AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 29, 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. 60 [X]
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 62 [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 on March 29, 1996
pursuant to paragraph (a)(1) of Rule 485.
The exhibit index required by Rule 483(a) under the Securities Act of 1933
is located on page in the sequential numbering system of the manually
signed copy of this Registration Statement.
The Registrant has filed a Declaration pursuant to Rule 24f-2. On
September 20, 1995, Registrant filed its "Notice" as required by that Rule for
the series of the Registrant with the fiscal year end of July 31, 1995, on
October 16, 1995 filed its "Notice" for the series of the Registrant with the
fiscal year end of August 31, 1995 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.
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 has also executed this Registration
Statement.
==============================================================================
<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 Prospectuses 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
EV Traditional Texas Municipals Fund
Part B -- The Combined Statements of Additional Information 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
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.
<PAGE>
EATON VANCE MUNICIPALS TRUST
CROSS REFERENCE SHEET
ITEMS REQUIRED BY FORM N-1A
---------------------------
<TABLE>
<CAPTION>
PART A
ITEM NO. ITEM CAPTION PROSPECTUS CAPTION
- ------ -------- ---------------------------------------------
<S> <C> <C>
1. ..................... Cover Page Cover Page
2. ..................... Synopsis Shareholder and Fund Expenses
3. ..................... Condensed Financial Information The Fund's Financial Highlights; Performance
Information
4. ..................... General Description of Registrant The Fund's Investment Objective; How the Fund
and the Portfolio Invest their Assets;
Organization of the Fund and the Portfolio
5. ..................... Management of the Fund Management of the Fund and the Portfolio
5A...................... Management's Discussion of Fund Not Applicable
Performance
6. ..................... Capital Stock and Other Securities Organization of the Fund and the Portfolio;
Reports to Shareholders; The Lifetime
Investing Account/Distribution Options;
Distributions and Taxes
7. ..................... Purchase of Securities Being Offered Valuing Fund Shares; How to Buy Fund Shares;
The Lifetime Investing Account/Distribution
Options; Service Plan; The Eaton Vance
Exchange Privilege; Eaton Vance Shareholder
Services; Statement of Intention and Escrow
Agreement
8. ..................... Redemption or Repurchase How to Redeem Fund Shares
9. ..................... Pending Legal Proceedings Not Applicable
<CAPTION>
PART B
ITEM NO. ITEM CAPTION STATEMENT OF ADDITIONAL INFORMATION CAPTION
- ------ -------- ---------------------------------------------
<S> <C> <C>
10. ..................... Cover Page Cover Page
11. ..................... Table of Contents Table of Contents
12. ..................... General Information and History Other Information
13. ..................... Investment Objectives and Policies Additional Information about Investment
Policies; Investment Restrictions
14. ..................... Management of the Fund Trustees and Officers; Fees and Expenses
15. ..................... Control Persons and Principal Holders of Control Persons and Principal Holders of
Securities Securities
16. ..................... Investment Advisory and Other Investment Adviser and Administrator; Service
Services Plan; Custodian; Independent Certified
Public Accountants; Fees and Expenses
17. ..................... Brokerage Allocation and Other Portfolio Security Transactions; Fees and
Practices Expenses
18. ..................... Capital Stock and Other Securities Other Information
19. ..................... Purchase, Redemption and Pricing of Determination of Net Asset Value; Principal
Securities Being Offered Underwriter; Service for Withdrawal;
Services for Accumulation; Service Plan;
Fees and Expenses
20. ..................... Tax Status Taxes; Tax Equivalent Yield Table
21. ..................... Underwriters Principal Underwriter; Fees and Expenses
22. ..................... Calculation of Performance Data Investment Performance; Performance
Information
23. ..................... Financial Statements Financial Statements
</TABLE>
<PAGE>
PART A
INFORMATION REQUIRED IN A PROSPECTUS
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>
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 AS WITH HISTORICALLY STRUCTURED MUTUAL FUNDS. 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 March 29, 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 ......................... 16
The Funds' Financial Highlights ....................... 4 Reports to Shareholders ........................... 17
The Funds' Investment Objectives ...................... 6 The Lifetime Investing Account/Distribution Options 17
How the Funds and the Portfolios Invest their Assets 6 The Eaton Vance Exchange Privilege ................ 18
Organization of the Funds and the Portfolios .......... 10 Eaton Vance Shareholder Services .................. 19
Management of the Funds and the Portfolios ............ 12 Distributions and Taxes ........................... 20
Service Plans ......................................... 14 Performance Information ........................... 21
Valuing Fund Shares ................................... 14 Statement of Intention and Escrow Agreement ....... 22
How to Buy Fund Shares ................................ 15 Appendix -- State Specific Information ............ 23
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
PROSPECTUS DATED MARCH 29, 1996
<PAGE>
SHAREHOLDER AND FUND EXPENSES
- -----------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES
- -----------------------------------------------------------------------------
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
<TABLE>
<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) 0.42% 0.13% 0.44% 0.44% 0.37% 0.47% 0.45% 0.00%
Other Expenses (including
Service Plan Fees and
after expense reductions) 0.38 0.33 0.07 0.45 0.30 0.03 0.01 0.21
---- ---- ---- ---- ---- ---- ---- ----
Total Operating Expenses
(after reductions) 0.80% 0.46% 0.51% 0.89% 0.67% 0.50% 0.46% 0.21%
==== ==== ==== ==== ==== ==== ==== ====
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:
<CAPTION>
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 $ 45 $42 $43 $ 46 $ 44 $42 $42 $40
3 Years 62 52 53 65 58 53 52 44
5 Years 80 62 65 85 73 64 62 49
10 Years 133 93 99 143 118 98 93 63
</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 fiscal year ending July 31, 1996
(assuming the Service Plan in effect on February 1, 1996). Absent a fee
reduction (in the case of the Investment Adviser Fee) and/or an expense
allocation (in the case of Other Expenses), expenses of the following Funds
would have been the following percentage of average daily net assets: Arizona
Fund Other Expenses would have been 0.99%; and Total Operating Expenses would
have been 1.56%; Colorado Fund Investment Adviser Fee and Other Expenses would
have been 0.28% and 1.10%, respectively and Total Operating Expenses would have
been 1.53%; Connecticut Fund Other Expenses would have been 3.01% and Total
Operating Expenses would have been 3.46%; Michigan Fund Other Expenses would
have been 0.68% and Total Operating Expenses would have been 1.27%; Minnesota
Fund Other Expenses would have been 0.81% and Total Operating Expenses would
have been 1.33%; New Jersey Fund Other Expenses would have been 1.98% and Total
Operating Expenses would have been 2.46%; Pennsylvania Fund Other Expenses would
have been 2.62% and Total Operating Expenses would have been 3.08%; and Texas
Fund Investment Adviser Fee and Other Expenses would have been 0.21% and 2.32%,
respectively and Total Operating Expenses would have been 2.68%.
Each Fund invests exclusively in its corresponding Portfolio. The Trustees
believe the aggregate per share expenses of a Fund and its corresponding
Portfolio should approximate, and over time may be less than, the per share
expenses the Fund would incur if the Fund were instead to retain the services of
an investment adviser and its assets were invested directly in the type of
securities being held by its corresponding Portfolio.
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'', "Organization of the Funds and the
Portfolios", "Management of the Funds and the Portfolios", "Service Plans" and
"How to Redeem Fund Shares".
If shares of a Fund are 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 contingent deferred sales
charge of 0.50% will be imposed on such redemption. 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.
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, Eaton Vance Distributors, Inc.
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
-------------------------------------------------------------------------------------------------------
ARIZONA FUND COLORADO FUND CONNECTICUT FUND MICHIGAN FUND
---------------------- -------------------- ---------------------- ---------------------
1995 1994<F1> 1995 1994<F1> 1995 1994<F1> 1995 1994<F1>
---------------------- -------------------- ---------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
beginning of year $ 9.390 $10.000 $ 9.180 $10.000 $10.100 $10.000 $ 9.220 $10.000
------- ------- ------- ------- ------- ------- ------- -------
INCOME (LOSS) FROM OPERATIONS:
Net investment
income $ 0.432 $ 0.253 $ 0.450 $ 0.256 $ 0.553 $ 0.153 $ 0.419 $ 0.261
Net realized and
unrealized gain
(loss) on
investments 0.142 (0.563) 0.062<F3> (0.761) 0.012 0.111 0.063 (0.733)
------- ------- ------- ------- ------- ------- ------- -------
Total income
(loss) from
operations $ 0.574 $(0.310) $ 0.512 $(0.505) $ 0.565 $ 0.264 $ 0.482 $(0.472)
------- ------- ------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
From net investment
income $(0.432) $(0.253) $(0.450) $(0.256) $(0.553) $(0.153) $(0.419) $(0.261)
In excess of net
investment income<F6> (0.022) (0.047) (0.012) (0.059) (0.022) (0.011) (0.023) (0.047)
------- ------- ------- ------- ------- ------- ------- -------
Total
distributions $(0.454) $(0.300) $(0.462) $(0.315) $(0.575) $(0.164) $(0.442) $(0.308)
------- ------- ------- ------- ------- ------- ------- -------
NET ASSET VALUE, end
of year $ 9.510 $ 9.390 $ 9.230 $ 9.180 $10.090 $10.100 $ 9.260 $ 9.220
======= ======= ======= ======= ======= ======= ======= =======
TOTAL RETURN<F4> 6.44% (3.23)% 5.89% (5.22)% 5.89% 2.66% 5.52% (4.88)%
RATIOS/SUPPLEMENTAL DATA**:
Net assets, end of
period (000 omitted) $ 2,465 $ 2,412 $ 1,971 $ 2,342 $ 1,115 $ 163 $ 4,475 $ 6,366
Ratio of net
expenses to
average daily net
assets<F5> 1.60% 1.75%<F2> 1.26% 1.38%<F2> 0.51% 0.48%<F2> 1.69% 1.69%<F2>
Ratio of net
investment income
to average daily
net assets 4.73% 4.14%<F2> 5.04% 4.20%<F2> 5.46% 4.83%<F2> 4.70% 4.18%<F2>
**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 $ 0.376 $ 0.181 $ 0.368 $ 0.146 $ 0.249 $ (0.045) $ 0.398 $ 0.235
======= ======= ======= ======= ======= ======== ======= =======
RATIOS (As a percentage of average daily net assets):
Expenses<F5> 2.21% 2.93%<F2> 2.18% 3.18%<F2> 3.51% 6.73%<F2> 1.92% 2.11%<F2>
Net investment
income (loss) 4.12% 2.96%<F2> 4.12% 2.40%<F2> 2.46% (1.42)%<F2> 4.47% 3.76%<F2>
<FN>
Footnotes:
<F1> 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.
<F2> Annualized.
<F3> 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.
<F4> 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. Dividends and 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.
<F5> Includes the Fund's share of its corresponding Portfolio's allocated expenses.
<F6> 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.
<F7> 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' FINANCIAL HIGHLIGHTS -- CONTINUED
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
-------------------------------------------------------------------------------------------------------
MINNESOTA FUND NEW JERSEY FUND PENNSYLVANIA FUND TEXAS FUND
-------------------- ---------------------- --------------------- ----------------------
1995 1994<F1> 1995 1994<F1> 1995 1994<F1> 1995 1994<F1>
---------------------- ---------------------- --------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
beginning of year $ 9.370 $10.000 $ 9.940 $10.000 $10.050 $10.000 $ 9.230 $10.000
------- ------- ------- ------- ------- ------- ------- -------
INCOME (LOSS) FROM OPERATIONS:
Net investment income $ 0.440 $ 0.267 $ 0.576 $ 0.161 $ 0.577 $ 0.044 $ 0.455 $ 0.267
Net realized and
unrealized gain
(loss) on
investments (0.048)<F3> (0.582) 0.054<F2> (0.044)<F3> (0.062)<F3> 0.104 (0.008) (0.709)
------- ------- ------- ------- ------- ------- ------- -------
Total income (loss)
from operations $ 0.392 $(0.315) $ 0.630 $ 0.117 $ 0.515 $ 0.148 $ 0.447 $(0.442)
------- ------- ------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
From net investment
income $(0.440) $(0.267) $(0.576) $(0.161) $(0.577) $(0.044) $(0.455) $(0.267)
In excess of net
investment income<F6> (0.022) (0.048) (0.014) (0.016) (0.008) (0.054) (0.032) (0.061)
------- ------- ------- ------- ------- ------- ------- -------
Total distributions $(0.462) $(0.315) $(0.590) $(0.177) $(0.585) $(0.098) $(0.487) $(0.328)
------- ------- ------- ------- ------- ------- ------- -------
NET ASSET VALUE, end of
year $ 9.300 $ 9.370 $ 9.980 $ 9.940 $ 9.980 $10.050 $ 9.190 $ 9.230
======= ======= ======= ======= ======= ======= ======= =======
TOTAL RETURN<F4> 4.45% (3.29)% 6.62% 1.19% 5.41% 1.49% 5.16% (4.61)%
RATIOS/SUPPLEMENTAL DATA**:
Net assets, end of
period (000 omitted) $ 3,688 $ 4,952 $ 1,712 $ 296 $ 1,487 $ 95 $ 469 $ 1,147
Ratio of net expenses
to average daily net
assets<F5> 1.47% 1.51%<F2> 0.50% 0.43%<F2> 0.46% 1.69%<F2> 1.01% 1.08%<F2>
Ratio of net
investment income to
average daily net
assets 4.84% 4.33%<F2> 5.65% 4.11%<F2> 5.58% 2.76%<F2> 5.25% 4.53%<F2>
**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 $ 0.394 $ 0.209 $ 0.375 $(0.237) $ 0.307 $(0.258) $ 0.254 $ 0.024
======= ======= ======= ======= ======= ======= ======= =======
RATIOS (As a percentage of average daily net assets):
Expenses<F5> 1.98% 2.45%<F2> 2.47% 10.59%<F2> 3.07% 20.95%<F2> 3.33% 5.20%<F2>
Net investment
income (loss) 4.33% 3.38%<F2> 3.68% (6.05)%<F2> 2.97% (16.50)%<F2> 2.93% 0.41%<F2>
<FN>
Footnotes:
<F1> 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.
<F2> Annualized.
<F3> 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.
<F4> 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. Dividends and 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.
<F5> Includes the Fund's share of its corresponding Portfolio's allocated expenses.
<F6> 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.
<F7> 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 seeks to
meet its investment objective by investing its assets in a separate
corresponding open-end management investment company (a "Portfolio") which
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.
HOW THE FUNDS AND THE PORTFOLIOS INVEST THEIR ASSETS
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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 is 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 Texas 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. 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, 1995, the Portfolios had invested in such obligations as follows
(as a percentage of net assets): Arizona Portfolio (5.2%); Colorado Portfolio
(9.3%); Connecticut Portfolio (7.5%); Michigan Portfolio (5.6%); Minnesota
Portfolio (14.3%); New Jersey Portfolio (18.8%); Pennsylvania Portfolio
(18.2%); and Texas Portfolio (19.5%). At July 31, 1995, the Portfolios limited
their investment in obligations subject to the AMT (and, in the case of the
Minnesota Portfolio, the Minnesota alternative minimum tax) to not more than
20% of net assets. The Portfolios are no longer subject to such limitation.
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 and by legislation
and other governmental activities in that State. 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 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 would be 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 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) and other financial instruments and indices. 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 not exceed 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. For a
description of municipal obligation ratings, see the Statement of Additional
Information.
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) 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 and distribute
income from zero-coupon bonds on a current basis, even though it does not
receive that income currently in cash. 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
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EACH FUND IS A NON-DIVERSIFIED SERIES OF EATON VANCE MUNICIPALS TRUST (THE
"TRUST"), A BUSINESS TRUST ESTABLISHED UNDER MASSACHUSETTS LAW PURSUANT TO A
DECLARATION OF TRUST DATED SEPTEMBER 30, 1985, AS AMENDED. THE TRUST IS A
MUTUAL FUND -- AN OPEN-END MANAGEMENT INVESTMENT COMPANY. The Trustees of the
Trust are responsible for the overall management and supervision of its
affairs. The Trust may issue an unlimited number of shares of beneficial
interest (no par value per share) in one or more series and because the Trust
can offer separate series (such as the Funds) it is known as a "series
company." 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.
SPECIAL INFORMATION ON THE FUND/PORTFOLIO INVESTMENT STRUCTURE. An investor in
a Fund should be aware that the Fund, unlike mutual funds which directly
acquire and manage their own portfolios of securities, seeks to achieve its
investment objective by investing its assets in an interest in its
corresponding Portfolio, which is a separate investment company with an
identical investment objective (although the Fund may temporarily hold a de
minimis amount of cash). Therefore, a Fund's interest in the securities owned
by its corresponding Portfolio is indirect. 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. For
information regarding the investment objective, policies and restrictions of
the Portfolios, see "The Funds" Investment Objectives" and "How the Funds and
the Portfolios Invest their Assets". Further information regarding investment
practices may be found in the Statement of Additional Information.
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, and affords the potential for economies of scale for each
Fund, at least when the assets of its corresponding Portfolio exceed $500
million.
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. The investment objective and
the nonfundamental investment policies of each Fund and Portfolio may be
changed by the Trustees of the Trust and the Portfolio without obtaining the
approval of the shareholders of that Fund or the investors in that Portfolio,
as the case may be. Any such change of an investment objective will be
preceded by thirty days' advance written notice to the shareholders of the
Fund or the investors in the Portfolio, as the case may be. 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.
Information regarding other pooled investment entities or funds which invest
in a Portfolio may be obtained by contacting Eaton Vance Distributors, Inc.
(the "Principal Underwriter" or "EVD"), 24 Federal Street, Boston, MA 02110,
(617) 482-8260. Smaller investors in a Portfolio may be adversely affected by
the actions of a larger investor in the Portfolio. For example, if a large
investor withdraws from a Portfolio, the remaining investors may experience
higher pro rata operating expenses, thereby producing lower returns.
Additionally, a Portfolio may hold fewer securities, resulting in increased
portfolio risk, and experience decreasing economies of scale. However, this
possibility exists as well for historically structured mutual funds which have
large or institutional investors.
Until 1992, the Administrator sponsored and advised historically structured
funds. Funds which invest all their assets in interests in a separate
investment company are a relatively new development in the mutual fund
industry and, therefore, the Funds may be subject to additional regulations
than historically structured funds.
Each Portfolio's Declaration of Trust provides that the Portfolio will
terminate 120 days after the complete withdrawal of a 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 Portfolios as partnerships for federal income tax purposes.
See "Distributions and Taxes" for further information. 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.
The Trustees of the Trust, including a majority of the noninterested Trustees,
have approved written procedures designed to identify and address any
potential conflicts of interest arising from the fact that the Trustees of the
Trust and the Trustees of each Portfolio are the same. Such procedures require
each Board to take action to resolve any conflict of interest between a Fund
and its corresponding Portfolio, and it is possible that the creation of
separate Boards may be considered. For further information concerning the
Trustees and officers of each of the Trust and the Portfolios, see the
Statement of Additional Information.
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 and 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>
Each Portfolio paid (or, absent a fee reduction, would have paid) advisory
fees for the fiscal year ended July 31, 1995 equivalent to the annualized
percentage of average daily net assets stated below.
NET ASSETS AS OF
PORTFOLIO JULY 31, 1995 ADVISORY FEE
-----------------------------------------------------------------------
Arizona $144,521,015 0.42%
Colorado 46,077,166 0.28%\1/
Connecticut 195,275,789 0.44%
Michigan 191,262,981 0.44%
Minnesota 82,967,696 0.37%
New Jersey 411,038,422 0.47%
Pennsylvania 502,250,304 0.48%
Texas 28,227,021 0.21%\2/
\1/ To enhance the net income of the Colorado Portfolio, BMR made a reduction
of its advisory of its advisory fee in the amount of $69,064.
\2/ To enhance the net income of the Texas Portfolio, BMR made a reduction of
its advisory fee in the full amount of such fee and BMR was allocated
$18,606 of expenses related to the operation of such Portfolio.
BMR OR EATON VANCE ACTS AS INVESTMENT ADVISER TO INVESTMENT COMPANIES AND
VARIOUS INDIVIDUAL AND INSTITUTIONAL CLIENTS WITH ASSETS UNDER MANAGEMENT OF
APPROXIMATELY $16 BILLION. Eaton Vance is a wholly-owned subsidiary of Eaton
Vance Corp., a publicly held holding company. Eaton Vance Corp., through its
subsidiaries and affiliates, engages in investment management and marketing
activities, oil and gas operations, real estate investment, consulting and
management, and development of precious metals properties.
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 (1978-1992).
