies
on pay-as-you-go capital outlays, revenue bonds and certificates of
participation to finance projects. Each of these projects is individually rated
based on its specific creditworthiness.
ARIZONA TAXES. Based upon the advice of Arizona tax counsel, the management of
the Fund believes that under Arizona law, dividends paid by the Fund will be
exempt from Arizona income tax imposed on individuals, corporations and estates
and trusts that are subject to Arizona taxation to the extent such dividends are
excluded from gross income for federal income tax purposes and are derived from
interest payments on Arizona obligations. In addition, dividends paid by the
Fund will be exempt from Arizona income tax imposed on such persons, though
included in gross income for federal income tax purposes, to the extent such
dividends are derived from interest payments on direct obligations of the United
States. Other distributions from the Fund, including distributions derived from
net short-term and long-term capital gains, are generally not exempt from
Arizona income tax.
Interest or indebtedness and other related expenses which are incurred or
continued by a shareholder to purchase or carry shares of the Fund generally
will not be deductible for Arizona income tax purposes.
COLORADO. Colorado's economy began to improve in the late 1980s, recovering from
a recession largely caused by contractions in the energy, high technology and
construction industries. The recovery has been fueled, in part, by large public
construction projects, net in-migration, a healthy tourist economy, and
increases in the wholesale and retail trade sector and the general services
sector. Momentum is sufficient that the Office of State Planning and Budgeting
has pronounced that Colorado's "slower growth pattern mimics that of the United
States, although it is not as severe as the nation's", even though most of the
large public works projects are completed and the boom in net migration begins
to ease. Employment in the service and trade industries represents approximately
54.5% of the State's nonagricultural wage and salary jobs, and government
employment represents approximately 15.9%. Manufacturing represents only 10.8%
and, while total jobs in the sector is increasing, manufacturing is slowly
falling as a percentage of total employment, due in part to a concentration in
defense-related production. Colorado's unemployment rate was 4.1% in June 1996,
below the national rate of 5.4%. Colorado added 50,000 jobs in the twelve months
ended June 1996. There is no State general obligation debt outstanding.
COLORADO TAXES. In the opinion of Kutak Rock, special Colorado tax counsel to
the Fund, provided that the Fund qualifies as a regulated investment company
under the Code, and the Portfolio is treated as a partnership for federal income
tax purposes, individuals, trusts, estates, and corporations who are holders of
the Fund and who are subject to the Colorado income tax will not be subject to
Colorado tax on Fund dividends to the extent that: (a) such dividends qualify as
exempt-interest dividends of a regulated investment company under Section
852(b)(5) of the Code and are derived from interest received by the Fund on
obligations of Colorado or any of its political subdivisions issued on or after
May 1, 1980 or (b) obligations of the United States or its possessions to the
extent included in federal taxable income. To the extent that Fund distributions
are attributable to sources not described in the preceding sentences, such as
long or short-term capital gains, such distributions will not be exempt from
Colorado income tax. There are no municipal income taxes in Colorado. As
intangibles, shares in the Fund will be exempt from Colorado property taxes.
CONNECTICUT. Historically, Connecticut's economic structure has been
concentrated in manufacturing, including a heavy component of defense-related
industries, which increases the State's vulnerability to economic cycles and to
declines in federal government defense spending. More recently, Connecticut's
level of manufacturing activity has declined, but this has been partially offset
by extensive urban development, a large insurance sector, relocations of
corporate headquarters to Connecticut (specifically to Fairfield County), and
the extension of other service sectors. As of June 1996, the unemployment rate
in Connecticut on a seasonally adjusted basis was 4.8%, as compared to a rate of
5.4% nationwide.
General obligation bonds issued by Connecticut municipalities are payable
primarily only from ad valorem taxes on property subject to taxation by the
municipality. The State has about $6 billion of general obligation bonds
outstanding, of which more than half have been issued for general State
purposes. The remaining general obligation bonds were issued for highway
construction, mass transit, and rental housing. Debt indicators have been rising
and are high at $1,850 of net direct debt per capita. Certain Connecticut
municipalities have experienced severe fiscal difficulties and have reported
operating and accumulated deficits in recent years. Regional economic
difficulties, reductions in revenues, and increased expenses could lead to
further fiscal problems for the State and its political subdivisions,
authorities, and agencies. This could result in declines in the value of their
outstanding obligations, reductions in their ability to pay interest and
principal thereon, and increases in their future borrowing costs.
General obligations of the State of Connecticut are rated AA-, Aa and AA by S&P,
Moody's and Fitch, respectively.
CONNECTICUT TAXES. In the opinion of Day, Berry & Howard, special Connecticut
tax counsel to the Connecticut Fund, shareholders of the Connecticut Fund will
not be subject to the Connecticut personal income tax on the Connecticut taxable
income of individuals, trusts, and estates in the case of distributions received
from the Connecticut Fund to the extent that such distributions qualify as
exempt-interest dividends for federal income tax purposes and are derived from
interest on tax-exempt obligations issued by or on behalf of the State of
Connecticut and its political subdivisions or the authorities,
instrumentalities, or districts of any of them, or on tax-exempt obligations the
interest on which Connecticut is prohibited from taxing by federal law, e.g.,
tax-exempt obligations that are issued by the governments of Puerto Rico, the
U.S. Virgin Islands and Guam.
Other distributions from the Connecticut Fund, including dividends attributable
to obligations of issuers in other states and all long-term and short-term
capital gains, will not be exempt from the Connecticut personal income tax,
except that capital gain dividends derived from obligations issued by or on
behalf of the State of Connecticut or its political subdivisions may not be
subject to such tax. Distributions from the Connecticut Fund that constitute
items of tax preference for purposes of the federal alternative minimum tax will
not be subject to the net Connecticut minimum tax applicable to taxpayers
subject to the Connecticut personal income tax and required to pay the federal
alternative minimum tax, to the extent qualifying as exempt-interest dividends
derived from obligations issued by or on behalf of the State of Connecticut and
its political subdivisions or the authorities, instrumentalities, or districts
of any of them, or from obligations the interest on which Connecticut is
prohibited from taxing by federal law, but other distributions from the Fund
could cause or increase liability for the net Connecticut minimum tax. The
Connecticut Fund will report annually to its shareholders the percentage and
source, on a state-by-state basis, of interest income received by the
Connecticut Fund on municipal bonds during the preceding year.
Distributions from investment income and capital gains, including
exempt-interest dividends derived from interest that is exempt from Connecticut
personal income tax and federal income tax, will be subject to the Connecticut
Corporation Business Tax if received by a corporation subject to such tax,
except for any portion therof that might qualify for the dividends-received
deduction provided under that tax, and all such distributions may be subject to
state and local taxes in states other than Connecticut.
MICHIGAN. Michigan has long had a large representation in and is dominated by
the automobile industry and related industries and tends to be more vulnerable
to economic cycles than other states and the nation as a whole. For June 1996,
Michigan's unemployment rate was 4.5%, as compared to the national rate of 5.4%.
In March, 1994, Michigan voters approved changes to the tax system resulting in,
among other things, an increase in the sales tax rate, a reduction in the income
tax rate and the creation of a statewide property tax.
Michigan's general obligation debt is rated A1, AA and AA, by Moody's, S&P and
Fitch, respectively.
MICHIGAN TAXES. The Michigan Fund has received an opinion from Butzel Long,
special Michigan tax counsel to the Michigan Fund, to the effect that
shareholders of the Michigan Fund who are subject to the Michigan state income
tax, municipal income tax or single business tax will not be subject to such
taxes on their Michigan Fund dividends to the extent that such distributions are
exempt-interest dividends for federal income tax purposes and are attributable
to interest on obligations held by the Michigan Portfolio and allocated to the
Michigan Fund which is exempt from regular federal income tax and is exempt from
Michigan State and City income taxes, Michigan single business tax and in the
form of an investment exempt from the Michigan intangibles tax ("Michigan
tax-exempt obligations"). Other distributions with respect to shares of the
Michigan Fund including, but not limited to, long or short-term capital gains,
will be subject to the Michigan income tax or single business tax and may be
subject to the city income taxes imposed by certain Michigan cities. The opinion
also provides that shares of the Michigan Fund will be exempt from the Michigan
intangibles tax to the extent the Michigan Portfolio's assets consist of
Michigan tax-exempt obligations and any other securities or obligations that are
exempt from the Michigan intangibles tax. The Michigan intangibles tax is being
phased out, thus, even if it applies to a portion of income from the Fund (for
instance, due to non-Michigan investments), it is now reduced and will be
eliminated by 1998.
MINNESOTA. Minnesota relies heavily on a progressive individual income tax and a
retail sales tax for revenue, which results in a fiscal system unusually
sensitive to economic conditions. Economic and State fiscal conditions have
improved. As of August 1996, the State's adjusted unemployment rate was 3.8%
compared with a national rate of 5.1%. Unaudited information indicates that the
State ended fiscal year 1996 with a General Fund balance of $1.057 billion.
The State's general obligation bonds are rated Aaa, AA+ and AAA, by Moody's, S&P
and Fitch, respectively. In March 1993, S&P revised the outlook on Minnesota
debt from Negative to Stable.
MINNESOTA TAXES. In the opinion of Faegre & Benson, special Minnesota tax
counsel to the Fund, provided that the Fund qualifies as a "regulated investment
company" under the Code, and subject to the discussion in the paragraph below,
exempt-interest dividends paid by the Fund will be exempt from the regular
Minnesota personal income tax imposed on individuals, estates and trusts that
are subject to Minnesota taxation to the extent that such dividends qualify as
exempt-interest dividends of a regulated investment company under section
852(b)(5) of the Internal Revenue Code which are derived from interest income on
tax-exempt obligations of Minnesota, or its political or governmental
subdivisions, municipalities, governmental agencies or instrumentalities
("Minnesota Sources"); provided, however, such exemption from the regular
Minnesota personal income tax is available only if the portion of the
exempt-interest dividends from such Minnesota Sources that is paid to all
shareholders represents 95% or more of the exempt-interest dividends that are
paid by the Fund. For this purpose, provided that the Portfolio is taxed
federally as a partnership and not as a corporation, the Fund will be treated as
owning its proportionate share of the assets of the Portfolio and the income
derived from such assets. The Fund and the Portfolio intend to invest their
respective assets so that each will meet the 95% test. However, if the 95% test
is not met, all exempt-interest dividends that are paid by the Fund will be
subject to the regular Minnesota personal income tax. Even if the 95% test is
met, to the extent that exempt-interest dividends paid by the Fund are not
derived from the Minnesota Sources referred to in the first sentence of this
paragraph, they will be subject to the regular Minnesota personal income tax.
Other distributions of the Fund, including distributions derived from net
short-term and long-term capital gains, are generally not exempt from the
regular Minnesota personal income tax imposed on individuals, estates and
trusts.
Legislation enacted in 1995 provides that it is the intent of the Minnesota
legislature that interest income on obligations of Minnesota governmental units,
including obligations of the Minnesota Sources described above, and
exempt-interest dividends that are derived from interest income on such
obligations, be included in the net income of individuals, estates, and trusts
for Minnesota income tax purposes if it is judicially determined that the
exemption by Minnesota of such interest or such exempt-interest dividends
unlawfully discriminates against interstate commerce because interest income on
obligations of governmental issuers located in other states, or exempt-interest
dividends derived from such obligations, is so included. This provision applies
to taxable years that begin during or after the calendar year in which such
judicial decision becomes final, regardless of the date on which the obligations
were issued, and other remedies apply for previous taxable years. The United
States Supreme Court in 1995 denied certiorari in a case in which an Ohio state
court upheld an exemption for interest income on obligations of Ohio
governmental issuers, even though interest income on obligations of non-Ohio
governmental issuers was subject to tax. The Ohio Supreme Court, in a subsequent
case involving the same taxpayer and the same issue, recently refused to
reconsider the merits of the case on the ground that the previous final state
court judgment barred any claim arising out of the transaction that was the
subject of the previous action. It cannot be predicted whether a similar case
will be brought in Minnesota or elsewhere, or what the outcome of such case
would be.
Minnesota imposes an alternative minimum tax on individuals, estates, and trusts
that is based, in part, on such taxpayers' federal alternative minimum taxable
income. Accordingly, exempt-interest dividends that constitute tax preference
items for purposes of the federal alternative minimum tax, even though they are
derived from the Minnesota Sources described above, will be included in the base
upon which such Minnesota alternative minimum tax is computed. In addition, the
entire portion of exempt-interest dividends that is derived from sources other
than the Minnesota Sources described above also is subject to the Minnesota
alternative minimum tax imposed on such individuals, estates and trusts.
Furthermore, should the 95% test that is described above fail to be met, all of
the exempt-interest dividends that are paid by the Fund, including all of those
derived from the Minnesota Sources described above, will be subject to the
Minnesota alternative minimum tax imposed on such shareholders.
Distributions from the Fund will be included in taxable income and in
alternative minimum taxable income, for purposes of determining the Minnesota
franchise tax imposed on corporations subject to Minnesota taxation. Such
distributions may also be taken into account in certain cases in determining the
minimum fee that is imposed on corporations, S corporations, and partnerships.
Interest on indebtedness which is incurred or continued by an individual, a
trust or an estate to purchase or carry shares of the Fund generally will not be
deductible for regular Minnesota personal income tax purposes or Minnesota
alternative minimum tax purposes.
NEW JERSEY. The fiscal year 1996 budget (for the fiscal period ending June 30,
1996) includes total spending of $15.987 billion, or a 3.14% increase over
fiscal 1995. In addition, New Jersey adopted a 10% personal income tax cut
retroactive to January 1, 1995. Furthermore, on June 26, 1995, the New Jersey
Legislature passed an additional 15% reduction that took effect January 1, 1996
for a total personal income tax cut of 30% since January 1, 1994. State
officials estimate the revenue loss resulting from these tax cuts at over $1
billion for fiscal 1996. To accommodate the tax cut, the fiscal 1996 budget
relies on non-recurring revenues and the use of prior years' surplus. Also a
major focus of the spending reductions has been employer contributions to
retiree health care and pension systems, which were cut by over $863 million in
fiscal 1995. There can be no assurance that the tax cuts will not have an
adverse impact on the State's finances and the demand for municipal bonds in the
State.
New Jersey's general obligation debt is rated Aa1, AA+ and AA+ by Moody's, S&P
and Fitch, respectively.
NEW JERSEY TAXES. The New Jersey Fund intends to satisfy New Jersey's statutory
requirements for treatment as a "Qualified Investment Fund." The Fund has
obtained an opinion of its special tax counsel, Wilentz, Goldman & Spitzer,
P.A., that, provided the New Jersey Fund limits its investments to those
described in this Prospectus and otherwise satisfies such statutory
requirements, shareholders of the New Jersey Fund which are individuals, estates
or trusts will not be required to include in their New Jersey gross income
distributions from the New Jersey Fund that are attributable to interest or gain
realized by the New Jersey Fund from obligations the interest on which is exempt
from regular federal income tax and is exempt from New Jersey State personal
income tax or other obligations statutorily free from New Jersey taxation.
However, with regard to corporate shareholders, such counsel is also of the
opinion that distributions from the New Jersey Fund will not be excluded from
net income and shares of the New Jersey Fund will not be excluded from
investment capital in determining New Jersey corporation business (franchise)
and corporation income taxes for corporate shareholders.
PENNSYLVANIA. Pennsylvania has long had a large representation in the steel,
mining and manufacturing industries and adverse conditions in those or other
significant industries within Pennsylvania may from time to time have a
correspondingly adverse effect on specific issuers within Pennsylvania or on
anticipated revenue to the Commonwealth. In recent years Pennsylvania's economy
has become more diversified with major new sources of growth in the service
sector, including trade, medical and the health services, education and
financial institutions. The unadjusted unemployment rate for Pennsylvania in
June 1996 was 5.1% versus the June 1995 level of 5.9%.
The Governor's fiscal year 1997 proposed budget contained tax reductions
totaling $60.2 million and certain cost reduction programs, particularly in the
areas of public health and welfare. Under the 1997 budget, revenues receipts are
expected to increase and approximately $95 million of surplus from 1996 are
expected to be used. The fiscal year 1997 budget projects a $5 million fiscal
year-end unappropriated surplus. All budgetary proposals require legislative
enactment.
Pennsylvania's general obligation debt is rated "AA-" by S&P and Fitch and "A1"
by Moody's.
PENNSYLVANIA TAXES. Interest derived by the Pennsylvania Fund from obligations
which are statutorily free from taxation in Pennsylvania ("Exempt Obligations")
are not taxable on pass through to shareholders for purposes of the Pennsylvania
personal income tax. The term "Exempt Obligations" includes (i) those
obligations issued by the Commonwealth of Pennsylvania and its political
subdivisions, agencies and instrumentalities, the interest from which is
statutorily free from state taxation in the Commonwealth of Pennsylvania, and
(ii) certain qualifying obligations of U.S. territories and possessions, or U.S.
Government obligations. Distributions attributable to most other sources,
including capital gains, will not be exempt from Pennsylvania personal income
tax.
Corporate shareholders that are subject to the Pennsylvania corporate net income
tax will not be subject to corporate net income tax on distributions of interest
made by the Pennsylvania Fund, provided such distributions are attributable to
Exempt Obligations. Distributions of capital gain attributable to Exempt
Obligations are subject to the Pennsylvania corporate net income tax. An
investment in the Pennsylvania Fund is also exempt from the Pennsylvania Gross
Premiums tax.
Shares of the Pennsylvania Fund which are held by individual shareholders who
are Pennsylvania residents and subject to the Pennsylvania county personal
property tax will be exempt from such tax to the extent that the obligations
held by the Pennsylvania Portfolio consist of Exempt Obligations on the annual
assessment date. Corporations are not subject to Pennsylvania personal property
taxes.
For individual shareholders who are residents of the City of Philadelphia,
distributions of interest derived from Exempt Obligations will not be taxable
for purposes of the Philadelphia School District Investment Net Income Tax
("Philadelphia School District Tax"), provided that the Pennsylvania Portfolio
reports to its investors the percentage of Exempt Obligations held by it for the
year. The Pennsylvania Portfolio will report such percentage to its investors.
TEXAS. Employment in Texas continued to expand during the 1990s. During June
1996, non-farm employment in Texas was 8.3 million. Over the past year, Texas
has gained more than 261,000 jobs, an increase of 3.3%, with most of the growth
occurring in the services and trade sectors of the economy. Unemployment as of
June 1996 was 5.9% versus the national rate of 5.4%.
The State finished the fiscal year ended August 31, 1995 with a $100 million
operating deficit in the General Revenue Fund. The General Revenue Fund
balance was $2.1 billion.
General obligations of Texas are rated AA, AA and AA+ by S&P, Moody's and Fitch,
respectively. Both S&P and Fitch have a stable outlook for the State.
TEXAS TAXES. Texas does not impose a state income tax on individuals. To the
extent that distributions from the Texas Fund are included in a corporate
shareholder's surplus, they will be subject to the Texas franchise tax that is
based on net worth.
PUERTO RICO. The economy of Puerto Rico is dominated by the manufacturing and
service sectors. Although the economy of Puerto Rico expanded significantly from
fiscal 1984 through fiscal 1990, the rate of this expansion slowed during fiscal
years 1991, 1992 and 1993. Growth in the future will depend on several factors,
including the state of the U.S. economy and the relative stability in the price
of oil, the exchange rate of the U.S. dollar and the cost of borrowing. Section
936 (a tax incentive that has encouraged economic growth in Puerto Rico) will be
phased out over a ten year period. At this time, it is uncertain as to the
implecation the change will have on the Puerto Rico economy. Although the Puerto
Rico unemployment rate has declined substantially since 1985, the seasonally
adjusted unemployment rate for July 1996 was approximately 13.8%. The North
American Free Trade Agreement (NAFTA), which became effective January 1, 1994,
could lead to the loss of Puerto Rico's lower salaried or labor intensive jobs
to Mexico.
S&P rates Puerto Rico general obligations debt A, while Moody's rates it Baa1;
these ratings have been in place since 1956 and 1976, respectively. S&P assigned
a negative outlook on Puerto Rico's rating on April 26, 1994 which was still in
place as of the date of this Prospectus.
<PAGE>
[LOGO: EATON VANCE]
EV MARATHON MUNICIPAL FUNDS
- --------------------------------------------------------------------------------
PROSPECTUS
DECEMBER 1, 1996
EV MARATHON ARIZONA MUNICIPALS FUND
EV MARATHON COLORADO MUNICIPALS FUND
EV MARATHON CONNECTICUT MUNICIPALS FUND
EV MARATHON MICHIGAN MUNICIPALS FUND
EV MARATHON MINNESOTA MUNICIPALS FUND
EV MARATHON NEW JERSEY MUNICIPALS FUND
EV MARATHON PENNSYLVANIA MUNICIPALS FUND
EV MARATHON TEXAS MUNICIPALS FUND
EV MARATHON
MUNICIPAL FUNDS
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
M-TFC12/1P
<PAGE>
PART A
INFORMATION REQUIRED IN A PROSPECTUS
EV TRADITIONAL
MUNICIPAL FUNDS
- ------------------------------------------------------------------------------
<TABLE>
<C> <C>
EV TRADITIONAL ARIZONA MUNICIPALS FUND EV TRADITIONAL MINNESOTA MUNICIPALS FUND
EV TRADITIONAL COLORADO MUNICIPALS FUND EV TRADITIONAL NEW JERSEY MUNICIPALS FUND
EV TRADITIONAL CONNECTICUT MUNICIPALS FUND EV TRADITIONAL PENNSYLVANIA MUNICIPALS FUND
EV TRADITIONAL MICHIGAN MUNICIPALS FUND EV TRADITIONAL TEXAS MUNICIPALS FUND
</TABLE>
THE EV TRADITIONAL MUNICIPAL FUNDS (THE "FUNDS") ARE MUTUAL FUNDS SEEKING TO
PROVIDE CURRENT INCOME EXEMPT FROM REGULAR FEDERAL INCOME TAX AND THE STATE
TAXES (IF ANY) DESCRIBED UNDER "THE FUNDS" INVESTMENT OBJECTIVES" IN THIS
PROSPECTUS. EACH FUND INVESTS ITS ASSETS IN A CORRESPONDING NON-DIVERSIFIED
OPEN-END INVESTMENT COMPANY (A "PORTFOLIO") HAVING THE SAME INVESTMENT OBJECTIVE
AS THE FUND, RATHER THAN BY DIRECTLY INVESTING IN AND MANAGING ITS OWN PORTFOLIO
OF SECURITIES. EACH FUND IS A SERIES OF EATON VANCE MUNICIPALS TRUST (THE
"TRUST").
Shares of the Funds 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 Funds involve
investment risks, including fluctuations in value and the possible loss of some
or all of the principal investment.
This combined Prospectus is designed to provide you with information you should
know before investing. Please retain this document for future reference. A
combined Statement of Additional Information dated December 1, 1996 for the
Funds, 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 Funds' principal
underwriter, Eaton Vance Distributors, Inc. (the "Principal Underwriter"), 24
Federal Street, Boston, MA 02110 (telephone (800) 225-6265). The Portfolios'
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 Funds. The offices of the
Investment Adviser and the Administrator are located at 24 Federal Street,
Boston, MA 02110.
AS OF THE DATE OF THIS COMBINED PROSPECTUS, A FUND MAY NOT BE AVAILABLE FOR
PURCHASE IN CERTAIN STATES. PLEASE CONTACT THE PRINCIPAL UNDERWRITER OR YOUR
BROKER FOR FURTHER INFORMATION.
- -------------------------------------------------------------------------------
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.
- -------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
PAGE PAGE
<S> <C> <C> <C>
Shareholder and Fund Expenses ...................... 2 How to Redeem Fund Shares .......................... 16
The Funds' Financial Highlights .................... 3 Reports to Shareholders ............................ 17
The Funds' Investment Objectives ................... 6 The Lifetime Investing Account/Distribution
Investment Policies and Risks ...................... 6 Options .......................................... 17
Organization of the Funds and the Portfolios ....... 10 The Eaton Vance Exchange Privilege ................. 18
Management of the Funds and the Portfolios ......... 11 Eaton Vance Shareholder Services ................... 19
Service Plans ...................................... 13 Distributions and Taxes ............................ 20
Valuing Fund Shares ................................ 13 Performance Information ............................ 21
How to Buy Fund Shares ............................. 14 Appendix -- State Specific Information ............. 22
</TABLE>
- -------------------------------------------------------------------------------
PROSPECTUS DATED DECEMBER 1, 1996
<PAGE>
SHAREHOLDER AND FUND EXPENSES
- ------------------------------------------------------------------------------
<TABLE>
SHAREHOLDER TRANSACTION EXPENSES
-------------------------------------------------------------------------------------------------------
<S> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price) 3.75%
Sales Charges Imposed on Reinvested Distributions None
Fees to Exchange Shares None
<CAPTION>
ANNUAL FUND AND ALLOCATED PORTFOLIO OPERATING EXPENSES (as a percentage of average daily net assets)
------------------------------------------------------------------------------------------------------------------------------
ARIZONA COLORADO CONNECTICUT MICHIGAN MINNESOTA NEW JERSEY PENNSYLVANIA TEXAS
FUND FUND FUND FUND FUND FUND FUND FUND
------- -------- ----------- -------- --------- ----------------------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment Adviser Fee
(after any applicable fee
reduction) 0.41% 0.26% 0.43% 0.43% 0.36% 0.47% 0.47% 0.10%
Other Expenses (including
Service Plan Fees and
after expense allocations) 0.56 0.50 0.16 0.50 0.39 0.13 0.21 0.52
---- ---- ---- ---- ---- ---- ---- ----
Total Operating Expenses
(after reductions) 0.97% 0.76% 0.59% 0.93% 0.75% 0.60% 0.68% 0.62%
==== ==== ==== ==== ==== ==== ==== ====
<CAPTION>
EXAMPLE
------------------------------------------------------------------------------------------------------------------------------
An investor would pay the following maximum initial sales charge and expenses on a $1,000 investment, assuming (a) 5% annual
return and (b) redemption at the end of each period:
ARIZONA COLORADO CONNECTICUT MICHIGAN MINNESOTA NEW JERSEY PENNSYLVANIA TEXAS
FUND FUND FUND FUND FUND FUND FUND FUND
------- -------- ----------- -------- --------- ----------------------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 47 $ 45 $ 43 $ 47 $ 45 $ 43 $ 44 $ 44
3 Years 67 61 56 66 61 56 58 57
5 Years 89 78 69 87 78 70 74 71
10 Years 152 128 109 148 127 110 119 112
</TABLE>
NOTES:
The table and Example summarize the aggregate expenses of the Funds and the
Portfolios and are designed to help investors understand the costs and expenses
they will bear, directly or indirectly, by investing in a Fund. Information for
each Fund is based on its expenses for the most recent fiscal year, except that
Service Plan Fees for the Arizona Fund, Colorado Fund, Michigan Fund, Minnesota
Fund and Texas Fund are estimated for the current fiscal year. Absent a fee
reduction and an expense allocation, respectively, the Investment Adviser Fee,
Other Expenses and Total Operating Expenses would have been 0.28%, 1.45% and
1.73%, respectively, for the Colorado Fund and 0.20%, 5.15% and 5.35%,
respectively, for the Texas Fund. Absent an expense allocation, Other Expenses
and Total Operating Expenses would have been 1.43% and 1.84%, respectively for
the Arizona Fund; 1.68% and 2.11%, respectively for the Connecticut Fund; 1.27%
and 1.70%, respectively, for the Michigan Fund; 1.23% and 1.59%, respectively,
for the Minnesota Fund; 1.16% and 1.63%, respectively, for the New Jersey Fund;
and 1.58% and 2.05%, respectively, for the Pennsylvania Fund.
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 Funds and the Portfolios
see "The Funds" Financial Highlights", "Management of the Funds and the
Portfolios" and "Service Plans."
No sales charge is payable at the time of purchase on investments 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."
Each 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 12.
Each Fund invests exclusively in its corresponding Portfolio. Other investment
companies with different distribution arrangements and fees are investing in the
Portfolios and others may do so in the future. See "Organization of the Funds
and the Portfolios".
<PAGE>
THE FUNDS' FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
The following information should be read in conjunction with the audited
financial statements included in the Funds' annual report to shareholders
which is incorporated by reference into the Statement of Additional
Information 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 a Fund is contained in its annual
report to shareholders which may be obtained without charge by contacting the
Principal Underwriter.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED JULY 31,
------------------------------------------------------------------------------------------------
ARIZONA FUND COLORADO FUND CONNECTICUT FUND
------------------------------- ---------------------------- -----------------------------
1996 1995 1994* 1996 1995 1994* 1996 1995 1994*
------------------------------- ---------------------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning
of year $ 9.510 $ 9.390 $10.000 $ 9.230 $ 9.180 $10.000 $10.090 $10.100 $10.000
------- ------- ------- ------- ------- ------- ------- ------- -------
INCOME (LOSS) FROM OPERATIONS:
Net investment income $ 0.449 $ 0.432 $ 0.253 $ 0.471 $ 0.450 $ 0.256 $ 0.550 $ 0.553 $ 0.153
Net realized and unrealized
gain (loss) on investments 0.129 0.142 (0.563) 0.148 0.062++ (0.761) 0.133 0.012 0.111
------- ------- ------- ------- ------- ------- ------- ------- -------
Total income (loss) from
operations $ 0.578 $ 0.574 $(0.310) $ 0.619 $ 0.512 $(0.505) $ 0.683 $ 0.565 $ 0.264
------- ------- ------- ------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
From net investment income $(0.478) $(0.432) $(0.253) $(0.479) $(0.450) $(0.256) $(0.550) $(0.553) $(0.153)
In excess of net investment
income(4) -- (0.022) (0.047) -- (0.012) (0.059) (0.023) (0.022) (0.011)
------- ------- ------- ------- ------- ------- ------- ------- -------
Total distributions $(0.478) $(0.454) $(0.300) $(0.479) $(0.462) $(0.315) $(0.573) $(0.575) $(0.164)
------- ------- ------- ------- ------- ------- ------- ------- -------
NET ASSET VALUE, end of year $ 9.610 $ 9.510 $ 9.390 $ 9.370 $ 9.230 $ 9.180 $10.200 $10.090 $10.100
======= ======= ======= ======= ======= ======= ======= ======= =======
TOTAL RETURN(2) 6.25% 6.44% (3.23)% 6.90% 5.89% (5.22)% 6.87% 5.89% 2.66%
RATIOS/SUPPLEMENTAL DATA**:
Net assets, end of year
(000 omitted) $ 1,639 $ 2,465 $ 2,412 $ 2,330 $ 1,971 $ 2,342 $ 2,013 $ 1,115 $ 163
Ratio of net expenses
to average daily net
assets (1)(3) 1.40% 1.60% 1.75%+ 1.09% 1.26% 1.38%+ 0.59% 0.51% 0.48%+
Ratio of net expenses to
average daily net assets
after custodian fee
reduction(1) 1.39% -- -- 1.05% -- -- 0.57% -- --
Ratio of net investment
income to average daily
net assets 4.60% 4.73% 4.14%+ 5.03% 5.04% 4.20%+ 5.35% 5.46% 4.83%+
**For the periods indicated, the operating expenses of the Funds and the Portfolios may reflect a reduction in the advisory fee by
the Investment Adviser and/or an allocation of expenses to the Administrator. Had such actions not been taken, net investment
income (loss) per share and the ratios would have been:
NET INVESTMENT INCOME (LOSS
PER SHARE $ 0.364 $ 0.376 $ 0.181 $ 0.380 $ 0.368 $ 0.146 $ 0.393 $ 0.249 $(0.045)
======= ======= ======= ======= ======= ======= ======= ======= =======
RATIOS (As a percentage of average daily net assets):
Expenses(1)(3) 2.27% 2.21% 2.93%+ 2.06% 2.18% 3.18%+ 2.11% 3.51% 6.73%+
Expenses after custodian
fee reduction(1) 2.26% -- -- 2.02% -- -- 2.09% -- --
Net investment income (loss) 3.73% 4.12% 2.96%+ 4.06% 4.12% 2.40%+ 3.82% 2.46% (1.42)%+
</TABLE>
(See footnotes on page 6.)
<PAGE>
THE FUNDS' FINANCIAL HIGHLIGHTS (CONTINUED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
------------------------------------------------------------------------------------------------
MICHIGAN FUND MINNESOTA FUND NEW JERSEY FUND
------------------------------ ---------------------------- ------------------------------
1996 1995 1994* 1996 1995 1994* 1996 1995 1994*
------------------------------ ---------------------------- ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning
of year $ 9.260 $ 9.220 $10.000 $ 9.300 $ 9.370 $10.000 $ 9.980 $ 9.940 $10.000
------- ------- ------- ------- ------- ------- ------- ------- -------
INCOME (LOSS) FROM OPERATIONS:
Net investment income $ 0.454 $ 0.419 $ 0.261 $ 0.474 $ 0.440 $ 0.267 $ 0.579 $ 0.576 $ 0.161
Net realized and unrealized
gain (loss) on investments 0.156 0.063 (0.733) 0.104 (0.048)++ (0.582) 0.081 0.054 (0.044)++
------- ------- ------- ------- ------- ------- ------- ------- -------
Total income (loss) from
operations $ 0.610 $ 0.482 $(0.472) $ 0.578 $ 0.392 $(0.315) $ 0.660 $ 0.630 $ 0.117
------- ------- ------- ------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
From net investment income $(0.460) $(0.419) $(0.261) (0.478) (0.440) $(0.267) $(0.579) $(0.576) $(0.161)
In excess of net investment
income(4) -- (0.023) (0.047) -- (0.022) (0.048) (0.011) (0.014) (0.016)
------- ------- ------- ------- ------- ------- ------- ------- -------
Total distributions $(0.460) $(0.442) $(0.308) $(0.478) $(0.462) $(0.315) $(0.590) $(0.590) $(0.177)
------- ------- ------- ------- ------- ------- ------- ------- -------
NET ASSET VALUE, end of year $ 9.410 $ 9.260 $ 9.220 $ 9.400 $ 9.300 $ 9.370 $10.050 $ 9.980 $ 9.940
======= ======= ======= ======= ======= ======= ======= ======= =======
TOTAL RETURN(2) 6.76% 5.52% (4.88)% 6.41% 4.45% (3.29)% 6.71% 6.62% 1.19%
RATIOS/SUPPLEMENTAL DATA**:
Net assets, end of year
(000 omitted) $ 1,651 $ 4,475 $ 6,366 $ 1,583 $ 3,688 $ 4,952 $ 3,488 $ 1,712 $ 296
Ratio of net expenses
to average daily net
assets (1)(3) 1.44% 1.69% 1.69%+ 1.24% 1.47% 1.51%+ 0.60% 0.50% 0.43%+
Ratio of net expenses to
average daily net assets
after custodian fee
reduction(1) 1.43% -- -- 1.22% -- -- 0.59% -- --
Ratio of net investment
income to average daily
net assets 4.62% 4.70% 4.18%+ 4.95% 4.84% 4.33%+ 5.68% 5.65% 4.11%+
**For the periods indicated, the operating expenses of the Funds and the Portfolios may reflect an allocation of expenses to the
Administrator and/or Investment Adviser. Had such actions not been taken, net investment income (loss) per share and the ratios
would have been:
NET INVESTMENT INCOME (LOSS)
PER SHARE $ 0.377 $ 0.398 $ 0.235 $ 0.394 $ 0.394 $ 0.209 $ 0.474 $ 0.375 $(0.237)
======= ======= ======= ======= ======= ======= ======= ======= =======
RATIOS (As a percentage of average daily net assets):
Expenses(1)(3) 2.21% 1.92% 2.11%+ 2.08% 1.98% 2.45%+ 1.63% 2.47% 10.59%+
Expenses after custodian
fee reduction(1) 2.20% -- -- 2.06% -- -- 1.62% -- --
Net investment income (loss) 3.84% 4.47% 3.76%+ 4.10% 4.33% 3.38%+ 4.65% 3.68% (6.05)%+
</TABLE>
(See footnotes on page 6.)
<PAGE>
THE FUNDS' FINANCIAL HIGHLIGHTS (CONTINUED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
-------------------------------------------------------------------------------
PENNSYLVANIA FUND TEXAS FUND
------------------------------------- --------------------------------------
1996 1995 1994* 1996 1995 1994*
------------------------------------- --------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of year $ 9.980 $10.050 $10.000 $ 9.190 $ 9.230 $10.000
------- ------- ------- ------- ------- -------
INCOME (LOSS) FROM OPERATIONS:
Net investment income $ 0.593 $ 0.577 $ 0.044 $ 0.453 $ 0.455 $ 0.267
Net realized and unrealized gain (loss) on
investments 0.122 (0.062)++ 0.104 0.158 (0.008) (0.709)
------- ------- ------- ------- ------- -------
Total income (loss) from operations $ 0.715 $ 0.515 $ 0.148 $ 0.611 $ 0.447 $(0.442)
------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
From net investment income $(0.585) $(0.577) $(0.044) $(0.453) $(0.455) $(0.267)
In excess of net investment income(4) -- (0.008) (0.054) (0.028) (0.032) (0.061)
------- ------- ------- ------- ------- -------
Total distributions $(0.585) $(0.585) $(0.098) $(0.481) $(0.487) $(0.328)
------- ------- ------- ------- ------- -------
NET ASSET VALUE, end of year $10.110 $ 9.980 $10.050 $ 9.320 $ 9.190 $ 9.230
======= ======= ======= ======= ======= =======
TOTAL RETURN(2) 7.28% 5.41% 1.49% 6.85% 5.16% (4.61)%
RATIOS/SUPPLEMENTAL DATA**:
Net assets, end of year (000 omitted) $ 3,035 $ 1,487 $ 95 $ 371 $ 469 $ 1,147
Ratio of net expenses to average daily net
assets(1)(3) 0.68% 0.46% 1.69%+ 1.06% 1.01% 1.08%+
Ratio of net expenses to average daily net
assets after custodian fee reduction(1) 0.53% -- -- 1.01% -- --
Ratio of net investment income to average
daily net assets 5.82% 5.58% 2.76%+ 4.79% 5.25% 4.53%+
**For the periods indicated, the operating expenses of the Funds and the Portfolios may reflect a reduction in the advisory fee by
the Investment Adviser and/or an allocation of expenses to the Administrator. Had such actions not been taken, net investment
income (loss) per share and the ratios would have been:
NET INVESTMENT INCOME (LOSS) PER SHARE $ 0.453 $ 0.307 $(0.258) $ 0.007 $ 0.254 $ 0.024
======= ======= ======= ======= ======= =======
RATIOS (As a percentage of average daily net assets):
Expenses(1)(3) 1.93% 3.07% 20.95%+ 5.79% 3.33% 5.20%+
Expenses after custodian fee reduction(1) 1.78% -- -- 5.74% -- --
Net investment income (loss) 4.56% 2.97% (16.50)%+ 0.06% 2.93% 0.41%+
<FN>
Footnotes:
*For the Arizona, Colorado, Connecticut, Michigan, Minnesota, New Jersey, Pennsylvania and Texas Funds, the Financial Highlights
are for the period from the start of business, December 13, 1993, December 10, 1993, April 19, 1994, December 7, 1993, December
9, 1993, April 13, 1994, June 1, 1994 and December 8, 1993, respectively, to July 31, 1994.
+Annualized.
++The per share amount is not in accord with the net realized and unrealized gain (loss) 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 its corresponding Portfolio's allocated expenses.
(2)Total return is calculated assuming 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 expense ratios for the year ended July 31, 1996 have been adjusted to reflect a change in reporting requirements. The new
reporting guidelines require the Fund to increase its expense ratio by the effect of any expense offset arrangements with its
service providers or those of the Portfolio. The expense ratios for each of the periods ended on or before July 31, 1995 have
not been adjusted to reflect this change.
(4)The Funds have followed the Statement of Position (SOP) 93-2: Determination, Disclosure and Financial Statement Presentation of
Income, Capital Gain, and Return of Capital Distribution 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.
(5)Prior to February 1, 1996, the Arizona Fund, Colorado Fund, Michigan Fund, Minnesota Fund and Texas Fund each made distribution
fee payments pursuant to a Distribution Plan.
</FN>
</TABLE>
<PAGE>
THE FUNDS' INVESTMENT OBJECTIVES
- ------------------------------------------------------------------------------
The investment objective of each Fund is set forth below. Each Fund currently
seeks to meet its investment objective by investing its assets in a separate
corresponding open-end management investment company (a "Portfolio"). Each
Portfolio invests primarily in municipal obligations (as 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.
Each Portfolio has the same investment objective as its corresponding Fund.
EV TRADITIONAL ARIZONA MUNICIPALS FUND (the "Arizona Fund") seeks to provide
current income exempt from regular federal income tax and Arizona State personal
income taxes. The Arizona Fund seeks to meet its objective by investing its
assets in the Arizona Municipals Portfolio (the "Arizona Portfolio").
EV TRADITIONAL COLORADO MUNICIPALS FUND (the "Colorado Fund") seeks to provide
current income exempt from regular federal income tax and Colorado State
personal income taxes. The Colorado Fund seeks to meet its objective by
investing its assets in the Colorado Municipals Portfolio (the "Colorado
Portfolio").
EV TRADITIONAL CONNECTICUT MUNICIPALS FUND (the "Connecticut Fund") seeks to
provide current income exempt from regular federal income tax and Connecticut
State personal income taxes. The Connecticut Fund seeks to meet its objective by
investing its assets in the Connecticut Municipals Portfolio (the "Connecticut
Portfolio").
EV TRADITIONAL MICHIGAN MUNICIPALS FUND (the "Michigan Fund") seeks to provide
current income exempt from regular federal income tax and Michigan State and
City income and single business taxes in the form of an investment exempt from
Michigan intangibles tax. The Michigan Fund seeks to meet its objective by
investing its assets in the Michigan Municipals Portfolio (the "Michigan
Portfolio").
EV TRADITIONAL MINNESOTA MUNICIPALS FUND (the "Minnesota Fund") seeks to provide
current income exempt from regular federal income tax and regular Minnesota
State personal income taxes. The Minnesota Fund seeks to meet its objective by
investing its assets in the Minnesota Municipals Portfolio (the "Minnesota
Portfolio").
EV TRADITIONAL NEW JERSEY MUNICIPALS FUND (the "New Jersey Fund") seeks to
provide current income exempt from regular federal income tax and New Jersey
State personal income taxes. The New Jersey Fund seeks to meet its objective by
investing its assets in the New Jersey Municipals Portfolio (the "New Jersey
Portfolio").
EV TRADITIONAL PENNSYLVANIA MUNICIPALS FUND (the "Pennsylvania Fund") seeks to
provide current income exempt from regular federal income tax and Pennsylvania
State and local taxes in the form of an investment exempt from Pennsylvania
personal property taxes. The Pennsylvania Fund seeks to meet its objective by
investing its assets in the Pennsylvania Municipals Portfolio (the "Pennsylvania
Portfolio").
EV TRADITIONAL TEXAS MUNICIPALS FUND (the "Texas Fund") seeks to provide current
income exempt from regular federal income taxes. The Texas Fund seeks to meet
its objective by investing its assets in the Texas Municipals Portfolio (the
"Texas Portfolio"). The State of Texas does not impose a State income tax on
individuals.
INVESTMENT POLICIES AND RISKS
- ------------------------------------------------------------------------------
EACH 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 NET ASSETS DURING PERIODS OF NORMAL MARKET
CONDITIONS) IN MUNICIPAL OBLIGATIONS, THE INTEREST ON WHICH IS EXEMPT FROM
REGULAR FEDERAL INCOME TAX AND FROM THE STATE TAXES WHICH, IN ACCORDANCE WITH
THE FUND'S INVESTMENT OBJECTIVE, THE FUND SEEKS TO AVOID. The foregoing policy
is a fundamental policy of each Fund and its corresponding Portfolio, which may
not be changed unless authorized by a vote of the Fund's shareholders or that
Portfolio's investors, as the case may be. The Minnesota Portfolio intends to
invest its assets so as to comply with the requirement that, in order for exempt
interest dividends that are derived from interest income from specified
Minnesota sources to be exempt from regular Minnesota State personal income
taxes, 95% or more of the exempt interest dividends that are paid to all
shareholders by the Minnesota Fund must be derived from such specified Minnesota
sources.
At least 80% of the net assets of the New Jersey Portfolio, at least 75% of the
net assets of the Colorado Portfolio, Connecticut Portfolio and Texas Portfolio,
and at least 70% of the net assets of the Arizona Portfolio, Michigan Portfolio,
Minnesota Portfolio and Pennsylvania 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 Fitch Investors
Service, Inc. ("Fitch")) or, if unrated, determined by the Investment Adviser to
be of at least investment grade quality. The balance of each Portfolio's net
assets may be invested 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 Baa or BBB are commonly
known as "junk bonds". A 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. Bond, tax and revenue anticipation notes are
short-term obligations that will be retired with the proceeds of an anticipated
bond issue, tax revenue or facility revenue, respectively. Under normal market
conditions, a Portfolio will invest at least 65% (in the case of the Minnesota
Portfolio, generally 95% or more) of its total assets in obligations issued by
its respective State or its political subdivisions.
Interest income from certain types of municipal obligations may be subject to
the federal alternative minimum tax (the "AMT") for individual investors. As at
July 31, 1996, the Portfolios had invested in such obligations as follows (as a
percentage of net assets): Arizona Portfolio (8.0%); Colorado Portfolio (22.5%);
Connecticut Portfolio (17.2%); Michigan Portfolio (6.3%); Minnesota Portfolio
(15.6%); New Jersey Portfolio (21.2%); Pennsylvania Portfolio (20.9%); and Texas
Portfolio (30.2%). Distributions to corporate investors of certain interest
income may also be subject to the AMT. For corporate shareholders of the
Minnesota Fund, exempt interest dividends attributable to interest on all
municipal obligations (whenever issued) eligible for exemption from regular
Minnesota State personal income taxes are included in taxable income and in
alternative minimum taxable income for purposes of determining the Minnesota
franchise tax imposed on corporations subject to Minnesota taxation. The Funds
may not be suitable for investors subject to the AMT.
CONCENTRATION. Each Portfolio will concentrate its investments in municipal
obligations issued by its respective State and that State's political
subdivisions. Each Portfolio is, therefore, more susceptible to factors
adversely affecting issuers in one State than mutual funds which do not
concentrate in a specific State. Municipal obligations of issuers in a single
State may be adversely affected by economic developments (including insolvency
of an issuer) and by legislation and other governmental activities in that
State. Municipal obligations that rely on an annual appropriation of funds by a
State's legislature for payment are also subject to the risk that the
legislature will not appropriate the necessary amounts or take other action
needed to permit the issuer of such obligations to make required payments. To
the extent that a Portfolio's assets are concentrated in municipal obligations
of issuers of a single State, that Portfolio may be subject to an increased risk
of loss. Each Portfolio may also invest in obligations issued by the governments
of Puerto Rico, the U.S. Virgin Islands and Guam. See the Appendix to this
Prospectus for a description of some of the economic and other factors relating
to the States and Puerto Rico.
In addition, each Portfolio may invest 25% or more of its total assets 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 a Portfolio more susceptible to adverse economic, political, or
regulatory occurrences affecting a particular category of issuer. For example,
health care-related issuers are susceptible to medicaid reimbursement policies,
and national and State health care legislation. As a Portfolio's concentration
increases, so does the potential for fluctuation in the value of the
corresponding Fund's shares.
NON-DIVERSIFIED STATUS. As "non-diversified" investment companies, each
Portfolio may invest, with respect to 50% of its total assets, more than 5% (but
not more than 25%) of its total assets in the securities of any issuer. A
Portfolio is likely to invest a greater percentage of its assets in the
securities of a single issuer than would a diversified fund. Therefore, a
Portfolio is more susceptible to any single adverse economic or political
occurrence or development affecting issuers of the relevant State's municipal
obligations.
OTHER INVESTMENT PRACTICES
Each 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, each Portfolio
may also temporarily borrow up to 5% of the value of its total assets to satisfy
redemption requests or settle securities transactions.
WHEN-ISSUED SECURITIES. Each 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 a Portfolio agreed to pay for them. Each Portfolio may also
purchase instruments that give the Portfolio the option to purchase a municipal
obligation when and if issued.
INVERSE FLOATERS. Each 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 a 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. Each Portfolio may purchase and sell various 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 municipal obligations) 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 a Portfolio's initial investment
in these contracts. A 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 a Portfolio. Distributions by a Fund of any gains
realized on its corresponding Portfolio's transactions in futures and options on
futures will be taxable.
INSURED OBLIGATIONS. Each 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 a 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 a 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, each 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. The lowest investment grade, lower rated and comparable unrated
municipal obligations in which a 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 a 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.
Each 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, a Portfolio may incur additional expense seeking recovery
of its investment. Municipal obligations held by a 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. A 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 a 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 a Fund will change in response to fluctuations
in prevailing interest rates and changes in the value of the securities held by
its corresponding Portfolio. When interest rates decline, the value of
securities held by a 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 a 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 a 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 a 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 issued within a State
(including issues which are privately placed with a Portfolio) is less liquid
than that for taxable debt obligations or other more widely traded municipal
obligations. No Portfolio will 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 a 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, a 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 in securities providing the same investment return
as the securities redeemed.
Some of the securities in which a 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. Each 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 each Fund is required to distribute its share of the Portfolio's income for
each taxable year. Thus, a Portfolio may have to sell other investments to
obtain cash needed to make income distributions.
Each 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.
EACH 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 EACH 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 A FUND'S SHAREHOLDERS OR THE INVESTORS IN
THE CORRESPONDING PORTFOLIO, AS THE CASE MAY BE. IF ANY CHANGES WERE MADE IN A
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 FUNDS AND THE PORTFOLIOS
- ------------------------------------------------------------------------------
EACH FUND IS A NON-DIVERSIFIED SERIES OF EATON VANCE MUNICIPALS 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 Funds). Each share represents an equal
proportionate beneficial interest in a Fund. When issued and outstanding, each
Fund's 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 a Fund, shareholders of that Fund are entitled
to share pro rata in the net assets available for distribution to shareholders.
EACH 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
Portfolios, as well as the Trust, intend to comply with all applicable federal
and state securities laws. Each Portfolio's Declaration of Trust provides that
its corresponding Fund and other entities permitted to invest in that 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 a 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 Funds nor their shareholders will be
adversely affected by reason of the Funds investing in the Portfolios.
The Trustees of the Trust have considered the advantages and disadvantages of
investing the assets of each Fund in its corresponding 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
Portfolios, affords the potential for economies of scale for each Fund (at least
when the assets of its corresponding Portfolio exceed $500 million) and may over
time result in lower expenses for a Fund.
In addition to selling an interest to its corresponding Fund, a Portfolio may
sell interests to other affiliated and non-affiliated mutual funds or
institutional investors. Such investors will invest in a Portfolio on the same
terms and conditions and will pay a proportionate share of the Portfolio's
expenses. However, the other investors investing in a Portfolio are not required
to sell their shares at the same public offering price as the corresponding Fund
due to variations in sales commissions and other operating expenses. Therefore,
investors in a Fund should be aware that these differences may result in
differences in returns experienced by investors in the various funds that invest
in its corresponding 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 a Portfolio may be obtained by contacting the Principal Underwriter,
24 Federal Street, Boston, MA 02110, (617) 482-8260.
Whenever a Fund as an investor in a 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. A 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 a 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 corresponding 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, a 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 a
Fund. Notwithstanding the above, there are other means for meeting shareholder
redemption requests, such as borrowing.
A Fund may withdraw (completely redeem) all its assets from its corresponding
Portfolio at any time if the Board of Trustees of the Trust determines that it
is in the best interest of that Fund to do so. In the event a Fund withdraws all
of its assets from its corresponding Portfolio, or the Board of Trustees of the
Trust determines that the investment objective of such Portfolio is no longer
consistent with the investment objective of the Fund, such Trustees would
consider what action might be taken, including investing the assets of such Fund
in another pooled investment entity or retaining an investment adviser to manage
the Fund's assets in accordance with its investment objective. A Fund's
investment performance may be affected by a withdrawal of all its assets from
its corresponding Portfolio.
Although each Fund offers only its own shares of beneficial interest, it is
possible that a Fund might become liable for a misstatement or omission in this
Prospectus regarding another Fund because the Funds use this combined
Prospectus. The Trustees of the Trust have considered this factor in approving
the use of a combined Prospectus.
MANAGEMENT OF THE FUNDS AND THE PORTFOLIOS
- ------------------------------------------------------------------------------
EACH 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 each Portfolio,
BMR manages each Portfolio's investments and affairs. BMR also furnishes for the
use of each Portfolio office space and all necessary office facilities,
equipment and personnel for servicing the investments of the Portfolios. Under
its investment advisory agreement with a 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 $20 million 0.100% 1.00%
2 $20 million but less than $40 million 0.200% 2.00%
3 $40 million but less than $500 million 0.300% 3.00%
4 $500 million but less than $1 billion 0.275% 2.75%
5 $1 billion but less than $1.5 billion 0.250% 2.50%
6 $1.5 billion but less than $2 billion 0.225% 2.25%
7 $2 billion but less than $3 billion 0.200% 2.00%
8 $3 billion and over 0.175% 1.75%
</TABLE>
For the fiscal year ended July 31, 1996, each Portfolio paid advisory fees
equivalent to the percentage of average daily net assets stated below.
<TABLE>
<CAPTION>
NET ASSETS AS OF
PORTFOLIO JULY 31, 1996 ADVISORY FEE
------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Arizona $129,861,547 0.41%
Colorado 45,415,574 0.26%(1)
Connecticut 187,616,885 0.43%
Michigan 173,464,608 0.43%
Minnesota 76,090,073 0.36%
New Jersey 386,244,341 0.47%
Pennsylvania 448,181,861 0.47%
Texas 24,366,836 0.10%(2)
<FN>
(1) Absent a fee reduction, the Colorado Portfolio would have paid BMR advisory
fees equivalent to 0.28% of average daily net assets.
(2) Absent a fee reduction, the Texas Portfolio would have paid BMR advisory
fees equivalent to 0.20% of average daily net assets.
</TABLE>
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.
Nicole Anderes has acted as the portfolio manager of the Connecticut Portfolio
since January, 1994 and the Texas Portfolio since December 1, 1995. She joined
Eaton Vance and BMR as a Vice President in January 1994. Prior to joining Eaton
Vance, she was a Vice President and portfolio manager at Lazard Freres Asset
Management (1992-1994) and a Vice President and Manager -- Municipal Research at
Roosevelt & Cross (1987-1992).
Timothy T. Browse has acted as the portfolio manager of the Michigan Portfolio
since it commenced operations and the Pennsylvania Portfolio since December 1,
1995. He has been a Vice President of Eaton Vance and of BMR since 1993 and an
employee of Eaton Vance since 1992. Prior to joining Eaton Vance, he was a
municipal bond trader at Fidelity Management & Research Company (1987-1992).
Cynthia J. Clemson has acted as the portfolio manager of the Arizona Portfolio
since January 1, 1994 and the Colorado Portfolio since November 1, 1996. Ms.
Clemson has been a Vice President of Eaton Vance and BMR since 1993 and an
employee of Eaton Vance since 1985.
Robert B. MacIntosh has acted as the portfolio manager of the New Jersey
Portfolio since it commenced operations and the Minnesota Portfolio since
November 1, 1996. Mr. MacIntosh has been a Vice President of Eaton Vance since
1991 and of BMR since 1992.
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 Portfolios and at reasonably competitive spreads. Subject to the foregoing,
BMR may consider sales of shares of the Funds or of other investment companies
sponsored by BMR or Eaton Vance as a factor in the selection of firms to execute
portfolio transactions. Each Fund, each 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 a Portfolio) for their own accounts, subject to certain
pre-clearance, 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 Funds. The Trust has not retained the services of an investment adviser
since the Trust seeks to achieve the investment objective of each Fund by
investing its assets in the corresponding Portfolio. As Administrator, Eaton
Vance provides the Funds 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 Portfolios and the Funds, 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 PLANS
- -------------------------------------------------------------------------------
In addition to advisory fees and other expenses, each Fund pays service fees
pursuant to a Service Plan (the "Plan") designed to meet the service fee
requirements of the sales charge rule of the National Association of Securities
Dealers, Inc. EACH FUND'S 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 FUND'S AVERAGE DAILY NET
ASSETS FOR ANY FISCAL YEAR. The Trustees of the Trust have initially implemented
each Fund's Plan by authorizing the Fund to make quarterly service fee payments
to the Principal Underwriter and Authorized Firms in amounts not expected to
exceed .20% of the Fund's average daily net assets for any fiscal year which is
based on the value of Fund shares sold by such persons and remaining outstanding
for at least twelve months. However, each Fund's Plan authorizes the Trustees of
the Trust on behalf of the Fund to increase payments to the Principal
Underwriter, Authorized Firms and other persons from time to time without
further action by shareholders of the Fund, provided that the aggregate amount
of payments made to such persons under the Plan in any fiscal year of the Fund
does not exceed .25% of the Fund's average daily net assets. For the fiscal year
ended July 31, 1996, each Fund paid or accrued service fees (as a percentage of
average daily net assets) as follows: Arizona Fund (0.18%); Colorado Fund
(0.20%); Connecticut Fund (0.06%); Michigan Fund (0.15%); Minnesota Fund
(0.15%); New Jersey Fund (0.05%); Pennsylvania Fund (0.05%); and Texas Fund
(0.17%). A portion of the service fee payments made by the Arizona, Colorado,
Michigan, Minnesota and Texas Funds was paid pursuant to a prior version of the
Plan. The Plan is described further in the Statement of Additional Information.
VALUING FUND SHARES
- ------------------------------------------------------------------------------
EACH 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). Each 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 is computed by dividing the value of a Fund's total assets, less
its liabilities, by the number of shares outstanding. Because each Fund invests
its assets in an interest in its corresponding 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 Fund share and the public offering price
based thereon. It is the Authorized Firms' responsibility to transmit orders
promptly to the Principal Underwriter.
Each 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 a
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 Portfolios' 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 A FUND MAY BE PURCHASED FOR CASH OR MAY BE ACQUIRED IN EXCHANGE FOR
SECURITIES. Investors may purchase shares of a Fund 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. A Fund receives the net
asset value, while the sales charge is divided between the Authorized Firm and
the Principal Underwriter. An Authorized Firm may charge its customers a fee in
connection with transactions executed by that Firm. A Fund may suspend the
offering of shares at any time and may refuse an order for the purchase of
shares. Shares of each Fund are offered for sale only in States where such
shares may be legally sold.
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 or Right of Accumulation are available
from Authorized Firms or the Principal Underwriter.
The current sales charges and dealer commissions are:
<TABLE>
<CAPTION>
SALES CHARGE SALES CHARGE DEALER COMMISSION
AS PERCENTAGE OF AS PERCENTAGE OF AS PERCENTAGE OF
AMOUNT OF PURCHASE OFFERING PRICE AMOUNT INVESTED OFFERING PRICE
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000 3.75% 3.90% 4.00%
$50,000 but less than $100,000 2.75 2.83 3.00
$100,000 but less than $250,000 2.25 2.30 2.50
$250,000 but less than $500,000 1.75 1.78 2.00
$500,000 but less than $1,000,000 1.25 1.27 1.50
$1,000,000 or more 0.00* 0.00* 0.50
<FN>
*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.
</TABLE>
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 a 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 Funds' 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".
Shares of a Fund may be sold at net asset value to current and retired Directors
and Trustees of Eaton Vance funds, including the Portfolios; 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; and 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.
Shares may also be issued at net asset value (1) in connection with the merger
of an investment company with a 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."
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
then 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 [State name] Municipals Fund
IN THE CASE OF PHYSICAL DELIVERY:
Investors Bank & Trust Company
Attention: EV Traditional [State name] Municipals Fund
Physical Securities Processing Settlement Area
89 South Street
Boston, MA 02111
Investors who are contemplating an exchange of securities for shares of a 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. If the investor, 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 such shares
is based upon the net asset value calculated after the Principal Underwriter, as
the Funds' 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, a Fund will make payment in cash for the net asset value of the
shares as of the date determined above, reduced by the amount of any federal
income tax required to be withheld. Although each 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 a Fund, either totally or partially, by a distribution in kind of
readily marketable securities withdrawn by that Fund from its corresponding
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 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, each Fund reserves the right
to redeem 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 a Fund if the cause
of the low account balance was a reduction in the net asset value of Fund
shares.
If 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. Certain shares of the Arizona Fund, Colorado Fund, Michigan Fund,
Minnesota Fund and Texas Fund purchased prior to February 1, 1996 and redeemed
within the first year of their purchase (except shares acquired through the
reinvestment of distributions) generally will be subject to a CDSC equal to 1%
of the net asset value of redeemed shares. The CDSC will be imposed on an amount
equal to the lesser of the current market value or the original purchase price
of the 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 will be paid to the Principal Underwriter.
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. In addition, the CDSC applicable to shares of
the Arizona Fund, Colorado Fund, Michigan Fund, Minnesota Fund and Texas Fund
purchased prior to February 1, 1996 will be waived for shares redeemed (1)
pursuant to a Withdrawal Plan (see "Eaton Vance Shareholder Services"), (2) as
part of a distribution from a retirement plan qualified under Section 401,
403(b) or 457 of the Code, or (3) as part of a minimum required distribution
from other tax-sheltered retirement plans.
REPORTS TO SHAREHOLDERS
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EACH FUND WILL ISSUE TO ITS SHAREHOLDERS SEMI-ANNUAL AND ANNUAL REPORTS
CONTAINING FINANCIAL STATEMENTS. Financial statements included in annual reports
are audited by the Funds' independent certified public accountants. Shortly
after the end of each calendar year, each Fund will furnish its shareholders
with information necessary for preparing federal and State 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
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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 APPLICABLE
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.
A Fund will not issue share certificates except upon request.
At least quarterly, shareholders will receive a statement showing complete
details of any transaction and the current share balance in the account. THE
LIFETIME INVESTING ACCOUNT ALSO PERMITS A SHAREHOLDER TO MAKE ADDITIONAL
INVESTMENTS IN SHARES BY SENDING A CHECK FOR $50 OR MORE to the Transfer Agent.
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 Funds'
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.
Income Option -- Dividends will be paid in cash, and capital gains will be
reinvested in additional shares.
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 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 a 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 a 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
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Shares of a Fund currently may be exchanged for shares 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 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). Such exchange offers are available only
in States where shares of the fund being acquired may be legally sold.
Each exchange must involve shares which have a net asset value of at least
$1,000. 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 Funds do 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.
Shares of a 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 other funds are available from
Authorized Firms or 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 advised or administered by Eaton Vance 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 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 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 Funds, 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 FUNDS OFFER 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 applicable Fund as an expense to all
shareholders.
INVEST-BY-MAIL -- FOR PERIODIC SHARE ACCUMULATION: Once the $1,000 minimum
investment has been made, checks of $50 or more payable to the order of the Fund
being purchased 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 dividends are reinvested. The name of the shareholder, the
Fund and the account number should accompany each investment.
BANK AUTOMATED INVESTING -- FOR REGULAR SHARE ACCUMULATION: Cash investments of
$50 or more may be made automatically each month or quarter from the
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 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 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 shares would be disadvantageous
because of the sales charge included in such purchases.
REINVESTMENT PRIVILEGE: A shareholder who has redeemed 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 a 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. 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 being 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 a Fund. If a shareholder reinvests redemption proceeds within the
60-day period, the shareholder's account will be credited with the amount of any
CDSC paid on such redeemed shares. To the extent that any shares of a 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 the 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 A FUND BY ITS
CORRESPONDING PORTFOLIO (LESS THE FUND'S DIRECT AND ALLOCATED 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 on the last day of each month or the
next business day thereafter. Each Fund anticipates that for tax purposes the
entire distribution, whether paid in cash or reinvested in 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 of a Fund 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. A Fund's net realized capital gains, if any, consist
of the net realized capital gains allocated to the Fund by its corresponding
Portfolio for tax purposes, after taking into account any available capital loss
carryovers; a 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 a Fund or of
another fund pursuant to a 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.
Each Fund intends to qualify as a regulated investment company under the Code,
and to satisfy all requirements necessary to be relieved of federal taxes on
income and gains it distributes to shareholders. In satisfying these
requirements, each Fund will treat itself as owning its proportionate share of
each of its corresponding 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, each 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 partnerships under the Code, the Portfolios
also do 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 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 a Fund. Tax-exempt
distributions received from a 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 a Fund is not deductible to the extent it is deemed related to
the Fund's distributions of tax-exempt interest. 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 a 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.
SEE THE APPENDIX TO THIS PROSPECTUS FOR INFORMATION CONCERNING STATE TAXES.
Shareholders should consult with their tax advisers concerning the applicability
of State, local and other taxes to an investment in a Fund.
PERFORMANCE INFORMATION
- ------------------------------------------------------------------------------
FROM TIME TO TIME, EACH FUND MAY ADVERTISE ITS YIELD AND/OR AVERAGE ANNUAL TOTAL
RETURN. Each Fund's current yield is calculated by dividing the net investment
income per share earned during a recent 30-day period by the maximum offering
price per share of the Fund 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. Each 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 includes the maximum
sales charge) for specified periods, assuming reinvestment of all distributions.
