<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 26, 1996
1933 ACT FILE NO. 33-572
1940 ACT FILE NO. 811-4409
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933 [X]
POST-EFFECTIVE AMENDMENT NO. 59 [X]
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 61 [X]
EATON VANCE MUNICIPALS TRUST
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
24 FEDERAL STREET, BOSTON, MASSACHUSETTS 02110
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
617-482-8260
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(REGISTRANT'S TELEPHONE NUMBER)
H. DAY BRIGHAM, JR., 24 FEDERAL STREET, BOSTON, MASSACHUSETTS 02110
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(NAME AND ADDRESS OF AGENT FOR SERVICE)
It is proposed that this filing will become effective on February 1, 1996
pursuant to paragraph (b) 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.
National Municipals Portfolio has also executed this Registration
Statement.
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<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 Classic National Municipals Fund
EV Marathon National Municipals Fund
EV Traditional National Municipals Fund
Part B -- The Combined Statements of Additional Information of:
EV Classic National Municipals Fund
EV Marathon National Municipals Fund
EV Traditional National Municipals Fund
Part C -- Other Information
Signatures
Exhibit Index Required by Rule 483(b) under the Securities Act of 1933
Exhibits
This Amendment is not intended to amend the Prospectuses and Statements of
Additional Information of any other Series of the Registrant not identified
above.
<PAGE>
<TABLE>
<CAPTION>
EATON VANCE MUNICIPALS TRUST
CROSS REFERENCE SHEET
ITEMS REQUIRED BY FORM N-1A
---------------------------
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; Distribution Plan (for Classic and
Marathon Funds) (or Service Plan for
Traditional Fund); The Eaton Vance Exchange
Privilege; Eaton Vance Shareholder
Services; Statement of Intention and Escrow
Agreement (Traditional Fund only)
8. ..................... Redemption or Repurchase How to Redeem Fund Shares
9. ..................... Pending Legal Proceedings Not Applicable
<PAGE>
PART B
ITEM NO. ITEM CAPTION STATEMENT OF ADDITIONAL INFORMATION CAPTION
- ------ -------- ---------------------------------------------
10. ..................... Cover Page Cover Page
11. ..................... Table of Contents Table of Contents
12. ..................... General Information and History Other Information
13. ..................... Investment Objectives and Policies Additional Information about Investment
Policies; Investment Restrictions
14. ..................... Management of the Fund Trustees and Officers; Fees and Expenses
15. ..................... Control Persons and Principal Holders of Control Persons and Principal Holders of
Securities Securities
16. ..................... Investment Advisory and Other Investment Adviser and Administrator;
Services Distribution Plan (for Classic and Marathon
Funds) (or Service Plan for Traditional
Fund); 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 (Traditional Fund
only); Distribution Plan (for Classic and
Marathon Funds) (or Service Plan for
Traditional Fund); 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 CLASSIC
NATIONAL MUNICIPALS FUND
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EV CLASSIC NATIONAL MUNICIPALS FUND (THE "FUND") IS A MUTUAL FUND SEEKING TO
PROVIDE CURRENT INCOME EXEMPT FROM THE REGULAR FEDERAL INCOME TAX. THE FUND
INVESTS ITS ASSETS IN NATIONAL MUNICIPALS PORTFOLIO (THE "PORTFOLIO"), A
DIVERSIFIED OPEN-END INVESTMENT COMPANY HAVING THE SAME INVESTMENT OBJECTIVE AS
THE FUND, RATHER THAN BY DIRECTLY INVESTING IN AND MANAGING ITS OWN PORTFOLIO OF
SECURITIES AS WITH HISTORICALLY STRUCTURED MUTUAL FUNDS. THE FUND IS A SERIES OF
EATON VANCE MUNICIPALS TRUST (THE "TRUST").
Shares of the Fund are not deposits or obligations of, or guaranteed or endorsed
by, any bank or other insured depository institution, and are not federally
insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board
or any other government agency. Shares of the Fund involve investment risks,
including fluctuations in value and the possible loss of some or all of the
principal investment.
This Prospectus is designed to provide you with information you should know
before investing. Please retain this document for future reference. A
Statement of Additional Information dated February 1, 1996 for the Fund, as
supplemented from time to time, has been filed with the Securities and
Exchange Commission and is incorporated herein by reference. This Statement of
Additional Information is available without charge from the Fund's principal
underwriter, Eaton Vance Distributors, Inc. (the "Principal Underwriter"), 24
Federal Street, Boston, MA 02110 (telephone (800) 225-6265). The Portfolio's
investment adviser is Boston Management and Research (the "Investment
Adviser"), a wholly-owned subsidiary of Eaton Vance Management, and Eaton
Vance Management is the administrator (the "Administrator") of the Fund. The
offices of the Investment Adviser and the Administrator are located at 24
Federal Street, Boston, MA 02110.
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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>
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PAGE PAGE
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Shareholder and Fund Expenses ....................... 2 How to Redeem Fund Shares .................... 13
The Fund's Financial Highlights ..................... 3 Reports to Shareholders ...................... 14
The Fund's Investment Objective ..................... 4 The Lifetime Investing Account/Distribution
How the Fund and the Portfolio Invest their Assets .. 4 Options .................................... 14
Organization of the Fund and the Portfolio .......... 7 The Eaton Vance Exchange Privilege .......... 15
Management of the Fund and the Portfolio ............ 9 Eaton Vance Shareholder Services ............ 16
Distribution Plan ................................... 10 Distributions and Taxes ..................... 16
Valuing Fund Shares ................................. 11 Performance Information ..................... 17
How to Buy Fund Shares .............................. 12 Appendix .................................... 19
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PROSPECTUS DATED FEBRUARY 1, 1996
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SHAREHOLDER AND FUND EXPENSES
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SHAREHOLDER TRANSACTION EXPENSES
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<S> <C>
Sales Charges Imposed on Purchases of Shares None
Sales Charges Imposed on Reinvested Distributions None
Fees to Exchange Shares None
Contingent Deferred Sales Charge Imposed on Redemption during the First Year
(as a percentage of redemption proceeds exclusive of all reinvestments and
capital appreciation in the account) 1.00%
<CAPTION>
ANNUAL FUND AND ALLOCATED PORTFOLIO OPERATING EXPENSES (as a percentage of
average daily net assets)
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<S> <C>
Investment Adviser Fee 0.45%
Rule 12b-1 Distribution (and Service) Fees 1.00
Other Expenses 0.33
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Total Operating Expenses 1.78%
=====
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
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<S> <C> <C> <C> <C>
An investor would pay the following expenses (including a contingent deferred
sales charge in the case of redemption during the first year after purchase)
on a $1,000 investment, assuming (a) 5% annual return and (b) redemption at
the end of each period: $28 $56 $96 $209
An investor would pay the following expenses on the same
investment, assuming (a) 5% annual return and (b) no
redemptions: $18 $56 $96 $209
</TABLE>
NOTES:
The table and Example summarize the aggregate expenses of the Fund and the
Portfolio and are designed to help investors understand the costs and expenses
they will bear, directly or indirectly, by investing in the Fund. Information
for the Fund is based on its expenses for the most recent fiscal year.
The Fund invests exclusively in the Portfolio. The Trustees believe the
aggregate per share expenses of the Fund and the 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 the
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 Fund and the Portfolio see
"The Fund's Financial Highlights," "Organization of the Fund and the Portfolio,"
"Management of the Fund and the Portfolio" and "How to Redeem Fund Shares." A
long-term shareholder in the Fund may pay more than the economic equivalent of
the maximum front-end sales charge permitted by a rule of the National
Association of Securities Dealers, Inc. See "Distribution Plan."
No contingent deferred sales charge is imposed on (a) shares purchased more than
one year prior to redemption, (b) shares acquired through the reinvestment of
distributions or (c) any appreciation in value of other shares in the account
(see "How to Redeem Fund Shares"), and no such charge is imposed on exchanges of
Fund shares for shares of one or more other funds listed under "The Eaton Vance
Exchange Privilege."
The Portfolio's monthly advisory fee has two components, a fee based on daily
net assets and a fee based on daily gross income, as set forth in the fee
schedule on page 9.
Other investment companies with different distribution arrangements and fees are
investing in the Portfolio and others may do so in the future. See "Organization
of the Fund and the Portfolio."
<PAGE>
THE FUND'S FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
The following information should be read in conjunction with the audited
financial statements included in the Fund's annual report to Shareholders 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 the Fund is contained in the Fund's annual report
to shareholders which may be obtained without charge by contacting the Principal
Underwriter, Eaton Vance Distributors, Inc.
- ------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
------------------------
1995 1994*
---- ----
NET ASSET VALUE, beginning of year 8.980 $10.000
-------- -------
INCOME (LOSS) FROM OPERATIONS:
Net investment income $ 0.517 $ 0.425
Net realized and unrealized gain
(loss) on investments 0.356 (0.961)
-------- ------
Total income (loss) from
operations $ 0.873 $ (0.536)
-------- --------
LESS DISTRIBUTIONS:
From net investment income $(0.517) $ (0.425)
In excess of net investment
income\3/ (0.026) (0.059)
------ ------
Total distributions $(0.543) $ (0.484)
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NET ASSET VALUE, end of year $ 9.310 $ 8.980
======= ========
TOTAL RETURN\1/ 10.10% (5.60%)
RATIOS/SUPPLEMENTAL DATA**:
Net assets, end of period
(000 omitted) $41,298 $ 33,982
Ratio of net expenses to
average daily net assets\2/ 1.78% 1.60%+
Ratio of net investment income to
average daily net assets 5.71% 5.39%+
**For the period from the start of business, December 3, 1993, to
September 30, 1994, the operating expenses of the Fund reflect an
allocation of expenses to the Administrator. Had such action not been
taken, net investment income per share and the ratios would have been
as follows:
NET INVESTMENT INCOME PER SHARE $ 0.405
RATIOS (As a percentage of average daily net assets):
Expenses\2/ 1.86%+
Net investment income 5.13%+
+ Annualized.
\1/ Total return is calculated assuming a purchase at the net asset value on the
first day and a sale at the net asset value on the last day of each period
reported. 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.
\2/ Includes the Fund's share of the Portfolio's allocated expenses.
\3/ The Fund has followed the Statement of Position (SOP) 93-2: Determination,
Disclosure and Financial Statement Presentation of Income, Capital Gain, and
Return of Capital Distributions by Investment Companies. The SOP requires
that differences in the recognition or classification of income between the
financial statements and tax earnings and profits that result in temporary
over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or accumulated net realized
gains.
* For the period from the start of business, December 3, 1993, to
September 30, 1994.
<PAGE>
THE FUND'S INVESTMENT OBJECTIVE
- ------------------------------------------------------------------------------
THE FUND'S INVESTMENT OBJECTIVE IS TO PROVIDE CURRENT INCOME EXEMPT FROM REGULAR
FEDERAL INCOME TAX. The Fund currently seeks to meet its investment objective by
investing its assets in the National Municipals Portfolio (the "Portfolio"), a
separate registered investment company which invests primarily in municipal
obligations (described below) which are rated at least investment grade by a
major rating agency or, if unrated, determined to be of at least investment
grade quality by the Investment Adviser.
HOW THE FUND AND THE PORTFOLIO INVEST THEIR ASSETS
- ------------------------------------------------------------------------------
THE FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY INVESTING EITHER DIRECTLY
OR INDIRECTLY THROUGH ANOTHER OPEN-END MANAGEMENT INVESTMENT COMPANY PRIMARILY
(I.E., AT LEAST 80% OF ITS ASSETS DURING PERIODS OF NORMAL MARKET CONDITIONS) IN
DEBT OBLIGATIONS ISSUED BY OR ON BEHALF OF STATES, TERRITORIES AND POSSESSIONS
OF THE UNITED STATES, AND THE DISTRICT OF COLUMBIA AND THEIR POLITICAL
SUBDIVISIONS, AGENCIES OR INSTRUMENTALITIES, THE INTEREST ON WHICH IS EXEMPT
FROM REGULAR FEDERAL INCOME TAX. The foregoing policy is a fundamental policy of
both the Fund and the Portfolio, which may not be changed unless authorized by a
vote of the shareholders of the Fund or the investors in the Portfolio, as the
case may be.