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. 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. Mr. MacIntosh has been a Vice
President of Eaton Vance since 1991 and of BMR since 1992. Prior to joining
Eaton Vance, he was a portfolio manager at Fidelity Management & Research
Company (1986-1991).
David C. Reilly has acted as the portfolio manager of the Minnesota and
Colorado Portfolios since December 1, 1995. He has been a Vice President of
Eaton Vance since 1991 and of BMR since 1992. Prior to joining Eaton Vance, he
was a Vice President and a municipal bond analyst at Scudder, Stevens & Clark
(1984-1991).
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.
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 EVD 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
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, 1995, each Fund made
service fee payments (as a percentage of average daily net assets) as follows:
Arizona Fund (0.20% annualized); Colorado Fund (0.20% annualized); Connecticut
Fund (0.01%); Michigan Fund (0.20% annualized); Minnesota Fund (0.20%
annualized); New Jersey Fund (0.01%); Pennsylvania Fund (0.01%) and Texas Fund
(0.20% annualized). The service fee payments made by the Arizona, Colorado,
Michigan, Minnesota and Texas Funds were made pursuant to a prior version of
the Plan. The Plan is described further in the Statement of Additional
Information.
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 and the public offering
price based thereon. It is the Authorized Firms' responsibility to transmit
orders promptly to the Principal Underwriter, which is a wholly-owned
subsidiary of Eaton Vance.
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. The Principal Underwriter will furnish the
names of Authorized Firms to an investor upon request. An Authorized Firm may
charge its customers a fee in connection with transactions executed by that
Firm. 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<F1> 0.00<F1> 0.50
<FN>
<F1> No sales charge is payable at the time of purchase on investments of $1 million or more. 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. For the Connecticut Fund, New Jersey Fund and Pennsylvania Fund, such purchases made before March 27, 1995
will be subject to a CDSC of 1% in the event of certain redemptions within 18 months of purchase.
</FN>
</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, BOS725, P.O. Box 1559, Boston, MA 02104. 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
officers and employees and clients of Eaton Vance and its affiliates; 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, (3) 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, and (4) to an investor making an investment through an investment
adviser, financial planner, broker or other intermediary that charges a fee
for its services and has entered into an agreement with a Fund or its
Principal Underwriter.
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 shown 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 to IBT. 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
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A SHAREHOLDER MAY REDEEM FUND SHARES BY DELIVERING TO FIRST DATA INVESTOR
SERVICES GROUP, BOS725, P.O. BOX 1559, BOSTON, MASSACHUSETTS 02104, during its
business hours a written request for redemption in good order, plus any share
certificates with executed stock powers. The redemption price will be based on
the net asset value per share of the applicable Fund next computed after such
delivery. 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 and acceptable to First Data Investor Services Group. 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.
Within seven days after receipt of a redemption request in good order by First
Data Investor Services Group, 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.
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 EVD, as the Funds' agent, receives the order. It
is the Authorized Firm's responsibility to transmit promptly repurchase orders
to EVD. Throughout this Prospectus, the word "redemption" is generally meant
to include a repurchase.
If shares were recently purchased, the proceeds of redemption (or repurchase)
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 or repurchases 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. For the Connecticut Fund, New Jersey Fund and Pennsylvania
Fund such purchases made before March 27, 1995 will be subject to a CDSC of 1%
in the event of certain redemptions made within 18 months of purchase. In
addition, 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 retained by the
Principal Underwriter. The CDSC will be imposed on an amount equal to the
lesser of the current market value or the original purchase price of the
shares redeemed. Accordingly, no CDSC will be imposed on increases in account
value above the initial purchase price, including any dividends or
distributions that have been reinvested in additional shares. In determining
whether a CDSC is applicable to a redemption, the calculation will be made in
a manner that results in the lowest possible rate being charged. It will be
assumed that redemptions are made first from any shares in the shareholder's
account that are not subject to a CDSC.
The CDSC is waived for redemptions involving certain liquidation, merger or
acquisition transactions involving other investment companies. If a
shareholder reinvests redemption proceeds within a 60-day period and in
accordance with the conditions set forth under "Eaton Vance Shareholder
Services -- Reinvestment Privilege," the shareholder's account will be
credited with the amount of any CDSC paid on such redeemed shares. 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 Internal
Revenue Code of 1986, as amended (the "Code"), or (3) as part of a minimum
required distribution from other tax-sheltered retirement plans.
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. Consistent with applicable law, duplicate mailings of shareholder
reports and certain other Fund information to shareholders residing at the
same address may be eliminated.
THE LIFETIME INVESTING ACCOUNT/DISTRIBUTION OPTIONS
- ------------------------------------------------------------------------------
AFTER AN INVESTOR MAKES AN INITIAL PURCHASE OF FUND SHARES, THE FUNDS'
TRANSFER AGENT, FIRST DATA INVESTOR SERVICES GROUP, 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 First Data
Investor Services Group.
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 First Data Investor Services Group, BOS725, P.O.
Box 1559, Boston, MA, 02104 (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, BOS725,
P.O. Box 1559, Boston, MA 02104. 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 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.
First Data Investor Services Group makes exchanges at the next determined net
asset value after receiving an exchange request in good order (see "How to
Redeem Fund Shares"). Consult First Data Investor Services Group 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 for which Eaton Vance acts as investment adviser
or administrator may be exchanged for Fund shares on the basis of the net
asset value per share of each fund at the time of the exchange, but subject to
any restrictions or qualifications set forth in the current prospectus of any
such fund.
Telephone exchanges are accepted by First Data Investor Services Group
provided the investor has not disclaimed in writing the use of the privilege.
To effect such exchanges, call First Data Investor Services Group at 800-262-
1122 or, within Massachusetts, 617-573-9403, 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 First Data
Investor Services Group 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
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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, is 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 First Data Investor Services
Group, BOS725, P.O. Box 1559, Boston, MA 02104 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 "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 REPURCHASED OR REDEEMED SHARES
MAY REINVEST AT NET ASSET VALUE ANY PORTION OR ALL OF THE REPURCHASE OR
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 repurchased or 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 repurchase or 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 or repurchase 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 the Fund are sold at a loss and the
proceeds are reinvested in shares of the Fund (or other shares of the Fund are
acquired within the period beginning 30 days before and ending 30 days after
the date of 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 shares of a Fund
or of another fund are subsequently acquired 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. 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 distribution 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 their own tax advisers with respect to the State,
local and foreign tax consequences of investing 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 multiplying a hypothetical
initial purchase order of $1,000 by the average annual compounded rate of
return (including capital appreciation/depreciation, and dividends and
distributions paid and reinvested) for the stated period and annualizing the
result. The average annual total return calculation assumes that the maximum
sales charge is deducted from the initial $1,000 purchase order and that all
dividends are reinvested at the net asset value on the reinvestment dates
during the period. The Funds may publish annual and cumulative total return
figures from time to time. 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.
The Principal Underwriter may publish to Authorized Firms a Fund's
distribution rate and/or effective distribution rate. Each Fund's distribution
rate is computed by dividing the most recent monthly distribution per share
annualized, by the current maximum offering price per share. Each Fund's
effective distribution rate is computed by dividing the distribution rate by
the ratio 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 a 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 a 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.
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 reduced 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 current yield or total return
for any prior period should not be considered a representation of what an
investment may earn or what the Fund's yield or total return may be in any
future period. If the expenses of a Fund or its corresponding Portfolio are
paid by Eaton Vance, the Fund's performance will be higher.
STATEMENT OF INTENTION AND ESCROW AGREEMENT
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TERMS OF ESCROW. 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 EVD 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 EVD 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.
PROVISION FOR RETROACTIVE PRICE ADJUSTMENT. 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 EVD.
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.
<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 Connecticut Fund 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 1995
was 5.1%, below the national rate of 5.6%.
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 54.4% 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 3.7% in August 1995, below the national rate of 5.6%. Colorado added
41,000 jobs in the twelve months ended August 1995, a 2.3% increase from the
prior year. 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
1995, the unemployment rate in Connecticut on a seasonally adjusted basis was
5.1%, as compared to a rate of 5.6% 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 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 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 that
are issued by the governments of Puerto Rico, the U.S. Virgin Islands and
Guam, but other distributions from the Fund that constitute items of tax
preference for purposes of the federal alternative minimum tax could cause
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. As of August,
1995 Michigan's unemployment rate was 5.1%, as compared to the national rate
of 5.6%. 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, is not a tax preference item under the federal alternative minimum 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.
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 1995, the State unadjusted unemployment rate was 2.6%
compared with a national rate of 5.6%. Unaudited information indicates that
the State ended fiscal year 1995 with a General Fund balance of $921 million.
The State's general obligation bonds are rated Aa1, 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 recently denied certiorari in
an Ohio case which 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. However, 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 in the paragraph
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 and 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 1995 budget included total spending of $15.5
billion. However, the proposed 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 has 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 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. 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, is not a tax preference
item under the federal minimum 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
was 5.5% for August 1995 versus the national rate of 5.6%.
The Governor's fiscal year 1996 budget contained no new taxes and proposed
numerous cost reduction programs. Under the 1996 budget, state spending
increased 2.3% over fiscal year 1995 appropriations. The fiscal year 1996
budget included tax reductions of approximately $214.8 million. The State Tax
Stabilization Reserve Fund had a balance at March 31, 1995 of $65.3 million.
The fiscal year 1996 budget projects a $3.2 million fiscal year-end
unappropriated surplus.
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 August
1995, non-farm employment in Texas reached 8.92 million. Over the past year,
Texas has gained more than 126,000 jobs, an increase of 1.4%, with most of the
growth occurring in the services and trade sectors of the economy. Texas
mining employment (which is 95% oil and gas) has, however, experienced a
slight decline of 4.7%. Unemployment as of August, 1995 was 6.7% versus the
national rate of 5.6%.
The State finished the fiscal year ended August 31, 1994 with a 200 million
operating deficit in the General Revenue Fund. However, there was still a $587
million balance in the General Revenue Fund, or 3.2% of expenditures.
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 fiscal 1994 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. Although the Puerto Rico unemployment rate has declined
substantially since 1985, the seasonally adjusted unemployment rate for June,
1995 was approximately 13.9%. 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 federal budget
proposals being currently considered by the U.S. Congress include the
elimination of Section 936, a federal tax credit program credited with
encouraging economic development in Puerto Rico. The fate of Section 936
cannot be determined at this time. There can be no assurance that the
elimination of the credit available under Section 936 will not have a negative
impact on Puerto Rico's economy and the credit quality (and value) of Puerto
Rican bonds.
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 stable outlook on Puerto Rico on April 26, 1994.
<PAGE>
EV TRADITIONAL
MUNICIPAL
FUNDS
PROSPECTUS
MARCH 29, 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, BOS725, P.O. Box 1559, Boston, MA 02104
(800) 262-1122
AUDITORS
Deloitte &Touche LLP, 125 Summer Street, Boston, MA 02110
T-C12/1P
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
March 29, 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") and
certain other series of Eaton Vance Municipals Trust (the "Trust"). As described
in the Prospectus, each Fund invests its assets in a separate registered
investment company (a "Portfolio") with the same investment objective and
policies as the Fund. Each Fund's Part II (a "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.
TABLE OF CONTENTS
Page
PART I
Additional Information about Investment Policies ................. 1
Investment Restrictions .......................................... 8
Trustees and Officers ............................................ 9
Investment Adviser and Administrator ............................. 11
Custodian ........................................................ 13
Services for Accumulation ........................................ 13
Service for Withdrawal ........................................... 14
Determination of Net Asset Value ................................. 14
Investment Performance ........................................... 15
Taxes ............................................................ 16
Principal Underwriter ............................................ 18
Service Plan ..................................................... 19
Portfolio Security Transactions .................................. 20
Other Information ................................................ 21
Independent Certified Public Accountants ......................... 22
Financial Statements ............................................. 22
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 Statement of Additional Information is sometimes
referred to as the "SAI".
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 MARCH 29, 1996, AS SUPPLEMENTED FROM
TIME TO TIME. 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
The following information relates generally to 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 taxes and is not a tax preference item for
purposes of the federal alternative minimum tax: (i) certain "public purpose"
obligations (whenever issued), which include obligations issued directly by
state and local governments or their agencies to fulfill essential governmental
functions; (ii) certain obligations issued before August 8, 1986 for the benefit
of non-governmental persons or entities; and (iii) certain "private activity
bonds" issued 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 federal alternative minimum tax. For corporate shareholders,
the Fund's distributions derived from interest on all municipal obligations
(whenever issued) is included in "adjusted current earnings" for purposes of the
federal alternative minimum tax as applied to corporations (to the extent not
already included in alternative minimum taxable income as income attributable to
private activity bonds).
Market discount on long-term tax-exempt municipal obligations (i.e.,
obligations with a term of more than one year) purchased in the secondary market
after April 30, 1993 is taxable as ordinary income. A long-term debt obligation
is generally treated as acquired at a market discount if the secondary market
purchase price is 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 amount.
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 of this SAI.
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.
Pollution control and other industrial development bonds are issued by state
or local agencies to finance various projects, including those of domestic steel
producers, and may be backed solely by agreements with such companies. Domestic
steel companies are expected to suffer the consequences of such adverse trends
as high labor costs, high foreign imports encouraged by foreign productivity
increases and a strong U.S. dollar, and other cost pressures such as those
imposed by anti-pollution legislation. Domestic steel capacity is being reduced
currently by large-scale plant closings and this period of rationalization may
not end until further legislative protection is provided through tariff price
supports or mandatory import quotas, such as those recently enacted for certain
specialty steel products.
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, 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
(the "Territories"). Accordingly, the Portfolio may be adversely affected by
local political and economic conditions and developments within the
Territories affecting the issuers of such obligations.
Puerto Rico has a diversified economy dominated by the manufacturing and
service sectors. 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.
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 June, 1995 unemployment rate was 13.9%.
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 Internal Revenue 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. 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. Puerto Ricans voted to retain Commonwealth
status, leaving 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
ratification by the U.S. Congress.
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. The economy is heavily reliant on the tourism industry, with roughly 43%
of non-agricultural employment in tourist-related trade and services. The
tourism industry is economically sensitive and would likely be adversely
affected by a recession in either the United States or Europe. In September
1995, St. Thomas was hit by a hurricane and sustained extensive damage. The
longer term impact on the tourism industry is not yet known. There can be no
assurances that the market for USVI bonds will not be affected. In general,
hurricanes and civil unrest have and will continue to have an adverse affect on
the tourism industry.
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 experienced a budget deficit in fiscal
years 1989 and 1990: in 1989 due to wage settlements with the unionized
government employees, and in 1990 as a result of Hurricane Hugo. The USVI
recorded a small surplus in fiscal year 1991. At the end of fiscal 1992, the
last year for which results are available, the USVI had an unreserved General
Fund deficit of approximately $8.31 million, or approximately 2.1% of
expenditures. In order to close a forecasted fiscal 1994 revenue gap of $45.6
million, the Department of Finance has proposed several tax increases and fund
transfers. 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. 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. Guam is
expected to benefit from the closure of the Subic Bay Naval Base and the Clark
Air Force Base in the Philippines. 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 1994, the financial position
of Guam was weakened as it incurred an unaudited General Fund operating deficit.
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 Baa by Moody's.
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 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 taking
place within a specified number of days after the date of the Portfolio's
commitment and are subject to certain conditions such as the issuance of
satisfactory legal opinions. The Portfolio may also purchase securities on a
when-issued basis pursuant to refunding contracts in connection with the
refinancing of an issuer's outstanding indebtedness. Refunding contracts
generally require the issuer to sell and the Portfolio to buy such securities on
a settlement date that could be several months or several years in the future.
The Portfolio will make commitments to purchase when-issued securities only
with the intention of actually acquiring the securities, but may sell such
securities before the settlement date if it is deemed advisable as a matter of
investment strategy. The payment obligation and the interest rate that will be
received on the securities are fixed at the time the Portfolio enters into the
purchase commitment. The Portfolio's custodian will segregate cash or high grade
liquid debt securities in a separate account of the Portfolio in an amount at
least equal to the when-issued commitments. If the value of the securities
placed in the separate account declines, additional cash or high grade liquid
debt securities will be placed in the account on a daily basis so that the value
of the account will at least equal the amount of the Portfolio's when-issued
commitments. 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. Interest income generated by certain bonds having demand
features may not qualify as tax-exempt interest. 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 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. Under present
regulatory policies of the Commission, such loans are required to be secured
continuously by collateral in cash, cash equivalents or U.S. Government
securities held by the Portfolio's custodian and maintained on a current basis
at an amount at least equal to the market value of the securities loaned, which
will be marked to market daily. Cash equivalents include short-term municipal
obligations as well as taxable certificates of deposit, commercial paper and
other short-term money market instruments. 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. 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, (ii) futures
contracts on securities indices and (iii) futures contracts on other financial
instruments and 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 exchange or board of trade. The
Portfolio will be required, in connection with transactions in futures contracts
and the writing of options on futures, to make margin deposits, which will be
held by the Portfolio's custodian for the benefit of the futures commission
merchant through whom the Portfolio engages in such futures and options
transactions.
Some futures contracts and options thereon may become illiquid under adverse
market conditions. In addition, during periods of market volatility, a commodity
exchange may suspend or limit transactions in an exchange-traded instrument,
which may make the instrument temporarily illiquid and difficult to price.
Commodity exchanges may also establish daily limits on the amount that the price
of a futures contract or futures option can vary from the previous day's
settlement price. Once the daily limit is reached, no trades may be made that
day at a price beyond the limit. This may prevent the Portfolio from closing out
positions and limiting its losses.
The Portfolio will engage in futures and related options transactions only
for bona fide hedging purposes as defined in or permitted by CFTC regulations.
The Portfolio will determine that the price fluctuations in the futures
contracts and options on futures are substantially related to price fluctuations
in securities held by the Portfolio or which it expects to purchase. The
Portfolio's futures transactions will be entered into for traditional hedging
purposes -- that is, futures contracts will be sold to protect against a decline
in the price of securities that the Portfolio owns, or futures contracts will be
purchased to protect the Portfolio against an increase in the price of
securities it intends to purchase. As evidence of this hedging intent, the
Portfolio expects that on 75% or more of the occasions on which it takes a long
futures (or option) position (involving the purchase of futures contracts), the
Portfolio will have purchased, or will be in the process of purchasing,
equivalent amounts of related securities in the cash market at the time when the
futures (or option) position is closed out. However, in particular cases, when
it is economically advantageous for the Portfolio to do so, a long futures
position may be terminated (or an option may expire) without the corresponding
purchase of securities. The Portfolio will engage in transactions in futures and
related options contracts only to the extent such transactions are consistent
with the requirements of the Internal Revenue Code for maintaining qualification
of the Fund as a regulated investment company for federal income tax purposes
(see "Taxes").
Transactions using 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, receivables and short-term debt 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, U.S. Government securities or other liquid, high-grade debt
securities in a segregated account with its custodian in the prescribed amount.
Assets used as cover or held in a segregated account cannot be sold while
the position in the corresponding futures contract or option is open, unless
they are replaced with other appropriate assets. As a result, the commitment of
a large portion of the Portfolio's assets to cover or segregated accounts 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, which as used in this SAI means
the lesser of (a) 67% of the outstanding voting securities of the Portfolio
present or represented by proxy at a meeting if the holders of more than 50% of
the outstanding voting securities of the Portfolio are present or represented at
the meeting or (b) more than 50% of the outstanding voting securities of the
Portfolio. The term "voting securities" as used in this paragraph has the same
meaning as in the 1940 Act. Whenever the Trust is requested to vote on a change
in the fundamental investment restrictions of the Portfolio (or the Portfolio's
80% investment policy with respect to State obligations described in the Fund's
current Prospectus), the Trust will hold a meeting of Fund shareholders and will
cast its vote as instructed by the shareholders.
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 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 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; (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); or (e) purchase oil, gas or other mineral
leases or purchase partnership interests in oil, gas or other mineral
exploration or development programs.
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.
In order to permit the sale of shares of the Fund in certain states, the
Fund may make commitments more restrictive than the policies described above.
Should the Fund determine that any such commitment is no longer in the best
interest of the Fund and its shareholders, it will revoke the commitment by
terminating sales of its shares in the state(s) involved.
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 (54), Vice President and Trustee*
Executive Vice President 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 (60), 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 (69), 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 (52), President
Vice President of BMR, Eaton Vance and EV. Mr. Fetter was elected a Vice
President of the Trust on December 17, 1990 and President of the Trust and the
Portfolio on December 13, 1993. Officer of various investment companies
managed by Eaton Vance or BMR.