Each 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.
Each 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 a 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 a Fund will fluctuate over
time, and any presentation of the Fund's 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 a Fund or its corresponding Portfolio are allocated to Eaton Vance,
the Fund's performance will be higher.
<PAGE>
APPENDIX
STATE SPECIFIC INFORMATION
Because each Portfolio will normally invest at least 65% of its assets (and, in
the case of the Minnesota Portfolio, generally 95% or more) in the obligations
of issuers in its corresponding State, it is susceptible to factors affecting
that State. Each Portfolio may also invest up to 5% of its net assets in
obligations issued by the governments of Guam and the U.S. Virgin Islands and up
to 35% of its assets in obligations issued by the government of Puerto Rico. The
Minnesota Portfolio has no intention of investing in such obligations. The
Connecticut Portfolio may invest in municipal obligations of Puerto Rico, the
U.S. Virgin Islands and Guam, the interest on which cannot be taxed by any State
under federal law. Set forth below is certain economic and tax information
concerning the States in which the Portfolios invest and Puerto Rico.
The bond ratings provided below are current as of the date of this Prospectus
and are based on economic conditions which may not continue; moreover, there can
be no assurance that particular bond issues may not be adversely affected by
changes in economic, political or other conditions. Unless stated otherwise, the
ratings indicated are for obligations of the State. A State's political
subdivisions may have different ratings which are unrelated to the ratings
assigned to State obligations.
ARIZONA. Arizona's economy is primarily based on the service, high-tech
manufacturing, construction and tourism industries, as well as the military. The
State experienced rapid economic and population growth in the 1980s, which has
slowed somewhat in the 1990s. The problems associated with such growth (air
quality, transportation and public infrastructure) continue to be addressed by
the State legislature. The State's unemployment rate in June 1996 was 5.3%,
below the national rate of 5.4%.
The State's ability to raise revenues is limited by Constitutional and
legislative restrictions on property tax increases. There is also a limit on
annual spending. The State does not issue general obligation bonds, but relies
on pay-as-you-go capital outlays, revenue bonds and certificates of
participation to finance projects. Each of these projects is individually rated
based on its specific creditworthiness.
ARIZONA TAXES. Based upon the advice of Arizona tax counsel, the management of
the Fund believes that under Arizona law, dividends paid by the Fund will be
exempt from Arizona income tax imposed on individuals, corporations and estates
and trusts that are subject to Arizona taxation to the extent such dividends are
excluded from gross income for federal income tax purposes and are derived from
interest payments on Arizona obligations. In addition, dividends paid by the
Fund will be exempt from Arizona income tax imposed on such persons, though
included in gross income for federal income tax purposes, to the extent such
dividends are derived from interest payments on direct obligations of the United
States. Other distributions from the Fund, including distributions derived from
net short-term and long-term capital gains, are generally not exempt from
Arizona income tax.
Interest or indebtedness and other related expenses which are incurred or
continued by a shareholder to purchase or carry shares of the Fund generally
will not be deductible for Arizona income tax purposes.
COLORADO. Colorado's economy began to improve in the late 1980s, recovering from
a recession largely caused by contractions in the energy, high technology and
construction industries. The recovery has been fueled, in part, by large public
construction projects, net in-migration, a healthy tourist economy, and
increases in the wholesale and retail trade sector and the general services
sector. Momentum is sufficient that the Office of State Planning and Budgeting
has pronounced that Colorado's "slower growth pattern mimics that of the United
States, although it is not as severe as the nation's", even though most of the
large public works projects are completed and the boom in net migration begins
to ease. Employment in the service and trade industries represents approximately
54.5% of the State's nonagricultural wage and salary jobs, and government
employment represents approximately 15.9%. Manufacturing represents only 10.8%
and, while total jobs in the sector is increasing, manufacturing is slowly
falling as a percentage of total employment, due in part to a concentration in
defense-related production. Colorado's unemployment rate was 4.1% in June 1996,
below the national rate of 5.4%. Colorado added 50,000 jobs in the twelve months
ended June 1996. There is no State general obligation debt outstanding.
COLORADO TAXES. In the opinion of Kutak Rock, special Colorado tax counsel to
the Fund, provided that the Fund qualifies as a regulated investment company
under the Code, and the Portfolio is treated as a partnership for federal income
tax purposes, individuals, trusts, estates, and corporations who are holders of
the Fund and who are subject to the Colorado income tax will not be subject to
Colorado tax on Fund dividends to the extent that: (a) such dividends qualify as
exempt-interest dividends of a regulated investment company under Section
852(b)(5) of the Code and are derived from interest received by the Fund on
obligations of Colorado or any of its political subdivisions issued on or after
May 1, 1980 or (b) obligations of the United States or its possessions to the
extent included in federal taxable income. To the extent that Fund distributions
are attributable to sources not described in the preceding sentences, such as
long or short-term capital gains, such distributions will not be exempt from
Colorado income tax. There are no municipal income taxes in Colorado. As
intangibles, shares in the Fund will be exempt from Colorado property taxes.
CONNECTICUT. Historically, Connecticut's economic structure has been
concentrated in manufacturing, including a heavy component of defense-related
industries, which increases the State's vulnerability to economic cycles and to
declines in federal government defense spending. More recently, Connecticut's
level of manufacturing activity has declined, but this has been partially offset
by extensive urban development, a large insurance sector, relocations of
corporate headquarters to Connecticut (specifically to Fairfield County), and
the extension of other service sectors. As of June 1996, the unemployment rate
in Connecticut on a seasonally adjusted basis was 4.8%, as compared to a rate of
5.4% nationwide.
General obligation bonds issued by Connecticut municipalities are payable
primarily only from ad valorem taxes on property subject to taxation by the
municipality. The State has about $6 billion of general obligation bonds
outstanding, of which more than half have been issued for general State
purposes. The remaining general obligation bonds were issued for highway
construction, mass transit, and rental housing. Debt indicators have been rising
and are high at $1,850 of net direct debt per capita. Certain Connecticut
municipalities have experienced severe fiscal difficulties and have reported
operating and accumulated deficits in recent years. Regional economic
difficulties, reductions in revenues, and increased expenses could lead to
further fiscal problems for the State and its political subdivisions,
authorities, and agencies. This could result in declines in the value of their
outstanding obligations, reductions in their ability to pay interest and
principal thereon, and increases in their future borrowing costs.
General obligations of the State of Connecticut are rated AA-, Aa and AA by S&P,
Moody's and Fitch, respectively.
CONNECTICUT TAXES. Based upon the advice of tax counsel, the management of the
Connecticut Fund believes that under Connecticut law, shareholders of the
Connecticut Fund will not be subject to the Connecticut personal income tax on
the Connecticut taxable income of individuals, trusts, and estates in the case
of distributions received from the Connecticut Fund to the extent that such
distributions qualify as exempt-interest dividends for federal income tax
purposes and are derived from interest on tax-exempt obligations issued by or on
behalf of the State of Connecticut and its political subdivisions or the
authorities, instrumentalities, or districts of any of them, or on tax-exempt
obligations the interest on which Connecticut is prohibited from taxing by
federal law, e.g., tax-exempt obligations that are issued by the governments of
Puerto Rico, the U.S. Virgin Islands and Guam.
Other distributions from the Connecticut Fund, including dividends attributable
to obligations of issuers in other states and all long-term and short-term
capital gains, will not be exempt from the Connecticut personal income tax,
except that capital gain dividends derived from obligations issued by or on
behalf of the State of Connecticut or its political subdivisions may not be
subject to such tax. Distributions from the Connecticut Fund that constitute
items of tax preference for purposes of the federal alternative minimum tax will
not be subject to the net Connecticut minimum tax applicable to taxpayers
subject to the Connecticut personal income tax and required to pay the federal
alternative minimum tax, to the extent qualifying as exempt-interest dividends
derived from obligations issued by or on behalf of the State of Connecticut and
its political subdivisions or the authorities, instrumentalities, or districts
of any of them, or from obligations the interest on which Connecticut is
prohibited from taxing by federal law, but other distributions from the Fund
could cause or increase liability for the net Connecticut minimum tax. The
Connecticut Fund will report annually to its shareholders the percentage and
source, on a state-by-state basis, of interest income received by the
Connecticut Fund on municipal bonds during the preceding year.
Distributions from investment income and capital gains, including
exempt-interest dividends derived from interest that is exempt from Connecticut
personal income tax and federal income tax, will be subject to the Connecticut
Corporation Business Tax if received by a corporation subject to such tax,
except for any portion therof that might qualify for the dividends-received
deduction provided under that tax, and all such distributions may be subject to
state and local taxes in states other than Connecticut.
MICHIGAN. Michigan has long had a large representation in and is dominated by
the automobile industry and related industries and tends to be more vulnerable
to economic cycles than other states and the nation as a whole. For June 1996,
Michigan's unemployment rate was 4.5%, as compared to the national rate of 5.4%.
In March, 1994, Michigan voters approved changes to the tax system resulting in,
among other things, an increase in the sales tax rate, a reduction in the income
tax rate and the creation of a statewide property tax.
Michigan's general obligation debt is rated A1, AA and AA, by Moody's, S&P and
Fitch, respectively.
MICHIGAN TAXES. The Michigan Fund has received an opinion from Butzel Long,
special Michigan tax counsel to the Michigan Fund, to the effect that
shareholders of the Michigan Fund who are subject to the Michigan state income
tax, municipal income tax or single business tax will not be subject to such
taxes on their Michigan Fund dividends to the extent that such distributions are
exempt-interest dividends for federal income tax purposes and are attributable
to interest on obligations held by the Michigan Portfolio and allocated to the
Michigan Fund which is exempt from regular federal income tax and is exempt from
Michigan State and City income taxes, Michigan single business tax and in the
form of an investment exempt from the Michigan intangibles tax ("Michigan
tax-exempt obligations"). Other distributions with respect to shares of the
Michigan Fund including, but not limited to, long or short-term capital gains,
will be subject to the Michigan income tax or single business tax and may be
subject to the city income taxes imposed by certain Michigan cities. The opinion
also provides that shares of the Michigan Fund will be exempt from the Michigan
intangibles tax to the extent the Michigan Portfolio's assets consist of
Michigan tax-exempt obligations and any other securities or obligations that are
exempt from the Michigan intangibles tax. The Michigan intangibles tax is being
phased out, thus, even if it applies to a portion of income from the Fund (for
instance, due to non-Michigan investments), it is now reduced and will be
eliminated by 1998.
MINNESOTA. Minnesota relies heavily on a progressive individual income tax and a
retail sales tax for revenue, which results in a fiscal system unusually
sensitive to economic conditions. Economic and State fiscal conditions have
improved. As of August 1996, the State's adjusted unemployment rate was 3.8%
compared with a national rate of 5.1%. Unaudited information indicates that the
State ended fiscal year 1996 with a General Fund balance of $1.057 billion.
The State's general obligation bonds are rated Aaa, AA+ and AAA, by Moody's, S&P
and Fitch, respectively. In March 1993, S&P revised the outlook on Minnesota
debt from Negative to Stable.
MINNESOTA TAXES. In the opinion of Faegre & Benson, special Minnesota tax
counsel to the Fund, provided that the Fund qualifies as a "regulated investment
company" under the Code, and subject to the discussion in the paragraph below,
exempt-interest dividends paid by the Fund will be exempt from the regular
Minnesota personal income tax imposed on individuals, estates and trusts that
are subject to Minnesota taxation to the extent that such dividends qualify as
exempt-interest dividends of a regulated investment company under section
852(b)(5) of the Internal Revenue Code which are derived from interest income on
tax-exempt obligations of Minnesota, or its political or governmental
subdivisions, municipalities, governmental agencies or instrumentalities
("Minnesota Sources"); provided, however, such exemption from the regular
Minnesota personal income tax is available only if the portion of the
exempt-interest dividends from such Minnesota Sources that is paid to all
shareholders represents 95% or more of the exempt-interest dividends that are
paid by the Fund. For this purpose, provided that the Portfolio is taxed
federally as a partnership and not as a corporation, the Fund will be treated as
owning its proportionate share of the assets of the Portfolio and the income
derived from such assets. The Fund and the Portfolio intend to invest their
respective assets so that each will meet the 95% test. However, if the 95% test
is not met, all exempt-interest dividends that are paid by the Fund will be
subject to the regular Minnesota personal income tax. Even if the 95% test is
met, to the extent that exempt-interest dividends paid by the Fund are not
derived from the Minnesota Sources referred to in the first sentence of this
paragraph, they will be subject to the regular Minnesota personal income tax.
Other distributions of the Fund, including distributions derived from net
short-term and long-term capital gains, are generally not exempt from the
regular Minnesota personal income tax imposed on individuals, estates and
trusts.
Legislation enacted in 1995 provides that it is the intent of the Minnesota
legislature that interest income on obligations of Minnesota governmental units,
including obligations of the Minnesota Sources described above, and
exempt-interest dividends that are derived from interest income on such
obligations, be included in the net income of individuals, estates, and trusts
for Minnesota income tax purposes if it is judicially determined that the
exemption by Minnesota of such interest or such exempt-interest dividends
unlawfully discriminates against interstate commerce because interest income on
obligations of governmental issuers located in other states, or exempt-interest
dividends derived from such obligations, is so included. This provision applies
to taxable years that begin during or after the calendar year in which such
judicial decision becomes final, regardless of the date on which the obligations
were issued, and other remedies apply for previous taxable years. The United
States Supreme Court in 1995 denied certiorari in a case in which an Ohio state
court upheld an exemption for interest income on obligations of Ohio
governmental issuers, even though interest income on obligations of non-Ohio
governmental issuers was subject to tax. The Ohio Supreme Court, in a subsequent
case involving the same taxpayer and the same issue, recently refused to
reconsider the merits of the case on the ground that the previous final state
court judgment barred any claim arising out of the transaction that was the
subject of the previous action. It cannot be predicted whether a similar case
will be brought in Minnesota or elsewhere, or what the outcome of such case
would be.
Minnesota imposes an alternative minimum tax on individuals, estates, and trusts
that is based, in part, on such taxpayers' federal alternative minimum taxable
income. Accordingly, exempt-interest dividends that constitute tax preference
items for purposes of the federal alternative minimum tax, even though they are
derived from the Minnesota Sources described above, will be included in the base
upon which such Minnesota alternative minimum tax is computed. In addition, the
entire portion of exempt-interest dividends that is derived from sources other
than the Minnesota Sources described above also is subject to the Minnesota
alternative minimum tax imposed on individuals, estates and trusts. Furthermore,
should the 95% test that is described above fail to be met, all of the
exempt-interest dividends that are paid by the Fund, including all of those
derived from the Minnesota Sources described above, will be subject to the
Minnesota alternative minimum tax imposed on such shareholders.
Distributions from the Fund will be included in taxable income and in
alternative minimum taxable income, for purposes of determining the Minnesota
franchise tax imposed on corporations subject to Minnesota taxation. Such
distributions may also be taken into account in certain cases in determining the
minimum fee that is imposed on corporations, S corporations, and partnerships.
Interest on indebtedness which is incurred or continued by an individual, a
trust or an estate to purchase or carry shares of the Fund generally will not be
deductible for regular Minnesota personal income tax purposes or Minnesota
alternative minimum tax purposes.
NEW JERSEY. The fiscal year 1996 budget (for the fiscal period ending June 30,
1996) includes total spending of $15.987 billion, or a 3.14% increase over
fiscal 1995. In addition, New Jersey adopted a 10% personal income tax cut
retroactive to January 1, 1995. Furthermore, on June 26, 1995, the New Jersey
Legislature passed an additional 15% reduction that took effect January 1, 1996
for a total personal income tax cut of 30% since January 1, 1994. State
officials estimate the revenue loss resulting from these tax cuts at over $1
billion for fiscal 1996. To accommodate the tax cut, the fiscal 1996 budget
relies on non-recurring revenues and the use of prior years' surplus. Also a
major focus of the spending reductions has been employer contributions to
retiree health care and pension systems, which were cut by over $863 million in
fiscal 1995. There can be no assurance that the tax cuts will not have an
adverse impact on the State's finances and the demand for municipal bonds in the
State.
New Jersey's general obligation debt is rated Aa1, AA+ and AA+ by Moody's, S&P
and Fitch, respectively.
NEW JERSEY TAXES. The New Jersey Fund intends to satisfy New Jersey's statutory
requirements for treatment as a "Qualified Investment Fund." The Fund has
obtained an opinion of its special tax counsel, Wilentz, Goldman & Spitzer,
P.A., that, provided the New Jersey Fund limits its investments to those
described in this Prospectus and otherwise satisfies such statutory
requirements, shareholders of the New Jersey Fund which are individuals, estates
or trusts will not be required to include in their New Jersey gross income
distributions from the New Jersey Fund that are attributable to interest or gain
realized by the New Jersey Fund from obligations the interest on which is exempt
from regular federal income tax and is exempt from New Jersey State personal
income tax or other obligations statutorily free from New Jersey taxation.
However, with regard to corporate shareholders, such counsel is also of the
opinion that distributions from the New Jersey Fund will not be excluded from
net income and shares of the New Jersey Fund will not be excluded from
investment capital in determining New Jersey corporation business (franchise)
and corporation income taxes for corporate shareholders.
PENNSYLVANIA. Pennsylvania has long had a large representation in the steel,
mining and manufacturing industries and adverse conditions in those or other
significant industries within Pennsylvania may from time to time have a
correspondingly adverse effect on specific issuers within Pennsylvania or on
anticipated revenue to the Commonwealth. In recent years Pennsylvania's economy
has become more diversified with major new sources of growth in the service
sector, including trade, medical and the health services, education and
financial institutions. The unadjusted unemployment rate for Pennsylvania in
June 1996 was 5.1% versus the June 1995 level of 5.9%.
The Governor's fiscal year 1997 proposed budget contained tax reductions
totaling $60.2 million and certain cost reduction programs, particularly in the
areas of public health and welfare. Under the 1997 budget, revenues receipts are
expected to increase and approximately $95 million of surplus from 1996 are
expected to be used. The fiscal year 1997 budget projects a $5 million fiscal
year-end unappropriated surplus. All budgetary proposals require legislative
enactment.
Pennsylvania's general obligation debt is rated "AA-" by S&P and Fitch and "A1"
by Moody's.
PENNSYLVANIA TAXES. Based upon the advice of tax counsel, the management of the
Pennsylvania Fund believes that under Pennsylvania law interest derived by the
Pennsylvania Fund from obligations which are statutorily free from taxation in
Pennsylvania ("Exempt Obligations") are not taxable on pass through to
shareholders for purposes of the Pennsylvania personal income tax. The term
"Exempt Obligations" includes (i) those obligations issued by the Commonwealth
of Pennsylvania and its political subdivisions, agencies and instrumentalities,
the interest from which is statutorily free from state taxation in the
Commonwealth of Pennsylvania, and (ii) certain qualifying obligations of U.S.
territories and possessions, or U.S. Government obligations. Distributions
attributable to most other sources, including capital gains, will not be exempt
from Pennsylvania personal income tax.
Corporate shareholders that are subject to the Pennsylvania corporate net income
tax will not be subject to corporate net income tax on distributions of interest
made by the Pennsylvania Fund, provided such distributions are attributable to
Exempt Obligations. Distributions of capital gain attributable to Exempt
Obligations are subject to the Pennsylvania corporate net income tax. An
investment in the Pennsylvania Fund is also exempt from the Pennsylvania Gross
Premiums tax.
Shares of the Pennsylvania Fund which are held by individual shareholders who
are Pennsylvania residents and subject to the Pennsylvania county personal
property tax will be exempt from such tax to the extent that the obligations
held by the Pennsylvania Portfolio consist of Exempt Obligations on the annual
assessment date. Corporations are not subject to Pennsylvania personal property
taxes.
For individual shareholders who are residents of the City of Philadelphia,
distributions of interest derived from Exempt Obligations will not be taxable
for purposes of the Philadelphia School District Investment Net Income Tax
("Philadelphia School District Tax"), provided that the Pennsylvania Portfolio
reports to its investors the percentage of Exempt Obligations held by it for the
year. The Pennsylvania Portfolio will report such percentage to its investors.
TEXAS. Employment in Texas continued to expand during the 1990s. During June
1996, non-farm employment in Texas was 8.3 million. Over the past year, Texas
has gained more than 261,000 jobs, an increase of 3.3%, with most of the growth
occurring in the services and trade sectors of the economy. Unemployment as of
June 1996 was 5.9% versus the national rate of 5.4%.
The State finished the fiscal year ended August 31, 1995 with a $100 million
operating deficit in the General Revenue Fund. The General Revenue Fund
balance was $2.1 billion.
General obligations of Texas are rated AA, AA and AA+ by S&P, Moody's and Fitch,
respectively. Both S&P and Fitch have a stable outlook for the State.
TEXAS TAXES. Texas does not impose a state income tax on individuals. To the
extent that distributions from the Texas Fund are included in a corporate
shareholder's surplus, they will be subject to the Texas franchise tax that is
based on net worth.
PUERTO RICO. The economy of Puerto Rico is dominated by the manufacturing and
service sectors. Although the economy of Puerto Rico expanded significantly from
fiscal 1984 through fiscal 1990, the rate of this expansion slowed during fiscal
years 1991, 1992 and 1993. Growth in the future will depend on several factors,
including the state of the U.S. economy and the relative stability in the price
of oil, the exchange rate of the U.S. dollar and the cost of borrowing. Section
936 (a tax incentive that has encouraged economic growth in Puerto Rico) will be
phased out over a ten year period. At this time, it is uncertain as to the
implication the change will have on the Puerto Rico economy. Although the Puerto
Rico unemployment rate has declined substantially since 1985, the seasonally
adjusted unemployment rate for July 1996 was approximately 13.8%. The North
American Free Trade Agreement (NAFTA), which became effective January 1, 1994,
could lead to the loss of Puerto Rico's lower salaried or labor intensive jobs
to Mexico.
S&P rates Puerto Rico general obligations debt A, while Moody's rates it Baa1;
these ratings have been in place since 1956 and 1976, respectively. S&P assigned
a negative outlook on Puerto Rico's rating on April 26, 1994, which was still in
place as of the date of this Prospectus.
<PAGE>
[LOGO: EATON VANCE]
EV TRADITIONAL
MUNICIPAL
FUNDS
PROSPECTUS
DECEMBER 1, 1996
EV TRADITIONAL ARIZONA MUNICIPALS FUND
EV TRADITIONAL COLORADO MUNICIPALS FUND
EV TRADITIONAL CONNECTICUT MUNICIPALS FUND
EV TRADITIONAL MICHIGAN MUNICIPALS FUND
EV TRADITIONAL MINNESOTA MUNICIPALS FUND
EV TRADITIONAL NEW JERSEY MUNICIPALS FUND
EV TRADITIONAL PENNSYLVANIA MUNICIPALS FUND
EV TRADITIONAL TEXAS MUNICIPALS FUND
EV TRADITIONAL
MUNICIPAL FUNDS
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-TFC12/1P
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
December 1, 1996
<TABLE>
EV MARATHON MUNICIPAL FUNDS
<C> <C>
EV MARATHON ARIZONA MUNICIPALS FUND EV MARATHON MINNESOTA MUNICIPALS FUND
EV MARATHON COLORADO MUNICIPALS FUND EV MARATHON NEW JERSEY MUNICIPALS FUND
EV MARATHON CONNECTICUT MUNICIPALS FUND EV MARATHON PENNSYLVANIA MUNICIPALS FUND
EV MARATHON MICHIGAN MUNICIPALS FUND EV MARATHON TEXAS MUNICIPALS FUND
</TABLE>
24 Federal Street
Boston, Massachusetts 02110
(800) 225-6265
This Statement of Additional Information consists of two parts. Part I
provides general information about the Funds listed above (each a "Fund"), its
corresponding Portfolio and certain other series of Eaton Vance Municipals Trust
(the "Trust"). Each Part II provides information solely about a Fund and its
corresponding Portfolio. 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 ...................................... 7
Trustees and Officers ........................................ 9
Investment Adviser and Administrator ......................... 10
Custodian .................................................... 13
Service for Withdrawal ....................................... 14
Determination of Net Asset Value ............................. 14
Investment Performance ....................................... 14
Taxes ........................................................ 16
Principal Underwriter ........................................ 18
Distribution Plan ............................................ 18
Portfolio Security Transactions .............................. 20
Other Information ............................................ 22
Independent Certified Public Accountants ..................... 23
Financial Statements ......................................... 23
Appendix ..................................................... 24
PART II
EV Marathon Arizona Municipals Fund .......................... a-1
EV Marathon Colorado Municipals Fund ........................ b-1
EV Marathon Connecticut Municipals Fund ...................... c-1
EV Marathon Michigan Municipals Fund ......................... d-1
EV Marathon Minnesota Municipals Fund ........................ e-1
EV Marathon New Jersey Municipals Fund ....................... f-1
EV Marathon Pennsylvania Municipals Fund ..................... g-1
EV Marathon Texas Municipals Fund ............................ h-1
Although each Fund offers only its shares of beneficial interest, it is
possible that a Fund might become liable for a misstatement or omission in this
Statement of Additional Information regarding another Fund because the Funds use
this combined Statement of Additional Information. The Trustees of the Trust
have considered this factor in approving the use of a combined Statement of
Additional Information.
THIS COMBINED STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY THE FUNDS' PROSPECTUS DATED DECEMBER 1, 1996, AS SUPPLEMENTED
FROM TIME TO TIME, WHICH IS INCORPORATED HEREIN BY REFERENCE. THIS COMBINED
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 on
which is exempt from federal income tax and is not a tax preference item for
purposes of the AMT: (i) certain "public purpose" obligations (whenever issued),
which include obligations issued directly by state and local governments or
their agencies to fulfill essential governmental functions; (ii) certain
obligations issued before August 8, 1986 for the benefit of non-governmental
persons or entities; and (iii) certain "private activity bonds" issued after
August 7, 1986 which include "qualified Section 501(c)(3) bonds" or refundings
of certain obligations included in the second category. 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 AMT. For corporate shareholders, the Fund's distributions
derived from interest on all municipal obligations (whenever issued) is included
in "adjusted current earnings" for purposes of the AMT as applied to
corporations (to the extent not already included in 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 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, although nominally
issued by municipal authorities, are in most cases revenue bonds and are
generally not secured by the taxing power of the municipality, but are usually
secured by the revenues derived by the authority from payments of the industrial
user or users.
The 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 will be 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 such 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
Municipal Obligations of a Particular State. For a discussion of the risks
associated with the Portfolio's policy of concentrating its investments in
particular State issuers of municipal obligations, see "Risks of Concentration"
in the Fund's Part II.
Obligations of Particular Types of Issuers. The Portfolio may invest 25% or more
of its total assets in municipal obligations of the same type. There could be
economic, business or political developments which might affect all municipal
obligations of the same 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, effects 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 and local 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.
Obligations of Puerto Rico, the U.S. Virgin Islands and Guam. Subject to the
Fund's investment policies as set forth in the Prospectus, the Portfolio may
invest in the obligations of Puerto Rico, the U.S. Virgin Islands and Guam.
Accordingly, the Portfolio may be adversely affected by local political and
economic conditions and developments within Puerto Rico, the U.S. Virgin Islands
and Guam affecting the issuers of such obligations.
Puerto Rico has a diversified economy dominated by the manufacturing and
service sectors. Manufacturing is the largest sector in terms of gross domestic
product and is more diversified than during earlier phases of Puerto Rico's
industrial development. The three largest sectors of the economy (as a
percentage of employment) are services (47%), government (22%) and manufacturing
(16.4%). These three sectors represent 39%, 11% and 39%, respectively, of the
gross domestic product. The service sector is the fastest growing, while the
government and manufacturing sectors have been stagnant for the past five years.
This decline was broad based among all manufacturing industries. The North
American Free Trade Agreement (NAFTA), which became effective January 1, 1994,
could lead to the loss of Puerto Rico's lower salaried or labor intensive jobs
to Mexico. The November, 1995 unemployment rate was 13.4%, down from 16% for
1994.
The Commonwealth of Puerto Rico exercises virtually the same control over
its internal affairs as do the fifty states; however, it differs from the states
in its relationship with the federal government. Most federal taxes, except
those such as social security taxes that are imposed by mutual consent, are not
levied in Puerto Rico. However, in conjunction with the 1993 U.S. budget plan,
Section 936 of the Code was amended and provided for two alternative limitations
to the Section 936 credit. The first option will limit the credit against such
income to 40% of the credit allowable under current law, with a five year
phase-in period starting at 60% of the allowable credit. The second option is a
wage and depreciation based credit. The reduction of the tax benefits to those
U.S. companies with operations in Puerto Rico may lead to slower growth in the
future. Furthermore, federal policymakers have proposed the total elimination of
Section 936, phased out over ten years, as a budget-balancing measure. There can
be no assurance that these modifications will not lead to a weakened economy, a
lower rating on Puerto Rico's debt or lower prices for Puerto Rican bonds that
may be held by the Portfolio.
Puerto Rico's financial reporting was first conformed to generally accepted
accounting principles in fiscal 1990. Nonrecurring revenues have been used
frequently to balance recent years' budgets. In November, 1993 Puerto Ricans
voted on whether they wished to retain their Commonwealth status, become a state
or establish an independent nation. The measure was defeated, with 48.5% voting
to remain a Commonwealth, 46% voting for statehood and 4% voting for
independence. Retaining Commonwealth status will leave intact the current
relationship with the federal government. There can be no assurance that the
statehood issue will not be brought to a vote in the future. A successful
statehood vote in Puerto Rico would then require the U.S. Congress to ratify the
election.
The United States Virgin Islands USVI are located approximately 1,100 miles
east-southeast of Miami and are made up of St. Croix, St. Thomas and St. John.
Population, after reaching a peak of 110,800 in 1985, declined to 101,809 in
1990. The economy is heavily reliant on the tourism industry, with roughly 43%
of non-agricultural employment in tourist-related trade and services. As of
June, 1996, unemployment stood at 4.7%. The tourism industry is economically
sensitive and would likely be adversely affected by a recession in either the
United States or Europe.
An important component of the USVI revenue base is the federal excise tax on
rum exports. Tax revenues rebated by the federal government to the USVI provide
the primary security of many outstanding USVI bonds. Since more than 90% of the
rum distilled in the USVI is distilled at one plant, any interruption in its
operations (as occurred after Hurricane Hugo in 1989) would adversely affect
these revenues. Consequently, there can be no assurance that rum exports to the
United States and the rebate of tax revenues to the USVI will continue at their
present levels. The preferential tariff treatment the USVI rum industry
currently enjoys could be reduced under NAFTA. Increased competition from
Mexican rum producers could reduce USVI rum imported to the U.S., decreasing
excise tax revenues generated. The USVI is periodically hit by hurricanes.
During this past hurricane season, several hurricanes caused extensive damage,
which has had a negative impact on revenue collections. There is currently no
rated, unenhanced Virgin Islands debt outstanding (although there is unrated
debt outstanding).
Guam, an unincorporated U.S. territory, is located 1,500 miles southeast of
Tokyo. Population, 133,000 in 1990, is up 26% from the 1980 census level. The
U.S. military is a key component of Guam's economy. The federal government
directly comprises more than 10% of the employment base, with a substantial
component of the service sector to support these personnel. The Naval Air
Station, one of several U.S. military facilities on the island, has been slated
for closure by the Defense Base Closure and Realignment Committee; however, the
administration plans to use these facilities to expand the island's commercial
airport. Guam is also heavily reliant on tourists, particularly the Japanese.
For 1995, the government realized a General Fund operating surplus. The
administration has taken steps to improve its financial position; however, there
are no guarantees that an improvement will be realized. Guam's general
obligation debt is rated BBB by S&P with a negative outlook.
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 (and later purchase) securities in anticipation of a
market decline (a rise in interest rates) or purchase (and later sell)
securities in anticipation of a market rise (a decline in interest rates). In
addition, a security may be sold and another purchased at approximately the same
time to take advantage of what the 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 anticipates
that its annual portfolio turnover rate will generally not exceed 100%
(excluding turnover of securities having a maturity of one year or less). A 100%
annual turnover rate 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 take 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 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. Since 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 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) Borrow money or issue senior securities except as permitted by the
Investment Company Act of 1940;
(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) 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;
(4) Purchase or sell real estate (including limited partnership interests in
real estate but excluding readily marketable interests in real estate investment
trusts or readily marketable securities of companies which invest or deal in
real estate or securities which are secured by real estate);
(5) Purchase or sell physical commodities or contracts for the purchase or
sale of physical commodities; or
(6) Make loans to any person except by (a) the acquisition of debt
instruments and making portfolio investments, (b) entering into repurchase
agreements and (c) lending portfolio securities.
Notwithstanding the investment policies and restrictions of the Fund; the
Fund may invest all of its investable assets in an open-end management
investment company with substantially the same investment objective, policies
and restrictions as the Fund.
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. As a matter of
nonfundamental policy, the Fund and the Portfolio will not: (a) 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; (b) make short sales of securities or maintain a short
position, unless at all times when a short position is open it 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 and the Portfolio will make such sales
only for the purpose of deferring realization of gain or loss for federal income
tax purposes); (c) invest more than 15% of its 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 under 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, determines to be liquid; or (d)
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 the Portfolio or is a member, officer, director or trustee of
any investment adviser of the Trust or the Portfolio, if after the purchase of
the securities of such issuer by the Fund or the Portfolio 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).
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 obligations.
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. Where applicable and notwithstanding the foregoing, under normal
market conditions the Fund and the Portfolio must take actions necessary to
comply with the policy of investing at least 65% of total assets in a particular
State. Moreover, 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"); of 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, 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 02134
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. Officer of various investment
companies managed by Eaton Vance or BMR. Mr. Fetter was elected President of
the Trust and the Portfolio on December 13, 1993.
ROBERT B. MACINTOSH (39), Vice President
Vice President of BMR since August 11, 1992, and of Eaton Vance and EV. Officer
of various investment companies managed by Eaton Vance or BMR. Mr. MacIntosh
was elected Vice President of the Trust on March 22, 1993.
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 (33), 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 on March 27,
1995.
ERIC G. WOODBURY (39), Assistant Secretary
Vice President of BMR, Eaton Vance and EV 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. Woodubury
was elected Assistant Secretary on June 19, 1995.
For any additional officers of the Portfolio, see "Additional Officer
Information" in the Fund's Part II.
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 Fund and of
the Portfolio.
Trustees of the Portfolio that are not affiliated with the Investment
Adviser may elect to defer receipt of all or a percentage of their annual fees
in accordance with the terms of 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 Portfolio
nor the Trust 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 earned 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. 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. For additional
information about the Investment Advisory Agreement, including the net assets of
the Portfolio and the investment advisory fees that the Portfolio paid BMR under
the Investment Advisory Agreement, see "Fees and Expenses" in the Fund's Part
II.
The Investment Advisory Agreement with BMR may be continued indefinitely so
long as such continuance 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 October
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. Browse, Fetter, MacIntosh, Metzold, Murphy,
O'Connor and Woodbury and Ms. Anderes, Ms. Clemson and Ms. Sanders, are
officers 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.
EVC owns all of the stock of Energex Energy Corporation, which engages in
oil and gas exploration and development. In addition, Eaton Vance owns all 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. EVC, BMR, Eaton Vance 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, IBT. It is Eaton Vance's opinion that the terms and conditions of
such transactions were not and will not be influenced by existing or potential
custodial or other relationships between the Fund or the Portfolio and such
banks.
CUSTODIAN
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 Portfolio 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
gains distributions in connection with withdrawal plan 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
transation prices for most municipal obligations held by the Portfolio, and such
obligations, including those purchaed on a when-issued basis, will normally be
valued on the basis of valuations furnished by a pricing service. The pricing
service uses information with respect to transactions in bonds, quotations from
bond dealers, market transactions in comparable securities, various
relationships between securities, and yield to maturity in determining value.
Taxable obligations for which price quotations are readily available normally
will be valued at the mean between the latest available bid and asked prices.
Open futures positions on debt securities are valued at the most recent
settlement prices, unless such price does not reflect the fair value of the
contract, in which case the positions will be valued by or at the direction of
the Trustees 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 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 distributions paid and
reinvested) for the stated period and annualizing the result. The calculation
assumes that all distributions are reinvested at net asset value on the
reinvestment dates during the period, a complete redemption of the investment
and the deduction of the CDSC 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 the net
investment income per share earned during a recent thirty-day period by the
maximum offering price (net asset value) 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 the CDSC which are imposed
upon certain redemptions at the rates set forth under "How to Redeem Fund
Shares" in the Fund's current Prospectus. A taxable-equivalent yield is computed
by using the tax-exempt yield and dividing 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. 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. Investor's 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 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, and intends to qualify each
year, as a regulated investment company ("RIC") under the Code. Accordingly, the
Fund intends to satisfy certain requirements relating to sources of its income
and diversification of its assets and to distribute its net investment income
(including tax-exempt income) and net realized capital gains (after reduction by
any available capital loss carryforwards) 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 July 31, 1996.
Because the Fund invests 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 RIC, 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 (or be deemed to have distributed) 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 RIC
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 enable the Fund 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 by the Fund of net tax-exempt interest income that are
properly designated as "exempt-interest dividends" may be treated by
shareholders as interest excludable from gross income under Section 103(a) of
the Code. In order for the Fund to be entitled to pay the 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 AMT. 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 of the Fund, 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 periods 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 RIC for federal income tax purposes.
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.
PRINCIPAL UNDERWRITER
Under the Distribution Agreement the Principal Underwriter acts as principal
in selling shares 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 is 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. In addition, the Fund makes payments to the Principal
Underwriter pursuant to its Distribution Plan as described in the Fund's current
Prospectus; the provisions of the plan relating to such payments are included in
the Distribution Agreement. The Distribution Agreement is renewable annually by
the Trust's Board of Trustees (including a majority of its Trustees who are not
interested persons of the Trust and who have no direct or indirect financial
interest in the operation of the Fund's Distribution Plan or the Distribution
Agreement), may be terminated on sixty days' notice either by such Trustees or
by vote of a majority of the outstanding voting securities of the Fund or on six
months' notice by the Principal Underwriter 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. 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 amount paid by
the Fund to the Principal Underwriter for acting as repurchase agent, see "Fees
and Expenses" in the Fund's Part II.
DISTRIBUTION PLAN
The Distribution Plan (the "Plan") is described in the prospectus and is
designed to meet the requirements of Rule 12b-1 under the 1940 Act and the NASD
Rule. The purpose of the Plan is to compensate the Principal Underwriter for its
distribution services and facilities provided to the Fund by paying the
Principal Underwriter sales commissions and a separate distribution fee in
connection with sales of Fund shares. The following supplements the discussion
of the Plan contained in the Fund's Prospectus.
The amount payable by the Fund to the Principal Underwriter pursuant to the
Plan as sales commissions and distribution fees with respect to each day will be
accrued on such day as a liability of the Fund and will accordingly reduce the
Fund's net assets upon such accrual, all in accordance with generally accepted
accounting principles. The amount payable on each day is limited to 1/365 of
.75% of the Fund's net assets on such day. The level of the Fund's net assets
changes each day and depends upon the amount of sales and redemptions of Fund
shares, the changes in the value of the investments held by the Portfolio, the
expenses of the Fund and of the Portfolio accrued and allocated to the Fund on
such day, income on portfolio investments of the Portfolio accrued and allocated
to the Fund on such day, and any dividends and distributions declared on Fund
shares. The Fund does not accrue possible future payments as a liability of the
Fund or reduce the Fund's current net assets in respect of unknown amounts which
may become payable under the Plan in the future because the standards for
accrual of such a liability under accounting principles have not been satisfied.
The Plan provides that the Fund will receive all CDSCs and will make no
payments to the Principal Underwriter in respect of any day on which there are
no outstanding Uncovered Distribution Charges of the Principal Underwriter.
CDSCs and accrued amounts will be paid by the Fund to the Principal Underwriter
whenever there exist Uncovered Distribution Charges under the Fund's Plan.
Periods with a high level of sales of Fund shares accompanied by a low level
of early redemptions of Fund shares resulting in the imposition of CDSCs will
tend to increase the time during which there will exist Uncovered Distribution
Charges of the Principal Underwriter. Conversely, periods with a low level of
sales of Fund shares accompanied by a high level of early redemptions of Fund
shares resulting in the imposition of CDSCs will tend to reduce the time during
which there will exist Uncovered Distribution Charges of the Principal
Underwriter.
In calculating daily the amount of Uncovered Distribution Charges,
distribution charges will include the aggregate amount of sales commissions and
distribution fees theretofore paid plus the aggregate amount of sales
commissions and distribution fees which the Principal Underwriter is entitled to
be paid under the Plan since its inception. Payments theretofore paid or payable
under the Plan by the Fund to the Principal Underwriter and CDSCs theretofore
paid or payable to the Principal Underwriter will be subtracted from such
distribution charges; if the result of such subtraction is positive, a
distribution fee (computed at 1% over the prime rate then reported in The Wall
Street Journal) will be computed on such amount and added thereto, with the
resulting sum constituting the amount of outstanding Uncovered Distribution
Charges with respect to such day. The amount of outstanding Uncovered
Distribution Charges of the Principal Underwriter calculated on any day does not
constitute a liability recorded on the financial statements of the Fund.
The amount of Uncovered Distribution Charges of the Principal Underwriter at
any particular time depends upon various changing factors, including the level
and timing of sales of Fund shares, the nature of such sales (i.e., whether they
result from exchange transactions, reinvestments or from cash sales through
Authorized Firms), the level and timing of redemptions of Fund shares upon which
a CDSC will be imposed, the level and timing of redemptions of Fund shares upon
which no CDSC will be imposed (including redemptions involving exchanges of Fund
shares pursuant to the exchange privilege which result in a reduction of
Uncovered Distribution Charges), changes in the level of the net assets of the
Fund, and changes in the interest rate used in the calculation of the
distribution fee under the Plan.
As currently implemented by the Trustees, the Fund's Plan authorizes
payments of sales commissions and distribution fees to the Principal Underwriter
and service fees to the Principal Underwriter and Authorized Firms which may be
equivalent, on an aggregate basis during any fiscal year of the Fund, to .95% of
the Fund's average daily net assets for such year. For the sales commission and
service fee payments made by the Fund and the outstanding Uncovered Distribution
Charges of the Principal Underwriter, see "Fees and Expenses -- Distribution
Plan" in the Fund's Part II. The Fund believes that the combined rate of all
these payments may be higher than the rate of payments made under distribution
plans adopted by other investment companies pursuant to Rule 12b-1. Although the
Principal Underwriter will use its own funds (which may be borrowed from banks)
to pay sales commissions at the time of sale, it is anticipated that the Eaton
Vance organization will profit by reason of the operation of the Plan through an
increase in the Fund's assets (thereby increasing the advisory fee payable to
BMR by the Portfolio) resulting from sale of Fund shares and through amounts
paid to the Principal Underwriter, including CDSCs pursuant to the Plan. The
Eaton Vance organization may be considered to have realized a profit under the
Plan if at any point in time the aggregate amounts theretofore received by the
Principal Underwriter pursuant to the Plan and from CDSCs have exceeded the
total expenses theretofore incurred by such organization in distributing shares
of the Fund. Total expenses for this purpose will include an allocable portion
of the overhead costs of such organization and its branch offices, which costs
will include without limitation leasing expense, depreciation of building and
equipment, utilities, communication and postage expense, compensation and
benefits of personnel, travel and promotional expense, stationery and supplies,
literature and sales aids, interest expense, data processing fees, consulting
and temporary help costs, insurance, taxes other than income taxes, legal and
auditing expense and other miscellaneous overhead items. Overhead is calculated
and allocated for such purpose by the Eaton Vance organization in a manner
deemed equitable to the Fund.
The Plan provides that it shall continue in effect for so long as such
continuance is approved at least annually by the vote of both a majority of (i)
the Trustees of the Trust 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 the Plan (the "Rule 12b-1 Trustees") and (ii) all of
the Trustees then in office, and the Distribution Agreement contains a similar
provision. The Plan and Distribution Agreement may be terminated at any time by
a vote of a majority of the Rule 12b-1 Trustees or by a vote of a majority of
the outstanding voting securities of the Fund. The provisions of the Plan
relating to payments of sales commissions and distribution fees to the Principal
Underwriter are also included in the Distribution Agreement between the Trust on
behalf of the Fund and the Principal Underwriter. 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
therein without approval of the shareholders of the Fund, and all material
amendments of the Plan must also be approved by the Trustees as required by Rule
12b-1. So long as the Plan is in effect, the selection and nomination of the
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 of the Trust believe that the Plan will be a significant factor
in the growth of the Fund's assets, resulting in increased investment
flexibility and advantages which have benefited and will continue to benefit the
Fund and its shareholders. Payments for sales commissions and distribution fees
made to the Principal Underwriter under the Plan will compensate the Principal
Underwriter for its services and expenses in distributing shares of the Fund.
Service fee payments made to the Principal Underwriter and Authorized Firms
under the Plan provide incentives to provide continuing personal services to
investors and the maintenance of shareholder accounts. By providing incentives
to the Principal Underwriter and Authorized Firms, the Plan is expected to
result in the maintenance of, and possible future growth in, the assets of the
Fund. Based on the foregoing and other relevant factors, the Trustees have
determined that in their judgment there is a reasonable likelihood that the Plan
will benefit the Fund and its shareholders.
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 either on the basis of 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 broker-dealer firm with whom portfolio orders may
be placed the fact that such firm has sold or is selling shares of the Fund or
of other investment companies sponsored by BMR or Eaton Vance. This policy is
not inconsistent with a rule of the NASD, which rule provides that no firm which
is a member of the NASD shall favor or disfavor the distribution of shares of
any particular investment company or group of investment companies on the basis
of brokerage commissions received or expected by such firm from any source.
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 brokerage commissions paid by the Portfolio
on portfolio transactions, see "Fees and Expenses" in the Fund's Part II.
OTHER INFORMATION
Eaton Vance, pursuant to its agreement with the Trust, controls the use of
the words "Eaton Vance" or "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 Trust's 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 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 interest
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.
FINANCIAL STATEMENTS
The financial statements of the Fund and the Portfolio, which are included
in the Fund's Annual Report to Shareholders, are incorporated by reference into
this SAI and have been so incorporated in reliance on the report of Deloitte &
Touche LLP, independent certified public accountants, as experts in accounting
and auditing. A copy of the Fund's most recent Annual Report accompanies this
SAI.
Registrant incorporates by reference the audited financial information for
the Funds and the Portfolios listed below for the fiscal year ended July 31,
1996, as previously filed electronically with the Commission:
EV Marathon Arizona Municipals Fund
EV Marathon Colorado Municipals Fund
EV Marathon Connecticut Municipals Fund
EV Marathon Michigan Municipals Fund
EV Marathon Minnesota Municipals Fund
EV Marathon New Jersey Municipals Fund
EV Marathon Pennsylvania Municipals Fund
EV Marathon Texas Municipals Fund
(Accession No. 0000950135-96-004171)
<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.
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.
- ----------
+The ratings indicated herein are believed to be the most recent ratings
available at the date of this SAI for the securities listed. Ratings are
generally given to securities at the time of issuance. While the rating
agencies may from time to time revise such ratings, they undertake no
obligation to do so, and the ratings indicated do not necessarily represent
ratings which would be given to these securities on the date of the Portfolio's
fiscal year end.
<PAGE>
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.
p: The letter "p" indicates that the rating is provisional. A provisional rating
assumes the successful completion of the project being financed by the debt
being rated and indicates that payment of debt service requirements is largely
or entirely dependent upon the successful and timely completion of the project.
This rating, however, while addressing credit quality subsequent to completion
of the project, makes no comment on the likelihood of, or the risk of default
upon failure of such completion. The investor should exercise his own judgment
with respect to such likelihood and risk.
L: The letter "L" indicates that the rating pertains to the principal amount of
those bonds to the extent that the underlying deposit collateral is insured by
the Federal Deposit Insurance Corp. and interest is adequately collateralized.
In the case of certificates of deposit, the letter "L" indicates that the
deposit, combined with other deposits being held in the same right and capacity,
will be honored for principal and accrued pre-default interest up to the federal
insurance limits within 30 days after closing of the insured institution or, in
the event that the deposit is assumed by a successor insured institution, upon
maturity.
NR: NR indicates no rating has been requested, that there is insufficient
information on which to base a rating, or that S&P does not rate a particular
type of obligation as a matter of policy.
MUNICIPAL NOTES
S&P note ratings reflect the liquidity concerns and market access risks unique
to notes. Notes due in 3 years or less will likely receive a note rating. Notes
maturing beyond 3 years will most likely receive a long-term debt rating. The
following criteria will be used in making that assessment:
-- Amortization schedule (the larger the final maturity relative to other
maturities the more likely it will be treated as a note).
-- Sources of payment (the more dependent the issue is on the market for its
refinancing, the more likely it will be treated as a note).
Note rating symbols are as follows:
SP-1: Strong capacity to pay principal and interest. Those issues determined
to possess very strong characteristics will be given a plus(+) designation.
SP-2: Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse financial and economic changes over the term of the
notes.
SP-3: Speculative capacity to pay principal and interest.
FITCH 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
BB: Bonds are considered speculative. The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified that could assist the
obligor in satisfying its debt service requirements.
B: Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue.
CCC: Bonds have certain identifiable characteristics which, if not remedied,
may lead to default. The ability to meet obligations requires an advantageous
business and economic environment.
CC: Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C: Bonds are in imminent default in payment of interest or principal.
DDD, DD, AND D: Bonds are in default on interest and/or principal payments. Such
bonds are extremely speculative and should be valued on the basis of their
ultimate recovery value in liquidation or reorganization of the obligor. "DDD"
represents the highest potential for recovery on these bonds, and "D" represents
the lowest potential for recovery.
PLUS (+) OR MINUS (-): The ratings from AA to C may be modified by the addition
of a plus or minus sign to indicate the relative position of a credit within the
rating category.
NR: Indicates that Fitch does not rate the specific issue.
CONDITIONAL: A conditional rating is premised on the successful completion of
a project or the occurrence of a specific event.
INVESTMENT GRADE SHORT-TERM RATINGS
Fitch's short-term ratings apply to debt obligations that are payable on demand
or have original maturities of generally up to three years, including commercial
paper, certificates of deposit, medium-term notes, and municipal and investment
notes.
F-1+: Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1: Very 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 MARATHON ARIZONA MUNICIPALS FUND.
The investment objective of the Fund is to provide current income exempt from
regular federal income tax and Arizona State personal income taxes. The Fund
currently seeks to achieve its investment objective by investing its assets in
the Arizona Municipals Portfolio (the "Portfolio").
RISKS OF CONCENTRATION
The following information as to certain Arizona considerations is given to
investors in view of the Portfolio's policy of concentrating its investments in
Arizona issuers. Such information supplements the information in the Prospectus.
It is derived from sources that are generally available to investors and is
believed to be accurate. Such information constitutes only a brief summary, does
not purport to be a complete description and is based on information from
official statements relating to securities offerings of Arizona issuers. Neither
the Trust nor the Portfolio has independently verified this information.
The ability of Arizona and its political subdivisions to respond to the
ever-increasing burdens placed upon them by the growth of the 1980's has been
limited, in part, by Constitutional and legislative restrictions on property tax
increases and limitations on annual expenditure increases. Subject to certain
exceptions, the maximum amount of property taxes levied by any Arizona county,
city, town or community college district for their operations and maintenance
expenditures cannot exceed the amount levied in a preceding year by more than
two percent. Certain taxes are specifically exempt from this limit, including
taxes levied for debt service payments. Annual property tax levies for the
payment of general obligation bonded indebtedness are unlimited as to rate or
amount. However, there are Constitutional limitations on the aggregate amount of
general obligation bonded indebtedness an Arizona municipality may incur, and
these limitations could impede a municipality's ability to respond to the needs
of a fast-growing population for additional public facilities and services.
Arizona State government general fund revenue growth in fiscal year 1995
increased 4.6%, while expenditures increased 12.5%. The State general fund ended
fiscal year 1995 with a fund balance of $305.0 million. Fiscal year 1996 is
expected to close with a general fund balance of $335 million. The 1997 budget
shows a slight slowdown in growth.
The 1995 legislature enacted a $200 million income tax reduction package and
has committed to enact a $200 million property tax reduction package in 1996. In
1992, Arizona voters passed a measure that requires a two-thirds vote of the
legislature to increase State revenue. Accordingly, it will be more difficult to
reverse the current and planned tax reductions, which may adversely affect State
fund balances and fiscal conditions.
FEES AND EXPENSES
INVESTMENT ADVISER
As of July 31, 1996, the Portfolio had net assets of $129,861,547. For the
fiscal year ended July 31, 1996, the Portfolio paid BMR advisory fees of
$574,999 (equivalent to 0.41% of the Portfolio's average daily net assets for
such year). For the fiscal year ended July 31, 1995, the Portfolio paid BMR
advisory fees of $629,148 (equivalent to 0.42% of the Portfolio's average daily
net assets for such year). For the ten months ended July 31, 1994, the Portfolio
paid BMR advisory fees of $505,544 (equivalent to 0.41% (annualized) of the
Portfolio's average daily net assets for such period). The Portfolio's
Investment Advisory Agreement with BMR is dated October 13, 1992 and may be
continued as described under "Investment Adviser and Administrator" in Part I.
DISTRIBUTION PLAN
The Distribution Plan and Distribution Agreement remain in effect until
April 28, 1997 and may be continued as described under "Distribution Plan" in
Part I. Pursuant to Rule 12b-1, the Plan has been approved by the Fund's
shareholders and by the Board of Trustees of the Trust, as required by Rule
12b-1. During the fiscal year ended July 31, 1996, the Principal Underwriter
paid to Authorized Firms sales commissions of $247,645 on sales of Fund shares.
During the same period, the Fund made sales commission payments under the Plan
to the Principal Underwriter aggregating $1,028,216 and the Principal
Underwriter received approximately $623,000 in CDSCs imposed on early redeeming
shareholders. The sales commissions and CDSCs paid to the Principal Underwriter
reduced Uncovered Distribution Charges under the Plan. As at July 31, 1996, the
outstanding Uncovered Distribution Charges of the Principal Underwriter
calculated under the Plan amounted to approximately $4,265,000 (which amount was
equivalent to 3.3% of the Fund's net assets on such date). During the fiscal
year ended July 31, 1996, the Fund paid or accrued service fees under the Plan
aggregating $217,493, of which $216,342 was paid to Authorized Firms and the
balance of which was retained by the Principal Underwriter.
PRINCIPAL UNDERWRITER
For the fiscal year ended July 31, 1996, the Fund paid the Principal
Underwriter $1,432.50 for repurchase transactions handled by the Principal
Underwriter (being $2.50 for each such transaction).
BROKERAGE
For the fiscal year ended July 31, 1996, the Portfolio paid brokerage
commissions of $22,534 on portfolio security transactions aggregating
$181,351,480 to firms which provided some research services to BMR or its
affiliates (although many of such firms may have been selected in any particular
transaction primarily because of their execution capabilities). For the fiscal
year ended July 31, 1995 and for the ten months ended July 31, 1994, the
Portfolio paid no brokerage commissions on portfolio transactions.
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 the Portfolio who are members of
the Eaton Vance organization receive no compensation from the Fund or the
Portfolio.) During the fiscal year ended July 31, 1996, the noninterested
Trustees of the Trust and the Portfolio received the following compensation in
their capacities as Trustees from the Fund and the Portfolio, and, for the year
ended September 30, 1996, earned the following compensation in their capacities
as Trustees of 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 .......... $687 $1,542(2) $142,500(4)
Samuel L. Hayes, III ...... 632 1,687(3) 153,750(5)
Norton H. Reamer .......... 628 1,645 142,500
John L. Thorndike ......... 636 1,729 147,500
Jack L. Treynor ........... 681 1,683 147,500
- ----------
(1) The Eaton Vance fund complex consists of 228 registered investment companies
or series thereof.
(2) Includes $578 of deferred compensation.
(3) Includes $570 of deferred compensation.
(4) Includes $42,500 of deferred compensation.
(5) Includes $37,500 of deferred compensation.
ADDITIONAL OFFICER INFORMATION
In addition to the officers of the Portfolio listed under "Officers of the
Trust and the Portfolio" in Part I, Cynthia J. Clemson (33) is a Vice
President of the Portfolio. Ms. Clemson has served as a Vice President of the
Portfolio since June 19, 1995. Ms. Clemson has been a Vice President of BMR
and Eaton Vance since 1993 and an employee of Eaton Vance since 1985. Ms.
Clemson is an officer of various investment companies managed by Eaton Vance
or BMR.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return on
a hypothetical investment of $1,000 in the Fund covering the life of the Fund
from July 25, 1991 through July 31, 1996 and for the five- and one-year periods
ended July 31, 1996.
<TABLE>
VALUE OF A $1,000 INVESTMENT
<CAPTION>
TOTAL RETURN BEFORE TOTAL RETURN AFTER
VALUE BEFORE VALUE AFTER DEDUCTING DEDUCTING
DEDUCTING THE DEDUCTING THE THE MAXIMUM CDSC THE MAXIMUM CDSC**
INVESTMENT INVESTMENT AMOUNT OF MAXIMUM CDSC MAXIMUM CDSC** -------------------------- --------------------------
PERIOD DATE INVESTMENT ON 7/31/96 ON 7/31/96 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------- ------------ ----------- --------------- --------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of
the Fund*** 7/25/91* $1,000 $1,437.06 $1,427.06 43.71% 7.49% 42.71% 7.34%
5 Years
Ended
7/31/96*** 7/31/91 $1,000 $1,424.28 $1,404.28 42.43% 7.33% 40.43% 7.03%
1 Year
Ended
7/31/96 7/31/95 $1,000 $1,061.69 $1,011.69 6.17% 6.17% 1.17% 1.17%
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>
- ----------
* Investment operations began on July 25, 1991.
** No CDSC is imposed on certain redemptions. See the Fund's current Prospectus.
*** If a portion of the Fund's expenses had not been subsidized, the Fund would have had lower returns.
</TABLE>
For the thirty-day period ended July 31, 1996, the yield of the Fund was
4.54%. The yield required of a taxable security that would produce an after-tax
yield equivalent to that earned by the Fund of 4.54% would be 6.94%, assuming a
combined federal and State tax rate of 34.59%.
See the Tax Equivalent Yield Table in this Part II 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
was the record owner of approximately 11.5% 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
The Fund changed its name from Eaton Vance Arizona Tax Free Fund to EV
Marathon Arizona Tax Free Fund on February 1, 1994 and to EV Marathon Arizona
Municipals Fund on December 1, 1995.
<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 equivalent to those of tax
exempt bonds yielding from 4% to 7% under the regular federal income tax and
Arizona State income tax laws and tax rates applicable for 1996.
<TABLE>
<CAPTION>
COMBINED
FEDERAL A FEDERAL AND ARIZONA STATE
AND TAX EXEMPT YIELD OF:
SINGLE RETURN JOINT RETURN ARIZONA 4% 4.5% 5% 5.5% 6% 6.5% 7%
- ------------------- --------------------- STATE TAX ------------------------------------------------------------------------
(TAXABLE INCOME*) BRACKET+ IS EQUIVALENT TO A FULLY TAXABLE YIELD OF:
- ------------------------------------------ --------- ------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Up to $ 24,000 Up to $ 40,100 17.98% 4.88% 5.49% 6.10% 6.71% 7.31% 7.92% 8.53%
$ 24,001 - $ 58,150 $ 40,101 - $ 96,900 31.74 5.86 6.59 7.33 8.06 8.79 9.52 10.26
$ 58,151 - $121,300 $ 96,901 - $147,700 34.59 6.12 6.88 7.64 8.41 9.17 9.94 10.70
$121,301 - $263,750 $147,701 - $263,750 39.58 6.62 7.45 8.28 9.10 9.93 10.76 11.59
Over $263,750 Over $263,750 42.98 7.02 7.89 8.77 9.65 10.52 11.40 12.28
*Net amount subject to federal and Arizona personal income tax after deductions and exemptions.
+The combined federal and Arizona tax brackets are calculated using the highest Arizona tax rate within each bracket.
Taxpayers with taxable income within such brackets may have lower combined tax brackets and taxable equivalent yields than
indicated above. The combined tax brackets assume that Arizona taxes are itemized deductions for federal income tax
purposes. Investors who do not itemize deductions on their federal income tax return will have a higher combined bracket
and higher taxable equivalent yield than those indicated above. The applicable federal tax rates within the brackets are
15%, 28%, 31%, 36% and 39.6%, over the same ranges of income.
</TABLE>
Note: The federal income tax portion of above-indicated combined income tax
brackets does not take into account the effect of a reduction in the
deductibility of itemized deductions (including Arizona State income taxes) for
taxpayers with adjusted gross income in excess of $117,950. The tax brackets
also do not show the effects of phaseout of personal exemptions for single
filers with adjusted gross income 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 and Arizona personal income taxes, 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 except for Arizona personal income taxes. 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>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EV MARATHON COLORADO MUNICIPALS
FUND. The investment objective of the Fund is to provide current income exempt
from regular federal income tax and Colorado State personal income taxes. The
Fund currently seeks to achieve its investment objective by investing its assets
in the Colorado Municipals Portfolio (the "Portfolio").
RISKS OF CONCENTRATION
The following information as to certain Colorado considerations is given to
investors in view of the Portfolio's policy of concentrating its investments in
Colorado issuers. Such information supplements the information in the
Prospectus. It is derived from sources that are generally available to investors
and is believed to be accurate. Such information constitutes only a brief
summary, does not purport to be a complete description and is based on
information from official statements relating to securities offerings of
Colorado issuers. Neither the Trust nor the Portfolio has independently verified
this information.
Large public works projects, a pickup in the housing sector and growth in
the trade and services industries led to moderate employment gains for the State
during the early 1990's. For July 1996, the adjusted unemployment rate was 4.1%
versus the 5.4% national average for the same month. Certain areas of
manufacturing, however, have been adversely impacted by the prolonged U.S.
downturn and by relatively heavy reliance on defense contracts and military
payroll. For 1996, the State's job growth is expected to slow to 3.2%.
The major revenue sources of the State are the individual income tax and the
general sales and use tax. Because of limitations contained in the State
constitution, the State of Colorado issues no general obligation bonds. Several
agencies and instrumentalities of State government, however, are authorized by
statute to issue bonds secured by revenues from specific projects and activities
or to enter into lease-purchase financings which are subject to annual
appropriation. Additionally, the State is authorized to issue short-term revenue
anticipation notes. To the extent the Portfolio holds debt of local units of
government whose revenues may rely in part on distributions from the State, the
fiscal health of the State will have an indirect affect on the Portfolio. The
State is required to have a balanced budget each fiscal year. Therefore, in the
event of a funding gap, the State must cut expenditures and/or raise revenues.
The latter is difficult, especially since the passage of the TABOR Amendment
(see below). Strong growth in income tax and sales tax collections recently
contributed to larger increases in the unreserved fund balance in fiscal year
1994. The State had revenue collections which exceeded expenditures by $38
million. In fiscal year 1994-95, revenues exceeded expenditures by $94 million.
The general fund reserve was $276 million, or roughly 7.6% of total annual
appropriations. Revenues for the 1995-96 fiscal year increased 6.8%, a slowdown
from the 7.3% pace in fiscal year 1995. This slowdown is expected to continue.
Expenditures increased more than revenues, exceeding revenues by $144.6 million.
The creation of the Controlled Maintenance Trust Fund per a new statute required
a $196 million transfer. This is reflected in the increased expenditures. The
Controlled Maintenance Trust Fund will be used for maintenance on State
administration buildings, courts, and higher education facilities.
There are approximately 1,800 units of local government in Colorado,
including counties, statutory cities and towns, home-rule cities and counties,
school districts and a variety of water, sewer and other special districts, all
with various constitutional and statutory authority to levy taxes and incur
indebtedness. The major sources of revenue for payment of indebtedness are the
ad valorem property tax, which presently is imposed and collected solely at the
local level, although the State is also authorized to levy the tax, sales and
use taxes, and revenue from special projects. Residential real property is
presently assessed at 10.36% of its actual value. All other property is assessed
at 29% of its actual value except producing mines and oil and gas properties.
Oil and gas properties are assessed at 87.5%.
A 1992 amendment to the State Constitution (the "TABOR Amendment") restricts
growth of State and local government spending to the rate of inflation plus
growth (as measured by population, school enrollment, or construction depending
on the government entity); and requires voter approval of all new taxes or tax
increases and the issuance of most types of debt. Though the TABOR Amendment is
not expected to have an immediate effect on the credit quality of state and
local governments, it will likely reduce the financial flexibility of all levels
of government in Colorado over time. In particular, local governments dependent
on taxes on residential property are being squeezed between the TABOR Amendment
requirements of voter approval for increased mill levies and an earlier State
Constitutional amendment which has had the effect of lowering the assessment
rate on residential property from 21% to 10.36% over the past 8 years. Younger
or rapidly growing municipalities with large infrastructure requirements may
have particular difficulty finding the revenues needed to finance their growth.