At least 65% of the net assets of the Portfolio will normally be invested in
obligations rated at least investment grade at the time of investment (which are
those rated Baa or higher by Moody's Investors Service, Inc. ("Moody's") or BBB
or higher by either Standard & Poor's Ratings Group ("S&P") or by Fitch
Investors Service, Inc. ("Fitch")), or, if unrated, determined by the Investment
Adviser to be of at least investment grade quality. The Portfolio may invest
less than 35% of its net assets in municipal obligations rated below investment
grade (but not lower than B by Moody's, S&P or Fitch) and unrated municipal
obligations considered to be of comparable quality by the Investment Adviser.
Municipal obligations rated Baa or BBB may have speculative characteristics.
Also, changes in economic conditions or other circumstances are more likely to
lead to a weakened capacity to make principal and interest payments than in the
case of higher rated obligations. Securities rated below BBB or Baa are commonly
known as "junk bonds". The Portfolio may retain an obligation whose rating drops
below B after its acquisition if such retention is considered desirable by the
Investment Adviser. See "Additional Risk Considerations." For a description of
municipal obligation ratings, see the Statement of Additional Information.
MUNICIPAL OBLIGATIONS. Municipal obligations include bonds, notes and commercial
paper issued by a municipality for a wide variety of both public and private
purposes, the interest on which is, in the opinion of bond counsel, exempt from
regular federal income tax. Public purpose municipal bonds include general
obligation and revenue bonds. General obligation bonds are backed by the taxing
power of the issuing municipality. Revenue bonds are backed by the revenues of a
project or facility. Municipal notes include bond anticipation, tax anticipation
and revenue anticipation notes, which are short-term obligations that will be
retired with the proceeds of an anticipated bond issue, tax revenue or facility
revenue, respectively.
Interest on certain types of municipal obligations may be subject to the federal
alternative minimum tax (the "AMT") for individual investors. As at September
30, 1995, the Portfolio had 24.8% of its net assets invested in such
obligations. Distributions to corporate investors of certain interest income may
also be subject to the AMT. The Fund may not be suitable for investors subject
to the AMT.
CONCENTRATION. The Portfolio may invest 25% or more of its total assets in
municipal obligations of issuers located in the same state or in municipal
obligations of the same type, including without limitation the following: lease
rental obligations of state and local authorities; obligations of state and
local housing finance authorities, municipal utilities systems or public housing
authorities; obligations of hospitals or life care facilities; or industrial
development or pollution control bonds issued for electric utility systems,
steel companies, paper companies or other purposes. This may make the Portfolio
more susceptible to adverse economic, political, or regulatory occurrences
affecting a particular category of issuers. For example, health-care related
issuers are susceptible to medicaid reimbursement policies, and national and
state health care legislation. As the Portfolio's concentration increases, so
does the potential for fluctuation in the value of the Fund's shares.
DIVERSIFIED STATUS. The Portfolio is a "diversified" investment company under
the Investment Company Act of 1940 (the "1940 Act"). This means that with
respect to 75% of its total assets (1) the Portfolio may not invest more than 5%
of its total assets in the securities of any one issuer (except U.S. Government
obligations) and (2) the Portfolio may not own more than 10% of the outstanding
voting securities of any one issuer. Since municipal obligations are not voting
securities, there is no limit on the percentage of a single issuer's obligations
which the Portfolio may own so long as it does not invest more than 5% of its
total assets in the securities of that issuer. Consequently, the Portfolio may
invest in a greater percentage of the outstanding securities of a single issuer
than would an investment company which invests in voting securities. There is no
diversification requirement with respect to the remaining 25% of the Portfolio's
total assets, so that all of such assets may be invested in the securities of
any one issuer. To the extent that the Portfolio is less diversified than that
of other investment companies, it may be subject to an increased risk of loss if
the issuer is unable to make interest or principal payments or if the market
value of such securities declines.
OTHER INVESTMENT PRACTICES
The Portfolio may engage in the following investment practices, some of which
may be considered to involve "derivative" instruments because they derive their
value from another instrument, security or index. In addition, the Portfolio may
temporarily borrow up to 5% of the value of its total assets to satisfy
redemption requests or settle securities transactions.
WHEN-ISSUED SECURITIES. The Portfolio may purchase securities on a "when-
issued" basis, which means that payment and delivery occur on a future
settlement date. The price and yield of such securities are generally fixed on
the date of commitment to purchase. However, the market value of the securities
may fluctuate prior to delivery and upon delivery the securities may be worth
more or less than the Portfolio agreed to pay for them. The Portfolio may also
purchase instruments that give the Portfolio the option to purchase a municipal
obligation when and if issued.
INVERSE FLOATERS. The Portfolio may invest in municipal securities whose
interest rates bear an inverse relationship to the interest rate on another
security or the value of an index ("inverse floaters"). An investment in inverse
floaters may involve greater risk than an investment in a fixed rate bond.
Because changes in the interest rate on the other security or index inversely
affect the residual interest paid on the inverse floater, the value of an
inverse floater is generally more volatile than that of a fixed rate bond.
Inverse floaters have interest rate adjustment formulas which generally reduce
or, in the extreme, eliminate the interest paid to the Portfolio when short-term
interest rates rise, and increase the interest paid to the Portfolio when
short-term interest rates fall. Inverse floaters have varying degrees of
liquidity, and the market for these securities is new and relatively volatile.
These securities tend to underperform the market for fixed rate bonds in a
rising interest rate environment, but tend to outperform the market for fixed
rate bonds when interest rates decline. Shifts in long-term interest rates may,
however, alter this tendency. Although volatile, inverse floaters typically
offer the potential for yields exceeding the yields available on fixed rate
bonds with comparable credit quality and maturity. These securities usually
permit the investor to convert the floating rate to a fixed rate (normally
adjusted downward), and this optional conversion feature may provide a partial
hedge against rising rates if exercised at an opportune time. Inverse floaters
are leveraged because they provide two or more dollars of bond market exposure
for every dollar invested.
FUTURES TRANSACTIONS. The Portfolio may purchase and sell various kinds of
financial futures contracts and options thereon to hedge against changes in
interest rates. Futures contracts may be based on various debt securities (such
as U.S. Government securities and municipal obligations) and securities indices
(such as the Municipal Bond Index traded on the Chicago Board of Trade). Such
transactions involve a risk of loss or depreciation due to unanticipated adverse
changes in securities prices, which may exceed the Portfolio's initial
investment in these contracts. The Portfolio may not purchase or sell futures
contracts or related options, except for closing purchase or sale transactions,
if immediately thereafter the sum of the amount of margin deposits and premiums
paid on the Portfolio's outstanding positions would exceed 5% of the market
value of the Portfolio's net assets. These transactions involve transaction
costs. There can be no assurance that the Investment Adviser's use of futures
will be advantageous to the Portfolio. Distributions by the Fund of any gains
realized on the Portfolio's transactions in futures and options on futures will
be taxable.
INSURED OBLIGATIONS. The Portfolio may purchase municipal bonds that are
additionally secured by insurance, bank credit agreements, or escrow accounts.
The credit quality of companies which provide such credit enhancements will
affect the value of those securities. Although the insurance feature reduces
certain financial risks, the premiums for insurance and the higher market price
paid for insured obligations may reduce the Fund's current yield. Insurance
generally will be obtained from insurers with a claims-paying ability rated Aaa
by Moody's or AAA by S&P or Fitch. The insurance does not guarantee the market
value of the insured obligations or the net asset value of the Fund's shares.
ADDITIONAL RISK CONSIDERATIONS
Many municipal obligations offering current income are in the lowest investment
grade category (Baa or BBB), lower categories or may be unrated. As indicated
above, the Portfolio may invest in municipal obligations rated below investment
grade (but not lower than B by Moody's, S&P or Fitch) and comparable unrated
obligations. See the Appendix to this Prospectus for the asset composition of
the Portfolio for the fiscal year ended September 30, 1995. The lowest
investment grade, lower rated and comparable unrated municipal obligations in
which the Portfolio may invest will have speculative characteristics in varying
degrees. While such obligations may have some quality and protective
characteristics, these characteristics can be expected to be offset or
outweighed by uncertainties or major risk exposures to adverse conditions. Lower
rated and comparable unrated municipal obligations are subject to the risk of an
issuer's inability to meet principal and interest payments on the obligations
(credit risk) and may also be subject to greater price volatility due to such
factors as interest rate sensitivity, market perception of the creditworthiness
of the issuer and general market liquidity (market risk). Lower rated or unrated
municipal obligations are also more likely to react to real or perceived
developments affecting market and credit risk than are more highly rated
obligations, which react primarily to movements in the general level of interest
rates. The Investment Adviser seeks to minimize the risks of investing in below
investment grade securities through professional investment analysis and
attention to current developments in interest rates and economic conditions.
When the Portfolio invests in lower rated or unrated municipal obligations, the
achievement of the Portfolio's goals is more dependent on the Investment
Adviser's ability than would be the case if the Portfolio were investing in
municipal obligations in the higher rating categories.
The Portfolio may retain defaulted obligations in its portfolio when such
retention is considered desirable by the Investment Adviser. In the case of a
defaulted obligation, the Portfolio may incur additional expense seeking
recovery of its investment. Municipal obligations held by the Portfolio which
are rated below investment grade but which, subsequent to the assignment of such
rating, are backed by escrow accounts containing U.S. Government obligations may
be determined by the Investment Adviser to be of investment grade quality for
purposes of the Portfolio's investment policies. The Portfolio may retain in its
portfolio an obligation whose rating drops below B after its acquisition, if
such retention is considered desirable by the Investment Adviser; provided,
however, that holdings of obligations rated below Baa or BBB will be less than
35% of net assets. In the event the rating of an obligation held by the
Portfolio is downgraded, causing the Portfolio to exceed this limitation, the
Investment Adviser will (in an orderly fashion within a reasonable period of
time) dispose of such obligations as it deems necessary in order to comply with
the Portfolio's credit quality limitations.
The net asset value of shares of the Fund will change in response to
fluctuations in prevailing interest rates and changes in the value of the
securities held by the Portfolio. When interest rates decline, the value of
securities held by the Portfolio can be expected to rise. Conversely, when
interest rates rise, the value of most portfolio security holdings can be
expected to decline. Changes in the credit quality of the issuers of municipal
obligations held by the Portfolio will affect the principal value of (and
possibly the income earned on) such obligations. In addition, the values of such
securities are affected by changes in general economic conditions and business
conditions affecting the specific industries of their issuers. Changes by
recognized rating services in their ratings of a security and in the ability of
the issuer to make payments of principal and interest may also affect the value
of the Portfolio's investments. The amount of information about the financial
condition of an issuer of municipal obligations may not be as extensive as that
made available by corporations whose securities are publicly traded. An
investment in shares of the Fund will not constitute a complete investment
program.
At times, a substantial portion of the Portfolio's assets may be invested in
securities as to which the Portfolio, by itself or together with other accounts
managed by the Investment Adviser and its affiliates, holds a major portion or
all of such securities. Under adverse market or economic conditions or in the
event of adverse changes in the financial condition of the issuer, the Portfolio
could find it more difficult to sell such securities when the Investment Adviser
believes it advisable to do so or may be able to sell such securities only at
prices lower than if such securities were more widely held. Under such
circumstances, it may also be more difficult to determine the fair value of such
securities for purposes of computing the Portfolio's net asset value.
The secondary market for some municipal obligations (including issues which are
privately placed with the Portfolio) is less liquid than that for taxable debt
obligations or other more widely traded municipal obligations. The Portfolio
will not invest in illiquid securities if more than 15% of its net assets would
be invested in securities that are not readily marketable. No established resale
market exists for certain of the municipal obligations in which the Portfolio
may invest. The market for obligations rated below investment grade is also
likely to be less liquid than the market for higher rated obligations. As a
result, the Portfolio may be unable to dispose of these municipal obligations at
times when it would otherwise wish to do so at the prices at which they are
valued.
Certain securities held by the Portfolio may permit the issuer at its option to
"call," or redeem, its securities. If an issuer redeems securities held by the
Portfolio during a time of declining interest rates, the Portfolio may not be
able to reinvest the proceeds providing the same investment return as the
securities redeemed.
Some of the securities in which the Portfolio invests may include so-called
"zero-coupon" bonds, whose values are subject to greater fluctuation in response
to changes in market interest rates than bonds which pay interest currently.