ROBERT B. MACINTOSH (39), Vice President
Vice President of BMR since August 11, 1992, and of Eaton Vance and EV, and an
employee of Eaton Vance since March 8, 1991. Fidelity Investments -- Portfolio
Manager (1986-1991). Officer of various investment companies managed by Eaton
Vance or BMR. Mr. MacIntosh was elected Vice President of the Trust on March
22, 1993.
JAMES L. O'CONNOR (50), Treasurer
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
THOMAS OTIS, (64) 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 (60), Assistant Secretary
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
A. JOHN MURPHY (32), Assistant Secretary
Assistant Vice President of BMR, Eaton Vance and EV since March 1, 1994;
employee of Eaton Vance since March 1993. Officer of various investment
companies managed by Eaton Vance or BMR. State Regulations Supervisor, The
Boston Company (1991-1993) and Registration Specialist, Fidelity Management &
Research Co. (1986-1991). Mr. Murphy was elected Assistant Secretary on March
27, 1995.
ERIC G. WOODBURY (38), 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. Thorndike (Chairman), Hayes and Reamer are members of the Special
Committee of the Board of Trustees of the Trust and of the Portfolio. The
Special Committee's functions include a continuous review of the Fund's
contractual relationship with the Administrator on behalf of the Fund and the
Portfolio's contractual relationship with the Investment Adviser, making
recommendations to the Trustees regarding the compensation of those Trustees who
are not members of the Eaton Vance organization, and making recommendations to
the Trustees regarding candidates to fill vacancies, as and when they occur, in
the ranks of those Trustees who are not "interested persons" of the Trust, the
Portfolio, or the Eaton Vance organization.
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 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 Fund nor
the Portfolio have 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 approximately $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 offers single-state tax-free portfolios in more states than any
other sponsor of mutual funds. There are 30 long-term state portfolios, 5
national portfolios and 12 limited maturity portfolios. A staff of 32 is
responsible for the day-to-day management of over 3,500 issues in 46 mutual fund
portfolios. Assets managed by the municipal investment group are currently over
$9.1 billion. The following persons manage one or more of the Eaton Vance
tax-free 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 Management and the
portfolio manager of single-state tax-exempt funds in five states: Hawaii,
Louisiana, Massachusetts, 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.
David C. Reilly is a Vice President of Eaton Vance and BMR. Mr. Reilly, a
Chartered Financial Analyst, received a B.S. from Skidmore College. He is a
member and former President of the Boston Municipal Analysts Forum. He also
holds memberships in the Boston Securities Analysts Society and the Financial
Analysts Federation.
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 the obligation of the Portfolio to indemnify its Trustees,
officers and investors with respect thereto.
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.
A commitment may be made to a state securities authority that Eaton Vance
will take certain actions, if necessary, so that the Fund's expenses will not
exceed expense limitation requirements of such state. The commitment may be
amended or rescinded by Eaton Vance in response to changes in the requirements
of the state or for other reasons.
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 and engage in other
business activities and may permit other fund clients and other corporations and
organizations to use the words "Eaton Vance" or "Boston Management and Research"
in their names. 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 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 the obligation of the Trust to indemnify its Trustees and officers
with respect thereto.
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. Gardner 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 December
31, 1995, 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, Reilly 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 operations. In addition, Eaton Vance owns all the stock of Northeast
Properties, Inc., which is engaged in real estate investment, consulting and
management. EVC owns all the stock of Fulcrum Management, Inc., and MinVen Inc.,
which are engaged in the development of precious metal properties. 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, Investors Bank & Trust Company. It is Eaton Vance's opinion that
the terms and conditions of such transactions were not and will not be
influenced by existing or potential custodial or other relationships between the
Fund or the Portfolio and such banks.
CUSTODIAN
Investors Bank & Trust Company ("IBT"), 89 South Street, Boston,
Massachusetts acts as custodian for the Fund and the Portfolio. IBT has the
custody of all cash and securities representing the Fund's interest in the
Portfolio, has custody of all the Portfolio's assets, maintains the general
ledger of the 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
custody 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 Investment Company Act of 1940. For the custody fees that the
Portfolio and the Fund paid to IBT, see "Fees and Expenses" in the Fund's Part
II.
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 for which Eaton Vance acts as investment adviser or administrator at
the time of purchase. The sales charge on the shares being purchased will then
be at the rate applicable to the aggregate. For example, if the shareholder
owned shares valued at $30,000 in EV Traditional California Municipals 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 financial service firm ("Authorized Firm") must provide
Eaton Vance Distributors, Inc. (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
By a standard agreement, the Fund's Transfer Agent will send to the
shareholder regular monthly or quarterly payments of any permitted amount
designated by the shareholder (see "Eaton Vance Shareholder Services Withdrawal
Plan" in the Fund's current Prospectus) based upon the value of the shares held.
The checks will be drawn from share redemptions and hence, are a return of
principal. Income dividends and capital gain distributions in connection with
withdrawal accounts will be credited at net asset value as of the record date
for each distribution. Continued withdrawals in excess of current income will
eventually use up principal, particularly in a period of declining market
prices.
To use this service, at least $5,000 in cash or shares at the public
offering price, (i.e., net asset value plus the applicable sales charge) will
have to be deposited with the Transfer Agent. The maintenance of a withdrawal
plan concurrently with purchases of additional Fund shares would be
disadvantageous because of the sales charge included in such purchases. 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 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 (a New York Stock Exchange holiday), Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Each investor in the Portfolio, including the Fund, may add to or reduce its
investment in the Portfolio on each day the New York Stock Exchange (the
"Exchange") is open for trading ("Portfolio Business Day") as of the close of
regular trading on the Exchange (the "Portfolio Valuation Time"). The value of
each investor's interest in the Portfolio will be determined by multiplying the
net asset value of the Portfolio by the percentage, determined on the prior
Portfolio Business Day, which represented that investor's share of the aggregate
interests in the Portfolio on such prior day. Any additions or withdrawals for
the current Portfolio Business Day will then be recorded. The investor's
percentage of the aggregate interest in the Portfolio will then be recomputed as
a percentage equal to a fraction (i) the numerator of which is the value of such
investor's investment in the Portfolio as of the Portfolio Valuation Time on the
prior Portfolio Business Day plus or minus, as the case may be, the amount of
any additions to or withdrawals from the investor's investment in the Portfolio
on the current Portfolio Business Day and (ii) the denominator of which is the
aggregate net asset value of the Portfolio as of the Portfolio Valuation Time on
the prior Portfolio Business Day plus or minus, as the case may be, the amount
of the net additions to or withdrawals from the aggregate investment in the
Portfolio on the current Portfolio Business Day by all investors in the
Portfolio. The percentage so determined will then be applied to determine the
value of the investor's interest in the Portfolio for the current Portfolio
Business Day.
INVESTMENT PERFORMANCE
Average annual total return is determined by multiplying a hypothetical
initial purchase order of $1,000 by the average annual compound rate of return
(including capital appreciation/depreciation, and dividends and distributions
paid and reinvested) for the stated period and annualizing the results. The
calculation assumes the maximum sales charge is deducted from the initial $1,000
purchase order and that all dividends and 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 its 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
dividends 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 figure 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 a 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. See "Distributions and Taxes" in the Fund's
current Prospectus. For the Fund's distribution rate and effective distribution
rate, see "Performance Information" in the Fund's Part II.
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 or Morningstar, Inc.). 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 relating to inflation and the effects
of inflation on the dollar may be included in advertisements and other material
furnished to present and prospective shareholders. For example, after 10 years,
the purchasing power of $25,000 would shrink to $16,621, $14,968, $13,465 and
$12,100, if the annual rates of inflation during such period were 4%, 5%, 6% and
7%, respectively. (To calculate the purchasing power, the value at the end of
each year is reduced by the above inflation rates for 10 consecutive years.)
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. 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 in materials furnished to present and
prospective shareholders may include statements or illustrations relating to the
appropriateness of types of securities and/or mutual funds which may be employed
to meet specific financial goals, such as (1) funding retirement, (2) paying for
children's education, and (3) financially supporting aging parents. These three
financial goals may be referred to in such advertisements or materials as the
"Triple Squeeze."
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 Internal Revenue Code
of 1986, as amended (the "Code"). Accordingly, the Fund intends to satisfy
certain requirements relating to sources of its income and diversification of
its assets and to distribute its net investment income (including tax-exempt
income) and net realized capital gains in accordance with the timing
requirements imposed by the Code, so as to avoid any federal income or excise
tax on the Fund. The Fund so qualified for its fiscal year ended July 31, 1995
(see the Notes to the Financial Statements incorporated by reference in this
SAI). 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, 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. For purposes of
applying this 50% requirement, the Fund will be deemed to own its proportionate
share of each of the assets of the Portfolio, and the Portfolio currently
intends to invest its assets in a manner such that the Fund can meet this 50%
requirement. Interest on certain municipal obligations is treated as a tax
preference item for purposes of the federal alternative minimum tax.
Shareholders of the Fund are required to report tax-exempt interest on their
federal income tax returns.
From time to time proposals have been introduced before Congress for the
purpose of restricting or eliminating the federal income tax exemption for
interest on certain types of municipal obligations, and it can be expected that
similar proposals may be introduced in the future. Under federal tax legislation
enacted in 1986, the federal income tax exemption for interest on certain
municipal obligations was eliminated or restricted. As a result of such
legislation, the availability of municipal obligations for investment by the
Portfolio and the value of the securities held by the Portfolio may be affected.
In the course of managing its investments, the Portfolio may realize some
short-term and long-term capital gains (and/or losses) as a result of market
transactions, including sales of portfolio securities and rights to when- issued
securities and options and futures transactions. The Portfolio may also realize
taxable income from certain short-term taxable obligations, securities loans, a
portion of original issue discount with respect to certain stripped municipal
obligations or their stripped coupons, and certain realized accrued market
discount. Any distributions by the Fund of its share of such capital gains
(after reduction by any capital loss carryforwards) 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
declared in October, November or December and paid the following January will be
taxed to shareholders as if received on December 31 of the year in which they
are declared.
The Portfolio's transactions in options and futures contracts will be
subject to special tax rules that may affect the amount, timing and character of
Fund distributions to shareholders. For example, certain positions held by the
Portfolio on the last business day of each taxable year will be marked to market
(i.e., treated as if closed out on such day), and any resulting gain or loss
will generally be treated as 60% long-term and 40% short-term capital gain or
loss. Certain positions held by the Portfolio that substantially diminish the
Portfolio's risk of loss with respect to other positions in its portfolio may
constitute "straddles," which are subject to tax rules that may cause deferral
of Portfolio losses, adjustments in the holding period of Portfolio securities
and conversion of short-term into long-term capital losses. The Portfolio may
have to limit its activities in options and futures contracts in order to enable
the Fund to maintain its qualification as a RIC.
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 treated as a long-term capital loss
to the extent of any distribution of net long-term capital gains with respect to
such shares. Any loss realized on the sale or exchange of shares which have been
held for tax purposes for 6 months or less (or such shorter period as may be
prescribed by Treasury regulations) will be disallowed to the extent the
shareholder has received tax-exempt interest with respect to such shares. In
addition, a loss realized on a redemption of Fund shares will be disallowed to
the extent the shareholder acquired other Fund shares 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 required certifications, as well as shareholders with respect to whom
the Fund has received notification from the Internal Revenue Service or a
broker, may be subject to "backup" withholding of federal income tax from the
Fund's 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 and certain foreign corporations and 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 certain 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 discount 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 requirements of the service fee requirements of the revised
sales charge rule of the National Association of Securities Dealers, Inc.
(Management believes service fee payments are not distribution expenses governed
by Rule 12b-1 under the 1940 Act, but has chosen to have the Plan approved as if
that Rule were applicable.) The following supplements the discussion of the Plan
contained in the Fund's Prospectus.
The Plan remains in effect through April 28, 1996, and 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 on the basis of either that particular transaction or on the basis of
overall responsibilities which BMR and its affiliates have for accounts over
which they exercise investment discretion. In making any such determination, BMR
will not attempt to place a specific dollar value on the brokerage and research
services provided or to determine what portion of the commission should be
related to such services. Brokerage and research services may include advice as
to the value of securities, the advisability of investing in, purchasing, or
selling securities, and the availability of securities or purchasers or sellers
of securities; furnishing analyses and reports concerning issuers, industries,
securities, economic factors and trends, portfolio strategy and the performance
of accounts; effecting securities transactions and performing functions
incidental thereto (such as clearance and settlement); and the "Research
Services" referred to in the next paragraph.
It is a common practice of the investment advisory industry and of the
advisers of investment companies, institutions and other investors to receive
research, statistical and quotation services, data, information and other
services, products and materials which assist such advisers in the performance
of their investment responsibilities ("Research Services") from broker-dealer
firms which execute portfolio transactions for the clients of such advisers and
from third parties with which such broker-dealers have arrangements. Consistent
with this practice, BMR receives Research Services from many broker-dealer firms
with which BMR places the Portfolio transactions and from third parties with
which these broker-dealers have arrangements. These Research Services include
such matters as general economic and market reviews, industry and company
reviews, evaluations of securities and portfolio strategies and transactions and
recommendations as to the purchase and sale of securities and other portfolio
transactions, financial, industry and trade publications, news and information
services, pricing and quotation equipment and services, and research oriented
computer hardware, software, data bases and services. Any particular Research
Service obtained through a broker-dealer may be used by BMR in connection with
client accounts other than those accounts which pay commissions to such
broker-dealer. Any such Research Service may be broadly useful and of value to
BMR in rendering investment advisory services to all or a significant portion of
its clients, or may be relevant and useful for the management of only one
client's account or of a few clients' accounts, or may be useful for the
management of merely a segment of certain clients' accounts, regardless of
whether any such account or accounts paid commissions to the broker-dealer
through which such Research Service was obtained. The advisory fee paid by the
Portfolio is not reduced because BMR receives such Research Services. BMR
evaluates the nature and quality of the various Research Services obtained
through broker-dealer firms and attempts to allocate sufficient commissions to
such firms to ensure the continued receipt of Research Services which BMR
believes are useful or of value to it in rendering investment advisory services
to its clients.
Subject to the requirement that BMR shall use its best efforts to seek and
execute portfolio security transactions at advantageous prices and at reasonably
competitive spreads or commission rates, BMR is authorized to consider as a
factor in the selection of any firm with whom portfolio orders may be placed the
fact that such firm has sold or is selling shares of the Fund or of other
investment companies sponsored by BMR or Eaton Vance. This policy is not
inconsistent with a rule of the National Association of Securities Dealers,
Inc., which rule provides that no firm which is a member of the Association
shall favor or disfavor the distribution of shares of any particular investment
company or group of investment companies on the basis of brokerage commissions
received or expected by such firm from any source.
Municipal obligations considered as investments for the Portfolio may also
be appropriate for other investment accounts managed by BMR or its affiliates.
BMR will attempt to allocate equitably portfolio security transactions among the
Portfolio and the portfolios of its other investment accounts purchasing
municipal obligations 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. While this procedure 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" and "EV" in other connections and for other purposes.
The Trust is organized as a Massachusetts business trust. 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 addition, the By-Laws of the Trust provide that no natural person
shall serve as a Trustee of the Trust after the holders of record of not less
than two-thirds of the outstanding shares have declared that he be removed from
office either by declaration in writing filed with the custodian of the assets
of the Trust or by votes cast in person or by proxy at a meeting called for the
purpose.
In accordance with the Declaration of Trust of the Portfolio, there will
normally be no meetings of the investors for the purpose of electing Trustees
unless and until such time as less than a majority of the Trustees holding
office have been elected by investors. In such an event the Trustees of the
Portfolio then in office will call an investors' meeting for the election of
Trustees. Except for the foregoing circumstances and unless removed by action of
the investors in accordance with the Portfolio's Declaration of Trust, the
Trustees shall continue to hold office and may appoint successor Trustees.
The Declaration of Trust of the Portfolio provides that no person shall
serve as a Trustee if investors holding two-thirds of the outstanding 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 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 Securities and
Exchange 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 EV Traditional Arizona, Colorado, Michigan, Minnesota and Texas Funds and
their corresponding Portfolios for the fiscal year ended July 31, 1995 as
previously filed electronically with the Securities and Exchange Commission
(Accession No. 00000950135-95-001944) and for the EV Traditional Connecticut,
New Jersey and Pennsylvania Funds and their corresponding Portfolios for the
fiscal year ended July 31, 1995 as previously filed electronically with the
Securities and Exchange Commission (Accession No. 00000950135-95-002074). (Each
Fund changed the phrase "Tax Free" in its name to "Municipals" on December 1,
1995. In addition, the Arizona, Colorado, Michigan, Minnesota and Texas Funds
will change their names from "EV Classic [State Name] Municipals Fund" to "EV
Traditional [State Name] Municipals Fund" on February 1, 1996).
<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.
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.
COMMERCIAL PAPER
Moody's commercial paper ratings are opinions of the ability of issuers to repay
punctually promissory obligations not having an original maturity in excess of
365 days.
Issuers (or supporting institutions) rated PRIME-1 or P-1 have a superior
ability for repayment of senior short-term debt obligations. Prime-1 or P-1
repayment ability will often be evidenced by many of the following
characteristics:
-- Leading market positions in well established industries.
-- High rates of return on funds employed.
-- Conservative capitalization structure with moderate reliance on debt and
ample asset protection.
-- Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
-- Well-established access to a range of financial markets and assured
sources of alternate liquidity.
PRIME-2
Issuers (or supporting institutions) rated PRIME-2 (P-2) have a strong ability
for repayment of senior short-term debt obligations. This will normally be
evidenced by many of the characteristics cited above, but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
PRIME-3
Issuers (or supporting institutions) rated PRIME-3 (P-3) have an acceptable
ability for repayment of senior short-term obligations. The effect of industry
characteristics and market compositions may be more pronounced. Variability in
earnings and profitability may result in changes in the level of debt protection
measurements and may require relatively high financial leverage.
Adequate alternate liquidity is maintained.
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.
COMMERCIAL PAPER
Standard & Poor's commercial paper ratings are a current assessments of the
likelihood of timely payment of debts considered short-term in the relevant
market.
A: Issues assigned this highest rating are regarded as having the greatest
capacity for timely payment. Issues in this category are delineated with the
numbers 1, 2 and 3 to indicate the relative degree of safety.
A-1: This designation indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus (+) sign designation.
A-2: Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1".
A-3: Issues carrying this designation have adequate capacity for timely
payment. They are, however, more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher designations.
B: Issues rated "B" are regarded as having only speculative capacity for
timely payment.
C: This rating is assigned to short term debt obligations with doubtful
capacity for payment.
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 had not expired, unless S&P believes
that such payments will be made during such grace period.
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.
- ----------
+ The ratings indicated herein are believed to be the most recent ratings
available at the date of this Statement of Additional Information for
the securities listed. Ratings are generally given to securities at the time
of issuance. While the rating agencies may from time to time revise such
ratings, they undertake no obligation to do so, and the ratings indicated
do not necessarily represent ratings which would be given to these securities
on the date of the Portfolio's fiscal year end.
<PAGE>
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 1994
exceeded projections, increasing 10.7% overall. The 10.8% increase in sales
tax revenue and the 9.3% increase in income tax revenue reflects the increased
economic growth in the State. With revenue growth outpacing an 8.8% increase
in expenditures, the State general fund ended fiscal year 1994 with a total
fund balance of $420.2 million. Fiscal year 1995 is expected to close with a
general fund balance of $115 million, and a budget stabilization ("rainy day"
fund) balance of approximately $203 million, with the two combined equal to
7.3% of total general fund expenditures.
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, 1995, the Portfolio had net assets of $144,521,015. 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). For the period from the Portfolio's
start of business, February 1, 1993, to the fiscal year ended September 30,
1993, the Portfolio paid BMR advisory fees of $268,894 (equivalent to 0.39%
(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 remains in effect until February 28, 1996. The Agreement may be continued
as described under "Investment Adviser and Administrator" in Part I of this
SAI.
ADMINISTRATOR
As stated under "Investment Adviser and Administrator" in Part I of this
SAI, the Administrator currently receives no compensation for providing
administrative services to the Fund. For the fiscal year ended July 31, 1995
and for the period from the start of business, December 13, 1993, to the
fiscal year ended July 31, 1994, $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, 1996 and may be
continued as described under "Service Plan" in Part I of this SAI. Prior to
February 1, 1996, the Fund made sales commission, distribution fee and service
fee payments pursuant to a Distribution Plan. During the fiscal year ended
July 31, 1995, the Principal Underwriter paid to Authorized Firms sales
commissions of $21,876 under that Plan on sales of Fund shares. During the
same period, the Fund paid sales commission payments under that Plan to the
Principal Underwriter aggregating $22,746. During such period, contingent
deferred sales charges ("CDSCs") aggregating approximately $600 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, 1995, the outstanding Uncovered
Distribution Charges of the Principal Underwriter calculated under the
Distribution Plan amounted to approximately $421,000 (which amount was
equivalent to 17.1% of the Fund's net assets on such date). During the fiscal
year ended July 31, 1995, the Fund paid service fee payments under the
Distribution Plan aggregating $6,090, of which $5,854 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, 1995, the Fund paid the Principal
Underwriter $87.50 for repurchase transactions handled by the Principal
Underwriter (being $2.50 for each such transaction).