FEES AND EXPENSES
INVESTMENT ADVISER
As of July 31, 1996, the Portfolio had net assets of $45,415,574. For the
fiscal year ended July 31, 1996, absent a fee reduction, the Portfolio would
have paid BMR advisory fees of $130,068 (equivalent to 0.28% of the Portfolio's
average daily net assets for such year). To enhance the net income of the
Portfolio, BMR made a reduction of its advisory fee in the amount of $7,886. For
the fiscal year ended July 31, 1995, absent a fee reduction, the Portfolio would
have paid BMR advisory fees of $128,496 (equivalent to 0.28% of the Portfolio's
average daily net assets for such year). To enhance the net income of the
Portfolio, BMR made a reduction of its advisory fee in the amount of $69,064.
For the ten months ended July 31, 1994, absent a fee reduction, the Portfolio
would have paid BMR advisory fees of $67,224 (equivalent to 0.23% (annualized)
of the Portfolio's average daily net assets for such period). To enhance the net
income of the Portfolio, BMR made a reduction of the full amount of its advisory
fee and BMR was allocated a portion of the expenses related to the operation of
the Portfolio in the amount of $31,504. The Portfolio's Investment Advisory
Agreement with BMR is dated October 13, 1992 and may be continued as described
under "Investment Adviser and Administrator" in Part I.
DISTRIBUTION PLAN
The Distribution Plan and Distribution Agreement remain in effect until
April 28, 1997 and may be continued as described under "Distribution Plan" in
Part I. Pursuant to Rule 12b-1, the Plan has been approved by the Fund's
shareholders and by the Board of Trustees of the Trust, as required by Rule
12b-1. During the fiscal year ended July 31, 1996, the Principal Underwriter
paid to Authorized Firms sales commissions of $151,854 on sales of Fund shares.
During the same period, the Fund made sales commission payments under the Plan
to the Principal Underwriter aggregating $335,453 and the Principal Underwriter
received approximately $194,000 in CDSCs imposed on early redeeming
shareholders. The sales commissions and CDSCs paid to the Principal Underwriter
reduced Uncovered Distribution Charges under the Plan. As at July 31, 1996, the
outstanding Uncovered Distribution Charges of the Principal Underwriter
calculated under the Plan amounted to approximately $1,766,000 (which amount was
equivalent to 4.1% of the Fund's net assets on such date). During the fiscal
year ended July 31, 1996, the Fund paid or accrued service fees under the Plan
aggregating $73,771, of which $73,703 was paid to Authorized Firms and the
balance of which was retained by the Principal Underwriter.
PRINCIPAL UNDERWRITER
For the fiscal year ended July 31, 1996, the Fund paid the Principal
Underwriter $900 for repurchase transactions handled by the Principal
Underwriter (being $2.50 for each such transaction).
BROKERAGE
For the fiscal year ended July 31, 1996, the Portfolio paid brokerage
commissions of $13,997 on portfolio security transactions aggregating
$72,328,156 to firms which provided some research services to BMR of its
affiliates (although many of such firms may have been selected in any particular
transaction primarily because of their execution capabilities). For the fiscal
year ended July 31, 1995 and for the ten months ended July 31, 1994, the
Portfolio paid no brokerage commissions on portfolio transactions.
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 the Portfolio who are members of
the Eaton Vance organization receive no compensation from the Fund or the
Portfolio.) During the fiscal year ended July 31, 1996, the noninterested
Trustees of the Trust and the Portfolio received the following compensation in
their capacities as Trustees from the Fund and the Portfolio, and, for the year
ended September 30, 1996, earned the following compensation in their capacities
as Trustees of 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 .......... $34 $343(2) $142,500(4)
Samuel L. Hayes, III ...... 32 316(3) 153,750(5)
Norton H. Reamer .......... 31 314 142,500
John L. Thorndike ......... 32 318 147,500
Jack L. Treynor ........... 34 341 147,500
- ----------
(1) The Eaton Vance fund complex consists of 228 registered investment companies
or series thereof.
(2) Includes $129 of deferred compensation.
(3) Includes $104 of deferred compensation.
(4) Includes $42,500 of deferred compensation.
(5) Includes $37,500 of deferred compensation.
ADDITIONAL OFFICER INFORMATION
In addition to the officers of the Portfolio listed under "Officers of the
Trust and the Portfolio" in Part I, Cynthia J. Clemson (33) is a Vice
President of the Portfolio. Ms. Clemson has served as a Vice President of the
Portfolio since November 18, 1996. Ms. Clemson has been a Vice President of
BMR and Eaton Vance since 1993 and an employee of Eaton Vance since 1985. Ms.
Clemson is an officer of various investment companies managed by Eaton Vance
or BMR.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return on
a hypothetical investment of $1,000 in the Fund covering the life of the Fund
from August 25, 1992 through July 31, 1996 and for the one-year period ended
July 31, 1996.
<TABLE>
VALUE OF A $1,000 INVESTMENT
<CAPTION>
TOTAL RETURN BEFORE TOTAL RETURN AFTER
VALUE BEFORE VALUE AFTER DEDUCTING DEDUCTING
DEDUCTING THE DEDUCTING THE THE MAXIMUM CDSC THE MAXIMUM CDSC**
INVESTMENT INVESTMENT AMOUNT OF MAXIMUM CDSC MAXIMUM CDSC** -------------------------- --------------------------
PERIOD DATE INVESTMENT ON 7/31/96 ON 7/31/96 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------- ------------ ----------- --------------- --------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of the
Fund*** 8/25/92* $1,000 $1,247.97 $1,217.97 24.80% 5.80% 21.80% 5.14%
1 Year
Ended
7/31/96*** 7/31/95 $1,000 $1,064.65 $1,014.65 6.46% 6.46% 1.46% 1.46%
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>
- ----------
* Investment operations began on August 25, 1992.
** No CDSC is imposed on certain redemptions. See the Fund's current Prospectus.
*** If a portion of the Portfolio's and/or the Fund's expenses had not been subsidized, the Fund would have had lower returns.
</TABLE>
For the thirty-day period ended July 31, 1996, the yield of the Fund was
4.79%. The yield required of a taxable security that would produce an after-tax
yield equivalent to that earned by the Fund of 4.79% would be 7.31%, assuming a
combined federal and State tax rate of 34.45%. If a portion of the Portfolio's
expenses had not been allocated to the Investment Adviser, the Fund would have
had a lower yield.
See the Tax Equivalent Yield Table in this Part II 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
was the record owner of approximately 6.3% 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
The Fund changed its name from Eaton Vance Colorado Tax Free Fund to EV
Marathon Colorado Tax Free Fund on February 1, 1994 and to EV Marathon Colorado
Municipals Fund on December 1, 1995.
<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 equivalent to those of tax
exempt bonds yielding from 4% to 7% under the regular federal income tax and
Colorado State income tax laws and tax rates applicable for 1996.
<TABLE>
<CAPTION>
A FEDERAL AND COLORADO STATE
COMBINED TAX EXEMPT YIELD OF:
SINGLE RETURN JOINT RETURN FEDERAL AND 4% 4.5% 5% 5.5% 6% 6.5% 7%
- ------------------- --------------------- CO STATE --------------------------------------------------------------------
(TAXABLE INCOME*) TAX BRACKET+ IS EQUIVALENT TO A FULLY TAXABLE YIELD OF:
- ------------------------------------------ ------------- --------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Up to $ 24,000 Up to $ 40,100 19.25% 4.95% 5.57% 6.19% 6.81% 7.43% 8.05% 8.67%
$ 24,001 - $ 58,150 $ 40,101 - $ 96,900 31.60 5.85 6.58 7.31 8.04 8.77 9.50 10.23
$ 58,151 - $121,300 $ 96,901 - $147,700 34.45 6.10 6.86 7.63 8.39 9.15 9.92 10.68
$121,301 - $263,750 $147,701 - $263,750 39.20 6.58 7.40 8.22 9.05 9.87 10.69 11.51
Over $263,750 Over $263,750 42.62 6.97 7.84 8.71 9.59 10.46 11.33 12.20
<FN>
*Net amount subject to federal and Colorado personal income tax after deductions and exemptions.
+The Colorado income tax rate is 5%. The combined tax brackets assume that Colorado taxes are itemized deductions for
federal income tax purposes. Investors who do not itemize deductions on their federal income tax return will have a higher
combined bracket and higher taxable equivalent yield than those indicated above. The applicable federal tax rates within
the brackets are 15%, 28%, 31%, 36% and 39.6%, over the same ranges of income.
</TABLE>
Note: The federal income tax portion of above-indicated combined income tax
brackets does not take into account the effect of a reduction in the
deductibility of itemized deductions (including Colorado State income taxes) for
taxpayers with adjusted gross income in excess $117,950. The tax brackets also
do not show the effects of phaseout of personal exemptions for single filers
with adjusted gross income 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 and Colorado personal income taxes, 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 except for Colorado personal income taxes. 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>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EV MARATHON CONNECTICUT MUNICIPALS
FUND. The investment objective of the Fund is to provide current income exempt
from regular federal income tax and Connecticut State personal income taxes. The
Fund currently seeks to achieve its investment objective by investing its assets
in the Connecticut Municipals Portfolio (the "Portfolio").
RISKS OF CONCENTRATION
The following information as to certain Connecticut considerations is given
to investors in view of the Portfolio's policy of concentrating its investments
in Connecticut issuers. Such information supplements the information in the
Prospectus. It is derived from sources that are generally available to investors
and is believed to be accurate. Such information constitutes only a brief
summary, does not purport to be a complete description and is based on
information from official statements relating to securities offerings of
Connecticut issuers. Neither the Trust nor the Portfolio has independently
verified this information.
Although the manufacturing sector (primarily aircraft engines, helicopters
and submarines) has traditionally been of prime economic importance to
Connecticut, the non-manufacturing sector of employment now dominate the State's
economy. Approximately 82% of the State's non-agricultural employment is in the
non-manufacturing sector, with 29% of the total in the service sector, 22% in
the wholesale and retail trade sector, and 14% in the government sector.
Defense-related business plays an important role in the Connecticut economy, and
defense awards to Connecticut have traditionally been among the highest in the
nation on a per capita basis. However, in recent years the federal government
has reduced defense-related spending which has had an adverse impact on the
Connecticut economy.
For 1995, the unemployment rate in Connecticut on a seasonally adjusted
basis was 5.2%, compared to 5.8% for the nation. Throughout 1995, the State
experienced little in the way of substantial job growth. For July 1996, the
unemployment rate was 4.7%, down from 5.5% in 1995. Despite this, Connecticut
continues to have the highest per capita income of any state, reaching 133.8% of
the U.S. average in 1994.
The State derives over 65% of its revenues from taxes imposed by the State.
For the fiscal year 1995, the two taxes that generated the greatest amount of
revenue were the personal income tax and the sales and use tax representing
41.4% and 37.8%, respectively, of total net tax revenues. The tax revenues
remained fairly stagnant, with the exception of the sales and use tax which
increased 8.6%. In order to promote economic stability and provide a positive
business climate, several tax changes were adopted during the 1993 legislative
session. Among the most significant changes were gradual reductions to the
corporation business tax rate of 11.5%, which reductions have since been
accelerated and increased so that for tax years commencing on or after January
1, 2000 such rate will be 7.5%.
For the fiscal year 1995, the State experienced a general fund operating
surplus of $80.5 million and had accumulated a GAAP-basis deficit of $577
million. As of April 1, 1996, the Comptroller had projected an operating deficit
of $22.3 million for the fiscal year 1996.
The State, its officers and employees are defendants in numerous lawsuits.
According to the State Attorney General's Office, an adverse decision in any of
the cases summarized herein could materially affect the State's financial
position: (i) an action to enforce the spending cap provision of the State's
constitution by seeking to require that the General Assembly define certain
terms used therein and to enjoin certain increases in "general budget
expenditures" until this is done; (ii) litigation on behalf of black and
hispanic school children in the City of Hartford seeking "integrated education"
within the greater Hartford metropolitan area; (iii) litigation involving claims
by Indian tribes to less than 1/10 of 1% of the State's land area; (iv)
litigation challenging the State's method of financing elementary and secondary
public schools on the grounds that it denies equal access to education; (v) an
action on behalf of all persons with retardation or traumatic brain injury,
claiming that their constitutional rights are violated by placement in State
hospitals alleged not to provide adequate treatment and training, and seeking
placement in community residential settings with appropriate support services;
(vi) an action by the Connecticut Hospital Association and 33 hospitals seeking
to require the State to reimburse hospitals for in-patient medical services on a
more favorable basis; (vii) a class action by the Connecticut Criminal Defense
Lawyers Association claiming a campaign of illegal surveillance activity and
seeking damages and injunctive relief; and (viii) an action by inmates of the
Department of Correction seeking damages and injunctive relief with respect to
alleged violations of statutory and constitutional rights as a result of the
monitoring and recording of their telephone calls from the State's correctional
institutions.
FEES AND EXPENSES
INVESTMENT ADVISER
As of July 31, 1996, the Portfolio had net assets of $187,616,885. For the
fiscal year ended July 31, 1996, the Portfolio paid BMR advisory fees of
$841,092 (equivalent to 0.43% of the Portfolio's average daily net assets for
such year). For the fiscal year ended July 31, 1995, the Portfolio paid BMR
advisory fees of $835,605 (equivalent to 0.44% of the Portfolio's average daily
net assets for such year). For the ten months ended July 31, 1994, the Portfolio
paid BMR advisory fees of $635,227 (equivalent to 0.42% (annualized) of the
Portfolio's average daily net assets for such period). The Portfolio's
Investment Advisory Agreement with BMR is dated October 13, 1992 and may be
continued as described under "Investment Adviser and Administrator" in Part I.
DISTRIBUTION PLAN
The Distribution Plan and Distribution Agreement remain in effect until
April 28, 1997 and may be continued as described under "Distribution Plan" in
Part I. Pursuant to Rule 12b-1, the Plan has been approved by the Fund's
shareholders and by the Board of Trustees of the Trust, as required by Rule
12b-1. During the fiscal year ended July 31, 1996, the Principal Underwriter
paid to Authorized Firms sales commissions of $288,971 on sales of Fund shares.
During the same period, the Fund made sales commission payments under the Plan
to the Principal Underwriter aggregating $1,415,229 and the Principal
Underwriter received approximately $580,000 in CDSCs imposed on early redeeming
shareholders. The sales commissions and CDSCs paid to the Principal Underwriter
reduced Uncovered Distribution Charges under the Plan. As at July 31, 1996, the
outstanding Uncovered Distribution Charges of the Principal Underwriter
calculated under the Plan amounted to approximately $6,538,000 (which amount was
equivalent to 3.6% of the Fund's net assets on such date). During the fiscal
year ended July 31, 1996, the Fund paid or accrued service fees under the Plan
aggregating $332,082, of which $330,320 was paid to Authorized Firms and the
balance of which was retained by the Principal Underwriter.
PRINCIPAL UNDERWRITER
For the fiscal year ended July 31, 1996, the Fund paid the Principal
Underwriter $1,747.50 for repurchase transactions handled by the Principal
Underwriter (being $2.50 for each such transaction).
BROKERAGE
For the fiscal year ended July 31, 1996, the Portfolio paid brokerage
commissions of $33,097 on portfolio security transactions aggregating
$237,056,390 to firms which provided some research services to BMR or its
affiliates (although many of such firms may have been selected in any particular
transaction primarily because of their execution capabilities). For the fiscal
year ended July 31, 1995 and for the ten months ended July 31, 1994, the
Portfolio paid no brokerage commissions on portfolio transactions.
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 the Portfolio who are members of
the Eaton Vance organization receive no compensation from the Fund or the
Portfolio.) During the fiscal year ended July 31, 1996, the noninterested
Trustees of the Trust and the Portfolio received the following compensation in
their capacities as Trustees from the Fund and the Portfolio, and, for the year
ended September 30, 1996, earned the following compensation in their capacities
as Trustees of 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 .......... $687 $2,197(2) $142,500(4)
Samuel L. Hayes, III ...... 632 2,288(3) 153,750(5)
Norton H. Reamer .......... 628 2,242 142,500
John L. Thorndike ......... 636 2,334 147,500
Jack L. Treynor ........... 681 2,330 147,500
- ----------
(1) The Eaton Vance fund complex consists of 228 registered investment companies
or series thereof.
(2) Includes $819 of deferred compensation.
(3) Includes $773 of deferred compensation.
(4) Includes $42,500 of deferred compensation.
(5) Includes $37,500 of deferred compensation.
ADDITIONAL OFFICER INFORMATION
In addition to the officers of the Portfolio listed under "Officers of the
Trust and the Portfolio" in Part I, Nicole Anderes (35) is a Vice President of
the Portfolio. Ms. Anderes has served as a Vice President of the Portfolio since
June 19, 1995. Ms. Anderes has been a Vice President of BMR and Eaton Vance
since 1994 and is an officer of various investment companies managed by Eaton
Vance or BMR. Prior to joining Eaton Vance, Ms. Anderes was Vice President and
portfolio manager, Lazard Freres Asset Management (1992-1994) and Vice President
and Manager -- Municipal Research, Roosevelt & Cross (1987-1992).
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return on
a hypothetical investment of $1,000 in the Fund covering the life of the Fund
from May 1, 1992 through July 31, 1996 and for the one-year period ended July
31, 1996.
<TABLE>
VALUE OF A $1,000 INVESTMENT
<CAPTION>
TOTAL RETURN BEFORE TOTAL RETURN AFTER
VALUE BEFORE VALUE AFTER DEDUCTING DEDUCTING
DEDUCTING THE DEDUCTING THE THE MAXIMUM CDSC THE MAXIMUM CDSC**
INVESTMENT INVESTMENT AMOUNT OF MAXIMUM CDSC MAXIMUM CDSC** -------------------------- --------------------------
PERIOD DATE INVESTMENT ON 7/31/96 ON 7/31/96 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------- ------------ ----------- --------------- --------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of
the Fund*** 5/1/92* $1,000 $1,264.73 $1,244.73 26.47% 5.68% 24.47% 5.29%
1 Year
Ended
7/31/96 7/31/95 $1,000 $1,063.04 $1,013.04 6.30% 6.30% 1.30% 1.30%
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>
- ----------
* Investment operations began on May 1, 1992.
** No CDSC is imposed on certain redemptions. See the Fund's current Prospectus.
*** If a portion of the Fund's expenses had not been subsidized, the Fund would have had lower returns.
</TABLE>
For the thirty-day period ended July 31, 1996, the yield of the Fund was
4.50%. The yield required of a taxable security that would produce an after-tax
yield equivalent to that earned by the Fund of 4.50% would be 6.83%, assuming a
combined federal and State tax rate of 34.11%.
See the Tax Equivalent Yield Table in this Part II 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
was the record owner of approximately 20.1% 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
The Fund changed its name from Eaton Vance Connecticut Tax Free Fund to EV
Marathon Connecticut Tax Free Fund on February 1, 1994 and to EV Marathon
Connecticut Municipals Fund on December 1, 1995.
<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 equivalent to those of tax
exempt bonds yielding from 4% to 7% under the regular federal income tax and
Connecticut State income tax laws and tax rates applicable for 1996.
<TABLE>
<CAPTION>
A FEDERAL AND CONNECTICUT STATE
SINGLE RETURN JOINT RETURN COMBINED TAX EXEMPT YIELD OF:
- ------------------- ---------------------- FEDERAL AND 4% 4.5% 5% 5.5% 6% 6.5% 7%
CT STATE -----------------------------------------------------------------
(TAXABLE INCOME*) TAX BRACKET+ IS EQUIVALENT TO A FULLY TAXABLE YIELD OF:
- ------------------------------------------- ------------- -----------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Up to $ 24,000 Up to $ 40,100 18.25% 4.89% 5.50% 6.12% 6.73% 7.34% 7.95% 8.56%
$ 24,001 - $ 58,150 $ 40,101 - $ 96,900 31.24 5.82 6.54 7.27 8.00 8.73 9.45 10.18
$ 58,151 - $121,300 $ 96,901 - $147,700 34.11 6.07 6.83 7.59 8.35 9.11 9.86 10.62
$121,301 - $263,750 $147,701 - $263,750 38.88 6.54 7.36 8.18 9.00 9.82 10.63 11.45
Over $263,750 Over $263,750 42.32 6.93 7.80 8.67 9.54 10.40 11.27 12.14
<FN>
*Net amount subject to federal and Connecticut personal income tax after eductions and exemptions.
+The combined federal and Connecticut tax brackets are calculated using the highest Connecticut tax rate within each
bracket, reduced by available tax credits. Taxpayers with taxable income within these brackets may have a lower combined
tax bracket and taxable equivalent yield than indicated above. Tax credits reduce the effective Connecticut tax rate for
single filers with taxable income up to $52,500 and joint filers up to $100,500. The combined tax brackets assume that
Connecticut taxes are itemized deductions for federal income tax purposes. Investors who do not itemize deductions on their
federal income tax return will have a higher combined bracket and higher taxable equivalent yield than those indicated
above. The applicable federal tax rates within the brackets are 15%, 28%, 31%, 36% and 39.6%, over the same ranges of
income.
</TABLE>
Note: The federal income tax portion of above-indicated combined income tax
brackets does not take into account the effect of a reduction in the
deductibility of itemized deductions (including Connecticut State income taxes)
for taxpayers with adjusted gross income in excess of $117,950. The tax brackets
also do not show the effects of phaseout of personal exemptions for single
filers with adjusted gross income 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 and Connecticut personal income taxes, 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 except for Connecticut personal income taxes. 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>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EV MARATHON MICHIGAN MUNICIPALS
FUND. The investment objective of the Fund is to provide current income exempt
from regular federal income tax and Michigan State and City income and single
business taxes in the form of an investment exempt from Michigan intangibles
tax. The Fund currently seeks to achieve its investment objective by investing
its assets in the Michigan Municipals Portoflio (the "Portfolio").
RISKS OF CONCENTRATION
The following information as to certain Michigan considerations is given
to investors in view of the Portfolio's policy of concentrating its
investments in Michigan issuers. Such information supplements the information
in the Prospectus. It is derived from sources that are generally available to
investors and is believed to be accurate. Such information constitutes only a
brief summary, does not purport to be a complete description and is based on
information from official statements relating to securities offerings of
Michigan issuers. Neither the Trust nor the Portfolio has independently
verified this information.
The State's economy is overly dependent on the manufacturing sector, more
specifically the auto industry. Manufacturing accounts for 23% of total
employment as compared to the national average of 17%. The dependency on
manufacturing makes the State economy overly susceptible to economic downturns.
For June 1996, the State unemployment rate was 4.5% as compared to the national
average of 5.4%. Modest employment growth is projected for 1996 and 1997. An
improving economy and successful cost containment have enabled the State to
improve its financial position. For 1995, the Budget Stabilization Fund was
slightly greater than $1.0 billion and is projected to reach $1.1 billion for
1996. The Governor has proposed reducing individual and business income taxes.
For 1996, revenues are estimated to grow 4.7% while expenditures will grow by a
similar rate.
In March, 1994, Michigan voters approved a change in the tax system. The
most significant provisions were an increase in the sales tax rate from 4% to
6%, a reduction in the income tax rate from 4.6% to 4.4% and the creation of a
statewide property tax. These changes are expected to provide sufficient
revenues to offset the elimination of property taxes for school district
operating purposes. There can be no assurance that school districts will receive
sufficient revenues to be able to service any limited tax bonds they may have
outstanding and which may be held by the Portfolio.
Under the State Constitution, the Legislature is prohibited from raising
taxes if doing so would cause total State revenues (except federal aid) to
exceed 10% of State personal income. The only exceptions to this revenue limit
are a majority approval of a referendum question or a specific emergency
declared by a two- thirds vote of the Legislature. However, this limit does not
apply to taxes imposed for the payment of principal and interest on bonds of the
State, if the bonds are approved by voters and authorized by a vote of
two-thirds of the members of each House of the Legislature. Local units of
government and local authorities are authorized to issue bonds and other
evidences of indebtedness in a variety of situations without the approval of
electors, but the ability of the obligor to levy taxes for the payment of such
obligations is subject to the foregoing limitations unless the obligations were
authorized before December 23, 1978 or approved by the electors. The
Constitution prohibits the State from reducing the proportion of total State
spending paid to all local units of government, taken as a group, below that
proportion in effect in the 1978-79 fiscal year. The State may not mandate new
or increased levels of services to be provided by local units without making
appropriations to cover any increased costs.
Under the State Constitution, the total amount of general ad valorem taxes
imposed on taxable property in any year cannot exceed certain millage
limitations specified by the Constitution, statute or charter. The Constitution
prohibits local units of government from levying any tax not authorized by law
or charter, or from increasing the rate of an existing tax above the rate
authorized by law or charter. The Constitution also contains millage reduction
provisions. Under such provisions, should the value of taxable property
(exclusive of new construction and improvements) increase at a percentage
greater than the percentage increase in the Consumer Price Index, the maximum
authorized tax rate would be reduced by a factor which would result in the same
maximum potential tax revenues to the local taxing unit as if the valuation of
taxable property (less new construction and improvements) had grown only at the
Consumer Price Index rate instead of at the higher actual growth rate. Thus, if
taxable property values rise faster than consumer prices, the maximum authorized
tax rate would be increased at the Consumer Price Index rate. Conversely, if
taxable property values rise slower than consumer prices, tax rates may be
raised accordingly, but never higher than the rate authorized on December 23,
1978, without elector approval.
The ability of the State to pay the principal and interest on its general
obligation bonds may be affected by the limitations described above. Similarly,
the ability of local units to levy taxes to pay the principal of and interest on
their general obligations is subject to the constitutional, statutory and
charter limits described below.
FEES AND EXPENSES
INVESTMENT ADVISER
As of July 31, 1996, the Portfolio had net assets of $173,464,608. For the
fiscal year ended July 31, 1996, the Portfolio paid BMR advisory fees of
$795,032 (equivalent to 0.43% of the Portfolio's average daily net assets for
such year). For the fiscal year ended July 31, 1995, the Portfolio paid BMR
advisory fees of $856,258 (equivalent to 0.44% of the Portfolio's average
daily net assets for such year). For the ten months ended July 31, 1994, the
Portfolio paid BMR advisory fees of $721,041 (equivalent to 0.43% (annualized)
of the Portfolio's average daily net assets for such period). The Portfolio's
Investment Advisory Agreement with BMR is dated October 13, 1992 and may be
continued as described under "Investment Adviser and Administrator" in Part I.
DISTRIBUTION PLAN
The Distribution Plan and Distribution Agreement remain in effect until
April 28, 1997 and may be continued as described under "Distribution Plan" in
Part I. Pursuant to Rule 12b-1, the Plan has been approved by the Fund's
shareholders and by the Board of Trustees of the Trust, as required by Rule
12b-1. During the fiscal year ended July 31, 1996, the Principal Underwriter
paid to Authorized Firms sales commissions of $163,807 on sales of Fund
shares. During the same period, the Fund made sales commission payments under
the Plan to the Principal Underwriter aggregating $1,364,186 and the Principal
Underwriter received approximately $655,000 in CDSCs imposed on early
redeeming shareholders. The sales commissions and CDSCs paid to the Principal
Underwriter reduced Uncovered Distribution Charges under the Plan. As at July
31, 1996, the outstanding Uncovered Distribution Charges of the Principal
Underwriter calculated under the Plan amounted to approximately $5,075,000
(which amount was equivalent to 3.0% of the Fund's net assets on such date).
During the fiscal year ended July 31, 1996, the Fund paid or accrued service
fees under the Plan aggregating $332,353, of which $330,741 was paid to
Authorized Firms and the balance of which was retained by the Principal
Underwriter.
PRINCIPAL UNDERWRITER
For the fiscal year ended July 31, 1996, the Fund paid the Principal
Underwriter $2,147.50 for repurchase transactions handled by the Principal
Underwriter (being $2.50 for each such transaction).
BROKERAGE
For the fiscal years ended July 31, 1996 and 1995, and for the ten months
ended July 31, 1994, the Portfolio paid no brokerage commissions on portfolio
transactions.
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 the Portfolio who are members of
the Eaton Vance organization receive no compensation from the Fund or the
Portfolio.) During the fiscal year ended July 31, 1996, the noninterested
Trustees of the Trust and the Portfolio received the following compensation in
their capacities as Trustees from the Fund and the Portfolio, and, for the year
ended September 30, 1996, earned the following compensation in their capacities
as Trustees of 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 ........ $687 $2,091(2) $142,500(4)
Samuel L. Hayes, III .... 632 2,192(3) 153,750(5)
Norton H. Reamer ........ 628 2,147 142,500
John L. Thorndike ....... 636 2,238 147,500
Jack L. Treynor ......... 681 2,228 147,500
- ----------
(1) The Eaton Vance fund complex consists of 228 registered investment
companies or series thereof.
(2) Includes $784 of deferred compensation.
(3) Includes $737 of deferred compensation.
(4) Includes $42,500 of deferred compensation.
(5) Includes $37,500 of deferred compensation.
ADDITIONAL OFFICER INFORMATION
In addition to the officers of the Portfolio listed under "Officers of the
Trust and the Portfolio" in Part I, Timothy T. Browse (37) is a Vice President
of the Portfolio. Mr. Browse has served as a Vice President of the Portfolio
since June 19, 1995. Mr. Browse has been a Vice President of BMR and Eaton
Vance since 1993 and an employee of Eaton Vance since 1992. Mr. Browse is an
officer of various investment companies managed by Eaton Vance or BMR. Prior
to joining Eaton Vance, Mr. Browse was a Municipal Bond Trader at Fidelity
Management & Research Company (1987-1992).
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return
on a hypothetical investment of $1,000 in the Fund covering the life of the
Fund from April 19, 1991 through July 31, 1996 and for the five- and one-year
periods ended July 31, 1996.
<TABLE>
VALUE OF A $1,000 INVESTMENT
<CAPTION>
TOTAL RETURN BEFORE TOTAL RETURN AFTER
VALUE BEFORE VALUE AFTER DEDUCTING DEDUCTING
DEDUCTING THE DEDUCTING THE THE MAXIMUM CDSC THE MAXIMUM CDSC**
INVESTMENT INVESTMENT AMOUNT OF MAXIMUM CDSC MAXIMUM CDSC** -------------------------- --------------------------
PERIOD DATE INVESTMENT ON 7/31/96 ON 7/31/96 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------- ----------- ----------- --------------- ---------------- ------------ ------------ ------------ ------------
<C> <C> <C> <C> <C> <C> <C> <C> <C>
Life of
the Fund*** 4/19/91* $1,000 $1,403.81 $1,393.81 40.38% 6.62% 39.38% 6.48%
5 Years
Ended
7/31/96*** 7/31/91 $1,000 $1,377.63 $1,357.63 37.76% 6.62% 35.76% 6.31%
1 Year
Ended
7/31/96 7/31/95 $1,000 $1,065.04 $1,015.04 6.50% 6.50% 1.50% 1.50%
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>
- ----------
* Investment operations began on April 19, 1991.
** No CDSC is imposed on certain redemptions. See the Fund's current
Prospectus.
*** If a portion of the Fund's expenses had not been subsidized, the Fund
would have had lower returns.
</TABLE>
For the thirty-day period ended July 31, 1996, the yield of the Fund was
4.38%. The yield required of a taxable security that would produce an after-tax
yield equivalent to that earned by the Fund of 4.38% would be 6.84%, assuming a
combined federal and State tax rate of 35.93%.
See the Tax Equivalent Yield Table in this Part II 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 was the record owner of approximately 24.2% 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% of more of the Fund's outstanding shares as
of such date.
OTHER INFORMATION
The Fund changed its name from Eaton Vance Michigan Tax Free Fund to EV
Marathon Michigan Tax Free Fund on February 1, 1994 and to EV Marathon
Michigan Municipals Fund on December 1, 1995.
<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 equivalent to those of
tax exempt bonds yielding from 4% to 7% under the regular federal income tax,
Michigan State income tax, Michigan State intangibles tax and Michigan City
income tax laws and tax rates applicable for 1996.
<TABLE>
<CAPTION>
A FEDERAL AND MICHIGAN STATE
COMBINED TAX EXEMPT YIELD OF:
SINGLE RETURN JOINT RETURN FEDERAL AND 4% 4.5% 5% 5.5% 6% 6.5% 7%
- ------------------- --------------- MI STATE --------------------------------------------------------------------
(TAXABLE INCOME)* TAX BRACKET+ IS EQUIVALENT TO A FULLY TAXABLE YIELD OF:
- ----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Up to $ 24,000 Up to $40,100 21.08% 5.07% 5.70% 6.34% 6.97% 7.60% 8.24% 8.87%
$ 24,001 - $ 58,150 $ 40,101 - $ 96,900 33.15 5.98 6.73 7.48 8.23 8.98 9.72 10.47
$ 58,151 - $121,300 $ 96,901 - $147,700 35.93 6.24 7.02 7.80 8.58 9.37 10.15 10.93
$121,301 - $263,750 $147,701 - $263,750 40.58 6.73 7.57 8.41 9.26 10.10 10.94 11.78
Over $263,750 Over $263,750 43.92 7.13 8.02 8.92 9.81 10.70 11.59 12.48
<FN>
* Net amount subject to federal and Michigan personal income tax after deductions and exemptions.
+ The combined tax brackets include a Michigan tax rate of 4.4%, Michigan City income tax rate of 1% (which may vary by city),
and a Michigan intangibles tax rate of 1.75%, and assume that Michigan State and local taxes are itemized deductions for
federal income tax purposes. Investors who do not itemize deductions on their federal income tax return will have a higher
combined bracket and higher taxable equivalent yield than those indicated above. The applicable federal tax rates within the
brackets are 15%, 28%, 31%, 36% and 39.6%, over the same ranges of income.
</TABLE>
Note: The federal income tax portion of above-indicated combined income tax
brackets does not take into account the effect of a reduction in the
deductibility of itemized deductions (including Michigan State and local
income taxes) for taxpayers with adjusted gross income in excess of $117,950.
The tax brackets also do not show the effects of phaseout of personal
exemptions for single filers with adjusted gross income 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 and Michigan personal income taxes, 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 except for Michigan personal income taxes. 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 with their tax adviser for additional information.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EV MARATHON MINNESOTA MUNICIPALS
FUND. The investment objective of the Fund is to provide current income exempt
from regular federal income tax and Minnesota State income taxes. The Fund
currently seeks to achieve its investment objective by investing its assets in
the Minnesota Municipals Portfolio (the "Portfolio").
RISKS OF CONCENTRATION
The following information as to certain Minnesota considerations is given
to investors in view of the Portfolio's policy of concentrating its
investments in Minnesota issuers. Such information supplements the information
in the Prospectus. It is derived from sources that are generally available to
investors and is believed to be accurate. Such information constitutes only a
brief summary, does not purport to be a complete description and is based on
information from official statements relating to securities offerings of
Minnesota issuers. Neither the Trust nor the Portfolio has independently
verified this information.
The State's diverse economy has continued to outperform the nation, as
evidenced by the State's employment growth in the early 1990s. For August 1996,
the unemployment rate was 3.8% compared to the national average of 5.1%. The
State of Minnesota has no obligation to pay any bonds of its political or
governmental subdivisions, municipalities, governmental agencies, or
instrumentalities. The creditworthiness of local general obligation bonds is
dependent upon the financial condition of the local government issuer, and the
creditworthiness of revenue bonds is dependent upon the availability of
particular designated revenue sources or the financial conditions of the
underlying obligors. Although most of the bonds owned by the Portfolio are
expected to be obligations other than general obligations of the State of
Minnesota itself, there can be no assurance that the same factors that adversely
affect the economy of the State generally will not also affect adversely the
market value or marketability of such other obligations, or the ability of the
obligors to pay the principal of or interest on such obligations.
At the local level, the property tax base has recovered after its growth was
slowed in many communities in the early 1990s by an overcapacity in certain
segments of the commercial real estate market. Local finances are also affected
by the amount of state aid that is made available. Further, various of the
issuers within the State of Minnesota, as well as the State of Minnesota itself,
whose securities may be purchased by the Portfolio, may now or in the future be
subject to lawsuits involving material amounts. It is impossible to predict the
outcome of these lawsuits. Any losses with respect to these lawsuits may have an
adverse impact on the ability of these issuers to meet their obligations.
FEES AND EXPENSES
INVESTMENT ADVISER
As of July 31, 1996, the Portfolio had net assets of $76,090,073. For the
fiscal year ended July 31, 1996, the Portfolio paid BMR advisory fees of
$295,178 (equivalent to 0.36% of the Portfolio's average daily net assets for
such year). For the fiscal year ended July 31, 1995, the Portfolio paid BMR
advisory fees of $310,489 (equivalent to 0.37% of the Portfolio's average
daily net assets for such year). For the ten months ended July 31, 1994, the
Portfolio paid BMR advisory fees of $228,154 (equivalent to 0.36% (annualized)
of the Portfolio's average daily net assets for such period). The Portfolio's
Investment Advisory Agreement with BMR is dated October 13, 1992 and may be
continued as described under "Investment Adviser and Administrator" in Part I.
DISTRIBUTION PLAN
The Distribution Plan and Distribution Agreement remain in effect until
April 28, 1997 and may be continued as described under "Distribution Plan" in
Part I. Pursuant to Rule 12b-1, the Plan has been approved by the Fund's
shareholders and by the Board of Trustees of the Trust, as required by Rule
12b-1. During the fiscal year ended July 31, 1996, the Principal Underwriter
paid to Authorized Firms sales commissions of $152,015 on sales of Fund
shares. During the same period, the Fund made sales commission payments under
the Plan to the Principal Underwriter aggregating $585,606 and the Principal
Underwriter received approximately $351,000 in CDSCs imposed on early
redeeming shareholders. The sales commissions and CDSCs paid to the Principal
Underwriter reduced Uncovered Distribution Charges under the Plan. As at July
31, 1996, the outstanding Uncovered Distribution Charges of the Principal
Underwriter calculated under the Plan amounted to approximately $2,539,000
(which amount was equivalent to 3.4% of the Fund's net assets on such date).
During the fiscal year ended July 31, 1996, the Fund paid or accrued service
fees under the Plan aggregating $132,036, of which $131,927 was paid to
Authorized Firms and the balance of which was retained by the Principal
Underwriter.
PRINCIPAL UNDERWRITER
For the fiscal year ended July 31, 1996, the Fund paid the Principal
Underwriter $1,137.50 for repurchase transactions handled by the Principal
Underwriter (being $2.50 for each such transaction).
BROKERAGE
For the fiscal year ended July 31, 1996, the Portfolio paid brokerage
commissions of $21,625 on portfolio security transactions aggregating
$104,595,026 to firms which provided some research services to BMR or its
affiliates (although many of such firms may have been selected in any
particular transaction primarily because of their execution capabilities). For
the fiscal year ended July 31, 1995 and for the ten months ended July 31,
1994, the Portfolio paid no brokerage commissions on portfolio transactions.
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 the Portfolio who are members of
the Eaton Vance organization receive no compensation from the Fund or the
Portfolio.) During the fiscal year ended July 31, 1996, the noninterested
Trustees of the Trust and the Portfolio received the following compensation in
their capacities as Trustees from the Fund and the Portfolio, and, for the year
ended September 30, 1996, earned the following compensation in their capacities
as Trustees of 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 ........ $343 $1,129(2) $142,500(4)
Samuel L. Hayes, III .... 316 1,308(3) 153,750(5)
Norton H. Reamer ........ 314 1,268 142,500
John L. Thorndike ....... 318 1,348 147,500
Jack L. Treynor ......... 341 1,274 147,500
- ----------
(1) The Eaton Vance fund complex consists of 228 registered investment
companies or series thereof.
(2) Includes $424 of deferred compensation.
(3) Includes $446 of deferred compensation.
(4) Includes $42,500 of deferred compensation.
(5) Includes $37,500 of deferred compensation.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return
on a hypothetical investment of $1,000 in the Fund covering the life of the
Fund from July 29, 1991 through July 31, 1996 and for the five- and one-year
periods ended July 31, 1996.
<PAGE>
<TABLE>
VALUE OF A $1,000 INVESTMENT
<CAPTION>
TOTAL RETURN BEFORE TOTAL RETURN AFTER
VALUE BEFORE VALUE AFTER DEDUCTING DEDUCTING
DEDUCTING THE DEDUCTING THE THE MAXIMUM CDSC THE MAXIMUM CDSC**
INVESTMENT INVESTMENT AMOUNT OF MAXIMUM CDSC MAXIMUM CDSC** -------------------------- --------------------------
PERIOD DATE INVESTMENT ON 7/31/96 ON 7/31/96 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------- ------------ ----------- --------------- --------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of
the Fund*** 7/29/91* $1,000 $1,321.11 $1,311.11 32.11% 5.72% 31.11% 5.56%
5 Years
Ended
7/31/96*** 7/31/91 $1,000 $1,326.38 $1,306.38 32.64% 5.81% 30.64% 5.49%
1 Year
Ended
7/31/96 7/31/95 $1,000 $1,060.04 $1,010.04 6.00% 6.00% 1.00% 1.00%
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>
- ----------
* Investment operations began on July 29, 1991.
** No CDSC is imposed on certain redemptions. See the Fund's current Prospectus.
*** If a portion of the Fund's expenses had not been subsidized, the Fund would have had lower returns.
</TABLE>
For the thirty-day period ended July 31, 1996, the yield of the Fund was
4.81%. The yield required of a taxable security that would produce an after-tax
yield equivalent to that earned by the Fund of 4.81% would be 7.62%, assuming a
combined federal and State tax rate of 36.87%.
See the Tax Equivalent Yield Table in this Part II 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 was the record owner of approximately 7.6% 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
The Fund changed its name from Eaton Vance Minnesota Tax Free Fund to EV
Marathon Minnesota Tax Free Fund on February 1, 1994 and to EV Marathon
Minnesota Municipals Fund on December 1, 1995.
<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 equivalent to those of
tax exempt bonds yielding from 4% to 7% under the regular federal income tax
and regular Minnesota State personal income tax laws and tax rates for 1996.
<TABLE>
<CAPTION>
A FEDERAL AND MINNESOTA STATE
COMBINED TAX EXEMPT YIELD OF:
SINGLE RETURN JOINT RETURN FEDERAL AND 4% 4.5% 5% 5.5% 6% 6.5% 7%
- ------------------- --------------- MN STATE --------------------------------------------------------------------
(TAXABLE INCOME)* TAX BRACKET+ IS EQUIVALENT TO A FULLY TAXABLE YIELD OF:
- -------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Up to $ 24,000 Up to $40,100 21.80% 5.12% 5.75% 6.39% 7.03% 7.67% 8.31% 8.95%
$ 24,001 - $ 58,150 $ 40,101 - $ 96,900 34.12 6.07 6.83 7.59 8.35 9.11 9.87 10.63
$ 58,151 - $121,300 $ 96,901 - $147,700 36.87 6.34 7.13 7.92 8.71 9.50 10.30 11.09
$121,301 - $263,750 $147,701 - $263,750 41.44 6.83 7.68 8.54 9.39 10.25 11.10 11.95
Over $263,750 Over $263,750 44.73 7.24 8.14 9.05 9.95 10.86 11.76 12.67
<FN>
*Net amount subject to federal and Minnesota personal income tax after deductions and exemptions.
+ The first two combined tax brackets are calculated using the highest Minnesota tax rate within each bracket. Taxpayers with
taxable income within such brackets may have lower combined tax brackets and taxable equivalent yields than indicated above.
The combined tax brackets assume that Minnesota taxes are itemized deductions for federal income tax purposes. Investors who
do not itemize deductions on their federal income tax return will have a higher combined bracket and higher taxable equivalent
yield than those indicated above. The applicable federal tax rates within the brackets are 15%, 28%, 31%, 36% and 39.6%, over
the same ranges of income.
</TABLE>
Note: The federal income tax portion of above-indicated combined income tax
brackets does not take into account the effect of a reduction in the
deductibility of itemized deductions (including Minnesota State income taxes)
for taxpayers with adjusted gross income in excess of $117,950. The tax
brackets also do not show the effects of phaseout of personal exemptions for
single filers with adjusted gross income 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 and Minnesota personal income taxes, 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 except for regular Minnesota personal income taxes. 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,
and regular Minnesota personal income tax, is treated as a tax preference item
which could subject the recipient to the federal and Minnesota alternative
minimum taxes. The illustrations assume that the federal and Minnesota
alternative minimum taxes are 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 with their tax adviser for additional information.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EV MARATHON NEW JERSEY MUNICIPALS
FUND. The investment objective of the Fund is to provide current income exempt
from regular federal income tax and New Jersey State personal income taxes.
The Fund currently seeks to achieve its investment objective by investing its
assets in the New Jersey Municipals Portfolio (the "Portfolio").
RISKS OF CONCENTRATION
The following information as to certain New Jersey considerations is given
to investors in view of the Portfolio's policy of concentrating its
investments in New Jersey issuers. Such information supplements the
information in the Prospectus. It is derived from sources that are generally
available to investors and is believed to be accurate. Such information
constitutes only a brief summary, does not purport to be a complete
description and is based on information from official statements relating to
securities offerings of New Jersey issuers. Neither the Trust nor the
Portfolio has independently verified this information.
New Jersey has a well diversified economy and high wealth levels. Per
capita income ranks as the second highest in the nation at 28% above the U.S.
average. The State's economy benefits from its proximity to New York and other
major eastern seaboard cities. New Jersey's economy, like most states,
suffered during the recent recession with unemployment increasing and
surpassing the national average. New Jersey's adjusted unemployment rate for
July 1996 was 6.1% compared to 5.4% nationally.
The State ended fiscal 1993 with an $855 million surplus, approximately
half of which was used in the 1994 budget. 1994 had an appropriation for all
funds of $15.7 billion, up 4.8% from fiscal 1993 revised appropriations of
$14.7 billion. Both years benefited from $412 million in nonrecurring revenues
from retroactive federal Medicaid payments. After the Legislature reduced the
Governor's fiscal 1994 requests by $182 million, about half the $855 million
fiscal 1993 total surplus was used for fiscal 1994, with a June 30, 1994
forecast of $416 million -- $110 million allocated to the General Fund and
over $305 million to rainy day and taxpayer relief funds.
In 1994, New Jersey adopted a 5% personal income tax cut retroactive to
January 1, 1994. In 1995, New Jersey adopted a 10% personal income tax cut
retroactive to January 1, 1995. On June 26, 1995, the New Jersey State
Legislature passed an additional 15% reduction to take effect January 1, 1996.
State officials estimate the revenue loss resulting from these tax cuts at
over $1 billion for fiscal 1996. To accommodate the tax cut, the fiscal 1996
budget would rely on non-recurring revenues and the use of prior years'
surplus. Furthermore, a major focus of the spending reductions has been
employer contributions to retiree health care and pension systems which were
cut by over $863 million in fiscal 1995. There can be no assurance that the
tax cuts will not have an adverse impact on the State's finances and the
demand for municipal bonds in the State.
In fiscal year 1995, expenditure control was a major factor with the
implementation of an income tax reduction. Operations were stronger than
budgeted. An operating deficit of $335.8 million was incurred instead of the
budgeted $555.0 million.
In fiscal year 1996, it is projected to be another year of operating
deficits, which will continue to draw down the State's general fund balances.
Revenue growth is projected to be slower than expected. One-time revenue
measures will account for approximately 3.5% of budget.
In fiscal year 1997, New Jersey will implement the last phase of its $1.25
billion multi-year personal income tax cut. The State will continue to
restrain state spending through agency and program cuts. The budget will be
balanced with the use of about $300 million of one-shot revenues, which is
equivalent to 2% of the budget.
General obligation bonds of New Jersey are the primary method for New
Jersey financing of capital projects. These bonds are backed by the full faith
and credit of New Jersey. New Jersey tax revenues and certain other fees are
pledged to meet the principal and interest payments required to fully pay the
debt. No general obligation debt can be issued by New Jersey without prior
voter approval, except that, pursuant to a constitutional amendment, no voter
approval is required for any law authorizing the creation of a debt for the
purpose of refinancing all or a portion of the outstanding debt of New Jersey,
so long as such law requires that the refinancing provided debt service
savings. The New Jersey Constitution also provides that no voter approval is
required for debt issued for purposes of war, to repel invasion, to suppress
insurrection or to meet an emergency caused by disaster or act of God. Capital
construction can also be funded by appropriation of current revenues on a pay-
as-you-go basis. All appropriations for capital projects and all proposals for
State bond authorizations are subject to the review and recommendation of the
New Jersey Commission on Capital Budgeting and Planning.
Other State-related obligations include those created pursuant to the New
Jersey Building Authority Act, which has the power to construct facilities for
leasing to the State. The rental for such buildings is equal to the debt
service relating thereto plus payments in lieu of real estate taxes.
Legislation provides for future appropriations for State aid to local school
districts equal to debt service on a maximum principal amount of $280,000,000
of bonds issued by such local school districts for construction and renovation
of school facilities and for State aid to counties equal to debt service on up
to $80,000,000 of bonds issued by counties for construction of county college
facilities.
The authorizing legislation for various State entities provides for
specific budgetary procedures with respect to certain obligations issued by
such entities. Bonds issued pursuant to authorizing legislation of this type
are sometimes referred to as "moral obligation" bonds. There is no statutory
limitation on the amount of moral obligation bonds which may be issued by
eligible State entities. Currently, there are two such entities available for
State appropriations to meet moral obligations. The New Jersey Housing and
Mortgage Finance Agency has not had a deficiency in a debt service reserve
which required New Jersey to appropriate funds. It is anticipated that the
agency's revenue will continue to be sufficient to cover debt service on its
bonds. The State provides the South Jersey Port Corporation with funds to
cover all debt service and property tax requirements, when earned revenues are
anticipated to be insufficient to cover these obligations. In the past,
anticipated revenues have, in some cases, been insufficient to cover debt
service and/or insufficient to cover all property tax requirements. These are
numerous other State-created entities with outstanding debt. This debt is
supported by revenues derived from or assets of the various projects financed
by such entities.
The Local Budget Law imposes specific budgetary procedures upon counties
and municipalities, subject to review by the Director of the Division of Local
Government Services. State law also regulates the issuance of debt by counties
and municipalities by limiting the amount of tax anticipation notes that may
be issued and requiring their repayment within three months of the end of the
fiscal year in which they are issued. The Local Bond Law governs the issuance
of bonds and notes and bars the issuance of bonds for the payment of current
expenses or to pay outstanding obligations, except where permitted by the
Local Finance Board. State law also authorizes State officials to supervise
fiscal administration in any municipality facing financial difficulties.
FEES AND EXPENSES
INVESTMENT ADVISER
As of July 31, 1996, the Portfolio had net assets of $386,244,341. For the
fiscal year ended July 31, 1996, the Portfolio paid BMR advisory fees of
$1,878,801 (equivalent to 0.47% of the Portfolio's average daily net assets
for such year). For the fiscal year ended July 31, 1995, the Portfolio paid
BMR advisory fees of $1,944,340 (equivalent to 0.47% of the Portfolio's
average daily net assets for such year). For the ten months ended July 31,
1994, the Portfolio paid BMR advisory fees of $1,609,137 (equivalent to 0.46%
(annualized) of the Portfolio's average daily net assets for such period). The
Portfolio's Investment Advisory Agreement with BMR is dated October 13, 1992
and may be continued as described under "Investment Adviser and Administrator"
in Part I.
DISTRIBUTION PLAN
The Distribution Plan and Distribution Agreement remain in effect until
April 28, 1997 and may be continued as described under "Distribution Plan" in
Part I. Pursuant to Rule 12b-1, the Plan has been approved by the Fund's
shareholders and by the Board of Trustees of the Trust, as required by Rule
12b-1. During the fiscal year ended July 31, 1996, the Principal Underwriter
paid to Authorized Firms sales commissions of $619,140 on sales of Fund
shares. During the same period, the Fund made sales commission payments under
the Plan to the Principal Underwriter aggregating $2,975,687 and the Principal
Underwriter received approximately $1,352,000 in CDSCs imposed on early
redeeming shareholders. The sales commissions and CDSCs paid to the Principal
Underwriter reduced Uncovered Distribution Charges under the Plan. As at July
31, 1996, the outstanding Uncovered Distribution Charges of the Principal
Underwriter calculated under the Plan amounted to approximately $11,266,000
(which amount was equivalent to 3.0% of the Fund's net assets on such date).
During the fiscal year ended July 31, 1996, the Fund paid or accrued service
fees under the Plan aggregating $680,396, of which $677,550 was paid to
Authorized Firms and the balance of which was retained by the Principal
Underwriter.
PRINCIPAL UNDERWRITER
For the fiscal year ended July 31, 1996, the Fund paid the Principal
Underwriter $4,345 for repurchase transactions handled by the Principal
Underwriter (being $2.50 for each such transaction).
BROKERAGE
For the fiscal year ended July 31, 1996, the Portfolio paid brokerage
commissions of $41,780 on portfolio security transactions aggregating
$276,203,309 to firms which provided some research services to BMR or its
affiliates (although many of such firms may have been selected in any
particular transaction primarily because of their execution capabilities). For
the fiscal year ended July 31, 1995 and for the ten months ended July 31,
1994, the Portfolio paid no brokerage commissions on portfolio transactions.
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 the Portfolio who are members of
the Eaton Vance organization receive no compensation from the Fund or the
Portfolio.) During the fiscal year ended July 31, 1996, the noninterested
Trustees of the Trust and the Portfolio received the following compensation in
their capacities as Trustees from the Fund and the Portfolio, and, for the year
ended September 30, 1996, earned the following compensation in their capacities
as Trustees of 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 .......... $687 $3,634(2) $142,500(4)
Samuel L. Hayes, III ...... 632 3,613(3) 153,750(5)
Norton H. Reamer .......... 628 3,560 142,500
John L. Thorndike ......... 636 3,668 147,500
Jack L. Treynor ........... 681 3,761 147,500
- ----------
(1) The Eaton Vance fund complex consists of 228 registered investment
companies or series thereof.
(2) Includes $1,351 of deferred compensation.
(3) Includes $1,236 of deferred compensation.
(4) Includes $42,500 of deferred compensation.
(5) Includes $37,500 of deferred compensation.
<PAGE>
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return
on a hypothetical investment of $1,000 in the Fund covering the life of the
Fund from January 8, 1991 through July 31, 1996 and for the five- and one-year
periods ended July 31, 1996.
<TABLE>
VALUE OF A $1,000 INVESTMENT
<CAPTION>
TOTAL RETURN BEFORE TOTAL RETURN AFTER
VALUE BEFORE VALUE AFTER DEDUCTING DEDUCTING
DEDUCTING THE DEDUCTING THE THE MAXIMUM CDSC THE MAXIMUM CDSC**
INVESTMENT INVESTMENT AMOUNT OF MAXIMUM CDSC MAXIMUM CDSC** -------------------------- --------------------------
PERIOD DATE INVESTMENT ON 7/31/96 ON 7/31/96 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------- ------------ ----------- --------------- --------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of
the Fund*** 1/8/91* $1,000 $1,438.21 $1,428.31 43.83% 6.76% 42.83% 6.62%
5 Years
Ended
7/31/96*** 7/31/91 $1,000 $1,362.89 $1,342.89 36.29% 6.39% 34.29% 6.07%
1 Year
Ended
7/31/96 7/31/95 $1,000 $1,057.43 $1,007.43 5.74% 5.74% 0.74% 0.74%
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>
- ----------
* Investment operations began on January 8, 1991.
** No CDSC is imposed on certain redemptions. See the Fund's current Prospectus.
*** If a portion of the Fund's expenses had not been subsidized, the Fund would have had lower returns.
</TABLE>
For the thirty-day period ended July 31, 1996, the yield of the Fund was
4.73%. The yield required of a taxable security that would produce an after-
tax yield equivalent to that earned by the Fund of 4.73% would be 7.32%,
assuming a combined federal and State tax rate of 35.40%.
See the Tax Equivalent Yield Table in this Part II 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 was the record owner of approximately 10.6% 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
The Fund changed its name from Eaton Vance New Jersey Tax Free Fund to EV
Marathon New Jersey Tax Free Fund on February 1, 1994 and to EV Marathon New
Jersey Municipals Fund on December 1, 1995.
<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 equivalent to those of
tax exempt bonds yielding from 4% to 7% under the regular federal income tax
and New Jersey State income tax laws and tax rates applicable for 1996.
<TABLE>
<CAPTION>
A FEDERAL AND NEW JERSEY STATE
COMBINED TAX EXEMPT YIELD OF:
SINGLE RETURN JOINT RETURN FEDERAL AND 4% 4.5% 5% 5.5% 6% 6.5% 7%
- ----------------- -------------------- NJ STATE ---------------------------------------------------------------------
(TAXABLE INCOME)* TAX BRACKET+ IS EQUIVALENT TO A FULLY TAXABLE YIELD OF:
- --------------------------------------- ------------- ---------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Up to $ 24,000 Up to $ 40,100 16.49% 4.79% 5.39% 5.99% 6.59% 7.18% 7.78% 8.38%
$ 24,001-$ 58,150 $ 40,101-$ 96,900 31.98% 5.88 6.62 7.35 8.09 8.82 9.56 10.29
$ 58,151-$121,300 $ 96,901-$147,700 35.40% 6.19 6.97 7.74 8.51 9.29 10.06 10.84
$121,301-$263,750 $147,701-$263,750 40.08% 6.68 7.51 8.34 9.18 10.01 10.85 11.68
Over $263,750 Over $263,750 43.45% 7.07 7.96 8.84 9.73 10.61 11.49 12.38
<FN>
*Net amount subject to federal and New Jersey personal income tax after eductions and exemptions.
+The combined federal and New Jersey tax brackets are calculated using the highest New Jersey tax rate applicable within each
bracket. Taxpayers with taxable income within such brackets may have lower combined tax brackets and taxable equivalent
yields than indicated above. The combined tax brackets assume that New Jersey taxes are itemized deductions for federal
income tax purposes. Investors who do not itemize deductions on their federal income tax return will have a higher combined
bracket and higher taxable equivalent yield then those indicated above. The applicable federal tax rates within the brackets
are 15%, 28%, 31%, 36% and 39.6%, over the same ranges of income.
</TABLE>
Note: The federal income tax portion of above-indicated combined income tax
brackets does not take into account the effect of a reduction in the
deductibility of itemized deductions (including New Jersey State income taxes)
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 income 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 and New Jersey personal income taxes, 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 except for New Jersey personal income taxes. 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>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EV MARATHON PENNSYLVANIA
MUNICIPALS FUND. The investment objective of the Fund is to provide current
income exempt from regular federal income tax and Pennsylvania State and local
income taxes in the form of an investment exempt from Pennsylvania personal
property taxes. The Fund currently seeks to achieve its investment objective
by investing its assets in the Pennsylvania Municipals Portfolio (the
"Portfolio").
RISKS OF CONCENTRATION
The following information as to certain Pennsylvania considerations is
given to investors in view of the Portfolio's policy of concentrating its
investments in Pennsylvania issuers. Such information supplements the
information in the Prospectus. It is derived from sources that are generally
available to investors and is believed to be accurate. Such information
constitutes only a brief summary, does not purport to be a complete
description and is based on information from official statements relating to
securities offerings of Pennsylvania issuers. Neither the Trust nor the
Portfolio has independently verified this information.
Pennsylvania historically has been identified as a heavy industry state,
although that reputation has changed with the decline of the coal, steel and
railroad industries and the resulting diversification of Pennsylvania's
industrial composition. The major new sources of growth are in the service
sector, including trade, medical and health services, education and financial
institutions. Pennsylvania continues, however, to have a greater percentage of
its workers employed in manufacturing than the national average, leaving the
economy somewhat cyclical and vulnerable to recessionary forces. During 1995,
manufacturing accounted for 18% of employment. For July 1996, the adjusted
unemployment rate for Pennsylvania was 5.1% as compared to the July, 1995
level of 5.9%. Per capita income in Pennsylvania for 1994 of $22,196 was
higher than the per capita income of the United States of $21,699.
Revenues and Expenditures. Pennsylvania utilizes the fund method of
accounting. The General Fund, the State's largest fund, receives all tax
receipts, revenues, federal grants and reimbursements that are not specified
by law to be deposited elsewhere. Debt service on all obligations, except
those issued for highway purposes or for the benefit of other special revenue
funds, is payable from the General Fund. The General Fund closed fiscal year
1995 with a balance of $688 million.
The Governor's fiscal year 1997 proposed budget contained tax reductions
totaling $60.2 million and certain cost reduction programs, particularly in
the areas of public health and welfare. Under the 1997 budget, revenue
receipts are expected to increase and approximately $95 million of surplus
from 1996 are expected to be used. The fiscal year 1997 budget projects a $5
million fiscal year-end unappropriated surplus. All budgetary proposals
require legislative enactment.
The Pennsylvania Constitution requires all proceeds of motor fuels taxes,
vehicle registration fees, license taxes, operators' license fees and other
excise taxes imposed on products used in motor transportation to be used
exclusively for construction, reconstruction, maintenance and repair of and
safety on highways and bridges and for the payment of debt service on
obligations incurred for such purposes. The Motor License Fund is the fund
through which such revenues are accounted for and expended.
Pennsylvania Debt. The current Constitutional provisions pertaining to the
Pennsylvania debt permit the issuance of the following types of debt: (i) debt
to suppress insurrection or rehabilitate areas affected by disaster, (ii)
electorate approved debt, (iii) debt for capital projects subject to an
aggregate debt limit of 1.75 times the annual average tax revenues of the
preceding five fiscal years (this debt need not be approved by the electorate)
and (iv) tax anticipation notes payable in the fiscal year of issuance. All
debt except tax anticipation notes must be amortized in substantial and
regular amounts.
Pennsylvania engages in short-term borrowing to fund expenses within a
fiscal year through the sale of tax anticipation notes, which must mature
within the fiscal year of issuance. The principal amount issued, when added to
that outstanding, may not exceed in the aggregate 20% of the revenues
estimated to accrue to the appropriate fund in the fiscal year. The State is
not permitted to fund deficits between fiscal years with any form of debt. All
year end deficit balances must be funded within the succeeding fiscal year's
budget.
Pending the issuance of bonds, Pennsylvania may issue bond anticipation
notes subject to the applicable statutory and constitutional limitations
generally imposed on bonds. The term of such borrowings may not exceed three
years.
State-Related Obligations. Certain state-created agencies have statutory
authorization to incur debt for which no legislation providing for state
appropriations to pay debt service thereon is required. The debt of these
agencies is supported by assets of or revenues derived from the various
projects financed; it is not an obligation of the State. Some of these
agencies, however, are indirectly dependent on state appropriations. State-
related agencies and their outstanding debt as of December 31, 1995 include
the Delaware River Joint Toll Bridge Commission ($55.1 million), the Delaware
River Port Authority ($185.5 million), the Pennsylvania Economic Development
Financing Authority ($1,050.8 million), the Pennsylvania Energy Development
Authority ($121.0 million), the Pennsylvania Higher Education Assistance
Agency ($1,408.8 million), the Pennsylvania Higher Education Facilities
Authority ($2,115.1 million), the Pennsylvania Industrial Development
Authority ($344.8 million), the Pennsylvania Infrastructure Investment
Authority ($213.1 million), the Pennsylvania Turnpike Commission ($1,228.7
million), the Philadelphia Regional Port Authority ($62.6 million) and the
State Public School Building Authority ($316.2 million).
The only obligations of state-created agencies in Pennsylvania which bear
a moral obligation of the state are those issued by the Pennsylvania Housing
Finance Agency, a state-created agency which provides housing for lower and
moderate income families in the state, which had $2,165 million of bonds
outstanding at December 31, 1995, and the Hospitals and Higher Education
Facilities Authority of Philadelphia which issued $21.1 million in bonds in
1993.
Litigation. Pennsylvania is currently involved in certain litigation where
adverse decisions could have an adverse impact on its ability to pay debt
service. In Baby Neal v. Commonwealth, the American Civil Liberties Union
filed a lawsuit against the Commonwealth seeking an order that would require
the Commonwealth to provide additional funding for child welfare services.
County of Allegheny v. Commonwealth of Pennsylvania involves litigation
regarding the state constitutionality of the statutory scheme for county
funding of the judicial system. In Pennsylvania Association of Rural and Small
Schools v. Casey, the constitutionality of Pennsylvania's system for funding
local school districts has been challenged. No estimates for the amount of
these claims are available.
Local Government Debt. Local government in Pennsylvania consists of numerous
individual units. Each unit is distinct and independent of other local units,
although they may overlap geographically.
There is extensive general legislation applying to local government. For
example, the Local Government Unit Debt Act provides for uniform debt limits
for local government units, including municipalities and school districts, and
prescribes methods of incurring, evidencing, securing and collecting debt.
Under the Local Government Unit Debt Act, the ability of Pennsylvania
municipalities and school districts to engage in general obligation borrowing
without electoral approval is generally limited by their recent revenue
collection experience. Generally such subdivisions can levy real property
taxes unlimited as to rate or amount to pay debt service on general obligation
borrowings.