Zero-coupon bonds are issued at a significant discount from face value and pay
interest only at maturity rather than at intervals during the life of the
security. The Portfolio is required to accrue and distribute income from
zero-coupon bonds on a current basis, even though it does not receive that
income currently in cash. Thus, the Portfolio may have to sell other investments
to obtain cash needed to make income distributions.
The Portfolio may invest in municipal leases, and participations in municipal
leases. The obligation of the issuer to meet its obligations under such leases
is often subject to the appropriation by the appropriate legislative body, on an
annual or other basis, of funds for the payment of the obligations. Investments
in municipal leases are thus subject to the risk that the legislative body will
not make the necessary appropriation and the issuer will not otherwise be
willing or able to meet its obligation.
THE FUND AND PORTFOLIO HAVE ADOPTED CERTAIN FUNDAMENTAL INVESTMENT
RESTRICTIONS WHICH ARE ENUMERATED IN DETAIL IN THE STATEMENT OF ADDITIONAL
INFORMATION AND WHICH MAY NOT BE CHANGED UNLESS AUTHORIZED BY A SHAREHOLDER
VOTE AND AN INVESTOR VOTE, RESPECTIVELY. EXCEPT FOR SUCH ENUMERATED
RESTRICTIONS AND AS OTHERWISE INDICATED IN THIS PROSPECTUS, THE INVESTMENT
OBJECTIVE AND POLICIES OF THE FUND AND PORTFOLIO ARE NOT FUNDAMENTAL POLICIES
AND ACCORDINGLY MAY BE CHANGED BY THE TRUSTEES OF THE TRUST AND THE PORTFOLIO
WITHOUT OBTAINING THE APPROVAL OF THE FUND'S SHAREHOLDERS OR THE INVESTORS IN
THE PORTFOLIO, AS THE CASE MAY BE. IF ANY CHANGES WERE MADE IN THE FUND'S
INVESTMENT OBJECTIVE, THE FUND MIGHT HAVE INVESTMENT OBJECTIVES DIFFERENT FROM
THE OBJECTIVE WHICH AN INVESTOR CONSIDERED APPROPRIATE AT THE TIME THE
INVESTOR BECAME A SHAREHOLDER IN THE FUND.
ORGANIZATION OF THE FUND AND THE PORTFOLIO
- ------------------------------------------------------------------------------
THE FUND IS A SERIES OF EATON VANCE MUNICIPALS TRUST (THE "TRUST"), A BUSINESS
TRUST ESTABLISHED UNDER MASSACHUSETTS LAW PURSUANT TO A DECLARATION OF TRUST
DATED SEPTEMBER 30, 1985, AS AMENDED AND RESTATED. 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 Fund) it is known as a "series company." Each share represents an
equal proportionate beneficial interest in the Fund. When issued and
outstanding, the shares are fully paid and nonassessable by the Trust and
redeemable as described under "How to Redeem Fund Shares." Shareholders are
entitled to one vote for each full share held. Fractional shares may be voted
proportionately. Shares have no preemptive or conversion rights and are freely
transferable. In the event of the liquidation of the Fund, shareholders are
entitled to share pro rata in the net assets of the Fund available for
distribution to shareholders.
THE PORTFOLIO IS ORGANIZED AS A TRUST UNDER THE LAWS OF THE STATE OF NEW YORK
AND INTENDS TO BE TREATED AS A PARTNERSHIP FOR FEDERAL TAX PURPOSES. The
Portfolio, as well as the Trust, intends to comply with all applicable federal
and state securities laws. The Portfolio's Declaration of Trust provides that
the Fund and other entities investing in the Portfolio (e.g., other U.S. and
foreign investment companies, and common and commingled trust funds) will each
be liable for all obligations of the Portfolio. However, the risk of the Fund
incurring financial loss on account of such liability is limited to
circumstances in which both inadequate insurance exists and the Portfolio itself
is unable to meet its obligations. Accordingly, the Trustees of the Trust
believe that neither the Fund nor its shareholders will be adversely affected by
reason of the Fund investing in the Portfolio.
SPECIAL INFORMATION ON THE FUND/PORTFOLIO INVESTMENT STRUCTURE. An investor in
the 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 the Portfolio
(although the Fund may temporarily hold a de minimus amount of cash), which is a
separate investment company with an identical investment objective. Therefore,
the Fund's interest in securities owned by the Portfolio is indirect. In
addition to selling an interest to the Fund, the Portfolio may sell interests to
other affiliated and non-affiliated mutual funds or institutional investors.
Such investors will invest in the Portfolio on the same terms and conditions and
will pay a proportionate share of the Portfolio's expenses. However, the other
investors investing in the Portfolio are not required to sell their shares at
the same public offering price as the Fund due to variations in sales
commissions and other operating expenses. Therefore, investors in the Fund
should be aware that these differences may result in differences in returns
experienced by investors in the various funds that invest in the Portfolio. Such
differences in returns are also present in other mutual fund structures,
including funds that have multiple classes of shares. For information regarding
the investment objective, policies and restrictions of the Portfolio, see "The
Fund's Investment Objective" and "How the Fund and the Portfolio 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 the Fund in the Portfolio, as well as the advantages and
disadvantages of the two-tier format. The Trustees believe that the structure
offers opportunities for substantial growth in the assets of the Portfolio, and
affords the potential for economies of scale for the Fund, at least when the
assets of the Portfolio exceed $500 million.
The Fund may withdraw (completely redeem) all its assets from the Portfolio at
any time if the Board of Trustees of the Trust determines that it is in the best
interest of the Fund to do so. The investment objective and the nonfundamental
investment policies of the Fund and the Portfolio may be changed by the Trustees
of the Trust and the Portfolio without obtaining the approval of the
shareholders of the Fund or the investors in the Portfolio, as the case may be.
Any such change of the investment objective of the Fund or the Portfolio 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. If a shareholder redeems
shares because of a change in the nonfundamental objective or policies of the
Fund, those shares may be subject to a contingent deferred sales charge, as
described in "How to Redeem Fund Shares." In the event the Fund withdraws all of
its assets from the Portfolio, or the Board of Trustees of the Trust determines
that the investment objective of the Portfolio is no longer consistent with the
investment objective of the Fund, the Board of Trustees of the Trust would
consider what action might be taken, including investing the assets of the Fund
in another pooled investment entity or retaining an investment adviser to manage
the Fund's assets in accordance with its investment objective. The Fund's
investment performance may be affected by a withdrawal of all its assets from
the Portfolio.
Information regarding other pooled investment entities or funds which invest in
the 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 the Portfolio may be adversely affected by the
actions of a larger investor in the Portfolio. For example, if a large investor
withdraws from the Portfolio, the remaining investors may experience higher pro
rata operating expenses, thereby producing lower returns. Additionally, the
Portfolio may become less diverse, resulting in increased portfolio risk, and
experience decreasing economies of scale. However, this possibility exists as
well for historically structured 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 Fund may be subject to additional regulations than historically
structured funds.
The Declaration of Trust of the Portfolio provides that the Portfolio will
terminate 120 days after the complete withdrawal of the Fund or any other
investor in the Portfolio, unless either the remaining investors, by unanimous
vote at a meeting of such investors, or a majority of the Trustees of the
Portfolio, by written instrument consented to by all investors, agree to
continue the business of the Portfolio. This provision is consistent with
treatment of the Portfolio as a partnership for federal income tax purposes. See
"Distributions and Taxes" for further information. Whenever the Fund as an
investor in the Portfolio is requested to vote on matters pertaining to the
Portfolio (other than the termination of the Portfolio's business, which may be
determined by the Trustees of the Portfolio without investor approval), the Fund
will hold a meeting of Fund shareholders and will vote its interest in the
Portfolio for or against such matters proportionately to the instructions to
vote for or against such matters received from Fund shareholders. The Fund shall
vote shares for which it receives no voting instructions in the same proportion
as the shares for which it receives voting instructions. Other investors in the
Portfolio may alone or collectively acquire sufficient voting interests in the
Portfolio to control matters relating to the operation of the Portfolio, which
may require the Fund to withdraw its investment in the Portfolio or take other
appropriate action. Any such withdrawal could result in a distribution "in kind"
of portfolio securities (as opposed to a cash distribution from the Portfolio).
If securities are distributed, the Fund could incur brokerage, tax or other
charges in converting the securities to cash. In addition, the distribution in
kind may result in a less diversified portfolio of investments or adversely
affect the liquidity of the Fund. Notwithstanding the above, there are other
means for meeting shareholder redemption requests, such as borrowing.
The 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 the Portfolio are the same. Such procedures require each Board
to take actions to resolve any conflict of interest between the Fund and the
Portfolio, and it is possible that the creation of separate Boards may be
considered. For further information concerning the Tustees and officers of the
Trust and the Portfolio, see the Statement of Additional Information.
MANAGEMENT OF THE FUND AND THE PORTFOLIO
- ------------------------------------------------------------------------------
THE PORTFOLIO ENGAGES BOSTON MANAGEMENT AND RESEARCH ("BMR"), A WHOLLY-OWNED
SUBSIDIARY OF EATON VANCE MANAGEMENT ("EATON VANCE"), AS ITS INVESTMENT ADVISER.
EATON VANCE, ITS AFFILIATES AND ITS PREDECESSOR COMPANIES HAVE BEEN MANAGING
ASSETS OF INDIVIDUALS AND INSTITUTIONS SINCE 1924 AND MANAGING INVESTMENT
COMPANIES SINCE 1931.
Acting under the general supervision of the Board of Trustees of the Portfolio,
BMR manages the Portfolio's investments and affairs and furnishes for the use of
the Portfolio office space and all necessary office facilities, equipment and
personnel for servicing the investments of the Portfolio. Under its investment
advisory agreement with the Portfolio, BMR receives a monthly advisory fee equal
to the aggregate of
(a) a daily asset based fee computed by applying the annual asset rate
applicable to that portion of the total daily net assets in each Category as
indicated below, plus
(b) a daily income based fee computed by applying the daily income rate
applicable to that portion of the total daily gross income (which portion
shall bear the same relationship to the total daily gross income on such day
as that portion of the total daily net assets in the same Category bears to
the total daily net assets on such day) in each Category as indicated below:
<TABLE>
<CAPTION>
ANNUAL DAILY
CATEGORY DAILY NET ASSETS ASSET RATE INCOME RATE
------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
1 up to $500 million 0.300% 3.00%
2 $500 million but less than $1 billion 0.275% 2.75%
3 $1 billion but less than $1.5 billion 0.250% 2.50%
4 $1.5 billion but less than $2 billion 0.225% 2.25%
5 $2 billion but less than $3 billion 0.200% 2.00%
6 $3 billion and over 0.175% 1.75%
</TABLE>
As at September 30, 1995, the Portfolio had net assets of $2,260,646,363. For
the fiscal year ended September 30, 1995, the Portfolio paid BMR advisory fees
equivalent to 0.45% of the Portfolio's average net assets for such year.
BMR OR EATON VANCE ACTS AS INVESTMENT ADVISER TO INVESTMENT COMPANIES AND
VARIOUS INDIVIDUAL AND INSTITUTIONAL CLIENTS WITH ASSETS UNDER MANAGEMENT OF
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.
Thomas M. Metzold has acted as the portfolio manager of the Portfolio since
December 17, 1993. He has been a Vice President of Eaton Vance since 1991 and of
BMR since 1992, and an employee of Eaton Vance since 1987.
Municipal obligations are normally traded on a net basis (without commission)
through broker-dealers and banks acting for their own account. Such firms
attempt to profit from such transactions by buying at the bid price and selling
at the higher asked price of the market, and the difference is customarily
referred to as the spread. In selecting firms which will execute portfolio
transactions BMR judges their professional ability and quality of service and
uses its best efforts to obtain execution at prices which are advantageous to
the Portfolio and at reasonably competitive spreads. Subject to the foregoing,
BMR may consider sales of shares of the Fund or of other investment companies
sponsored by BMR or Eaton Vance as a factor in the selection of firms to execute
portfolio transactions.
The Trust has retained the services of Eaton Vance to act as administrator of
the Fund. The Trust has not retained the services of an investment adviser since
the Trust seeks to achieve the investment objective of the Fund by investing its
assets in the Portfolio. As Administrator, Eaton Vance provides the Fund with
general office facilities and supervises the overall administration of the Fund.