CUSTODIAN
For the fiscal year ended July 31, 1995, the Fund paid IBT $4,972 and the
Portfolio paid IBT $65,302.
BROKERAGE
For the fiscal year ended July 31, 1995, the ten months ended July 31,
1994, and for the period from the start of business, February 1, 1993, to the
fiscal year ended September 30, 1993, 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, 1995, 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, 1995, 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 $1,692(2) $135,000(4)
Samuel L. Hayes, III ...... 0 1,736(3) 150,000(5)
Norton H. Reamer .......... 0 1,752 135,000
John L. Thorndike ......... 0 1,841 140,000
Jack L. Treynor ........... 0 1,784 140,000
- ----------
(1) The Eaton Vance fund complex consists of 211 registered investment
companies or series thereof.
(2) Includes $436 of deferred compensation.
(3) Includes $559 of deferred compensation.
(4) Includes $35,000 of deferred compensation.
(5) Includes $33,750 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 of this SAI, 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, 1995 and for the one year period ended July 31, 1995. 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. The total
return for such prior period has not been adjusted to reflect the Fund's
service fees and certain other expenses. The performance reflects the Fund's
sales charge effective February 1, 1996.
VALUE OF A $1,000 INVESTMENT
<TABLE>
<CAPTION>
TOTAL RETURN TOTAL RETURN
VALUE OF EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
INVESTMENT INVESTMENT AMOUNT OF INVESTMENT ---------------------------- ---------------------------
PERIOD DATE INVESTMENT<F1> ON 7/31/95 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------------------- ------------- -------------- ------------- ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of the Fund<F2> 7/25/91 $962.50 $1,291.13 34.14% 7.58% 29.11% 6.56%
1 Year Ended 7/31/95<F2> 7/31/94 $962.09 $1,024.04 6.44% 6.44% 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>
<F1> Initial investment less the maximum sales charge of 3.75%. This sales charge is effective February 1, 1996. Prior thereto,
Fund shares redeemed within one year of their purchase are subject to a contingent deferred sales charge of 1%.
<F2> If a portion of the Portfolio's and/or the Fund's expenses had not been subsidized, the Fund would have had lower returns.
</FN>
</TABLE>
For the thirty-day period ended July 31, 1995, the yield of the Fund was
4.35%. The yield required of a taxable security that would produce an after-
tax yield equivalent to that earned by the Fund of 4.35% would be 6.65%,
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.
The Fund's distribution rate (calculated on July 31, 1995 and based on the
Fund's monthly distribution paid July 24, 1995) was 4.45%, and the Fund's
effective distribution rate (calculated on the same date and based on the same
monthly distribution) was 4.55%. If a portion of the Fund's expenses had not
been allocated to the Administrator, the Fund would have had a lower
distribution rate and effective distribution rate.
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 December 29, 1995, 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 December 29, 1995, Merrill Lynch, Pierce, Fenner & Smith, Inc.,
Jacksonville, FL and Southwest Securities, Dallas, TX were the record owners
of approximately 32.4% and 20.2% 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. In
addition, as of such date, Sherely F. Randall, Trustee, Sherely F. Randall Liv
Trust U/A dtd 8/9/94, Green Valley, AZ owned approximately 9.2% of the
outstanding shares of the Fund. 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 Trust, which is a Massachusetts business trust established in 1985,
was originally called Eaton Vance High Yield Municipals Trust. The Trust
changed its name to Eaton Vance Municipals Trust on January 7, 1991. 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.
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.
<PAGE>
<TABLE>
<CAPTION>
COMBINED A FEDERAL AND ARIZONA STATE
SINGLE RETURN JOINT RETURN FEDERAL AND TAX EXEMPT YIELD OF:
- -------------------------- -------------------- ARIZONA 4% 4.5% 5% 5.5% 6% 6.5% 7%
STATE TAX ---------------------------------------------------------------
(TAXABLE INCOME<F1>) BRACKET<F2> 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
<F1> Net amount subject to federal and Arizona personal income tax after deductions and exemptions.
<F2> 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 a substantial portion
of the interest income distributed to Fund Shareholders will be 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. 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.
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 than had been budgeted. In fiscal
year 1993-94, the State had revenue collections which exceeded expenditures by
$38 million. In fiscal year 1994-95, revenues exceeded expenditures by $94
million. The State will make a $74 million contribution to an emergency
reserve, leaving the general fund reserve at $276 million, or roughly 7.6% of
total annual appropriations. Such emergency reserve transfers are not foreseen
to be required in the next several years. Revenues for the 1995-96 fiscal year
are budgeted to increase 4% while expenditures will increase 6%.
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, 1995, the Portfolio had net assets of $46,077,166. 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. For the
period from the Portfolio's start of business, February 1, 1993, to the fiscal
year ended September 30, 1993, absent a fee reduction, the Portfolio would
have paid BMR advisory fees of $15,122 (equivalent to 0.16% (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 expenses related to the
operation of the Portfolio in the amount of $12,114. The Portfolio's
Investment Advisory Agreement with BMR is dated October 13, 1992 and remains
in effect until February 28, 1996. The Agreement may be continued as described
under "Investment Adviser and Administrator" in Part I of this SAI.
ADMINISTRATOR
As stated under "Investment Adviser and Administrator" in Part I of this
SAI, the Administrator currently receives no compensation for providing
administrative services to the Fund. For the fiscal year ended July 31, 1995
and for the period from the start of business, December 10, 1993, to the
fiscal year ended July 31, 1994, $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, 1996 and may be
continued as described under "Service Plan" in Part I of this SAI. Prior to
February 1, 1996, the Fund made sales commission, distribution fee and service
fee payments pursuant to a Distribution Plan. During the fiscal year ended
July 31, 1995, the Principal Underwriter paid to Authorized Firms sales
commissions of $16,399 under that Plan on sales of Fund shares. During the
same period, the Fund paid sales commission payments under that Plan to the
Principal Underwriter aggregating $17,028. During such period, contingent
deferred sales charges ("CDSCs") aggregating approximately $200 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, 1995, the outstanding Uncovered
Distribution Charges of the Principal Underwriter calculated under the
Distribution Plan amounted to approximately $286,000 (which amount was
equivalent to 14.5% of the Fund's net assets on such date). During the fiscal
year ended July 31, 1995, the Fund paid service fee payments under the
Distribution Plan aggregating $4,594, of which $4,346 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, 1995, the Fund paid the Principal
Underwriter $125 for repurchase transactions handled by the Principal
Underwriter (being $2.50 for each such transaction).
CUSTODIAN
For the fiscal year ended July 31, 1995, the Fund paid IBT $4,950 and the
Portfolio paid IBT $16,604.
BROKERAGE
For the fiscal year ended July 31, 1995, the ten months ended July 31,
1994, and for the period from the start of business, February 1, 1993, to the
fiscal year ended September 30, 1993, 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, 1995, 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, 1995, 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 $333(2) $135,000(4)
Samuel L. Hayes, III ...... 0 322(3) 150,000(5)
Norton H. Reamer .......... 0 314 135,000
John L. Thorndike ......... 0 318 140,000
Jack L. Treynor ........... 0 343 140,000
- ----------
(1) The Eaton Vance fund complex consists of 211 registered investment
companies or series thereof.
(2) Includes $83 of deferred compensation.
(3) Includes $103 of deferred compensation.
(4) Includes $35,000 of deferred compensation.
(5) Includes $33,750 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 of this SAI, David C. Reilly (38) is a Vice
President of the Portfolio. Mr. Reilly has served as a Vice President of the
Portfolio since December 1, 1995. Mr. Reilly has been a Vice President of BMR
since 1992 and Eaton Vance since 1991 and an employee of Eaton Vance since
1991. Prior to joining Eaton Vance, he was a Vice President and a municipal
bond analyst at Scudder, Stevens & Clark (1984-1991). Mr. Reilly 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, 1995 and for the one year period ended July 31, 1995. 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. The total
return for such prior period has not been adjusted to reflect the Fund's
service fees and certain other expenses. The performance reflects the Fund's
sales charge effective February 1, 1996.
VALUE OF A $1,000 INVESTMENT
<TABLE>
<CAPTION>
TOTAL RETURN TOTAL RETURN
VALUE OF EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
INVESTMENT INVESTMENT AMOUNT OF INVESTMENT ---------------------------- ---------------------------
PERIOD DATE INVESTMENT<F1> ON 7/31/95 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------------------- ------------- -------------- ------------- ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of the Fund<F2> 8/25/92 $962.49 $1,130.44 17.45% 5.64% 13.05% 4.27%
1 Year Ended 7/31/95<F2> 7/31/94 $962.27 $1,018.93 5.89% 5.89% 1.92% 1.92%
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>
<F1> Initial investment less the maximum sales charge of 3.75%. This sales charge is effective February 1, 1996. Prior thereto,
Fund shares redeemed within one year of their purchase are subject to a contingent deferred sales charge of 1%.
<F2> If a portion of the Portfolio's and/or the Fund's expenses had not been subsidized, the Fund would have had lower returns.
</FN>
</TABLE>
For the thirty-day period ended July 31, 1995, the yield of the Fund was
4.65%. The yield required of a taxable security that would produce an after-
tax yield equivalent to that earned by the Fund of 4.65% would be 7.09%,
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.
The Fund's distribution rate (calculated on July 31, 1995 and based on the
Fund's monthly distribution paid July 24, 1995) was 4.62%, and the Fund's
effective distribution rate (calculated on the same date and based on the same
monthly distribution) was 4.72%. 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 distribution rate
and effective distribution rate.
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 December 29, 1995, 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 December 29, 1995, Donaldson Lufkin Jenrette Securities
Corporation Inc., Jersey City, NJ and Merrill Lynch, Pierce, Fenner & Smith,
Inc., Jacksonville, FL were the record owners of approximately 8.9% and 11.3%
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 Trust, which is a Massachusetts business trust established in 1985,
was originally called Eaton Vance High Yield Municipals Trust. The Trust
changed its name to Eaton Vance Municipals Trust on January 7, 1991. 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 1995.
<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<F1>) TAX BRACKET<F2> IS EQUIVALENT TO A FULLY TAXABLE YIELD OF:
- ------------------------------------------------ ------ ---------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Up to $ 23,350 Up to $ 39,000 19.25% 4.95% 5.57% 6.19% 6.81% 7.43% 8.05% 8.67%
$ 23,351 - $ 56,550 $ 39,001 - $ 94,250 31.60 5.85 6.58 7.31 8.04 8.77 9.50 10.23
$ 56,551 - $117,950 $ 94,251 - $143,600 34.45 6.10 6.86 7.63 8.39 9.15 9.92 10.68
$117,951 - $256,500 $143,601 - $256,500 39.20 6.58 7.40 8.22 9.05 9.87 10.69 11.51
Over $256,500 Over $256,500 42.62 6.97 7.84 8.71 9.59 10.46 11.33 12.20
<FN>
<F1> Net amount subject to federal and Colorado personal income tax after deductions and exemptions.
<F2> The Colorado income tax rate is 5%. The combined tax rates 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.
</FN>
</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 $114,700. The tax brackets
also do not show the effects of phaseout of personal exemptions for single
filers with adjusted gross income in excess of $114,700 and joint filers with
adjusted gross income in excess of $172,050. 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 has traditionally been of prime economic
importance to Connecticut, the non-manufacturing sector of employment
(primarily aircraft engines, helicopters and submarines) now dominate the
State's economy. Approximately 82% of the State's non-agricultural employment
is in the non-manufacturing sector, with 30% 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.
As of June 1995, the unemployment rate in Connecticut on a seasonally
adjusted basis was 5.4%, compared to 5.6% for the nation. Between June 1994
and June 1995, the State lost 1,700 non-farm jobs, with gains in the services,
and construction sectors being offset by losses in the manufacturing (durable
goods), finance, insurance and real estate sectors of the economy. The State's
economy is beginning a slow recovery, constrained by military spending cuts
and cost containment pressures in the insurance and biomedical industries. The
full economic impact of continued corporate downsizing in the defense and
insurance industries may not be fully realized.
The State derives over 70% of its revenues from taxes imposed by the
State. The two major taxes have been the sales and use tax and the corporation
business tax, each of which is sensitive to changes in the level of economic
activity in the State, but the Connecticut personal income tax on individuals,
trusts, and estates enacted in 1991 is expected to supersede them in
importance. 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 the changes to the
Corporation Business Tax -- a 4 year gradual rate reduction to 11.25%
beginning January 1, 1995; 11% beginning January 1, 1996; 10.5% beginning
January 1, 1997 and 10% beginning January 1, 1998.
During fiscal 1991-92, the State issued $965.7 million of Economic
Recovery Notes, of which $455.6 million remained outstanding as of March 1995.
The State ended the 1992-93 fiscal year with a $113.5 million General Fund
operating surplus and a $19.7 million General Fund surplus for the 1993-94
fiscal year. The estimated surplus at June 1995 for the General Fund is $74.5
million, and the estimated surplus for the Transportation Fund is $57.9
million.
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 in which two retarded persons seek placement outside
a State hospital, new programs, and damages on behalf of themselves and all
mentally retarded patients at the hospital; (vi) litigation involving claims
for refunds of taxes by several cable television companies; (vii) 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; (viii) 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; (ix) a class action by the Connecticut Criminal Defense
Lawyers Association claiming a campaign of illegal surveillance activity and
seeking damages and injunctive relief; (x) two actions for monetary damages
brought by a former patient at a State mental hospital stemming from an
attempted suicide that left her brain-damaged; (xi) an action challenging the
validity of the State's imposition of surcharges on hospital charges to
finance certain uncompensated care costs incurred by hospitals; and (xii) an
action challenging the validity of the State's imposition of gross earnings
taxes on hospital revenues to finance certain uncompensated care costs.
FEES AND EXPENSES
INVESTMENT ADVISER
As of July 31, 1995, the Portfolio had net assets of $195,275,789. 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). For the period from the Portfolio's
start of business, February 1, 1993, to the fiscal year ended September 30,
1993, the Portfolio paid BMR advisory fees of $331,388 (equivalent to 0.40%
(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 remains in effect until February 28, 1996. The Agreement may be continued
as described under "Investment Adviser and Administrator" in Part I of this
SAI.
ADMINISTRATOR
As stated under "Investment Adviser and Administrator" in Part I of this
SAI, the Administrator currently receives no compensation for providing
administrative services to 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, $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, 1996 and may be
continued as described under "Service Plan" in Part I of this SAI. The
Trustees have initially implemented the 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 based on the value of Fund shares sold by such
persons and remaining outstanding for at least twelve months. During the
fiscal year ended July 31, 1995, the Fund made service fee payments under the
Plan aggregating $36, which amount was paid to Authorized Firms.
PRINCIPAL UNDERWRITER
The total sales charges for sales of shares of the Fund for the fiscal
year ended July 31, 1995 was $28,595, of which $28 was received by the
Principal Underwriter and $28,567 was received by Authorized Firms.
For the fiscal year ended July 31, 1995, the Fund paid the Principal
Underwriter $7.50 for repurchase transactions handled by the Principal
Underwriter (being $2.50 for each such transactiion).
CUSTODIAN
For the fiscal year ended July 31, 1995, the Fund paid IBT $1,419 and the
Portfolio paid IBT $48,135.
BROKERAGE
For the fiscal year ended July 31, 1995, the ten months ended July 31,
1994, and for the period from the start of business, February 1, 1993, to the
fiscal year ended September 30, 1993, 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, 1995, 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, 1995, earned the following compensation
in their capacities as Trustees of the funds in the Eaton Vance fund
complex(1):
AGGREGATE
AGGREGATE COMPENSATION TOTAL COMPENSATION
COMPENSATION FROM FROM TRUST AND
NAME FROM FUND PORTFOLIO FUND COMPLEX
- ---- ----------- --------- ---------------
Donald R. Dwight .......... $0 $2,096(2) $135,000(4)
Samuel L. Hayes, III ...... 0 2,123(3) 150,000(5)
Norton H. Reamer .......... 0 2,133 135,000
John L. Thorndike ......... 0 2,227 140,000
Jack L. Treynor ........... 0 2,196 140,000
- ----------
(1) The Eaton Vance fund complex consists of 211 registered investment
companies or series thereof.
(2) Includes $525 of deferred compensation.
(3) Includes $682 of deferred compensation.
(4) Includes $35,000 of deferred compensation.
(5) Includes $33,750 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 of this SAI, Nicole Anderes (34) 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, 1995 and for the one year period ended July 31, 1995. 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. The total return for
such prior period has not been adjusted to reflect the Fund's distribution
fees and certain other expenses.
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT
TOTAL RETURN TOTAL RETURN
EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
VALUE OF ------------------------------ ------------------------------
INVESTMENT INVESTMENT AMOUNT OF INVESTMENT
PERIOD DATE INVESTMENT* ON 7/31/95 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
-------- ---------- ----------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of
the Fund+ 5/1/92 $962.76 $1,160.72 20.56% 5.92% 16.07% 4.69%
1 Year Ended
7/31/95+ 7/31/94 $962.82 $1,019.56 5.89% 5.89% 1.96% 1.96%
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.
- ----------
*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, 1995, the yield of the Fund was
5.21%. The yield required of a taxable security that would produce an after-
tax yield equivalent to that earned by the Fund of 5.21% would be 7.91%,
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.
The Fund's distribution rate (calculated on July 31, 1995 and based on the
Fund's monthly distribution paid July 31, 1995) was 5.49%, and the Fund's
effective distribution rate (calculated on the same date and based on the same
monthly distribution) was 5.63%. If a portion of the Fund's expenses had not
been allocated to the Administrator, the Fund would have had a lower
distribution rate and effective distribution rate.
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 December 29, 1995, 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 December 29, 1995, Merrill Lynch, Pierce, Fenner & Smith, Inc.,
Jacksonville, FL and Donaldson Lufkin Jenrette Securities Corporation Inc.,
Jersey City, NJ were the record owners of approximately 7.9% and 5.3% 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. In addition, as of such date, the following
shareholders owned beneficially and of record the percentages of outstanding
shares of the Fund indicated after their names: George J. Sherman 1989 Trust,
Wm. T. Sherman Trs dtd 12/19/89, West Hanford, CT (16.2%); Mary E. Corona,
Wethersfield, CT (6.2%); George H. Marcinek, Killingworth, CT (6.0%); Martha
W. Duck, Darien, CT (6.0%) and Carol Gardner Wallace, Fairfield, CT (5.2%). 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 Trust, which is a Massachusetts business trust established in 1985,
was originally called Eaton Vance High Yield Municipals Trust. The Trust
changed its name to Eaton Vance Municipals Trust on January 7, 1991. 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
*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 the first time since 1966, the unemployment rate was below the
national average. An improving economy and successful cost containment have
enabled the State to improve its financial position. For 1994, the Budget
Stabilization Fund was $779 million and is projected to reach $1.1 billion for
1995. 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, 1995, the Portfolio had net assets of $191,262,981. 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). For the period from the Portfolio's
start of business, February 1, 1993, to the fiscal year ended September 30,
1993, the Portfolio paid BMR advisory fees of $443,391 (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 remains in effect until February 28, 1996. The Agreement may be continued
as described under "Investment Adviser and Administrator" in Part I of this
SAI.
ADMINISTRATOR
As stated under "Investment Adviser and Administrator" in Part I of this
SAI, the Administrator currently receives no compensation for providing
administrative services to the Fund. For the fiscal year ended July 31, 1995,
and for the period from the start of business, December 7, 1993, to the fiscal
year ended July 31, 1994, $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, 1996 and may be
continued as described under "Service Plan" in Part I of this SAI. Prior to
February 1, 1996, the Fund made sales commission, distribution fee and service
fee payments pursuant to a Distribution Plan. During the fiscal year ended
July 31, 1995, the Principal Underwriter paid to Authorized Firms sales
commissions of $40,804 under that Plan on sales of Fund shares. During the
same period, the Fund paid sales commission payments under that Plan to the
Principal Underwriter aggregating $41,523. During such period, contingent
deferred sales charges ("CDSCs") aggregating approximately $50 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, 1995, the outstanding Uncovered
Distribution Charges of the Principal Underwriter calculated under the
Distribution Plan amounted to approximately $527,000 (which amount was
equivalent to 11.8% of the Fund's net assets on such date). During the fiscal
year ended July 31, 1995, the Fund paid service fee payments under the
Distribution Plan aggregating $11,008, of which $10,877 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, 1995, the Fund paid the Principal
Underwriter $177.50 for repurchase transactions handled by the Principal
Underwriter (being $2.50 for each such transaction).