Municipalities may also issue revenue obligations without limit and
without affecting their general obligation borrowing capacity if the
obligations are projected to be paid solely from project revenues.
Municipal authorities and industrial development authorities are
widespread in Pennsylvania. An authority is organized by a municipality acting
singly or jointly with another municipality and is governed by a board
appointed by the governing unit of the creating municipality or
municipalities. Typically, authorities are established to acquire, own and
lease or operate one or more projects and to borrow money and issue revenue
bonds to finance them.
As of the date of this Statement of Additional Information, the City of
Philadelphia's general obligations are rated Ba, B and BB, by Moody's, S&P and
Fitch, respectively.
FEES AND EXPENSES
INVESTMENT ADVISER
As of July 31, 1996, the Portfolio had net assets of $448,181,861. For the
fiscal year ended July 31, 1996, the Portfolio paid BMR advisory fees of
$2,262,320 (equivalent to 0.47% of the Portfolio's average daily net assets
for such year). For the fiscal year ended July 31, 1995, the Portfolio paid
BMR advisory fees of $2,416,419 (equivalent to 0.48% of the Portfolio's
average daily net assets for such year). For the ten months ended July 31,
1994, the Portfolio paid BMR advisory fees of $2,054,802 (equivalent to 0.46%
(annualized) of the Portfolio's average daily net assets for such period). The
Portfolio's Investment Advisory Agreement with BMR is dated October 13, 1992
and may be continued as described under "Investment Adviser and Administrator"
in Part I.
DISTRIBUTION PLAN
The Distribution Plan and Distribution Agreement remain in effect until
April 28, 1997 and may be continued as described under "Distribution Plan" in
Part I. Pursuant to Rule 12b-1, the Plan has been approved by the Fund's
shareholders and by the Board of Trustees of the Trust, as required by Rule
12b-1. During the fiscal year ended July 31, 1996, the Principal Underwriter
paid to Authorized Firms sales commissions of $430,940 on sales of Fund
shares. During the same period, the Fund made sales commission payments under
the Plan to the Principal Underwriter aggregating $3,552,652 and the Principal
Underwriter received approximately $1,882,000 in CDSCs imposed on early
redeeming shareholders. The sales commissions and CDSCs paid to the Principal
Underwriter reduced Uncovered Distribution Charges under the Plan. As at July
31, 1996, the outstanding Uncovered Distribution Charges of the Principal
Underwriter calculated under the Plan amounted to approximately $13,539,000
(which amount was equivalent to 3.1% of the Fund's net assets on such date).
During the fiscal year ended July 31, 1996, the Fund paid or accrued service
fees under the Plan aggregating $814,722, of which $812,144 was paid to
Authorized Firms and the balance of which was retained by the Principal
Underwriter.
PRINCIPAL UNDERWRITER
For the fiscal year ended July 31, 1996, the Fund paid the Principal
Underwriter $6,050 for repurchase transactions handled by the Principal
Underwriter (being $2.50 for each such transaction).
BROKERAGE
For the fiscal year ended July 31, 1996, the Portfolio paid brokerage
commissions of $106,001 on portfolio security transactions aggregating
$688,954,042 to firms which provided some research services to BMR or its
affiliates (although many of such firms may have been selected in any
particular transaction primarily because of their excution capabilities). For
the fiscal year ended July 31, 1995 and for the ten months ended July 31, 1994
the Portfolio paid no brokerage commissions on portfolio transactions.
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 the Portfolio who are members of
the Eaton Vance organization receive no compensation from the Fund or the
Portfolio.) During the fiscal year ended July 31, 1996, the noninterested
Trustees of the Trust and the Portfolio received the following compensation in
their capacities as Trustees from the Fund and the Portfolio, and, for the year
ended September 30, 1996, earned the following compensation in their capacities
as Trustees of 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 .......... $687 $3,845(2) $142,500(4)
Samuel L. Hayes, III ...... 632 3,807(3) 153,750(5)
Norton H. Reamer .......... 628 3,753 142,500
John L. Thorndike ......... 636 3,864 147,500
Jack L. Treynor ........... 681 3,971 147,500
- ----------
(1) The Eaton Vance fund complex consists of 228 registered investment
companies or series thereof.
(2) Includes $1,439 of deferred compensation.
(3) Includes $1,236 of deferred compensation.
(4) Includes $42,500 of deferred compensation.
(5) Includes $37,500 of deferred compensation.
ADDITIONAL OFFICER INFORMATION
In addition to the officers of the Portfolio listed under "Officers of the
Trust and the Portfolio" in Part I, Timothy T. Browse (37) is a Vice President
of the Portfolio. Mr. Browse has served as a Vice President of the Portfolio
since December 1, 1995. Mr. Browse has been a Vice President of BMR and Eaton
Vance since 1993 and an employee of Eaton Vance since 1992. Mr. Browse is an
officer of various investment companies managed by Eaton Vance or BMR. Prior
to joining Eaton Vance, Mr. Browse was a Municipal Bond Trader -- Fidelity
Management & Research Company (1987-1992).
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return
on a hypothetical investment of $1,000 in the Fund covering the life of the
Fund from January 8, 1991 through July 31, 1996 and for the five- and one-year
periods ended July 31, 1996.
<TABLE>
VALUE OF A $1,000 INVESTMENT
<CAPTION>
TOTAL RETURN BEFORE TOTAL RETURN AFTER
VALUE BEFORE VALUE AFTER DEDUCTING DEDUCTING
DEDUCTING THE DEDUCTING THE THE MAXIMUM CDSC THE MAXIMUM CDSC**
INVESTMENT INVESTMENT AMOUNT OF MAXIMUM CDSC MAXIMUM CDSC** -------------------------- --------------------------
PERIOD DATE INVESTMENT ON 7/31/96 ON 7/31/96 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------- ------------ ----------- --------------- --------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of the
Fund*** 1/8/91* $1,000 $1,437.13 $1,427.13 43.71% 6.74% 42.71% 6.61%
5 Years
Ended
7/31/96*** 7/31/91 $1,000 $1,365.06 $1,345.06 36.51% 6.42% 34.51% 6.11%
1 Year
Ended
7/31/96 7/31/95 $1,000 $1,060.76 $1,010.76 6.08% 6.08% 1.08% 1.08%
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>
- ----------
* Investment operations began on January 8, 1991.
** No CDSC is imposed on certain redemptions. See the Fund's current
Prospectus.
*** If a portion of the Fund's expenses had not been subsidized, the Fund
would have had lower returns.
</TABLE>
For the thirty-day period ended July 31, 1996, the yield of the Fund was
4.94%. The yield required of a taxable security that would produce an after-
tax yield equivalent to that earned by the Fund of 4.94% would be 8.04%,
assuming a combined federal and State tax rate of 38.52%.
See the Tax Equivalent Yield Table in this Part II 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 was the record owner of approximately 14.5% 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
The Fund changed its name from Eaton Vance Pennsylvania Tax Free Fund to
EV Marathon Pennsylvania Tax Free Fund on February 1, 1994 and to EV Marathon
Pennsylvania Municipals Fund on December 1, 1995.
<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 equivalent to those of
tax exempt bonds yielding 6% under the regular federal income tax and
Pennsylvania State and local tax laws in effect for 1996.
<TABLE>
<CAPTION>
TAXABLE YIELD NEEDED TO MATCH 6% FREE OF
--------------------------------------------------
FEDERAL, STATE,
1994 TAXABLE INCOME FEDERAL FEDERAL, STATE COUNTY AND
- ------------------------------------------- FEDERAL STATE AND STATE AND COUNTY PHILADELPHIA
SINGLE RETURN JOINT RETURN INCOME TAX INCOME TAX TAXES TAXES (1) TAXES (2)
- ------------------- ---------------------- ------------- ------------- ------------ ----------------- -----------------
<C> <C> <C> <C> <C> <C> <C> <C> <C>
Up to $ 24,000 Up to $ 40,100 15.00% 2.80% 7.26% 7.80% 8.24%
$ 24,001 - $ 58,150 $ 40,101 - $ 96,900 28.00 2.80 8.57 9.20 9.73
$ 58,151 - $121,300 $ 96,901 - $147,700 31.00 2.80 8.95 9.60 10.15
$121,301 - $263,750 $147,701 - $263,750 36.00 2.80 9.65 10.36 10.94
Over $263,750 Over $263,750 39.60 2.80 10.22 10.97 11.59
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Equivalent yields are based on a fixed $1,000 investment with all taxes
deducted from income. Included in all areas are the effects of: federal income
tax and a 2.8% Pennsylvania income tax. (1) Includes a 4 mil county personal
property tax imposed by most counties. (2) Includes a 4 mil county personal
property and a 4.86% Philadelphia school income tax. The equivalent yields
assume that the Pennsylvania state and local taxes referred to above are
itemized deductions for federal income tax purposes. Investors who do not
itemize deductions on their federal income tax return will have a higher
equivalent yield than indicated.
Note: The above-indicated federal income tax brackets do not take into account
the effect of a reduction in the deductibility of itemized deductions
(including Pennsylvania State and local taxes) for taxpayers with adjusted
gross income in excess of $117,950. The tax brackets and taxable equivalent
yields also do not show the effects of phaseout of personal exemptions for
single filers with adjusted gross income in excess of $117,950 and joint
filers with adjusted gross income in excess of $176,950. The effective federal
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 and Pennsylvania State and local income taxes,
other income received by the Portfolio and allocated to the Fund may be
taxable. 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
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>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EV MARATHON TEXAS MUNICIPALS FUND.
The investment objective of the Fund is to provide current income exempt from
regular federal income taxes. The Fund currently seeks to achieve its
investment objective by investing its assets in the Texas Municipals Portfolio
(the "Portfolio").
RISKS OF CONCENTRATION
The following information as to certain Texas considerations is given to
investors in view of the Portfolio's policy of concentrating its investments
in Texas issuers. Such information supplements the information in the
Prospectus. It is derived from sources that are generally available to
investors and is believed to be accurate. Such information constitutes only a
brief summary, does not purport to be a complete description and is based on
information from official statements relating to securities offerings of Texas
issuers. Neither the Trust nor the Portfolio has independently verified this
information.
Once largely dependent on the drilling, production, refining, chemical and
energy-related manufacturing sectors, the economy of Texas has diversified
with the major source of job growth in the State now being the service-
producing sector (which includes transportation and public utilities, finance,
insurance and real estate, trade, services, and government). The Texas economy
continues to outpace the nation, adding 290,000 jobs in 1995. Continued job
growth is expected. The unemployment rate of 5.7% for July 1996, is just above
the national average of 5.4%. Over the past decade, the population of Texas
grew at a rate twice as fast as that of the entire United States. Currently
the third largest state in the nation, Texas is expected to move into second
place by the late 1990's.
The Texas legislature passed a $80 billion biennial budget for fiscal
years 1996 and 1997. The new budget includes no new tax increases.
Historically, the primary sources of the State's revenues have been sales
taxes, mineral severance taxes and Federal grants. The beginning fiscal 1996
cash balance was $2.1 billion. The State has no personal or corporate income
tax, although the State does impose a corporate franchise tax based on the
amount of a corporation's capital and surplus. A bill was passed by the
legislature reforming educational aid. Also, the State provided additional
funding construction for poor districts. For the fiscal year ended August
1995, net revenues increased 7.3% while net expenditures increased 12.1%, this
decreased the general fund balance to $2.1 billion from $2.2 billion in 1994.
FEES AND EXPENSES
INVESTMENT ADVISER
As of July 31, 1996, the Portfolio had net assets of $24,366,836. For the
fiscal year ended July 31, 1996, absent a fee reduction, the Portfolio would
have paid BMR advisory fees of $55,086 (equivalent to 0.20% of the Portfolio's
average daily net assets for such year). To enhance the net income of the
Portfolio, BMR made a reduction of its advisory fee in the amount of $27,295.
For the fiscal year ended July 31, 1995, absent a fee reduction, the Portfolio
would have paid BMR advisory fees of $56,319 (equivalent to 0.21% of the
Portfolio's average daily net assets for such year). To enhance the net income
of the Portfolio, BMR made a reduction of the full amount of its advisory fee
and BMR was allocated a portion of the expenses related to the operation of
the Portfolio in the amount of $18,606. For the ten months ended July 31,
1994, absent a fee reduction, the Portfolio would have paid BMR advisory fees
of $31,214 (equivalent to 0.17% (annualized) of the Portfolio's average daily
net assets for such period). To enhance the net income of the Portfolio, BMR
made a reduction of the full amount of its advisory fee and BMR was allocated
a portion of the expenses related to the operation of the Portfolio in the
amount of $35,347. The Portfolio's Investment Advisory Agreement with BMR is
dated October 13, 1992 and may be continued as described under "Investment
Adviser and Administrator" in Part I.
ADMINISTRATOR
As stated under "Investment Adviser and Administrator" in Part I, the
Administrator currently receives no compensation for providing administrative
services to the Fund. For the fiscal year ended July 31, 1995 and for the ten
months ended July 31, 1994, $46,683 and $85,239, respectively, of the Fund's
operating expenses were allocated to the Administrator.
DISTRIBUTION PLAN
The Distribution Plan and Distribution Agreement remain in effect until
April 28, 1997 and may be continued as described under "Distribution Plan" in
Part I. Pursuant to Rule 12b-1, the Plan has been approved by the Fund's
shareholders and by the Board of Trustees of the Trust, as required by Rule
12b-1. During the fiscal year ended July 31, 1996, the Principal Underwriter
paid to Authorized Firms sales commissions of $30,561 on sales of Fund shares.
During the same period, the Fund made sales commission payments under the Plan
to the Principal Underwriter aggregating $199,982 and the Principal
Underwriter received approximately $110,000 in CDSCs imposed on early
redeeming shareholders. The sales commissions and CDSCs paid to the Principal
Underwriter reduced Uncovered Distribution Charges under the Plan. As at July
31, 1996, the outstanding Uncovered Distribution Charges of the Principal
Underwriter calculated under the Plan amounted to approximately $757,000
(which amount was equivalent to 3.2% of the Fund's net assets on such date).
During the fiscal year ended July 31, 1996, the Fund paid or accrued service
fees under the Plan aggregating $44,196, of which $44,186 was paid to
Authorized Firms and the balance of which was retained by the Principal
Underwriter.
PRINCIPAL UNDERWRITER
For the fiscal year ended July 31, 1996, the Fund paid the Principal
Underwriter $260 for repurchase transactions handled by the Principal
Underwriter (being $2.50 for each such transaction).
BROKERAGE
For the fiscal year ended July 31, 1996, the Portfolio paid brokerage
commissions of $5,915 on portfolio security transactions aggregating
$40,706,177 to firms which provided some research services to BMR or its
affiliates (although many of such firms may have been selected in any
particular transaction primarily because of their execution capabilities). For
the fiscal year ended July 31, 1995 and for the ten months ended July 31,
1994, the Portfolio paid no brokerage commissions on portfolio transactions.
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 the Portfolio who are members of
the Eaton Vance organization receive no compensation from the Fund or the
Portfolio.) During the fiscal year ended July 31, 1996, the noninterested
Trustees of the Trust and the Portfolio received the following compensation in
their capacities as Trustees from the Fund and the Portfolio, and, for the year
ended September 30, 1996, earned the following compensation in their capacities
as Trustees of 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 .......... $34 $343(2) $142,500(4)
Samuel L. Hayes, III ...... 32 316(3) 153,750(5)
Norton H. Reamer .......... 31 314 142,500
John L. Thorndike ......... 32 318 147,500
Jack L. Treynor ........... 34 341 147,500
- ----------
(1) The Eaton Vance fund complex consists of 228 registered investment
companies or series thereof.
(2) Includes $129 of deferred compensation.
(3) Includes $104 of deferred compensation.
(4) Includes $42,500 of deferred compensation.
(5) Includes $37,500 of deferred compensation.
ADDITIONAL OFFICER INFORMATION
In addition to the officers of the Portfolio listed under "Officers of the
Trust and the Portfolio" in Part I, Nicole Anderes (35) is a Vice President of
the Portfolio. Ms. Anderes has served as a Vice President of the Portfolio
since December 1, 1995. She joined BMR and Eaton Vance as a Vice President in
January 1994. Ms. Anderes is an officer of various investment companies
managed by Eaton Vance or BMR. Prior to joining Eaton Vance, she was a Vice
President and portfolio manager at Lazard Freres Asset Management (1992-1994)
and a Vice President and Manager -- Municipal Research at Roosevelt & Cross
(1987-1992).
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return
on a hypothetical investment of $1,000 in the Fund covering the life of the
Fund from March 24, 1992 through July 31, 1996 and for the one-year period
ended July 31, 1996.
<TABLE>
VALUE OF A $1,000 INVESTMENT
<CAPTION>
TOTAL RETURN BEFORE TOTAL RETURN AFTER
VALUE BEFORE VALUE AFTER DEDUCTING DEDUCTING
DEDUCTING THE DEDUCTING THE THE MAXIMUM CDSC THE MAXIMUM CDSC**
INVESTMENT INVESTMENT AMOUNT OF MAXIMUM CDSC MAXIMUM CDSC** -------------------------- --------------------------
PERIOD DATE INVESTMENT ON 7/31/96 ON 7/31/96 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------- ------------ ----------- --------------- --------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of
the Fund*** 3/24/92* $1,000 $1,325.72 $1,305.72 32.57% 6.68% 30.57% 6.31%
1 Year
Ended
7/31/96*** 7/31/95 $1,000 $1,065.96 $1,015.96 6.60% 6.60% 1.60% 1.60%
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>
- ----------
* Investment operations began on March 24, 1992.
** No CDSC is imposed on certain redemptions. See the Fund's current Prospectus.
*** If a portion of the Portfolio's and/or the Fund's expenses had not been subsidized, the Fund would have had lower returns.
</TABLE>
For the thirty-day period ended July 31, 1996, the yield of the Fund was
4.81%. The yield required of a taxable security that would produce an after-
tax yield equivalent to that earned by the Fund of 4.81% would be 6.97%,
assuming a federal tax rate of 31%. If a portion of the Portfolio's expenses
had not been allocated to the Investment Adviser, the Fund would have had a
lower yield.
See the Tax Equivalent Yield Table in this Part II for information
concerning applicable tax rates and income brackets.
TAXES
In most every state which has an income tax, dividends paid by a mutual
fund attributable to investments in a particular state's municipal obligations
are exempt from both federal and such state's income tax. If Texas adopts an
income tax in the future, and assuming that its income tax policy with respect
to mutual funds investing in Texas state and local municipal obligations would
be similar to the general tax policy of other states, dividends paid by the
Fund would be exempt from Texas state income tax.
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 was the record owner of approximately 22.6% 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
The Fund changed its name from Eaton Vance Texas Tax Free Fund to EV
Marathon Texas Tax Free Fund on February 1, 1994 and to EV Marathon Texas
Municipals Fund on December 1, 1995.
<PAGE>
TAX EQUIVALENT YIELD TABLE
The table shows the approximate taxable bond yields which are equivalent
to tax-exempt bond yields from 4% to 7% under the regular federal income tax
laws that apply to 1996.
<TABLE>
<CAPTION>
IF THE TAXABLE OR THE TAXABLE
INCOME ON INCOME ON YOU ARE IN IN YOUR BRACKET, A TAX-FREE YIELD OF
YOUR SINGLE YOUR JOINT THIS FEDERAL 4% 4.5% 5% 5.5% 6% 6.5% 7%
RETURN IS* RETURN IS* BRACKET EQUALS THAT OF A TAXABLE INVESTMENT YIELDING
- ------------------------------------------ ------------- --------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Up to $ 24,000 Up to $ 40,100 15.0% 4.71% 5.29% 5.88% 6.47% 7.06% 7.65% 8.24%
$ 24,001 - $ 58,150 $ 40,101 - $ 96,900 28.0 5.56 6.25 6.94 7.64 8.33 9.03 9.72
$ 58,151 - $121,300 $ 96,901 - $147,700 31.0 5.80 6.52 7.25 7.97 8.70 9.42 10.14
$121,301 - $263,750 $147,701 - $263,750 36.0 6.25 7.03 7.81 8.59 9.38 10.16 10.94
Over $263,750 Over $263,750 39.6 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 take into account the phaseout of personal exemptions for single
filers with adjusted gross income 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. This 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.
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>
[LOGO: EATON VANCE]
EV MARATHON MUNICIPAL FUNDS
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
DECEMBER 1, 1996
EV MARATHON ARIZONA MUNICIPALS FUND
EV MARATHON COLORADO MUNICIPALS FUND
EV MARATHON CONNECTICUT MUNICIPALS FUND
EV MARATHON MICHIGAN MUNICIPALS FUND
EV MARATHON MINNESOTA MUNICIPALS FUND
EV MARATHON NEW JERSEY MUNICIPALS FUND
EV MARATHON PENNSYLVANIA MUNICIPALS FUND
EV MARATHON TEXAS MUNICIPALS FUND
EV MARATHON
MUNICIPAL FUNDS
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
M-TFC12/1SAI
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
December 1, 1996
EV TRADITIONAL MUNICIPAL FUNDS
<TABLE>
<S> <C>
EV TRADITIONAL ARIZONA MUNICIPALS FUND EV TRADITIONAL MINNESOTA MUNICIPALS FUND
EV TRADITIONAL COLORADO MUNICIPALS FUND EV TRADITIONAL NEW JERSEY MUNICIPALS FUND
EV TRADITIONAL CONNECTICUT MUNICIPALS FUND EV TRADITIONAL PENNSYLVANIA MUNICIPALS FUND
EV TRADITIONAL MICHIGAN MUNICIPALS FUND EV TRADITIONAL TEXAS MUNICIPALS FUND
</TABLE>
24 Federal Street
Massachusetts 02110
(800) 225-6265
This Statement of Additional Information consists of two parts. Part I
provides general information about the Funds listed above (each a "Fund"), its
corresponding Portfolio and certain other series of Eaton Vance Municipals
Trust (the "Trust"). Each Part II provides information solely about a Fund and
its corresponding Portfolio. 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 .................................................. 7
Trustees and Officers .................................................... 9
Investment Adviser and Administrator ..................................... 10
Custodian ................................................................ 13
Services for Accumulation ................................................ 14
Service for Withdrawal ................................................... 14
Determination of Net Asset Value ......................................... 14
Investment Performance ................................................... 15
Taxes .................................................................... 17
Principal Underwriter .................................................... 18
Service Plan ............................................................. 19
Portfolio Security Transactions .......................................... 20
Other Information ........................................................ 21
Independent Certified Public Accountants ................................. 23
Financial Statements ..................................................... 23
Appendix ................................................................. 24
PART II
EV Traditional Arizona Municipals Fund ................................... a-1
EV Traditional Colorado Municipals Fund .................................. b-1
EV Traditional Connecticut Municipals Fund ............................... c-2
EV Traditional Michigan Municipals Fund .................................. d-1
EV Traditional Minnesota Municipals Fund ................................. e-1
EV Traditional New Jersey Municipals Fund ................................ f-1
EV Traditional Pennsylvania Municipals Fund .............................. g-1
EV Traditional Texas Municipals Fund ..................................... h-1
Although each Fund offers only its shares of beneficial interest, it is
possible that a Fund might become liable for a misstatement or omission in
this Statement of Additional Information regarding another Fund because the
Funds use this combined Statement of Additional Information. The Trustees of
the Trust have considered this factor in approving the use of a combined
Statement of Additional Information.
THIS COMBINED STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND
IS AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY THE FUNDS' PROSPECTUS DATED DECEMBER 1, 1996, AS SUPPLEMENTED
FROM TIME TO TIME, WHICH IS INCORPORATED HEREIN BY REFERENCE. THIS COMBINED
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 on
which is exempt from federal income tax and is not a tax preference item for
purposes of the AMT: (i) certain "public purpose" obligations (whenever
issued), which include obligations issued directly by state and local
governments or their agencies to fulfill essential governmental functions;
(ii) certain obligations issued before August 8, 1986 for the benefit of non-
governmental persons or entities; and (iii) certain "private activity bonds"
issued after August 7, 1986 which include "qualified Section 501(c)(3) bonds"
or refundings of certain obligations included in the second category. 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 AMT. For corporate shareholders, the Fund's
distributions derived from interest on all municipal obligations (whenever
issued) is included in "adjusted current earnings" for purposes of the AMT as
applied to corporations (to the extent not already included in 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 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, although nominally
issued by municipal authorities, are in most cases revenue bonds and are
generally not secured by the taxing power of the municipality, but are usually
secured by the revenues derived by the authority from payments of the
industrial user or users.
The 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 will be 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 such 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
Municipal Obligations of a Particular State. For a discussion of the risks
associated with the Portfolio's policy of concentrating its investments in
particular State issuers of municipal obligations, see "Risks of
Concentration" in the Fund's Part II.
Obligations of Particular Types of Issuers. The Portfolio may invest 25% or
more of its total assets in municipal obligations of the same type. There
could be economic, business or political developments which might affect all
municipal obligations of the same 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, effects
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 and local
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.
Obligations of Puerto Rico, the U.S. Virgin Islands and Guam. Subject to the
Fund's investment policies as set forth in the Prospectus, the Portfolio may
invest in the obligations of Puerto Rico, the U.S. Virgin Islands and Guam.
Accordingly, the Portfolio may be adversely affected by local political and
economic conditions and developments within Puerto Rico, the U.S. Virgin
Islands and Guam affecting the issuers of such obligations.
Puerto Rico has a diversified economy dominated by the manufacturing and
service sectors. Manufacturing is the largest sector in terms of gross
domestic product and is more diversified than during earlier phases of Puerto
Rico's industrial development. The three largest sectors of the economy (as a
percentage of employment) are services (47%), government (22%) and
manufacturing (16.4%). These three sectors represent 39%, 11% and 39%,
respectively, of the gross domestic product. The service sector is the fastest
growing, while the government and manufacturing sectors have been stagnant for
the past five years. This decline was broad based among all manufacturing
industries. The North American Free Trade Agreement (NAFTA), which became
effective January 1, 1994, could lead to the loss of Puerto Rico's lower
salaried or labor intensive jobs to Mexico. The November, 1995 unemployment
rate was 13.4%, down from 16% for 1994.
The Commonwealth of Puerto Rico exercises virtually the same control over
its internal affairs as do the fifty states; however, it differs from the
states in its relationship with the federal government. Most federal taxes,
except those such as social security taxes that are imposed by mutual consent,
are not levied in Puerto Rico. However, in conjunction with the 1993 U.S.
budget plan, Section 936 of the Code was amended and provided for two
alternative limitations to the Section 936 credit. The first option will limit
the credit against such income to 40% of the credit allowable under current
law, with a five year phase-in period starting at 60% of the allowable credit.
The second option is a wage and depreciation based credit. The reduction of
the tax benefits to those U.S. companies with operations in Puerto Rico may
lead to slower growth in the future. Furthermore, federal policymakers have
proposed the total elimination of Section 936, phased out over ten years, as a
budget-balancing measure. There can be no assurance that these modifications
will not lead to a weakened economy, a lower rating on Puerto Rico's debt or
lower prices for Puerto Rican bonds that may be held by the Portfolio.
Puerto Rico's financial reporting was first conformed to generally
accepted accounting principles in fiscal 1990. Nonrecurring revenues have been
used frequently to balance recent years' budgets. In November, 1993 Puerto
Ricans voted on whether they wished to retain their Commonwealth status,
become a state or establish an independent nation. The measure was defeated,
with 48.5% voting to remain a Commonwealth, 46% voting for statehood and 4%
voting for independence. Retaining Commonwealth status will leave intact the
current relationship with the federal government. There can be no assurance
that the statehood issue will not be brought to a vote in the future. A
successful statehood vote in Puerto Rico would then require the U.S. Congress
to ratify the election.
The United States Virgin Islands (USVI) are located approximately 1,100
miles east-southeast of Miami and are made up of St. Croix, St. Thomas and St.
John. Population, after reaching a peak of 110,800 in 1985, declined to
101,809 in 1990. The economy is heavily reliant on the tourism industry, with
roughly 43% of non-agricultural employment in tourist-related trade and
services. As of June 1996, unemployment stood at 4.7%. The tourism industry is
economically sensitive and would likely be adversely affected by a recession
in either the United States or Europe.
An important component of the USVI revenue base is the federal excise tax
on rum exports. Tax revenues rebated by the federal government to the USVI
provide the primary security of many outstanding USVI bonds. Since more than
90% of the rum distilled in the USVI is distilled at one plant, any
interruption in its operations (as occurred after Hurricane Hugo in 1989)
would adversely affect these revenues. Consequently, there can be no assurance
that rum exports to the United States and the rebate of tax revenues to the
USVI will continue at their present levels. The preferential tariff treatment
the USVI rum industry currently enjoys could be reduced under NAFTA. Increased
competition from Mexican rum producers could reduce USVI rum imported to the
U.S., decreasing excise tax revenues generated. The USVI is periodically hit
by hurricanes. During this past hurricane season, several hurricanes caused
extensive damage, which has had a negative impact on revenue collections.
There is currently no rated, unenhanced Virgin Islands debt outstanding
(although there is unrated debt outstanding).
Guam, an unincorporated U.S. territory, is located 1,500 miles southeast
of Tokyo. Population, 133,000 in 1990, is up 26% from the 1980 census level.
The U.S. military is a key component of Guam's economy. The federal government
directly comprises more than 10% of the employment base, with a substantial
component of the service sector to support these personnel. The Naval Air
Station, one of several U.S. military facilities on the island, has been
slated for closure by the Defense Base Closure and Realignment Committee;
however, the administration plans to use these facilities to expand the
island's commercial airport. Guam is also heavily reliant on tourists,
particularly the Japanese. For 1995, the government realized a General Fund
operating surplus. The administration has taken steps to improve its financial
position; however, there are no guarantees that an improvement will be
realized. Guam's general obligation debt is rated BBB by S&P with a negative
outlook.
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 muncipal 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 (and later purchase) securities in anticipation of
a market decline (a rise in interest rates) or purchase (and later sell)
securities in anticipation of a market rise (a decline in interest rates). In
addition, a security may be sold and another purchased at approximately the
same time to take advantage of what the 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 anticipates that its annual portfolio turnover rate will generally
not exceed 100% (excluding turnover of securities having a maturity of one
year or less). A 100% annual turnover rate 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 take
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 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 Investment Company Act of 1940, as amended, (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. Since 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 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) Borrow money or issue senior securities except as permitted by the
Investment Company Act of 1940;
(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) 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;
(4) Purchase or sell real estate (including limited partnership interests
in real estate, but excluding readily marketable interests in real estate
investment trusts or readily marketable securities of companies which invest
or deal in real estate or securities which are secured by real estate);
(5) Purchase or sell physical commodities or contracts for the purchase or
sale of physical commodities; or
(6) Make loans to any person except by (a) the acquisition of debt
instruments and making portfolio investments, (b) entering into repurchase
agreements and (c) lending portfolio securities.
Notwithstanding the investment policies and restrictions of the Fund; the
Fund may invest all of its investable assets in an open-end management
investment company with substantially the same investment objective, policies
and restrictions as the Fund.
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. As a matter of
nonfundamental policy, the Fund and the Portfolio will not: (a) 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; (b) make short sales of securities or maintain a short
position, unless at all times when a short position is open it 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 and the Portfolio will make such
sales only for the purpose of deferring realization of gain or loss for
federal income tax purposes); (c) invest more than 15% of its 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 under 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, determines to be
liquid; or (d) 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 the Portfolio or is a member, officer,
director or trustee of any investment adviser of the Trust or the Portfolio,
if after the purchase of the securities of such issuer by the Fund or the
Portfolio 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).
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 obligations.
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. Where applicable and notwithstanding the foregoing,
under normal market conditions the Fund and the Portfolio must take actions
necessary to comply with the policy of investing at least 65% of total assets
in a particular State. Moreover, 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"); of 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, 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 02134
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. Officer of various investment
companies managed by Eaton Vance or BMR. Mr. Fetter was elected President of
the Trust and the Portfolio on December 13, 1993.
ROBERT B. MACINTOSH (39), Vice President
Vice President of BMR since August 11, 1992, and of Eaton Vance and EV.
Officer of various investment companies managed by Eaton Vance or BMR. Mr.
MacIntosh was elected Vice President of the Trust on March 22, 1993.
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 (33), 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 on March
27, 1995.
ERIC G. WOODBURY (39), Assistant Secretary
Vice President of BMR, Eaton Vance and EV 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. Woodubury
was elected Assistant Secretary on June 19, 1995.
For any additional officers of the Portfolio, see "Additional Officer
Information" in the Fund's Part II.
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 Fund and of the Portfolio.
Trustees of the Portfolio that are not affiliated with the Investment
Adviser may elect to defer receipt of all or a percentage of their annual fees
in accordance with the terms of 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 Portfolio nor the Trust 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 earned 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. 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. For
additional information about the Investment Advisory Agreement, including the
net assets of the Portfolio and the investment advisory fees that the
Portfolio paid BMR under the Investment Advisory Agreement, see "Fees and
Expenses" in the Fund's Part II.
The Investment Advisory Agreement with BMR may be continued indefinitely
so long as such continuance 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 October
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. Browse, Fetter, MacIntosh, Metzold, Murphy,
O'Connor and Woodbury and Ms. Anderes, Ms. Clemson and Ms. Sanders, are
officers 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.
EVC owns all of the stock of Energex Energy Corporation, which engages in
oil and gas exploration and development. In addition, Eaton Vance owns all 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. EVC, BMR, Eaton Vance 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, IBT. It is Eaton Vance's opinion that the terms and conditions
of such transactions were not and will not be influenced by existing or
potential custodial or other relationships between the Fund or the Portfolio
and such banks.
CUSTODIAN
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 Portfolio 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.
SERVICES FOR ACCUMULATION
The following services 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 Fund 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 Fund 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 or her 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. 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 of the Fund, and purchased an
additional $20,000 of Fund 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. Confirmation 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.
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 plan 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 service uses information with respect to
transactions in bonds, quotations from bond dealers, market transactions in
comparable securities, various relationships between securities, and yield to
maturity in determining value. Taxable obligations for which price quotations
are readily available normally will be valued at the mean between the latest
available bid and asked prices. Open futures positions on debt securities are
valued at the most recent settlement prices, unless such price does not
reflect the fair value of the contract, in which case the positions will be
valued by or at the direction of the Trustees 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 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 distributions paid and
reinvested) for the stated period and annualizing the result. The calculation
assumes the maximum sales charge is deducted from the initial $1,000 purchase
order and that all distributions are reinvested at net asset value on the
reinvestment dates during 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 the net
investment income per share earned during a recent thirty-day period by the
maximum offering price (which includes the maximum 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. Yield calculations assume a maximum sales
charge equal to 3.75% of the public offering price. Actual yield may be
affected by variations in sales charges on investments. A taxable-equivalent
yield is computed by using the tax-exempt yield and dividing 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 maximum offering price per share. 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 the 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 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 tax 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, and intends to
qualify each year, as a regulated investment company ("RIC") under the Code.
Accordingly, the Fund intends to satisfy certain requirements relating to
sources of its income and diversification of its assets and to distribute its
net investment income (including tax-exempt income) and net realized capital
gains (after reduction by any available capital loss carryforwards) 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 July 31, 1996. Because the Fund invests 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 RIC, 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 (or be deemed to have distributed) 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 RIC 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 enable the Fund 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 by the Fund of net tax-exempt interest income that are
properly designated as "exempt-interest dividends" may be treated by
shareholders as interest excludable from gross income under Section 103(a) of
the Code. In order for the Fund to be entitled to pay the 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
AMT. 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 of the Fund, 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 periods 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 RIC
for federal income tax purposes.
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.
PRINCIPAL UNDERWRITER
Shares 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, 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 (see "How to Buy Fund
Shares"). Such table is applicable to purchases of the Fund 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
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 $50,000 or more made
by any of the persons enumerated above within a thirteen-month period starting
with the 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 the Fund 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
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 Fund shares for the assets of
such investment company. 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.
Shares of the Fund may also be sold at net asset value to registered
representatives and employees of Authorized Firms and to the spouses and
children under the age of 21 and beneficial accounts of such persons.
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. The
Principal Underwriter allows Authorized Firms discounts from the applicable
public offering price which are alike for all Authorized Firms. 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. See "How to Buy Fund Shares" in the Fund's current Prospectus
for the discounts allowed to Authorized Firms on the sale of Fund shares.
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. For the amount of sales charges for sales of Fund
shares paid to the Principal Underwriter (and Authorized Firms), see "Fees and
Expenses" in the Fund's Part II.
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 amount paid by the Fund
to the Principal Underwriter for acting as repurchase agent, see "Fees and
Expenses" in the Fund's Part II.
SERVICE PLAN
The Trust on behalf of the Fund has adopted 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 "NASD").
(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 from year to year, thereafter, provided such
continuance is approved by a vote of 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 "Noninterested 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 Noninterested
Trustees or by a vote of a majority of the outstanding voting securities of
the Fund. 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
Noninterested 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 shareholders of the Fund, and all material amendments of the Plan must
also be approved by the Trustees of the Trust as prescribed by the Rule. 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 the Fund's Part II.
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 either on the basis of 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 broker-dealer firm with whom
portfolio orders may be placed the fact that such firm has sold or is selling
shares of the Fund or of other investment companies sponsored by BMR or Eaton
Vance. This policy is not inconsistent with a rule of the NASD, which rule
provides that no firm which is a member of the NASD shall favor or disfavor
the distribution of shares of any particular investment company or group of
investment companies on the basis of brokerage commissions received or
expected by such firm from any source.
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 brokerage commissions paid by the Portfolio on portfolio
transactions, see "Fees and Expenses" in the Fund's
Part II.
OTHER INFORMATION
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 Trust's 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 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 interest
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.
FINANCIAL STATEMENTS
The financial statements of the Fund and the Portfolio, which are included
in the Fund's Annual Report to Shareholders, are incorporated by reference
into this SAI and have been so incorporated in reliance on the report of
Deloitte & Touche LLP, independent certified public accountants, as experts in
accounting and auditing. A copy of the Fund's most recent Annual Report
accompanies this SAI.
Registrant incorporates by reference the audited financial information for
the Funds and the Portfolios listed below for the fiscal year ended July 31,
1996, as previously filed electronically with the Commission:
EV Traditional Arizona Municipals Fund
EV Traditional Colorado Municipals Fund
EV Traditional Connecticut Municipals Fund
EV Traditional Michigan Municipals Fund
EV Traditional Minnesota Municipals Fund
EV Traditional New Jersey Municipals Fund
EV Traditional Pennsylvania Municipals Fund
EV Traditional Texas Municipals Fund
(Accession No. 0000950135-96-004170)
<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 SAI for the securities listed. Ratings are
generally given to securities at the time of issuance. While the rating
agencies may from time to time revise such ratings, they undertake no
obligation to do so, and the ratings indicated do not necessarily represent
ratings which would be given to these securities on the date of the
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.
p: The letter "p" indicates that the rating is provisional. A provisional
rating assumes the successful completion of the project being financed by the
debt being rated and indicates that payment of debt service requirements is
largely or entirely dependent upon the successful and timely completion of the
project. This rating, however, while addressing credit quality subsequent to
completion of the project, makes no comment on the likelihood of, or the risk
of default upon failure of such completion. The investor should exercise his
own judgment with respect to such likelihood and risk.
L: The letter "L" indicates that the rating pertains to the principal amount
of those bonds to the extent that the underlying deposit collateral is insured
by the Federal Deposit Insurance Corp. and interest is adequately
collateralized. In the case of certificates of deposit, the letter "L"
indicates that the deposit, combined with other deposits being held in the
same right and capacity, will be honored for principal and accrued pre-default
interest up to the federal insurance limits within 30 days after closing of
the insured institution or, in the event that the deposit is assumed by a
successor insured institution, upon maturity.
NR: NR indicates no rating has been requested, that there is insufficient
information on which to base a rating, or that S&P does not rate a particular
type of obligation as a matter of policy.
MUNICIPAL NOTES
S&P note ratings reflect the liquidity concerns and market access risks unique
to notes. Notes due in 3 years or less will likely receive a note rating.
Notes maturing beyond 3 years will most likely receive a long-term debt
rating. The following criteria will be used in making that assessment:
-- Amortization schedule (the larger the final maturity relative to other
maturities the more likely it will be treated as a note).
-- Sources of payment (the more dependent the issue is on the market for
its refinancing, the more likely it will be treated as a note).
Note rating symbols are as follows:
SP-1: Strong capacity to pay principal and interest. Those issues
determined to possess very strong characteristics will be given a plus(+)
designation.
SP-2: Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse financial and economic changes over the term of
the notes.
SP-3: Speculative capacity to pay principal and interest.
FITCH 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
BB: Bonds are considered speculative. The obligor's ability to pay interest
and repay principal may be affected over time by adverse economic changes.
However, business and financial alternatives can be identified that could
assist the obligor in satisfying its debt service requirements.
B: Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued
timely payment of principal and interest reflects the obligor's limited margin
of safety and the need for reasonable business and economic activity
throughout the life of the issue.
CCC: Bonds have certain identifiable characteristics which, if not remedied,
may lead to default. The ability to meet obligations requires an advantageous
business and economic environment.
CC: Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C: Bonds are in imminent default in payment of interest or principal.
DDD, DD, AND D: Bonds are in default on interest and/or principal payments.
Such bonds are extremely speculative and should be valued on the basis of
their ultimate recovery value in liquidation or reorganization of the obligor.
"DDD" represents the highest potential for recovery on these bonds, and "D"
represents the lowest potential for recovery.
PLUS (+) OR MINUS (-): The ratings from AA to C may be modified by the
addition of a plus or minus sign to indicate the relative position of a credit
within the rating category.
NR: Indicates that Fitch does not rate the specific issue.
CONDITIONAL: A conditional rating is premised on the successful completion of
a project or the occurrence of a specific event.
INVESTMENT GRADE SHORT-TERM RATINGS
Fitch's short-term ratings apply to debt obligations that are payable on
demand or have original maturities of generally up to three years, including
commercial paper, certificates of deposit, medium-term notes, and municipal
and investment notes.
F-1+: Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1: Very 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 ARIZONA MUNICIPALS
FUND. The investment objective of the Fund is to provide current income exempt
from regular federal income tax and Arizona State personal income taxes. The
Fund currently seeks to achieve its investment objective by investing its
assets in the Arizona Municipals Portfolio (the "Portfolio").
RISKS OF CONCENTRATION
The following information as to certain Arizona considerations is given to
investors in view of the Portfolio's policy of concentrating its investments
in Arizona issuers. Such information supplements the information in the
Prospectus. It is derived from sources that are generally available to
investors and is believed to be accurate. Such information constitutes only a
brief summary, does not purport to be a complete description and is based on
information from official statements relating to securities offerings of
Arizona issuers. Neither the Trust nor the Portfolio has independently
verified this information.
The ability of Arizona and its political subdivisions to respond to the
ever-increasing burdens placed upon them by the growth of the 1980's has been
limited, in part, by Constitutional and legislative restrictions on property
tax increases and limitations on annual expenditure increases. Subject to
certain exceptions, the maximum amount of property taxes levied by any Arizona
county, city, town or community college district for their operations and
maintenance expenditures cannot exceed the amount levied in a preceding year
by more than two percent. Certain taxes are specifically exempt from this
limit, including taxes levied for debt service payments. Annual property tax
levies for the payment of general obligation bonded indebtedness are unlimited
as to rate or amount. However, there are Constitutional limitations on the
aggregate amount of general obligation bonded indebtedness an Arizona
municipality may incur, and these limitations could impede a municipality's
ability to respond to the needs of a fast-growing population for additional
public facilities and services.
Arizona State government general fund revenue growth in fiscal year 1995
increased 4.6%, while expenditures increased 12.5%. The State general fund
ended fiscal year 1995 with a fund balance of $305.0 million. Fiscal year 1996
is expected to close with a general fund balance of $335 million. The 1997
budget shows a slight slowdown in gorwth.
The 1995 legislature enacted a $200 million income tax reduction package
and has committed to enact a $200 million property tax reduction package in
1997. In 1992, Arizona voters passed a measure that requires a two-thirds vote
of the legislature to increase State revenue. Accordingly, it will be more
difficult to reverse the current and planned tax reductions, which may
adversely affect State fund balances and fiscal conditions.
FEES AND EXPENSES
INVESTMENT ADVISER
As of July 31, 1996, the Portfolio had net assets of $129,861,547. For the
fiscal year ended July 31, 1996, the Portfolio paid BMR advisory fees of
$574,999 (equivalent to 0.41% of the Portfolio's average daily net assets for
such year). For the fiscal year ended July 31, 1995, the Portfolio paid BMR
advisory fees of $629,148 (equivalent to 0.42% of the Portfolio's average
daily net assets for such year). For the ten months ended July 31, 1994, the
Portfolio paid BMR advisory fees of $505,544 (equivalent to 0.41% (annualized)
of the Portfolio's average daily net assets for such period). The Portfolio's
Investment Advisory Agreement with BMR is dated October 13, 1992 and may be
continued as described under "Investment Adviser and Administrator" in Part I.
ADMINISTRATOR
As stated under "Investment Adviser and Administrator" in Part I, the
Administrator currently receives no compensation for providing administrative
services to the Fund. For the fiscal years ended July 31, 1996 and 1995, and
for the period from the start of business, December 13, 1993, to the fiscal
year ended July 31, 1994, $19,116, $18,453 and $16,438, respectively, of the
Fund's operating expenses were allocated to the Administrator.
SERVICE PLAN
The Service Plan remains in effect until April 28, 1997 and may be
continued as described under "Service Plan" in Part I. Prior to February 1,
1996, the Fund made sales commission, distribution fee and service fee
payments pursuant to a Distribution Plan. During the period from August 1,
1995 to January 31, 1996, the Principal Underwriter paid to Authorized Firms
sales commissions of $2,140 under that Plan on sales of Fund shares. During
the same period, the Fund paid sales commissions under that Plan to the
Principal Underwriter aggregating $9,253, and CDSCs aggregating approximately
$140 were imposed on early redeeming shareholders and paid to the Principal
Underwriter. The CDSCs and sales commissions paid to the Principal Underwriter
reduced Uncovered Distribution Charges. As at July 31, 1996, the outstanding
Uncovered Distribution Charges of the Principal Underwriter calculated under
the Distribution Plan amounted to approximately $436,000 (which amount was
equivalent to 26.6% of the Fund's net assets on such date). This charge will
be extinguished at no expense to the Fund on January 31, 1997. During the
fiscal year ended July 31, 1996, the Fund paid or accrued service fees
aggregating $4,407, of which $4,041 was paid to Authorized Firms and the
balance of which was retained by the Principal Underwriter. A portion of such
fee was paid under the service fee provisions of the Distribution Plan and the
balance was paid under the existing Plan.
PRINCIPAL UNDERWRITER
The total sales charges for sales of shares of the Fund during the period
from February 1, 1996 to July 31, 1996 was $10,803, of which $58 was received
by the Principal Underwriter and $10,745 was received by Authorized Firms.
For the fiscal year ended July 31, 1996, the Fund paid the Principal
Underwriter $167.50 for repurchase transactions handled by the Principal
Underwriter (being $2.50 for each such transaction).
BROKERAGE
For the fiscal year ended July 31, 1996, the Portfolio paid brokerage
commissions of $22,534 on portfolio security transactions aggregating
$181,351,480 to firms which provided some research services to BMR or its
affiliates (although many of such firms may have been selected in any
particular transaction primarily because of their execution capabilities). For
the fiscal year ended July 31, 1995 and for the ten months ended July 31,
1994, the Portfolio paid no brokerage commissions on portfolio transactions.
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 the Portfolio who are
members of the Eaton Vance organization receive no compensation from the Fund
or the Portfolio.) During the fiscal year ended July 31, 1996, the
noninterested Trustees of the Trust and the Portfolio received the following
compensation in their capacities as Trustees from the Fund and the Portfolio,
and, for the year ended September 30, 1996, earned the following compensation
in their capacities as Trustees of 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 ...... $0 $1,542(2) $142,500(4)
Samuel L. Hayes, III .. 0 1,687(3) 153,750(5)
Norton H. Reamer ...... 0 1,645 142,500
John L. Thorndike ..... 0 1,729 147,500
Jack L. Treynor ....... 0 1,683 147,500
- ----------
(1) The Eaton Vance fund complex consists of 228 registered investment
companies or series thereof.
(2) Includes $578 of deferred compensation.
(3) Includes $570 of deferred compensation.
(4) Includes $42,500 of deferred compensation.
(5) Includes $37,500 of deferred compensation.
ADDITIONAL OFFICER INFORMATION
In addition to the officers of the Portfolio listed under "Officers of the
Trust and the Portfolio" in Part I, Cynthia J. Clemson (33) is a Vice
President of the Portfolio. Ms. Clemson has served as a Vice President of the
Portfolio since June 19, 1995. Ms. Clemson has been a Vice President of BMR
and Eaton Vance since 1993 and an employee of Eaton Vance since 1985. Ms.
Clemson is an officer of various investment companies managed by Eaton Vance
or BMR.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return
on a hypothetical investment of $1,000 in the Fund from July 25, 1991 through
July 31, 1996 and for the five- and one-year periods ended July 31, 1996. The
total return for the period prior to the Fund's commencement of operations on
December 13, 1993 reflects the Portfolio's total return (or that of its
predecessor) adjusted to reflect any applicable Fund sales charge. Total
return for this time period has not been adjusted to reflect the Fund's
distribution fees and/or service fees and certain other expenses.
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT
TOTAL RETURN TOTAL RETURN
EXCLUDING MAXIMUM INCLUDING MAXIMUM
VALUE OF SALES CHARGE SALES CHARGE
INVESTMENT INVESTMENT AMOUNT OF INVESTMENT ------------------------------ -----------------------------
PERIOD DATE INVESTMENT* ON 7/31/96 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ------------- -------------- --------------- -------------- -------------- -------------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of the Fund** 7/25/91 $962.57 $1,371.84 42.52% 7.31% 37.18% 6.50%
5 Years Ended 7/31/96** 7/31/91 $962.87 $1,360.04 41.25% 7.15% 36.00% 6.34%
1 Year Ended 7/31/96** 7/31/95 $962.55 $1,022.72 6.25% 6.25% 2.27% 2.27%
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 Portfolio's and/or the Fund's expenses had not been subsidized, the Fund would have had lower returns.
</TABLE>
For the thirty-day period ended July 31, 1996, the yield of the Fund was
5.04%. The yield required of a taxable security that would produce an after-
tax yield equivalent to that earned by the Fund of 5.04% would be 7.71%,
assuming a combined federal and State tax rate of 34.59%. If a portion of the
Fund's expenses had not been allocated to the Administrator, the Fund would
have had a lower yield.
See the Tax Equivalent Yield Table in this Part II 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 was the record owner of approximately 33.5% 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. In addition, as of such date, the following
shareholders owned beneficially and of record the percentage of outstanding
shares of the Fund indicated after their name: Southwest Securities Inc. FBO
Larry L. Gartin & Shirley K. Gartin, Dallas, TX (7.0%); and Barbara R.
McQuillan, Scottsdale, AZ (6.3%). 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
The Fund changed its name from EV Classic Arizona Tax Free Fund to EV
Classic Arizona Municipals Fund on December 1, 1995 and to EV Traditional
Arizona Municipals Fund on February 1, 1996.
<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 equivalent to those of
tax exempt bonds yielding from 4% to 7% under the regular federal income tax
and Arizona State income tax laws and tax rates applicable for 1996.
<TABLE>
<CAPTION>
COMBINED A FEDERAL AND ARIZONA STATE
FEDERAL AND TAX EXEMPT YIELD OF:
SINGLE RETURN JOINT RETURN ARIZONA 4% 4.5% 5% 5.5% 6% 6.5% 7%
- ------------------------ --------------------- STATE TAX -------------------------------------------------------------------
(TAXABLE INCOME*) BRACKET(+) IS EQUIVALENT TO A FULLY TAXABLE YIELD OF:
- ----------------------------------------------- ------------- -------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Up to $ 24,000 Up to $ 40,100 17.98% 4.88% 5.49% 6.10% 6.71% 7.31% 7.92% 8.53%
$ 24,001 - $ 58,150 $ 40,101 - $ 96,900 31.74 5.86 6.59 7.33 8.06 8.79 9.52 10.26
$ 58,151 - $121,300 $ 96,901 - $147,700 34.59 6.12 6.88 7.64 8.41 9.17 9.94 10.70
$121,301 - $263,750 $147,701 - $263,750 39.58 6.62 7.45 8.28 9.10 9.93 10.76 11.59
Over $263,750 Over $263,750 42.98 7.02 7.89 8.77 9.65 10.52 11.40 12.28
<FN>
* Net amount subject to federal and Arizona personal income tax after deductions and exemptions.
(+) The combined federal and Arizona tax brackets are calculated using the highest Arizona tax rate within each bracket. Taxpayers
with taxable income within such brackets may have lower combined tax brackets and taxable equivalent yields than indicated
above. The combined tax brackets assume that Arizona taxes are itemized deductions for federal income tax purposes. Investors
who do not itemize deductions on their federal income tax return will have a higher combined bracket and higher taxable
equivalent yield than those indicated above. The applicable federal tax rates within the brackets are 15%, 28%, 31%, 36% and
39.6%, over the same ranges of income.
</TABLE>
Note: The federal income tax portion of above-indicated combined income tax
brackets does not take into account the effect of a reduction in the
deductibility of itemized deductions (including Arizona State Income Taxes)
for taxpayers with adjusted gross income in excess of $117,950. The tax
brackets also do not show the effects of phaseout of personal exemptions for
single filers with adjusted gross income 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 and Arizona personal income taxes, 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 except for Arizona personal income taxes. 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>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EV TRADITIONAL COLORADO MUNICIPALS
FUND. The investment objective of the Fund is to provide current income exempt
from regular federal income tax and Colorado State personal income taxes. The
Fund currently seeks to achieve its investment objective by investing its
assets in the Colorado Municipals Portfolio (the "Portfolio").
RISKS OF CONCENTRATION
The following information as to certain Colorado considerations is given
to investors in view of the Portfolio's policy of concentrating its
investments in Colorado issuers. Such information supplements the information
in the Prospectus. It is derived from sources that are generally available to
investors and is believed to be accurate. Such information constitutes only a
brief summary, does not purport to be a complete description and is based on
information from official statements relating to securities offerings of
Colorado issuers. Neither the Trust nor the Portfolio has independently
verified this information.
Large public works projects, a pickup in the housing sector and growth in
the trade and services industries led to moderate employment gains for the
State during the early 1990's. For July 1996, the adjusted unemployment rate
was 4.1% versus the 5.4% national average for the same month. Certain areas of
manufacturing, however, have been adversely impacted by the prolonged U.S.
downturn and by relatively heavy reliance on defense contracts and military
payroll. For 1996, the State's job growth is expected to slow to 3.2%.
The major revenue sources of the State are the individual income tax and
the general sales and use tax. Because of limitations contained in the State
constitution, the State of Colorado issues no general obligation bonds.
Several agencies and instrumentalities of State government, however, are
authorized by statute to issue bonds secured by revenues from specific
projects and activities or to enter into lease-purchase financings which are
subject to annual appropriation. Additionally, the State is authorized to
issue short-term revenue anticipation notes. To the extent the Portfolio holds
debt of local units of government whose revenues may rely in part on
distributions from the State, the fiscal health of the State will have an
indirect affect on the Portfolio. The State is required to have a balanced
budget each fiscal year. Therefore, in the event of a funding gap, the State
must cut expenditures and/or raise revenues. The latter is difficult,
especially since the passage of the TABOR Amendment (see below). Strong growth
in income tax and sales tax collections recently contributed to larger
increases in the unreserved fund balance in fiscal year 1994. The State had
revenue collections which exceeded expenditures by $38 million. In fiscal year
1994-95, revenues exceeded expenditures by $94 million. The general fund
reserve was $276 million, or roughly 7.6% of total annual appropriations.
Revenues for the 1995-96 fiscal year increased 6.8%, a slowdown from the 7.3%
pace in fiscal year 1995. This slowdown is expected to continue. Expenditures
increased more than revenues, exceeding revenues by $144.6 million. The
creation of the Controlled Maintenance Trust Fund per a new statute required a
$196 million transfer. This is reflected in the increased expenditures. The
Controlled Maintenance Trust Fund will be used for maintenance on State
administration buildings, courts, and higher education facilities.
There are approximately 1,800 units of local government in Colorado,
including counties, statutory cities and towns, home-rule cities and counties,
school districts and a variety of water, sewer and other special districts,
all with various constitutional and statutory authority to levy taxes and
incur indebtedness. The major sources of revenue for payment of indebtedness
are the ad valorem property tax, which presently is imposed and collected
solely at the local level, although the State is also authorized to levy the
tax, sales and use taxes, and revenue from special projects. Residential real
property is presently assessed at 10.36% of its actual value. All other
property is assessed at 29% of its actual value except producing mines and oil
and gas properties. Oil and gas properties are assessed at 87.5%.
A 1992 amendment to the State Constitution (the "TABOR Amendment")
restricts growth of State and local government spending to the rate of
inflation plus growth (as measured by population, school enrollment, or
construction depending on the government entity); and requires voter approval
of all new taxes or tax increases and the issuance of most types of debt.
Though the TABOR Amendment is not expected to have an immediate effect on the
credit quality of state and local governments, it will likely reduce the
financial flexibility of all levels of government in Colorado over time. In
particular, local governments dependent on taxes on residential property are
being squeezed between the TABOR Amendment requirements of voter approval for
increased mill levies and an earlier State Constitutional amendment which has
had the effect of lowering the assessment rate on residential property from
21% to 10.36% over the past 8 years. Younger or rapidly growing municipalities
with large infrastructure requirements may have particular difficulty finding
the revenues needed to finance their growth.
FEES AND EXPENSES
INVESTMENT ADVISER
As of July 31, 1996, the Portfolio had net assets of $45,415,574. For the
fiscal year ended July 31, 1996, absent a fee reduction, the Portfolio would
have paid BMR advisory fees of $130,068 (equivalent to 0.28% of the
Portfolio's average daily net assets for such year). To enhance the net income
of the Portfolio, BMR made a reduction of its advisory fee in the amount of
$7,886. For the fiscal year ended July 31, 1995, absent a fee reduction, the
Portfolio would have paid BMR advisory fees of $128,496 (equivalent to 0.28%
of the Portfolio's average daily net assets for such year). To enhance the net
income of the Portfolio, BMR made a reduction of its advisory fee in the
amount of $69,064. For the ten months ended July 31, 1994, absent a fee
reduction, the Portfolio would have paid BMR advisory fees of $67,224
(equivalent to 0.23% (annualized) of the Portfolio's average daily net assets
for such period). To enhance the net income of the Portfolio, BMR made a
reduction of the full amount of its advisory fee and BMR was allocated a
portion of the expenses related to the operation of the Portfolio in the
amount of $31,504. The Portfolio's Investment Advisory Agreement with BMR is
dated October 13, 1992 and may be continued as described under "Investment
Adviser and Administrator" in Part I.
ADMINISTRATOR
As stated under "Investment Adviser and Administrator" in Part I, the
Administrator currently receives no compensation for providing administrative
services to the Fund. For the fiscal years ended July 31, 1996 and 1995, and
for the period from the start of business, December 10, 1993, to the fiscal
year ended July 31, 1994, $20,152, $17,169 and $14,596, respectively, of the
Fund's operating expenses were allocated to the Administrator.
SERVICE PLAN
The Service Plan remains in effect until April 28, 1997 and may be
continued as described under "Service Plan" in Part I. Prior to February 1,
1996, the Fund made sales commission, distribution fee and service fee
payments pursuant to a Distribution Plan. During the period from August 1,
1995 to January 31, 1996, the Principal Underwriter paid to Authorized Firms
sales commissions of $1,605 under that Plan on sales of Fund shares. During
the same period, the Fund paid sales commissions under that Plan to the
Principal Underwriter aggregating $7,018, and CDSCs aggregating approximately
$70 were imposed on early redeeming shareholders and paid to the Principal
Underwriter. The CDSCs and sales commissions paid to the Principal Underwriter
reduced Uncovered Distribution Charges. As at July 31, 1996, the outstanding
Uncovered Distribution Charges of the Principal Underwriter calculated under
the Distribution Plan amounted to approximately $334,000 (which amount was
equivalent to 14.3% of the Fund's net assets on such date). This charge will
be extinguished at no expense to the Fund on Janaury 31, 1997. During the
fiscal year ended July 31, 1996, the Fund paid or accrued service fees
aggregating $4,215, of which $3,948 was paid to Authorized Firms and the
balance of which was retained by the Principal Underwriter. A portion of such
fee was paid under the service fee provisions of the Distribution Plan and the
balance was paid under the existing Plan.
PRINCIPAL UNDERWRITER
The total sales charges for sales of shares of the Fund during the period
from February 1, 1996 to July 31, 1996 was $2,009, which amount was paid to
Authorized Firms.
For the fiscal year ended July 31, 1996, the Fund paid the Principal
Underwriter $940 for repurchase transactions handled by the Principal
Underwriter (being $2.50 for each such transaction).
BROKERAGE
For the fiscal year ended July 31, 1996, the Portfolio paid brokerage
commissions of $13,997 on portfolio security transactions aggregating
$72,328,156 to firms which provided some research services to BMR or its
affiliates (although many of such firms may have been selected in any
particular transaction primarily because of their execution capabilities). For
the fiscal year ended July 31, 1995 and for the ten months ended July 31,
1994, the Portfolio paid no brokerage commissions on portfolio transactions.
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 the Portfolio who are
members of the Eaton Vance organization receive no compensation from the Fund
or the Portfolio.) During the fiscal year ended July 31, 1996, the
noninterested Trustees of the Trust and the Portfolio received the following
compensation in their capacities as Trustees from the Fund and the Portfolio,
and, for the year ended September 30, 1996, earned the following compensation
in their capacities as Trustees of 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 ...... $0 $343(2) $142,500(4)
Samuel L. Hayes, III .. 0 316(3) 153,750(5)
Norton H. Reamer ...... 0 314 142,500
John L. Thorndike ..... 0 318 147,500
Jack L. Treynor ....... 0 341 147,500
- ----------
(1) The Eaton Vance fund complex consists of 228 registered investment
companies or series thereof.
(2) Includes $129 of deferred compensation.
(3) Includes $104 of deferred compensation.
(4) Includes $42,500 of deferred compensation.
(5) Includes $37,500 of deferred compensation.
ADDITIONAL OFFICER INFORMATION
In addition to the officers of the Portfolio listed under "Officers of the
Trust and the Portfolio" in Part I, Cynthia J. Clemson (33) is a Vice
President of the Portfolio. Ms. Clemson has served as a Vice President of the
Portfolio since November 18, 1996. Ms. Clemson has been a Vice President of
BMR and Eaton Vance since 1993 and an employee of Eaton Vance since 1985. Ms.
Clemson is an officer of various investment companies managed by Eaton Vance
or BMR.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return
on a hypothetical investment of $1,000 in the Fund from August 25, 1992
through July 31, 1996 and for the one-year period ended July 31, 1996. The
total return for the period prior to the Fund's commencement of operations on
December 10, 1993 reflects the Portfolio's total return (or that of its
predecessor) adjusted to reflect any applicable Fund sales charge. Total
return for this time period has not been adjusted to reflect the Fund's
distribution fees and/or service fees and certain other expenses.
<PAGE>
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT
TOTAL RETURN TOTAL RETURN
VALUE OF EXCLUDING MAXIMUM SALES CHARGE INCLUDING MAXIMUM SALES CHARGE
INVESTMENT INVESTMENT AMOUNT OF INVESTMENT ------------------------------ ------------------------------
PERIOD DATE INVESTMENT* ON 7/31/96 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ------------------------ ------------ ------------- ------------ -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of the Fund** 8/25/92 $962.18 $1,208.07 25.55% 5.96% 20.81% 4.93%
1 Year Ended 7/31/96** 7/31/95 $962.46 $1,028.86 6.90% 6.90% 2.89% 2.89%
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 Portfolio's and/or the Fund's expenses had not been subsidized, the Fund would have had lower returns.
</TABLE>
For the thirty-day period ended July 31, 1996, the yield of the Fund was
5.22%. The yield required of a taxable security that would produce an after-
tax yield equivalent to that earned by the Fund of 5.22% would be 7.96%,
assuming a combined federal and State tax rate of 34.45%. If a portion of the
Portfolio's and the Fund's expenses had not been allocated to the Investment
Adviser and the Administrator, respectively, the Fund would have had a lower
yield.
See the Tax Equivalent Yield Table in this Part II 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, U.S. Clearing Corp., New York, NY, Donaldson
Lufkin Jenrette Securities Corporation Inc., Jersey City, NJ and Merrill
Lynch, Pierce, Fenner & Smith, Inc., Jacksonville, FL were the record owners
of approximately 17.9%, 17.7% and 5.0% of the outstanding shares, which were
held on behalf of their customers who are the beneficial owners of such
shares, and as to which they 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
The Fund changed its name from EV Classic Colorado Tax Free Fund to EV
Classic Colorado Municipals Fund on December 1, 1995 and to EV Traditional
Colorado Municipals Fund on February 1, 1996.