For these services Eaton Vance currently receives no compensation. The Trustees
of the Trust may determine, in the future, to compensate Eaton Vance for such
services.
The Portfolio and the Fund, as the case may be, will each be responsible for all
respective costs and expenses not expressly stated to be payable by BMR under
the investment advisory agreement, by Eaton Vance under the administrative
services agreement, or by EVD under the distribution agreement.
DISTRIBUTION PLAN
- --------------------------------------------------------------------------------
THE FUND FINANCES DISTRIBUTION ACTIVITIES AND HAS ADOPTED A DISTRIBUTION PLAN
(THE "PLAN") PURSUANT TO RULE 12B-1 UNDER THE 1940 ACT. Rule 12b-1 permits a
mutual fund, such as the Fund, to finance distribution activities and bear
expenses associated with the distribution of its shares provided that any
payments made by the Fund are made pursuant to a written plan adopted in
accordance with the Rule. The Plan is subject to, and complies with, the sales
charge rule of the National Association of Securities Dealers, Inc. (the "NASD
Rule"). The Plan is described further in the Statement of Additional
Information, and the following is a description of the salient features of the
Plan. The Plan provides that the Fund, subject to the NASD Rule, will pay sales
commissions and distribution fees to the Principal Underwriter only after and as
a result of the sale of shares of the Fund. On each sale of Fund shares
(excluding reinvestment of distributions) the Fund will pay the Principal
Underwriter amounts representing (i) sales commissions equal to 6.25% of the
amount received by the Fund for each share sold and (ii) distribution fees
calculated by applying the rate of 1% over the prime rate then reported in The
Wall Street Journal to the outstanding balance of Uncovered Distribution Charges
(as described below) of the Principal Underwriter. On sales of shares made prior
to January 30, 1995, the Principal Underwriter currently pays monthly sales
commissions to a financial service firm (an "Authorized Firm") in amounts
anticipated to be equivalent to .75%, annualized, of the assets maintained in
the Fund by the customers of such Firm. On sales of shares made on January 30,
1995 and thereafter, the Principal Underwriter currently expects to pay to an
Authorized Firm (a) sales commissions (except on exchange transactions and
reinvestments) at the time of sale equal to .75% of the purchase price of the
shares sold by such Firm and (b) monthly sales commissions approximately
equivalent to 1/12 of .75% of the value of shares sold by such Firm and
remaining outstanding for at least one year. The Plan is designed to permit an
investor to purchase Fund shares through an Authorized Firm without incurring an
initial sales charge and at the same time permit the Principal Underwriter to
compensate Authorized Firms in connection with the sale of Fund shares.
THE NASD RULE REQUIRES THE FUND TO LIMIT ITS ANNUAL PAYMENTS OF SALES
COMMISSIONS AND DISTRIBUTION FEES TO AN AMOUNT NOT EXCEEDING .75% OF THE FUND'S
AVERAGE DAILY NET ASSETS FOR EACH FISCAL YEAR. Under its Plan, the Fund accrues
daily an amount at the rate of 1/365 of .75% of its net assets, and pays such
accrued amounts monthly to the Principal Underwriter. The Plan requires such
accruals to be automatically discontinued during any period in which there are
no outstanding Uncovered Distribution Charges under the Plan. Uncovered
Distribution Charges are calculated daily and, briefly, are equivalent to all
unpaid sales commissions and distribution fees to which the Principal
Underwriter is entitled under the Plan less all contingent deferred sales
charges theretofore paid to the Principal Underwriter. The Eaton Vance
organization may be considered to have realized a profit under the Plan if at
any point in time the aggregate amounts of all payments received by the
Principal Underwriter pursuant to the Plan, including any contingent deferred
sales charges, have exceeded the total expenses theretofore incurred by such
organization in distributing shares of the Fund. Total expenses for this purpose
will include an allocable portion of the overhead costs of such organization and
its branch offices.
Because of the NASD Rule limitation on the amount of sales commissions and
distribution fees paid during any fiscal year, a high level of sales of Fund
shares during the initial years of the Fund's operations would cause a large
portion of the sales commission attributable to a sale of Fund shares to be
accrued and paid by the Fund to the Principal Underwriter in fiscal years
subsequent to the year in which such shares were sold. This spreading of sales
commissions payments under the Plan over an extended period would result in the
incurrence and payment of increased distribution fees under the Plan.
For the fiscal year ended September 30, 1995, the Fund paid sales commissions
under the Plan to the Principal Underwriter equivalent to 0.75% of the Fund's
average daily net assets for such year. As at September 30, 1995, the
outstanding Uncovered Distribution Charges of the Principal Underwriter
calculated under the Plan amounted to approximately $4,059,000 (which amount was
equivalent to 9.8% of the Fund's net assets on such day).
THE PLAN ALSO AUTHORIZES THE FUND TO MAKE PAYMENTS OF SERVICE FEES TO THE
PRINCIPAL UNDERWRITER, AUTHORIZED FIRMS AND OTHER PERSONS IN AMOUNTS NOT
EXCEEDING .25% OF THE FUND'S AVERAGE DAILY NET ASSETS FOR EACH FISCAL YEAR. The
Trustees of the Trust have initially implemented the Plan by authorizing the
Fund to make monthly service fee payments to the Principal Underwriter in
amounts not expected to exceed .25% of the Fund's average daily net assets for
any fiscal year. The Fund accrues the service fee daily at the rate of 1/365 of
.25% of the Fund's net assets. On sales of shares made prior to January 30,
1995, the Principal Underwriter currently makes monthly service fee payments to
an Authorized Firm in amounts anticipated to be equivalent to .25%, annualized,
of the assets maintained in the Fund by the customers of such Firm. On sales of
shares made on January 30, 1995 and thereafter, the Principal Underwriter
currently expects to pay to an Authorized Firm (a) a service fee (except on
exchange transactions and reinvestments) at the time of sale equal to .25% of
the purchase price of the shares sold by such Firm, and (b) monthly service fees
approximately equivalent to 1/12 of .25% of the value of shares sold by such
Firm and remaining outstanding for at least one year. During the first year
after a purchase of Fund shares, the Principal Underwriter will retain the
service fee as reimbursement for the service fee payment made to the Authorized
Firm at the time of sale. As permitted by the NASD Rule, all service fee
payments are made for personal services and/or the maintenance of shareholder
accounts. Service fees are separate and distinct from the sales commissions and
distribution fees payable by the Fund to the Principal Underwriter, and as such
are not subject to automatic discontinuance when there are no outstanding
Uncovered Distribution Charges of the Principal Underwriter. For the fiscal year
ended September 30, 1995, the Fund paid or accrued service fees under the Plan
equivalent to 0.25% (annualized) of the Fund's average daily net assets for such
year.
The Principal Underwriter may, from time to time, at its own expense, provide
additional incentives to Authorized Firms which employ registered
representatives who sell the Fund's shares and/or shares of other funds
distributed by the Principal Underwriter. In some instances, such additional
incentives may be offered only to certain Authorized Firms whose representatives
sell or are expected to sell significant amounts of shares. In addition, the
Principal Underwriter may from time to time increase or decrease the sales
commissions payable to Authorized Firms.
The Fund may, in its absolute discretion, suspend, discontinue or limit the
offering of its shares at any time. In determining whether any such action
should be taken, the Fund's management intends to consider all relevant factors,
including without limitation the size of the Fund, the investment climate and
market conditions, the volume of sales and redemptions of Fund shares, and the
amount of Uncovered Distribution Charges of the Principal Underwriter. The Plan
may continue in effect and payments may be made under the Plan following any
such suspension, discontinuance or limitation of the offering of Fund shares;
however, the Fund is not contractually obligated to continue the Plan for any
particular period of time. Suspension of the offering of Fund shares would not,
of course, affect a shareholder's ability to redeem shares.
VALUING FUND SHARES
- ------------------------------------------------------------------------------
THE FUND VALUES ITS SHARES ONCE ON EACH DAY THE NEW YORK STOCK EXCHANGE (THE
"EXCHANGE") IS OPEN FOR TRADING, as of the close of regular trading on the
Exchange (normally 4:00 p.m. New York time). The Fund's net asset value per
share is determined by its custodian, Investors Bank & Trust Company ("IBT"),
(as agent for the Fund) in the manner authorized by the Trustees of the Trust.
Net asset value is computed by dividing the value of the Fund's total assets,
less its liabilities, by the number of shares outstanding. Because the Fund
invests its assets in an interest in the Portfolio, the Fund's net asset value
will reflect the value of its interest in the Portfolio (which, in turn,
reflects the underlying value of the Portfolio's assets and liabilities).
Authorized Firms must communicate an investor's order to the Principal
Underwriter prior to the close of the Principal Underwriter's business day to
receive that day's net asset value per Fund share. It is the Authorized Firms'
responsibility to transmit orders promptly to the Principal Underwriter, which
is a wholly-owned subsidiary of Eaton Vance.
The Portfolio's net asset value is also determined as of the close of regular
trading on the Exchange by IBT (as custodian and agent for the Portfolio) in the
manner authorized by the Trustees of the Portfolio. Net asset value is computed
by subtracting the liabilities of the Portfolio from the value of its total
assets. For further information regarding the valuation of the Portfolio's
assets, see "Determination of Net Asset Value" in the Statement of Additional
Information.
SHAREHOLDERS MAY DETERMINE THE VALUE OF THEIR INVESTMENT BY MULTIPLYING THE
NUMBER OF FUND SHARES OWNED BY THE CURRENT NET ASSET VALUE PER SHARE.
HOW TO BUY FUND SHARES
- ------------------------------------------------------------------------------
SHARES OF THE FUND MAY BE PURCHASED FOR CASH OR MAY BE ACQUIRED IN EXCHANGE FOR
SECURITIES. Investors may purchase shares of the Fund through Authorized Firms
at the net asset value per share of the Fund next determined after an order is
effective. The Fund may suspend the offering of shares at any time and may
refuse an order for the purchase of shares. An Authorized Firm may charge its
customers a fee in connection with transactions executed by that Firm.
An initial investment in the Fund must be at least $1,000. Once an account has
been established the investor may send investments of $50 or more at any time
directly to the Fund's transfer agent (the "Transfer Agent") as follows: First
Data Investor Services Group, 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."
ACQUIRING FUND SHARES IN EXCHANGE FOR SECURITIES. IBT, as escrow agent, will
receive securities acceptable to Eaton Vance, as Administrator, in exchange for
Fund shares at their net asset value as determined above. The minimum value of
securities (or securities and cash) accepted for deposit is $5,000. Securities
accepted will be sold on the day of their receipt or as soon thereafter as
possible. The number of Fund shares to be issued in exchange for securities will
be the aggregate proceeds from the sale of such securities, divided by the
applicable net asset value per Fund share on the day such proceeds are received.
Eaton Vance will use reasonable efforts to obtain the then current price for
such securities but does not guarantee the best available. 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 Classic National Municipals Fund
IN THE CASE OF PHYSICAL DELIVERY:
Investors Bank & Trust Company
Attention: EV Classic National Municipals Fund
Physical Securities Processing Settlement Area
89 South Street
Boston, MA 02111
Investors who are contemplating an exchange of securities for shares of the
Fund, or their representatives, must contact Eaton Vance to determine whether
the securities are acceptable before forwarding such securities 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
- ------------------------------------------------------------------------------
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 Fund share 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 (the "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, the Fund will make payment in cash for the net
asset value of the shares as of the date determined above, reduced by the amount
of any applicable contingent deferred sales charge (described below) and any
federal income tax required to be withheld. Although the Fund normally expects
to make payment in cash for redeemed shares, the Trust, subject to compliance
with applicable regulations, has reserved the right to pay the redemption price
of shares of the Fund, either totally or partially, by a distribution in kind of
readily marketable securities withdrawn by the Fund from the Portfolio. The
securities so distributed would be valued pursuant to the Portfolio's valuation
procedures. If a shareholder received a distribution in kind, the shareholder
could incur brokerage or other charges in converting the securities to cash.