CUSTODIAN
For the fiscal year ended July 31, 1995, the Fund paid IBT $3,955 and the
Portfolio paid IBT $1,944.
BROKERAGE
For the fiscal year ended July 31, 1995, the ten months ended July 31,
1994, and for the period from the start of business, February 1, 1993, to the
fiscal year ended September 30, 1993, 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, 1995, 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, 1995, 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 ......... $33 $2,198(2) $135,000(4)
Samuel L. Hayes, III ..... 32 2,219(3) 150,000(5)
Norton H. Reamer ......... 31 2,229 135,000
John L. Thorndike ........ 32 2,325 140,000
Jack L. Treynor .......... 34 2,300 140,000
- ----------
(1) The Eaton Vance fund complex consists of 211 registered investment
companies or series thereof.
(2) Includes $525 of deferred compensation.
(3) Includes $682 of deferred compensation.
(4) Includes $35,000 of deferred compensation.
(5) Includes $33,750 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 of this SAI, Timothy T. Browse (36) 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, 1995 and for the one-year period ended July 31, 1995. 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. The total
return for such prior period has not been adjusted to reflect the Fund's
service fees and certain other expenses. The performance reflects the Fund's
sales charge effective February 1, 1996.
VALUE OF A $1,000 INVESTMENT
<TABLE>
<CAPTION>
TOTAL RETURN TOTAL RETURN
VALUE OF EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
INVESTMENT INVESTMENT AMOUNT OF INVESTMENT ---------------------------- ---------------------------
PERIOD DATE INVESTMENT<F1> ON 7/31/95 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------------------- ------------- -------------- ------------- ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of the Fund<F2> 4/19/91 $962.54 $1,257.82 30.68% 6.44% 25.78% 5.50%
1 Year Ended 7/31/95<F2> 7/31/94 $962.42 $1,015.52 5.52% 5.52% 1.56% 1.56%
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>
<F1> Initial investment less the maximum sales charge of 3.75%. This sales charge is effective February 1, 1996. Prior thereto,
Fund shares redeemed within one year of their purchase are subject to a contingent deferred sales charge of 1%.
<F2> If a portion of the Fund's expenses had not been subsidized, the Fund would have had lower returns.
</FN>
</TABLE>
For the thirty-day period ended July 31, 1995, the yield of the Fund was
3.97%. The yield required of a taxable security that would produce an after-
tax yield equivalent to that earned by the Fund of 3.97% would be 6.26%,
assuming a combined federal and State tax rate of 36.54%. If a portion of the
Fund's expenses had not been allocated to the Administrator, the Fund would
have had a lower yield.
The Fund's distribution rate (calculated on July 31, 1995 and based on the
Fund's monthly distribution paid July 24, 1995) was 4.40%, and the Fund's
effective distribution rate (calculated on the same date and based on the same
monthly distribution) was 4.49%. If a portion of the Fund's expenses had not
been allocated to the Administrator, the Fund would have had a lower
distribution rate and effective distribution rate.
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 December 29, 1995, 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 December 29, 1995, Merrill Lynch, Pierce, Fenner & Smith, Inc.,
Jacksonville, FL was the record owner of approximately 76.4% 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 Trust, which is a Massachusetts business trust established in 1985,
was originally called Eaton Vance High Yield Municipals Trust. The Trust
changed its name to Eaton Vance Municipals Trust on January 7, 1991. 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 FEDERAL AND 4% 4.5% 5% 5.5% 6% 6.5% 7%
- ------------------------- --------------------- MI STATE ---------------------------------------------------------------
(TAXABLE INCOME)<F1> TAX BRACKET<F2> 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>
<F1> Net amount subject to federal and Michigan personal income tax after deductions and exemptions.
<F2> 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.
</FN>
</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 economic downturn has been less severe than that of the
nation, as evidenced by the State's employment growth in the early 1990s. 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, 1995, the Portfolio had net assets of $82,967,696. 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). For the period from the Portfolio's
start of business, February 1, 1993, to the fiscal year ended September 30,
1993, the Portfolio paid BMR advisory fees of $107,030 (equivalent to 0.30%
(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 remains in effect until February 28, 1996. The Agreement may be continued
as described under "Investment Adviser and Administrator" in Part I of this
SAI.
ADMINISTRATOR
As stated under "Investment Adviser and Administrator" in Part I of this
SAI, the Administrator currently receives no compensation for providing
administrative services to the Fund. For the fiscal year ended July 31, 1995,
and for the period from the start of business, December 9, 1993, to the fiscal
year ended July 31, 1994, $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, 1996 and may be
continued as described under "Service Plan" in Part I of this SAI. Prior to
February 1, 1996, the Fund made sales commission, distribution fee and service
fee payments pursuant to a Distribution Plan. During the fiscal year ended
July 31, 1995, the Principal Underwriter paid to Authorized Firms sales
commissions of $35,560 under that Plan on sales of Fund shares. During the
same period, the Fund paid sales commission payments under that Plan to the
Principal Underwriter aggregating $36,299. During such period, there were no
contingent deferred sales charges imposed on early redeeming shareholders. As
at July 31, 1995, the outstanding Uncovered Distribution Charges of the
Principal Underwriter calculated under the Distribution Plan amounted to
approximately $419,000 (which amount was equivalent to 11.4% of the Fund's net
assets on such date). During the fiscal year ended July 31, 1995, the Fund
accrued service fee payments under the Distribution Plan aggregating $9,699,
of which $9,447 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, 1995, the Fund paid the Principal
Underwriter $105.00 for repurchase transactions handled by the Principal
Underwriter (being $2.50 for each such transaction).
CUSTODIAN
For the fiscal year ended July 31, 1995, the Fund paid IBT $3,348 and the
Portfolio paid IBT $20,399.
BROKERAGE
For the fiscal year ended July 31, 1995, the ten months ended July 31,
1994, and for the period from the start of business, February 1, 1993, to the
fiscal year ended September 30, 1993, 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, 1995, 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, 1995, 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 ....... $25 $1,164(2) $135,000(4)
Samuel L. Hayes, III ... 24 1,222(3) 150,000(5)
Norton H. Reamer ....... 23 1,254 135,000
John L. Thorndike ...... 24 1,336 140,000
Jack L. Treynor ........ 26 1,235 140,000
- ----------
(1) The Eaton Vance fund complex consists of 211 registered investment
companies or series thereof.
(2) Includes $294 of deferred compensation.
(3) Includes $393 of deferred compensation.
(4) Includes $35,000 of deferred compensation.
(5) Includes $33,750 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 of this SAI, David C. Reilly (38) is a Vice
President of the Portfolio. Mr. Reilly has served as a Vice President of the
Portfolio since December 1, 1995. Mr. Reilly has been a Vice President of BMR
since 1992 and Eaton Vance since 1991 and an employee of Eaton Vance since
1991. Prior to joining Eaton Vance, he was a Vice President and a municipal
bond analyst at Scudder, Stevens & Clark (1984-1991). Mr. Reilly 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 29, 1991 through
July 31, 1995 and for the one-year period ended July 31, 1995. 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. The total
return for such prior period has not been adjusted to reflect the Fund's
service fees and certain other expenses. The performance reflects the Fund's
sales charge effective February 1, 1996.
VALUE OF A $1,000 INVESTMENT
<TABLE>
<CAPTION>
TOTAL RETURN TOTAL RETURN
VALUE OF EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
INVESTMENT INVESTMENT AMOUNT OF INVESTMENT ---------------------------- ----------------------------
PERIOD DATE INVESTMENT<F1> ON 7/31/95 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------------------- ------------- ------------ ---------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of the Fund<F2> 7/29/91 $962.55 $1,214.72 26.20% 5.98% 21.47% 4.97%
1 Year Ended 7/31/95<F2> 7/31/94 $962.01 $1,004.78 4.45% 4.45% 0.53% 0.53%
Past performance is not indicative of future results. Investment return and principal value will fluctuate; shares, when
redeemed, may be worth more or less than their original cost.
- ----------
<FN>
<F1> Initial investment less the maximum sales charge of 3.75%. This sales charge is effective February 1, 1996. Prior thereto,
Fund shares redeemed within one year of their purchase are subject to a contingent deferred sales charge of 1%.
<F2> If a portion of the Fund's expenses had not been subsidized, the Fund would have had lower returns.
</FN>
</TABLE>
For the thirty-day period ended July 31, 1995, the yield of the Fund was
4.43%. The yield required of a taxable security that would produce an after-
tax yield equivalent to that earned by the Fund of 4.43% would be 7.02%,
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.
The Fund's distribution rate (calculated on July 31, 1995 and based on the
Fund's monthly distribution paid July 24, 1995) was 4.58%, and the Fund's
effective distribution rate (calculated on the same date and based on the same
monthly distribution) was 4.67%. If a portion of the Fund's expenses had not
been allocated to the Administrator, the Fund would have had a lower
distribution rate and effective distribution rate.
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 December 29, 1995, 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 December 29, 1995, the following shareholders owned of record the
percentages of outstanding shares indicated after their names: PaineWebber FBO
B.F. Nelson Inc., Minneapolis, MN (28.6%); PaineWebber FBO Larry Ross,
Bloomington, MN (14.1%); and PaineWebber FBO James Yackel, Gertrude Boyum &
Jean Pedersen co-Trustees U/A dtd. 12/31/76, Hammond, IN (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 Trust, which is a Massachusetts business trust established in 1985,
was originally called Eaton Vance High Yield Municipals Trust. The Trust
changed its name to Eaton Vance Municipals Trust on January 7, 1991. 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)<F1> TAX BRACKET<F2> 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>
<F1> Net amount subject to federal and Minnesota personal income tax after deductions and exemptions.
<F2> 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.
</FN>
</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.
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 one of the highest in the nation. 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 May 1995 was 6.5% compared to 5.7%
nationally.
As of the date of this Statement of Additional Information, New Jersey's
general obligation debt was rated Aa1, AA+ and AA+, by Moody's, S&P and Fitch,
respectively. As a result of New Jersey's fiscal weakness, evidenced by
declining fund balances, S&P placed the State's general obligation debt and
related agency and lease obligations on CreditWatch with negative implications
in June 1991. In July, 1991 S&P downgraded the State's general obligation debt
from AAA to AA+. As part of this action, numerous agency and lease obligation
debts were also downgraded accordingly. These downgrades did not affect state
university and college ratings. In August 1992, Moody's downgraded New Jersey
to Aa1 from Aaa due to the use of one-time revenue items, revenue shortfalls
and ongoing operating deficits. S&P affirmed their AA+ rating for the State,
but retained the negative outlook. On December 16, 1992, Fitch lowered their
rating on the State to AA+ from AAA. The rating action was due to the State's
decision, with the most recent bond issuance, to defer debt service in the
immediate future in order to provide for unmet capital needs, while increasing
debt service requirements in future years wnen additional resources may or may
not be available.
As part of the 1992-1993 budget, the Legislature cut approximately $1
billion in spending from the Governor's budget, including cutbacks in both the
State's homestead rebate and general assistance programs. To cover the
shortfall resulting from the cutbacks, the State employee pension fund was
revalued, allowing the State to reduce its contribution, and a surplus in the
school aid funds was applied to the General Fund. 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.
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, 1995, the Portfolio had net assets of $411,038,422. 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). For the period from the
Portfolio's start of business, February 1, 1993, to the fiscal year ended
September 30, 1993, the Portfolio paid BMR advisory fees of $1,012,430
(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 remains in effect until February 28, 1996. The
Agreement may be continued as described under "Investment Adviser and
Administrator" in Part I of this SAI.
ADMINISTRATOR
As stated under "Investment Adviser and Administrator" in Part I of this
SAI, the Administrator currently receives no compensation for providing
administrative services to the Fund. For the fiscal year ended July 31, 1995
and for the period from the start of business, April 13, 1994, to the fiscal
year ended July 31, 1994, $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, 1996 and may be
continued as described under "Service Plan" in Part I of this SAI. The
Trustees have initially implemented the 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 based on the value of Fund shares sold by such
persons and remaining outstanding for at least twelve months. During the
fiscal year ended July 31, 1995, the Fund made service fee payments under the
Plan aggregating $28, which amount was paid to Authorized Firms.
PRINCIPAL UNDERWRITER
For the fiscal year ended July 31, 1995, total sales charges of $62,628
were paid on sales of Fund shares. All of such amount was paid to Authorized
Firms.
For the fiscal year ended July 31, 1995, the Fund paid the Principal
Underwriter $15.00 for repurchase transactions handled by the Principal
Underwriter (being $2.50 for each such transaction).
CUSTODIAN
For the fiscal year ended July 31, 1995, the Fund paid IBT $2,584 and the
Portfolio paid IBT $91,170.
BROKERAGE
For the fiscal year ended July 31, 1995, the ten months ended July 31,
1994 and for the period from the start of business, February 1, 1993, to the
fiscal year ended September 30, 1993, 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, 1995, 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, 1995, earned the following compensation
in their capacities as Trustees of the funds in the Eaton Vance fund complex
(1):
AGGREGATE
AGGREGATE COMPENSATION TOTAL COMPENSATION
COMPENSATION FROM FROM TRUST AND
NAME FROM FUND PORTFOLIO FUND COMPLEX
- ---- ----------- --------- ---------------
Donald R. Dwight .......... $0 $3,594(2) $135,000(4)
Samuel L. Hayes, III ...... 0 3,569(3) 150,000(5)
Norton H. Reamer .......... 0 3,545 135,000
John L. Thorndike ......... 0 3,661 140,000
Jack L. Treynor ........... 0 3,742 140,000
- ----------
(1) The Eaton Vance fund complex consists of 211 registered investment
companies or series thereof.
(2) Includes $889 of deferred compensation.
(3) Includes $1,086 of deferred compensation.
(4) Includes $35,000 of deferred compensation.
(5) Includes $33,750 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, 1995 and for the one year period ended July 31, 1995. 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. The total
return for such prior period has not been adjusted to reflect the Fund's
distribution fees and certain other expenses.
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT
TOTAL RETURN TOTAL RETURN
EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
VALUE OF ------------------------------ ------------------------------
INVESTMENT INVESTMENT AMOUNT OF INVESTMENT
PERIOD DATE INVESTMENT* ON 7/31/95 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
-------- ---------- ----------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of
the Fund+ 1/8/91 $962.06 $1,331.56 38.42% 7.39% 33.16% 6.48%
1 Year
Ended 7/31/95+ 7/31/94 $962.24 $1,025.94 6.62% 6.62% 2.59% 2.59%
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.
- ----------
*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, 1995, the yield of the Fund was
5.46%. The yield required of a taxable security that would produce an after-
tax yield equivalent to that earned by the Fund of 5.46% would be 8.47%,
assuming a combined federal and New Jersey tax rate of 35.54%. If a portion of
the Fund's expenses had not been allocated to the Administrator, the Fund
would have had a lower yield.
The Fund's distribution rate (calculated on July 31, 1995 and based on the
Fund's monthly distribution paid July 31, 1995) was 5.69%, and the Fund's
effective distribution rate (calculated on the same date and based on the same
monthly distribution) was 5.84%. If a portion of the Fund's expenses had not
been allocated to the Administrator, the Fund would have had a lower
distribution rate and effective distribution rate.
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 December 29, 1995, 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 December 29, 1995, Merrill Lynch, Pierce, Fenner & Smith, Inc.,
Jacksonville, FL and Smith Barney, Inc., New York, NY, were the record owners
of approximately 14.8% and 8.8%, 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 Trust, which is a Massachusetts business trust established in 1985,
was originally called Eaton Vance High Yield Municipals Trust. The Trust
changed its name to Eaton Vance Municipals Trust on January 7, 1991. 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
*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 1993,
manufacturing accounted for 18% of employment. As of May 1995, the unadjusted
unemployment rate for Pennsylvania and the United States was 5.7%. Per capita
income in Pennsylvania for 1993 of $21,352 was higher than the per capita
income of the United States of $20,817.
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 years
ended June 30, 1992, June 30, 1993 and June 30, 1994 with fund balances of
$87,455, $698,945 and $892,940, respectively.
The Governor's fiscal year 1996 budget contains no new taxes and proposed
numerous cost reduction programs. Under the 1996 budget, state spending will
increase 2.3% over fiscal year 1995 appropriations. The fiscal year 1996
budget included tax reductions of approximately $214.8 million and projects a
$3.2 million fiscal year-end unappropriated surplus. The state Tax
Stabilization Fund had a balance at March 31, 1995 of $65.3 million.
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.
The Motor License Fund ended fiscal year ended June 30, 1994 with an
unappropriated balance of $107.5 million on a budgetary basis. State revenue
collections for fiscal year 1995 are projected to increase slightly from
fiscal 1994. The budget for fiscal year 1996 includes a 2.3% increase in
appropriations from the prior year. The unappropriated balance of the General
Fund at June 30, 1995 is projected to be approximately $3 million on a
budgetary basis.
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.
Total outstanding general obligation debt totalled $5,075.8 million as of
June 30, 1994, an increase of $37.0 million from June 30, 1993. In its current
debt financing plans, Pennsylvania is emphasizing infrastructure investment to
improve and rehabilitate existing capital facilities, such as water supply
systems, and to construct new facilities, such as flood control systems and
public buildings.
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, 1994 include
the Delaware River Joint Toll Bridge Commission ($56.3 million), the Delaware
River Port Authority ($233.9 million), the Pennsylvania Economic Development
Financing Authority ($659.9 million), the Pennsylvania Energy Development
Authority ($162.1 million), the Pennsylvania Higher Education Assistance
Agency ($1,283.8 million), the Pennsylvania Higher Education Facilities
Authority ($1,965.8 million), the Pennsylvania Industrial Development
Authority ($357.3 million), the Pennsylvania Infrastructure Investment
Authority ($227.5 million), the Pennsylvania Turnpike Commission ($1,252.6
million), the Philadelphia Regional Port Authority ($63.9 million) and the
State Public School Building Authority ($286.8 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 $2,300 million of bonds and
notes outstanding, and the Hospitals and Higher Education Facilities Authority
of Philadelphia which issued $21.1 million in bonds in 1993.
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, 1995, the Portfolio had net assets of $502,250,304. 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). For the period from the
Portfolio's start of business, February 1, 1993, to the fiscal year ended
September 30, 1993, the Portfolio paid BMR advisory fees of $1,300,484
(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 remains in effect until February 28, 1996. The
Agreement may be continued as described under "Investment Adviser and
Administrator" in Part I of this SAI.
ADMINISTRATOR
As stated under "Investment Adviser and Administrator" in Part I of this
SAI, the Administrator currently receives no compensation for providing
administrative services to the Fund. For the fiscal year ended July 31, 1995
and for the period from the start of business, June 1, 1994, to the fiscal
year ended July 31, 1994, $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, 1996 and may be
continued as described under "Service Plan" in Part I of this SAI. The
Trustees have initially implemented the 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 based on the value of Fund shares sold by such
persons and remaining outstanding for at least twelve months. During the
fiscal year ended July 31, 1995, the Fund made service fee payments under the
Plan aggregating $56, which amount was paid to Authorized Firms.
PRINCIPAL UNDERWRITER
For the fiscal year ended July 31, 1995, total sales charges of $58,444
were paid on sales of Fund shares. All of such amount was paid to Authorized
Firms.
For the fiscal year ended July 31, 1995, the Fund paid the Principal
Underwriter $17.50 for repurchase transactions handled by the Principal
Underwriter (being $2.50 for each such transaction).
CUSTODIAN
For the fiscal year ended July 31, 1995, the Fund paid IBT $850 and the
Portfolio paid no custodian fees to IBT.
BROKERAGE
For the fiscal year ended July 31, 1995, the ten months ended July 31,
1994 and for the period from the start of business, February 1, 1993, to the
fiscal year ended September 30, 1993, 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, 1995, 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, 1995, earned the following compensation
in their capacities as Trustees of the funds in the Eaton Vance fund complex
(1):
AGGREGATE COMPENSATION TOTAL COMPENSATION
COMPENSATION FROM FROM TRUST AND
NAME FROM FUND PORTFOLIO FUND COMPLEX
- ---- ----------- --------- ---------------
Donald R. Dwight .......... $0 $3,994(2) $135,000(4)
Samuel L. Hayes, III ...... 0 3,955(3) 150,000(5)
Norton H. Reamer .......... 0 3,922 135,000
John L. Thorndike ......... 0 4,043 140,000
Jack L. Treynor ........... 0 4,154 140,000
- ----------
(1) The Eaton Vance fund complex consists of 211 registered investment
companies or series thereof.