<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 equivalent to those of
tax exempt bonds yielding from 4% to 7% under the regular federal income tax
and Colorado State income tax laws and tax rates applicable for 1996.
<TABLE>
<CAPTION>
A FEDERAL AND COLORADO STATE
COMBINED TAX EXEMPT YIELD OF:
SINGLE RETURN JOINT RETURN FEDERAL AND 4% 4.5% 5% 5.5% 6% 6.5% 7%
- ------------------------ --------------------- CO STATE -------------------------------------------------------------------
(TAXABLE INCOME*) TAX BRACKET(+) IS EQUIVALENT TO A FULLY TAXABLE YIELD OF:
- ------------------------------------------------ ------ -------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Up to $ 24,000 Up to $ 40,100 19.25% 4.95% 5.57% 6.19% 6.81% 7.43% 8.05% 8.67%
$ 24,001 - $ 58,150 $ 40,101 - $ 96,900 31.60 5.85 6.58 7.31 8.04 8.77 9.50 10.23
$ 58,151 - $121,300 $ 96,901 - $147,700 34.45 6.10 6.86 7.63 8.39 9.15 9.92 10.68
$121,301 - $263,750 $147,701 - $263,750 39.20 6.58 7.40 8.22 9.05 9.87 10.69 11.51
Over $263,750 Over $263,750 42.62 6.97 7.84 8.71 9.59 10.46 11.33 12.20
<FN>
* Net amount subject to federal and Colorado personal income tax after deductions and exemptions.
(+) The Colorado income tax rate is 5%. The combined tax brackets assume that Colorado taxes are itemized deductions for federal
income tax purposes. Investors who do not itemize deductions on their federal income tax return will have a higher combined
bracket and higher taxable equivalent yield than those indicated above. The applicable federal tax rates within the brackets
are 15%, 28%, 31%, 36% and 39.6%, over the same ranges of income.
</TABLE>
Note: The federal income tax portion of above-indicated combined income tax
brackets does not take into account the effect of a reduction in the
deductibility of itemized deductions (including Colorado State income taxes)
for taxpayers with adjusted gross income in excess $117,950. The tax brackets
also do not show the effects of phaseout of personal exemptions for single
filers with adjusted gross income 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 and Colorado personal income taxes, 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 except for Colorado personal income taxes. 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>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EV TRADITIONAL CONNECTICUT
MUNICIPALS FUND. The investment objective of the Fund is to provide current
income exempt from regular federal income tax and Connecticut State personal
income taxes. The Fund currently seeks to achieve its investment objective by
investing its assets in the Connecticut Municipals Portfolio (the
"Portfolio").
RISKS OF CONCENTRATION
The following information as to certain Connecticut considerations is
given to investors in view of the Portfolio's policy of concentrating its
investments in Connecticut issuers. Such information supplements the
information in the Prospectus. It is derived from sources that are generally
available to investors and is believed to be accurate. Such information
constitutes only a brief summary, does not purport to be a complete
description and is based on information from official statements relating to
securities offerings of Connecticut issuers. Neither the Trust nor the
Portfolio has independently verified this information.
Although the manufacturing sector (primarily aircraft engines, helicopters
and submarines) has traditionally been of prime economic importance to
Connecticut, the non-manufacturing sector of employment now dominate the
State's economy. Approximately 82% of the State's non-agricultural employment
is in the non-manufacturing sector, with 29% of the total in the service
sector, 22% in the wholesale and retail trade sector, and 14% in the
government sector. Defense-related business plays an important role in the
Connecticut economy, and defense awards to Connecticut have traditionally been
among the highest in the nation on a per capita basis. However, in recent
years the federal government has reduced defense-related spending which has
had an adverse impact on the Connecticut economy.
For 1995, the unemployment rate in Connecticut on a seasonally adjusted
basis was 5.2%, compared to 5.8% for the nation. Throughout 1995, the State
experienced little in the way of substantial job growth. For July 1996, the
unemployment rate was 4.7%, down from 5.5% in 1995. Despite this, Connecticut
continues to have the highest per capita income of any state, reaching 133.8%
of the U.S. average in 1994.
The State derives over 65% of its revenues from taxes imposed by the
State. For the fiscal year 1995, the two taxes that generated the greatest
amount of revenue were the personal income tax and the sales and use tax
representing 41.4% and 37.8%, respectively, of total net tax revenues. The tax
revenues remained fairly stagnant, with the exception of the sales and use tax
which increased 8.6%. In order to promote economic stability and provide a
positive business climate, several tax changes were adopted during the 1993
legislative session. Among the most significant changes were gradual
reductions to the corporation business tax rate of 11.5%, which reductions
have since been accelerated and increased so that for tax years commencing on
or after January 1, 2000 such rate will be 7.5%.
For the fiscal year 1995, the State experienced a general fund operating
surplus of $80.5 million and had accumulated a GAAP-basis deficit of $577
million. As of April 1, 1996, the Comptroller had projected an operating
deficit of $22.3 million for the fiscal year 1996.
The State, its officers and employees are defendants in numerous lawsuits.
According to the State Attorney General's Office, an adverse decision in any
of the cases summarized herein could materially affect the State's financial
position: (i) an action to enforce the spending cap provision of the State's
constitution by seeking to require that the General Assembly define certain
terms used therein and to enjoin certain increases in "general budget
expenditures" until this is done; (ii) litigation on behalf of black and
hispanic school children in the City of Hartford seeking "integrated
education" within the greater Hartford metropolitan area; (iii) litigation
involving claims by Indian tribes to less than 1/10 of 1% of the State's land
area; (iv) litigation challenging the State's method of financing elementary
and secondary public schools on the grounds that it denies equal access to
education; (v) an action on behalf of all persons with retardation or
traumatic brain injury, claiming that their constitutional rights are violated
by placement in State hospitals alleged not to provide adequate treatment and
training, and seeking placement in community residential settings with
appropriate support services; (vi) an action by the Connecticut Hospital
Association and 33 hospitals seeking to require the State to reimburse
hospitals for in-patient medical services on a more favorable basis; (vii) a
class action by the Connecticut Criminal Defense Lawyers Association claiming
a campaign of illegal surveillance activity and seeking damages and injunctive
relief; and (viii) an action by inmates of the Department of Correction
seeking damages and injunctive relief with respect to alleged violations of
statutory and constitutional rights as a result of the monitoring and
recording of their telephone calls from the State's correctional institutions.
FEES AND EXPENSES
INVESTMENT ADVISER
As of July 31, 1996, the Portfolio had net assets of $187,616,885. For the
fiscal year ended July 31, 1996, the Portfolio paid BMR advisory fees of
$841,092 (equivalent to 0.43% of the Portfolio's average daily net assets for
such year). For the fiscal year ended July 31, 1995, the Portfolio paid BMR
advisory fees of $835,605 (equivalent to 0.44% of the Portfolio's average
daily net assets for such year). For the ten months ended July 31, 1994, the
Portfolio paid BMR advisory fees of $635,227 (equivalent to 0.42% (annualized)
of the Portfolio's average daily net assets for such period). The Portfolio's
Investment Advisory Agreement with BMR is dated October 13, 1992 and may be
continued as described under "Investment Adviser and Administrator" in Part I.
ADMINISTRATOR
As stated under "Investment Adviser and Administrator" in Part I, the
Administrator currently receives no compensation for providing administrative
services to the Fund. For the fiscal years ended July 31, 1996 and 1995, and
for the period from the start of business, April 19, 1994, to the fiscal year
ended July 31, 1994, $24,364, $19,622 and $1,413, respectively, of the Fund's
operating expenses were allocated to the Administrator.
SERVICE PLAN
The Service Plan remains in effect until April 28, 1997 and may be
continued as described under "Service Plan" in Part I. During the fiscal year
ended July 31, 1996, the Fund paid or accrued service fees under the Plan
aggregating $909, of which $907 was paid to Authorized Firms and the balance
of which was retained by the Principal Underwriter.
PRINCIPAL UNDERWRITER
The total sales charges for sales of shares of the Fund during the fiscal
year ended July 31, 1996 was $18,380, which amount was paid to Authorized
Firms. The total sales charges for sales of the Fund for the fiscal year ended
July 31, 1995, and for the period from the start of business, April 19, 1994
to the fiscal year ended July 31, 1994, were $28,595 and $4,977, respectively,
of which $28 and $139, respectively, was received by the Principal Underwriter
and Authorized Firms received $28,567 and $4,838, respectively.
For the fiscal year ended July 31, 1996, the Fund paid the Principal
Underwriter $7.50 for repurchase transactions handled by the Principal
Underwriter (being $2.50 for each such transactiion).
BROKERAGE
For the fiscal year ended July 31, 1996, the Portfolio paid brokerage
commissions of $33,097 on portfolio security transactions aggregating
$237,056,390 to firms which provided some research services to BMR or its
affiliates (although many of such firms may have been selected in any
particular transaction primarily because of their execution capabilities). For
the fiscal year ended July 31, 1995 and for the ten months ended July 31,
1994, the Portfolio paid no brokerage commissions on portfolio transactions.
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 the Portfolio who are
members of the Eaton Vance organization receive no compensation from the Fund
or the Portfolio.) During the fiscal year ended July 31, 1996, the
noninterested Trustees of the Trust and the Portfolio received the following
compensation in their capacities as Trustees from the Fund and the Portfolio,
and, for the year ended September 30, 1996, earned the following compensation
in their capacities as Trustees of 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 ...... $0 $2,197(2) $142,500(4)
Samuel L. Hayes, III .. 0 2,288(3) 153,750(5)
Norton H. Reamer ...... 0 2,242 142,500
John L. Thorndike ..... 0 2,334 147,500
Jack L. Treynor ....... 0 2,330 147,500
- ----------
(1) The Eaton Vance fund complex consists of 228 registered investment
companies or series thereof.
(2) Includes $819 of deferred compensation.
(3) Includes $773 of deferred compensation.
(4) Includes $42,500 of deferred compensation.
(5) Includes $37,500 of deferred compensation.
ADDITIONAL OFFICER INFORMATION
In addition to the officers of the Portfolio listed under "Officers of the
Trust and the Portfolio" in Part I, Nicole Anderes (35) is a Vice President of
the Portfolio. Ms. Anderes has served as a Vice President of the Portfolio
since June 19, 1995. Ms. Anderes has been a Vice President of BMR and Eaton
Vance since 1994 and is an officer of various investment companies managed by
Eaton Vance or BMR. Prior to joining Eaton Vance, Ms. Anderes was Vice
President and portfolio manager, Lazard Freres Asset Management (1992-1994)
and Vice President and Manager -- Municipal Research, Roosevelt & Cross
(1987-1992).
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return
on a hypothetical investment of $1,000 in the Fund from May 1, 1992 through
July 31, 1996 and for the one-year period ended July 31, 1996. The total
return for the period prior to the Fund's commencement of operations on April
19, 1994 reflects the Portfolio's total return (or that of its predecessor)
adjusted to reflect any applicable Fund sales charge. Total return for this
time period has not been adjusted to reflect the Fund's service fees and
certain other expenses.
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT
TOTAL RETURN TOTAL RETURN
EXCLUDING MAXIMUM INCLUDING MAXIMUM
VALUE OF SALES CHARGE SALES CHARGE
INVESTMENT INVESTMENT AMOUNT OF INVESTMENT ------------------------------ -----------------------------
PERIOD DATE INVESTMENT* ON 7/31/96 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
---------- ---------- ----------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of the Fund** 5/1/92 $962.76 $1,240.45 28.84% 6.14% 24.04% 5.20%
1 Year Ended 7/31/96** 7/31/95 $962.79 $1,028.94 6.87% 6.87% 2.89% 2.89%
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 current 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.
</TABLE>
For the thirty-day period ended July 31, 1996, the yield of the Fund was
5.16%. The yield required of a taxable security that would produce an after-
tax yield equivalent to that earned by the Fund of 5.16% would be 7.83%,
assuming a combined federal and State tax rate of 34.11%. If a portion of the
Fund's expenses had not been allocated to the Administrator, the Fund would
have had a lower yield.
See the Tax Equivalent Yield Table in this Part II 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 was the record owner of approximately 6.2% 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. In addition, as of such date, the following shareholder
owned beneficially and of record the percentage of outstanding shares of the
Fund: George J. Sherman 1989 Trust, Wm. T. Sherman Trs dtd 12/19/89, West
Hanford, CT (10.9%). To the knowledge of the Trust, no other person owned of
record of beneficially 5% or more of the Fund's outstanding shares as of such
date.
OTHER INFORMATION
The Fund changed its name from EV Traditional Connecticut Tax Free Fund
to EV Traditional Connecticut Municipals Fund on December 1, 1995.
<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 equivalent to those of
tax exempt bonds yielding from 4% to 7% under the regular federal income tax
and Connecticut State income tax laws and tax rates applicable for 1996.
<TABLE>
<CAPTION>
A FEDERAL AND CONNECTICUT STATE
COMBINED TAX EXEMPT YIELD OF:
SINGLE RETURN JOINT RETURN FEDERAL AND 4% 4.5% 5% 5.5% 6% 6.5% 7%
- ------------------------- ---------------------- CT STATE -----------------------------------------------------------------
(TAXABLE INCOME*) TAX BRACKET(+) IS EQUIVALENT TO A FULLY TAXABLE YIELD OF:
- ------------------------------------------------- ------------- -----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Up to $ 24,000 Up to $ 40,100 18.25% 4.89% 5.50% 6.12% 6.73% 7.34% 7.95% 8.56%
$ 24,001 - $ 58,150 $ 40,101 - $ 96,900 31.24 5.82 6.54 7.27 8.00 8.73 9.45 10.18
$ 58,151 - $121,300 $ 96,901 - $147,700 34.11 6.07 6.83 7.59 8.35 9.11 9.86 10.62
$121,301 - $263,750 $147,701 - $263,750 38.88 6.54 7.36 8.18 9.00 9.82 10.63 11.45
Over $263,750 Over $263,750 42.32 6.93 7.80 8.67 9.54 10.40 11.27 12.14
<FN>
* Net amount subject to federal and Connecticut personal income tax after deductions and exemptions.
(+) The combined federal and Connecticut tax brackets are calculated using the highest Connecticut tax rate within each bracket,
reduced by available tax credits. Taxpayers with taxable income within these brackets may have a lower combined tax bracket and
taxable equivalent yield than indicated above. Tax credits reduce the effective Connecticut tax rate for single filers with
taxable income up to $52,500 and joint filers up to $100,500. The combined tax brackets assume that Connecticut taxes are
itemized deductions for federal income tax purposes. Investors who do not itemize deductions on their federal income tax return
will have a higher combined bracket and higher taxable equivalent yield than those indicated above. The applicable federal tax
rates within the brackets are 15%, 28%, 31%, 36% and 39.6%, over the same ranges of income.
</TABLE>
Note: The federal income tax portion of above-indicated combined income tax
brackets does not take into account the effect of a reduction in the
deductibility of itemized deductions (including Connecticut State income
taxes) for taxpayers with adjusted gross income in excess of $117,950. The tax
brackets also do not show the effects of phaseout of personal exemptions for
single filers with adjusted gross income 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 and Connecticut personal income taxes, 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 except for Connecticut personal income taxes. 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>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EV TRADITIONAL MICHIGAN MUNICIPALS
FUND. The investment objective of the Fund is to provide current income exempt
from regular federal income tax and Michigan State and City income and single
business taxes in the form of an investment exempt from Michigan intangibles
tax. The Fund currently seeks to achieve its investment objective by investing
its assets in the Michigan Municipals Portfolio (the "Portfolio").
RISKS OF CONCENTRATION
The following information as to certain Michigan considerations is given
to investors in view of the Portfolio's policy of concentrating its
investments in Michigan issuers. Such information supplements the information
in the Prospectus. It is derived from sources that are generally available to
investors and is believed to be accurate. Such information constitutes only a
brief summary, does not purport to be a complete description and is based on
information from official statements relating to securities offerings of
Michigan issuers. Neither the Trust nor the Portfolio has independently
verified this information.
The State's economy is overly dependent on the manufacturing sector, more
specifically the auto industry. Manufacturing accounts for 23% of total
employment as compared to the national average of 17%. The dependency on
manufacturing makes the State economy overly susceptible to economic
downturns. For June 1996, the State unemployment rate was 4.5% as compared to
the national average of 5.4%. Modest employment growth is prjected for 1996
and 1997. An improving economy and successful cost containment have enabled
the State to improve its financial position. for 1995, the Budget
Stabilization Fund was slightly greater than $1.0 billion and is projected to
reach $1.1 billion for 1996. The Governor has proposed reducing individual and
business income taxes. For 1996, revenues are estimated to grow 4.7% while
expenditures will grow by a similar rate.
In March, 1994, Michigan voters approved a change in the tax system. The
most significant provisions were an increase in the sales tax rate from 4% to
6%, a reduction in the income tax rate from 4.6% to 4.4% and the creation of a
statewide property tax. These changes are expected to provide sufficient
revenues to offset the elimination of property taxes for school district
operating purposes. There can be no assurance that school districts will
receive sufficient revenues to be able to service any limited tax bonds they
may have outstanding and which may be held by the Portfolio.
Under the State Constitution, the Legislature is prohibited from raising
taxes if doing so would cause total State revenues (except federal aid) to
exceed 10% of State personal income. The only exceptions to this revenue limit
are a majority approval of a referendum question or a specific emergency
declared by a two-thirds vote of the Legislature. However, this limit does not
apply to taxes imposed for the payment of principal and interest on bonds of
the State, if the bonds are approved by voters and authorized by a vote of
two-thirds of the members of each House of the Legislature. Local units of
government and local authorities are authorized to issue bonds and other
evidences of indebtedness in a variety of situations without the approval of
electors, but the ability of the obligor to levy taxes for the payment of such
obligations is subject to the foregoing limitations unless the obligations
were authorized before December 23, 1978 or approved by the electors. The
Constitution prohibits the State from reducing the proportion of total State
spending paid to all local units of government, taken as a group, below that
proportion in effect in the 1978-79 fiscal year. The State may not mandate new
or increased levels of services to be provided by local units without making
appropriations to cover any increased costs.
Under the State Constitution, the total amount of general ad valorem taxes
imposed on taxable property in any year cannot exceed certain millage
limitations specified by the Constitution, statute or charter. The
Constitution prohibits local units of government from levying any tax not
authorized by law or charter, or from increasing the rate of an existing tax
above the rate authorized by law or charter. The Constitution also contains
millage reduction provisions. Under such provisions, should the value of
taxable property (exclusive of new construction and improvements) increase at
a percentage greater than the percentage increase in the Consumer Price Index,
the maximum authorized tax rate would be reduced by a factor which would
result in the same maximum potential tax revenues to the local taxing unit as
if the valuation of taxable property (less new construction and improvements)
had grown only at the Consumer Price Index rate instead of at the higher
actual growth rate. Thus, if taxable property values rise faster than consumer
prices, the maximum authorized tax rate would be increased at the Consumer
Price Index rate. Conversely, if taxable property values rise slower than
consumer prices, tax rates may be raised accordingly, but never higher than
the rate authorized on December 23, 1978, without elector approval.
The ability of the State to pay the principal and interest on its general
obligation bonds may be affected by the limitations described above.
Similarly, the ability of local units to levy taxes to pay the principal of
and interest on their general obligations is subject to the constitutional,
statutory and charter limits described below.
FEES AND EXPENSES
INVESTMENT ADVISER
As of July 31, 1996, the Portfolio had net assets of $173,464,608. For the
fiscal year ended July 31, 1996, the Portfolio paid BMR advisory fees of
$795,032 (equivalent to 0.43% of the Portfolio's average daily net assets for
such year). For the fiscal year ended July 31, 1995, the Portfolio paid BMR
advisory fees of $856,258 (equivalent to 0.44% of the Portfolio's average
daily net assets for such year). For the ten months ended July 31, 1994, the
Portfolio paid BMR advisory fees of $721,041 (equivalent to 0.43% (annualized)
of the Portfolio's average daily net assets for such period). The Portfolio's
Investment Advisory Agreement with BMR is dated October 13, 1992 and may be
continued as described under "Investment Adviser and Administrator" in Part I.
ADMINISTRATOR
As stated under "Investment Adviser and Administrator" in Part I, the
Administrator currently receives no compensation for providing administrative
services to the Fund. For the fiscal years ended July 31, 1996 and 1995, and
for the period from the start of business, December 7, 1993, to the fiscal
year ended July 31, 1994, $23,512, $12,579 and $13,862, respectively, of the
Fund's operating expenses were allocated to the Administrator.
SERVICE PLAN
The Service Plan remains in effect until April 28, 1997 and may be
continued as described under "Service Plan" in Part I. Prior to February 1,
1996, the Fund made sales commission, distribution fee and service fee
payments pursuant to a Distribution Plan. During the period from August 1,
1995 to January 31, 1996, the Principal Underwriter paid to Authorized Firms
sales commissions of $3,777 under that Plan on sales of Fund shares. During
the same period, the Fund paid sales commissions under that Plan to the
Principal Underwriter aggregating $15,711, and CDSCs aggregating approximately
$220 were imposed on early redeeming shareholders and paid to the Principal
Underwriter. The CDSCs and sales commissions paid to the Principal Underwriter
reduced Uncovered Distribution Charges. As at July 31, 1996, the outstanding
Uncovered Distribution Charges of the Principal Underwriter calculated under
the Distribution Plan amounted to approximately $547,000 (which amount was
equivalent to 33.1% of the Fund's net assets on such date). This charge will
be extinguished at no expense to the Fund on January 31, 1997. During the
fiscal year ended July 31, 1996, the Fund paid or accrued service fees
aggregating $6,128, of which $5,715 was paid to Authorized Firms and the
balance of which was retained by the Principal Underwriter. A portion of such
fee was paid under the service fee provisions of the Distribution Plan and the
balance was paid under the existing Plan.
PRINCIPAL UNDERWRITER
The total sales charges for sales of shares of the Fund during the period
from February 1, 1996 to July 31, 1996 was $1,684, of which $11 was received
by the Principal Underwriter and $1,673 was received by Authorized Firms.
For the fiscal year ended July 31, 1996, the Fund paid the Principal
Underwriter $222.50 for repurchase transactions handled by the Principal
Underwriter (being $2.50 for each such transaction).
BROKERAGE
For the fiscal years ended July 31, 1996 and 1995, and for the ten months
ended July 31, 1994, the Portfolio paid no brokerage commissions on portfolio
transactions.
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
Fund or the Portfolio.) During the fiscal year ended July 31, 1996, the
noninterested Trustees of the Trust and the Portfolio received the following
compensation in their capacities as Trustees from the Fund and the Portfolio,
and, for the year ended September 30, 1996, earned the following compensation
in their capacities as Trustees of 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 ...... $0 $2,091(2) $142,500(4)
Samuel L. Hayes, III .. 0 2,192(3) 153,750(5)
Norton H. Reamer ...... 0 2,147 142,500
John L. Thorndike ..... 0 2,238 147,500
Jack L. Treynor ....... 0 2,228 147,500
- ----------
(1) The Eaton Vance fund complex consists of 228 registered investment
companies or series thereof.
(2) Includes $784 of deferred compensation.
(3) Includes $737 of deferred compensation.
(4) Includes $42,500 of deferred compensation.
(5) Includes $37,500 of deferred compensation.
ADDITIONAL OFFICER INFORMATION
In addition to the officers of the Portfolio listed under "Officers of the
Trust and the Portfolio" in Part I, Timothy T. Browse (37) is a Vice President
of the Portfolio. Mr. Browse has served as a Vice President of the Portfolio
since June 19, 1995. Mr. Browse has been a Vice President of BMR and Eaton
Vance since 1993, and is an officer of various investment companies managed by
Eaton Vance or BMR. Prior to joining Eaton Vance, Mr. Browse was a Municipal
Bond Trader at Fidelity Management & Research Company (1987-1992).
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return
on a hypothetical investment of $1,000 in the Fund from April 19, 1991 through
July 31, 1996 and for the five- and one-year periods ended July 31, 1996. The
total return for the period prior to the Fund's commencement of operations on
December 7, 1993 reflects the Portfolio's total return (or that of its
predecessor) adjusted to reflect any applicable Fund sales charge. Total
return for this time period has not been adjusted to reflect the Fund's
distribution fees and/or service fees and certain other expenses.
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT
TOTAL RETURN TOTAL RETURN
EXCLUDING MAXIMUM INCLUDING MAXIMUM
VALUE OF SALES CHARGE SALES CHARGE
INVESTMENT INVESTMENT AMOUNT OF INVESTMENT ------------------------------ ------------------------------
PERIOD DATE INVESTMENT* ON 7/31/96 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ------------------------ ------------ ------------- ------------ -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of the Fund** 4/19/91 $962.02 $1,342.17 39.52% 6.50% 34.22% 5.72%
5 Years Ended 7/31/96** 7/31/91 $962.86 $1,318.36 36.91% 6.48% 31.84% 5.68%
1 Year Ended 7/31/96** 7/31/95 $962.58 $1,027.71 6.76% 6.76% 2.77% 2.77%
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.
</TABLE>
For the thirty-day period ended July 31, 1996, the yield of the Fund was
4.85%. The yield required of a taxable security that would produce an after-
tax yield equivalent to that earned by the Fund of 4.85% would be 7.57%,
assuming a combined federal and State tax rate of 35.93%. If a portion of the
Fund's expenses had not been allocated to the Administrator, the Fund would
have had a lower yield.
See the Tax Equivalent Yield Table in this Part II 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 was the record owner of approximately 56.2% 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
The Fund changed its name from EV Classic Michigan Tax Free Fund to EV
Classic Michigan Municipals Fund on December 1, 1995 and to EV Traditional
Michigan Municipals Fund on February 1, 1996.
<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 equivalent to those of
tax exempt bonds yielding from 4% to 7% under the regular federal income tax,
Michigan State income tax, Michigan State intangibles tax and Michigan City
income tax laws and tax rates applicable for 1996.
<TABLE>
<CAPTION>
A FEDERAL AND MICHIGAN STATE
COMBINED TAX EXEMPT YIELD OF:
SINGLE RETURN JOINT RETURN FEDERALL AND 4% 4.5% 5% 5.5% 6% 6.5% 7%
- ------------------------- ---------------------- MI STATE -----------------------------------------------------------------
(TAXABLE INCOME)* TAX BRACKET(+) IS EQUIVALENT TO A FULLY TAXABLE YIELD OF:
- ------------------------------------------------- ------------- -----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Up to $ 24,000 Up to $ 40,100 21.08% 5.07% 5.70% 6.34% 6.97% 7.60% 8.24% 8.87%
$ 24,001 - $ 58,150 $ 40,101 - $ 96,900 33.15 5.98 6.73 7.48 8.23 8.98 9.72 10.47
$ 58,151 - $121,300 $ 96,901 - $147,700 35.93 6.24 7.02 7.80 8.58 9.37 10.15 10.93
$121,301 - $263,750 $147,701 - $263,750 40.58 6.73 7.57 8.41 9.26 10.10 10.94 11.78
Over $263,750 Over $263,750 43.92 7.13 8.02 8.92 9.81 10.70 11.59 12.48
<FN>
* Net amount subject to federal and Michigan personal income tax after deductions and exemptions.
(+) The combined tax brackets include a Michigan tax rate of 4.4%, Michigan City income tax rate of 1% (which may vary by city),
and a Michigan intangibles tax rate of 1.75%, and assume that Michigan State and local taxes are itemized deductions for
federal income tax purposes. Investors who do not itemize deductions on their federal income tax return will have a higher
combined bracket and higher taxable equivalent yield than those indicated above. The applicable federal tax rates within the
brackets are 15%, 28%, 31%, 36% and 39.6%, over the same ranges of income.
</TABLE>
Note: The federal income tax portion of above-indicated combined income tax
brackets does not take into account the effect of a reduction in the
deductibility of itemized deductions (including Michigan State and local
income taxes) for taxpayers with adjusted gross income in excess of $117,950.
The tax brackets also do not show the effects of phaseout of personal
exemptions for single filers with adjusted gross income 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 and Michigan personal income taxes, 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 except for Michigan personal income taxes. 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 with their tax adviser for additional information.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EV TRADITIONAL MINNESOTA
MUNICIPALS FUND. The investment objective of the Fund is to provide current
income exempt from regular federal income tax and Minnesota State personal
income taxes. The Fund currently seeks to achieve its investment objective by
investing its assets in the Minnesota Municipals Portfolio (the "Portfolio").
RISKS OF CONCENTRATION
The following information as to certain Minnesota considerations is given
to investors in view of the Portfolio's policy of concentrating its
investments in Minnesota issuers. Such information supplements the information
in the Prospectus. It is derived from sources that are generally available to
investors and is believed to be accurate. Such information constitutes only a
brief summary, does not purport to be a complete description and is based on
information from official statements relating to securities offerings of
Minnesota issuers. Neither the Trust nor the Portfolio has independently
verified this information.
The State's diverse economy has continued to outperform the nation, as
evidenced by the State's employment growth in the early 1990s. For August
1996, the unemployment rate was 3.8% compared to the national average of 5.1%.
The State of Minnesota has no obligation to pay any bonds of its political or
governmental subdivisions, municipalities, governmental agencies, or
instrumentalities. The creditworthiness of local general obligation bonds is
dependent upon the financial condition of the local government issuer, and the
creditworthiness of revenue bonds is dependent upon the availability of
particular designated revenue sources or the financial conditions of the
underlying obligors. Although most of the bonds owned by the Portfolio are
expected to be obligations other than general obligations of the State of
Minnesota itself, there can be no assurance that the same factors that
adversely affect the economy of the State generally will not also affect
adversely the market value or marketability of such other obligations, or the
ability of the obligors to pay the principal of or interest on such
obligations.
At the local level, the property tax base has recovered after its growth
was slowed in many communities in the early 1990s by an overcapacity in
certain segments of the commercial real estate market. Local finances are also
affected by the amount of state aid that is made available. Further, various
of the issuers within the State of Minnesota, as well as the State of
Minnesota itself, whose securities may be purchased by the Portfolio, may now
or in the future be subject to lawsuits involving material amounts. It is
impossible to predict the outcome of these lawsuits. Any losses with respect
to these lawsuits may have an adverse impact on the ability of these issuers
to meet their obligations.
FEES AND EXPENSES
INVESTMENT ADVISER
As of July 31, 1996, the Portfolio had net assets of $76,090,073. For the
fiscal year ended July 31, 1996, the Portfolio paid BMR advisory fees of
$295,178 (equivalent to 0.36% of the Portfolio's average daily net assets for
such year). For the fiscal year ended July 31, 1995, the Portfolio paid BMR
advisory fees of $310,489 (equivalent to 0.37% of the Portfolio's average
daily net assets for such year). For the ten months ended July 31, 1994, the
Portfolio paid BMR advisory fees of $228,154 (equivalent to 0.36% (annualized)
of the Portfolio's average daily net assets for such period). The Portfolio's
Investment Advisory Agreement with BMR is dated October 13, 1992 and may be
continued as described under "Investment Adviser and Administrator" in Part I.
ADMINISTRATOR
As stated under "Investment Adviser and Administrator" in Part I, the
Administrator currently receives no compensation for providing administrative
services to the Fund. For the fiscal years ended July 31, 1996 and 1995, and
for the period from the start of business, December 9, 1993, to the fiscal
year ended July 31, 1994, $24,485, $24,179 and $22,241, respectively, of the
Fund's operating expenses were allocated to the Administrator.
SERVICE PLAN
The Service Plan remains in effect until April 28, 1997 and may be
continued as described under "Service Plan" in Part I. Prior to February 1,
1996, the Fund made sales commission, distribution fee and service fee
payments pursuant to a Distribution Plan. During the period from August 1,
1995 to January 31, 1996, the Principal Underwriter paid to Authorized Firms
sales commissions of $2,794 under that Plan on sales of Fund shares. During
the same period, the Fund paid sales commissions under that Plan to the
Principal Underwriter aggregating $13,097, and CDSCs aggregating approximately
$275 were imposed on early redeeming shareholders and paid to the Principal
Underwriter. The CDSCs and sales commissions paid to the Principal Underwriter
reduced Uncovered Distribution Charges. As at July 31, 1996, the outstanding
Uncovered Distribution Charges of the Principal Underwriter calculated under
the Distribution Plan amounted to approximately $446,000 (which amount was
equivalent to 28.2% of the Fund's net assets on such date). This charge will
be extinguished at no expense to the Fund on January 31, 1997. During the
fiscal year ended July 31, 1996, the Fund paid or accrued service fees
aggregating $5,361, of which $4,662 was paid to Authorized Firms and the
balance of which was retained by the Principal Underwriter. A portion of such
fee was paid under the service fee provisions of the Distribution Plan and the
balance was paid under the existing Plan.
PRINCIPAL UNDERWRITER
The total sales charges for sales of shares of the Fund during the period
from February 1, 1996 to July 31, 1996 was $4,961, which amount was paid to
Authorized Firms.
For the fiscal year ended July 31, 1996, the Fund paid the Principal
Underwriter $192.50 for repurchase transactions handled by the Principal
Underwriter (being $2.50 for each such transaction).
BROKERAGE
For the fiscal year ended July 31, 1996, the Portfolio paid brokerage
commissions of $21,625 on portfolio security transactions aggregating
$104,595,026 to firms which provided some research services to BMR or its
affiliates (although many of such firms may have been selected in any
particular transaction primarily because of their execution capabilities). For
the fiscal year ended July 31, 1995 and for the ten months ended July 31,
1994, the Portfolio paid no brokerage commissions on portfolio transactions.
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 the Portfolio who are
members of the Eaton Vance organization receive no compensation from the Fund
or the Portfolio.) During the fiscal year ended July 31, 1996, the
noninterested Trustees of the Trust and the Portfolio received the following
compensation in their capacities as Trustees from the Fund and the Portfolio,
and, for the year ended September 30, 1996, earned the following compensation
in their capacities as Trustees of 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 ....... $0 $1,129(2) $142,500(4)
Samuel L. Hayes, III ... 0 1,308(3) 153,750(5)
Norton H. Reamer ....... 0 1,268 142,500
John L. Thorndike ...... 0 1,348 147,500
Jack L. Treynor ........ 0 1,274 147,500
- ----------
(1) The Eaton Vance fund complex consists of 228 registered investment
companies or series thereof.
(2) Includes $424 of deferred compensation.
(3) Includes $446 of deferred compensation.
(4) Includes $42,500 of deferred compensation.
(5) Includes $37,500 of deferred compensation.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return
on a hypothetical investment of $1,000 in the Fund from July 29, 1991 through
July 31, 1996 and for the five- and one-year periods ended July 31, 1996. The
total return for the period prior to the Fund's commencement of operations on
December 9, 1993 reflects the Portfolio's total return (or that of its
predecessor) adjusted to reflect any applicable Fund sales charge. Total
return for this time period has not been adjusted to reflect the Fund's
distribution fees and/or service fees and certain other expenses.
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT
TOTAL RETURN TOTAL RETURN
EXCLUDING MAXIMUM INCLUDING MAXIMUM
VALUE OF SALES CHARGE SALES CHARGE
INVESTMENT INVESTMENT AMOUNT OF INVESTMENT ---------------------------- ---------------------------
PERIOD DATE INVESTMENT* ON 7/31/96 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------------------- ------------- ------------ ---------------- ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of the Fund** 7/29/91 $962.55 $1,292.58 34.29% 6.06% 29.26% 5.26%
5 Years Ended 7/31/96** 7/31/91 $962.74 $1,298.00 34.82% 6.16% 29.80% 5.36%
1 Year Ended 7/31/96** 7/31/95 $962.74 $1,024.46 6.41% 6.41% 2.45% 2.45%
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.
</TABLE>
For the thirty-day period ended July 31, 1996, the yield of the Fund was
5.20%. The yield required of a taxable security that would produce an after-
tax yield equivalent to that earned by the Fund of 5.20% would be 8.24%,
assuming a combined federal and State tax rate of 36.87%. If a portion of the
Fund's expenses had not been allocated to the Administrator, the Fund would
have had a lower yield.
See the Tax Equivalent Yield Table in this Part II 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 was the record owner of approximately 7.9% 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. In addition, as of such date, the following
shareholders owned of record the percentages of outstanding shares indicated
after their names: James M. Winey, North Oaks, MN (10.3%); PaineWebber FBO
Catherine E. Jacobson Rev Trust dtd 12/8/94 Catherine Jacobson TTEE,
Bloomington, MN (7.8%); George Waters & Dorothy Waters JTWROS, Inver Grove
Heights, MN (6.1%); and PaineWebber FBO Leslie W. Jacobson Insurance Trust dtd
3/4/82 Leslie Bradford Jacobson TTEE, Bloomington, MN (5.5%). 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
The Fund changed its name from EV Classic Minnesota Tax Free Fund to EV
Classic Minnesota Municipals Fund on December 1, 1995 and to EV Traditional
Minnesota Municipals Fund on February 1, 1996.
<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 equivalent to those of
tax exempt bonds yielding from 4% to 7% under the regular federal income tax
and regular Minnesota State personal income tax laws and tax rates for 1996.
<TABLE>
<CAPTION>
A FEDERAL AND MINNESOTA STATE
COMBINED TAX EXEMPT YIELD OF:
SINGLE RETURN JOINT RETURN FEDERAL AND 4% 4.5% 5% 5.5% 6% 6.5% 7%
- ------------------------ --------------------- MN STATE -------------------------------------------------------------------
(TAXABLE INCOME)* TAX BRACKET(+) IS EQUIVALENT TO A FULLY TAXABLE YIELD OF:
- ----------------------------------------------- ------------- -------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Up to $ 24,000 Up to $ 40,100 21.80% 5.12% 5.75% 6.39% 7.03% 7.67% 8.31% 8.95%
$ 24,001 - $ 58,150 $ 40,101 - $ 96,900 34.12 6.07 6.83 7.59 8.35 9.11 9.87 10.63
$ 58,151 - $121,300 $ 96,901 - $147,700 36.87 6.34 7.13 7.92 8.71 9.50 10.30 11.09
$121,301 - $263,750 $147,701 - $263,750 41.44 6.83 7.68 8.54 9.39 10.25 11.10 11.95
Over $263,750 Over $263,750 44.73 7.24 8.14 9.05 9.95 10.86 11.76 12.67
<FN>
* Net amount subject to federal and Minnesota personal income tax after deductions and exemptions.
(+) The first two combined tax brackets are calculated using the highest Minnesota tax rate within each bracket. Taxpayers with
taxable income within such brackets may have lower combined tax brackets and taxable equivalent yields than indicated above.
The combined tax brackets assume that Minnesota taxes are itemized deductions for federal income tax purposes. Investors who
do not itemize deductions on their federal income tax return will have a higher combined bracket and higher taxable
equivalent yield than those indicated above. The applicable federal tax rates within the brackets are 15%, 28%, 31%, 36% and
39.6%, over the same ranges of income.
</TABLE>
Note: The federal income tax portion of above-indicated combined income tax
brackets does not take into account the effect of a reduction in the
deductibility of itemized deductions (including Minnesota State income taxes)
for taxpayers with adjusted gross income in excess of $117,950. The tax
brackets also do not show the effects of phaseout of personal exemptions for
single filers with adjusted gross income 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 and Minnesota personal income taxes, 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 except for regular Minnesota personal income taxes. 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,
and regular Minnesota personal income tax, is treated as a tax preference item
which could subject the recipient to the federal and Minnesota alternative
minimum taxes. The illustrations assume that the federal and Minnesota
alternative minimum taxes are 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 with their tax adviser for additional information.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EV TRADITIONAL NEW JERSEY
MUNICIPALS FUND. The investment objective of the Fund is to provide current
income exempt from regular federal income tax and New Jersey State personal
income taxes. The Fund currently seeks to meet its investment objective by
investing its assets in the New Jersey Municipals Portfolio (the "Portfolio").
RISKS OF CONCENTRATION
The following information as to certain New Jersey considerations is given
to investors in view of the Portfolio's policy of concentrating its
investments in New Jersey issuers. Such information supplements the
information in the Prospectus. It is derived from sources that are generally
available to investors and is believed to be accurate. Such information
constitutes only a brief summary, does not purport to be a complete
description and is based on information from official statements relating to
securities offerings of New Jersey issuers. Neither the Trust nor the
Portfolio has independently verified this information.
New Jersey has a well diversified economy and high wealth levels. Per
capita income ranks as the second highest in the nation at 28% above the U.S.
average. The State's economy benefits from its proximity to New York and other
major eastern seaboard cities. New Jersey's economy, like most states,
suffered during the recent recession with unemployment increasing and
surpassing the national average. New Jersey's adjusted unemployment rate for
July 1996 was 6.1% compared to 5.4% nationally.
The State ended fiscal 1993 with an $855 million surplus, approximately
half of which was used in the 1994 budget. 1994 had an appropriation for all
funds of $15.7 billion, up 4.8% from fiscal 1993 revised appropriations of
$14.7 billion. Both years benefited from $412 million in nonrecurring revenues
from retroactive federal Medicaid payments. After the Legislature reduced the
Governor's fiscal 1994 requests by $182 million, about half the $855 million
fiscal 1993 total surplus was used for fiscal 1994, with a June 30, 1994
forecast of $416 million -- $110 million allocated to the General Fund and
over $305 million to rainy day and taxpayer relief funds.
In 1994, New Jersey adopted a 5% personal income tax cut retroactive to
January 1, 1994. In 1995, New Jersey adopted a 10% personal income tax cut
retroactive to January 1, 1995. On June 26, 1995, the New Jersey State
Legislature passed an additional 15% reduction to take effect January 1, 1996.
State officials estimate the revenue loss resulting from these tax cuts at
over $1 billion for fiscal 1996. To accommodate the tax cut, the fiscal 1996
budget would rely on non-recurring revenues and the use of prior years'
surplus. Furthermore, a major focus of the spending reductions has been
employer contributions to retiree health care and pension systems which were
cut by over $863 million in fiscal 1995. There can be no assurance that the
tax cuts will not have an adverse impact on the State's finances and the
demand for municipal bonds in the State.
In fiscal year 1995, expenditure control was a major factor with the
implementation of an income tax reduction. Operations were stronger than
budgeted. An operating deficit of $335.8 million was incurred instead of the
budgeted $555.0 million.
In fiscal year 1996, it is projected to be another year of operating
deficits, which will continue to draw down the State's general fund balances.
Revenue growth is projected to be slower than expected. One-time revenue
measures will account for approximately 3.5% of budget.
In fiscal year 1997, New Jersey will implement the last phase of its $1.25
billion multi-year personal income tax cut. The State will continue to
restrain state spending through agency and program cuts. The budget will be
balanced with the use of about $300 million of one-shot revenues, which is
equivalent to 2% of the budget.
General obligation bonds of New Jersey are the primary method for New
Jersey financing of capital projects. These bonds are backed by the full faith
and credit of New Jersey. New Jersey tax revenues and certain other fees are
pledged to meet the principal and interest payments required to fully pay the
debt. No general obligation debt can be issued by New Jersey without prior
voter approval, except that, pursuant to a constitutional amendment, no voter
approval is required for any law authorizing the creation of a debt for the
purpose of refinancing all or a portion of the outstanding debt of New Jersey,
so long as such law requires that the refinancing provided debt service
savings. The New Jersey Constitution also provides that no voter approval is
required for debt issued for purposes of war, to repel invasion, to suppress
insurrection or to meet an emergency caused by disaster or act of God. Capital
construction can also be funded by appropriation of current revenues on a pay-
as-you-go basis. All appropriations for capital projects and all proposals for
State bond authorizations are subject to the review and recommendation of the
New Jersey Commission on Capital Budgeting and Planning.
Other State-related obligations include those created pursuant to the New
Jersey Building Authority Act, which has the power to construct facilities for
leasing to the State. The rental for such buildings is equal to the debt
service relating thereto plus payments in lieu of real estate taxes.
Legislation provides for future appropriations for State aid to local school
districts equal to debt service on a maximum principal amount of $280,000,000
of bonds issued by such local school districts for construction and renovation
of school facilities and for State aid to counties equal to debt service on up
to $80,000,000 of bonds issued by counties for construction of county college
facilities.
The authorizing legislation for various State entities provides for
specific budgetary procedures with respect to certain obligations issued by
such entities. Bonds issued pursuant to authorizing legislation of this type
are sometimes referred to as "moral obligation" bonds. There is no statutory
limitation on the amount of moral obligation bonds which may be issued by
eligible State entities. Currently, there are two such entities available for
State appropriations to meet moral obligations. The New Jersey Housing and
Mortgage Finance Agency has not had a deficiency in a debt service reserve
which required New Jersey to appropriate funds. It is anticipated that the
agency's revenue will continue to be sufficient to cover debt service on its
bonds. The State provides the South Jersey Port Corporation with funds to
cover all debt service and property tax requirements, when earned revenues are
anticipated to be insufficient to cover these obligations. In the past,
anticipated revenues have, in some cases, been insufficient to cover debt
service and/or insufficient to cover all property tax requirements. These are
numerous other State-created entities with outstanding debt. This debt is
supported by revenues derived from or assets of the various projects financed
by such entities.
The Local Budget Law imposes specific budgetary procedures upon counties
and municipalities, subject to review by the Director of the Division of Local
Government Services. State law also regulates the issuance of debt by counties
and municipalities by limiting the amount of tax anticipation notes that may
be issued and requiring their repayment within three months of the end of the
fiscal year in which they are issued. The Local Bond Law governs the issuance
of bonds and notes and bars the issuance of bonds for the payment of current
expenses or to pay outstanding obligations, except where permitted by the
Local Finance Board. State law also authorizes State officials to supervise
fiscal administration in any municipality facing financial difficulties.
FEES AND EXPENSES
INVESTMENT ADVISER
As of July 31, 1996, the Portfolio had net assets of $386,244,341. For the
fiscal year ended July 31, 1996, the Portfolio paid BMR advisory fees of
$1,878,801 (equivalent to 0.47% of the Portfolio's average daily net assets
for such year). For the fiscal year ended July 31, 1995, the Portfolio paid
BMR advisory fees of $1,944,340 (equivalent to 0.47% of the Portfolio's
average daily net assets for such year). For the ten months ended July 31,
1994, the Portfolio paid BMR advisory fees of $1,609,137 (equivalent to 0.46%
(annualized) of the Portfolio's average daily net assets for such period). The
Portfolio's Investment Advisory Agreement with BMR is dated October 13, 1992
and may be continued as described under "Investment Adviser and Administrator"
in Part I.
ADMINISTRATOR
As stated under "Investment Adviser and Administrator" in Part I, the
Administrator currently receives no compensation for providing administrative
services to the Fund. For the fiscal years ended July 31, 1996 and 1995, and
for the period from the start of business, April 13, 1994, to the fiscal year
ended July 31, 1994, $25,726, $19,481 and $1,482, respectively, of the Fund's
operating expenses were allocated to the Administrator.
SERVICE PLAN
The Service Plan remains in effect until April 28, 1997 and may be
continued as described under "Service Plan" in Part I. During the fiscal year
ended July 31, 1996, the Fund paid or accrued service fees under the Plan
aggregating $1,126, which amount was paid to Authorized Firms.
PRINCIPAL UNDERWRITER
The total sales charges for sales of shares of the Fund during the fiscal
years ended July 31, 1996 and 1995, were $62,357 and $62,628, which amounts
were paid to Authorized Firms. The total sales charges for sales of the Fund
for the period from the start of business, April 13, 1994 to the fiscal year
ended July 31, 1994 was $14,889, of which $294 was received by the Principal
Underwriter and $14,595 was received by Authorized Firms.
For the fiscal year ended July 31, 1996, the Fund paid the Principal
Underwriter $7.50 for repurchase transactions handled by the Principal
Underwriter (being $2.50 for each such transaction).
BROKERAGE
For the fiscal year ended July 31, 1996, the Portfolio paid brokerage
commissions of $41,780 on portfolio security transactions aggregating
$276,203,309 to firms which provided some research services to BMR or its
affiliates (although many of such firms may have been selected in any
particular transaction primarily because of their execution capabilities). For
the fiscal year ended July 31, 1995 and for the ten months ended July 31,
1994, the Portfolio paid no brokerage commissions on portfolio transactions.
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 the Portfolio who are
members of the Eaton Vance organization receive no compensation from the Fund
or the Portfolio.) During the fiscal year ended July 31, 1996, the
noninterested Trustees of the Trust and the Portfolio received the following
compensation in their capacities as Trustees from the Fund and the Portfolio,
and, for the year ended September 30, 1996, earned the following compensation
in their capacities as Trustees of 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 ....... $0 $3,634(2) $142,500(4)
Samuel L. Hayes, III ... 0 3,613(3) 153,750(5)
Norton H. Reamer ....... 0 3,560 142,500
John L. Thorndike ...... 0 3,668 147,500
Jack L. Treynor ........ 0 3,761 147,500
- ----------
(1) The Eaton Vance fund complex consists of 228 registered investment
companies or series thereof.
(2) Includes $1,351 of deferred compensation.
(3) Includes $1,236 of deferred compensation.
(4) Includes $42,500 of deferred compensation.
(5) Includes $37,500 of deferred compensation.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return
on a hypothetical investment of $1,000 in the Fund from January 8, 1991
through July 31, 1996 and for the five- and one-year periods ended July 31,
1996. The total return for the period prior to the Fund's commencement of
operations on April 13, 1994 reflects the Portfolio's total return (or that of
its predecessor) adjusted to reflect any applicable Fund sales charge. Total
return for this time period has not been adjusted to reflect the Fund's
service fees and certain other expenses.
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT
TOTAL RETURN TOTAL RETURN
EXCLUDING MAXIMUM INCLUDING MAXIMUM
VALUE OF SALES CHARGE SALES CHARGE
INVESTMENT INVESTMENT AMOUNT OF INVESTMENT ------------------------------ --------------------------
PERIOD DATE INVESTMENT* ON 7/31/96 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of the Fund** 1/8/91 $962.06 $1,420.87 47.70% 7.27% 42.09% 6.52%
5 Years Ended 7/31/96** 7/31/91 $962.79 $1,347.47 39.95% 6.95% 34.75% 6.15%
1 Year Ended 7/31/96** 7/31/95 $962.39 $1,026.95 6.71% 6.71% 2.70% 2.70%
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 current 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.
</TABLE>
For the thirty-day period ended July 31, 1996, the yield of the Fund was
5.37%. The yield required of a taxable security that would produce an after-
tax yield equivalent to that earned by the Fund of 5.37% would be 8.31%,
assuming a combined federal and State tax rate of 36.87%. If a portion of the
Fund's expenses had not been allocated to the Administrator, the Fund would
have had a lower yield.
See the Tax Equivalent Yield Table in this Part II 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, U.S. Clearing Corp., New York, NY and Merrill
Lynch, Pierce, Fenner & Smith, Inc., Jacksonville, FL, were the record owners
of approximately 14.0% and 11.6%, respectively, of the outstanding shares,
which were held on behalf of their customers who are beneficial owners of such
shares, and as to which they 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
The Fund changed its name from EV Traditional New Jersey Tax Free Fund to
EV Traditional New Jersey Municipals Fund on December 1, 1995.
<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 equivalent to those of
tax exempt bonds yielding from 4% to 7% under the regular federal income tax
and New Jersey State income tax laws and tax rates applicable for 1996.
<TABLE>
<CAPTION>
A FEDERAL AND NEW JERSEY STATE
COMBINED TAX EXEMPT YIELD OF:
SINGLE RETURN JOINT RETURN FEDERAL AND 4% 4.5% 5% 5.5% 6% 6.5% 7%
- ----------------------- -------------------- NJ STATE ---------------------------------------------------------------------
(TAXABLE INCOME)* TAX BRACKET(+) IS EQUIVALENT TO A FULLY TAXABLE YIELD OF:
- --------------------------------------------- ------------- ---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Up to $ 24,000 Up to $ 40,100 16.49% 4.79% 5.39% 5.99% 6.59% 7.18% 7.78% 8.38%
$ 24,001-$ 58,150 $ 40,101-$ 96,900 31.98% 5.88 6.62 7.35 8.09 8.82 9.56 10.29
$ 58,151-$121,300 $ 96,901-$147,700 35.40% 6.19 6.97 7.74 8.51 9.29 10.06 10.84
$121,301-$263,750 $147,701-$263,750 40.08% 6.68 7.51 8.34 9.18 10.01 10.85 11.68
Over $263,750 Over $263,750 43.45% 7.07 7.96 8.84 9.73 10.61 11.49 12.38
<FN>
* Net amount subject to federal and New Jersey personal income tax after deductions and exemptions.
(+) The combined federal and New Jersey tax brackets are calculated using the highest New Jersey tax rate applicable within each
bracket. Taxpayers with taxable income within such brackets may have lower combined tax brackets and taxable equivalent
yields than indicated above. The combined tax brackets assume that New Jersey taxes are itemized deductions for federal
income tax purposes. Investors who do not itemize deductions on their federal income tax return will have a higher combined
bracket and higher taxable equivalent yield then those indicated above. The applicable federal tax rates within the brackets
are 15%, 28%, 31%, 36% and 39.6%, over the same ranges of income.
</TABLE>
Note: The federal income tax portion of above-indicated combined income tax
brackets does not take into account the effect of a reduction in the
deductibility of itemized deductions (including New Jersey State income taxes)
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 income 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 and New Jersey personal income taxes, 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 except for New Jersey personal income taxes. 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>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EV TRADITIONAL PENNSYLVANIA
MUNICIPALS FUND. The investment objective of the Fund is to provide current
income exempt from regular federal income tax and Pennsylvania State and local
taxes in the form of an investment exempt from Pennsylvania personal property
taxes. The Fund currently seeks to meet its investment objective by investing
its assets in the Pennsylvania Municipals Portfolio (the "Portfolio").
RISKS OF CONCENTRATION
The following information as to certain Pennsylvania considerations is
given to investors in view of the Portfolio's policy of concentrating its
investments in Pennsylvania issuers. Such information supplements the
information in the Prospectus. It is derived from sources that are generally
available to investors and is believed to be accurate. Such information
constitutes only a brief summary, does not purport to be a complete
description and is based on information from official statements relating to
securities offerings of Pennsylvania issuers. Neither the Trust nor the
Portfolio has independently verified this information.
Pennsylvania historically has been identified as a heavy industry state,
although that reputation has changed with the decline of the coal, steel and
railroad industries and the resulting diversification of Pennsylvania's
industrial composition. The major new sources of growth are in the service
sector, including trade, medical and health services, education and financial
institutions. Pennsylvania continues, however, to have a greater percentage of
its workers employed in manufacturing than the national average, leaving the
economy somewhat cyclical and vulnerable to recessionary forces. During 1995,
manufacturing accounted for 18% of employment. For July 1996, the adjusted
unemployment rate for Pennsylvania was 5.1% as compared to the July, 1995
level of 5.9%. Per capita income in Pennsylvania for 1994 of $22,196 was
higher than the per capita income of the United States of $21,699.
Revenues and Expenditures. Pennsylvania utilizes the fund method of
accounting. The General Fund, the State's largest fund, receives all tax
receipts, revenues, federal grants and reimbursements that are not specified
by law to be deposited elsewhere. Debt service on all obligations, except
those issued for highway purposes or for the benefit of other special revenue
funds, is payable from the General Fund. The General Fund closed fiscal year
1995 with a balance of $688 million.
The Governor's fiscal year 1997 proposed budget contained tax reductions
totaling $60.2 million and certain cost reduction programs, particularly in
the areas of public health and welfare. Under the 1997 budget, revenue
receipts are expected to increase and approximately $95 million of surplus
from 1996 are expected to be used. The fiscal year 1997 budget projects a $5
million fiscal year-end unappropriated surplus. All budgetary proposals
require legislative enactment.
The Pennsylvania Constitution requires all proceeds of motor fuels taxes,
vehicle registration fees, license taxes, operators' license fees and other
excise taxes imposed on products used in motor transportation to be used
exclusively for construction, reconstruction, maintenance and repair of and
safety on highways and bridges and for the payment of debt service on
obligations incurred for such purposes. The Motor License Fund is the fund
through which such revenues are accounted for and expended.
Pennsylvania Debt. The current Constitutional provisions pertaining to the
Pennsylvania debt permit the issuance of the following types of debt: (i) debt
to suppress insurrection or rehabilitate areas affected by disaster, (ii)
electorate approved debt, (iii) debt for capital projects subject to an
aggregate debt limit of 1.75 times the annual average tax revenues of the
preceding five fiscal years (this debt need not be approved by the electorate)
and (iv) tax anticipation notes payable in the fiscal year of issuance. All
debt except tax anticipation notes must be amortized in substantial and
regular amounts.
Pennsylvania engages in short-term borrowing to fund expenses within a
fiscal year through the sale of tax anticipation notes, which must mature
within the fiscal year of issuance. The principal amount issued, when added to
that outstanding, may not exceed in the aggregate 20% of the revenues
estimated to accrue to the appropriate fund in the fiscal year. The State is
not permitted to fund deficits between fiscal years with any form of debt. All
year end deficit balances must be funded within the succeeding fiscal year's
budget.
Pending the issuance of bonds, Pennsylvania may issue bond anticipation
notes subject to the applicable statutory and constitutional limitations
generally imposed on bonds. The term of such borrowings may not exceed three
years.
State-Related Obligations. Certain state-created agencies have statutory
authorization to incur debt for which no legislation providing for state
appropriations to pay debt service thereon is required. The debt of these
agencies is supported by assets of or revenues derived from the various
projects financed; it is not an obligation of the State. Some of these
agencies, however, are indirectly dependent on state appropriations. State-
related agencies and their outstanding debt as of December 31, 1995 include
the Delaware River Joint Toll Bridge Commission ($55.1 million), the Delaware
River Port Authority ($185.5 million), the Pennsylvania Economic Development
Financing Authority ($1,050.8 million), the Pennsylvania Energy Development
Authority ($121.0 million), the Pennsylvania Higher Education Assistance
Agency ($1,408.8 million), the Pennsylvania Higher Education Facilities
Authority ($2,115.1 million), the Pennsylvania Industrial Development
Authority ($344.8 million), the Pennsylvania Infrastructure Investment
Authority ($213.1 million), the Pennsylvania Turnpike Commission ($1,228.7
million), the Philadelphia Regional Port Authority ($62.6 million) and the
State Public School Building Authority ($316.2 million).
The only obligations of state-created agencies in Pennsylvania which bear
a moral obligation of the state are those issued by the Pennsylvania Housing
Finance Agency, a state-created agency which provides housing for lower and
moderate income families in the state, which had $2,165 million of bonds
outstanding at December 31, 1995, and the Hospitals and Higher Education
Facilities Authority of Philadelphia which issued $21.1 million in bonds in
1993.
Litigation. Pennsylvania is currently involved in certain litigation where
adverse decisions could have an adverse impact on its ability to pay debt
service. In Baby Neal v. Commonwealth, the American Civil Liberties Union
filed a lawsuit against the Commonwealth seeking an order that would require
the Commonwealth to provide additional funding for child welfare services.
County of Allegheny v. Commonwealth of Pennsylvania involves litigation
regarding the state constitutionality of the statutory scheme for county
funding of the judicial system. In Pennsylvania Association of Rural and Small
Schools v. Casey, the constitutionality of Pennsylvania's system for funding
local school districts has been challenged. No estimates for the amount of
these claims are available.
Local Government Debt. Local government in Pennsylvania consists of numerous
individual units. Each unit is distinct and independent of other local units,
although they may overlap geographically.
There is extensive general legislation applying to local government. For
example, the Local Government Unit Debt Act provides for uniform debt limits
for local government units, including municipalities and school districts, and
prescribes methods of incurring, evidencing, securing and collecting debt.
Under the Local Government Unit Debt Act, the ability of Pennsylvania
municipalities and school districts to engage in general obligation borrowing
without electoral approval is generally limited by their recent revenue
collection experience. Generally such subdivisions can levy real property
taxes unlimited as to rate or amount to pay debt service on general obligation
borrowings.
Municipalities may also issue revenue obligations without limit and
without affecting their general obligation borrowing capacity if the
obligations are projected to be paid solely from project revenues.
Municipal authorities and industrial development authorities are
widespread in Pennsylvania. An authority is organized by a municipality acting
singly or jointly with another municipality and is governed by a board
appointed by the governing unit of the creating municipality or
municipalities. Typically, authorities are established to acquire, own and
lease or operate one or more projects and to borrow money and issue revenue
bonds to finance them.
As of the date of this Statement of Additional Information, the City of
Philadelphia's general obligations are rated Ba, B and BB, by Moody's, S&P and
Fitch, respectively.
FEES AND EXPENSES
INVESTMENT ADVISER
As of July 31, 1996, the Portfolio had net assets of $448,181,861. For the
fiscal year ended July 31, 1996, the Portfolio paid BMR advisory fees of
$2,262,320 (equivalent to 0.47% of the Portfolio's average daily net assets
for such year). For the fiscal year ended July 31, 1995, the Portfolio paid
BMR advisory fees of $2,416,419 (equivalent to 0.48% of the Portfolio's
average daily net assets for such year). For the ten months ended July 31,
1994, the Portfolio paid BMR advisory fees of $2,054,802 (equivalent to 0.46%
(annualized) of the Portfolio's average daily net assets for such period). The
Portfolio's Investment Advisory Agreement with BMR is dated October 13, 1992
and may be continued as described under "Investment Adviser and Administrator"
in Part I.
ADMINISTRATOR
As stated under "Investment Adviser and Administrator" in Part I, the
Administrator currently receives no compensation for providing administrative
services to the Fund. For the fiscal years ended July 31, 1996 and 1995, and
for the period from the start of business, June 1, 1994, to the fiscal year
ended July 31, 1994, $27,368, $15,522 and $763, respectively, of the Fund's
operating expenses were allocated to the Administrator.
SERVICE PLAN
The Service Plan remains in effect until April 28, 1997 and may be
continued as described under "Service Plan" in Part I. During the fiscal year
ended July 31, 1996, the Fund paid or accrued service fees under the Plan
aggregating $1,033, which amount was paid to Authorized Firms.
PRINCIPAL UNDERWRITER
The total sales charges for sales of shares of the Fund during the fiscal
years ended July 31, 1996 and 1995, were $48,891 and $58,444, which amounts
were paid to Authorized Firms. The total sales charges for sales of the Fund
for the period from the start of business, June 1, 1994 to the fiscal year
ended July 31, 1994 was $2,720, of which $103 was received by the Principal
Underwriter and $2,617 was received by Authorized Firms.
For the fiscal year ended July 31, 1996, the Fund paid the Principal
Underwriter $60 for repurchase transactions handled by the Principal
Underwriter (being $2.50 for each such transaction).
BROKERAGE
For the fiscal year ended July 31, 1996, the Portfolio paid brokerage
commissions of $106,001 on portfolio security transactions aggregating
$688,954,042 to firms which provided some research services to BMR or its
affiliates (although many of such firms may have been selected in any
particular transaction primarily because of their execution capabilities). For
the fiscal year ended July 31, 1995 and for the ten months ended July 31,
1994, the Portfolio paid no brokerage commissions on portfolio transactions.
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 the Portfolio who are
members of the Eaton Vance organization receive no compensation from the Fund
or the Portfolio.) During the fiscal year ended July 31, 1996, the
noninterested Trustees of the Trust and the Portfolio received the following
compensation in their capacities as Trustees from the Fund and the Portfolio,
and, for the year ended September 30, 1996, earned the following compensation
in their capacities as Trustees of 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 ....... $0 $3,845(2) $142,500(4)
Samuel L. Hayes, III ... 0 3,807(3) 153,750(5)
Norton H. Reamer ....... 0 3,753 142,500
John L. Thorndike ...... 0 3,864 147,500
Jack L. Treynor ........ 0 3,971 147,500
- ----------
(1) The Eaton Vance fund complex consists of 228 registered investment
companies or series thereof.
(2) Includes $1,439 of deferred compensation.
(3) Includes $1,236 of deferred compensation.
(4) Includes $42,500 of deferred compensation.
(5) Includes $37,500 of deferred compensation.
ADDITIONAL OFFICER INFORMATION
In addition to the officers of the Portfolio listed under "Officers of the
Trust and the Portfolio" in Part I, Timothy T. Browse (37) is a Vice President
of the Portfolio. Mr. Browse has served as a Vice President of the Portfolio
since December 1, 1995. Mr. Browse has been a Vice President of BMR and Eaton
Vance since 1993 and an employee of Eaton Vance since 1992. Mr. Browse is an
officer of various investment companies managed by Eaton Vance or BMR. Prior
to joining Eaton Vance, Mr. Browse was a Municipal Bond Trader -- Fidelity
Management & Research Company (1987-1992).
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return
on a hypothetical investment of $1,000 in the Fund from January 8, 1991
through July 31, 1996 and for the five- and one-year periods ended July 31,
1996. The total return for the period prior to the Fund's commencement of
operations on June 1, 1994 reflects the Portfolio's total return (or that of
its predecessor) adjusted to reflect any applicable Fund sales charge. Total
return for such time period has not been adjusted to reflect the Fund's
service fees and certain other expenses.