To sell shares at their net asset value through an Authorized Firm (a
repurchase), a shareholder can place a repurchase order with the Authorized
Firm, which may charge a fee. The value of those shares is based upon the net
asset value calculated after EVD, as the Fund's 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, the Fund reserves the right
to redeem accounts with balances of less than $1,000. Prior to such a
redemption, shareholders will be given 60 days' written notice to make an
additional purchase. Thus, an investor making an initial investment of $1,000
would not be able to redeem shares without being subject to this policy.
However, no such redemption would be required by the Fund if the cause of the
low account balance was a reduction in the net asset value of Fund shares. No
contingent deferred sales charge will be imposed with respect to such
involuntary redemptions.
CONTINGENT DEFERRED SALES CHARGE. Shares purchased on or after January 30, 1995
and redeemed within the first year of their purchase (except shares acquired
through the reinvestment of distributions) generally will be subject to a
contingent deferred sales charge equal to 1% of the net asset value of redeemed
shares. This contingent deferred sales charge is imposed on any redemption the
amount of which exceeds the aggregate value at the time of redemption of (a) all
shares in the account purchased more than one year prior to the redemption, (b)
all shares in the account acquired through reinvestment of distributions, and
(c) the increase, if any, of value in the other shares in the account (namely
those purchased within the year preceding the redemption) over the purchase
price of such shares. Redemptions are processed in a manner to maximize the
amount of redemption proceeds which will not be subject to a contingent deferred
sales charge; i.e., each redemption will be assumed to have been made first from
the exempt amounts referred to in clauses (a), (b) and (c) above, and second
through liquidation of those shares in the account referred to in clause (c) on
a first-in-first-out basis.
In calculating the contingent deferred sales charge upon the redemption of Fund
shares acquired in an exchange for shares of a fund currently listed under "The
Eaton Vance Exchange Privilege," the purchase of Fund shares acquired in the
exchange is deemed to have occurred at the time of the original purchase of
exchanged shares.
No contingent deferred sales charge will be imposed on Fund shares which have
been sold to Eaton Vance or its affiliates, or to their respective employees or
clients. The contingent deferred sales charge will also 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, as amended (the "Code")
or (3) as part of a minimum required distribution from other tax-sheltered
retirement plans. The contingent deferred sales charge will be paid to the
Principal Underwriter or the Fund. When paid to the Principal Underwriter it
will reduce the amount of Uncovered Distribution Charges calculated under the
Fund's Distribution Plan. See "Distribution Plan."
REPORTS TO SHAREHOLDERS
- ------------------------------------------------------------------------------
THE FUND WILL ISSUE TO ITS SHAREHOLDERS SEMI-ANNUAL AND ANNUAL REPORTS
CONTAINING FINANCIAL STATEMENTS. Financial statements included in annual reports
are audited by the Fund's independent certified public accountants. Shortly
after the end of each calendar year, the Fund will furnish all shareholders with
information necessary for preparing federal and state income tax returns.
THE LIFETIME INVESTING ACCOUNT/DISTRIBUTION OPTIONS
- ------------------------------------------------------------------------------
AFTER AN INVESTOR MAKES AN INITIAL PURCHASE OF FUND SHARES, THE FUND'S TRANSFER
AGENT, FIRST DATA INVESTOR SERVICES GROUP, WILL SET UP A LIFETIME INVESTING
ACCOUNT FOR THE INVESTOR ON THE FUND'S RECORDS. This account is a complete
record of all transactions between the investor and the Fund which at all times
shows the balance of shares owned. The Fund will not issue share certificates
except upon request.
At least quarterly, the shareholder will receive a statement showing complete
details of any transaction and the current share balance in the account. THE
LIFETIME INVESTING ACCOUNT ALSO PERMITS A SHAREHOLDER TO MAKE ADDITIONAL
INVESTMENTS 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 Fund's
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 the Fund are held in a "street name"
account with an Authorized Firm, all recordkeeping, transaction processing and
payments of distributions relating to the beneficial owner's account will be
performed by the Authorized Firm, and not by the Fund and its Transfer Agent.
Since the Fund will have no record of the beneficial owner's transactions, a
beneficial owner should contact the Authorized Firm to purchase, redeem or
exchange shares, to make changes in or give instructions concerning the account,
or to obtain information about the account. The transfer of shares in a "street
name" account to an account with another dealer or to an account directly with
the Fund involves special procedures and will require the beneficial owner to
obtain historical purchase information about the shares in the account from the
Authorized Firm. Before establishing a "street name" account with an investment
firm, or transferring the account to another investment firm, an investor
wishing to reinvest distributions should determine whether the firm which will
hold the shares allows reinvestment of distributions in "street name" accounts.
THE EATON VANCE EXCHANGE PRIVILEGE
- ------------------------------------------------------------------------------
Shares of the Fund currently may be exchanged for shares of one or more other
funds in the Eaton Vance Classic Group of Funds or Eaton Vance Money Market
Fund, which are distributed with a contingent deferred sales charge, on the
basis of the net asset value per share of each fund at the time of the exchange,
provided that such offer is 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 Fund does not permit the
exchange privilege to be used for "Market Timing" and may terminate the exchange
privilege for any shareholder account engaged in Market Timing activity. Any
shareholder account for which more than two round-trip exchanges are made within
any twelve month period will be deemed to be engaged in Market Timing.
Furthermore, a group of unrelated accounts for which exchanges are entered
contemporaneously by a financial intermediary will be considered to be engaged
in Market Timing.
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.
No contingent deferred sales charge is imposed on exchanges. For purposes of
calculating the contingent deferred sales charge upon the redemption of Fund
shares acquired in an exchange, the purchase of shares acquired in one or more
exchanges is deemed to have occurred at the time of the original purchase of the
exchanged shares.
Shares of other funds in the Eaton Vance Classic Group of Funds (and shares of
Eaton Vance Money Market Fund acquired as a result of an exchange from an EV
Classic fund) may be exchanged for Fund shares on the basis of the net asset
value per share of each fund at the time of exchange, but subject to any
restrictions or qualifications set forth in a 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 Fund, 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
- ------------------------------------------------------------------------------
THE FUND OFFERS THE FOLLOWING SERVICES WHICH ARE VOLUNTARY, INVOLVE NO EXTRA
CHARGE, AND MAY BE CHANGED OR DISCONTINUED WITHOUT PENALTY AT ANY TIME. Full
information on each of the services described below and an application, where
required, are available from Authorized Firms or the Principal Underwriter. The
cost of administering such services for the benefit of shareholders who
participate in them is borne by the Fund as an expense to all shareholders.
INVEST-BY-MAIL -- FOR PERIODIC SHARE ACCUMULATION: Once the $1,000 minimum
investment has been made, checks of $50 or more payable to the order of EV
Classic National Municipals Fund may be mailed directly to First Data Investor
Services Group, BOS725, P.O. Box 1559, Boston, MA 02104 at any time -- whether
or not distributions are reinvested. The name of the shareholder, the Fund and
the account number should accompany each investment.
BANK AUTOMATED INVESTING -- FOR REGULAR SHARE ACCUMULATION: Cash investments of
$50 or more may be made automatically each month or quarter from a shareholder's
bank account. The $1,000 minimum initial investment and small account redemption
policy are waived for these accounts.
WITHDRAWAL PLAN: A shareholder may draw on shareholdings systematically with
monthly or quarterly checks in an aggregate amount that does not exceed annually
12% of the account balance at the time the plan is established. Such amount will
not be subject to a contingent deferred sales charge. See "How to Redeem Fund
Shares." A minimum deposit of $5,000 in shares is required.
REINVESTMENT PRIVILEGE: A SHAREHOLDER WHO HAS REPURCHASED OR REDEEMED SHARES MAY
REINVEST, WITH CREDIT FOR ANY CONTINGENT DEFERRED SALES CHARGES PAID ON THE
REPURCHASED OR REDEEMED SHARES, 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 THE FUND,
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 (or by the Fund's Transfer Agent). To the
extent that any shares of the Fund are sold at a loss and the proceeds are
reinvested in shares of the Fund (or other shares of the Fund are acquired
within the period beginning 30 days before and ending 30 days after the date of
redemption) some or all of the loss generally will not be allowed as a tax
deduction. Shareholders should consult their tax advisers concerning the tax
consequences of reinvestments.
DISTRIBUTIONS AND TAXES
- ------------------------------------------------------------------------------
SUBSTANTIALLY ALL OF THE INVESTMENT INCOME ALLOCATED TO THE FUND BY THE
PORTFOLIO, LESS THE FUND'S DIRECT AND ALLOCATED EXPENSES, WILL BE DECLARED DAILY
AS A DISTRIBUTION TO FUND SHAREHOLDERS OF RECORD AT THE TIME OF DECLARATION.
Such distributions, whether taken in cash or reinvested in additional shares,
will ordinarily be paid monthly on the twenty-second day of each month or the
next business day thereafter. The Fund anticipates that for tax purposes, the
entire distribution, whether paid in cash or additional shares of the Fund, will
constitute tax-exempt income to shareholders, except for the proportionate part
of the distribution that may be considered taxable income if the Fund has
taxable income during the calendar year. Shareholders reinvesting the monthly
distribution should treat the amount of the entire distribution as the tax cost
basis of the additional shares acquired by reason of such reinvestment. Daily
distribution crediting will commence on the day that collected funds for the
purchase of Fund shares are available at the Transfer Agent. Shareholders will
receive timely federal income tax information as to the tax-exempt or taxable
status of all distributions made by the Fund during the calendar year. The
Fund's net realized capital gains, if any, consist of the net realized capital
gains allocated to the Fund by the Portfolio for tax purposes, after taking into
account any available capital loss carryovers; the Fund's net realized capital
gains, if any, will be distributed at least once a year, usually in December.
The Fund intends to qualify as a regulated investment company under the Code and
to satisfy certain requirements relating to the sources of its income, the
distribution of its income, and the diversification of its assets. In satisfying
these requirements, the Fund will treat itself as owning its proportionate share
of each of the Portfolio's assets and as entitled to the income of the Portfolio
properly attributable to such share.
AS A REGULATED INVESTMENT COMPANY UNDER THE CODE, THE FUND DOES NOT PAY
FEDERAL INCOME OR EXCISE TAXES TO THE EXTENT THAT IT DISTRIBUTES TO
SHAREHOLDERS ITS NET INVESTMENT INCOME AND NET REALIZED CAPITAL GAINS IN
ACCORDANCE WITH THE TIMING REQUIREMENTS IMPOSED BY THE CODE. AS A PARTNERSHIP
UNDER THE CODE, THE PORTFOLIO ALSO DOES NOT PAY FEDERAL INCOME OR EXCISE
TAXES.
Distributions of interest on certain municipal obligations constitute a tax
preference item under the alternative minimum tax provisions applicable to
individuals and corporations. Distributions of taxable income (including a
portion of any original issue discount with respect to certain stripped
municipal obligations and stripped coupons and accretion of certain market
discount) and net short-term capital gains will be taxable to shareholders as
ordinary income. Distributions of long-term capital gains included therein are
taxable to shareholders as such for federal income tax purposes, regardless of
the length of time Fund shares have been owned by the shareholder. Tax-exempt
distributions received from the Fund are includable in the tax base for
determining the taxability of social security and railroad retirement benefits.
Interest on indebtedness incurred or continued by a shareholder to purchase or
carry shares of the Fund is not deductible. Further, entities or persons who are
"substantial users" (or persons related to "substantial users") of facilities
financed by industrial development or private activity bonds should consult
their tax advisers before purchasing shares of the Fund. "Substantial user" is
defined in applicable Treasury regulations to include a "non-exempt person" who
regularly uses in trade or business a part of a facility financed from the
proceeds of industrial development bonds and would likely be interpreted to
include private activity bonds issued to finance similar facilities.
Shareholders should consult their own tax advisers with respect to the state,
local and foreign tax consequences of investing in the Fund.
PERFORMANCE INFORMATION
- ------------------------------------------------------------------------------
FROM TIME TO TIME, THE FUND MAY ADVERTISE ITS YIELD AND/OR AVERAGE ANNUAL TOTAL
RETURN. The Fund's current yield is calculated by dividing the net investment
income per share earned during a recent 30-day period by the maximum offering
price per share (net asset value) of the Fund on the last day of the period and
annualizing the resulting figure. A taxable-equivalent yield is computed by
using the tax-exempt yield figure and dividing by 1 minus the tax rate. The
Fund's average annual total return is determined by computing the average annual
percentage change in value of $1,000 invested at the maximum sales charge (net
asset value) for specified periods ending with the most recent calendar quarter,
assuming reinvestment of all distributions. The average annual total return
calculation assumes a complete redemption of the investment and the deduction of
any applicable contingent deferred sales charge at the end of the period. The
Fund may publish annual and cumulative total return figures from time to time.