(2) Includes $988 of deferred compensation.
(3) Includes $1,209 of deferred compensation.
(4) Includes $35,000 of deferred compensation.
(5) Includes $33,750 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 of this SAI, Timothy T. Browse (36) 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, 1995 and for the one year period ended July 31, 1995. 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. The total
return for such prior period has not been adjusted to reflect the Fund's
distribution fees and certain other expenses.
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT
TOTAL RETURN TOTAL RETURN
VALUE OF EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
INVESTMENT INVESTMENT AMOUNT OF INVESTMENT ------------------------------ ------------------------------
PERIOD DATE INVESTMENT* ON 7/31/95 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
-------- ---------- ----------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of the Fund+ 1/8/91 $962.39 $1,317.22 36.87% 7.13% 31.72% 6.23%
1 Year Ended
7/31/95+ 7/31/94 $962.64 $1,014.78 5.41% 5.41% 1.48% 1.48%
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.
- ----------
*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, 1995, the yield of the Fund was
5.46%. The yield required of a taxable security that would produce an after-
tax yield equivalent to that earned by the Fund of 5.46% would be 8.92%,
assuming a combined federal and State tax rate of 37.99%. If a portion of the
Fund's expenses had not been allocated to the Administrator, the Fund would
have had a lower yield.
The Fund's distribution rate (calculated on July 31, 1995 and based on the
Fund's monthly distribution paid July 31, 1995) was 5.64%, and the Fund's
effective distribution rate (calculated on the same date and based on the same
monthly distribution) was 5.79%. If a portion of the Fund's expenses had not
been allocated to the Administrator, the Fund would have had a lower
distribution rate and effective distribution rate.
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 December 29, 1995, 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 December 29, 1995, BHC Securities Inc., Philadelphia, PA, Merrill
Lynch, Pierce, Fenner & Smith, Inc., Jacksonville, FL and Donaldson Lufkin
Jenrette Securities Corporation Inc., Jersey City, NJ were the record owners
of approximately 26.5%, 6.1% and 5.6%, respectively, of the outstanding
shares, which were held on behalf of their customers who are the benficial
owners of such shares, and as to which they had voting power under certain
limited circumstances. In addition, as of such date the following shareholders
owned beneficially and of record the percentages of outstanding shares of the
Fund indicated after their names: Charles J. Venango & Margaret Venango
JTWROS, Feasterville, PA (5.6%) and Marion Forman, Wynnewood, PA (5.6%). 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 Trust, which is a Massachusetts business trust established in 1985,
was originally called Eaton Vance High Yield Municipals Trust. The Trust
changed its name to Eaton Vance Municipals Trust on January 7, 1991. The Fund
changed its name from EV Traditional Pennsylvania Tax Free Fund to EV
Traditional Pennsylvania Municipals Fund on December 1, 1995.
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.
<PAGE>
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). 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 1994
cash balance was $1.6 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.
FEES AND EXPENSES
INVESTMENT ADVISER
As of July 31, 1995, the Portfolio had net assets of $28,227,021. 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. For the period from the Portfolio's start of business,
February 1, 1993, to the fiscal year ended September 30, 1993, absent a fee
reduction, the Portfolio would have paid BMR advisory fees of $9,014
(equivalent to 0.16% (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 $13,473. The Portfolio's Investment Advisory Agreement with BMR is
dated October 13, 1992 and remains in effect until February 28, 1996. The
Agreement may be continued as described under "Investment Adviser and
Administrator" in Part I of this SAI.
ADMINISTRATOR
As stated under "Investment Adviser and Administrator" in Part I of this
SAI, the Administrator currently receives no compensation for providing
administrative services to the Fund. For the fiscal year ended July 31, 1995
and for the period from the start of business, December 8, 1993, to the fiscal
year ended July 31, 1994, $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, 1996 and may be
continued as described under "Service Plan" in Part I of this SAI. Prior to
February 1, 1996, the Fund made sales commission, distribution fee and service
fee payments pursuant to a Distribution Plan. During the fiscal year ended
July 31, 1995, the Principal Underwriter paid to Authorized Firms sales
commissions of $5,561 under that Plan on sales of Fund shares. During the same
period, the Fund paid sales commission payments under that Plan to the
Principal Underwriter aggregating $5,614. During such period, no contingent
deferred sales charges were paid to the Principal Underwriter. As at July 31,
1995, the outstanding Uncovered Distribution Charges of the Principal
Underwriter calculated under the Distribution Plan amounted to approximately
$81,000 (which amount was equivalent to 17.3% of the Fund's net assets on such
date). During the fiscal year ended July 31, 1995, the Fund paid service fee
payments under the Distribution Plan aggregating $1,486, of which $1,483 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, 1995, the Fund paid the Principal
Underwriter $22.50 for repurchase transactions handled by the Principal
Underwriter (being $2.50 for each such transaction).
CUSTODIAN
For the fiscal year ended July 31, 1995, the Fund paid IBT $4,862 and the
Portfolio paid IBT $7,834.
BROKERAGE
For the fiscal year ended July 31, 1995, the ten months ended July 31,
1994, and for the period from the start of business, February 1, 1993, to the
fiscal year ended September 30, 1993, 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, 1995, 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, 1995, 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 $333(2) $135,000(4)
Samuel L. Hayes, III ...... 0 322(3) 150,000(5)
Norton H. Reamer .......... 0 314 135,000
John L. Thorndike ......... 0 318 140,000
Jack L. Treynor ........... 0 343 140,000
- ----------
(1) The Eaton Vance fund complex consists of 211 registered investment
companies or series thereof.
(2) Includes $83 of deferred compensation.
(3) Includes $103 of deferred compensation.
(4) Includes $35,000 of deferred compensation.
(5) Includes $33,750 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 of this SAI, Nicole Anderes (34) 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 (1978-1992).
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, 1995 and for the one year period ended July 31, 1995. 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. The total
return for such prior period has not been adjusted to reflect the Fund's
service fees and certain other expenses. The performance reflects the Fund's
sales charge effective February 1, 1996.
VALUE OF A $1,000 INVESTMENT
<TABLE>
<CAPTION>
TOTAL RETURN TOTAL RETURN
VALUE OF EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
INVESTMENT INVESTMENT AMOUNT OF INVESTMENT ---------------------------- ---------------------------
PERIOD DATE INVESTMENT<F1> ON 7/31/95 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------------------- ------------- -------------- ------------- ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of the Fund<F2> 3/24//92 $962.49 $1,176.61 22.25% 6.17% 17.66% 4.97%
1 Year Ended 7/31/95<F2> 7/31/94 $962.46 $1,012.08 5.16% 5.16% 1.21% 1.21%
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>
<F1> Initial investment less the maximum sales charge of 3.75%. This sales charge is effective February 1, 1996. Prior thereto,
Fund shares redeemed within one year of their purchase are subject to a contingent deferred sales charge of 1%.
<F2> If a portion of the Portfolio's and/or the Fund's expenses had not been subsidized, the Fund would have had lower returns.
</FN>
</TABLE>
For the thirty-day period ended July 31, 1995, the yield of the Fund was
4.42%. The yield required of a taxable security that would produce an after-
tax yield equivalent to that earned by the Fund of 4.42% would be 6.41%,
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.
The Fund's distribution rate (calculated on July 31, 1995 and based on the
Fund's monthly distribution paid July 24, 1995) was 4.90%, and the Fund's
effective distribution rate (calculated on the same date and based on the same
monthly distribution) was 5.01%. 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 distribution rate
and effective distribution rate.
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 December 29, 1995, 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 December 29, 1995, Merrill Lynch, Pierce, Fenner & Smith, Inc.,
Jacksonville, FL was the record owner of approximately 76.9% 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
shareholder owned beneficially and of record the percentage of outstanding
shares of the Fund indicated after the name: PaineWebber FBO, Dr. David H.
Medley, Rosemary Medley, TenCom, Dallas, TX (12.5%). 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 Trust, which is a Massachusetts business trust established in 1985,
was originally called Eaton Vance High Yield Municipals Trust. The Trust
changed its name to Eaton Vance Municipals Trust on January 7, 1991. 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<F1> RETURN IS<F1> 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>
<F1> Net amount subject to federal personal income tax after deductions and exemptions.
</FN>
</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
MUTUAL FUNDS
EV TRADITIONAL
MUNICIPAL
FUNDS
STATEMENT OF ADDITIONAL INFORMATION
MARCH 29, 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, BOS725, P.O. Box 1559, Boston, MA 02104
(800) 262-1122
AUDITORS
Deloitte & Touche LLP, 125 Summer Street, Boston, MA 02110
T-C12/1SA
<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, 1995:
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)
INCLUDED IN PART B:
INCORPORATED BY REFERENCE TO THE ANNUAL REPORTS FOR THE FUNDS, EACH DATED
JULY 31, 1995, FILED ELECTRONICALLY PURSUANT TO SECTION 30(B)(2) OF THE
INVESTMENT COMPANY ACT OF 1940 (ACCESSION NO. 0000950135-95-001994 FOR THE
CLASSIC FUNDS, AND ACCESSION NO. 0000950135-95-002074 FOR THE TRADITIONAL
FUNDS) ARE THE FOLLOWING:
<TABLE>
<CAPTION>
For:
<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>
The Financial Statements for the above-referenced Funds for the time
periods set forth in the Funds' Annual Reports dated July 31, 1995 include:
Statement of Assets and Liabilities
Statement of Operations
Statements of Changes in Net Assets
Financial Highlights
Notes to Financial Statements
Independent Auditors' Report
(Each Fund changed the phrase "Tax Free" in its name to "Municipals" on
December 1, 1995. In addition, the Arizona, Colorado, Michigan, Minnesota
and Texas Funds will change their names from "EV Classic [State Name]
Municipals Fund" to "EV Traditional [State Name] Municipals Fund" on
February 1, 1996).
The Financial Statements for the Arizona, Colorado, Connecticut, Michigan,
Minnesota, New Jersey, Pennsylvania and Texas Municipals Portfolios for
the time periods set forth in the Funds' Annual Reports dated July 31,
1995 include:
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
(Each Portfolio changed the phrase "Tax Free" in its name to "Municipals"
on December 1, 1995.)
(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 June 19, 1995 filed as Exhibit (1)(b) to
Post-Effective Amendment No. 55 and incorporated herein by
reference.
(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) Amended Distribution Agreement between Eaton Vance Municipals
Trust (on behalf of its Classic series) and Eaton Vance
Distributors, Inc. with attached schedules (including Amended
Schedule A dated September 29, 1995) filed as Exhibit (6)(a)(1)
to Post-Effective Amendment No. 55 and incorporated herein by
reference.
(a)Amended Schedule A dated February 1, 1996 to the Amended
Distribution Agreement (filed as Exhibit (6)(a)(1)) filed
herewith.
(2) Amended Distribution Agreement between Eaton Vance Municipals
Trust (on behalf of its Marathon series) and Eaton Vance
Distributors, Inc. with attached schedules (including Amended
Schedule A dated September 29, 1995) filed as Exhibit (6)(a)(2)
to Post-Effective Amendment No. 55 and incorporated herein by
reference.
(3) Amended Distribution Agreement between Eaton Vance Municipals
Trust (on behalf of its Traditional series) and Eaton Vance
Distributors, Inc. with attached schedules (including Amended
Schedule A dated September 29, 1995) filed as Exhibit (6)(a)(3)
to Post-Effective Amendment No. 55 and incorporated herein by
reference.
(a)Amended Schedule A dated February 1, 1996 to the Amended
Distribution Agreement (filed as Exhibit (6)(a)(3)) 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) Not applicable
(11) Consent of Independent Certified Public Accountants for EV
Traditional Arizona Municipals Fund, EV Traditional Colorado
Municipals Fund, EV Traditional Connecticut Mu- nicipals 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 September 29, 1995) filed as Exhibit (15)(a) to
Post-Effective Amendment No. 55 and incorporated herein by
reference.
(1) Amended Schedule A dated February 1, 1996 to the Amended
Distribution Plan (filed as Exhibit (15)(a)) filed herewith.
(b) 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.
(c) 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 September
29, 1995) filed as Exhibit (15)(c) to Post-Effective Amendment
No. 55 and incorporated herein by reference.
(1) Amended Schedule A dated February 1, 1996 to the Amended Service
Plan (filed as Exhibit (15)(c)) 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 UMBER OF RECORD HOLDERS
Shares of beneficial interest as of December 29, 1995
EV Marathon Alabama Municipals Fund 2,049
EV Classic Alabama Municipals Fund 65
EV Marathon Arizona Municipals Fund 3,128
EV Classic Arizona Municipals Fund 53
EV Marathon Arkansas Municipals Fund 2,180
EV Classic Arkansas Municipals Fund 19
EV Marathon California Municipals Fund 7,757
EV Classic California Municipals Fund 41
EV Marathon Colorado Municipals Fund 1,201
EV Classic Colorado Municipals Fund 96
EV Marathon Connecticut Municipals Fund 4,589
EV Classic Connecticut Municipals Fund 96
EV Marathon Florida Municipals Fund 13,779
EV Classic Florida Municipals Fund 58
EV Marathon Georgia Municipals Fund 2,886
EV Classic Georgia Municipals Fund 58
EV Marathon Kentucky Municipals Fund 3,619
EV Classic Kentucky Municipals Fund 30
EV Marathon Louisiana Municipals Fund 608
EV Classic Louisiana Municipals Fund 35
EV Marathon Maryland Municipals Fund 3,154
EV Classic Maryland Municipals Fund 49
EV Marathon Massachusetts Municipals Fund 7,195
EV Classic Massachusetts Municipals Fund 53
EV Marathon Michigan Municipals Fund 4,450
EV Classic Michigan Municipals Fund 46
EV Marathon Minnesota Municipals Fund 2,627
EV Classic Minnesota Municipals Fund 79
EV Marathon Mississippi Municipals Fund 701
EV Classic Mississippi Municipals Fund 49
EV Marathon Missouri Municipals Fund 2,741
EV Classic Missouri Municipals Fund 110
EV Marathon National Municipals Fund 44,547
EV Classic National Municipals Fund 838
EV Marathon New Jersey Municipals Fund 10,978
EV Classic New Jersey Municipals Fund 101
EV Marathon New York Municipals Fund 15,490
EV Classic New York Municipals Fund 137
EV Marathon North Carolina Municipals Fund 4,747
EV Classic North Carolina Municipals Fund 104
EV Marathon Ohio Municipals Fund 7,802
EV Classic Ohio Municipals Fund 55
EV Marathon Oregon Municipals Fund 3,799
EV Classic Oregon Municipals Fund 50
EV Marathon Pennsylvania Municipals Fund 13,985
EV Classic Pennsylvania Municipals Fund 92
EV Marathon Rhode Island Municipals Fund 835
EV Classic Rhode Island Municipals Fund 39
EV Marathon South Carolina Municipals Fund 1,400
EV Classic South Carolina Municipals Fund 26
EV Marathon Tennessee Municipals Fund 1,581
EV Classic Tennessee Municipals Fund 23
EV Marathon Texas Municipals Fund 447
EV Classic Texas Municipals Fund 7
EV Marathon Virginia Municipals Fund 5,030
EV Classic Virginia Municipals Fund 38
EV Marathon West Virginia Municipals Fund 1,199
EV Classic West Virginia Municipals Fund 24
Massachusetts Municipal Bond Portfolio 36
EV Traditional California Municipals Fund 45
EV Traditional Connecticut Municipals Fund 39
EV Traditional Florida Municipals Fund 101
EV Traditional National Municipals Fund 641
EV Traditional New Jersey Municipals Fund 79
EV Traditional New York Municipals Fund 129
EV Traditional Pennsylvania Municipals Fund 49
ITEM 27. INDEMNIFICATION
The Registrant's By-Laws filed as Exhibit (2) to Post-Effective Amendment
No. 55 contain pro- visions limiting the liability, and providing for
indemnification, of the Trustees and officers under certain circumstances.
Registrant's Trustees and officers are insured under a standard mutual
fund errors and omissions insurance policy covering incurred by reason of
negligent errors and omissions committed in their capacities as such.
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
<TABLE>
<CAPTION>
(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 mutual funds named below:
<S> <C>
EV Classic Alabama Municipals Fund EV Classic Senior Floating-Rate Fund
EV Classic Arizona Municipals Fund EV Classic Strategic Income Fund
EV Classic Arkansas Municipals Fund EV Classic South Carolina Municipals Fund
EV Classic California Limited Maturity EV Classic Special Equities Fund
Municipals Fund EV Classic Stock Fund
EV Classic California Municipals Fund EV Classic Tennessee Municipals Fund
EV Classic Colorado Municipals Fund EV Classic Texas Municipals Fund
EV Classic Connecticut Limited Maturity EV Classic Total Return Fund
Municipals Fund EV Classic Virginia Municipals Fund
EV Classic Connecticut Municipals Fund EV Classic West Virginia Municipals Fund
EV Classic Florida Insured Municipals Fund EV Marathon Alabama Municipals Fund
EV Classic Florida Limited Maturity EV Marathon Arizona Limited Maturity
Municipals Fund Municipals Fund
EV Classic Florida Municipals Fund EV Marathon Arizona Municipals Fund
EV Classic Georgia Municipals Fund EV Marathon Arkansas Municipals Fund
EV Classic Government Obligations Fund EV Marathon California Limited Maturity
EV Classic Greater China Growth Fund Municipals Fund
EV Classic Growth Fund EV Marathon California Municipals Fund
EV Classic Hawaii Municipals Fund EV Marathon Colorado Municipals Fund
EV Classic High Income Fund EV Marathon Connecticut Limited Maturity
EV Classic Information Age Fund Municipals Fund
EV Classic Investors Fund EV Marathon Connecticut Municipals Fund
EV Classic Kansas Municipals Fund EV Marathon Emerging Markets Fund
EV Classic Kentucky Municipals Fund EV Marathon Florida Insured Municipals Fund
EV Classic Louisiana Municipals Fund EV Marathon Florida Limited Maturity
EV Classic Maryland Municipals Fund Municipals Fund
EV Classic Massachusetts Limited Maturity EV Marathon Florida Municipals Fund
Municipals Fund EV Marathon Georgia Municipals Fund
EV Classic Massachusetts Municipals Fund EV Marathon Gold & Natural Resources Fund
EV Classic Michigan Limited Maturity EV Marathon Government Obligations Fund
Municipals Fund EV Marathon Greater China Growth Fund
EV Classic Michigan Municipals Fund EV Marathon Greater India Fund
EV Classic Minnesota Municipals Fund EV Marathon Growth Fund
EV Classic Mississippi Municipals Fund EV Marathon Hawaii Municipals Fund
EV Classic Missouri Municipals Fund EV Marathon High Income Fund
EV Classic National Limited Maturity EV Marathon High Yield Municipals Fund
Municipals Fund EV Marathon Information Age Fund
EV Classic National Municipals Fund EV Marathon Investors Fund
EV Classic New Jersey Limited Maturity EV Marathon Kansas Municipals Fund
Municipals Fund EV Marathon Kentucky Municipals Fund
EV Classic New Jersey Municipals Fund EV Marathon Louisiana Municipals Fund
EV Classic New York Limited Maturity EV Marathon Maryland Municipals Fund
Municipals Fund EV Marathon Massachusetts Limited Maturity
EV Classic New York Municipals Fund Municipals Fund
EV Classic North Carolina Municipals Fund EV Marathon Massachusetts Municipals Fund
EV Classic Ohio Limited Maturity Municipals Fund EV Marathon Michigan Limited Maturity
EV Classic Ohio Municipals Fund Municipals Fund
EV Classic Oregon Municipals Fund EV Marathon Michigan Municipals Fund
EV Classic Pennsylvania Limited Maturity EV Marathon Minnesota Municipals Fund
Municipals Fund EV Marathon Mississippi Municipals Fund
EV Classic Pennsylvania Municipals Fund EV Marathon Missouri Municipals Fund
EV Classic Rhode Island Municipals Fund
<PAGE>
EV Marathon National Limited Maturity EV Traditional Emerging Markets Fund
Municipals Fund EV Traditional Florida Insured Municipals Fund
EV Marathon National Municipals Fund EV Traditional Florida Limited Maturity
EV Marathon New Jersey Limited Maturity Municipals Fund
Municipals Fund EV Traditional Florida Municipals Fund
EV Marathon New Jersey Municipals Fund EV Traditional Government Obligations Fund
EV Marathon New York Limited Maturity EV Traditional Greater China Growth Fund
Municipals Fund EV Traditional Greater India Fund
EV Marathon New York Municipals Fund EV Traditional Growth Fund
EV Marathon North Carolina Limited Maturity EV Traditional High Yield Municipals Fund
Tax Free Fund Eaton Vance Income Fund of Boston
EV Marathon North Carolina Municipals Fund EV Traditional Information Age Fund
EV Marathon Ohio Limited Maturity EV Traditional Investors Fund
Municipals Fund Eaton Vance Municipal Bond Fund L.P.