VALUE OF A $1,000 INVESTMENT
<TABLE>
<CAPTION>
TOTAL RETURN TOTAL RETURN
EXCLUDING MAXIMUM INCLUDING MAXIMUM
VALUE OF SALES CHARGE SALES CHARGE
INVESTMENT INVESTMENT AMOUNT OF INVESTMENT ------------------------------ ------------------------
PERIOD DATE INVESTMENT* ON 7/31/96 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
---------- ---------- ----------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of the Fund** 1/8/91 $962.39 $1,413.16 46.84% 7.15% 41.32% 6.42%
5 Years Ended 7/31/96** 7/31/91 $962.42 $1,342.37 39.48% 6.88% 34.24% 6.07%
1 Year Ended 7/31/96** 7/31/95 $962.39 $1,032.46 7.28% 7.28% 3.25% 3.25%
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 current 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.
</TABLE>
For the thirty-day period ended July 31, 1996, the yield of the Fund was
5.66%. The yield required of a taxable security that would produce an after-
tax yield equivalent to that earned by the Fund of 5.66% would be 9.10%,
assuming a combined federal and State tax rate of 35.40%. If a portion of the
Fund's expenses had not been allocated to the Administrator, the Fund would
have had a lower yield.
See the Tax Equivalent Yield Table in this Part II 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, Dime Bank, Honesdale, PA was the record owner of
approximately 11.1% of the outstanding shares, which were held on behalf of
its customers who are the benficial 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
The Fund changed its name from EV Traditional Pennsylvania Tax Free Fund
to EV Traditional Pennsylvania Municipals Fund on December 1, 1995.
<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 equivalent to those of
tax exempt bonds yielding 6% under the regular federal income tax and
Pennsylvania State and local tax laws in effect for 1996.
<TABLE>
<CAPTION>
TAXABLE YIELD NEEDED TO MATCH 6% FREE OF
--------------------------------------------------
FEDERAL, STATE,
1994 TAXABLE INCOME FEDERAL FEDERAL, STATE COUNTY AND
- ------------------------------------------------- FEDERAL STATE AND STATE AND COUNTY PHILADELPHIA
SINGLE RETURN JOINT RETURN INCOME TAX INCOME TAX TAXES TAXES (1) TAXES (2)
- ------------------------- ---------------------- ------------- ------------- ------------ ----------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Up to $ 24,000 Up to $ 40,100 15.00% 2.80% 7.26% 7.80% 8.24%
$ 24,001 - $ 58,150 $ 40,101 - $ 96,900 28.00 2.80 8.57 9.20 9.73
$ 58,151 - $121,300 $ 96,901 - $147,700 31.00 2.80 8.95 9.60 10.15
$121,301 - $263,750 $147,701 - $263,750 36.00 2.80 9.65 10.36 10.94
Over $263,750 Over $263,750 39.60 2.80 10.22 10.97 11.59
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Equivalent yields are based on a fixed $1,000 investment with all taxes
deducted from income. Included in all areas are the effects of: federal income
tax and a 2.8% Pennsylvania income tax. (1) Includes a 4 mil county personal
property tax imposed by most counties. (2) Includes a 4 mil county personal
property and a 4.86% Philadelphia school income tax. The equivalent yields
assume that the Pennsylvania state and local taxes referred to above are
itemized deductions for federal income tax purposes. Investors who do not
itemize deductions on their federal income tax return will have a higher
equivalent yield than indicated.
Note: The above-indicated federal income tax brackets do not take into account
the effect of a reduction in the deductibility of itemized deductions
(including Pennsylvania State and local taxes) for taxpayers with adjusted
gross income in excess of $117,950. The tax brackets and taxable equivalent
yields also do not show the effects of phaseout of personal exemptions for
single filers with adjusted gross income in excess of $117,950 and joint
filers with adjusted gross income in excess of $176,950. The effective federal
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 and Pennsylvania State and local income taxes,
other income received by the Portfolio and allocated to the Fund may be
taxable. 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
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>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EV TRADITIONAL TEXAS MUNICIPALS
FUND. The investment objective of the Fund is to provide current income exempt
from regular federal income taxes. The Fund currently seeks to achieve its
investment objective by investing its assets in the Texas Municipals Portfolio
(the "Portfolio").
RISKS OF CONCENTRATION
The following information as to certain Texas considerations is given to
investors in view of the Portfolio's policy of concentrating its investments
in Texas issuers. Such information supplements the information in the
Prospectus. It is derived from sources that are generally available to
investors and is believed to be accurate. Such information constitutes only a
brief summary, does not purport to be a complete description and is based on
information from official statements relating to securities offerings of Texas
issuers. Neither the Trust nor the Portfolio has independently verified this
information.
Once largely dependent on the drilling, production, refining, chemical and
energy-related manufacturing sectors, the economy of Texas has diversified
with the major source of job growth in the State now being the service-
producing sector (which includes transportation and public utilities,
finances, insurance and real estate, trade, services, and government). The
Texas economy continues to outpace the nation, adding 290,000 jobs in 1995.
Continued job growth is expected. The unemployment rate of 5.7% for July 1996,
is just above the national average of 5.4%. Over the past decade, the
population of Texas grew at a rate twice as fast as that of the entire United
States. Currently the third largest state in the nation, Texas is expected to
move into second place by the late 1990's.
The Texas legislature passed a $80 billion biennial budget for fiscal
years 1996 and 1997. The new budget includes no new tax increases.
Historically, the primary sources of the State's revenues have been sales
taxes, mineral severance taxes and Federal grants. The beginning fiscal 1996
cash balance was $2.1 billion. The State has no personal or corporate income
tax, although the State does impose a corporate franchise tax based on the
amount of a corporation's capital and surplus. A bill was passed by the
legislature reforming educational aid. Also, the State provided additional
funding contruction for poor districts. For the fiscal year ended August 1995,
net revenues increased 7.3% while net expenditures increased 12.1%, this
decreased the general fund balance to $2.1 billion from $2.2 billion in 1994.
FEES AND EXPENSES
INVESTMENT ADVISER
As of July 31, 1996, the Portfolio had net assets of $24,366,836. For the
fiscal year ended July 31, 1996, absent a fee reduction, the Portfolio would
have paid BMR advisory fees of $55,086 (equivalent to 0.20% of the Portfolio's
average daily net assets for such year). To enhance the net income of the
Portfolio, BMR made a reduction of its advisory fee in the amount of $27,295.
For the fiscal year ended July 31, 1995, absent a fee reduction, the Portfolio
would have paid BMR advisory fees of $56,319 (equivalent to 0.21% of the
Portfolio's average daily net assets for such year). To enhance the net income
of the Portfolio, BMR made a reduction of the full amount of its advisory fee
and BMR was allocated a portion of the expenses related to the operation of
the Portfolio in the amount of $18,606. For the ten months ended July 31,
1994, absent a fee reduction, the Portfolio would have paid BMR advisory fees
of $31,214 (equivalent to 0.17% (annualized) of the Portfolio's average daily
net assets for such period). To enhance the net income of the Portfolio, BMR
made a reduction of the full amount of its advisory fee and BMR was allocated
a portion of the expenses related to the operation of the Portfolio in the
amount of $35,347. The Portfolio's Investment Advisory Agreement with BMR is
dated October 13, 1992 and may be continued as described under "Investment
Adviser and Administrator" in Part I.
ADMINISTRATOR
As stated under "Investment Adviser and Administrator" in Part I, the
Administrator currently receives no compensation for providing administrative
services to the Fund. For the fiscal years ended July 31, 1996 and 1995, and
for the period from the start of business, December 8, 1993, to the fiscal
year ended July 31, 1994, $20,325, $15,081 and $21,269, respectively, of the
Fund's operating expenses were allocated to the Administrator.
SERVICE PLAN
The Service Plan remains in effect until April 28, 1997 and may be
continued as described under "Service Plan" in Part I. Prior to February 1,
1996, the Fund made sales commission, distribution fee and service fee
payments pursuant to a Distribution Plan. During the period from August 1,
1995 to January 31, 1996, the Principal Underwriter paid to Authorized Firms
sales commissions of $182 under that Plan on sales of Fund shares. During the
same period, the Fund paid sales commissions under that Plan to the Principal
Underwriter aggregating $1,924, and CDSCs aggregating approximately $20 were
imposed on early redeeming shareholders and paid to the Principal Underwriter.
The CDSCs and sales commissions paid to the Principal Underwriter reduced
Uncovered Distribution Charges. As at July 31, 1996, the outstanding Uncovered
Distribution Charges of the Principal Underwriter calculated under the
Distribution Plan amounted to approximately $87,000 (which amount was
equivalent to 23.4% of the Fund's net assets on such date). This charge will
be extinguished at no expense to the Fund on January 31, 1997. During the
fiscal year ended July 31, 1996, the Fund paid or accrued service fees
aggregating $880, of which $549 was paid to Authorized Firms and the balance
of which was retained by the Principal Underwriter. A portion of such fee was
paid under the service fee provisions of the Distribution Plan and the balance
was paid under the existing Plan.
PRINCIPAL UNDERWRITER
The total sales charges for sales of shares of the Fund during the period
from February 1, 1996 to July 31, 1996 was $1,375, which amount was paid to
Authorized Firms.
For the fiscal year ended July 31, 1996, the Fund paid the Principal
Underwriter $222.50 for repurchase transactions handled by the Principal
Underwriter (being $2.50 for each such transaction).
BROKERAGE
For the fiscal year ended July 31, 1996, the Portfolio paid brokerage
commissions of $5,915 on portfolio security transactions aggregating
$40,706,177 to firms which provided some research services to BMR or its
affiliates (although many of such firms may have been selected in any
particular transaction primarily because of their execution capabilities). For
the fiscal year ended July 31, 1995 and for the ten months ended July 31,
1994, the Portfolio paid no brokerage commissions on portfolio transactions.
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 the Portfolio who are
members of the Eaton Vance organization receive no compensation from the Fund
or the Portfolio.) During the fiscal year ended July 31, 1996, the
noninterested Trustees of the Trust and the Portfolio received the following
compensation in their capacities as Trustees from the Fund and the Portfolio,
and, for the year ended September 30, 1996, earned the following compensation
in their capacities as Trustees of 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 ...... $0 $343(2) $142,500(4)
Samuel L. Hayes, III .. 0 316(3) 153,750(5)
Norton H. Reamer ...... 0 314 142,500
John L. Thorndike ..... 0 318 147,500
Jack L. Treynor ....... 0 341 147,500
- ----------
(1) The Eaton Vance fund complex consists of 228 registered investment
companies or series thereof.
(2) Includes $129 of deferred compensation.
(3) Includes $104 of deferred compensation.
(4) Includes $42,500 of deferred compensation.
(5) Includes $37,500 of deferred compensation.
ADDITIONAL OFFICER INFORMATION
In addition to the officers of the Portfolio listed under "Officers of the
Trust and the Portfolio" in Part I, Nicole Anderes (35) is a Vice President of
the Portfolio. Ms. Anderes has served as a Vice President of the Portfolio
since December 1, 1995. Ms. Anderes has been a Vice President of BMR and Eaton
Vance since 1994 and is an officer of various investment companies managed by
Eaton Vance or BMR. Prior to joining Eaton Vance, she was a Vice President and
portfolio manager at Lazard Freres Asset Management (1992-1994) and a Vice
President and Manager -- Municipal Research at Roosevelt & Cross (1987-1992).
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return
on a hypothetical investment of $1,000 in the Fund from March 24, 1992 through
July 31, 1996 and for the one-year period ended July 31, 1996. The total
return for the period prior to the Fund's commencement of operations on
December 8, 1993 reflects the Portfolio's total return (or that of its
predecessor) adjusted to reflect any applicable Fund sales charge. Total
return for this time period has not been adjusted to reflect the Fund's
distribution fees and/or service fees and certain other expenses.
VALUE OF A $1,000 INVESTMENT
<TABLE>
<CAPTION>
TOTAL RETURN TOTAL RETURN
VALUE OF EXCLUDING MAXIMUM SALES CHARGE INCLUDING MAXIMUM SALES CHARGE
INVESTMENT INVESTMENT AMOUNT OF INVESTMENT ------------------------------ -----------------------------
PERIOD DATE INVESTMENT* ON 7/31/96 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ------------- -------------- --------------- -------------- -------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of the Fund** 3/24/92 $962.59 $1,257.31 30.62% 6.32% 25.73% 5.39%
1 Year Ended 7/31/96** 7/31/95 $962.30 $1,028.20 6.85% 6.85% 2.82% 2.82%
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 Portfolio's and/or the Fund's expenses had not been subsidized, the Fund would have had lower returns.
</TABLE>
For the thirty-day period ended July 31, 1996, the yield of the Fund was
5.19%. The yield required of a taxable security that would produce an after-
tax yield equivalent to that earned by the Fund of 5.19% would be 7.52%,
assuming a federal tax rate of 31%. If a portion of the Portfolio's and the
Fund's expenses had not been allocated to the Investment Adviser and the
Administrator, respectively, the Fund would have had a lower yield.
See the Tax Equivalent Yield Table in this Part II for information
concerning applicable tax rates and income brackets.
TAXES
In most every state which has an income tax, dividends paid by a mutual
fund attributable to investments in a particular state's municipal obligations
are exempt from both federal and such state's income tax. If Texas adopts an
income tax in the future, and assuming that its income tax policy with respect
to mutual funds investing in Texas state and local municipal obligations would
be similar to the general tax policy of other states, dividends paid by the
Fund would be exempt from Texas state income tax.
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 was the record owner of approximately 52.2% 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. In addition, as of such date, the following
shareholders owned beneficially and of record the percentage of outstanding
shares of the Fund indicated after their name: PaineWebber FBO, Dr. David H.
Medley, Rosemary Medley, TenCom, Dallas, TX (18.8%); Frank Green & Joyce Green
Jt Ten, Stephenville, TX (13.1%); Margaretha R. Lafferty, Houston, TX (7.1%);
and Dick D. Heller & Evelyn Jane Heller Jt Ten, Mission, TX (6.7%). 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
The Fund changed its name from EV Classic Texas Tax Free Fund to EV
Classic Texas Municipals Fund on December 1, 1995 and to EV Traditional Texas
Municipals Fund on February 1, 1996.
<PAGE>
TAX EQUIVALENT YIELD TABLE
The table shows the approximate taxable bond yields which are equivalent
to tax-exempt bond yields from 4% to 7% under the regular federal income tax
laws that apply to 1996.
<TABLE>
<CAPTION>
IF THE TAXABLE OR THE TAXABLE
INCOME ON INCOME ON YOU ARE IN IN YOUR BRACKET, A TAX-FREE YIELD OF
YOUR SINGLE YOUR JOINT THIS FEDERAL 4% 4.5% 5% 5.5% 6% 6.5% 7%
RETURN IS* RETURN IS* BRACKET EQUALS THAT OF A TAXABLE INVESTMENT YIELDING
- ------------------------------------------------- ------------- -----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Up to $ 24,000 Up to $ 40,100 15.0% 4.71% 5.29% 5.88% 6.47% 7.06% 7.65% 8.24%
$ 24,001 - $ 58,150 $ 40,101 - $ 96,900 28.0 5.56 6.25 6.94 7.64 8.33 9.03 9.72
$ 58,151 - $121,300 $ 96,901 - $147,700 31.0 5.80 6.52 7.25 7.97 8.70 9.42 10.14
$121,301 - $263,750 $147,701 - $263,750 36.0 6.25 7.03 7.81 8.59 9.38 10.16 10.94
Over $263,750 Over $263,750 39.6 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 take into account the phaseout of personal exemptions for single
filers with adjusted gross income 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. This 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.
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>
[graphic omitted: EV logo]
EV TRADITIONAL
MUNICIPAL
FUNDS
STATEMENT OF ADDITIONAL
INFORMATION
DECEMBER 1, 1996
EV TRADITIONAL ARIZONA MUNICIPALS FUND
EV TRADITIONAL COLORADO MUNICIPALS FUND
EV TRADITIONAL CONNECTICUT MUNICIPALS FUND
EV TRADITIONAL MICHIGAN MUNICIPALS FUND
EV TRADITIONAL MINNESOTA MUNICIPALS FUND
EV TRADITIONAL NEW JERSEY MUNICIPALS FUND
EV TRADITIONAL PENNSYLVANIA MUNICIPALS FUND
EV TRADITIONAL TEXAS MUNICIPALS FUND
EV TRADITIONAL
MUNICIPAL FUNDS
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-TFC12/1SAI
<PAGE>
PART C
OTHER INFORMATION
ITEM 24: FINANCIAL STATEMENTS AND EXHIBITS
(A) FINANCIAL STATEMENTS
INCLUDED IN PART A FOR THE FUNDS LISTED BELOW ARE "FINANCIAL
HIGHLIGHTS" FOR THE PERIOD FROM THE START OF BUSINESS TO THE FISCAL
YEAR ENDED JULY 31, 1996:
EV Marathon Arizona Municipals Fund (start of business July 25, 1991)
EV Marathon Colorado Municipals Fund (start of business August 25,
1992)
EV Marathon Connecticut Municipals Fund (start of business May 1,
1992)
EV Marathon Michigan Municipals Fund (start of business April 19,
1991)
EV Marathon Minnesota Municipals Fund (start of business July 29,
1991)
EV Marathon New Jersey Municipals Fund (start of business January 8,
1991)
EV Marathon Pennsylvania Municipals Fund (start of business January
8, 1991)
EV Marathon Texas Municipals Fund (start of business March 2, 1992)
EV Traditional Arizona Municipals Fund (start of business December
13, 1993)
EV Traditional Colorado Municipals Fund (start of business December
10, 1993)
EV Traditional Connecticut Municipals Fund (start of business April
19, 1994)
EV Traditional Michigan Municipals Fund (start of business December
7, 1993)
EV Traditional Minnesota Municipals Fund (start of business December
9, 1993)
EV Traditional New Jersey Municipals Fund (start of business April
13, 1994)
EV Traditional Pennsylvania Municipals Fund (start of business June
1, 1994)
EV Traditional Texas Municipals Fund (start of business December 8,
1993)
INCORPORATED BY REFERENCE INTO PART B ARE THE FINANCIAL STATEMENTS
CONTAINED IN THE ANNUAL REPORTS FOR THE FUNDS, EACH DATED JULY 31,
1996 (WHICH WERE PREVIOUSLY FILED ELECTRONICALLY PURSUANT TO SECTION
30(B)(2) OF THE INVESTMENT COMPANY ACT OF 1940):
<TABLE>
<CAPTION>
<S> <C>
EV Marathon Arizona Municipals Fund EV Traditional Arizona Municipals Fund
EV Marathon Colorado Municipals Fund EV Traditional Colorado Municipals Fund
EV Marathon Connecticut Municipals Fund EV Traditional Connecticut Municipals Fund
EV Marathon Michigan Municipals Fund EV Traditional Michigan Municipals Fund
EV Marathon Minnesota Municipals Fund EV Traditional Minnesota Municipals Fund
EV Marathon New Jersey Municipals Fund EV Traditional New Jersey Municipals Fund
EV Marathon Pennsylvania Municipals Fund EV Traditional Pennsylvania Municipals Fund
EV Marathon Texas Municipals Fund EV Traditional Texas Municipals Fund
(Accession No. 0000950135-96-004171) (Accession No. 0000950135-96-004170)
</TABLE>
THE FINANCIAL STATEMENTS CONTAINED IN EACH FUND'S ANNUAL REPORT ARE AS
FOLLOWS:
Statement of Assets and Liabilities
Statement of Operations
Statements of Changes in Net Assets
Financial Highlights
Notes to Financial Statements
Independent Auditors' Report
ALSO INCORPORATED BY REFERENCE INTO PART B ARE THE FOLLOWING FINANCIAL
STATEMENTS OF ARIZONA MUNICIPALS PORTFOLIO, COLORADO MUNICIPALS PORTFOLIO,
CONNECTICUT MUNICIPALS PORTFOLIO, MICHIGAN MUNICIPALS PORTFOLIO, MINNESOTA
MUNICIPALS PORTFOLIO, NEW JERSEY MUNICIPALS PORTFOLIO, PENNSYLVANIA MUNICIPALS
PORTFOLIO AND TEXAS MUNICIPALS PORTFOLIO, WHICH ARE CONTAINED IN THE ANNUAL
REPORT DATED JULY 31, 1996 OF THE CORRESPONDING FUNDS:
THE FINANCIAL STATEMENTS FOR EACH PORTFOLIO CONTAINED IN EACH FUND'S ANNUAL
REPORT ARE AS FOLLOWS:
Portfolio of Investments
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Supplementary Data
Notes to Financial Statements
Independent Auditors' Report
(B) EXHIBITS:
(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 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 herewith.
(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 herewith.
(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 herewith.
(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 herewith.
(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) Opinion of Counsel dated November 20, 1996.
(11)(a) Consent of Independent Auditors for EV Marathon Arizona Municipals
Fund, EV Marathon Colorado Municipals Fund, EV Marathon
Connnecticut Municipal Fund, EV Marathon Michigan Municipals Fund,
EV Marathon Minnesota Municipals Fund, EV Marathon New Jersey
Municipals Fund, EV Marathon Pennsylvania Municipals Fund and EV
Marathon Texas Municipals Fund filed herewith.
(b) Consent of Independent Auditors for EV Traditional Arizona
Municipals Fund, EV Traditional Colorado Municipals Fund, EV
Traditional Connecticut Municipals Fund, EV Traditional Michigan
Municipals Fund, EV Traditional Minnesota Municipals Fund, EV
Traditional New Jersey Municipals Fund, EV Traditional Pennsylvania
Municipals Fund and EV Traditional Texas Municipals Fund filed
herewith.
(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
herewith.
(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 herewith.
(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 Distribution Plan for Eaton Vance Municipals
Trust (on behalf of its Traditional Series) adopted June 24, 1996
filed herewith.
(16) Schedules 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.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not applicable
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
(1) (2)
TITLE OF CLASS NUMBER OF RECORD HOLDERS
Shares of beneficial interest as of October 31, 1996
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
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.
<PAGE>
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>
<CAPTION>
<S> <C>
EV Classic California Municipals Fund EV Marathon Hawaii Municipals Fund
EV Classic Connecticut Municipals Fund EV Marathon High Income Fund
EV Classic Florida Insured Municipals Fund EV Marathon High Yield Municipals Fund
EV Classic Florida Limited Maturity EV Marathon Information Age Fund
Municipals Fund EV Marathon Investors Fund
EV Classic Florida Municipals Fund EV Marathon Kansas Municipals Fund
EV Classic Government Obligations Fund EV Marathon Kentucky Municipals Fund
EV Classic Greater China Growth Fund EV Marathon Louisiana Municipals Fund
EV Classic Growth Fund EV Marathon Maryland Municipals Fund
EV Classic High Income Fund EV Marathon Massachusetts Limited Maturity
EV Classic Information Age Fund Municipals Fund
EV Classic Investors Fund EV Marathon Massachusetts Municipals Fund
EV Classic Massachusetts Limited Maturity EV Marathon Michigan Limited Maturity
Municipals Fund Municipals Fund
EV Classic National Limited Maturity EV Marathon Michigan Municipals Fund
Municipals Fund EV Marathon Minnesota Municipals Fund
EV Classic National Municipals Fund EV Marathon Mississippi Municipals Fund
EV Classic New Jersey Municipals Fund EV Marathon Missouri Municipals Fund
EV Classic New York Limited Maturity EV Marathon National Limited Maturity
Municipals Fund Municipals Fund
EV Classic New York Municipals Fund EV Marathon National Municipals Fund
EV Classic Pennsylvania Municipals Fund EV Marathon New Jersey Limited Maturity
EV Classic Rhode Island 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 Traditional Asian Small Companies Fund
<PAGE>
EV Traditional California Limited Maturity Eaton Vance Municipal Bond Fund L.P.
Municipals Fund EV Traditional National Limited Maturity
EV Traditional California Municipals Fund Municipals Fund
EV Traditional Colorado Municipals Fund EV Traditional National Municipals Fund
EV Traditional Connecticut Limited Maturity EV Traditional New Jersey Limited Maturity
Municipals Fund Municipals Fund
EV Traditional Connecticut Municipals Fund EV Traditional New Jersey Municipals Fund
EV Traditional Emerging Markets Fund EV Traditional New York Limited Maturity
EV Traditional Florida Insured Municipals Fund Municipals Fund
EV Traditional Florida Limited Maturity EV Traditional New York Municipals Fund
Municipals Fund EV Traditional North Carolina Municipals Fund
EV Traditional Florida Municipals Fund EV Traditional Ohio Limited
EV Traditional Georgia Municipals Fund Maturity Municipals Fund
EV Traditional Government Obligations Fund EV Traditional Ohio Municipals Fund
EV Traditional Greater China Growth Fund EV Traditional Oregon Municipals Fund
EV Traditional Greater India Fund EV Traditional Pennsylvania 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 Trust
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
Massachusetts Municipal Bond Portfolio
</TABLE>
(b)
<TABLE>
<CAPTION>
(1) (2) (3)
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICE
BUSINESS ADDRESS WITH PRINCIPAL UNDERWRITER WITH REGISTRANT
------------------ -------------------------- --------------------
<S> <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
<FN>
- ----------
*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 certifies that it meets all of
the requirements for effectiveness of this Amendment to the Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and 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 20th 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.
SIGNATURE TITLE DATE
--------- ----- ----
President, (Chief
/s/ THOMAS J. FETTER Executive Officer) November 20, 1996
- -----------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and Accounting
/s/ JAMES L. O'CONNOR Officer November 20, 1996
- -----------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee November 20, 1996
- -----------------------------
DONALD R. DWIGHT
/s/ JAMES B. HAWKES Trustee November 20, 1996
- -----------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee November 20, 1996
- -----------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee November 20, 1996
- -----------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee November 20, 1996
- -----------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee November 20, 1996
- -----------------------------
JACK L. TREYNOR
*By: /s/ H. DAY BRIGHAM, JR.
------------------------
H. DAY BRIGHAM, JR.
As attorney-in-fact
<PAGE>
SIGNATURES
Arizona 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
20th day of November, 1996.
ARIZONA 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.
SIGNATURE TITLE DATE
--------- ----- ----
President, (Chief
/s/ THOMAS J. FETTER Executive Officer) November 20, 1996
- -----------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and Accounting
/s/ JAMES L. O'CONNOR Officer November 20, 1996
- -----------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee November 20, 1996
- -----------------------------
DONALD R. DWIGHT
/s/ JAMES B. HAWKES Trustee November 20, 1996
- -----------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee November 20, 1996
- -----------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee November 20, 1996
- -----------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee November 20, 1996
- -----------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee November 20, 1996
- -----------------------------
JACK L. TREYNOR
*By: /s/ H. DAY BRIGHAM, JR.
------------------------
H. DAY BRIGHAM, JR.
As attorney-in-fact
<PAGE>
SIGNATURES
Colorado 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
20th day of November, 1996.
COLORADO 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.
SIGNATURE TITLE DATE
--------- ----- ----
President, (Chief
/s/ THOMAS J. FETTER Executive Officer) November 20, 1996
- -----------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and Accounting
/s/ JAMES L. O'CONNOR Officer November 20, 1996
- -----------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee November 20, 1996
- -----------------------------
DONALD R. DWIGHT
/s/ JAMES B. HAWKES Trustee November 20, 1996
- -----------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee November 20, 1996
- -----------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee November 20, 1996
- -----------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee November 20, 1996
- -----------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee November 20, 1996
- -----------------------------
JACK L. TREYNOR
*By: /s/ H. DAY BRIGHAM, JR.
------------------------
H. DAY BRIGHAM, JR.
As attorney-in-fact
<PAGE>
SIGNATURES
Connecticut 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
20th day of November, 1996.
CONNECTICUT 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.
SIGNATURE TITLE DATE
--------- ----- ----
President, (Chief
/s/ THOMAS J. FETTER Executive Officer) November 20, 1996
- -----------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and Accounting
/s/ JAMES L. O'CONNOR Officer November 20, 1996
- -----------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee November 20, 1996
- -----------------------------
DONALD R. DWIGHT
/s/ JAMES B. HAWKES Trustee November 20, 1996
- -----------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee November 20, 1996
- -----------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee November 20, 1996
- -----------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee November 20, 1996
- -----------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee November 20, 1996
- -----------------------------
JACK L. TREYNOR
*By: /s/ H. DAY BRIGHAM, JR.
------------------------
H. DAY BRIGHAM, JR.
As attorney-in-fact
<PAGE>
SIGNATURES
Michigan 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
20th day of November, 1996.
MICHIGAN 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.
SIGNATURE TITLE DATE
--------- ----- ----
President, (Chief
/s/ THOMAS J. FETTER Executive Officer) November 20, 1996
- -----------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and Accounting
/s/ JAMES L. O'CONNOR Officer November 20, 1996
- -----------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee November 20, 1996
- -----------------------------
DONALD R. DWIGHT
/s/ JAMES B. HAWKES Trustee November 20, 1996
- -----------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee November 20, 1996
- -----------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee November 20, 1996
- -----------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee November 20, 1996
- -----------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee November 20, 1996
- -----------------------------
JACK L. TREYNOR
*By: /s/ H. DAY BRIGHAM, JR.
------------------------
H. DAY BRIGHAM, JR.
As attorney-in-fact
<PAGE>
SIGNATURES
Minnesota 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
20th day of November, 1996.
MINNESOTA 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.
SIGNATURE TITLE DATE
--------- ----- ----
President, (Chief
/s/ THOMAS J. FETTER Executive Officer) November 20, 1996
- -----------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and Accounting
/s/ JAMES L. O'CONNOR Officer November 20, 1996
- -----------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee November 20, 1996
- -----------------------------
DONALD R. DWIGHT
/s/ JAMES B. HAWKES Trustee November 20, 1996
- -----------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee November 20, 1996
- -----------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee November 20, 1996
- -----------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee November 20, 1996
- -----------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee November 20, 1996
- -----------------------------
JACK L. TREYNOR
*By: /s/ H. DAY BRIGHAM, JR.
------------------------
H. DAY BRIGHAM, JR.
As attorney-in-fact
<PAGE>
SIGNATURES
New Jersey 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
20th day of November, 1996.
NEW JERSEY 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.
SIGNATURE TITLE DATE
--------- ----- ----
President, (Chief
/s/ THOMAS J. FETTER Executive Officer) November 20, 1996
- -----------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and Accounting
/s/ JAMES L. O'CONNOR Officer November 20, 1996
- -----------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee November 20, 1996
- -----------------------------
DONALD R. DWIGHT
/s/ JAMES B. HAWKES Trustee November 20, 1996
- -----------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee November 20, 1996
- -----------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee November 20, 1996
- -----------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee November 20, 1996
- -----------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee November 20, 1996
- -----------------------------
JACK L. TREYNOR
*By: /s/ H. DAY BRIGHAM, JR.
------------------------
H. DAY BRIGHAM, JR.
As attorney-in-fact
<PAGE>
SIGNATURES
Pennsylvania 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
20th day of November, 1996.
PENNSYLVANIA 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.
SIGNATURE TITLE DATE
--------- ----- ----
President, (Chief
/s/ THOMAS J. FETTER Executive Officer) November 20, 1996
- -----------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and Accounting
/s/ JAMES L. O'CONNOR Officer November 20, 1996
- -----------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee November 20, 1996
- -----------------------------
DONALD R. DWIGHT
/s/ JAMES B. HAWKES Trustee November 20, 1996
- -----------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee November 20, 1996
- -----------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee November 20, 1996
- -----------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee November 20, 1996
- -----------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee November 20, 1996
- -----------------------------
JACK L. TREYNOR
*By: /s/ H. DAY BRIGHAM, JR.
------------------------
H. DAY BRIGHAM, JR.
As attorney-in-fact
<PAGE>
SIGNATURES
Texas 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
20th day of November, 1996.
TEXAS 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.
SIGNATURE TITLE DATE
--------- ----- ----
President, (Chief
/s/ THOMAS J. FETTER Executive Officer) November 20, 1996
- -----------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and Accounting
/s/ JAMES L. O'CONNOR Officer November 20, 1996
- -----------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee November 20, 1996
- -----------------------------
DONALD R. DWIGHT
/s/ JAMES B. HAWKES Trustee November 20, 1996
- -----------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee November 20, 1996
- -----------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee November 20, 1996
- -----------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee November 20, 1996
- -----------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee November 20, 1996
- -----------------------------
JACK L. TREYNOR
*By: /s/ H. DAY BRIGHAM, JR.
------------------------
H. DAY BRIGHAM, JR.
As attorney-in-fact
<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.
PAGE IN
SEQUENTIAL
NUMBERING
EXHIBIT NO. DESCRIPTION SYSTEM
- ----------- ----------- ---------
(1)(b) Amendment and Restatement of Establishment and
Designation of Series dated October 18, 1996.
(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.
(6)(a)(2) Distribution Agreement between Eaton Vance Municipals
Trust (on behalf of its Marathon Series) and Eaton Vance
Distributors, Inc. effective November 1, 1996.
(6)(a)(3) Distribution Agreement between Eaton Vance Municipals
Trust (on behalf of its Traditional Series) and Eaton
Vance Distributors, Inc. effective November 1, 1996.
(6)(a)(4) Distribution Agreement between Eaton Vance Municipals
Trust (on behalf of Massachusetts Municipal Bond
Portfolio) and Eaton Vance Distributors, Inc. effective
November 1, 1996.
(10) Opinion of Counsel dated November 20, 1996.
(11)(a) Consent of Independent Auditors for EV Marathon Arizona
Municipals Fund, EV Marathon Colorado Municipals Fund, EV
Marathon Connecticut Municipals Fund, EV Marathon
Michigan Municipals Fund, EV Marathon Minnnesota
Municipals Fund, EV Marathon New Jersey Municipals Fund,
EV Marathon Pennsylvania Municipals Fund and EV Marathon
Texas Municipals Fund.
(11)(b) Consent of Independent Auditors for EV Traditional
Arizona Municipals Fund, EV Traditional Colorado
Municipals Fund, EV Traditional Connecticut Municipals
Fund, EV Traditional Michigan Municipals Fund, EV
Traditional Minnesota Municipals Fund, EV Traditional New
Jersey Municipals Fund, EV Traditional Pennsylvania
Municipals Fund and EV Traditional Texas Municipals Fund.
(15)(b) Amendment to Amended Distribution Plan for Eaton Vance
Municipals Trust (on behalf of its Classic Series)
adopted June 24, 1996.
(15)(d) Amendment to Amended Distribution Plan for Eaton Vance
Municipals Trust (on behalf of its Marathon Series)
adopted June 24, 1996.
(15)(f) Amendment to Amended Distribution Plan for Eaton Vance
Municipals Trust (on behalf of its Traditional Series)
adopted June 24, 1996.
(16) Schedules for Computation of Performance Quotations.
<PAGE>
EXHIBIT 99.1(b)
EATON VANCE MUNICIPALS TRUST
Amendment and Restatement of
Establishment and Designation of Series of Shares
of Beneficial Interest, Without Par Value
(as amended and restated October 18, 1996)
WHEREAS, the Trustees of Eaton Vance Municipals Trust, a Massachusetts
business trust (the "Trust"), have previously designated separate series (or
"Funds"); and
WHEREAS, the Trustees now desire to further redesignate the Funds
effective November 30, 1996 and to terminate six Funds, i.e. EV Classic
California Municipals Fund, EV Classic Connecticut Municipals Fund, EV Classic
Florida Municipals Fund, EV Classic New Jersey Municipals Fund, EV Classic New
York Municipals Fund, and EV Classic Pennsylvania Municipals Fund, and to
redesignate EV Classic Rhode Island Municipals Fund as EV Traditional Rhode
Island Municipals 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 divide
the shares of beneficial interest of the Trust into sixty separate series
("Funds"), each Fund to have the following special and relative rights:
1. The Funds shall be redesignated as follows:
EV Marathon Alabama Municipals Fund
EV Traditional Alabama Municipals Fund
EV Marathon Arizona Municipals Fund
EV Traditional Arizona Municipals Fund
EV Marathon Arkansas Municipals Fund
EV Traditional Arkansas Municipals Fund
EV Marathon California Municipals Fund
EV Traditional California Municipals Fund
EV Marathon Colorado Municipals Fund
EV Traditional Colorado Municipals Fund
EV Marathon Connecticut Municipals Fund
EV Traditional Connecticut Municipals Fund
EV Marathon Florida Municipals Fund
EV Traditional Florida Municipals Fund
EV Marathon Georgia Municipals Fund
EV Traditional Georgia Municipals Fund
EV Marathon Kentucky Municipals Fund
EV Traditional Kentucky Municipals Fund
EV Marathon Louisiana Municipals Fund
EV Traditional Louisiana Municipals Fund
EV Marathon Maryland Municipals Fund
EV Traditional Maryland Municipals Fund
EV Marathon Massachusetts Municipals Fund
EV Traditional Massachusetts Municipals Fund
EV Marathon Michigan Municipals Fund
EV Traditional Michigan Municipals Fund
EV Marathon Minnesota Municipals Fund
EV Traditional Minnesota Municipals Fund
EV Marathon Mississippi Municipals Fund
EV Traditional Mississippi Municipals Fund
EV Marathon Missouri Municipals Fund
EV Traditional Missouri Municipals Fund
EV Classic National Municipals Fund
EV Marathon National Municipals Fund
EV Traditional National Municipals Fund
EV Marathon New Jersey Municipals Fund
EV Traditional New Jersey Municipals Fund
EV Marathon New York Municipals Fund
EV Traditional New York Municipals Fund
EV Marathon North Carolina Municipals Fund
EV Traditional North Carolina Municipals Fund
EV Marathon Ohio Municipals Fund
EV Traditional Ohio Municipals Fund
EV Marathon Oregon Municipals Fund
EV Traditional Oregon Municipals Fund
EV Marathon Pennsylvania Municipals Fund
EV Traditional Pennsylvania Municipals Fund
EV Marathon Rhode Island Municipals Fund
EV Traditional Rhode Island Municipals Fund
EV Marathon South Carolina Municipals Fund
EV Traditional South Carolina Municipals Fund
EV Marathon Tennessee Municipals Fund
EV Traditional Tennessee Municipals Fund
EV Marathon Texas Municipals Fund
EV Traditional Texas Municipals Fund
EV Marathon Virginia Municipals Fund
EV Traditional Virginia Municipals Fund
EV Marathon West Virginia Municipals Fund
EV Traditional West Virginia Municipals Fund
Massachusetts Municipal Bond Portfolio
2. Each Fund shall be authorized to invest in cash, securities,
instruments and other property as from time to time described in the Trust's
then currently effective registration statements under the Securities Act of
1933 and the Investment Company Act of 1940. Each share of beneficial interest
of each Fund ("share") shall be redeemable, shall be entitled to one vote (or
fraction thereof in respect of a fractional share) on matters on which shares of
that Fund shall be entitled to vote and shall represent a pro rata beneficial
interest in the assets allocated to that Fund, all as provided in the
Declaration of Trust. The proceeds of sales of shares of each Fund, together
with any income and gain thereon, less any diminution or expenses thereof, shall
irrevocably belong to such Fund, unless otherwise required by law. Each share of
a Fund shall be entitled to receive its pro rata share of net assets of that
Fund upon liquidation of that Fund.
3. Shareholders of each Fund shall vote separately as a class to the
extent provided in Rule 18f-2, as from time to time in effect, under the
Investment Company Act of 1940.
4. The assets and liabilities of the Trust shall be allocated among the
above-referenced Funds as set forth in Section 5.5 of Article V of the
Declaration of Trust, except as provided below:
(a) Costs incurred by each Fund in connection with its organization and
start-up, including Federal and state registration and qualification fees and
expenses of the initial public offering of such Fund's shares, shall (if
applicable) be borne by such Fund and deferred and amortized over the five year
period beginning on the date that such Fund commences operations.
(b) Reimbursement required under any expense limitation applicable to the
Trust shall be allocated among those Funds whose expense ratios exceed such
limitation on the basis of the relative expense ratios of such Funds.
(C) The liabilities, expenses, costs, charges and reserves of the Trust
(other than the management and investment advisory fees or the organizational
expenses paid by the Trust) which are not readily identifiable as belonging to
any particular Fund shall be allocated among the Funds on an equitable basis as
determined by the Trustees.
5. The Trustees (including any successor Trustees) shall have the right at
any time and from time to time to reallocate assets and expenses or to change
the designation of any Fund now or hereafter created, or to otherwise change the
special and relative rights of any such Fund, and to terminate any Fund or add
additional Funds as provided in the Declaration of Trust.
6. Any Fund may merge or consolidate with any other corporation,
association, trust or other organization or may sell, lease or exchange all or
substantially all of its property, including its good will, upon such terms and
conditions and for such consideration when and as authorized by the Trustees;
and any such merger, consolidation, sale, lease or exchange shall be deemed for
all purposes to have been accomplished under and pursuant to the statutes of the
Commonwealth of Massachusetts. The Trustees may also at any time sell and
convert into money all the assets of any Fund. Upon making provision for the
payment of all outstanding obligations, taxes and other liabilities, accrued or
contingent, of such Fund, the Trustees shall distribute the remaining assets of
such Fund ratably among the holders of the outstanding shares. Upon completion
of the distribution of the remaining proceeds or the remaining assets as
provided in this paragraph 6, the Fund shall terminate and the Trustees shall be
discharged of any and all further liabilities and duties hereunder with respect
to such Fund and the right, title and interest of all parties with respect to
such Fund shall be cancelled and discharged.
7. The Declaration of Trust authorizes the Trustees to divide each Fund
and any other series of shares into two or more classes and to fix and determine
the relative rights and preferences as between, and all provisions applicable
to, each of the different classes so established and designated by the Trustees.
The establishment and designation of any class of any Fund or other series of
shares shall be effective upon the execution by a majority of the then Trustees
of an instrument setting forth such establishment and designation and the
relative rights and preferences, and provisions applicable to, such class, or as
otherwise provided in such instrument.
Dated: October 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 99.6(a)(1)
EATON VANCE MUNICIPALS TRUST
DISTRIBUTION AGREEMENT
(CLASSIC FUNDS)
AGREEMENT effective November 1, 1996 between EATON VANCE MUNICIPALS TRUST,
a Massachusetts business trust having its principal place of business in Boston
in the Commonwealth of Massachusetts, hereinafter called the "Trust," on behalf
of each of its series listed on Schedule A (the "Funds"), and EATON VANCE
DISTRIBUTORS, INC., a Massachusetts corporation having its principal place of
business in said Boston and formerly named EV Distributors, Inc., hereinafter
sometimes called the "Principal Underwriter."
IN CONSIDERATION of the mutual promises and undertakings herein contained,
the parties hereto agree with respect to each Fund:
1. The Trust grants to the Principal Underwriter the right to purchase
shares of the Fund upon the terms hereinbelow set forth during the term of this
Agreement. While this Agreement is in force, the Principal Underwriter agrees to
use its best efforts to find purchasers for shares of the Fund.
The Principal Underwriter shall have the right to buy from the Fund the
shares needed, but not more than the shares needed (except for clerical errors
and errors of transmission) to fill unconditional orders for shares of the Fund
placed with the Principal Underwriter by financial service firms or investors as
set forth in the current Prospectus relating to shares of the Fund. The price
which the Principal Underwriter shall pay for the shares so purchased shall be
equal to the price paid by investors upon purchasing such shares. The Principal
Underwriter shall notify Investors Bank & Trust Company, Custodian of the Fund
("IBT"), and First Data Investor Services Group, Transfer Agent of the Fund
("First Data"), or a successor transfer agent, at the end of each business day,
or as soon thereafter as the orders placed with it have been compiled, of the
number of shares and the prices thereof which the Principal Underwriter is to
purchase as principal for resale. The Principal Underwriter shall take down and
pay for shares ordered from the Fund on or before the eleventh business day
(excluding Saturdays) after the shares have been so ordered.
The right granted to the Principal Underwriter to buy shares from the Fund
shall be exclusive, except that said exclusive right shall not apply to shares
issued in connection with the merger or consolidation of any other investment
company or personal holding company with the Fund or the acquisition by purchase
or otherwise of all (or substantially all) the assets or the outstanding shares
of any such company, by the Fund; nor shall it apply to shares, if any, issued
by the Fund in distribution of income or realized capital gains of the Fund
payable in shares or in cash at the option of the shareholder.
2. The shares may be resold by the Principal Underwriter to or through
financial service firms having agreements with the Principal Underwriter, and to
investors, upon the following terms and conditions.
The public offering price, i.e., the price per share at which the
Principal Underwriter or financial service firm purchasing shares from the
Principal Underwriter may sell shares to the public, shall be equal to the net
asset value at which the Principal Underwriter is to purchase the shares.
The net asset value of shares of the Fund shall be determined by the Trust
or IBT, as the agent of the Fund, as of the close of regular trading on the New
York Stock Exchange on each business day on which said Exchange is open, or as
of such other time on each such business day as may be determined by the
Trustees of the Trust, in accordance with the methodology and procedures for
calculating such net asset value authorized by the Trustees. The Trust may also
cause the net asset value to be determined in substantially the same manner or
estimated in such manner and as of such other time or times as may from time to
time be agreed upon by the Trust and Principal Underwriter. The Trust will
notify the Principal Underwriter each time the net asset value of the Fund's
shares is determined and when such value is so determined it shall be applicable
to transactions as set forth in the current Prospectus and Statement of
Additional Information (hereafter the "Prospectus") relating to the Fund's
shares.
No shares of the Fund shall be sold by the Fund during any period when the
determination of net asset value is suspended pursuant to the Declaration of
Trust, except to the Principal Underwriter, in the manner and upon the terms
above set forth to cover contracts of sale made by the Principal Underwriter
with its customers prior to any such suspension, and except as provided in the
last paragraph of paragraph 1 hereof. The Trust shall also have the right to
suspend the sale of the Fund's shares if in the judgment of the Trust conditions
obtaining at any time render such action advisable. The Principal Underwriter
shall have the right to suspend sales at any time, to refuse to accept or
confirm any order from an investor or financial service firm, or to accept or
confirm any such order in part only, if in the judgment of the Principal
Underwriter such action is in the best interests of the Fund.
3. The Trust agrees that it will, from time to time, but subject to the
necessary approval of the Fund's shareholders, take such steps as may be
necessary to register the Fund's shares under the federal Securities Act of
1933, as amended from time to time (the "1933 Act"), to the end that there will
be available for sale such number of shares as the Principal Underwriter may
reasonably be expected to sell. The Trust agrees to indemnify and hold harmless
the Principal Underwriter and each person, if any, who controls the Principal
Underwriter within the meaning of Section 15 of the 1933 Act against any loss,
liability, claim, damages or expense (including the reasonable cost of
investigating or defending any alleged loss, liability, claim, damages or
expense and reasonable counsel fees incurred in connection therewith), arising
by reason of any person acquiring any shares of the Fund, which may be based
upon the 1933 Act or on any other statute or at common law, on the ground that
the Registration Statement or Prospectus, as from time to time amended and
supplemented, includes an untrue statement of a material fact or omits to state
a material fact required to be stated therein or necessary in order to make the
statements therein not misleading, unless such statement or omission was made in
reliance upon, and in conformity with, information furnished in writing to the
Trust in connection therewith by or on behalf of the Principal Underwriter;
provided, however, that in no case (i) is the indemnity of the Trust in favor of
the Principal Underwriter and any such controlling person to be deemed to
protect such Principal Underwriter or any such controlling person against any
liability to the Trust or the Fund or its security holders to which such
Principal Underwriter or any such controlling person would otherwise be subject
by reason of willful misfeasance, bad faith, or gross negligence in the
performance of its duties or by reason of its reckless disregard of its
obligations and duties under this Agreement, or (ii) is the Trust or the Fund to
be liable under its indemnity agreement contained in this paragraph with respect
to any claim made against the Principal Underwriter or any such controlling
person unless the Principal Underwriter or any such controlling person, as the
case may be, shall have notified the Trust in writing within a reasonable time
after the summons or other first legal process giving information of the nature
of the claim shall have been served upon the Principal Underwriter or such
controlling person (or after such Principal Underwriter or such controlling
person shall have received notice of such service on any designated agent), but
failure to notify the Trust of any such claim shall not relieve it from any
liability which the Fund may have to the person against whom such action is
brought otherwise than on account of its indemnity agreement contained in this
paragraph. The Trust shall be entitled to participate, at the expense of the
Fund, in the defense, or, if the Trust so elects, to assume the defense of any
suit brought to enforce any such liability, but if the Trust elects to assume
the defense, such defense shall be conducted by counsel chosen by it and
satisfactory to the Principal Underwriter or controlling person or persons,
defendant or defendants in the suit. In the event the Trust elects to assume the
defense of any such suit and retains such counsel, the Principal Underwriter or
controlling person or persons, defendant or defendants in the suit, shall bear
the fees and expenses of any additional counsel retained by them, but, in case
the Trust does not elect to assume the defense of any such suit, the Fund shall
reimburse the Principal Underwriter or controlling person or persons, defendant
or defendants in the suit, for the reasonable fees and expenses of any counsel
retained by them. The Trust agrees promptly to notify the Principal Underwriter
of the commencement of any litigation or proceedings against it or any of its
officers or Trustees in connection with the issuance or sale of any of the
Fund's shares.
4. The Principal Underwriter covenants and agrees that, in selling the
shares of the Fund, it will use its best efforts in all respects duly to conform
with the requirements of all state and federal laws relating to the sale of such
shares, and will indemnify and hold harmless the Trust and each of its Trustees
and officers and each person, if any, who controls the Trust within the meaning
of Section 15 of the 1933 Act, against any loss, liability, damages, claim or
expense (including the reasonable cost of investigating or defending any alleged
loss, liability, damages, claim or expense and reasonable counsel fees incurred
in connection therewith), arising by reason of any person acquiring any shares
of the Fund, which may be based upon the 1933 Act or any other statute or at
common law, on account of any wrongful act of the Principal Underwriter or any
of its employees (including any failure to conform with any requirement of any
state or federal law relating to the sale of such shares) or on the ground that
the Registration Statement or Prospectus, as from time to time amended and
supplemented, includes an untrue statement of a material fact or omits to state
a material fact required to be stated therein or necessary in order to make the
statements therein not misleading, insofar as any such statement or omission was
made in reliance upon, and in conformity with information furnished in writing
to the Fund in connection therewith by or on behalf of the Principal
Underwriter, provided, however, that in no case (i) is the indemnity of the
Principal Underwriter in favor of any person indemnified to be deemed to protect
the Fund or any such person against any liability to which the Fund or any such
person would otherwise be subject by reason of willful misfeasance, bad faith,
or gross negligence in the performance of its or his duties or by reason of its
or his reckless disregard of its obligations and duties under this Agreement, or
(ii) is the Principal Underwriter to be liable under its indemnity agreement
contained in this paragraph with respect to any claim made against the Fund or
any person indemnified unless the Trust or such person, as the case may be,
shall have notified the Principal Underwriter in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon the Trust, the Fund or upon such
person (or after the Trust or such person shall have received notice of such
service on any designated agent), but failure to notify the Principal
Underwriter of any such claim shall not relieve it from any liability which it
may have to the Fund or any person against whom such action is brought otherwise
than on account of its indemnity agreement contained in this paragraph. The
Principal Underwriter shall be entitled to participate, at its own expense, in
the defense, or, if it so elects, to assume the defense of any suit brought to
enforce any such liability, but if the Principal Underwriter elects to assume
the defense, such defense shall be conducted by counsel chosen by it and
satisfactory to the Trust, or to its officers or Trustees, or to any controlling
person or persons, defendant or defendants in the suit. In the event that the
Principal Underwriter elects to assume the defense of any such suit and retains
such counsel, the Fund or such officers or Trustees or controlling person or
persons, defendant or defendants in the suit, shall bear the fees and expenses
of any additional counsel retained by them or the Trust, but, in case the
Principal Underwriter does not elect to assume the defense of any such suit, it
shall reimburse the Fund, any such officers and Trustees or controlling person
or persons, defendant or defendants in such suit, for the reasonable fees and
expenses of any counsel retained by them or the Trust. The Principal Underwriter
agrees promptly to notify the Trust of the commencement of any litigation or
proceedings against it in connection with the issue and sale of any of the
Fund's shares.
Neither the Principal Underwriter nor any financial service firm nor any
other person is authorized by the Trust to give any information or to make any
representations, other than those contained in the Registration Statement or
Prospectus filed with the Securities and Exchange Commission (the "Commission")
under the 1933 Act, (as said Registration Statement and Prospectus may be
amended or supplemented from time to time), covering the shares of the Fund.
Neither the Principal Underwriter nor any financial service firm nor any other
person is authorized to act as agent for the Trust or the Fund in connection
with the offering or sale of shares of the Fund to the public or otherwise. All
such sales made by the Principal Underwriter shall be made by it as principal,
for its own account. The Principal Underwriter may, however, act as agent in
connection with the repurchase of shares as provided in paragraph 6 below, or in
connection with "exchanges" between investment companies for which the Principal
Underwriter acts as Principal Underwriter or for which an affiliate of the
Principal Underwriter acts as investment adviser.
5(a). The Fund will pay, or cause to be paid -
(i) all the costs and expenses of the Fund, including fees and
disbursements of its counsel, in connection with the preparation and filing of
any required Registration Statement and/or Prospectus under the 1933 Act, or the
Investment Company Act of 1940, as amended from time to time (the "1940 Act"),
covering its shares and all amendments and supplements thereto, and preparing
and mailing periodic reports to shareholders (including the expense of setting
up in type any such Registration Statement, Prospectus or periodic report);
(ii) the cost of preparing temporary and permanent share
certificates (if any) for shares of the Fund;
(iii) the cost and expenses of delivering to the Principal
Underwriter at its office in Boston, Massachusetts, all shares of the Fund
purchased by it as principal hereunder; and
(iv) all the federal and state (if any) issue and/or transfer taxes
payable upon the issue by or (in the case of treasury shares) transfer from the
Fund to the Principal Underwriter of any and all shares of the Fund purchased by
the Principal Underwriter hereunder.
(b) The Principal Underwriter agrees that, after the Prospectus (other
than to existing shareholders of the Fund) and periodic reports have been set up
in type, it will bear the expense of printing and distributing any copies
thereof which are to be used in connection with the offering of shares of the
Fund to financial service firms or investors. The Principal Underwriter further
agrees that it will bear the expenses of preparing, printing and distributing
any other literature used by the Principal Underwriter or furnished by it for
use by financial service firms in connection with the offering of the shares of
the Fund for sale to the public and any expenses of advertising in connection
with such offering. The Fund agrees to pay the expenses of registration and
maintaining registration of its shares for sale under federal and state
securities laws, and, if necessary or advisable in connection therewith, of
qualifying the Trust or the Fund as a dealer or broker, in such states as shall
be selected by the Principal Underwriter and the fees payable to each such state
for continuing the qualification therein until the Principal Underwriter
notifies the Trust that it does not wish such qualification continued.
(c) In addition, the Trust agrees, in accordance with the Fund's
Distribution Plan (the "Plan"), adopted pursuant to Rule 12b-1 under the 1940
Act with respect to shares, to make certain payments as follows. The Principal
Underwriter shall be entitled to be paid by the Fund a sales commission equal to
an amount not exceeding 6.25% of the price received by the Fund for each sale of
shares (excluding reinvestment of dividends and distributions), such payment to
be made in the manner set forth in this paragraph 5. The Principal Underwriter
shall also be entitled to be paid by the Fund a separate distribution fee
(calculated in accordance with paragraph 5(d)), such payment to be made in the
manner set forth and subject to the terms of this paragraph 5.
(d) The sales commissions and distribution fees referred to in paragraph
5(c) shall be accrued and paid by the Fund in the following manner. The Fund
shall accrue daily an amount calculated at the rate of .75% per annum of the
daily net assets of the Fund, which net assets shall be computed as described in
paragraph 2. The daily amounts so accrued throughout the month shall be paid to
the Principal Underwriter on the last day of each month. The amount of such
daily accrual, as so calculated, shall first be applied and charged to all
unpaid sales commissions, and the balance, if any, shall then be applied and
charged to all unpaid distribution fees. No amount shall be accrued with respect
to any day on which there exist no outstanding uncovered distribution charges of
the Principal Underwriter. The amount of such uncovered distribution charges
shall be calculated daily. For purposes of this calculation, distribution
charges of the Principal Underwriter shall include (a) the aggregate of all
sales commissions which the Principal Underwriter (and Prior Principal
Underwriter) has been paid pursuant to this paragraph (d) (and pursuant to
paragraph (d) of the Prior Agreements) plus all sales commissions which it is
entitled to be paid pursuant to paragraph 5(c) (and pursuant to paragraph 5(c)
of the Prior Agreements) since inception of the Prior Agreements through and
including the day next preceding the date of calculation, and (b) an amount
equal to the aggregate of all distribution fees referred to below which the
Principal Underwriter (and Prior Principal Underwriter) has been paid pursuant
to this paragraph (d) (and pursuant to paragraph (d) of the Prior Agreements)
plus all such fees which it is entitled to be paid pursuant to paragraph 5(c)
(and pursuant to paragraph 5(c) of the Prior Agreements) since inception of the
Prior Agreements through and including the day next preceding the date of
calculation. From this sum (distribution charges) there shall be subtracted (i)
the aggregate amount paid or payable to the Principal Underwriter (and Prior
Principal Underwriter) pursuant to this paragraph (d) (and pursuant to paragraph
(d) of the Prior Agreements) since inception of the Prior Agreements through and
including the day next preceding the date of calculation and (ii) the aggregate
amount of all contingent deferred sales charges paid or payable to the Principal
Underwriter (and Prior Principal Underwriter) since inception of the Prior
Agreements through and including the day next preceding the date of calculation.
If the result of such subtraction is a positive amount, a distribution fee
[computed at the rate of 1% per annum above the prime rate (being the base rate
on corporate loans posted by at least 75% of the nation's 30 largest banks) then
being reported in the Eastern Edition of The Wall Street Journal or if such
prime rate is not so reported such other rate as may be designated from time to
time by vote or other action of a majority of (i) those Trustees of the Trust
who are not "interested persons" of the Trust (as defined in the 1940 Act) and
have no direct or indirect financial interest in the operation of the Plan or
any agreements related to it (the "Rule 12b-1 Trustees") and (ii) all of the
Trustees then in office] shall be computed on such amount and added to such
amount, with the resulting sum constituting the amount of outstanding uncovered
distribution charges of the Principal Underwriter with respect to such day for
all purposes of this Agreement. If the result of such subtraction is a negative
amount, there shall exist no outstanding uncovered distribution charges of the
Principal Underwriter with respect to such day and no amount shall be accrued or
paid to the Principal Underwriter with respect to such day. The aggregate
amounts accrued and paid pursuant to this paragraph (d) during any fiscal year
of the Fund shall not exceed .75% of the average daily net assets of the Fund
for such year.
(e) The Principal Underwriter shall be entitled to receive all contingent
deferred sales charges paid or payable with respect to any day on which there
exist outstanding uncovered distribution charges of the Principal Underwriter.
The Fund shall be entitled to receive all remaining contingent deferred sales
charges paid or payable by shareholders with respect to any day on which there
exist no outstanding uncovered distribution charges of the Principal
Underwriter, provided that no such sales charge which would cause the Fund to
exceed the maximum applicable cap imposed thereon by paragraph (2) of subsection
(d) of Section 26 of Article III of the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. shall be imposed.
(f) The persons authorized to direct the disposition of monies paid or
payable on behalf of the Fund pursuant to the Plan or this Agreement shall be
the President or any Vice President of the Trust. Such persons shall provide to
the Trust's Trustees and the Trustees shall review, at least quarterly, a
written report of the amounts so expended and the purposes for which such
expenditures were made.
(g) In addition to the payments to the Principal Underwriter provided for
in paragraph 5(d), the Fund may make payments of service fees to the Principal
Underwriter, Authorized Firms and other persons. The aggregate of such payments
during any fiscal year of the Fund shall not exceed .25% of the Fund's average
daily net assets for such year.
6. The Trust hereby authorizes the Principal Underwriter to repurchase,
upon the terms and conditions set forth in written instructions given by the
Trust to the Principal Underwriter from time to time, as agent of the Fund and
for its account, such shares of the Fund as may be offered for sale to the Fund
from time to time.
(a) The Principal Underwriter shall notify in writing IBT and First Data
at the end of each business day, or as soon thereafter as the repurchases in
each pricing period have been compiled, of the number of shares repurchased for
the account of the Fund since the last previous report, together with the prices
at which such repurchases were made, and upon the request of any officer or
Trustee of the Trust shall furnish similar information with respect to all
repurchases made up to the time of the request on any day.
(b) The Trust reserves the right to suspend or revoke the foregoing
authorization at any time; unless otherwise stated, any such suspension or
revocation shall be effective forthwith upon receipt of notice thereof by an
officer of the Principal Underwriter, by telegraph or by written instrument from
an officer of the Trust duly authorized by its Trustees. In the event that the
authorization of the Principal Underwriter is, by the terms of such notice,
suspended for more than twenty-four hours or until further notice, the
authorization given by this paragraph 6 shall not be revived except by action of
a majority of the Trustees of the Trust.
(c) The Principal Underwriter shall have the right to terminate the
operation of this paragraph 6 upon giving to the Trust thirty (30) days' written
notice thereof.
(d) The Trust agrees to authorize and direct IBT to pay, for the account
of the Fund, the purchase price of any shares so repurchased against delivery of
the certificates in proper form for transfer to the Fund or for cancellation by
the Fund.
(e) The Principal Underwriter shall receive no commission in respect of
any repurchase of shares under the foregoing authorization and appointment as
agent, except for any sales commission, distribution fee or contingent deferred
sales charges payable under paragraph 5.
(f) The Trust agrees that the Fund will reimburse the Principal
Underwriter, from time to time on demand, for any reasonable expenses incurred
in connection with the repurchase of shares of the Fund pursuant to this
paragraph 6.
7. If, at any time during the existence of this Agreement, the Trust shall
deem it necessary or advisable in the best interests of the Fund that any
amendment of this Agreement be made in order to comply with the recommendations
or requirements of the Commission or other governmental authority or to obtain
any advantage under Massachusetts or federal tax laws, and shall notify the
Principal Underwriter of the form of amendment which it deems necessary or
advisable and the reasons therefor, and, if the Principal Underwriter declines
to assent to such amendment, the Trust may terminate this Agreement forthwith by
written notice to the Principal Underwriter. If, at any time during the
existence of its agreement upon request by the Principal Underwriter, the Trust
fails (after a reasonable time) to make any changes in its Declaration of Trust,
as amended, or in its methods of doing business which are necessary in order to
comply with any requirement of Federal law or regulations of the Commission or
of a national securities association of which the Principal Underwriter is or
may be a member, relating to the sale of the shares of the Fund, the Principal
Underwriter may terminate this Agreement forthwith by written notice to the
Trust.
8. The term "net asset value" as used in this Agreement with reference to
the shares of the Fund shall have the same meaning as used in the Declaration of
Trust, as amended, and calculated in the manner referred to in paragraph 2
above.
9(a). The Principal Underwriter is a corporation in the United States
organized under the laws of Massachusetts and holding membership in the National
Association of Securities Dealers, Inc., a securities association registered
under Section 15A of the Securities Exchange Act of 1934, as amended from time
to time, and during the life of this Agreement will continue to be so resident
in the United States, so organized and a member in good standing of said
Association. The Principal Underwriter will comply with the Trust's Declaration
of Trust and By-Laws, and the 1940 Act and the rules promulgated thereunder,
insofar as they are applicable to the Principal Underwriter.
(b) The Principal Underwriter shall maintain in the United States and
preserve therein for such period or periods as the Commission shall prescribe by
rules and regulations applicable to it as Principal Underwriter of an open-end
investment company registered under the 1940 Act such accounts, books and other
documents as are necessary or appropriate to record its transactions with the
Fund. Such accounts, books and other documents shall be subject at any time and
from time to time to such reasonable periodic, special and other examinations by
the Commission or any member or representative thereof as the Commission may
prescribe. The Principal Underwriter shall furnish to the Commission within such
reasonable time as the Commission may prescribe copies of or extracts from such
records which may be prepared without effort, expense or delay as the Commission
may by order require.