The Fund may 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 the Fund's
distribution rate and/or its effective distribution rate. The Fund's
distribution rate is computed by dividing the most recent monthly distribution
per share annualized by the current net asset value per share. The Fund's
effective distribution rate is computed by dividing the distribution rate by the
ratio used to annualize the most recent monthly distribution and reinvesting the
resulting amount for a full year on the basis of such ratio. The effective
distribution rate will be higher than the distribution rate because of the
compounding effect of the assumed reinvestment. Investors should note that the
Fund's yield is calculated using a standardized formula, the income component of
which is computed from the yields to maturity of all debt obligations held by
the Portfolio based on prescribed methods (with all purchases and sales of
securities during such period included in the income calculation on a settlement
date basis), whereas the distribution rate is based on the Fund's last monthly
distribution which tends to be relatively stable and may be more or less than
the amount of net investment income and short-term capital gain actually earned
by the Fund during the month.
The Fund may also publish total return figures which do not take into account
any contingent deferred sales charge which may be imposed upon redemptions at
the end of the specific period. Any performance figure which does not take into
account the contingent deferred sales charge would be reduced to the extent such
charge is imposed upon a redemption.
Investors should note that the investment results of the Fund will fluctuate
over time, and any presentation of the Fund's current yield or total return for
any prior period should not be considered a representation of what an investment
may earn or what the Fund's yield or total return may be in any future period.
If the expenses of the Fund or the Portfolio are paid by Eaton Vance, the Fund's
performance will be higher.
<TABLE>
<CAPTION>
APPENDIX
NATIONAL MUNICIPALS PORTFOLIO
ASSET COMPOSITION INFORMATION
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1995
RATINGS OF RATINGS OF
MUNICIPAL BONDS MUNICIPAL BONDS
BY MOODY'S BY S&P
PERCENT OF PERCENT OF
NET ASSETS NET ASSETS
---------- ----------
<S> <C> <C> <C>
Aaa ....................................... 19.25 AAA ................................... 21.48
Aa2 ....................................... 3.61 AA+ ................................... 0.02
Aa3 ....................................... 2.13 AA .................................... 2.36
A1 ........................................ 2.14 AA- ................................... 2.60
A2 ........................................ 3.37 A+ .................................... 0.72
Baa1 ...................................... 7.63 A ..................................... 1.73
Baa2 ...................................... 11.23 A- .................................... 2.63
Baa3 ...................................... 4.59 BBB+ .................................. 3.64
Ba1 ....................................... 3.03 BBB ................................... 9.43
Ba2 ....................................... 0.37 BBB- .................................. 3.03
B1 ........................................ 0.88 BB+ ................................... 6.31
B2 ........................................ 0.55 BB .................................... 6.23
Unrated ................................... 41.22 B ..................................... 0.21
----- Unrated ............................... 39.61
100.00 ------ %
100.00%
</TABLE>
The chart above indicates the weighted average composition of the securities
held by the Portfolio for the period ended September 30, 1995, with the debt
securities rated by Moody's and S&P separated into the indicated categories. The
above was calculated on a dollar weighted basis and was computed as at the end
of each month during the fiscal year. The chart does not necessarily indicate
what the composition of the securities held by the Portfolio's will be in the
current and subsequent fiscal years. Securities that are rated by one rating
agency may be "unrated" by the other.
For a description of Moody's and S&P's municipal bond ratings, see the Appendix
to the Statement of Additional Information.
<PAGE>
[LOGO]
EATON VANCE
MUTUAL FUNDS
EV CLASSIC NATIONAL
MUNICIPALS FUND
Prospectus
February 1, 1996
EV CLASSIC
NATIONAL MUNICIPALS FUND
24 FEDERAL STREET
BOSTON, MA 02110
- --------------------------------------------------------------------------------
PORTFOLIO INVESTMENT ADVISER
Boston Management and Research, 24 Federal Street, Boston, MA 02110
FUND ADMINISTRATOR
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111
TRANSFER AGENT
First Data Services Group, BOS725, P.O. Box 1559, Boston, MA 02104
(800) 262-1122
AUDITORS
Deloitte & Touche LLP, 125 Summer Street, Boston, MA 02110
C-HMP
<PAGE>
Part A
Information Required in a Prospectus
EV MARATHON
NATIONAL MUNICIPALS FUND
- ------------------------------------------------------------------------------
EV MARATHON NATIONAL MUNICIPALS FUND (THE "FUND") IS A MUTUAL FUND SEEKING TO
PROVIDE CURRENT INCOME EXEMPT FROM THE REGULAR FEDERAL INCOME TAX. THE FUND
INVESTS ITS ASSETS IN NATIONAL MUNICIPALS PORTFOLIO (THE "PORTFOLIO"), A
DIVERSIFIED OPEN-END INVESTMENT COMPANY HAVING THE SAME INVESTMENT OBJECTIVE AS
THE FUND, RATHER THAN BY DIRECTLY INVESTING IN AND MANAGING ITS OWN PORTFOLIO OF
SECURITIES AS WITH HISTORICALLY STRUCTURED MUTUAL FUNDS. THE FUND IS A SERIES OF
EATON VANCE MUNICIPALS TRUST (THE "TRUST").
Shares of the Fund are not deposits or obligations of, or guaranteed or endorsed
by, any bank or other insured depository institution, and are not federally
insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board
or any other government agency. Shares of the Fund involve investment risks,
including fluctuations in value and the possible loss of some or all of the
principal investment.
This Prospectus is designed to provide you with information you should know
before investing. Please retain this document for future reference. A
Statement of Additional Information dated February 1, 1996 for the Fund, as
supplemented from time to time, has been filed with the Securities and
Exchange Commission and is incorporated herein by reference. This Statement of
Additional Information is available without charge from the Fund's principal
underwriter, Eaton Vance Distributors, Inc. (the "Principal Underwriter"), 24
Federal Street, Boston, MA 02110 (telephone (800) 225-6265). The Portfolio's
investment adviser is Boston Management and Research (the "Investment
Adviser"), a wholly-owned subsidiary of Eaton Vance Management, and Eaton
Vance Management is the administrator (the "Administrator") of the Fund. The
offices of the Investment Adviser and the Administrator are located at 24
Federal Street, Boston, MA 02110.
- ------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE PAGE
<S> <C> <S> <C>
Shareholder and Fund Expenses ....................... 2 How to Redeem Fund Shares .................... 13
The Fund's Financial Highlights ..................... 3 Reports to Shareholders ...................... 14
The Fund's Investment Objective ..................... 4 The Lifetime Investing Account/Distribution
How the Fund and the Portfolio Invest their Assets .. 4 Options .................................... 14
Organization of the Fund and the Portfolio .......... 7 The Eaton Vance Exchange Privilege .......... 15
Management of the Fund and the Portfolio ............ 9 Eaton Vance Shareholder Services ............ 16
Distribution Plan ................................... 10 Distributions and Taxes ..................... 17
Valuing Fund Shares ................................. 11 Performance Information ..................... 17
How to Buy Fund Shares .............................. 12 Appendix .................................... 19
- ---------------------------------------------------------------------------------------------------------------------
PROSPECTUS DATED FEBRUARY 1, 1996
</TABLE>
<PAGE>
<TABLE>
SHAREHOLDER AND FUND EXPENSES
- -----------------------------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES
---------------------------------------------------------------------------------------------------
<S> <C>
Sales Charges Imposed on Purchases of Shares None
Sales Charges Imposed on Reinvested Distributions None
Fees to Exchange Shares None
Range of Declining Contingent Deferred Sales Charges Imposed on Redemption
during the First Seven Years (as a percentage of redemption proceeds exclusive
of all reinvestments and capital appreciation in the account) 5.00%-0%
ANNUAL FUND AND ALLOCATED PORTFOLIO OPERATING EXPENSES (as a percentage of
average daily net assets)
---------------------------------------------------------------------------------------------------
<S> <C>
Investment Adviser Fee 0.45%
Rule 12b-1 Distribution (and Service) Fees 0.94
Other Expenses 0.13
-----
Total Operating Expenses 1.52%
=====
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
An investor would pay the following contingent deferred sales charge and
expenses on a $1,000 investment, assuming (a) 5% annual return and (b)
redemption at the end of each period: $65 $88 $103 $181
An investor would pay the following expenses on the same
investment, assuming (a) 5% annual return and (b) no
redemptions: $15 $48 $ 83 $181
</TABLE>
NOTES:
The table and Example summarize the aggregate expenses of the Fund and the
Portfolio and are designed to help investors understand the costs and expenses
they will bear, directly or indirectly, by investing in the Fund. Information
for the Fund is based on its expenses for the most recent fiscal year.
The Fund invests exclusively in the Portfolio. The Trustees believe the
aggregate per share expenses of the Fund and the 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 the
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 Fund and the Portfolio see
"The Fund's Financial Highlights," "Organization of the Fund and the Portfolio,"
"Management of the Fund and the Portfolio" and "How to Redeem Fund Shares." A
long-term shareholder in the Fund may pay more than the economic equivalent of
the maximum front-end sales charge permitted by a rule of the National
Association of Securities Dealers, Inc. See "Distribution Plans."
No contingent deferred sales charge is imposed on (a) shares purchased more than
six years prior to redemption, (b) shares acquired through the reinvestment of
distributions or (c) any appreciation in value of other shares in the account
(see "How to Redeem Fund Shares"), and no such charge is imposed on exchanges of
Fund shares for shares of one or more other funds listed under "The Eaton Vance
Exchange Privilege."
The Portfolio's monthly advisory fee has two components, a fee based on daily
net assets and a fee based on daily gross income, as set forth in the fee
schedule on page 9.
Other investment companies with different distribution arrangements and fees are
investing in the Portfolio and others may do so in the future. See "Organization
of the Fund and the Portfolio."
<PAGE>
THE FUND'S FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
The following information should be read in conjunction with the audited
financial statements included in the Fund's annual report to shareholders 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 the Fund is contained in the Fund's annual report
to shareholders which may be obtained without charge by contacting the Principal
Underwriter, Eaton Vance Distributors, Inc.
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED SEPTEMBER 30,
----------------------------------------------------------------------------------------------------------
1995 1994 1993<F5> 1992 1991 1990 1989 1988 1987 1986<F1><F3>
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
beginning of year $ 9.410 $10.570 $ 9.820 $ 9.430 $ 9.120 $ 9.570 $ 9.570 $ 9.260 $10.180 $10.000
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
INCOME (LOSS) FROM
OPERATIONS:
Net investment income $ 0.570 $ 0.556 $ 0.553 $ 0.568 $ 0.586 $ 0.613 $ 0.642 $ 0.659 $ 0.684 $ 0.669
Net realized and
unrealized gain
(loss) on investments 0.395 (1.043) 0.856 0.490 0.413 (0.348) 0.095 0.404 (0.819) 0.257
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total income
(loss) from
operations $ 0.965 $(0.487) $ 1.409 $ 1.058 $ 0.999 $ 0.265 $ 0.737 $ 1.063 $(0.135) $ 0.849
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
From net
investment
income $(0.570) $(0.556) $(0.553) $(0.568) $(0.586) $(0.613) $(0.643) $(0.658) $(0.684) $(0.669)
In excess of net
investment
income<F5> (0.005) (0.077) (0.106) (0.100) (0.103) (0.102) (0.094) (0.095) (0.101) --
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
In excess of net
realized gain on
investment
transactions<F5> -- (0.040) -- -- -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total
distributions $(0.575) $(0.673) $(0.659) $(0.668) $(0.689) $(0.715) $(0.737) $(0.753) $(0.785) (0.669)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
NET ASSET VALUE, end
of year $ 9.800 $ 9.410 $10.570 $ 9.820 $ 9.430 $ 9.120 $ 9.570 $ 9.570 $ 9.260 $10.180
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
TOTAL RETURN<F6> 10.60% (4.82)% 14.90% 11.67% 11.33% 2.83% 7.96% 11.94% (1.64)% 8.33%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
year (000
omitted) $2,191,240 $2,171,901 $2,090,482 $1,491,904 $1,178,454 $1,063,131 $988,267 $849,875 $860,547 $615,771
Ratio of net
expenses to
average net
assets<F7><F4> 1.52% 1.51% 1.67% 1.79% 1.86% 1.90% 1.91% 1.93% 1.78% 0.63%<F2>
Ratio of net
investment
income to
average net
assets<F4> 6.00% 5.54% 5.43% 5.88% 6.31% 6.50% 6.66% 6.98% 6.78% 7.86%<F2>
PORTFOLIO
TURNOVER<F8> -- -- 10% 54% 54% 15% 10% 19% 15% 13%
<FN>
<F1> Period from the start of business, December 19, 1985, to September 30,
1986.