EV Marathon Ohio Municipals Fund EV Traditional National Limited Maturity
EV Marathon Oregon Municipals Fund Municipals Fund
EV Marathon Pennsylvania Limited Maturity EV Traditional National Municipals Fund
Municipals Fund EV Traditional New Jersey Municipals Fund
EV Marathon Pennsylvania Municipals Fund EV Traditional New York Limited Maturity
EV Marathon Rhode Island Municipals Fund Municipals Fund
EV Marathon Strategic Income Fund EV Traditional New York Municipals Fund
EV Marathon South Carolina Municipals Fund EV Traditional Pennsylvania Municipals Fund
EV Marathon Special Equities Fund EV Traditional Special Equities Fund
EV Marathon Stock Fund EV Traditional Stock Fund
EV Marathon Tennessee Municipals Fund EV Traditional Total Return Fund
EV Marathon Texas Municipals Fund Eaton Vance Cash Management Fund
EV Marathon Total Return Fund Eaton Vance Liquid Assets Fund
EV Marathon Virginia Limited Maturity Eaton Vance Money Market Fund
Tax Free Fund Eaton Vance Prime Rate Reserves
EV Marathon Virginia Municipals Fund Eaton Vance Short-Term Treasury Fund
EV Marathon West Virginia Municipals Fund Eaton Vance Tax Free Reserves
EV Traditional California Municipals Fund Massachusetts Municipal Bond Portfolio
EV Traditional Connecticut Municipals Fund
</TABLE>
(b)
(1) (2) (3)
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICE
BUSINESS ADDRESS WITH PRINCIPAL UNDERWRITER WITH REGISTRANT
------------------ -------------------------- ---------------
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
45 Windsor Lane
Palm Beach Gardens, Florida
H. Day Brigham, Jr.* Vice President None
Susan W. Bukima Vice President None
106 Princess Street
Alexandria, Virginia
Jeffrey W. Butterfield Vice President None
9378 Mirror Road
Columbus, Indiana
Mark A. Carlson* Vice President None
Jeffrey Chernoff Vice President None
115 Concourse West
Bright Waters, New York
James S. Comforti Vice President None
1859 Crest Drive
Encinitas, California
Mark P. Doman Vice President None
107 Pine Street
Philadelphia, Pennsylvania
Michael A. Foster Vice President None
850 Kelsey Court
Centerville, Ohio
William M. Gillen Vice President None
280 Rea Street
North Andover, Massachusetts
Hugh S. Gilmartin Vice President None
1531-184th Avenue, NE
Bellevue, Washington
Brian Jacobs* Senior Vice President None
Stephen D. Johnson Vice President None
13340 Providence Lake Drive
Alpharetta, Georgia
Thomas J. Marcello Vice President None
553 Belleville Avenue
Glen Ridge, New Jersey
Timothy D. McCarthy Vice President None
9801 Germantown Pike
Lincoln Woods Apt. 416
Lafayette Hill, Pennsylvania
Morgan C. Mohrman* Senior Vice President None
James A. Naughton* Vice President None
James L. O'Connor* Vice President None
Thomas Otis* Secretary and Clerk Secretary
George D. Owen Vice President None
1911 Wildwood Court
Blue Springs, Missouri
F. Anthony Robinson Vice President None
510 Gravely Hill Road
Wakefield, Rhode Island
Benjamin A. Rowland, Jr.* Vice President, None
Treasurer and Director
John P. Rynne* Vice President None
George V.F. Schwab, Jr. Vice President None
9501 Hampton Oaks Lane
Charlotte, North Carolina
Cornelius J. Sullivan* Vice President None
David M. Thill Vice President None
126 Albert Drive
Lancaster, New York
Chris Volf Vice President None
6517 Thoroughbred Loop
Odessa, Florida
Sue Wilder Vice President None
141 East 89th Street
New York, New York
- ----------
*Address is 24 Federal Street, Boston, MA 02110
(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,
53 State Street, Boston, MA 02104, with the exception of certain corporate
documents and portfolio trading documents which are in the possession and
custody, Eaton Vance Management, 24 Federal Street, Boston, MA 02110.
Registrant is informed that all applicable accounts, books and documents
required to be maintained by registered investment advisers are in the custody
and possession of Eaton Vance Management and Boston Management and Research.
ITEM 31. MANAGEMENT SERVICES
Not applicable
ITEM 32. UNDERTAKINGS
The Registrant undertakes to furnish to each person to whom a prospectus
is delivered a copy of the latest annual report to shareholders, upon request
and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, and the
Investment Company Act of 1940, the Registrant has duly caused this Amendment
to its Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized in the City of Boston, and the Commonwealth of
Massachusetts, on the 25th day of January, 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) January 25, 1996
- ------------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and Accounting
/s/JAMES L. O'CONNOR Officer January 25, 1996
- ------------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee January 25, 1996
- ------------------------------------
DONALD R. DWIGHT
/s/JAMES B. HAWKES Trustee January 25, 1996
- ------------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee January 25, 1996
- ------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee January 25, 1996
- ------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee January 25, 1996
- ------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee January 25, 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
25th day of January, 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) January 25, 1996
- ------------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and Accounting
/s/JAMES L. O'CONNOR Officer January 25, 1996
- ------------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee January 25, 1996
- ------------------------------------
DONALD R. DWIGHT
/s/JAMES B. HAWKES Trustee January 25, 1996
- ------------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee January 25, 1996
- ------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee January 25, 1996
- ------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee January 25, 1996
- ------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee January 25, 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
25th day of January, 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) January 25, 1996
- ------------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and Accounting
/s/JAMES L. O'CONNOR Officer January 25, 1996
- ------------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee January 25, 1996
- ------------------------------------
DONALD R. DWIGHT
/s/JAMES B. HAWKES Trustee January 25, 1996
- ------------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee January 25, 1996
- ------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee January 25, 1996
- ------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee January 25, 1996
- ------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee January 25, 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
25th day of January, 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) January 25, 1996
- ------------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and Accounting
/s/JAMES L. O'CONNOR Officer January 25, 1996
- ------------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee January 25, 1996
- ------------------------------------
DONALD R. DWIGHT
/s/JAMES B. HAWKES Trustee January 25, 1996
- ------------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee January 25, 1996
- ------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee January 25, 1996
- ------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee January 25, 1996
- ------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee January 25, 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
25th day of January, 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) January 25, 1996
- ------------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and Accounting
/s/JAMES L. O'CONNOR Officer January 25, 1996
- ------------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee January 25, 1996
- ------------------------------------
DONALD R. DWIGHT
/s/JAMES B. HAWKES Trustee January 25, 1996
- ------------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee January 25, 1996
- ------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee January 25, 1996
- ------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee January 25, 1996
- ------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee January 25, 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
25th day of January, 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) January 25, 1996
- ------------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and Accounting
/s/JAMES L. O'CONNOR Officer January 25, 1996
- ------------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee January 25, 1996
- ------------------------------------
DONALD R. DWIGHT
/s/JAMES B. HAWKES Trustee January 25, 1996
- ------------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee January 25, 1996
- ------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee January 25, 1996
- ------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee January 25, 1996
- ------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee January 25, 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
25th day of January, 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) January 25, 1996
- ------------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and Accounting
/s/JAMES L. O'CONNOR Officer January 25, 1996
- ------------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee January 25, 1996
- ------------------------------------
DONALD R. DWIGHT
/s/JAMES B. HAWKES Trustee January 25, 1996
- ------------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee January 25, 1996
- ------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee January 25, 1996
- ------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee January 25, 1996
- ------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee January 25, 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
25th day of January, 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) January 25, 1996
- ------------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and Accounting
/s/JAMES L. O'CONNOR Officer January 25, 1996
- ------------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee January 25, 1996
- ------------------------------------
DONALD R. DWIGHT
/s/JAMES B. HAWKES Trustee January 25, 1996
- ------------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee January 25, 1996
- ------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee January 25, 1996
- ------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee January 25, 1996
- ------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee January 25, 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
25th day of January, 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) January 25, 1996
- ------------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and Accounting
/s/JAMES L. O'CONNOR Officer January 25, 1996
- ------------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee January 25, 1996
- ------------------------------------
DONALD R. DWIGHT
/s/JAMES B. HAWKES Trustee January 25, 1996
- ------------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee January 25, 1996
- ------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee January 25, 1996
- ------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee January 25, 1996
- ------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee January 25, 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
- ---------- ------------ ----------
(6)(a)(1)(a) Amended Schedule A dated February 1, 1996 to the
Amended Distribution Agreement (filed as Exhibit
(6)(a)(1)).
(6)(a)(3)(a) Amended Schedule A dated February 1, 1996 to the
amended Distribution Agreement (filed as Exhibit
(6)(a)(3)).
(11) Consent of Independent Certified Public Accountants
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)(a)(1) Amended Schedule A dated February 1, 1996 to the
Amended Distribution Plan (filed as Exhibit (15)(a)).
(15)(c)(1) Amended Schedule A dated February 1, 1996 to the Amended
Service Plan (filed as Exhibit (15)(c)).
(16) Schedules for Computation of Performance Quotations.
EXHIBIT 99.6a1a
AMENDED SCHEDULE A
EATON VANCE MUNICIPALS TRUST
AMENDED DISTRIBUTION AGREEMENT
(CLASSIC FUNDS)
EFFECTIVE: FEBRUARY 1, 1996
Name of Fund Inception Date of Original Agreement
EV Classic California Municipals Fund* November 22, 1993/January 27, 1995
EV Classic Connecticut Municipals Fund November 29, 1993
EV Classic Florida Municipals Fund November 22, 1993
EV Classic National Municipals Fund November 22, 1993
EV Classic New Jersey Municipals Fund November 22, 1993
EV Classic New York Municipals Fund November 22, 1993
EV Classic Pennsylvania Municipals Fund November 22, 1993
EV Classic Rhode Island Municipals Fund November 29, 1993
- ----------------------------
*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.
EXHIBIT 99.6a3a
<TABLE>
<CAPTION>
AMENDED SCHEDULE A
EATON VANCE MUNICIPALS TRUST
AMENDED DISTRIBUTION AGREEMENT
(TRADITIONAL FUNDS)
EFFECTIVE: FEBRUARY 1, 1996
NAME OF FUND INCEPTION DATE OF PRIOR AGREEMENTS
- -------------- ----------------------------------
<S> <C>
EV Traditional Alabama Municipals Fund* November 29, 1993/January 27, 1995
EV Traditional Arizona Municipals Fund* November 29, 1993/January 27, 1995
EV Traditional Arkansas Municipals Fund* February 1, 1994/January 27, 1995
EV Traditional California Municipals Fund** April 14, 1994
EV Traditional Colorado Municipals Fund* November 29, 1993/January 27, 1995
EV Traditional Connecticut Municipals Fund March 21, 1994
EV Traditional Florida Municipals Fund March 7, 1994
EV Traditional Georgia Municipals Fund* November 29, 1993/January 27, 1995
EV Traditional Kentucky Municipals Fund* November 29, 1993/January 27, 1995
EV Traditional Louisiana Municipals Fund* February 1, 1995/January 27, 1995
EV Traditional Maryland Municipals Fund* November 29, 1993/January 27, 1995
EV Traditional Massachusetts Municipals Fund* November 29, 1993/January 27, 1995
EV Traditional Michigan Municipals Fund* November 29, 1993/January 27, 1995
EV Traditional Minnesota Municipals Fund* November 29, 1993/January 27, 1995
EV Traditional Mississippi Municipals Fund* November 29, 1993/January 27, 1995
EV Traditional Missouri Municipals Fund* November 29, 1993/January 27, 1995
EV Traditional National Municipals Fund March 7, 1994
EV Traditional New Jersey Municipals Fund March 21, 1994
EV Traditional New York Municipals Fund March 7, 1994
EV Traditional North Carolina Municipals Fund* November 29, 1993/January 27, 1995
EV Traditional Ohio Municipals Fund* November 29, 1993/January 27, 1995
EV Traditional Oregon Municipals Fund* November 29, 1993/January 27, 1995
EV Traditional Pennsylvania Municipals Fund March 21, 1994
EV Traditional South Carolina Municipals Fund* February 1, 1994/January 27, 1995
EV Traditional Tennessee Municipals Fund* November 29, 1993/January 27, 1995
EV Traditional Texas Municipals Fund* November 29, 1993/January 27, 1995
EV Traditional Virginia Municipals Fund* November 29, 1993/January 27, 1995
EV Traditional West Virginia Municipals Fund* November 29, 1993/January 27, 1995
</TABLE>
*This fund formerly was 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 99.11
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 60 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 reports dated
August 25, 1995, relating to EV Classic Arizona Tax Free Fund, EV Classic
Colorado Tax Free Fund, EV Traditional Connecticut Tax Free Fund, EV Classic
Michigan Tax Free Fund, EV Classic Minnesota Tax Free Fund, EV Traditional
New Jersey Tax Free Fund, EV Traditional Pennsylvania Tax Free Fund and EV
Classic Texas Tax Free Fund, and of our report dated August 25, 1995, relating
to Arizona Tax Free Portfolio, Colorado Tax Free Portfolio, Connecticut Tax
Free Portfolio, Michigan Tax Free Portfolio, Minnesota Tax Free Portfolio, New
Jersey Tax Free Portfolio, Pennsylvania Tax Free Portfolio and Texas Tax Free
Portfolio, which reports are included in the Annual Report to Shareholders for
the year ended July 31, 1995 which is incorporated by reference in the
Statement of Additional Information. (Each Fund and Portfolio changed the
phrase "Tax Free" in its name to "Municipals" on December 1, 1995. In
addition, the Arizona, Colorado, Michigan, Minnesota and Texas Funds will
change their names from "EV Classic [State Name] Municipals Fund" to EV
Traditional [State Name] Municipals Fund'' on February 1, 1996).
We also consent to the reference to our Firm under the heading "The Fund's
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.
DELOITTE & TOUCHE LLP
January 25, 1996
Boston, Massachusetts
EXHIBIT 99.15a1
AMENDED SCHEDULE A
EATON VANCE MUNICIPALS TRUST
AMENDED DISTRIBUTION PLAN
(CLASSIC FUNDS)
EFFECTIVE: FEBRUARY 1, 1996
Name of Fund Inception Date of Original Plan
EV Classic California Municipals Fund* November 22, 1993
EV Classic Connecticut Municipals Fund November 29, 1993
EV Classic Florida Municipals Fund November 22, 1993
EV Classic National Municipals Fund November 22, 1993
EV Classic New Jersey Municipals Fund November 22, 1993
EV Classic New York Municipals Fund November 22, 1993
EV Classic Pennsylvania Municipals Fund November 22, 1993
EV Classic Rhode Island Municipals Fund November 29, 1993
- -------------------------------
*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.
EXHIBIT 99.15(c)(1)
<TABLE>
<CAPTION>
AMENDED SCHEDULE A
EATON VANCE MUNICIPALS TRUST
AMENDED SERVICE PLAN
(TRADITIONAL FUNDS)
EFFECTIVE: FEBRUARY 1, 1996
NAME OF FUND INCEPTION DATE OF PRIOR PLANS
<S> <C>
EV Traditional Alabama Municipals Fund* November 29, 1993/January 27, 1995
EV Traditional Arizona Municipals Fund* November 29, 1993/January 27, 1995
EV Traditional Arkansas Municipals Fund* February 1, 1994/January 27, 1995
EV Traditional California Municipals Fund** April 14, 1994
EV Traditional Colorado Municipals Fund* November 29, 1993/January 27, 1995
EV Traditional Connecticut Municipals Fund March 21, 1994
EV Traditional Florida Municipals Fund March 7, 1994
EV Traditional Georgia Municipals Fund* November 29, 1993/January 27, 1995
EV Traditional Kentucky Municipals Fund* November 29, 1993/January 27, 1995
EV Traditional Louisiana Municipals Fund* February 1, 1995/January 27, 1995
EV Traditional Maryland Municipals Fund* November 29, 1993/January 27, 1995
EV Traditional Massachusetts Municipals Fund* November 29, 1993/January 27, 1995
EV Traditional Michigan Municipals Fund* November 29, 1993/January 27, 1995
EV Traditional Minnesota Municipals Fund* November 29, 1993/January 27, 1995
EV Traditional Mississippi Municipals Fund* November 29, 1993/January 27, 1995
EV Traditional Missouri Municipals Fund* November 29, 1993/January 27, 1995
EV Traditional National Municipals Fund March 7, 1994
EV Traditional New Jersey Municipals Fund March 21, 1994
EV Traditional New York Municipals Fund March 7, 1994
EV Traditional North Carolina Municipals Fund* November 29, 1993/January 27, 1995
EV Traditional Ohio Municipals Fund* November 29, 1993/January 27, 1995
EV Traditional Oregon Municipals Fund* November 29, 1993/January 27, 1995
EV Traditional Pennsylvania Municipals Fund March 21, 1994
EV Traditional South Carolina Municipals Fund* February 1, 1994/January 27, 1995
EV Traditional Tennessee Municipals Fund* November 29, 1993/January 27, 1995
EV Traditional Texas Municipals Fund* November 29, 1993/January 27, 1995
EV Traditional Virginia Municipals Fund* November 29, 1993/January 27, 1995
EV Traditional West Virginia Municipals Fund* November 29, 1993/January 27, 1995
- -------------------------------
*This fund formerly was a Classic series of the Trust with a Rule 12b-1 distribution plan.
**This fund is a successor in operations to a fund which was reorganized, effective October 1, 1995.
</TABLE>
<PAGE>
EXHIBIT 99.16
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, 1995 and for the 1 year period
ended July 31, 1995. 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.
<TABLE>
VALUE OF A $1,000 INVESTMENT
<CAPTION>
VALUE OF VALUE OF TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT INITIAL INVESTMENT EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
PERIOD DATE INVESTMENT* ON 07/31/95 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ------ ---- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 07/25/91 $962.50 $1,291.13 34.14% 7.58% 29.11% 6.56%
1 YEAR ENDED
07/31/95 07/31/94 $962.09 $1,024.04 6.44% 6.44% 2.45% 2.45%
</TABLE>
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%.
CALCULATION OF DISTRIBUTION RATE AND EFFECTIVE DISTRIBUTION RATE
The distribution rate as of 07/31/95 was 4.45% and was calculated by annualizing
the most recent dividend distribution ($0.038575360) and dividing the result by
the current maximum offering price ($9.88).
The effective distribution rate as of 07/31/95 was 4.55% and was calculated by
dividing the distribtion rate by the compounding period (365/32), and then
compounding the result by adding 1, raising the sum to a power equal to the
compounding period, and subtracting 1 from the result according to the following
formula:
(365/32)
EFFECTIVE DISTRIBUTION RATE = [(DISTRIBUTION RATE/(365/32))+1] - 1
<PAGE>
Exhibit 16
EV TRADITIONAL ARIZONA MUNICIPALS FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 7/31/95:
Interest Income Earned: $12,103
Plus Dividend Income Earned:
------
Equal Gross Income: $12,103
Minus Expenses: $2,980
------
Equal Net Investment Income: $9,123
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 257,263
------
Equal Net Investment Income Earned Per Share: $0.0355
Net Asset Value Per Share 7/31/95: $9.88
30 Day Yield*: 4.35%
Divided by One minus the Tax Rate of 31%: 0.69
------
Equal Tax Equivalent Yield **: 6.30%
Divided by one minus a tax rate of 34.59%: 0.6541
------
Equal Tax Equivalent Yield***: 6.65%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0355/$9.88)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and Arizona tax rate of 34.59%
<PAGE>
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, 1995 and for the 1 year period
ended July 31, 1995. 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.
<TABLE>
VALUE OF A $1,000 INVESTMENT
<CAPTION>
VALUE OF VALUE OF TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT INITIAL INVESTMENT EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
PERIOD DATE INVESTMENT* ON 07/31/95 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ------ ---- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 08/25/92 $962.49 $1,130.44 17.45% 5.64% 13.05% 4.27%
1 YEAR ENDED
07/31/95 07/31/94 $962.27 $1,018.93 5.89% 5.89% 1.92% 1.92%
</TABLE>
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%.