10. This Agreement shall continue in force indefinitely until terminated
as in this Agreement above provided, except that:
(a) this Agreement shall remain in effect through and including April 28,
1997 (or, if applicable, the next April 28 which follows the day on which the
Fund has become a party hereto by amendment of Schedule A subsequent to April
28, 1997), and shall continue in full force and effect indefinitely thereafter,
but only so long as such continuance is specifically approved at least annually
(i) by the vote of a majority of the Rule 12b-1 Trustees cast in person at a
meeting called for the purpose of voting on such approval, and (ii) by the
Trustees of the Trust or by vote of a majority of the outstanding voting
securities of the Fund;
(b) this Agreement may be terminated at any time by vote of a majority of
the Rule 12b-1 Trustees or by vote of a majority of the outstanding voting
securities of the Fund on not more than sixty (60) days' notice to the Principal
Underwriter. The Principal Underwriter shall be entitled to receive all
contingent deferred sales charges paid or payable with respect to any day
subsequent to the termination of this Agreement;
(c) the Principal Underwriter shall have the right to terminate this
Agreement on six (6) months' written notice thereof given in writing to the
Fund;
(d) the Trust shall have the right to terminate this Agreement forthwith
in the event that it shall have been established by a court of competent
jurisdiction that the Principal Underwriter or any director or officer of the
Principal Underwriter has taken any action which results in a breach of the
covenants set out in paragraph 9 hereof; and
(e) additional series of the Trust will become parties hereto upon
approval by the Trustees of the Trust and amendment of Schedule A.
11. In the event of the assignment of this Agreement by the Principal
Underwriter, this Agreement shall automatically terminate.
12. Any notice under this Agreement shall be in writing, addressed and
delivered, or mailed postage paid, to the other party, at such address as such
other party may designate for the receipt of such notices. Until further notice
to the other party, it is agreed that the record address of the Trust and that
of the Principal Underwriter, shall be 24 Federal Street, Boston, Massachusetts
02110.
13. The services of the Principal Underwriter to the Fund hereunder are
not to be deemed to be exclusive, the Principal Underwriter being free to (a)
render similar service to, and to act as principal underwriter in connection
with the distribution of shares of, other series of the Trust or other
investment companies, and (b) engage in other business and activities from time
to time.
14. The terms "vote of a majority of the outstanding voting securities,"
"assignment" and "interested persons," when used herein, shall have the
respective meanings specified in the 1940 Act, subject, however, to such
exemptions as may be granted by the Commission by any rule, regulation or order.
15. The Principal Underwriter expressly acknowledges the provision in the
Trust's Declaration of Trust limiting the personal liability of the shareholders
of the Fund or the Trustees of the Trust. The Principal Underwriter hereby
agrees that it shall have recourse to the Trust or the Fund for payment of
claims or obligations as between the Trust or the Fund and the Principal
Underwriter arising out of this Agreement and shall not seek satisfaction from
the shareholders or any shareholder of the Trust or from the Trustees or any
Trustee of the Trust. The Fund shall not be responsible for obligations of any
other series of the Trust.
16. The term "Prior Principal Underwriter" means Eaton Vance Distributors,
Inc., a separate Massachusetts corporation that has served as principal
underwriter prior to the effective date of this Agreement. All references in
this Agreement to the "Prior Agreements" shall mean the distribution agreements
referenced on Schedule A hereto between the Trust on behalf of the Fund and the
Prior Principal Underwriter. Such references shall not be applicable to any
additional series of the Trust which becomes a Fund hereunder by amendment of
Schedule A hereafter.
17. This Agreement shall amend, replace and be substituted for the Prior
Agreements as of the opening of business on November 1, 1996, and this Agreement
shall be effective as of such time. The outstanding uncovered distribution
charges of the Prior Principal Underwriter calculated under the Prior Agreements
as of the close of business on October 31, 1996 shall be the outstanding
uncovered distribution charges of the Principal Underwriter calculated under
this Agreement as of the opening of business on November 1, 1996.
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement on
the 18th day of October, 1996.
EATON VANCE MUNICIPALS TRUST
By /s/ Thomas J. Fetter
-----------------------------------
President
EATON VANCE DISTRIBUTORS, INC.
By /s/ H. D. Brigham, Jr.
-----------------------------------
Vice President
<PAGE>
SCHEDULE A
EATON VANCE MUNICIPALS TRUST
DISTRIBUTION AGREEMENT
(CLASSIC FUNDS)
EFFECTIVE NOVEMBER 1, 1996
Name of Fund Inception Date of Prior Agreements
- ------------ ----------------------------------
EV Classic California Municipals Fund* November 22, 1993/January 27, 1995
EV Classic Connecticut Municipals Fund November 29, 1993/January 27, 1995
EV Classic Florida Municipals Fund November 22, 1993/January 27, 1995
EV Classic National Municipals Fund November 22, 1993/January 27, 1995
EV Classic New Jersey Municipals Fund November 22, 1993/January 27, 1995
EV Classic New York Municipals Fund November 22, 1993/January 27, 1995
EV Classic Pennsylvania Municipals Fund November 22, 1993/January 27, 1995
EV Classic Rhode Island Municipals Fund November 29, 1993/January 27, 1995
- ----------
*This fund is a successor in operations to a fund which was reorganized,
effective October 1, 1995, and the outstanding uncovered distribution charges
of the predecessor fund were assumed by the above fund.
<PAGE>
EXHIBIT 99.6(a)(2)
EATON VANCE MUNICIPALS TRUST
DISTRIBUTION AGREEMENT
(MARATHON FUNDS)
AGREEMENT effective November 1, 1996 between EATON VANCE MUNICIPALS TRUST,
a Massachusetts business trust having its principal place of business in Boston
in the Commonwealth of Massachusetts, hereinafter called the "Trust," on behalf
of each of its series listed on Schedule A (the "Funds"), and EATON VANCE
DISTRIBUTORS, INC., a Massachusetts corporation having its principal place of
business in said Boston and formerly named EV Distributors, Inc., hereinafter
sometimes called the "Principal Underwriter."
IN CONSIDERATION of the mutual promises and undertakings herein contained,
the parties hereto agree with respect to each Fund:
1. The Trust grants to the Principal Underwriter the right to purchase
shares of the Fund upon the terms hereinbelow set forth during the term of this
Agreement. While this Agreement is in force, the Principal Underwriter agrees to
use its best efforts to find purchasers for shares of the Fund.
The Principal Underwriter shall have the right to buy from the Fund the
shares needed, but not more than the shares needed (except for clerical errors
and errors of transmission) to fill unconditional orders for shares of the Fund
placed with the Principal Underwriter by financial service firms or investors as
set forth in the current Prospectus relating to shares of the Fund. The price
which the Principal Underwriter shall pay for the shares so purchased shall be
equal to the price paid by investors upon purchasing such shares. The Principal
Underwriter shall notify Investors Bank & Trust Company, Custodian of the Fund
("IBT"), and First Data Investor Services Group, Transfer Agent of the Fund
("First Data"), or a successor transfer agent, at the end of each business day,
or as soon thereafter as the orders placed with it have been compiled, of the
number of shares and the prices thereof which the Principal Underwriter is to
purchase as principal for resale. The Principal Underwriter shall take down and
pay for shares ordered from the Fund on or before the eleventh business day
(excluding Saturdays) after the shares have been so ordered.
The right granted to the Principal Underwriter to buy shares from the Fund
shall be exclusive, except that said exclusive right shall not apply to shares
issued in connection with the merger or consolidation of any other investment
company or personal holding company with the Fund or the acquisition by purchase
or otherwise of all (or substantially all) the assets or the outstanding shares
of any such company, by the Fund; nor shall it apply to shares, if any, issued
by the Fund in distribution of income or realized capital gains of the Fund
payable in shares or in cash at the option of the shareholder.
2. The shares may be resold by the Principal Underwriter to or through
financial service firms having agreements with the Principal Underwriter, and to
investors, upon the following terms and conditions.
The public offering price, i.e., the price per share at which the
Principal Underwriter or financial service firm purchasing shares from the
Principal Underwriter may sell shares to the public, shall be equal to the net
asset value at which the Principal Underwriter is to purchase the shares.
The net asset value of shares of the Fund shall be determined by the Trust
or IBT, as the agent of the Fund, as of the close of regular trading on the New
York Stock Exchange on each business day on which said Exchange is open, or as
of such other time on each such business day as may be determined by the
Trustees of the Trust, in accordance with the methodology and procedures for
calculating such net asset value authorized by the Trustees. The Trust may also
cause the net asset value to be determined in substantially the same manner or
estimated in such manner and as of such other time or times as may from time to
time be agreed upon by the Trust and Principal Underwriter. The Trust will
notify the Principal Underwriter each time the net asset value of the Fund's
shares is determined and when such value is so determined it shall be applicable
to transactions as set forth in the current Prospectus and Statement of
Additional Information (hereafter the "Prospectus") relating to the Fund's
shares.
No shares of the Fund shall be sold by the Fund during any period when the
determination of net asset value is suspended pursuant to the Declaration of
Trust, except to the Principal Underwriter, in the manner and upon the terms
above set forth to cover contracts of sale made by the Principal Underwriter
with its customers prior to any such suspension, and except as provided in the
last paragraph of paragraph 1 hereof. The Trust shall also have the right to
suspend the sale of the Fund's shares if in the judgment of the Trust conditions
obtaining at any time render such action advisable. The Principal Underwriter
shall have the right to suspend sales at any time, to refuse to accept or
confirm any order from an investor or financial service firm, or to accept or
confirm any such order in part only, if in the judgment of the Principal
Underwriter such action is in the best interests of the Fund.
3. The Trust agrees that it will, from time to time, but subject to the
necessary approval of the Fund's shareholders, take such steps as may be
necessary to register the Fund's shares under the federal Securities Act of
1933, as amended from time to time (the "1933 Act"), to the end that there will
be available for sale such number of shares as the Principal Underwriter may
reasonably be expected to sell. The Trust agrees to indemnify and hold harmless
the Principal Underwriter and each person, if any, who controls the Principal
Underwriter within the meaning of Section 15 of the 1933 Act against any loss,
liability, claim, damages or expense (including the reasonable cost of
investigating or defending any alleged loss, liability, claim, damages or
expense and reasonable counsel fees incurred in connection therewith), arising
by reason of any person acquiring any shares of the Fund, which may be based
upon the 1933 Act or on any other statute or at common law, on the ground that
the Registration Statement or Prospectus, as from time to time amended and
supplemented, includes an untrue statement of a material fact or omits to state
a material fact required to be stated therein or necessary in order to make the
statements therein not misleading, unless such statement or omission was made in
reliance upon, and in conformity with, information furnished in writing to the
Trust in connection therewith by or on behalf of the Principal Underwriter;
provided, however, that in no case (i) is the indemnity of the Trust in favor of
the Principal Underwriter and any such controlling person to be deemed to
protect such Principal Underwriter or any such controlling person against any
liability to the Trust or the Fund or its security holders to which such
Principal Underwriter or any such controlling person would otherwise be subject
by reason of willful misfeasance, bad faith, or gross negligence in the
performance of its duties or by reason of its reckless disregard of its
obligations and duties under this Agreement, or (ii) is the Trust or the Fund to
be liable under its indemnity agreement contained in this paragraph with respect
to any claim made against the Principal Underwriter or any such controlling
person unless the Principal Underwriter or any such controlling person, as the
case may be, shall have notified the Trust in writing within a reasonable time
after the summons or other first legal process giving information of the nature
of the claim shall have been served upon the Principal Underwriter or such
controlling person (or after such Principal Underwriter or such controlling
person shall have received notice of such service on any designated agent), but
failure to notify the Trust of any such claim shall not relieve it from any
liability which the Fund may have to the person against whom such action is
brought otherwise than on account of its indemnity agreement contained in this
paragraph. The Trust shall be entitled to participate, at the expense of the
Fund, in the defense, or, if the Trust so elects, to assume the defense of any
suit brought to enforce any such liability, but if the Trust elects to assume
the defense, such defense shall be conducted by counsel chosen by it and
satisfactory to the Principal Underwriter or controlling person or persons,
defendant or defendants in the suit. In the event the Trust elects to assume the
defense of any such suit and retains such counsel, the Principal Underwriter or
controlling person or persons, defendant or defendants in the suit, shall bear
the fees and expenses of any additional counsel retained by them, but, in case
the Trust does not elect to assume the defense of any such suit, the Fund shall
reimburse the Principal Underwriter or controlling person or persons, defendant
or defendants in the suit, for the reasonable fees and expenses of any counsel
retained by them. The Trust agrees promptly to notify the Principal Underwriter
of the commencement of any litigation or proceedings against it or any of its
officers or Trustees in connection with the issuance or sale of any of the
Fund's shares.
4. The Principal Underwriter covenants and agrees that, in selling the
shares of the Fund, it will use its best efforts in all respects duly to conform
with the requirements of all state and federal laws relating to the sale of such
shares, and will indemnify and hold harmless the Trust and each of its Trustees
and officers and each person, if any, who controls the Trust within the meaning
of Section 15 of the 1933 Act, against any loss, liability, damages, claim or
expense (including the reasonable cost of investigating or defending any alleged
loss, liability, damages, claim or expense and reasonable counsel fees incurred
in connection therewith), arising by reason of any person acquiring any shares
of the Fund, which may be based upon the 1933 Act or any other statute or at
common law, on account of any wrongful act of the Principal Underwriter or any
of its employees (including any failure to conform with any requirement of any
state or federal law relating to the sale of such shares) or on the ground that
the Registration Statement or Prospectus, as from time to time amended and
supplemented, includes an untrue statement of a material fact or omits to state
a material fact required to be stated therein or necessary in order to make the
statements therein not misleading, insofar as any such statement or omission was
made in reliance upon, and in conformity with information furnished in writing
to the Fund in connection therewith by or on behalf of the Principal
Underwriter, provided, however, that in no case (i) is the indemnity of the
Principal Underwriter in favor of any person indemnified to be deemed to protect
the Fund or any such person against any liability to which the Fund or any such
person would otherwise be subject by reason of willful misfeasance, bad faith,
or gross negligence in the performance of its or his duties or by reason of its
or his reckless disregard of its obligations and duties under this Agreement, or
(ii) is the Principal Underwriter to be liable under its indemnity agreement
contained in this paragraph with respect to any claim made against the Fund or
any person indemnified unless the Trust or such person, as the case may be,
shall have notified the Principal Underwriter in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon the Trust, the Fund or upon such
person (or after the Trust, the Fund or such person shall have received notice
of such service on any designated agent), but failure to notify the Principal
Underwriter of any such claim shall not relieve it from any liability which it
may have to the Fund or any person against whom such action is brought otherwise
than on account of its indemnity agreement contained in this paragraph. The
Principal Underwriter shall be entitled to participate, at its own expense, in
the defense, or, if it so elects, to assume the defense of any suit brought to
enforce any such liability, but if the Principal Underwriter elects to assume
the defense, such defense shall be conducted by counsel chosen by it and
satisfactory to the Trust, or to its officers or Trustees, or to any controlling
person or persons, defendant or defendants in the suit. In the event that the
Principal Underwriter elects to assume the defense of any such suit and retains
such counsel, the Fund or such officers or Trustees or controlling person or
persons, defendant or defendants in the suit, shall bear the fees and expenses
of any additional counsel retained by them or the Trust, but, in case the
Principal Underwriter does not elect to assume the defense of any such suit, it
shall reimburse the Fund, any such officers and Trustees or controlling person
or persons, defendant or defendants in such suit, for the reasonable fees and
expenses of any counsel retained by them or the Trust. The Principal Underwriter
agrees promptly to notify the Trust of the commencement of any litigation or
proceedings against it in connection with the issue and sale of any of the
Fund's shares.
Neither the Principal Underwriter nor any financial service firm nor any
other person is authorized by the Trust to give any information or to make any
representations, other than those contained in the Registration Statement or
Prospectus filed with the Securities and Exchange Commission (the "Commission")
under the 1933 Act, (as said Registration Statement and Prospectus may be
amended or supplemented from time to time), covering the shares of the Fund.
Neither the Principal Underwriter nor any financial service firm nor any other
person is authorized to act as agent for the Trust or the Fund in connection
with the offering or sale of shares of the Fund to the public or otherwise. All
such sales made by the Principal Underwriter shall be made by it as principal,
for its own account. The Principal Underwriter may, however, act as agent in
connection with the repurchase of shares as provided in paragraph 6 below, or in
connection with "exchanges" between investment companies for which the Principal
Underwriter acts as Principal Underwriter or for which an affiliate of the
Principal Underwriter acts as investment adviser.
5(a). The Fund will pay, or cause to be paid -
(i) all the costs and expenses of the Fund, including fees and
disbursements of its counsel, in connection with the preparation and filing of
any required Registration Statement and/or Prospectus under the 1933 Act, or the
Investment Company Act of 1940, as amended from time to time (the "1940 Act"),
covering its shares and all amendments and supplements thereto, and preparing
and mailing periodic reports to shareholders (including the expense of setting
up in type any such Registration Statement, Prospectus or periodic report);
(ii) the cost of preparing temporary and permanent share
certificates (if any) for shares of the Fund;
(iii) the cost and expenses of delivering to the Principal
Underwriter at its office in Boston, Massachusetts, all shares of the Fund
purchased by it as principal hereunder; and
(iv) all the federal and state (if any) issue and/or transfer taxes
payable upon the issue by or (in the case of treasury shares) transfer from the
Fund to the Principal Underwriter of any and all shares of the Fund purchased by
the Principal Underwriter hereunder.
(b) The Principal Underwriter agrees that, after the Prospectus and
periodic reports have been set up in type, it will bear the expense of printing
and distributing any copies thereof which are to be used in connection with the
offering of shares of the Fund to financial service firms or investors. The
Principal Underwriter further agrees that it will bear the expenses of
preparing, printing and distributing any other literature used by the Principal
Underwriter or furnished by it for use by financial service firms in connection
with the offering of the shares of the Fund for sale to the public and any
expenses of advertising in connection with such offering. The Fund agrees to pay
the expenses of registration and maintaining registration of its shares for sale
under federal and state securities laws, and, if necessary or advisable in
connection therewith, of qualifying the Trust or the Fund as a dealer or broker,
in such states as shall be selected by the Principal Underwriter and the fees
payable to each such state for continuing the qualification therein until the
Principal Underwriter notifies the Trust that it does not wish such
qualification continued.
(c) In addition, the Trust agrees, in accordance with the Fund's
Distribution Plan (the "Plan"), adopted pursuant to Rule 12b-1 under the 1940
Act with respect to shares, to make certain payments as follows. The Principal
Underwriter shall be entitled to be paid by the Fund a sales commission equal to
an amount not exceeding 5% of the price received by the Fund for each sale of
shares (excluding reinvestment of dividends and distributions), such payment to
be made in the manner set forth in this paragraph 5. The Principal Underwriter
shall also be entitled to be paid by the Fund a separate distribution fee
(calculated in accordance with paragraph 5(d)), such payment to be made in the
manner set forth and subject to the terms of this paragraph 5.
(d) The sales commissions and distribution fees referred to in paragraph
5(c) shall be accrued and paid by the Fund in the following manner. The Fund
shall accrue daily an amount calculated at the rate of .75% per annum of the
daily net assets of the Fund, which net assets shall be computed as described in
paragraph 2. The daily amounts so accrued throughout the month shall be paid to
the Principal Underwriter on the last day of each month. The amount of such
daily accrual, as so calculated, shall first be applied and charged to all
unpaid sales commissions, and the balance, if any, shall then be applied and
charged to all unpaid distribution fees. No amount shall be accrued with respect
to any day on which there exist no outstanding uncovered distribution charges of
the Principal Underwriter. The amount of such uncovered distribution charges
shall be calculated daily. For purposes of this calculation, distribution
charges of the Principal Underwriter shall include (a) the aggregate of all
sales commissions which the Principal Underwriter (and Prior Principal
Underwriter) has been paid pursuant to this paragraph (d) (and pursuant to
paragraph (d) of the Prior Agreements) plus all sales commissions which it is
entitled to be paid pursuant to paragraph 5(c) (and pursuant to paragraph 5(c)
of the Prior Agreements) since inception of the Prior Agreements through and
including the day next preceding the date of calculation, and (b) an amount
equal to the aggregate of all distribution fees referred to below which the
Principal Underwriter (and Prior Principal Underwriter) has been paid pursuant
to this paragraph (d) (and pursuant to paragraph (d) of the Prior Agreements)
plus all such fees which it is entitled to be paid pursuant to paragraph 5(c)
(and pursuant to paragraph 5(c) of the Prior Agreements) since inception of the
Prior Agreements through and including the day next preceding the date of
calculation. From this sum (distribution charges) there shall be subtracted (i)
the aggregate amount paid or payable to the Principal Underwriter (and Prior
Principal Underwriter) pursuant to this paragraph (d) (and pursuant to paragraph
(d) of the Prior Agreements) since inception of the Prior Agreements through and
including the day next preceding the date of calculation and (ii) the aggregate
amount of all contingent deferred sales charges paid or payable to the Principal
Underwriter (and Prior Principal Underwriter) since inception of the Prior
Agreements through and including the day next preceding the date of calculation.
If the result of such subtraction is a positive amount, a distribution fee
[computed at the rate of 1% per annum above the prime rate (being the base rate
on corporate loans posted by at least 75% of the nation's 30 largest banks) then
being reported in the Eastern Edition of The Wall Street Journal or if such
prime rate is not so reported such other rate as may be designated from time to
time by vote or other action of a majority of (i) those Trustees of the Trust
who are not "interested persons" of the Trust (as defined in the 1940 Act) and
have no direct or indirect financial interest in the operation of the Plan or
any agreements related to it (the "Rule 12b-1 Trustees") and (ii) all of the
Trustees then in office] shall be computed on such amount and added to such
amount, with the resulting sum constituting the amount of outstanding uncovered
distribution charges of the Principal Underwriter with respect to such day for
all purposes of this Agreement. If the result of such subtraction is a negative
amount, there shall exist no outstanding uncovered distribution charges of the
Principal Underwriter with respect to such day and no amount shall be accrued or
paid to the Principal Underwriter with respect to such day. The aggregate
amounts accrued and paid pursuant to this paragraph (d) during any fiscal year
of the Fund shall not exceed .75% of the average daily net assets of the Fund
for such year.
(e) The Principal Underwriter shall be entitled to receive all contingent
deferred sales charges paid or payable with respect to any day on which there
exist outstanding uncovered distribution charges of the Principal Underwriter.
The Fund shall be entitled to receive all remaining contingent deferred sales
charges paid or payable by shareholders with respect to any day on which there
exist no outstanding uncovered distribution charges of the Principal
Underwriter, provided that no such sales charge which would cause the Fund to
exceed the maximum applicable cap imposed thereon by paragraph (2) of subsection
(d) of Section 26 of Article III of the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. shall be imposed.
(f) The persons authorized to direct the disposition of monies paid or
payable by the Fund pursuant to the Plan or this Agreement shall be the
President or any Vice President of the Trust. Such persons shall provide to the
Trust's Trustees and the Trustees shall review, at least quarterly, a written
report of the amounts so expended and the purposes for which such expenditures
were made.
(g) In addition to the payments to the Principal Underwriter provided for
in paragraph 5(d), the Fund may make payments of service fees to the Principal
Underwriter, Authorized Firms and other persons. The aggregate of such payments
during any fiscal year of the Fund shall not exceed .25% of the Fund's average
daily net assets for such year.
6. The Trust hereby authorizes the Principal Underwriter to repurchase,
upon the terms and conditions set forth in written instructions given by the
Trust to the Principal Underwriter from time to time, as agent of the Fund and
for its account, such shares of the Fund as may be offered for sale to the Fund
from time to time.
(a) The Principal Underwriter shall notify in writing IBT and First Data
at the end of each business day, or as soon thereafter as the repurchases in
each pricing period have been compiled, of the number of shares repurchased for
the account of the Fund since the last previous report, together with the prices
at which such repurchases were made, and upon the request of any officer or
Trustee of the Trust shall furnish similar information with respect to all
repurchases made up to the time of the request on any day.
(b) The Trust reserves the right to suspend or revoke the foregoing
authorization at any time; unless otherwise stated, any such suspension or
revocation shall be effective forthwith upon receipt of notice thereof by an
officer of the Principal Underwriter, by telegraph or by written instrument from
an officer of the Trust duly authorized by its Trustees. In the event that the
authorization of the Principal Underwriter is, by the terms of such notice,
suspended for more than twenty-four hours or until further notice, the
authorization given by this paragraph 6 shall not be revived except by action of
a majority of the Trustees of the Trust.
(c) The Principal Underwriter shall have the right to terminate the
operation of this paragraph 6 upon giving to the Trust thirty (30) days' written
notice thereof.
(d) The Trust agrees to authorize and direct IBT to pay, for the account
of the Fund, the purchase price of any shares so repurchased against delivery of
the certificates in proper form for transfer to the Fund or for cancellation by
the Fund.
(e) The Principal Underwriter shall receive no commission in respect of
any repurchase of shares under the foregoing authorization and appointment as
agent, except for any sales commission, distribution fee or contingent deferred
sales charges payable under paragraph 5.
(f) The Trust agrees that the Fund will reimburse the Principal
Underwriter, from time to time on demand, for any reasonable expenses incurred
in connection with the repurchase of shares of the Fund pursuant to this
paragraph 6.
7. If, at any time during the existence of this Agreement, the Trust shall
deem it necessary or advisable in the best interests of the Fund that any
amendment of this Agreement be made in order to comply with the recommendations
or requirements of the Commission or other governmental authority or to obtain
any advantage under Massachusetts or federal tax laws, and shall notify the
Principal Underwriter of the form of amendment which it deems necessary or
advisable and the reasons therefor, and, if the Principal Underwriter declines
to assent to such amendment, the Trust may terminate this Agreement forthwith by
written notice to the Principal Underwriter. If, at any time during the
existence of its agreement upon request by the Principal Underwriter, the Trust
fails (after a reasonable time) to make any changes in its Declaration of Trust,
as amended, or in its methods of doing business which are necessary in order to
comply with any requirement of federal law or regulations of the Commission or
of a national securities association of which the Principal Underwriter is or
may be a member, relating to the sale of the shares of the Fund, the Principal
Underwriter may terminate this Agreement forthwith by written notice to the
Trust.
8. The term "net asset value" as used in this Agreement with reference to
the shares of the Fund shall have the same meaning as used in the Declaration of
Trust, as amended, and calculated in the manner referred to in paragraph 2
above.
9(a). The Principal Underwriter is a corporation in the United States
organized under the laws of Massachusetts and holding membership in the National
Association of Securities Dealers, Inc., a securities association registered
under Section 15A of the Securities Exchange Act of 1934, as amended from time
to time, and during the life of this Agreement will continue to be so resident
in the United States, so organized and a member in good standing of said
Association. The Principal Underwriter will comply with the Trust's Declaration
of Trust and By-Laws, and the 1940 Act and the rules promulgated thereunder,
insofar as they are applicable to the Principal Underwriter.
(b) The Principal Underwriter shall maintain in the United States and
preserve therein for such period or periods as the Commission shall prescribe by
rules and regulations applicable to it as Principal Underwriter of an open-end
investment company registered under the 1940 Act such accounts, books and other
documents as are necessary or appropriate to record its transactions with the
Fund. Such accounts, books and other documents shall be subject at any time and
from time to time to such reasonable periodic, special and other examinations by
the Commission or any member or representative thereof as the Commission may
prescribe. The Principal Underwriter shall furnish to the Commission within such
reasonable time as the Commission may prescribe copies of or extracts from such
records which may be prepared without effort, expense or delay as the Commission
may by order require.
10. This Agreement shall continue in force indefinitely until terminated
as in this Agreement above provided, except that:
(a) this Agreement shall remain in effect through and including April 28,
1997 (or, if applicable, the next April 28 which follows the day on which the
Fund has become a party hereto by amendment of Schedule A subsequent to April
28, 1997), and shall continue in full force and effect indefinitely thereafter,
but only so long as such continuance is specifically approved at least annually
(i) by the vote of a majority of the Rule 12b-1 Trustees cast in person at a
meeting called for the purpose of voting on such approval, and (ii) by the
Trustees of the Trust or by vote of a majority of the outstanding voting
securities of the Fund;
(b) this Agreement may be terminated at any time by vote of a majority of
the Rule 12b-1 Trustees or by vote of a majority of the outstanding voting
securities of the Fund on not more than sixty (60) days' notice to the Principal
Underwriter. The Principal Underwriter shall be entitled to receive all
contingent deferred sales charges paid or payable with respect to any day
subsequent to the termination of this Agreement;
(c) the Principal Underwriter shall have the right to terminate this
Agreement on six (6) months' written notice thereof given in writing to the
Fund;
(d) the Trust shall have the right to terminate this Agreement forthwith
in the event that it shall have been established by a court of competent
jurisdiction that the Principal Underwriter or any director or officer of the
Principal Underwriter has taken any action which results in a breach of the
covenants set out in paragraph 9 hereof; and
(e) additional series of the Trust will become parties hereto upon
approval by the Trustees of the Trust and amendment of Schedule A.
11. In the event of the assignment of this Agreement by the Principal
Underwriter, this Agreement shall automatically terminate.
12. Any notice under this Agreement shall be in writing, addressed and
delivered, or mailed postage paid, to the other party, at such address as such
other party may designate for the receipt of such notices. Until further notice
to the other party, it is agreed that the record address of the Trust and that
of the Principal Underwriter, shall be 24 Federal Street, Boston, Massachusetts
02110.
13. The services of the Principal Underwriter to the Fund hereunder are
not to be deemed to be exclusive, the Principal Underwriter being free to (a)
render similar service to, and to act as principal underwriter in connection
with the distribution of shares of, other series of the Trust or other
investment companies, and (b) engage in other business and activities from time
to time.
14. The terms "vote of a majority of the outstanding voting securities,"
"assignment" and "interested persons," when used herein, shall have the
respective meanings specified in the 1940 Act, subject, however, to such
exemptions as may be granted by the Commission by any rule, regulation or order.
15. The Principal Underwriter expressly acknowledges the provision in the
Trust's Declaration of Trust limiting the personal liability of the shareholders
of the Fund or the Trustees of the Trust. The Principal Underwriter hereby
agrees that it shall have recourse to the Trust or the Fund for payment of
claims or obligations as between the Trust or the Fund and the Principal
Underwriter arising out of this Agreement and shall not seek satisfaction from
the shareholders or any shareholder of the Trust or from the Trustees or any
Trustee of the Trust. The Fund shall not be responsible for obligations of any
other series of the Trust.
16. The term "Prior Principal Underwriter" means Eaton Vance Distributors,
Inc., a separate Massachusetts corporation that has served as principal
underwriter prior to the effective date of this Agreement. All references in
this Agreement to the "Prior Agreements" shall mean the distribution agreements
referenced on Schedule A hereto between the Trust on behalf of the Fund and the
Prior Principal Underwriter. Such references shall not be applicable to any
additional series of the Trust which becomes a Fund hereunder by amendment of
Schedule A hereafter.
17. This Agreement shall amend, replace and be substituted for the Prior
Agreements as of the opening of business on November 1, 1996, and this Agreement
shall be effective as of such time. The outstanding uncovered distribution
charges of the Principal Underwriter calculated under the Prior Agreements as of
the close of business on October 31, 1996 shall be the outstanding uncovered
distribution charges of the Principal Underwriter calculated under this
Agreement as of the opening of business on November 1, 1996.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement on
the 18th day October, 1996.
EATON VANCE MUNICIPALS TRUST
By /s/ Thomas J. Fetter
------------------------------
President
EATON VANCE DISTRIBUTORS, INC.
By /s/ H. Day Brigham, Jr.
------------------------------
Vice President
<PAGE>
SCHEDULE A
EATON VANCE MUNICIPALS TRUST
DISTRIBUTION AGREEMENT
(MARATHON FUNDS)
EFFECTIVE NOVEMBER 1, 1996
<TABLE>
<CAPTION>
Name of Fund Inception Date of Prior Agreements
- ------------ ----------------------------------
<S> <C>
EV Marathon Alabama Municipals Fund April 24, 1992/July 7, 1993/June 19, 1995
EV Marathon Arizona Municipals Fund July 22, 1991/July 7, 1993/June 19, 1995
EV Marathon Arkansas Municipals Fund October 1, 1992/July 7, 1993/June 19, 1995
EV Marathon California Municipals Fund* December 19, 1985/July 7, 1993/June 19, 1995
EV Marathon Colorado Municipals Fund August 20, 1992/July 7, 1993/June 19, 1995
EV Marathon Connecticut Municipals Fund April 24, 1992/July 7, 1993/June 19, 1995
EV Marathon Florida Municipals Fund August 20, 1990/July 7, 1993/June 19, 1995
EV Marathon Georgia Municipals Fund December 16, 1991/July 7, 1993/June 19, 1995
EV Marathon Kentucky Municipals Fund December 16, 1991/July 7, 1993/June 19, 1995
EV Marathon Louisiana Municipals Fund October 1, 1992/July 7, 1993/June 19, 1995
EV Marathon Maryland Municipals Fund December 16, 1991/July 7, 1993/June 19, 1995
EV Marathon Massachusetts Municipals Fund April 15, 1991/July 7, 1993/June 19, 1995
EV Marathon Michigan Municipals Fund April 15, 1991/July 7, 1993/June 19, 1995
EV Marathon Minnesota Municipals Fund July 22, 1991/July 7, 1993/June 19, 1995
EV Marathon Mississippi Municipals Fund June 7, 1993/June 19, 1995
EV Marathon Missouri Municipals Fund April 24, 1992/July 7, 1993/June 19, 1995
EV Marathon National Municipals Fund December 19, 1985/July 7, 1993/June 19, 1995
EV Marathon New Jersey Municipals Fund January 7, 1991/July 7, 1993/June 19, 1995
EV Marathon New York Municipals Fund August 20, 1990/July 7, 1993/June 19, 1995
EV Marathon North Carolina Municipals Fund October 10, 1991/July 7, 1993/June 19, 1995
EV Marathon Ohio Municipals Fund April 16, 1991/July 7, 1993/June 19, 1995
EV Marathon Oregon Municipals Fund December 16, 1991/July 7, 1993/June 19, 1995
EV Marathon Pennsylvania Municipals Fund January 7, 1991/July 7, 1993/June 19, 1995
EV Marathon Rhode Island Municipals Fund June 7, 1993/June 19, 1995
EV Marathon South Carolina Municipals Fund October 1, 1992/July 7, 1993/June 19, 1995
EV Marathon Tennessee Municipals Fund August 20, 1992/July 7, 1993/June 19, 1995
EV Marathon Texas Municipals Fund January 31, 1992/July 7, 1993/June 19, 1995
EV Marathon Virginia Municipals Fund July 22, 1991/July 7, 1993/June 19, 1995
EV Marathon West Virginia Municipals Fund June 7, 1993/June 19, 1995
</TABLE>
- ----------
*This fund is a successor in operations to a fund which was reorganized,
effective October 1, 1995, and the outstanding uncovered distribution charges
of the predecessor fund were assumed by the above fund.
<PAGE>
EXHIBIT 99.6(a)(3)
EATON VANCE MUNICIPALS TRUST
DISTRIBUTION AGREEMENT
(TRADITIONAL FUNDS)
AGREEMENT effective November 1, 1996 between EATON VANCE MUNICIPALS TRUST,
hereinafter called the "Trust," a Massachusetts business trust having its
principal place of business in Boston in the Commonwealth of Massachusetts, on
behalf of each of its series listed on Schedule A (the "Funds") and EATON VANCE
DISTRIBUTORS, INC., a Massachusetts corporation having its principal place of
business in said Boston and formerly named EV Distributors, Inc., hereinafter
sometimes called the "Principal Underwriter."
IN CONSIDERATION of the mutual promises and undertakings herein contained,
the parties hereto agree with respect to each Fund:
1. The Trust grants to the Principal Underwriter the right to purchase
shares of the Fund upon the terms hereinbelow set forth during the term of this
Agreement. While this Agreement is in force, the Principal Underwriter agrees to
use its best efforts to find purchasers for shares of the Fund.
The Principal Underwriter shall have the right to buy from the Fund the
shares needed, but not more than the shares needed (except for clerical errors
and errors of transmission) to fill unconditional orders for shares of the Fund
placed with the Principal Underwriter by financial service firms or investors as
set forth in the current Prospectus relating to shares of the Fund. The price
which the Principal Underwriter shall pay for the shares so purchased shall be
the net asset value used in determining the public offering price on which such
orders were based. The Principal Underwriter shall notify Investors Bank & Trust
Company, Custodian of the Fund ("IBT"), and First Data Investor Services Group,
Transfer Agent of the Fund ("First Data"), or a successor transfer agent, at the
end of each business day, or as soon thereafter as the orders placed with it
have been compiled, of the number of shares and the prices thereof which the
Principal Underwriter is to purchase as principal for resale. The Principal
Underwriter shall take down and pay for shares ordered from the Fund on or
before the eleventh business day (excluding Saturdays) after the shares have
been so ordered.
The right granted to the Principal Underwriter to buy shares from the Fund
shall be exclusive, except that said exclusive right shall not apply to shares
issued in connection with the merger or consolidation of any other investment
company or personal holding company with the Fund or the acquisition by purchase
or otherwise of all (or substantially all) the assets or the outstanding shares
of any such company, by the Fund; nor shall it apply to shares, if any, issued
by the Fund in distribution of income or realized capital gains of the Fund
payable in shares or in cash at the option of the shareholder.
2. The shares may be resold by the Principal Underwriter to or through
financial service firms having agreements with the Principal Underwriter, and to
investors, upon the following terms and conditions.
The public offering price, i.e., the price per share at which the
Principal Underwriter or financial service firm purchasing shares from the
Principal Underwriter may sell shares to the public, shall be the public
offering price as set forth in the current Prospectus relating to said shares,
but not to exceed the net asset value at which the Principal Underwriter is to
purchase the shares, plus a sales charge not to exceed 7.25% of the public
offering price (the net asset value divided by .9275). If the resulting public
offering price does not come out to an even cent, the public offering price
shall be adjusted to the nearer cent.
The Principal Underwriter may also sell shares at the net asset value at
which the Principal Underwriter is to purchase such shares, provided such sales
are not inconsistent with the provisions of Section 22(d) of the Investment
Company Act of 1940, as amended from time to time (the "1940 Act"), and the
rules thereunder, including any applicable exemptive orders or administrative
interpretations or "no-action" positions with respect thereto.
The net asset value of shares of the Fund shall be determined by the Trust
or IBT, as the agent of the Fund, as of the close of regular trading on the New
York Stock Exchange on each business day on which said Exchange is open, or as
of such other time on each such business day as may be determined by the
Trustees of the Trust, in accordance with the methodology and procedures for
calculating such net asset value authorized by the Trustees. The Trust may also
cause the net asset value to be determined in substantially the same manner or
estimated in such manner and as of such other time or times as may from time to
time be agreed upon by the Trust and Principal Underwriter. The Trust will
notify the Principal Underwriter each time the net asset value of the Fund's
shares is determined and when such value is so determined it shall be applicable
to transactions as set forth in the current Prospectus and Statement of
Additional Information (hereafter the "Prospectus") relating to the Fund's
shares.
No shares of the Fund shall be sold by the Fund during any period when the
determination of net asset value is suspended pursuant to the Declaration of
Trust, except to the Principal Underwriter, in the manner and upon the terms
above set forth to cover contracts of sale made by the Principal Underwriter
with its customers prior to any such suspension, and except as provided in the
last paragraph of paragraph 1 hereof. The Trust shall also have the right to
suspend the sale of the Fund's shares if in the judgment of the Trust conditions
obtaining at any time render such action advisable. The Principal Underwriter
shall have the right to suspend sales at any time, to refuse to accept or
confirm any order from an investor or financial service firm, or to accept or
confirm any such order in part only, if in the judgment of the Principal
Underwriter such action is in the best interests of the Fund.
3. The Trust covenants and agrees that it will, from time to time, but
subject to the necessary approval of the Fund's shareholders, take such steps as
may be necessary to register the Fund's shares under the federal Securities Act
of 1933, as amended from time to time (the "1933 Act"), to the end that there
will be available for sale such number of shares as the Principal Underwriter
may reasonably be expected to sell. The Trust covenants and agrees to indemnify
and hold harmless the Principal Underwriter and each person, if any, who
controls the Principal Underwriter within the meaning of Section 15 of the 1933
Act against any loss, liability, claim, damages or expense (including the
reasonable cost of investigating or defending any alleged loss, liability,
claim, damages or expense and reasonable counsel fees incurred in connection
therewith), arising by reason of any person acquiring any shares of the Fund,
which may be based upon the 1933 Act or on any other statute or at common law,
on the ground that the Registration Statement or Prospectus, as from time to
time amended and supplemented, includes an untrue statement of a material fact
or omits to state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading, unless such statement or
omission was made in reliance upon, and in conformity with, information
furnished in writing to the Trust in connection therewith by or on behalf of the
Principal Underwriter; provided, however, that in no case (i) is the indemnity
of the Trust in favor of the Principal Underwriter and any such controlling
person to be deemed to protect such Principal Underwriter or any such
controlling person against any liability to the Trust or the Fund or its
security holders to which such Principal Underwriter or any such controlling
person would otherwise be subject by reason of willful misfeasance, bad faith,
or gross negligence in the performance of its duties or by reason of its
reckless disregard of its obligations and duties under this Agreement, or (ii)
is the Trust or the Fund to be liable under its indemnity agreement contained in
this paragraph with respect to any claim made against the Principal Underwriter
or any such controlling person unless the Principal Underwriter or any such
controlling person, as the case may be, shall have notified the Trust in writing
within a reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon the Principal
Underwriter or such controlling person (or after such Principal Underwriter or
such controlling person shall have received notice of such service on any
designated agent), but failure to notify the Trust of any such claim shall not
relieve it from any liability which the Fund may have to the person against whom
such action is brought otherwise than on account of its indemnity agreement
contained in this paragraph. The Trust shall be entitled to participate, at the
expense of the Fund, in the defense, or, if the Trust so elects, to assume the
defense of any suit brought to enforce any such liability, but if the Trust
elects to assume the defense, such defense shall be conducted by counsel chosen
by it and satisfactory to the Principal Underwriter or controlling person or
persons, defendant or defendants in the suit. In the event the Trust elects to
assume the defense of any such suit and retains such counsel, the Principal
Underwriter or controlling person or persons, defendant or defendants in the
suit, shall bear the fees and expenses of any additional counsel retained by
them, but, in case the Trust does not elect to assume the defense of any such
suit, the Fund shall reimburse the Principal Underwriter or controlling person
or persons, defendant or defendants in the suit, for the reasonable fees and
expenses of any counsel retained by them. The Trust agrees promptly to notify
the Principal Underwriter of the commencement of any litigation or proceedings
against it or any of its officers or Trustees in connection with the issuance or
sale of any of the Fund's shares.
4. The Principal Underwriter covenants and agrees that, in selling the
shares of the Fund, it will use its best efforts in all respects duly to conform
with the requirements of all state and federal laws relating to the sale of such
shares, and will indemnify and hold harmless the Trust and each of its Trustees
and officers and each person, if any, who controls the Trust within the meaning
of Section 15 of the 1933 Act, against any loss, liability, damages, claim or
expense (including the reasonable cost of investigating or defending any alleged
loss, liability, damages, claim or expense and reasonable counsel fees incurred
in connection therewith), arising by reason of any person acquiring any shares
of the Fund, which may be based upon the 1933 Act or any other statute or at
common law, on account of any wrongful act of the Principal Underwriter or any
of its employees (including any failure to conform with any requirement of any
state or federal law relating to the sale of such shares) or on the ground that
the registration statement or Prospectus, as from time to time amended and
supplemented, includes an untrue statement of a material fact or omits to state
a material fact required to be stated therein or necessary in order to make the
statements therein not misleading, insofar as any such statement or omission was
made in reliance upon, and in conformity with information furnished in writing
to the Trust in connection therewith by or on behalf of the Principal
Underwriter, provided, however, that in no case (i) is the indemnity of the
Principal Underwriter in favor of any person indemnified to be deemed to protect
the Fund or any such person against any liability to which the Fund or any such
person would otherwise be subject by reason of willful misfeasance, bad faith,
or gross negligence in the performance of its or his duties or by reason of its
or his reckless disregard of its obligations and duties under this Agreement, or
(ii) is the Principal Underwriter to be liable under its indemnity agreement
contained in this paragraph with respect to any claim made against the Fund or
any person indemnified unless the Trust or such person, as the case may be,
shall have notified the Principal Underwriter in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon the Trust, the Fund or upon such
person (or after the Trust, the Fund or such person shall have received notice
of such service on any designated agent), but failure to notify the Principal
Underwriter of any such claim shall not relieve it from any liability which it
may have to the Fund or any person against whom such action is brought otherwise
than on account of its indemnity agreement contained in this paragraph. The
Principal Underwriter shall be entitled to participate, at its own expense, in
the defense, or, if it so elects, to assume the defense of any suit brought to
enforce any such liability, but if the Principal Underwriter elects to assume
the defense, such defense shall be conducted by counsel chosen by it and
satisfactory to the Trust, or to its officers or Trustees, or to any controlling
person or persons, defendant or defendants in the suit. In the event that the
Principal Underwriter elects to assume the defense of any such suit and retains
such counsel, the Fund or such officers or Trustees or controlling person or
persons, defendant or defendants in the suit, shall bear the fees and expenses
of any additional counsel retained by them or the Trust, but, in case the
Principal Underwriter does not elect to assume the defense of any such suit, it
shall reimburse the Fund, any such officers and Trustees or controlling person
or persons, defendant or defendants in such suit, for the reasonable fees and
expenses of any counsel retained by them or the Trust. The Principal Underwriter
agrees promptly to notify the Trust of the commencement of any litigation or
proceedings against it in connection with the issue and sale of any of the
Fund's shares.
Neither the Principal Underwriter nor any financial service firm nor any
other person is authorized by the Trust to give any information or to make any
representations, other than those contained in the Registration Statement or
Prospectus filed with the Securities and Exchange Commission (the "Commission")
under the 1933 Act (as said Registration Statement and Prospectus may be amended
or supplemented from time to time), covering the shares of the Fund. Neither the
Principal Underwriter nor any financial service firm nor any other person is
authorized to act as agent for the Trust or the Fund in connection with the
offering or sale of shares of the Fund to the public or otherwise. All such
sales made by the Principal Underwriter shall be made by it as principal, for
its own account. The Principal Underwriter may, however, act as agent in
connection with the repurchase of shares as provided in paragraph 6 below, or in
connection with "exchanges" between investment companies for which the Principal
Underwriter (or an affiliate thereof) acts as principal underwriter or
investment adviser.
5(a). The Fund will pay, or cause to be paid -
(i) all the costs and expenses of the Fund, including fees and
disbursements of its counsel, in connection with the preparation and filing of
any required Registration Statement and/or Prospectus under the 1933 Act, or the
1940 Act, covering its shares and all amendments and supplements thereto, and
preparing and distributing periodic reports to shareholders (including the
expense of setting up in type any such Registration Statement, Prospectus or
periodic report);
(ii) the cost of preparing temporary and permanent share
certificates (if any) for shares of the Fund;
(iii) the cost and expenses of delivering to the Principal
Underwriter at its office in Boston, Massachusetts, all shares of the Fund
purchased by it as principal hereunder;
(iv) all the federal and state (if any) issue and/or transfer
taxes payable upon the issue by or (in the case of treasury shares) transfer
from the Fund to the Principal Underwriter of any and all shares of the Fund
purchased by the Principal Underwriter hereunder;
(v) the fees, costs and expenses of the registration or
qualification of shares of the Fund for sale in the various states, territories
or other jurisdictions (including without limitation the registering or
qualifying the Fund as a broker or dealer or any officer of the Fund as agent or
salesman in any state, territory or other jurisdiction); and
(vi) all payments to be made by the Fund pursuant to any written
plan approved in accordance with Rule 12b-1 under the 1940 Act or any written
service plan.
(b) The Principal Underwriter agrees that, after the Prospectus (other
than to existing shareholders of the Fund) and periodic reports have been set up
in type, it will bear the expense of printing and distributing any copies
thereof which are to be used in connection with the offering of shares of the
Fund to financial service firms or investors. The Principal Underwriter further
agrees that it will bear the expenses of preparing, printing and distributing
any other literature used by the Principal Underwriter or furnished by it for
use by financial service firms in connection with the offering of the shares of
the Fund for sale to the public and any expenses of advertising in connection
with such offering.
(c) The Principal Underwriter shall be entitled to receive all contingent
deferred sales charges imposed in accordance with the Prospectus on early
redemptions of Fund shares.
6. The Trust hereby authorizes the Principal Underwriter to repurchase,
upon the terms and conditions set forth in written instructions given by the
Trust to the Principal Underwriter from time to time, as agent of the Fund and
for its account, such shares of the Fund as may be offered for sale to the Fund
from time to time.
(a) The Principal Underwriter shall notify in writing IBT and First Data,
at the end of each business day, or as soon thereafter as the repurchases in
each pricing period have been compiled, of the number of shares repurchased for
the account of the Fund since the last previous report, together with the prices
at which such repurchases were made, and upon the request of any officer or
Trustee of the Trust shall furnish similar information with respect to all
repurchases made up to the time of the request on any day.
(b) The Trust reserves the right to suspend or revoke the foregoing
authorization at any time; unless otherwise stated, any such suspension or
revocation shall be effective forthwith upon receipt of notice thereof by an
officer of the Principal Underwriter, by telegraph or by written instrument from
an officer of the Trust duly authorized by its Trustees. In the event that the
authorization of the Principal Underwriter is, by the terms of such notice,
suspended for more than twenty-four hours or until further notice, the
authorization given by this paragraph 6 shall not be revived except by action of
a majority of the Trustees of the Trust.
(c) The Principal Underwriter shall have the right to terminate the
operation of this paragraph 6 upon giving to the Trust thirty (30) days' written
notice thereof.
(d) The Trust agrees to authorize and direct IBT, to pay, for the account
of the Fund, the purchase price of any shares so repurchased against delivery of
the certificates in proper form for transfer to the Fund or for cancellation by
the Fund.
(e) The Principal Underwriter shall receive no commission in respect of
any repurchase of shares under the foregoing authorization and appointment as
agent, except contingent deferred sales charges.
(f) The Trust agrees that the Fund will reimburse the Principal
Underwriter, from time to time on demand, for any reasonable expenses incurred
in connection with the repurchase of shares of the Fund pursuant to this
paragraph 6.
7. If, at any time during the existence of this Agreement, the Trust shall
deem it necessary or advisable in the best interests of the Fund that any
amendment of this Agreement be made in order to comply with the recommendations
or requirements of the Commission or other governmental authority or to obtain
any advantage under Massachusetts or federal tax laws, and shall notify the
Principal Underwriter of the form of amendment which it deems necessary or
advisable and the reasons therefor, and, if the Principal Underwriter declines
to assent to such amendment, the Trust may terminate this Agreement forthwith by
written notice to the Principal Underwriter. If, at any time during the
existence of this Agreement upon request by the Principal Underwriter, the Trust
fails (after a reasonable time) to make any changes in its Declaration of Trust,
as amended, or in its methods of doing business which are necessary in order to
comply with any requirement of federal law or regulations of the Commission or
of a national securities association of which the Principal Underwriter is or
may be a member, relating to the sale of the shares of the Fund, the Principal
Underwriter may terminate this Agreement forthwith by written notice to the
Trust.
8(a). The Principal Underwriter is a corporation in the United States
organized under the laws of Massachusetts and holding membership in the National
Association of Securities Dealers, Inc., a securities association registered
under Section 15A of the Securities Exchange Act of 1934, as amended from time
to time, and during the life of this Agreement will continue to be so resident
in the United States, so organized and a member in good standing of said
Association. The Principal Underwriter covenants that it and its officers and
directors will comply with the Trust's Declaration of Trust and By-Laws, and the
1940 Act and the rules promulgated thereunder, insofar as they are applicable to
the Principal Underwriter.
(b) The Principal Underwriter shall maintain in the United States and
preserve therein for such period or periods as the Commission shall prescribe by
rules and regulations applicable to it as Principal Underwriter of an open-end
investment company registered under the 1940 Act such accounts, books and other
documents as are necessary or appropriate to record its transactions with the
Fund. Such accounts, books and other documents shall be subject at any time and
from time to time to such reasonable periodic, special and other examinations by
the Commission or any member or representative thereof as the Commission may
prescribe. The Principal Underwriter shall furnish to the Commission within such
reasonable time as the Commission may prescribe copies of or extracts from such
records which may be prepared without effort, expense or delay as the Commission
may by order require.
9. This Agreement shall continue in force indefinitely until terminated as
in this Agreement above provided, except that:
(a) this Agreement shall continue in effect through and including April
28, 1997 (or, if applicable, the next April 28 which follows the day on which
the Fund has become a party hereto by amendment of Schedule A subsequent to
April 28, 1997) and shall continue in full force and effect indefinitely
thereafter, but only so long as such continuance is specifically approved at
least annually (i) by the vote of a majority of the Trustees of the Trust who
are not interested persons of the Trust or of the Principal Underwriter cast in
person at a meeting called for the purpose of voting on such approval, and (ii)
by the Trustees of the Trust or by vote of a majority of the outstanding voting
securities of the Fund;
(b) that either party shall have the right to terminate this Agreement on
six (6) months' written notice thereof given in writing to the other; and
(c) additional series of the Trust will become parties hereto upon
approval by the Trustees of the Trust and amendment of Schedule A.
10. In the event of the assignment of this Agreement by
the Principal Underwriter, this Agreement shall automatically
terminate.
11. Any notice under this Agreement shall be in writing, addressed and
delivered, or mailed postage paid, to the other party, at such address as such
other party may designate for the receipt of such notices. Until further notice
to the other party, it is agreed that the record address of the Trust and that
of the Principal Underwriter, shall be 24 Federal Street, Boston, Massachusetts
02110.
12. The services of the Principal Underwriter to the Fund hereunder are
not to be deemed to be exclusive, the Principal Underwriter being free to (a)
render similar services to, and to act as principal underwriter in connection
with the distribution of shares of, other series of the Trust or other
investment companies, and (b) engage in other business and activities from time
to time.
13. The terms "vote of a majority of the outstanding voting securities,"
"assignment" and "interested persons," when used herein, shall have the
respective meanings specified in the 1940 Act, subject, however, to such
exemptions as may be granted by the Commission by any rule, regulation or order.
14. The Principal Underwriter expressly acknowledges the provision in the
Trust's Declaration of Trust limiting the personal liability of the shareholders
of the Fund or the Trustees of the Trust. The Principal Underwriter hereby
agrees that it shall have recourse only to the assets of the Fund for payment of
claims or obligations as between the Trust on behalf of the Fund, and the
Principal Underwriter arising out of this Agreement and shall not seek
satisfaction from any shareholders of the Trust or from the Trustees or any
Trustee of the Trust. The Fund shall not be responsible for obligations of any
other series of the Trust.
15. All references in this Agreement to the "Prior Agreements" shall mean
the distribution agreements referenced on Schedule A hereto between the Trust on
behalf of the Fund and the Prior Principal Underwriter, Eaton Vance
Distributors, Inc., a separate Massachusetts corporation that has served as
principal underwriter prior to the effective date of this Agreement. Such
references shall not be applicable to any additional series of the Trust which
becomes a Fund hereunder by amendment of Schedule A hereafter.
16. This Agreement shall amend, replace and be substituted for the Prior
Agreements as of the opening of business on November 1, 1996, and this Agreement
shall be effective as of such time.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement
the 18th day of October, 1996.
EATON VANCE MUNICIPALS TRUST
By /s/ Thomas J. Fetter
------------------------------
President
EATON VANCE DISTRIBUTORS, INC.
By /s/ H. Day Brigham, Jr.
------------------------------
Vice President
<PAGE>
SCHEDULE A
EATON VANCE MUNICIPALS TRUST
DISTRIBUTION AGREEMENT
(TRADITIONAL FUNDS)
EFFECTIVE NOVEMBER 1, 1996
<TABLE>
<CAPTION>
NAME OF FUND INCEPTION DATE OF PRIOR AGREEMENTS
- ------------ ----------------------------------
<S> <C>
EV Traditional Alabama Municipals Fund* November 29, 1993/January 27, 1995/June 19, 1995
EV Traditional Arizona Municipals Fund* November 29, 1993/January 27, 1995/June 19, 1995
EV Traditional Arkansas Municipals Fund* February 1, 1994/January 27, 1995/June 19, 1995
EV Traditional California Municipals Fund** April 14, 1994/June 19, 1995
EV Traditional Colorado Municipals Fund* November 29, 1993/January 27, 1995/June 19, 1995
EV Traditional Connecticut Municipals Fund March 21, 1994/June 19, 1995
EV Traditional Florida Municipals Fund March 7, 1994/June 19, 1995
EV Traditional Georgia Municipals Fund* November 29, 1993/January 27, 1995/June 19, 1995
EV Traditional Kentucky Municipals Fund* November 29, 1993/January 27, 1995/June 19, 1995
EV Traditional Louisiana Municipals Fund* February 1, 1995/January 27, 1995/June 19, 1995
EV Traditional Maryland Municipals Fund* November 29, 1993/January 27, 1995/June 19, 1995
EV Traditional Massachusetts Municipals Fund* November 29, 1993/January 27, 1995/June 19, 1995
EV Traditional Michigan Municipals Fund* November 29, 1993/January 27, 1995/June 19, 1995
EV Traditional Minnesota Municipals Fund* November 29, 1993/January 27, 1995/June 19, 1995
EV Traditional Mississippi Municipals Fund* November 29, 1993/January 27, 1995/June 19, 1995
EV Traditional Missouri Municipals Fund* November 29, 1993/January 27, 1995/June 19, 1995
EV Traditional National Municipals Fund March 7, 1994/June 19, 1995
EV Traditional New Jersey Municipals Fund March 21, 1994/June 19, 1995
EV Traditional New York Municipals Fund March 7, 1994/June 19, 1995
EV Traditional North Carolina Municipals Fund* November 29, 1993/January 27, 1995/June 19, 1995
EV Traditional Ohio Municipals Fund* November 29, 1993/January 27, 1995/June 19, 1995
EV Traditional Oregon Municipals Fund* November 29, 1993/January 27, 1995/June 19, 1995
EV Traditional Pennsylvania Municipals Fund March 21, 1994/June 19, 1995
EV Traditional Rhode Island Municipals Fund* November 29, 1993/January 27, 1995
EV Traditional South Carolina Municipals Fund* February 1, 1994/January 27, 1995/June 19, 1995
EV Traditional Tennessee Municipals Fund* November 29, 1993/January 27, 1995/June 19, 1995
EV Traditional Texas Municipals Fund* November 29, 1993/January 27, 1995/June 19, 1995
EV Traditional Virginia Municipals Fund* November 29, 1993/January 27, 1995/June 19, 1995
EV Traditional West Virginia Municipals Fund* November 29, 1993/January 27, 1995/June 19, 1995
</TABLE>
- ----------
* This fund formerly was (or currently is) a Classic series of the Trust.
**This fund is a successor in operations to a fund which was reorganized,
effective October 1, 1995.
<PAGE>
EXHIBIT 99.6(a)(4)
EATON VANCE MUNICIPALS TRUST
DISTRIBUTION AGREEMENT
ON BEHALF OF MASSACHUSETTS MUNICIPAL BOND PORTFOLIO
AGREEMENT effective November 1, 1996 between EATON VANCE MUNICIPALS TRUST,
a Massachusetts business trust having its principal place of business in Boston
in the Commonwealth of Massachusetts, hereinafter called the "Trust," on behalf
of Massachusetts Municipal Bond Portfolio (the "Fund"), and EATON VANCE
DISTRIBUTORS INC., a Massachusetts corporation having its principal place of
business in said Boston and formerly named EV Distributors, Inc., hereinafter
sometimes called the "Principal Underwriter."
IN CONSIDERATION of the mutual promises and undertakings herein contained,
the parties hereto agree:
1. The Trust grants to the Principal Underwriter the right to purchase
shares of the Fund upon the terms hereinbelow set forth during the term of this
Agreement. While this Agreement is in force, the Principal Underwriter agrees to
use its best efforts to find purchasers for shares of the Fund.
The Principal Underwriter shall have the right to buy from the Fund the
shares needed, but not more than the shares needed (except for clerical errors
and errors of transmission) to fill unconditional orders for shares of the Fund
placed with the Principal Underwriter by investors as set forth in the current
Prospectus relating to shares of the Fund. The price which the Principal
Underwriter shall pay for the shares so purchased shall be the public offering
price, as defined in paragraph 2 below. The Principal Underwriter shall notify
Investors Bank & Trust Company, Custodian of the Fund ("IBT"), and First Data
Investor Services Group, Transfer Agent of the Fund ("First Data"), or a
successor transfer agent, at the end of each business day, or as soon thereafter
as the orders placed with it have been compiled, of the number of shares and the
prices thereof which the Principal Underwriter is to purchase as principal for
resale. The Principal Underwriter shall take down and pay for shares ordered
from the Fund on or before the eleventh business day (excluding Saturdays) after
the shares have been so ordered.
The right granted to the Principal Underwriter to buy shares from the Fund
shall be exclusive, except that said exclusive right shall not apply to shares
issued in connection with the merger or consolidation of any other investment
company or personal holding company with the Fund or the acquisition by purchase
or otherwise of all (or substantially all) the assets or the outstanding shares
of any such company, by the Fund; nor shall it apply to shares, if any, issued
by the Fund in distribution of realized capital gains of the Fund payable in
shares or in cash at the option of the shareholder.
2. The shares may be resold by the Principal Underwriter to
investors upon the following terms and conditions.
The public offering price, i.e., the price per share at which the
Principal Underwriter may sell shares to the public, shall be equal to the net
asset value of a share of the Fund.
The net asset value of shares of the Fund shall be determined by the Trust
or IBT, as the agent of the Fund, as of the close of regular trading on the New
York Stock Exchange on each business day on which said Exchange is open, or as
of such other time on each such business day as may be determined by the
Trustees of the Trust, in accordance with the method referred to in Article XII
of the Declaration of Trust of the Trust. The Trust may also cause the net asset
value to be determined in substantially the same manner or estimated in such
manner and as of such other time or times as may from time to time be agreed
upon by the Trust and Principal Underwriter. The Trust will notify the Principal
Underwriter each time the net asset value of the Fund's shares is determined and
when such value is so determined it shall be applicable to transactions as set
forth in the current Prospectus relating to the Fund's shares.
No shares of the Fund shall be sold by the Fund during any period when the
determination of net asset value is suspended pursuant to Article XII of the
Declaration of Trust, except to the Principal Underwriter, in the manner and
upon the terms above set forth to cover contracts of sale made by the Principal
Underwriter with its customers prior to any such suspension, and except as
provided in the last paragraph of paragraph 1 hereof. The Trust shall also have
the right to suspend the sale of the Fund's shares if in the judgment of the
Trust conditions obtaining at any time render such action advisable. The
Principal Underwriter shall have the right to suspend sales at any time, to
refuse to accept or confirm any order from an investor or dealer, or to accept
or confirm any such order in part only, if in the judgment of the Principal
Underwriter such action is in the best interests of the Fund.
3. The Trust agrees that it will, from time to time, but subject to the
necessary approval of the Fund's shareholders, take such steps as may be
necessary to register the Fund's shares under the federal Securities Act of
1933, as amended from time to time (the "1933 Act"), to the end that there will
be available for sale such number of shares as the Principal Underwriter may
reasonably be expected to sell. The Trust agrees to indemnify and hold harmless
the Principal Underwriter and each person, if any, who controls the Principal
Underwriter within the meaning of Section 15 of the 1933 Act against any loss,
liability, claim, damages or expense (including the reasonable cost of
investigating or defending any alleged loss, liability, claim, damages or
expense and reasonable counsel fees incurred in connection therewith), arising
by reason of any person acquiring any shares of the Fund, which may be based
upon the 1933 Act or on any other statute or at common law, on the ground that
the Registration Statement or Prospectus, as from time to time amended and
supplemented, includes an untrue statement of a material fact or omits to state
a material fact required to be stated therein or necessary in order to make the
statements therein not misleading, unless such statement or omission was made in
reliance upon, and in conformity with, information furnished in writing to the
Trust in connection therewith by or on behalf of the Principal Underwriter;
provided, however, that in no case (1) is the indemnity of the Trust in favor of
the Principal Underwriter and any such controlling person to be deemed to
protect such Principal Underwriter or any such controlling person against any
liability of the Trust or the Fund or its security holders to which such
Principal Underwriter or any such controlling person would otherwise be subject
by reason of willful misfeasance, bad faith, or gross negligence in the
performance of its duties or by reason of its reckless disregard of its
obligations and duties under this Agreement, or (ii) is the Trust or the Fund to
be liable under its indemnity agreement contained in this paragraph with respect
to any claim made against the Principal Underwriter or any such controlling
person unless the Principal Underwriter or any such controlling person, as the
case may be, shall have notified the Trust in writing within a reasonable time
after the summons or other first legal process giving information of the nature
of the claim shall have been served upon the Principal Underwriter or such
controlling person (or after such Principal Underwriter or such controlling
person shall have received notice of such service on any designated agent), but
failure to notify the Trust of any such claim shall not relieve it from any
liability which the Fund may have to the person against whom such action is
brought otherwise than on account of its indemnity agreement contained in this
paragraph. The Trust shall be entitled to participate, at the expense of the
Fund, in the defense, or, if the Trust so elects, to assume the defense of any
suit brought to enforce any such liability, but it the Trust elects to assume
the defense, such defense shall be conducted by counsel chosen by it and
satisfactory to the Principal Underwriter or controlling person or persons,
defendant or defendants in the suit. In the event the Trust elects to assume the
defense of any such suit and retains such counsel, the Principal Underwriter or
controlling person or persons, defendant or defendants in the suit, shall bear
the fees and expenses of any additional counsel retained by them, but, in case
the Trust does not elect to assume the defense of any such suit, the Fund shall
reimburse the Principal Underwriter or controlling person or persons, defendant
or defendants in the suit, for the reasonable fees and expenses of any counsel
retained by them. The Trust agrees promptly to notify the Principal Underwriter
of the commencement of any litigation or proceedings against it or any of its
officers or Trustees in connection with the issuance or sale of any of the
Fund's shares.