<F2> Annualized.
NOTES:
<F3> Certain of the above per-share figures for the period ended September 30,
1986 are based on average shares outstanding during the period.
<F4> On June 12, 1987, the Securities and Exchange Commission adopted a new rule
which requires sales commissions paid to the Principal Underwriter under
the Distribution Plan to be treated as an operating expense rather than a
charge to paid-in capital. Beginning with the year ended September 30,
1987, the Fund changed its policy from charging such commissions to paid-in
capital to recognizing them as operating expenses. Had the rule been in
effect for the year ended September 30, 1986, the annualized ratios of
expenses and net investment income to average net assets would have been
1.63% and 6.86%, respectively.
<F5> Distributions from paid-in capital for the years ended September 30, 1986
through 1992 have been restated to conform with the treatment permitted
under current financial reporting standards. During the year ended
September 30, 1993, the Fund adopted Statement of Position (SOP) 93-2:
Determination, Disclosure and Financial Statement Presentation of Income,
Capital Gain, and Return of Capital Distributions by Investment Companies.
The SOP requires that differences in the recognition or classification of
income between the financial statements and tax earnings and profits that
result in temporary over-distributions for financial statement purposes,
are classified as distributions in excess of net investment income or
accumulated net realized gains.
<F6> Total return is calculated assuming a purchase at the net asset value on
the first day and a sale at the net asset value on the last day of each
period reported. 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.
<F7> Includes the Fund's share of the Portfolio's allocated expenses for years
ended September 30, 1995 and 1994, and for the period from February 1, 1993
to September 30, 1993.
<F8> Portfolio Turnover represents the rate of portfolio activity for the period
while the Fund was making investments directly in securities. The portfolio
turnover for the period since the Fund transferred substantially all of its
investable assets to the Portfolio is shown in the Portfolio's financial
statements which are included in the Fund's annual report.
</TABLE>
<PAGE>
THE FUND'S INVESTMENT OBJECTIVE
- ------------------------------------------------------------------------------
THE FUND'S INVESTMENT OBJECTIVE IS TO PROVIDE CURRENT INCOME EXEMPT FROM REGULAR
FEDERAL INCOME TAX. The Fund currently seeks to meet its investment objective by
investing its assets in the National Municipals Portfolio (the "Portfolio"), a
separate registered investment company which invests primarily in municipal
obligations (described below) which are rated at least investment grade by a
major rating agency or, if unrated, determined to be of at least investment
grade quality by the Investment Adviser.
HOW THE FUND AND THE PORTFOLIO INVEST THEIR ASSETS
- ------------------------------------------------------------------------------
THE FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY INVESTING EITHER DIRECTLY
OR INDIRECTLY THROUGH ANOTHER OPEN-END MANAGEMENT INVESTMENT COMPANY PRIMARILY
(I.E., AT LEAST 80% OF ITS ASSETS DURING PERIODS OF NORMAL MARKET CONDITIONS) IN
DEBT OBLIGATIONS ISSUED BY OR ON BEHALF OF STATES, TERRITORIES AND POSSESSIONS
OF THE UNITED STATES, AND THE DISTRICT OF COLUMBIA AND THEIR POLITICAL
SUBDIVISIONS, AGENCIES OR INSTRUMENTALITIES, THE INTEREST ON WHICH IS EXEMPT
FROM REGULAR FEDERAL INCOME TAX. The foregoing policy is a fundamental policy of
both the Fund and the Portfolio, which may not be changed unless authorized by a
vote of the shareholders of the Fund or the investors in the Portfolio, as the
case may be.
At least 65% of the net assets of the Portfolio will normally be invested in
obligations rated at least investment grade at the time of investment (which are
those rated Baa or higher by Moody's Investors Service, Inc. ("Moody's") or BBB
or higher by either Standard & Poor's Ratings Group ("S&P") or by Fitch
Investors Service, Inc. ("Fitch")), or, if unrated, determined by the Investment
Adviser to be of at least investment grade quality. The Portfolio may invest
less than 35% of its net assets in municipal obligations rated below investment
grade (but not lower than B by Moody's, S&P or Fitch) and unrated municipal
obligations considered to be of comparable quality by the Investment Adviser.
Municipal obligations rated Baa or BBB may have speculative characteristics.
Also, changes in economic conditions or other circumstances are more likely to
lead to a weakened capacity to make principal and interest payments than in the
case of higher rated obligations. Securities rated below BBB or Baa are commonly
known as "junk bonds". The Portfolio may retain an obligation whose rating drops
below B after its acquisition if such retention is considered desirable by the
Investment Adviser. See "Additional Risk Considerations." For a description of
municipal obligation ratings, see the Statement of Additional Information.
MUNICIPAL OBLIGATIONS. Municipal obligations include bonds, notes and commercial
paper issued by a municipality for a wide variety of both public and private
purposes, the interest on which is, in the opinion of bond counsel, exempt from
regular federal income tax. Public purpose municipal bonds include general
obligation and revenue bonds. General obligation bonds are backed by the taxing
power of the issuing municipality. Revenue bonds are backed by the revenues of a
project or facility. Municipal notes include bond anticipation, tax anticipation
and revenue anticipation notes, which are short-term obligations that will be
retired with the proceeds of an anticipated bond issue, tax revenue or facility
revenue, respectively.
Interest on certain types of municipal obligations may be subject to the federal
alternative minimum tax (the "AMT") for individual investors. As at September
30, 1995, the Portfolio had 24.8% of its net assets invested in such
obligations. Distributions to corporate investors of certain interest income may
also be subject to the AMT. The Fund may not be suitable for investors subject
to the AMT.
CONCENTRATION. The Portfolio may invest 25% or more of its total assets in
municipal obligations of issuers located in the same state or in municipal
obligations of the same type, including without limitation the following: lease
rental obligations of state and local authorities; obligations of state and
local housing finance authorities, municipal utilities systems or public housing
authorities; obligations of hospitals or life care facilities; or industrial
development or pollution control bonds issued for electric utility systems,
steel companies, paper companies or other purposes. This may make the Portfolio
more susceptible to adverse economic, political, or regulatory occurrences
affecting a particular category of issuers. For example, health-care related
issuers are susceptible to medicaid reimbursement policies, and national and
state health care legislation. As the Portfolio's concentration increases, so
does the potential for fluctuation in the value of the Fund's shares.
DIVERSIFIED STATUS. The Portfolio is a "diversified" investment company under
the Investment Company Act of 1940 (the "1940 Act"). This means that with
respect to 75% of its total assets (1) the Portfolio may not invest more than 5%
of its total assets in the securities of any one issuer (except U.S. Government
obligations) and (2) the Portfolio may not own more than 10% of the outstanding
voting securities of any one issuer. Since municipal obligations are not voting
securities, there is no limit on the percentage of a single issuer's obligations
which the Portfolio may own so long as it does not invest more than 5% of its
total assets in the securities of that issuer. Consequently, the Portfolio may
invest in a greater percentage of the outstanding securities of a single issuer
than would an investment company which invests in voting securities. There is no
diversification requirement with respect to the remaining 25% of the Portfolio's
total assets, so that all of such assets may be invested in the securities of
any one issuer. To the extent that the Portfolio is less diversified than that
of other investment companies, it may be subject to an increased risk of loss if
the issuer is unable to make interest or principal payments or if the market
value of such securities declines.
OTHER INVESTMENT PRACTICES
The Portfolio may engage in the following investment practices, some of which
may be considered to involve "derivative" instruments because they derive their
value from another instrument, security or index. In addition, the Portfolio may
temporarily borrow up to 5% of the value of its total assets to satisfy
redemption requests or settle securities transactions.
WHEN-ISSUED SECURITIES. The Portfolio may purchase securities on a "when-
issued" basis, which means that payment and delivery occur on a future
settlement date. The price and yield of such securities are generally fixed on
the date of commitment to purchase. However, the market value of the securities
may fluctuate prior to delivery and upon delivery the securities may be worth
more or less than the Portfolio agreed to pay for them. The Portfolio may also
purchase instruments that give the Portfolio the option to purchase a municipal
obligation when and if issued.
INVERSE FLOATERS. The Portfolio may invest in municipal securities whose
interest rates bear an inverse relationship to the interest rate on another
security or the value of an index ("inverse floaters"). An investment in inverse
floaters may involve greater risk than an investment in a fixed rate bond.
Because changes in the interest rate on the other security or index inversely
affect the residual interest paid on the inverse floater, the value of an
inverse floater is generally more volatile than that of a fixed rate bond.
Inverse floaters have interest rate adjustment formulas which generally reduce
or, in the extreme, eliminate the interest paid to the Portfolio when short-term
interest rates rise, and increase the interest paid to the Portfolio when
short-term interest rates fall. Inverse floaters have varying degrees of
liquidity, and the market for these securities is new and relatively volatile.
These securities tend to underperform the market for fixed rate bonds in a
rising interest rate environment, but tend to outperform the market for fixed
rate bonds when interest rates decline. Shifts in long-term interest rates may,
however, alter this tendency. Although volatile, inverse floaters typically
offer the potential for yields exceeding the yields available on fixed rate
bonds with comparable credit quality and maturity. These securities usually
permit the investor to convert the floating rate to a fixed rate (normally
adjusted downward), and this optional conversion feature may provide a partial
hedge against rising rates if exercised at an opportune time. Inverse floaters
are leveraged because they provide two or more dollars of bond market exposure
for every dollar invested.
FUTURES TRANSACTIONS. The Portfolio may purchase and sell various kinds of
financial futures contracts and options thereon to hedge against changes in
interest rates. Futures contracts may be based on various debt securities (such
as U.S. Government securities and municipal obligations) and securities indices
(such as the Municipal Bond Index traded on the Chicago Board of Trade). Such
transactions involve a risk of loss or depreciation due to unanticipated adverse
changes in securities prices, which may exceed the Portfolio's initial
investment in these contracts. The Portfolio may not purchase or sell futures
contracts or related options, except for closing purchase or sale transactions,
if immediately thereafter the sum of the amount of margin deposits and premiums
paid on the Portfolio's outstanding positions would exceed 5% of the market
value of the Portfolio's net assets. These transactions involve transaction
costs. There can be no assurance that the Investment Adviser's use of futures
will be advantageous to the Portfolio. Distributions by the Fund of any gains
realized on the Portfolio's transactions in futures and options on futures will
be taxable.
INSURED OBLIGATIONS. The Portfolio may purchase municipal bonds that are
additionally secured by insurance, bank credit agreements, or escrow accounts.
The credit quality of companies which provide such credit enhancements will
affect the value of those securities. Although the insurance feature reduces
certain financial risks, the premiums for insurance and the higher market price
paid for insured obligations may reduce the Fund's current yield. Insurance
generally will be obtained from insurers with a claims-paying ability rated Aaa
by Moody's or AAA by S&P or Fitch. The insurance does not guarantee the market
value of the insured obligations or the net asset value of the Fund's shares.