CALCULATION OF DISTRIBUTION RATE AND EFFECTIVE DISTRIBUTION RATE
The distribution rate as of 07/31/95 was 4.62% and was calculated by annualizing
the most recent dividend distribution ($0.038838368) and dividing the result by
the current maximum offering price ($9.59).
The effective distribution rate as of 07/31/95 was 4.72% and was calculated by
dividing the distribtion rate by the compounding period (365/32), and then
compounding the result by adding 1, raising the sum to a power equal to the
compounding period, and subtracting 1 from the result according to the following
formula:
(365/32)
EFFECTIVE DISTRIBUTION RATE = [(DISTRIBUTION RATE/(365/32))+1] - 1
<PAGE>
Exhibit 16
EV TRADITIONAL COLORADO MUNICIPALS FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 7/31/95:
Interest Income Earned: $9,829
Plus Dividend Income Earned:
------
Equal Gross Income: $9,829
Minus Expenses: $2,031
------
Equal Net Investment Income: $7,798
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 212,129
------
Equal Net Investment Income Earned Per Share: $0.0368
Net Asset Value Per Share 7/31/95: $9.59
30 Day Yield*: 4.65%
Divided by One minus the Tax Rate of 31%: 0.69
------
Equal Tax Equivalent Yield **: 6.74%
Divided by one minus a tax rate of 34.45%: 0.6555
------
Equal Tax Equivalent Yield***: 7.09%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0368/$9.59)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and Colorado tax rate of 34.45%
<PAGE>
Exhibit 16
INVESTMENT PERFORMANCE -- EV TRADITIONAL CONNECTICUT TAX FREE 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, 1995 and for the 1 year period
ended July 31, 1995. 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.
<TABLE>
VALUE OF A $1,000 INVESTMENT
<CAPTION>
VALUE OF VALUE OF TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT INITIAL INVESTMENT EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
PERIOD DATE INVESTMENT* ON 07/31/95 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------- ---------- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 05/01/92 $962.76 $1,160.72 20.56% 5.92% 16.07% 4.69%
1 YEAR ENDED
07/31/95 07/31/94 $962.82 $1,019.56 5.89% 5.89% 1.96% 1.96%
</TABLE>
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%.
CALCULATION OF DISTRIBUTION RATE AND EFFECTIVE DISTRIBUTION RATE
The distribution rate as of 07/31/95 was 5.49% and was calculated by annualizing
the most recent dividend distribution ($0.048835633) and dividing the result by
the current maximum offering price ($10.48).
The effective distribution rate as of 07/31/95 was 5.63% and was calculated by
dividing the distribtion rate by the compounding period (365/31), and then
compounding the result by adding 1, raising the sum to a power equal to the
compounding period, and subtracting 1 from the result according to the following
formula:
(365/31)
EFFECTIVE DISTRIBUTION RATE = [(DISTRIBUTION RATE/(365/31))+1] - 1
<PAGE>
Exhibit 16
EV TRADITIONAL CONNECTICUT TAX FREE FUND
TAX EQUIVALENT YIELD CALCULATION
For the 30 days ended 7/31/95:
Interest Income Earned: $5,264
Plus Dividend Income Earned:
----------
Equal Gross Income: $5,264
Minus Expenses: $461
----------
Equal Net Investment Income: $4,803
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 106,803
----------
Equal Net Investment Income Earned Per Share: $0.0450
Net Asset Value Per Share 7/31/95: $10.48
30 Day Yield*: 5.21%
Divided by One minus the Tax Rate of 31%: 0.69
----------
Equal Tax Equivalent Yield**: 7.55%
Divided by one minus a tax rate of 34.11%: 0.6589
----------
Equal Tax Equivalent Yield***: 7.91%
*Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0450/$10.48)+1)-1]
**Assuming a tax rate of 31%
***Assuming a combined federal and Connecticut tax rate of 34.11%
<PAGE>
Exhibit 16
EV TRADITIONAL CONNECTICUT TAX FREE FUND
CALCULATION OF YIELD
For the 30 days ended 7/31/95:
Interest Income Earned: $5,264
Plus Dividend Income Earned:
----------
Equal Gross Income: $5,264
Minus Expenses: $461
----------
Equal Net Investment Income: $4,803
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 106,803
----------
Equal Net Investment Income Earned Per Share: $0.0450
Maximum Offering Price Per Share 7/31/95: $10.48
30 Day Yield*: 5.21%
*Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0450/$10.48)+1)-1]
<PAGE>
Exhibit 16
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, 1995 and for the 1 year period
ended July 31, 1995. 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.
<TABLE>
VALUE OF A $1,000 INVESTMENT
<CAPTION>
VALUE OF VALUE OF TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT INITIAL INVESTMENT EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
PERIOD DATE INVESTMENT* ON 07/31/95 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ------ ---- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 04/19/91 $962.54 $1,257.82 30.68% 6.44% 25.78% 5.50%
1 YEAR ENDED
07/31/95 07/31/94 $962.42 $1,015.52 5.52% 5.52% 1.56% 1.56%
</TABLE>
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%.
CALCULATION OF DISTRIBUTION RATE AND EFFECTIVE DISTRIBUTION RATE
The distribution rate as of 07/31/95 was 4.40% and was calculated by annualizing
the most recent dividend distribution ($0.037084960) and dividing the result by
the current maximum offering price ($9.62).
The effective distribution rate as of 07/31/95 was 4.49% and was calculated by
dividing the distribtion rate by the compounding period (365/32), and then
compounding the result by adding 1, raising the sum to a power equal to the
compounding period, and subtracting 1 from the result according to the following
formula:
(365/32)
EFFECTIVE DISTRIBUTION RATE = [(DISTRIBUTION RATE/(365/32))+1] - 1
<PAGE>
Exhibit 16
EV TRADITIONAL MICHIGAN MUNICIPALS FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 7/31/95:
Interest Income Earned: $22,321
Plus Dividend Income Earned:
------
Equal Gross Income: $22,321
Minus Expenses: $6,814
------
Equal Net Investment Income: $15,507
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 490,262
------
Equal Net Investment Income Earned Per Share: $0.0316
Net Asset Value Per Share 7/31/95: $9.62
30 Day Yield*: 3.97%
Divided by One minus the Tax Rate of 31%: 0.69
------
Equal Tax Equivalent Yield **: 5.75%
Divided by one minus a tax rate of 36.54%: 0.6346
------
Equal Tax Equivalent Yield***: 6.26%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0316/$9.62)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and Michigan tax rate of 36.54%
<PAGE>
Exhibit 16
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, 1995 and for the 1 year period
ended July 31, 1995. 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.
<TABLE>
VALUE OF A $1,000 INVESTMENT
<CAPTION>
VALUE OF VALUE OF TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT INITIAL INVESTMENT EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
PERIOD DATE INVESTMENT* ON 07/31/95 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ------ ---- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 07/29/91 $962.55 $1,214.72 26.20% 5.98% 21.47% 4.97%
1 YEAR ENDED
07/31/95 07/31/94 $962.01 $1,004.78 4.45% 4.45% 0.53% 0.53%
</TABLE>
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%.
CALCULATION OF DISTRIBUTION RATE AND EFFECTIVE DISTRIBUTION RATE
The distribution rate as of 07/31/95 was 4.58% and was calculated by annualizing
the most recent dividend distribution ($0.038750688) and dividing the result by
the current maximum offering price ($9.66).
The effective distribution rate as of 07/31/95 was 4.67% and was calculated by
dividing the distribtion rate by the compounding period (365/32), and then
compounding the result by adding 1, raising the sum to a power equal to the
compounding period, and subtracting 1 from the result according to the following
formula:
(365/32)
EFFECTIVE DISTRIBUTION RATE = [(DISTRIBUTION RATE/(365/32))+1] - 1
<PAGE>
Exhibit 16
EV TRADITIONAL MINNESOTA MUNICIPALS FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 7/31/95:
Interest Income Earned: $18,476
Plus Dividend Income Earned:
------
Equal Gross Income: $18,476
Minus Expenses: $4,471
------
Equal Net Investment Income: $14,005
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 396,224
------
Equal Net Investment Income Earned Per Share: $0.0353
Net Asset Value Per Share 7/31/95: $9.66
30 Day Yield*: 4.43%
Divided by One minus the Tax Rate of 31%: 0.69
------
Equal Tax Equivalent Yield **: 6.41%
Divided by one minus a tax rate of 36.87%: 0.6313
------
Equal Tax Equivalent Yield***: 7.02%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0353/$9.66)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and Minnesota tax rate of 36.87%
<PAGE>
Exhibit 16
INVESTMENT PERFORMANCE -- EV TRADITIONAL NEW JERSEY TAX FREE 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, 1995 and for the 1 year period
ended July 31, 1995. 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.
<TABLE>
<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 07/31/95 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------- ---------- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 01/08/91 $962.06 $1,331.56 38.42% 7.39% 33.16% 6.48%
1 YEAR ENDED
07/31/95 07/31/94 $962.24 $1,025.94 6.62% 6.62% 2.59% 2.59%
</TABLE>
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%.
CALCULATION OF DISTRIBUTION RATE AND EFFECTIVE DISTRIBUTION RATE
The distribution rate as of 07/31/95 was 5.69% and was calculated by annualizing
the most recent dividend distribution ($0.050109609) and dividing the result by
the current maximum offering price ($10.37).
The effective distribution rate as of 07/31/95 was 5.84% and was calculated by
dividing the distribtion rate by the compounding period (365/31), and then
compounding the result by adding 1, raising the sum to a power equal to the
compounding period, and subtracting 1 from the result according to the following
formula:
(365/31)
EFFECTIVE DISTRIBUTION RATE = [(DISTRIBUTION RATE/(365/31))+1] - 1
<PAGE>
Exhibit 16
EV TRADITIONAL NEW JERSEY TAX FREE FUND
TAX EQUIVALENT YIELD CALCULATION
For the 30 days ended 7/31/95:
Interest Income Earned: $7,917
Plus Dividend Income Earned:
----------
Equal Gross Income: $7,917
Minus Expenses: $692
----------
Equal Net Investment Income: $7,225
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 154,840
----------
Equal Net Investment Income Earned Per Share: $0.0467
Net Asset Value Per Share 7/31/95: $10.37
30 Day Yield*: 5.46%
Divided by One minus the Tax Rate of 31%: 0.69
----------
Equal Tax Equivalent Yield **: 7.91%
Divided by one minus a tax rate of 35.54%: 0.6446
----------
Equal Tax Equivalent Yield***: 8.47%
*Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0467/$10.37)+1)-1]
**Assuming a tax rate of 31%
***Assuming a combined federal and New Jersey tax rate of 35.54%
<PAGE>
Exhibit 16
EV TRADITIONAL NEW JERSEY TAX FREE FUND
CALCULATION OF YIELD
For the 30 days ended 7/31/95:
Interest Income Earned: $7,917
Plus Dividend Income Earned:
----------
Equal Gross Income: $7,917
Minus Expenses: $692
----------
Equal Net Investment Income: $7,225
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 154,840
----------
Equal Net Investment Income Earned Per Share: $0.0467
Maximum Offering Price Per Share 7/31/95: $10.37
30 Day Yield*: 5.46%
*Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0467/$10.37)+1)-1]
<PAGE>
Exhibit 16
INVESTMENT PERFORMANCE -- EV TRADITIONAL PENNSYLVANIA TAX FREE 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, 1995 and for the 1 year period
ended July 31, 1995. 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.
<TABLE>
<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 07/31/95 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------- ---------- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 01/08/91 $962.39 $1,317.22 36.87% 7.13% 31.72% 6.23%
1 YEAR ENDED
07/31/95 07/31/94 $962.64 $1,014.78 5.41% 5.41% 1.48% 1.48%
</TABLE>
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%.
CALCULATION OF DISTRIBUTION RATE AND EFFECTIVE DISTRIBUTION RATE
The distribution rate as of 07/31/95 was 5.64% and was calculated by annualizing
the most recent dividend distribution ($0.049684940) and dividing the result by
the current maximum offering price ($10.37).
The effective distribution rate as of 07/31/95 was 5.79% and was calculated by
dividing the distribtion rate by the compounding period (365/31), and then
compounding the result by adding 1, raising the sum to a power equal to the
compounding period, and subtracting 1 from the result according to the following
formula:
(365/31)
EFFECTIVE DISTRIBUTION RATE = [(DISTRIBUTION RATE/(365/31))+1] - 1
<PAGE>
Exhibit 16
EV TRADITIONAL PENNSYLVANIA TAX FREE FUND
TAX EQUIVALENT YIELD CALCULATION
For the 30 days ended 7/31/95:
Interest Income Earned: $7,338
Plus Dividend Income Earned:
------
Equal Gross Income: $7,338
Minus Expenses: $614
------
Equal Net Investment Income: $6,724
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 144,221
------
Equal Net Investment Income Earned Per Share: $0.0466
Net Asset Value Per Share 7/31/95: $10.37
30 Day Yield*: 5.46%
Divided by One minus the Tax Rate of 31%: 0.69
------
Equal Tax Equivalent Yield**: 7.91%
Divided by one minus a tax rate of 37.99%: 0.6201
------
Equal Tax Equivalent Yield***: 8.81%
*Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0466/$10.37)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and Pennsylvania tax rate of 37.99%
<PAGE>
Exhibit 16
EV TRADITIONAL PENNSYLVANIA TAX FREE FUND
CALCULATION OF YIELD
For the 30 days ended 7/31/95:
Interest Income Earned: $7,338
Plus Dividend Income Earned:
------
Equal Gross Income: $7,338
Minus Expenses: $614
------
Equal Net Investment Income: $6,724
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 144,221
-------
Equal Net Investment Income Earned Per Share: $0.0466
Maximum Offering Price Per Share 7/31/95: $10.37
30 Day Yield*: 5.46%
*Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0466/$10.37)+1)-1]
<PAGE>
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, 1995 and for the 1 year period
ended July 31, 1995. 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.
<TABLE>
VALUE OF A $1,000 INVESTMENT
<CAPTION>
VALUE OF VALUE OF TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT INITIAL INVESTMENT EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
PERIOD DATE INVESTMENT* ON 07/31/95 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ------ ---- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 03/24/92 $962.49 $1,176.61 22.25% 6.17% 17.66% 4.97%
1 YEAR ENDED
07/31/95 07/31/94 $962.46 $1,012.08 5.16% 5.16% 1.21% 1.21%
</TABLE>
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%.
CALCULATION OF DISTRIBUTION RATE AND EFFECTIVE DISTRIBUTION RATE
The distribution rate as of 07/31/95 was 4.90% and was calculated by annualizing
the most recent dividend distribution ($0.041030144) and dividing the result by
the current maximum offering price ($9.55).
The effective distribution rate as of 07/31/95 was 5.01% and was calculated by
dividing the distribtion rate by the compounding period (365/32), and then
compounding the result by adding 1, raising the sum to a power equal to the
compounding period, and subtracting 1 from the result according to the following
formula:
(365/32)
EFFECTIVE DISTRIBUTION RATE = [(DISTRIBUTION RATE/(365/32))+1] - 1
<PAGE>
Exhibit 16
EV TRADITIONAL TEXAS MUNICIPALS FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 7/31/95:
Interest Income Earned: $2,221
Plus Dividend Income Earned:
------
Equal Gross Income: $2,221
Minus Expenses: $440
------
Equal Net Investment Income: $1,781
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 50,865
------
Equal Net Investment Income Earned Per Share: $0.0350
Net Asset Value Per Share 7/31/95: $9.58
30 Day Yield*: 4.42%
Divided by One minus the Tax Rate of 31%: 0.69
------
Equal Tax Equivalent Yield **: 6.41%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.030/$9.58)+1)-1]
** Assuming a tax rate of 31%
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000778365
<NAME> EATON VANCE MUNICIPALS TRUST
<SERIES>
<NUMBER> 38
<NAME> EV CLASSIC ARIZONA TAX FREE FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1995
<PERIOD-END> JUL-31-1995
<INVESTMENTS-AT-COST> 2424
<INVESTMENTS-AT-VALUE> 2433
<RECEIVABLES> 28
<ASSETS-OTHER> 7
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2468
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3
<TOTAL-LIABILITIES> 3
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2597
<SHARES-COMMON-STOCK> 259
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (140)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 8
<NET-ASSETS> 2465
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 174
<EXPENSES-NET> 32
<NET-INVESTMENT-INCOME> 142
<REALIZED-GAINS-CURRENT> (119)
<APPREC-INCREASE-CURRENT> 158
<NET-CHANGE-FROM-OPS> 181
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (142)
<DISTRIBUTIONS-OF-GAINS> (7)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 285
<NUMBER-OF-SHARES-REDEEMED> 294
<SHARES-REINVESTED> 12
<NET-CHANGE-IN-ASSETS> 54
<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> 3004
<PER-SHARE-NAV-BEGIN> 9.39
<PER-SHARE-NII> .432
<PER-SHARE-GAIN-APPREC> .142
<PER-SHARE-DIVIDEND> (.432)
<PER-SHARE-DISTRIBUTIONS> (.022)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.51
<EXPENSE-RATIO> 1.60
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000778365
<NAME> EATON VANCE MUNICIPALS TRUST
<SERIES>
<NUMBER> 50
<NAME> EV CLASSIC COLORADO TAX FREE FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1995
<PERIOD-END> JUL-31-1995
<INVESTMENTS-AT-COST> 1912
<INVESTMENTS-AT-VALUE> 1951
<RECEIVABLES> 17
<ASSETS-OTHER> 6
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1974
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3
<TOTAL-LIABILITIES> 3
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2089
<SHARES-COMMON-STOCK> 214
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (157)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 39
<NET-ASSETS> 1971
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 134
<EXPENSES-NET> 22
<NET-INVESTMENT-INCOME> 112
<REALIZED-GAINS-CURRENT> (138)
<APPREC-INCREASE-CURRENT> 125
<NET-CHANGE-FROM-OPS> 99
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (112)
<DISTRIBUTIONS-OF-GAINS> (3)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 132
<NUMBER-OF-SHARES-REDEEMED> 183
<SHARES-REINVESTED> 9
<NET-CHANGE-IN-ASSETS> (371)
<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> 2228
<PER-SHARE-NAV-BEGIN> 9.18
<PER-SHARE-NII> .450
<PER-SHARE-GAIN-APPREC> .062
<PER-SHARE-DIVIDEND> (.450)
<PER-SHARE-DISTRIBUTIONS> (.012)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.23
<EXPENSE-RATIO> 1.26
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000778365
<NAME> EATON VANCE MUNICIPALS TRUST
<SERIES>
<NUMBER> 62
<NAME> EV TRADITIONAL CONNECTICUT TAX FREE FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1995
<PERIOD-END> JUL-31-1995
<INVESTMENTS-AT-COST> 1044
<INVESTMENTS-AT-VALUE> 1092
<RECEIVABLES> 20
<ASSETS-OTHER> 8
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1120
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5
<TOTAL-LIABILITIES> 5
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1080
<SHARES-COMMON-STOCK> 111
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (1)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (12)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 48
<NET-ASSETS> 1115
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 36
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 36
<REALIZED-GAINS-CURRENT> (12)
<APPREC-INCREASE-CURRENT> 47
<NET-CHANGE-FROM-OPS> 71
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (36)
<DISTRIBUTIONS-OF-GAINS> (1)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 121
<NUMBER-OF-SHARES-REDEEMED> 27
<SHARES-REINVESTED> 1
<NET-CHANGE-IN-ASSETS> 952
<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> 20
<AVERAGE-NET-ASSETS> 655
<PER-SHARE-NAV-BEGIN> 10.10
<PER-SHARE-NII> .553
<PER-SHARE-GAIN-APPREC> .012
<PER-SHARE-DIVIDEND> (.553)
<PER-SHARE-DISTRIBUTIONS> (.022)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.09
<EXPENSE-RATIO> .51
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000778365
<NAME> EATON VANCE MUNICIPALS TRUST
<SERIES>
<NUMBER> 36
<NAME> EV CLASSIC MICHIGAN TAX FREE FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1995
<PERIOD-END> JUL-31-1995
<INVESTMENTS-AT-COST> 4558
<INVESTMENTS-AT-VALUE> 4512
<RECEIVABLES> 13
<ASSETS-OTHER> 7
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4532
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 57
<TOTAL-LIABILITIES> 57
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4876
<SHARES-COMMON-STOCK> 483
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (354)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (46)
<NET-ASSETS> 4476
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 320
<EXPENSES-NET> 65
<NET-INVESTMENT-INCOME> 255
<REALIZED-GAINS-CURRENT> (240)
<APPREC-INCREASE-CURRENT> 256
<NET-CHANGE-FROM-OPS> 271
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