4. The Principal Underwriter covenants and agrees that, in selling the
shares of the Fund, it will use its best efforts in all respects duly to conform
with the requirements of all state and federal laws relating to the sale of such
shares, and will indemnify and hold harmless the Trust and each of its Trustees
and officers and each person, if any, who controls the Trust within the meaning
of Section 15 of the 1933 Act, against any loss, liability, damages, claim or
expense (including the reasonable cost of investigating or defending any alleged
loss, liability, damages, claim or expense and reasonable counsel fees incurred
in connection therewith), arising by reason of any person acquiring any shares
of the Fund, which may be based upon the 1933 Act or any other statute or at
common law, on account of any wrongful act of the Principal Underwriter or any
of its employees (including any failure to conform with any requirement of any
state or federal law relating to the sale of such shares) or on the ground that
the registration statement or Prospectus, as from time to time amended and
supplemented, includes an untrue statement of a material fact or omits to state
a material fact required to be stated therein or necessary in order to make the
statements therein not misleading, insofar as any such statement or omission was
made in reliance upon, and in conformity with information furnished in writing
to the Fund in connection therewith by or on behalf of the Principal
Underwriter, provided, however, that in no case (i) is the indemnity of the
Principal Underwriter in favor of any person indemnified to be deemed to protect
the Fund or any such person against any liability to which the Fund or any such
person would otherwise be subject by reason of willful misfeasance, bad faith,
or gross negligence in the performance of its or his duties or by reason of its
or his reckless disregard of its obligations and duties under this Agreement, or
(ii) is the Principal Underwriter to be liable under its indemnity agreement
contained in this paragraph with respect to any claim made against the Fund or
any person indemnified unless the Trust or such person, as the case may be,
shall have notified the Principal Underwriter in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon the Trust; the Fund or upon such
person (or after the Trust or such person shall have received notice of such
service on any designated agent), but failure to notify the Principal
Underwriter of any such claim shall not relieve it from any liability which it
may have to the Fund or any person against whom such action is brought otherwise
than on account of its indemnity agreement contained in this paragraph. The
Principal Underwriter shall be entitled to participate, at its own expense, in
the defense, or, if it so elects, to assume the defense of any suit brought to
enforce any such liability, but if the Principal Underwriter elects to assume
the defense, such defense shall be conducted by counsel chosen by it and
satisfactory to the Trust, or to its officers or Trustees, or to any controlling
person or persons, defendant or defendants in the suit. In the event that the
Principal Underwriter elects to assume the defense of any such suit and retains
such counsel, the Fund or such officers or Trustees or controlling person or
persons, defendant or defendants in the suit, shall bear the fees and expenses
of any additional counsel retained by them or the Trust, but, in case the
Principal Underwriter does not elect to assume the defense of any such suit, it
shall reimburse the Fund, any such officers and Trustees or controlling person
or persons, defendant or defendants in such suit, for the reasonable fees and
expenses of any counsel retained by them or the Trust. The Principal Underwriter
agrees promptly to notify the Trust of the commencement of any litigation or
proceedings against it in connection with the issue and sale of any of the
Fund's shares.
Neither the Principal Underwriter nor any dealer nor any other person is
authorized by the Trust to give any information or to make any representations,
other than those contained in the Registration Statement or Prospectus filed
with the Securities and Exchange Commission (the "Commission") under the 1933
Act (as said Registration Statement and prospectus may be amended or
supplemented from time to time), covering the shares of the Fund. Neither the
Principal Underwriter nor any other person is authorized to act as agent for the
Trust or the Fund in connection with the offering or sale of shares of the Fund
to the public or otherwise. All such sales made by the Principal Underwriter
shall be made by it as principal, for its own account. The Principal Underwriter
may, however, act as agent in connection with "exchanges" between investment
companies for which the Principal Underwriter acts as Principal Underwriter or
investment manager as provided in the agreement among such companies as from
time to time in effect.
5. (a) The Fund will pay, or cause to be paid -
(i) all the costs and expenses of the Fund, including fees and
disbursements of its counsel, in connection with the preparation and filing of
any required Registration Statement and/or Prospectus under the 1933 Act,
covering its shares and all amendments and supplements thereto, and preparing
and mailing periodic reports to shareholders (including the expense of setting
up in type any such Registration Statement, Prospectus and periodic report);
(ii) the cost of preparing temporary and permanent share
certificates (if any) for shares of the Fund;
(iii) the cost and expenses of delivering to the Principal
Underwriter at its office in Boston, Massachusetts, all shares of the Fund
purchased by it as principal hereunder; and
(iv) all the federal and state (f any) issue and/or transfer taxes
payable upon the issue by or (in the case of treasury shares) transfer from the
Fund to the Principal Underwriter of any and all shares of the Fund purchased by
the Principal Underwriter hereunder.
(b) The Principal Underwriter agrees that, after the Prospectus and
periodic reports have been set up in type, it will bear the expense of printing
and distributing any copies thereof which are to be used in connection with the
offering of shares of the Fund to investors. The Principal Underwriter further
agrees that it will bear the expenses of preparing, printing and distributing
any other literature used by the Principal Underwriter in connection with the
offering of the shares of the Fund for sale to the public and any expenses of
advertising in connection with such offering. The Fund agrees to pay the
expenses of registration and maintaining registration of its shares for sale
under federal and state securities laws, and, if necessary or advisable in
connection therewith, of qualifying the Trust or the Fund as a dealer or broker,
in such states as shall be selected by the Principal Underwriter and the fees
payable to each such state for continuing the qualification therein until the
Principal Underwriter notifies the Trust that it does not wish such
qualification continued.
6. If, at any time during the existence of this Agreement, the Trust shall
deem it necessary or advisable in the best interests of the Fund that any
amendment of this Agreement be made in order to comply with the recommendations
or requirements of the Commission or other governmental authority or to obtain
any advantage under Massachusetts or federal tax laws, and shall notify the
Principal Underwriter of the form of amendment which it deems necessary or
advisable and the reasons therefor, and, if the Principal Underwriter declines
to assent to such amendment, the Trust may terminate this Agreement forthwith by
written notice to the Principal Underwriter. If, at any time during the
existence of its agreement upon request by the Principal Underwriter, the Trust
fails (after a reasonable time) to make any changes in its Declaration of Trust,
as amended, or in its methods of doing business which are necessary in order to
comply with any requirement of federal law or regulations of the Commission or
of a national securities association of which the Principal Underwriter is or
may be a member, relating to the sale of the shares of the Fund, the Principal
Underwriter may terminate this Agreement forthwith by written notice to the
Trust.
7. In connection with purchases or sales of portfolio securities for the
account of the Fund, neither the Principal Underwriter nor any officer or
director of the Principal Underwriter shall act as a principal. The Principal
Underwriter covenants that it and its officers and directors shall comply with
the provisions of Article XIV of the Trust's By-Laws applicable to them.
8. The Principal Underwriter agrees that it will not take any long or
short positions in the shares of the Fund except as permitted by paragraph 1
hereof, and that, so far as it can control the situation, it will prevent any
officer, director or owner of voting common stock of the Principal Underwriter
from taking any long or short position in the shares of the Fund, except as
permitted by the By-Laws of the Trust as from time to time in effect.
9. The term "net asset value" as used in this Agreement with reference to
the shares of the Fund shall have the same meaning as the term "asset value" as
used in the Declaration of Trust, as amended, and as defined in Article XII
thereof.
10. (a) The Principal Underwriter is a corporation in the United States
organized under the laws of Massachusetts and holding membership in the National
Association of Securities Dealers, Inc., a securities association registered
under Section 15A of the Securities Exchange Act of 1934, and during the life of
this Agreement will continue to be so resident in the United States, so
organized and a member in good standing of said Association. The Principal
Underwriter will comply with the Trust's Declaration of Trust and By-Laws, and
the Investment Company Act of 1940 (the "1940 Act") and the rules promulgated
thereunder, insofar as they are applicable to the Principal Underwriter.
(b) The Principal Underwriter shall maintain in the United States
and preserve therein for such period or periods as the Commission shall
prescribe by rules and regulations applicable to it as Principal Underwriter of
an open-end investment company registered under the 1940 Act such accounts,
books and other documents as are necessary or appropriate to record its
transactions with the Fund. Such accounts, books and other documents shall be
subject at any time and from time to time such reasonable periodic, special and
other examinations by the Commission or any member or representative thereof as
the Commission may prescribe. The Principal Underwriter shall furnish to the
Commission within such reasonable time as the Commission may prescribe copies of
or extracts from such records which may be prepared without effort, expense or
delay as the Commission may by order require.
11. This Agreement shall continue in force indefinitely until terminated
as in this Agreement above provided, except that:
(a) this Agreement shall continue in effect through and including
April 28, 1997 and shall continue in full force and effect indefinitely
thereafter, but only so long as such continuance is specifically approved at
least annually (i) by the vote of a majority of the Trustees of the Trust who
are not "interested persons" (as defined in Section 2(a)(19) of the 1940 Act) of
the Trust or of the Principal Underwriter cast in person at a meeting called for
the purpose of voting on such approval, and (ii) by the Trustees of the Trust or
by vote of a majority of the outstanding voting securities (as defined in
Section 2(a)(42) of the 1940 Act) of the Fund;
(b) either party shall have the right to terminate this Agreement on
six (6) months' written notice thereof given in writing to the other; and
(c) the Trust shall have the right to terminate this Agreement
forthwith in the event that it shall have been established by a court of
competent jurisdiction that the Principal Underwriter or any director or officer
of the Principal Underwriter has taken any action which results in a breach of
the covenants set out in paragraph 7 hereof.
12. In the event of the assignment (as defined in Section 2(a)(4) of the
1940 Act) of this Agreement by the Principal Underwriter, this Agreement shall
automatically terminate.
13. Any notice under this Agreement shall be in writing, addressed and
delivered, or mailed postage paid, to the other party, at such address as such
other party may designate for the receipt of such notices. Until further notice
to the other party, it is agreed that the record address of the Trust and that
of the Principal Underwriter, shall be 24 Federal Street, Boston, Massachusetts
02110.
14. The services of the Principal Underwriter to the Fund hereunder are
not to be deemed to be exclusive, the Principal Underwriter being free to (a)
render similar service to, and to act as principal underwriter in connection
with the distribution of shares of, other series of the Trust or investment
companies, and (b) engage in other business and activities from time to time.
15. The Principal Underwriter expressly acknowledges the provision in
Article XIV, Section 2 of the Trust's Declaration of Trust limiting the personal
liability of shareholders of the Fund. The Principal Underwriter hereby agrees
that it shall have recourse to the Trust or the Fund for payment of claims or
obligations as between the Trust or the Fund and the Principal Underwriter
arising out of this Agreement and shall not seek satisfaction from the
shareholders or any shareholder of the Fund. The Fund shall not be responsible
for obligations of any other series of the Trust.
16. This Agreement shall amend, replace and be substituted for the
distribution agreement dated June 7, 1993 between the Trust on behalf of the
Fund and Eaton Vance Distributors, Inc., a separate Massachusetts corporation
that has served as principal underwriter prior to the effective date of this
Agreement as of the opening of business on November 1, 1996, and this Agreement
shall be effective as of such time.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement on
October 18, 1996.
EATON VANCE MUNICIPALS TRUST
(on behalf of Massachusetts Municipal
Bond Portfolio)
By /s/ Thomas J. Fetter
-------------------------------
President
EATON VANCE DISTRIBUTORS, INC.
By /s/ H. Day Brigham, Jr.
-------------------------------
Vice President
<PAGE>
EXHIBIT 99.10
Eaton Vance Management
24 Federal Street
Boston, MA 02110
(617) 482-8260
November 20, 1996
Eaton Vance Municipals Trust
24 Federal Street
Boston, MA 02110
Gentlemen:
Eaton Vance Municipals Trust (the "Trust") is a Massachusetts business
trust created under a Declaration of Trust dated September 30, 1985 executed and
delivered in Boston, Massachusetts and currently operating under an Amended and
Restated Declaration of Trust dated January 11, 1993 (the "Declaration of
Trust"). I am of the opinion that all legal requirements have been complied with
in the creation of the Trust, and that said Declaration of Trust is legal and
valid.
The Trustees of the Trust have the powers set forth in the Declaration
of Trust, subject to the terms, provisions and conditions therein provided. As
provided in the Declaration of Trust, the interest of shareholders is divided
into shares of beneficial interest without par value, and the number of shares
that may be issued is unlimited. The Trustees may from time to time issue and
sell or cause to be issued and sold shares for cash or for property. All such
shares, when so issued, shall be fully paid and nonassessable by the Trust.
By votes duly adopted, the Trustees of the Trust have authorized the
issuance of shares of beneficial interest, without par value. The Trust intends
to register under the Securities Act of 1933, as amended, 14,261,232 of its
shares of beneficial interest with Post-Effective Amendment No. 61 to its
Registration Statement on Form N-1A (the "Amendment") with the Securities and
Exchange Commission.
I have examined originals, or copies, certified or otherwise identified
to my satisfaction, of such certificates, records and other documents as I have
deemed necessary or appropriate for the purpose of this opinion, including the
Declaration of Trust and votes adopted by the Trustees. Based upon the
foregoing, and with respect to Massachusetts law (other than the Massachusetts
Uniform Securities Act), only to the extent that Massachusetts law may be
applicable and without reference to the laws of the other several states or of
the United States of America, I am of the opinion that under existing law:
1. The Trust is a trust with transferable shares of beneficial interest
organized in compliance with the laws of The Commonwealth of Massachusetts, and
the Declaration of Trust is legal and valid under the laws of The Commonwealth
of Massachusetts.
2. Shares of beneficial interest registered by the Amendment may be
legally and validly issued in accordance with the Declaration of Trust upon
receipt by the Trust of payment in compliance with the Declaration of Trust and,
when so issued and sold, will be fully paid and nonassessable by the Trust.
I am a member of the Massachusetts and New York bars, and I hereby
consent to the filing of this opinion with the Securities and Exchange
Commission as an exhibit thereto.
Very truly yours,
/s/ H. Day Brigham, Jr.
H. Day Brigham, Jr., Esq.
Vice President, Eaton Vance Management
<PAGE>
EXHIBIT 99.11(a)
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 61 to the
Registration Statement of Eaton Vance Municipals Trust (1933 Act File No. 33-
572) on behalf of EV Marathon Arizona Municipals Fund, EV Marathon Colorado
Municipals Fund, EV Marathon Connecticut Municipals Fund, EV Marathon Michigan
Municipals Fund, EV Marathon Minnesota Municipals Fund, EV Marathon New Jersey
Municipals Fund, EV Marathon Pennsylvania Municipals Fund and EV Marathon
Texas Municipals Fund of our report dated August 23, 1996, relating to EV
Marathon Arizona Municipals Fund, EV Marathon Colorado Munic-ipals Fund, EV
Marathon Connecticut Municipals Fund, EV Marathon Michigan Municipals Fund, EV
Marathon Minnesota Municipals Fund, EV Marathon New Jersey Municipals Fund, EV
Marathon Pennsylvania Municipals Fund and EV Marathon Texas Municipals Fund,
and of our report dated August 23, 1996, relating to Arizona Municipals
Portfolio, Colorado Municipals Portfolio, Connecticut Municipals Portfolio,
Michigan Municipals Portfolio, Minnesota Municipals Portfolio, New Jersey
Municipals Portfolio, Pennsylvania Municipals Portfolio and Texas Municipals
Portfolio, which reports are included in the Annual Report to Shareholders for
the year ended July 31, 1996 which is incorporated by reference in the
Statement of Additional Information, which is part of such Registration
Statement.
We also consent to the reference to our Firm under the heading "The Funds'
Financial Highlights" in the Prospectus and under the captions "Independent
Certified Public Accountants" and "Financial Statements" in the Statement of
Additional Information of the Registration Statement.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
November 20, 1996
Boston, Massachusetts
<PAGE>
EXHIBIT 99.11(b)
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 61 to the
Registration Statement of Eaton Vance Municipals Trust (1933 Act File No.
33- 572) on behalf of EV Traditional Arizona Municipals Fund, EV Traditional
Colorado Municipals Fund, EV Traditional Connecticut Municipals Fund, EV
Traditional Michigan Municipals Fund, EV Traditional Minnesota Municipals Fund,
EV Traditional New Jersey Municipals Fund, EV Traditional Pennsylvania
Municipals Fund and EV Traditional Texas Municipals Fund of our report dated
August 23, 1996, relating to EV Traditional Arizona Municipals Fund, EV
Traditional Colorado Municipals Fund, EV Traditional Connecticut Municipals
Fund, EV Traditional Michigan Municipals Fund, EV Traditional Minnesota
Municipals Fund, EV Traditional New Jersey Municipals Fund, EV Traditional
Pennsylvania Municipals Fund and EV Traditional Texas Municipals Fund, and of
our report dated August 23, 1996, relating to Arizona Municipals Portfolio,
Colorado Municipals Portfolio, Connecticut Municipals Portfolio, Michigan
Municipals Portfolio, Minnesota Municipals Portfolio, New Jersey Municipals
Portfolio, Pennsylvania Municipals Portfolio and Texas Municipals Portfolio,
which reports are included in the Annual Report to Shareholders for the year
ended July 31, 1996 which is incorporated by reference in the Statement of
Additional Information, which is part of such Registration Statement.
We also consent to the reference to our Firm under the heading "The Funds"
Financial Highlights'' in the Prospectus and under the captions "Independent
Certified Public Accountants" and "Financial Statements" in the Statement of
Additional Information of the Registration Statement.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
November 20, 1996
Boston, Massachusetts
<PAGE>
EXHIBIT 99.15(b)
EATON VANCE MUNICIPALS TRUST
(CLASSIC SERIES)
AMENDMENT TO
AMENDED DISTRIBUTION PLAN
Whereas Eaton Vance Distributors, Inc. (the "prior principal
underwriter") has served as the Principal Underwriter of Trust shares with
multiple series as listed on Amended Schedule A of the Trust's Amended
Distribution Plan, prior to the effective date of this Amendment, and whereas
Eaton Vance Distributors, Inc. (currently named EV Distributors, Inc.) a
separate Massachusetts corporation (the "successor principal underwriter") is
succeeding to the business of the prior principal underwriter on November 1,
1996, the Trust hereby amends its Amended Distribution Plan of the above funds,
by substituting the successor principal underwriter for the prior principal
underwriter in the Plan effective November 1, 1996. The uncovered distribution
charges as of the close of business on October 31, 1996 shall be the uncovered
distribution charges of the successor principal underwriter as of the opening of
business on November 1, 1996.
ADOPTED: June 24, 1996
<PAGE>
EXHIBIT 99.15(d)
EATON VANCE MUNICIPALS TRUST
(MARATHON SERIES)
AMENDMENT TO
AMENDED DISTRIBUTION PLAN
Whereas Eaton Vance Distributors, Inc. (the "prior principal
underwriter") has served as the Principal Underwriter of Trust shares shares
with multiple series as listed on Amended Schedule A of the Trust's Amended
Distribution Plan, prior to the effective date of this Amendment, and whereas
Eaton Vance Distributors, Inc. (currently named EV Distributors, Inc.) a
separate Massachusetts corporation (the "successor principal underwriter") is
succeeding to the business of the prior principal underwriter on November 1,
1996, the Trust hereby amends its Amended Distribution Plan of the above funds,
by substituting the successor principal underwriter for the prior principal
underwriter in the Plan effective November 1, 1996. The uncovered distribution
charges as of the close of business on October 31, 1996 shall be the uncovered
distribution charges of the successor principal underwriter as of the opening of
business on November 1, 1996.
ADOPTED: June 24, 1996
<PAGE>
EXHIBIT 99.15(f)
EATON VANCE MUNICIPALS TRUST
(TRADITIONAL SERIES)
AMENDMENT TO
AMENDED SERVICE PLAN
Whereas Eaton Vance Distributors, Inc. (the "prior principal
underwriter") has served as the Principal Underwriter of Trust shares with
multiple series as listed on Amended Schedule A of the Trust's Amended
Distribution Plan, prior to the effective date of this Amendment, and whereas
Eaton Vance Distributors, Inc. (currently named EV Distributors, Inc.) a
separate Massachusetts corporation (the "successor principal underwriter") is
succeeding to the business of the prior principal underwriter on November 1,
1996, the Trust hereby amends its Amended Service Plan of the above funds, by
substituting the successor principal underwriter for the prior principal
underwriter in the Plan effective November 1, 1996.
ADOPTED: June 24, 1996
<PAGE>
EXHIBIT 99.16
EV MARATHON ARIZONA MUNICIPALS FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 7/31/96:
Interest Income Earned: $ 645,693
Plus Dividend Income Earned:
----------
Equal Gross Income: $ 645,693
Minus Expenses: $ 163,449
----------
Equal Net Investment Income: $ 482,244
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 12,074,008
----------
Equal Net Investment Income Earned Per Share: $ 0.0399
Net Asset Value Per Share 7/31/96: $ 10.68
30 Day Yield*: 4.54%
Divided by One minus the Tax Rate of 31%: 0.69
----------
Equal Tax Equivalent Yield**: 6.58%
Divided by one minus a tax rate of 34.59%: 0.6541
----------
Equal Tax Equivalent Yield***: 6.94%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0399/$10.68)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and Arizona tax rate of 34.59%
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EV MARATHON ARIZONA 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 period from July 25, 1991 through July 31, 1996 and for the 1 and 5 year periods ended
July 31, 1996.
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC BEFORE DEDUCTING CDSC AFTER DEDUCTING CDSC
PERIOD DATE ON 07/31/96 ON 07/31/96 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------- ---------- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 07/25/91 $1,437.06 $1,427.06 43.71% 7.49% 42.71% 7.34%
5 YEARS ENDED
07/31/96 07/31/91 $1,424.28 $1,404.28 42.43% 7.33% 40.43% 7.03%
1 YEAR ENDED
07/31/96 07/31/95 $1,061.69 $1,011.69 6.17% 6.17% 1.17% 1.17%
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 after
deducting the CDSC*
Cumulative total return is calculated using the following formula:
T = (ERV/P) - 1
where T = cumulative total return including the CDSC
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC**
P = an initial investment of $1,000
* The average annual total return not including the CDSC is calculated based on the ending investment value
before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based on the ending investment value before
deducting the CDSC.
</TABLE>
<PAGE>
EXHIBIT 16
EV MARATHON COLORADO MUNICIPALS FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 7/31/96:
Interest Income Earned: $ 222,378
Plus Dividend Income Earned:
---------
Equal Gross Income: $ 222,378
Minus Expenses: $ 52,334
---------
Equal Net Investment Income: $ 170,044
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 4,239,329
---------
Equal Net Investment Income Earned Per Share: $ 0.0401
Net Asset Value Per Share 7/31/96: $ 10.17
30 Day Yield*: 4.79%
Divided by One minus the Tax Rate of 31%: 0.69
---------
Equal Tax Equivalent Yield**: 6.94%
Divided by one minus a tax rate of 34.45%: 0.6555
---------
Equal Tax Equivalent Yield***: 7.31%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0401/$10.17)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and Coloraado tax rate of 34.45%
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EV MARATHON COLORADO 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 period from August 25, 1992 through July 31, 1996 and for the 1 year period ended
July 31, 1996.
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC BEFORE DEDUCTING CDSC AFTER DEDUCTING CDSC
PERIOD DATE ON 07/31/96 ON 07/31/96 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------- ---------- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 08/25/92 $1,247.97 $1,217.97 24.80% 5.80% 21.80% 5.14%
1 YEAR ENDED
07/31/96 07/31/95 $1,064.65 $1,014.65 6.46% 6.46% 1.46% 1.46%
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 after
deducting the CDSC*
Cumulative total return is calculated using the following formula:
T = (ERV/P) - 1
where T = cumulative total return including the CDSC
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC**
P = an initial investment of $1,000
* The average annual total return not including the CDSC is calculated based on the ending investment value
before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based on the ending investment value before
deducting the CDSC.
</TABLE>
<PAGE>
EXHIBIT 16
EV MARATHON CONNECTICUT MUNICIPALS FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 7/31/96:
Interest Income Earned: $ 912,782
Plus Dividend Income Earned:
----------
Equal Gross Income: $ 912,782
Minus Expenses: $ 236,620
----------
Equal Net Investment Income: $ 676,162
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 18,022,857
----------
Equal Net Investment Income Earned Per Share: $ 0.0375
Net Asset Value Per Share 7/31/96: $ 10.12
30 Day Yield*: 4.50%
Divided by One minus the Tax Rate of 31%: 0.69
----------
Equal Tax Equivalent Yield **: 6.52%
Divided by one minus a tax rate of 34.11%: 0.6589
----------
Equal Tax Equivalent Yield***: 6.83%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.038/$0.12)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and Connecticut tax rate of 34.11%
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EV MARATHON CONNECTICUT 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 period from May 1, 1992 through July 31, 1996 and for the 1 year period ended
July 31, 1996.
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC BEFORE DEDUCTING CDSC AFTER DEDUCTING CDSC
PERIOD DATE ON 07/31/96 ON 07/31/96 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------- ---------- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 05/01/92 $1,264.73 $1,244.73 26.47% 5.68% 24.47% 5.29%
1 YEAR ENDED
07/31/96 07/31/95 $1,063.04 $1,013.04 6.30% 6.30% 1.30% 1.30%
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 after
deducting the CDSC*
Cumulative total return is calculated using the following formula:
T = (ERV/P ) - 1
where T = cumulative total return including the CDSC
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC**
P = an initial investment of $1,000
* The average annual total return not including the CDSC is calculated based on the ending investment value
before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based on the ending investment value before
deducting the CDSC.
</TABLE>
<PAGE>
EXHIBIT 16
EV MARATHON MICHIGAN MUNICIPALS FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 7/31/96:
Interest Income Earned: $ 846,149
Plus Dividend Income Earned:
----------
Equal Gross Income: $ 846,149
Minus Expenses: $ 221,697
----------
Equal Net Investment Income: $ 624,452
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 16,590,021
----------
Equal Net Investment Income Earned Per Share: $ 0.0376
Net Asset Value Per Share 7/31/96: $ 10.42
30 Day Yield*: 4.38%
Divided by One minus the Tax Rate of 31%: 0.69
----------
Equal Tax Equivalent Yield**: 6.35%
Divided by one minus a tax rate of 35.93%: 0.6407
----------
Equal Tax Equivalent Yield***: 6.84%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0376/$10.42)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and Michigan tax rate of 35.93%
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EV MARATHON MICHIGAN 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 period from April 19, 1991 through July 31, 1996 and for the 1 and 5 year periods ended
July 31, 1996.
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC BEFORE DEDUCTING CDSC AFTER DEDUCTING CDSC
PERIOD DATE ON 07/31/96 ON 07/31/96 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------- ---------- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 04/19/91 $1,403.81 $1,393.81 40.38% 6.62% 39.38% 6.48%
5 YEARS ENDED
07/31/96 07/31/91 $1,377.63 $1,357.63 37.76% 6.62% 35.76% 6.31%
1 YEAR ENDED
07/31/96 07/31/95 $1,065.04 $1,015.04 6.50% 6.50% 1.50% 1.50%
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 after
deducting the CDSC*
Cumulative total return is calculated using the following formula:
T = (ERV/P) - 1
where T = cumulative total return including the CDSC
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC**
P = an initial investment of $1,000
* The average annual total return not including the CDSC is calculated based on the ending investment value
before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based on the ending investment value before
deducting the CDSC.
</TABLE>
<PAGE>
EXHIBIT 16
EV MARATHON MINNESOTA MUNICIPALS FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 7/31/96:
Interest Income Earned: $ 392,947
Plus Dividend Income Earned:
---------
Equal Gross Income: $ 392,947
Minus Expenses: $ 96,774
---------
Equal Net Investment Income: $ 296,173
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 7,400,559
---------
Equal Net Investment Income Earned Per Share: $ 0.0400
Net Asset Value Per Share 7/31/96: $ 10.07
30 Day Yield*: 4.81%
Divided by One minus the Tax Rate of 31%: 0.69
---------
Equal Tax Equivalent Yield**: 6.97%
Divided by one minus a tax rate of 36.87%: 0.6313
---------
Equal Tax Equivalent Yield***: 7.62%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0400/$10.07)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and Minnesota tax rate of 36.87%
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EV MARATHON MINNESOTA 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 period from July 29, 1991 through July 31, 1996 and for the 1 and 5 year periods ended
July 31, 1996.
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC BEFORE DEDUCTING CDSC AFTER DEDUCTING CDSC
PERIOD DATE ON 07/31/96 ON 07/31/96 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------- ---------- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 07/29/91 $1,321.11 $1,311.11 32.11% 5.72% 31.11% 5.56%
5 YEARS ENDED
07/31/96 07/31/91 $1,326.38 $1,306.38 32.64% 5.81% 30.64% 5.49%
1 YEAR ENDED
07/31/96 07/31/95 $1,060.04 $1,010.04 6.00% 6.00% 1.00% 1.00%
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 after
deducting the CDSC*
Cumulative total return is calculated using the following formula:
T = ( ERV/P) - 1
where T = cumulative total return including the CDSC
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC**
P = an initial investment of $1,000
* The average annual total return not including the CDSC is calculated based on the ending investment value
before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based on the ending investment value before
deducting the CDSC.
</TABLE>
<PAGE>
EXHIBIT 16
EV MARATHON NEW JERSEY MUNICIPALS FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 7/31/96:
Interest Income Earned: $1,964,490
Plus Dividend Income Earned:
----------
Equal Gross Income: $1,964,490
Minus Expenses: $ 482,181
----------
Equal Net Investment Income: $1,482,309
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 36,405,980
----------
Equal Net Investment Income Earned Per Share: $ 0.0407
Net Asset Value Per Share 7/31/96: $ 10.44
30 Day Yield*: 4.73%
Divided by One minus the Tax Rate of 31%: 0.69
----------
Equal Tax Equivalent Yield**: 6.86%
Divided by one minus a tax rate of 35.40%: 0.6460
----------
Equal Tax Equivalent Yield***: 7.32%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0407/$10.44)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and New Jersey tax rate of 35.40%
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EV MARATHON NEW JERSEY 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 period from January 8, 1991 through July 31, 1996 and for the 1 and 5 year periods ended
July 31, 1996.
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC BEFORE DEDUCTING CDSC AFTER DEDUCTING CDSC
PERIOD DATE ON 07/31/96 ON 07/31/96 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------- ---------- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 01/08/91 $1,438.31 $1,428.31 43.83% 6.76% 42.83% 6.62%
5 YEARS ENDED
07/31/96 07/31/91 $1,362.89 $1,342.89 36.29% 6.39% 34.29% 6.07%
1 YEAR ENDED
07/31/96 07/31/95 $1,057.43 $1,007.43 5.74% 5.74% 0.74% 0.74%
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 after
deducting the CDSC*
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 after
deducting the CDSC**
P = an initial investment of $1,000
* The average annual total return not including the CDSC is calculated based on the ending investment value
before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based on the ending investment value before
deducting the CDSC.
</TABLE>
<PAGE>
EXHIBIT 16
EV MARATHON PENNSYLVANIA MUNICIPALS FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 7/31/96:
Interest Income Earned: $2,371,612
Plus Dividend Income Earned:
----------
Equal Gross Income: $2,371,612
Minus Expenses: $ 564,274
----------
Equal Net Investment Income: $1,807,338
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 42,648,013
----------
Equal Net Investment Income Earned Per Share: $ 0.0424
Net Asset Value Per Share 7/31/96: $ 10.43
30 Day Yield*: 4.94%
Divided by One minus the Tax Rate of 31%: 0.69
----------
Equal Tax Equivalent Yield**: 7.16%
Divided by one minus a tax rate of 38.52%: 0.6148
----------
Equal Tax Equivalent Yield***: 8.04%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0424/$10.43)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and Pennsylvania tax rate of 38.52%
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EV MARATHON PENNSYLVANIA 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 period from January 8, 1991 through July 31, 1996 and for the 1 and 5 year periods ended
July 31, 1996.
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC BEFORE DEDUCTING CDSC AFTER DEDUCTING CDSC
PERIOD DATE ON 07/31/96 ON 07/31/96 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------- ---------- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 01/08/91 $1,437.13 $1,427.13 43.71% 6.74% 42.71% 6.61%
5 YEARS ENDED
07/31/96 07/31/91 $1,365.06 $1,345.06 36.51% 6.42% 34.51% 6.11%
1 YEAR ENDED
07/31/96 07/31/95 $1,060.76 $1,010.76 6.08% 6.08% 1.08% 1.08%
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 after
deducting the CDSC*
Cumulative total return is calculated using the following formula:
T = (ERV/P) - 1
where T = cumulative total return including the CDSC
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC**
P = an initial investment of $1,000
* The average annual total return not including the CDSC is calculated based on the ending investment value
before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based on the ending investment value before
deducting the CDSC.
</TABLE>
<PAGE>
EXHIBIT 16
EV MARATHON TEXAS MUNICIPALS FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 7/31/96:
Interest Income Earned: $ 124,500
Plus Dividend Income Earned:
---------
Equal Gross Income: $ 124,500
Minus Expenses: $ 29,136
---------
Equal Net Investment Income: $ 95,364
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 2,312,027
---------
Equal Net Investment Income Earned Per Share: $ 0.0412
Net Asset Value Per Share 7/31/96: $ 10.44
30 Day Yield*: 4.81%
Divided by One minus the Tax Rate of 31%: 0.69
---------
Equal Tax Equivalent Yield**: 6.97%
Divided by one minus a tax rate of 31.00%: 0.6900
---------
Equal Tax Equivalent Yield***: 6.97%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0412/$10.44)+1)-1]
** Assuming a tax rate of 31%
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EV MARATHON TEXAS 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 period from March 24, 1992 through July 31, 1996 and for the 1 year period ended
July 31, 1996.
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC BEFORE DEDUCTING CDSC AFTER DEDUCTING CDSC
PERIOD DATE ON 07/31/96 ON 07/31/96 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------- ---------- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 03/24/92 $1,325.72 $1,305.72 32.57% 6.68% 30.57% 6.31%
1 YEAR ENDED
07/31/96 07/31/95 $1,065.96 $1,015.96 6.60% 6.60% 1.60% 1.60%
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 after
deducting the CDSC*
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 after
deducting the CDSC**
P = an initial investment of $1,000
* The average annual total return not including the CDSC is calculated based on the ending investment value
before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based on the ending investment value before
deducting the CDSC.
</TABLE>
<PAGE>
EXHIBIT 16
EV TRADITIONAL ARIZONA MUNICIPALS FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 7/31/96:
Interest Income Earned: $ 8,617
Plus Dividend Income Earned:
-------
Equal Gross Income: $ 8,617
Minus Expenses: $ 1,094
-------
Equal Net Investment Income: $ 7,523
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 181,879
-------
Equal Net Investment Income Earned Per Share: $0.0414
Net Asset Value Per Share 7/31/96: $ 9.98
30 Day Yield*: 5.04%
Divided by One minus the Tax Rate of 31%: 0.69
-------
Equal Tax Equivalent Yield**: 7.30%
Divided by one minus a tax rate of 34.59%: 0.6541
-------
Equal Tax Equivalent Yield***: 7.71%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0414/$9.98)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and Arizona tax rate of 34.59%
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EV TRADITIONAL ARIZONA 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 period from July 25, 1991 through July 31, 1996 and for the 1 and 5 year periods ended
July 31, 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 07/31/96 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------- ---------- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 07/25/91 $962.57 $1,371.84 42.52% 7.31% 37.18% 6.50%
5 YEARS ENDED
07/31/96 07/31/91 $962.87 $1,360.04 41.25% 7.15% 36.00% 6.34%
1 YEAR ENDED
07/31/96 07/31/95 $962.55 $1,022.72 6.25% 6.25% 2.27% 2.27%
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>
EXHIBIT 16
EV TRADITIONAL COLORADO MUNICIPALS FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 7/31/96:
Interest Income Earned: $11,860
Plus Dividend Income Earned:
-------
Equal Gross Income: $11,860
Minus Expenses: $ 1,521
-------
Equal Net Investment Income: $10,339
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 247,611
-------
Equal Net Investment Income Earned Per Share: $0.0418
Net Asset Value Per Share 7/31/96: $ 9.74
30 Day Yield*: 5.22%
Divided by One minus the Tax Rate of 31%: 0.69
-------
Equal Tax Equivalent Yield**: 7.57%
Divided by one minus a tax rate of 34.45%: 0.6555
-------
Equal Tax Equivalent Yield***: 7.96%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0418/$9.74)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and Colorado tax rate of 34.45%
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EV TRADITIONAL COLORADO 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 period from August 25, 1992 through July 31, 1996 and for the 1 year period ended
July 31, 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 07/31/96 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------- ---------- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 08/25/92 $962.18 $1,208.07 25.55% 5.96% 20.81% 4.93%
1 YEAR ENDED
07/31/96 07/31/95 $962.46 $1,028.86 6.90% 6.90% 2.89% 2.89%
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>
EXHIBIT 16
EV TRADITIONAL CONNECTICUT MUNICIPALS FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 7/31/96:
Interest Income Earned: $ 9,817
Plus Dividend Income Earned:
-------
Equal Gross Income: $ 9,817
Minus Expenses: $ 1,001
-------
Equal Net Investment Income: $ 8,816
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 194,912
-------
Equal Net Investment Income Earned Per Share: $0.0452
Net Asset Value Per Share 7/31/96: $ 10.60
30 Day Yield*: 5.16%
Divided by One minus the Tax Rate of 31%: 0.69
-------
Equal Tax Equivalent Yield**: 7.48%
Divided by one minus a tax rate of 34.11%: 0.6589
-------
Equal Tax Equivalent Yield***: 7.83%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0444/$10.6)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and Connecticut tax rate of 34.11%
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EV TRADITIONAL CONNECTICUT 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 period from May 1, 1992 through July 31, 1996 and for the 1 year period ended
July 31, 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 07/31/96 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------- ---------- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 05/01/92 $962.76 $1,240.45 28.84% 6.14% 24.04% 5.20%
1 YEAR ENDED
07/31/96 07/31/95 $962.79 $1,028.94 6.87% 6.87% 2.89% 2.89%
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>
EXHIBIT 16
EV TRADITIONAL MICHIGAN MUNICIPALS FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 7/31/96:
Interest Income Earned: $ 7,998
Plus Dividend Income Earned:
-------
Equal Gross Income: $ 7,998
Minus Expenses: $ 1,109
-------
Equal Net Investment Income: $ 6,889
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 176,331
-------
Equal Net Investment Income Earned Per Share: $0.0391
Net Asset Value Per Share 7/31/96: $ 9.78
30 Day Yield*: 4.85%
Divided by One minus the Tax Rate of 31%: 0.69
-------
Equal Tax Equivalent Yield**: 7.03%
Divided by one minus a tax rate of 35.93%: 0.6407
-------
Equal Tax Equivalent Yield***: 7.57%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0391/$9.78)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and Michigan tax rate of 35.93%
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EV TRADITIONAL MICHIGAN 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 period from April 19, 1991 through July 31, 1996 and for the 1 and 5 year periods ended
July 31, 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 07/31/96 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------- ---------- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 04/19/91 $962.02 $1,342.17 39.52% 6.50% 34.22% 5.72%
5 YEARS ENDED
07/31/96 07/31/91 $962.86 $1,318.36 36.91% 6.48% 31.84% 5.68%
1 YEAR ENDED
07/31/96 07/31/95 $962.58 $1,027.71 6.76% 6.76% 2.77% 2.77%
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>
EXHIBIT 16
EV TRADITIONAL MINNESOTA MUNICIPALS FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 7/31/96:
Interest Income Earned: $ 8,606
Plus Dividend Income Earned:
-------
Equal Gross Income: $ 8,606
Minus Expenses: $ 1,116
-------
Equal Net Investment Income: $ 7,490
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 178,348
-------
Equal Net Investment Income Earned Per Share: $0.0420
Net Asset Value Per Share 7/31/96: $ 9.77
30 Day Yield*: 5.20%
Divided by One minus the Tax Rate of 31%: 0.69
-------
Equal Tax Equivalent Yield **: 7.53%
Divided by one minus a tax rate of 36.87%: 0.6313
-------
Equal Tax Equivalent Yield***: 8.24%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0415/$9.77)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and Minnesota tax rate of 36.87%
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EV TRADITIONAL MINNESOTA 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 period from July 29, 1991 through July 31, 1996 and for the 1 and 5 year periods ended
July 31, 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 07/31/96 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 07/29/91 $962.55 $1,292.58 34.29% 6.06% 29.26% 5.26%
5 YEARS ENDED
07/31/96 07/31/91 $962.74 $1,298.00 34.82% 6.16% 29.80% 5.36%
1 YEAR ENDED
07/31/96 07/31/95 $962.74 $1,024.46 6.41% 6.41% 2.45% 2.45%
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>
EXHIBIT 16
EV TRADITIONAL NEW JERSEY MUNICIPALS FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 7/31/96:
Interest Income Earned: $17,530
Plus Dividend Income Earned:
-------
Equal Gross Income: $17,530
Minus Expenses: $ 1,826
-------
Equal Net Investment Income: $15,704
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 340,724
-------
Equal Net Investment Income Earned Per Share: $0.0461
Net Asset Value Per Share 7/31/96: $ 10.44
30 Day Yield*: 5.37%
Divided by One minus the Tax Rate of 31%: 0.69
-------
Equal Tax Equivalent Yield**: 7.78%
Divided by one minus a tax rate of 35.40%: 0.6460
-------
Equal Tax Equivalent Yield***: 8.31%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0461/$10.44)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and New Jersey tax rate of 35.40%
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EV TRADITIONAL NEW JERSEY 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 period from January 8, 1991 through July 31, 1996 and for the 1 and 5 year periods ended
July 31, 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 07/31/96 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------- ---------- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 01/08/91 $962.06 $1,420.87 47.70% 7.27% 42.09% 6.52%
5 YEARS ENDED
07/31/96 07/31/91 $962.79 $1,347.47 39.95% 6.95% 34.75% 6.15%
1 YEAR ENDED
07/31/96 07/31/95 $962.39 $1,026.95 6.71% 6.71% 2.70% 2.70%
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>
EXHIBIT 16
EV TRADITIONAL PENNSYLVANIA MUNICIPALS FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 7/31/96:
Interest Income Earned: $15,459
Plus Dividend Income Earned:
-------
Equal Gross Income: $15,459
Minus Expenses: $ 1,372
-------
Equal Net Investment Income: $14,087
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 288,219
-------
Equal Net Investment Income Earned Per Share: $0.0489
Net Asset Value Per Share 7/31/96: $10.50
30 Day Yield*: 5.66%
Divided by One minus the Tax Rate of 31%: 0.69
-------
Equal Tax Equivalent Yield**: 8.20%
Divided by one minus a tax rate of 37.81%: 0.6219
-------
Equal Tax Equivalent Yield***: 9.10%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0489/$10.5)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and Pennsylvania tax rate of 37.81%
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EV TRADITIONAL PENNSYLVANIA 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 period from January 8, 1991 through July 31, 1996 and for the 1 and 5 year periods ended
July 31, 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 07/31/96 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------- ---------- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 01/08/91 $962.39 $1,413.16 46.84% 7.15% 41.32% 6.42%
5 YEARS ENDED
07/31/96 07/31/91 $962.42 $1,342.37 39.48% 6.88% 34.24% 6.07%
1 YEAR ENDED
07/31/96 07/31/95 $962.39 $1,032.46 7.28% 7.28% 3.25% 3.25%
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>
EXHIBIT 16
EV TRADITIONAL TEXAS MUNICIPALS FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 7/31/96:
Interest Income Earned: $ 1,787
Plus Dividend Income Earned:
-------
Equal Gross Income: $ 1,787
Minus Expenses: $143
-------
Equal Net Investment Income: $ 1,644
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 39,745
-------
Equal Net Investment Income Earned Per Share: $0.0414
Net Asset Value Per Share 7/31/96: $9.68
30 Day Yield*: 5.19%
Divided by One minus the Tax Rate of 31%: 0.69
-------
Equal Tax Equivalent Yield**: 7.52%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0414/$9.68)+1)-1]
** Assuming a tax rate of 31%
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EV TRADITIONAL TEXAS 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 period from March 24, 1992 through July 31, 1996 and for the 1 year period ended
July 31, 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 07/31/96 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------- ---------- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 03/24/92 $962.59 $1,257.31 30.62% 6.32% 25.73% 5.39%
1 YEAR ENDED
07/31/96 07/31/95 $962.30 $1,028.20 6.85% 6.85% 2.82% 2.82%
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>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 9
<NAME> EV MARATHON ARIZONA MUNICIPALS FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-END> JUL-31-1996
<INVESTMENTS-AT-COST> 123148
<INVESTMENTS-AT-VALUE> 128240
<RECEIVABLES> 1
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 128241
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 561
<TOTAL-LIABILITIES> 561
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 127619
<SHARES-COMMON-STOCK> 11959
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (74)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (4957)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5092
<NET-ASSETS> 127680
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 7590
<EXPENSES-NET> 1440
<NET-INVESTMENT-INCOME> 6150
<REALIZED-GAINS-CURRENT> 892
<APPREC-INCREASE-CURRENT> 1224
<NET-CHANGE-FROM-OPS> 8266
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (6223)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (74)
<NUMBER-OF-SHARES-SOLD> 786
<NUMBER-OF-SHARES-REDEEMED> 2524
<SHARES-REINVESTED> 230
<NET-CHANGE-IN-ASSETS> (14179)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1440
<AVERAGE-NET-ASSETS> 136897
<PER-SHARE-NAV-BEGIN> 10.53
<PER-SHARE-NII> .482
<PER-SHARE-GAIN-APPREC> .161
<PER-SHARE-DIVIDEND> (.488)
<PER-SHARE-DISTRIBUTIONS> (.005)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.68
<EXPENSE-RATIO> 1.56
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 21
<NAME> EV MARATHON COLORADO MUNICIPALS FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-END> JUL-31-1996
<INVESTMENTS-AT-COST> 41558
<INVESTMENTS-AT-VALUE> 43102
<RECEIVABLES> 0
<ASSETS-OTHER> 2
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 43104
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 132
<TOTAL-LIABILITIES> 132
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 43727
<SHARES-COMMON-STOCK> 4224
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 43
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (2342)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1544
<NET-ASSETS> 42972
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 2577
<EXPENSES-NET> 484
<NET-INVESTMENT-INCOME> 2093
<REALIZED-GAINS-CURRENT> 302
<APPREC-INCREASE-CURRENT> 394
<NET-CHANGE-FROM-OPS> 2789
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2146)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 452
<NUMBER-OF-SHARES-REDEEMED> 709
<SHARES-REINVESTED> 102
<NET-CHANGE-IN-ASSETS> (928)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 484
<AVERAGE-NET-ASSETS> 44673
<PER-SHARE-NAV-BEGIN> 10.02
<PER-SHARE-NII> .480
<PER-SHARE-GAIN-APPREC> .162
<PER-SHARE-DIVIDEND> (.492)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.17
<EXPENSE-RATIO> 1.49
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 19
<NAME> EV MARATHON CONNECTICUT MUNICIPALS FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-END> JUL-31-1996
<INVESTMENTS-AT-COST> 180117
<INVESTMENTS-AT-VALUE> 181967
<RECEIVABLES> 137
<ASSETS-OTHER> 2
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 182106
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 498
<TOTAL-LIABILITIES> 498
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 185280
<SHARES-COMMON-STOCK> 17941
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (360)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (5162)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1850
<NET-ASSETS> 181608
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 10381
<EXPENSES-NET> 2004
<NET-INVESTMENT-INCOME> 8377
<REALIZED-GAINS-CURRENT> (21)
<APPREC-INCREASE-CURRENT> 3340
<NET-CHANGE-FROM-OPS> 11696
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (8377)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (361)
<NUMBER-OF-SHARES-SOLD> 920
<NUMBER-OF-SHARES-REDEEMED> 2340
<SHARES-REINVESTED> 477
<NET-CHANGE-IN-ASSETS> (7292)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2004
<AVERAGE-NET-ASSETS> 188461
<PER-SHARE-NAV-BEGIN> 9.97
<PER-SHARE-NII> .452
<PER-SHARE-GAIN-APPREC> .169
<PER-SHARE-DIVIDEND> (.452)
<PER-SHARE-DISTRIBUTIONS> (.019)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.12
<EXPENSE-RATIO> 1.58
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 7
<NAME> EV MARATHON MICHIGAN MUNICIPALS FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-END> JUL-31-1996
<INVESTMENTS-AT-COST> 166334
<INVESTMENTS-AT-VALUE> 171835
<RECEIVABLES> 1
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 171836
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 770
<TOTAL-LIABILITIES> 770
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 169568
<SHARES-COMMON-STOCK> 16413
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (142)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (3861)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5501
<NET-ASSETS> 171066
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 10020
<EXPENSES-NET> 1959
<NET-INVESTMENT-INCOME> 8061
<REALIZED-GAINS-CURRENT> 2769
<APPREC-INCREASE-CURRENT> 859
<NET-CHANGE-FROM-OPS> 11689
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (8357)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (142)
<NUMBER-OF-SHARES-SOLD> 583
<NUMBER-OF-SHARES-REDEEMED> 2773
<SHARES-REINVESTED> 421
<NET-CHANGE-IN-ASSETS> (15296)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1959
<AVERAGE-NET-ASSETS> 181639
<PER-SHARE-NAV-BEGIN> 10.25
<PER-SHARE-NII> .464
<PER-SHARE-GAIN-APPREC> .195
<PER-SHARE-DIVIDEND> (.481)
<PER-SHARE-DISTRIBUTIONS> (.008)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.42
<EXPENSE-RATIO> 1.61
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 10
<NAME> EV MARATHON MINNESOTA MUNICIPALS FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-END> JUL-31-1996
<INVESTMENTS-AT-COST> 71377
<INVESTMENTS-AT-VALUE> 74533
<RECEIVABLES> 64
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 74597
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 223
<TOTAL-LIABILITIES> 223
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 75773
<SHARES-COMMON-STOCK> 7386
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (125)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (4430)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3156
<NET-ASSETS> 74374
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 4450
<EXPENSES-NET> 843
<NET-INVESTMENT-INCOME> 3607
<REALIZED-GAINS-CURRENT> 374
<APPREC-INCREASE-CURRENT> 632
<NET-CHANGE-FROM-OPS> 4613
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (3607)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (20)
<NUMBER-OF-SHARES-SOLD> 440
<NUMBER-OF-SHARES-REDEEMED> 1186
<SHARES-REINVESTED> 195
<NET-CHANGE-IN-ASSETS> (4596)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 843
<AVERAGE-NET-ASSETS> 77978
<PER-SHARE-NAV-BEGIN> 9.95
<PER-SHARE-NII> .468
<PER-SHARE-GAIN-APPREC> .123
<PER-SHARE-DIVIDEND> (.468)
<PER-SHARE-DISTRIBUTIONS> (.003)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.07
<EXPENSE-RATIO> 1.56
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 4
<NAME> EV MARATHON NEW JERSEY MUNICIPALS FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-END> JUL-31-1996
<INVESTMENTS-AT-COST> 362208
<INVESTMENTS-AT-VALUE> 379763
<RECEIVABLES> 247
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 380010
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1361
<TOTAL-LIABILITIES> 1361
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 378464
<SHARES-COMMON-STOCK> 36261
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (480)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (16889)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 17554
<NET-ASSETS> 378649
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 23159
<EXPENSES-NET> 4126
<NET-INVESTMENT-INCOME> 19033
<REALIZED-GAINS-CURRENT> (306)
<APPREC-INCREASE-CURRENT> 3879
<NET-CHANGE-FROM-OPS> 22606
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (19033)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (149)
<NUMBER-OF-SHARES-SOLD> 2040
<NUMBER-OF-SHARES-REDEEMED> 5798
<SHARES-REINVESTED> 937
<NET-CHANGE-IN-ASSETS> (26212)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4126
<AVERAGE-NET-ASSETS> 396230
<PER-SHARE-NAV-BEGIN> 10.36
<PER-SHARE-NII> .505
<PER-SHARE-GAIN-APPREC> .084
<PER-SHARE-DIVIDEND> (.505)
<PER-SHARE-DISTRIBUTIONS> (.004)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.44
<EXPENSE-RATIO> 1.57
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 5
<NAME> EV MARATHON PENNSYLVANIA MUNICIPALS FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-END> JUL-31-1996
<INVESTMENTS-AT-COST> 428992
<INVESTMENTS-AT-VALUE> 442808
<RECEIVABLES> 87
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 442895
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1790
<TOTAL-LIABILITIES> 1790
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 443433
<SHARES-COMMON-STOCK> 42306
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 356
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (16500)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 13816
<NET-ASSETS> 441105
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 28031
<EXPENSES-NET> 4912
<NET-INVESTMENT-INCOME> 23119
<REALIZED-GAINS-CURRENT> 5988
<APPREC-INCREASE-CURRENT> (282)
<NET-CHANGE-FROM-OPS> 28825
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (23060)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1572
<NUMBER-OF-SHARES-REDEEMED> 8334
<SHARES-REINVESTED> 1002
<NET-CHANGE-IN-ASSETS> (54751)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4912
<AVERAGE-NET-ASSETS> 472981
<PER-SHARE-NAV-BEGIN> 10.32
<PER-SHARE-NII> .512
<PER-SHARE-GAIN-APPREC> .108
<PER-SHARE-DIVIDEND> (.510)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.43
<EXPENSE-RATIO> 1.58
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 17
<NAME> EV MARATHON TEXAS MUNICIPALS FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-END> JUL-31-1996
<INVESTMENTS-AT-COST> 23377
<INVESTMENTS-AT-VALUE> 24020
<RECEIVABLES> 30
<ASSETS-OTHER> 4
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 24054
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 57
<TOTAL-LIABILITIES> 57
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 24170
<SHARES-COMMON-STOCK> 2298
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 36
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (852)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 643
<NET-ASSETS> 23997
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 1551
<EXPENSES-NET> 298
<NET-INVESTMENT-INCOME> 1253
<REALIZED-GAINS-CURRENT> 353
<APPREC-INCREASE-CURRENT> 156
<NET-CHANGE-FROM-OPS> 1762
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1253)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (43)
<NUMBER-OF-SHARES-SOLD> 103
<NUMBER-OF-SHARES-REDEEMED> 551
<SHARES-REINVESTED> 44
<NET-CHANGE-IN-ASSETS> (3766)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 298
<AVERAGE-NET-ASSETS> 26623
<PER-SHARE-NAV-BEGIN> 10.28
<PER-SHARE-NII> .492
<PER-SHARE-GAIN-APPREC> .177
<PER-SHARE-DIVIDEND> (.492)
<PER-SHARE-DISTRIBUTIONS> (.017)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.44
<EXPENSE-RATIO> 1.43
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 38
<NAME> EV TRADITIONAL ARIZONA MUNICIPALS FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-END> JUL-31-1996
<INVESTMENTS-AT-COST> 1579
<INVESTMENTS-AT-VALUE> 1621
<RECEIVABLES> 19
<ASSETS-OTHER> 5
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1645
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 7
<TOTAL-LIABILITIES> 7
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1725
<SHARES-COMMON-STOCK> 171
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 2
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (131)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 42
<NET-ASSETS> 1638
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 121
<EXPENSES-NET> 19
<NET-INVESTMENT-INCOME> 102
<REALIZED-GAINS-CURRENT> 9
<APPREC-INCREASE-CURRENT> 34
<NET-CHANGE-FROM-OPS> 145
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (108)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 42
<NUMBER-OF-SHARES-REDEEMED> 138
<SHARES-REINVESTED> 7
<NET-CHANGE-IN-ASSETS> (827)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 39
<AVERAGE-NET-ASSETS> 2199
<PER-SHARE-NAV-BEGIN> 9.51
<PER-SHARE-NII> .449
<PER-SHARE-GAIN-APPREC> .129
<PER-SHARE-DIVIDEND> (.478)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.61
<EXPENSE-RATIO> 1.39
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 50
<NAME> EV TRADITIONAL COLORADO MUNICIPALS FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-END> JUL-31-1996
<INVESTMENTS-AT-COST> 2266
<INVESTMENTS-AT-VALUE> 2313
<RECEIVABLES> 20
<ASSETS-OTHER> 4
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2237
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 8
<TOTAL-LIABILITIES> 8
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2438
<SHARES-COMMON-STOCK> 249
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 4
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (160)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 47
<NET-ASSETS> 2329
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 121
<EXPENSES-NET> 15
<NET-INVESTMENT-INCOME> 106
<REALIZED-GAINS-CURRENT> (3)
<APPREC-INCREASE-CURRENT> 9
<NET-CHANGE-FROM-OPS> 112
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (108)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 88
<NUMBER-OF-SHARES-REDEEMED> 62
<SHARES-REINVESTED> 9
<NET-CHANGE-IN-ASSETS> 359
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 35
<AVERAGE-NET-ASSETS> 2106
<PER-SHARE-NAV-BEGIN> 9.23
<PER-SHARE-NII> .471
<PER-SHARE-GAIN-APPREC> .148
<PER-SHARE-DIVIDEND> (.479)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.37
<EXPENSE-RATIO> 1.05
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 62
<NAME> EV TRADITIONAL CONNECTICUT MUNICIPALS FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-END> JUL-31-1996
<INVESTMENTS-AT-COST> 1946
<INVESTMENTS-AT-VALUE> 1991
<RECEIVABLES> 24
<ASSETS-OTHER> 6
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2021
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 9
<TOTAL-LIABILITIES> 9
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1973
<SHARES-COMMON-STOCK> 197
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (5)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 45
<NET-ASSETS> 2012
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 86
<EXPENSES-NET> 1
<NET-INVESTMENT-INCOME> 85
<REALIZED-GAINS-CURRENT> 11
<APPREC-INCREASE-CURRENT> (3)
<NET-CHANGE-FROM-OPS> 93
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (85)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (4)
<NUMBER-OF-SHARES-SOLD> 100
<NUMBER-OF-SHARES-REDEEMED> 16
<SHARES-REINVESTED> 3
<NET-CHANGE-IN-ASSETS> 898
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 26
<AVERAGE-NET-ASSETS> 1598
<PER-SHARE-NAV-BEGIN> 10.09
<PER-SHARE-NII> .550
<PER-SHARE-GAIN-APPREC> .133
<PER-SHARE-DIVIDEND> (.550)
<PER-SHARE-DISTRIBUTIONS> (.023)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.20
<EXPENSE-RATIO> .57
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 36
<NAME> EV TRADITIONAL MICHIGAN MUNICIPALS FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-END> JUL-31-1996
<INVESTMENTS-AT-COST> 1563
<INVESTMENTS-AT-VALUE> 1629
<RECEIVABLES> 24
<ASSETS-OTHER> 5
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1658
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 7
<TOTAL-LIABILITIES> 7
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1885
<SHARES-COMMON-STOCK> 175
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 12
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (312)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 66
<NET-ASSETS> 1651
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 168
<EXPENSES-NET> 27
<NET-INVESTMENT-INCOME> 141
<REALIZED-GAINS-CURRENT> 42
<APPREC-INCREASE-CURRENT> 112
<NET-CHANGE-FROM-OPS> 295
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (143)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 24
<NUMBER-OF-SHARES-REDEEMED> 343
<SHARES-REINVESTED> 11
<NET-CHANGE-IN-ASSETS> (2824)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 51
<AVERAGE-NET-ASSETS> 3051
<PER-SHARE-NAV-BEGIN> 9.26
<PER-SHARE-NII> .454
<PER-SHARE-GAIN-APPREC> .156
<PER-SHARE-DIVIDEND> (.460)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.41
<EXPENSE-RATIO> 1.43
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 39
<NAME> EV TRADITIONAL MINNESOTA MUNICIPALS FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-END> JUL-31-1996
<INVESTMENTS-AT-COST> 1432
<INVESTMENTS-AT-VALUE> 1557
<RECEIVABLES> 24
<ASSETS-OTHER> 6
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1587
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5
<TOTAL-LIABILITIES> 5
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1730
<SHARES-COMMON-STOCK> 168
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 11
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (284)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 125
<NET-ASSETS> 1582
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 152
<EXPENSES-NET> 20
<NET-INVESTMENT-INCOME> 132
<REALIZED-GAINS-CURRENT> 37
<APPREC-INCREASE-CURRENT> 65
<NET-CHANGE-FROM-OPS> 234
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (133)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (12)
<NUMBER-OF-SHARES-SOLD> 52
<NUMBER-OF-SHARES-REDEEMED> 288
<SHARES-REINVESTED> 7
<NET-CHANGE-IN-ASSETS> (2105)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 44
<AVERAGE-NET-ASSETS> 2670
<PER-SHARE-NAV-BEGIN> 9.30
<PER-SHARE-NII> .474
<PER-SHARE-GAIN-APPREC> .104
<PER-SHARE-DIVIDEND> (.478)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.40
<EXPENSE-RATIO> 1.22
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 63
<NAME> EV TRADITIONAL NEW JERSEY MUNICIPALS FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-END> JUL-31-1996
<INVESTMENTS-AT-COST> 3432
<INVESTMENTS-AT-VALUE> 3468
<RECEIVABLES> 26
<ASSETS-OTHER> 4
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3498
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 10
<TOTAL-LIABILITIES> 10
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3482
<SHARES-COMMON-STOCK> 347
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (4)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (25)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 35
<NET-ASSETS> 3488
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 143
<EXPENSES-NET> 2
<NET-INVESTMENT-INCOME> 141
<REALIZED-GAINS-CURRENT> (4)
<APPREC-INCREASE-CURRENT> 12
<NET-CHANGE-FROM-OPS> 149
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (141)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (3)
<NUMBER-OF-SHARES-SOLD> 210
<NUMBER-OF-SHARES-REDEEMED> 41
<SHARES-REINVESTED> 7
<NET-CHANGE-IN-ASSETS> 1777
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 28
<AVERAGE-NET-ASSETS> 2488
<PER-SHARE-NAV-BEGIN> 9.98
<PER-SHARE-NII> .579
<PER-SHARE-GAIN-APPREC> .081
<PER-SHARE-DIVIDEND> (.579)
<PER-SHARE-DISTRIBUTIONS> (.011)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.05
<EXPENSE-RATIO> .59
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 61
<NAME> EV TRADITIONAL PENNSYLVANIA MUNICIPALS FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-END> JUL-31-1996
<INVESTMENTS-AT-COST> 2965
<INVESTMENTS-AT-VALUE> 2982
<RECEIVABLES> 61
<ASSETS-OTHER> 1
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3044
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 9
<TOTAL-LIABILITIES> 9
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3007
<SHARES-COMMON-STOCK> 300
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 1
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 10
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 17
<NET-ASSETS> 3035
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 128
<EXPENSES-NET> 1
<NET-INVESTMENT-INCOME> 127
<REALIZED-GAINS-CURRENT> 22
<APPREC-INCREASE-CURRENT> (10)
<NET-CHANGE-FROM-OPS> 139
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (125)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 235
<NUMBER-OF-SHARES-REDEEMED> 90
<SHARES-REINVESTED> 6
<NET-CHANGE-IN-ASSETS> 1548
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 31
<AVERAGE-NET-ASSETS> 2182
<PER-SHARE-NAV-BEGIN> 9.98
<PER-SHARE-NII> .593
<PER-SHARE-GAIN-APPREC> .122
<PER-SHARE-DIVIDEND> (.585)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.11
<EXPENSE-RATIO> .53
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 46
<NAME> EV TRADITIONAL TEXAS MUNICIPALS FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-END> JUL-31-1996
<INVESTMENTS-AT-COST> 356
<INVESTMENTS-AT-VALUE> 347
<RECEIVABLES> 20
<ASSETS-OTHER> 7
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 374
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2
<TOTAL-LIABILITIES> 2
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 454
<SHARES-COMMON-STOCK> 40
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (1)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (72)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (9)
<NET-ASSETS> 372
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 24
<EXPENSES-NET> 3
<NET-INVESTMENT-INCOME> 21
<REALIZED-GAINS-CURRENT> (11)
<APPREC-INCREASE-CURRENT> 23
<NET-CHANGE-FROM-OPS> 33
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (21)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (1)
<NUMBER-OF-SHARES-SOLD> 12
<NUMBER-OF-SHARES-REDEEMED> 25
<SHARES-REINVESTED> 2
<NET-CHANGE-IN-ASSETS> (97)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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