ADDITIONAL RISK CONSIDERATIONS
Many municipal obligations offering current income are in the lowest investment
grade category (Baa or BBB), lower categories or may be unrated. As indicated
above, the Portfolio may invest in municipal obligations rated below investment
grade (but not lower than B by Moody's, S&P or Fitch) and comparable unrated
obligations. See the Appendix to this Prospectus for the asset composition of
the Portfolio for the fiscal year ended September 30, 1995. The lowest
investment grade, lower rated and comparable unrated municipal obligations in
which the Portfolio may invest will have speculative characteristics in varying
degrees. While such obligations may have some quality and protective
characteristics, these characteristics can be expected to be offset or
outweighed by uncertainties or major risk exposures to adverse conditions. Lower
rated and comparable unrated municipal obligations are subject to the risk of an
issuer's inability to meet principal and interest payments on the obligations
(credit risk) and may also be subject to greater price volatility due to such
factors as interest rate sensitivity, market perception of the creditworthiness
of the issuer and general market liquidity (market risk). Lower rated or unrated
municipal obligations are also more likely to react to real or perceived
developments affecting market and credit risk than are more highly rated
obligations, which react primarily to movements in the general level of interest
rates. The Investment Adviser seeks to minimize the risks of investing in below
investment grade securities through professional investment analysis and
attention to current developments in interest rates and economic conditions.
When the Portfolio invests in lower rated or unrated municipal obligations, the
achievement of the Portfolio's goals is more dependent on the Investment
Adviser's ability than would be the case if the Portfolio were investing in
municipal obligations in the higher rating categories.
The Portfolio may retain defaulted obligations in its portfolio when such
retention is considered desirable by the Investment Adviser. In the case of a
defaulted obligation, the Portfolio may incur additional expense seeking
recovery of its investment. Municipal obligations held by the Portfolio which
are rated below investment grade but which, subsequent to the assignment of such
rating, are backed by escrow accounts containing U.S. Government obligations may
be determined by the Investment Adviser to be of investment grade quality for
purposes of the Portfolio's investment policies. The Portfolio may retain in its
portfolio an obligation whose rating drops below B after its acquisition, if
such retention is considered desirable by the Investment Adviser; provided,
however, that holdings of obligations rated below Baa or BBB will be less than
35% of net assets. In the event the rating of an obligation held by the
Portfolio is downgraded, causing the Portfolio to exceed this limitation, the
Investment Adviser will (in an orderly fashion within a reasonable period of
time) dispose of such obligations as it deems necessary in order to comply with
the Portfolio's credit quality limitations.
The net asset value of shares of the Fund will change in response to
fluctuations in prevailing interest rates and changes in the value of the
securities held by the Portfolio. When interest rates decline, the value of
securities held by the Portfolio can be expected to rise. Conversely, when
interest rates rise, the value of most portfolio security holdings can be
expected to decline. Changes in the credit quality of the issuers of municipal
obligations held by the Portfolio will affect the principal value of (and
possibly the income earned on) such obligations. In addition, the values of such
securities are affected by changes in general economic conditions and business
conditions affecting the specific industries of their issuers. Changes by
recognized rating services in their ratings of a security and in the ability of
the issuer to make payments of principal and interest may also affect the value
of the Portfolio's investments. The amount of information about the financial
condition of an issuer of municipal obligations may not be as extensive as that
made available by corporations whose securities are publicly traded. An
investment in shares of the Fund will not constitute a complete investment
program.
At times, a substantial portion of the Portfolio's assets may be invested in
securities as to which the Portfolio, by itself or together with other accounts
managed by the Investment Adviser and its affiliates, holds a major portion or
all of such securities. Under adverse market or economic conditions or in the
event of adverse changes in the financial condition of the issuer, the Portfolio
could find it more difficult to sell such securities when the Investment Adviser
believes it advisable to do so or may be able to sell such securities only at
prices lower than if such securities were more widely held. Under such
circumstances, it may also be more difficult to determine the fair value of such
securities for purposes of computing the Portfolio's net asset value.
The secondary market for some municipal obligations (including issues which are
privately placed with the Portfolio) is less liquid than that for taxable debt
obligations or other more widely traded municipal obligations. The Portfolio
will not invest in illiquid securities if more than 15% of its net assets would
be invested in securities that are not readily marketable. No established resale
market exists for certain of the municipal obligations in which the Portfolio
may invest. The market for obligations rated below investment grade is also
likely to be less liquid than the market for higher rated obligations. As a
result, the Portfolio may be unable to dispose of these municipal obligations at
times when it would otherwise wish to do so at the prices at which they are
valued.
Certain securities held by the Portfolio may permit the issuer at its option to
"call," or redeem, its securities. If an issuer redeems securities held by the
Portfolio during a time of declining interest rates, the Portfolio may not be
able to reinvest the proceeds providing the same investment return as the
securities redeemed.
Some of the securities in which the Portfolio invests may include so-called
"zero-coupon" bonds, whose values are subject to greater fluctuation in response
to changes in market interest rates than bonds which pay interest currently.
Zero-coupon bonds are issued at a significant discount from face value and pay
interest only at maturity rather than at intervals during the life of the
security. The Portfolio is required to accrue and distribute income from
zero-coupon bonds on a current basis, even though it does not receive that
income currently in cash. Thus, the Portfolio may have to sell other investments
to obtain cash needed to make income distributions.
The Portfolio may invest in municipal leases, and participations in municipal
leases. The obligation of the issuer to meet its obligations under such leases
is often subject to the appropriation by the appropriate legislative body, on an
annual or other basis, of funds for the payment of the obligations. Investments
in municipal leases are thus subject to the risk that the legislative body will
not make the necessary appropriation and the issuer will not otherwise be
willing or able to meet its obligation.
THE FUND AND PORTFOLIO HAVE ADOPTED CERTAIN FUNDAMENTAL INVESTMENT
RESTRICTIONS WHICH ARE ENUMERATED IN DETAIL IN THE STATEMENT OF ADDITIONAL
INFORMATION AND WHICH MAY NOT BE CHANGED UNLESS AUTHORIZED BY A SHAREHOLDER
VOTE AND AN INVESTOR VOTE, RESPECTIVELY. EXCEPT FOR SUCH ENUMERATED
RESTRICTIONS AND AS OTHERWISE INDICATED IN THIS PROSPECTUS, THE INVESTMENT
OBJECTIVE AND POLICIES OF THE FUND AND PORTFOLIO ARE NOT FUNDAMENTAL POLICIES
AND ACCORDINGLY MAY BE CHANGED BY THE TRUSTEES OF THE TRUST AND THE PORTFOLIO
WITHOUT OBTAINING THE APPROVAL OF THE FUND'S SHAREHOLDERS OR THE INVESTORS IN
THE PORTFOLIO, AS THE CASE MAY BE. IF ANY CHANGES WERE MADE IN THE FUND'S
INVESTMENT OBJECTIVE, THE FUND MIGHT HAVE INVESTMENT OBJECTIVES DIFFERENT FROM
THE OBJECTIVE WHICH AN INVESTOR CONSIDERED APPROPRIATE AT THE TIME THE
INVESTOR BECAME A SHAREHOLDER IN THE FUND.
ORGANIZATION OF THE FUND AND THE PORTFOLIO
- ------------------------------------------------------------------------------
THE FUND IS A SERIES OF EATON VANCE MUNICIPALS TRUST (THE "TRUST"), A BUSINESS
TRUST ESTABLISHED UNDER MASSACHUSETTS LAW PURSUANT TO A DECLARATION OF TRUST
DATED SEPTEMBER 30, 1985, AS AMENDED AND RESTATED. 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 Fund) it is known as a "series company." Each share represents an
equal proportionate beneficial interest in the Fund. When issued and
outstanding, the shares are fully paid and nonassessable by the Trust and
redeemable as described under "How to Redeem Fund Shares". Shareholders are
entitled to one vote for each full share held. Fractional shares may be voted
proportionately. Shares have no preemptive or conversion rights and are freely
transferable. In the event of the liquidation of the Fund, shareholders are
entitled to share pro rata in the net assets of the Fund available for
distribution to shareholders.
THE PORTFOLIO IS ORGANIZED AS A TRUST UNDER THE LAWS OF THE STATE OF NEW YORK
AND INTENDS TO BE TREATED AS A PARTNERSHIP FOR FEDERAL TAX PURPOSES. The
Portfolio, as well as the Trust, intends to comply with all applicable federal
and state securities laws. The Portfolio's Declaration of Trust provides that
the Fund and other entities investing in the Portfolio (e.g., other U.S. and
foreign investment companies, and common and commingled trust funds) will each
be liable for all obligations of the Portfolio. However, the risk of the Fund
incurring financial loss on account of such liability is limited to
circumstances in which both inadequate insurance exists and the Portfolio itself
is unable to meet its obligations. Accordingly, the Trustees of the Trust
believe that neither the Fund nor its shareholders will be adversely affected by
reason of the Fund investing in the Portfolio.
SPECIAL INFORMATION ON THE FUND/PORTFOLIO INVESTMENT STRUCTURE. An investor in
the 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 the Portfolio
(although the Fund may temporarily hold a de minimus amount of cash), which is a
separate investment company with an identical investment objective. Therefore,
the Fund's interest in securities owned by the Portfolio is indirect. In
addition to selling an interest to the Fund, the Portfolio may sell interests to
other affiliated and non-affiliated mutual funds or institutional investors.
Such investors will invest in the Portfolio on the same terms and conditions and
will pay a proportionate share of the Portfolio's expenses. However, the other
investors investing in the Portfolio are not required to sell their shares at
the same public offering price as the Fund due to variations in sales
commissions and other operating expenses. Therefore, investors in the Fund
should be aware that these differences may result in differences in returns
experienced by investors in the various funds that invest in the Portfolio. Such
differences in returns are also present in other mutual fund structures,
including funds that have multiple classes of shares. For information regarding
the investment objective, policies and restrictions of the Portfolio, see "The
Fund's Investment Objective" and "How the Fund and the Portfolio 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 the Fund in the Portfolio, as well as the advantages and
disadvantages of the two-tier format. The Trustees believe that the structure
offers opportunities for substantial growth in the assets of the Portfolio, and
affords the potential for economies of scale for the Fund, at least when the
assets of the Portfolio exceed $500 million. The public shareholders of the Fund
have previously approved the policy of investing in an interest in the
Portfolio.
The Fund may withdraw (completely redeem) all its assets from the Portfolio at
any time if the Board of Trustees of the Trust determines that it is in the best
interest of the Fund to do so. The investment objective and the nonfundamental
investment policies of the Fund and the Portfolio may be changed by the Trustees
of the Trust and the Portfolio without obtaining the approval of the
shareholders of the Fund or the investors in the Portfolio, as the case may be.
Any such change of the investment objective of the Fund or the Portfolio 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 the Fund
withdraws all of its assets from the Portfolio, or the Board of Trustees of the
Trust determines that the investment objective of the Portfolio is no longer
consistent with the investment objective of the Fund, the Board of Trustees of
the Trust would consider what action might be taken, including investing the
assets of the Fund in another pooled investment entity or retaining an
investment adviser to manage the Fund's assets in accordance with its investment
objective. The Fund's investment performance may be affected by a withdrawal of
all its assets from the Portfolio.
Information regarding other pooled investment entities or funds which invest in
the 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 the Portfolio may be adversely affected by the
actions of a larger investor in the Portfolio. For example, if a large investor
withdraws from the Portfolio, the remaining investors may experience higher pro
rata operating expenses, thereby producing lower returns. Additionally, the
Portfolio may become less diverse, resulting in increased portfolio risk, and
experience decreasing economies of scale. However, this possibility exists as
well for historically structured 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 Fund may be subject to additional regulations than historically
structured funds.
The Declaration of Trust of the Portfolio provides that the Portfolio will
terminate 120 days after the complete withdrawal of the Fund or any other
investor in the Portfolio, unless either the remaining investors, by unanimous
vote at a meeting of such investors, or a majority of the Trustees of the
Portfolio, by written instrument consented to by all investors, agree to
continue the business of the Portfolio. This provision is consistent with
treatment of the Portfolio as a partnership for federal income tax purposes. See
"Distributions and Taxes" for further information. Whenever the Fund as an
investor in the Portfolio is requested to vote on matters pertaining to the
Portfolio (other than the termination of the Portfolio's business, which may be
determined by the Trustees of the Portfolio without investor approval), the Fund
will hold a meeting of Fund shareholders and will vote its interest in the
Portfolio for or against such matters proportionately to the instructions to
vote for or against such matters received from Fund shareholders. The Fund shall
vote shares for which it receives no voting instructions in the same proportion
as the shares for which it receives voting instructions. Other investors in the
Portfolio may alone or collectively acquire sufficient voting interests in the
Portfolio to control matters relating to the operation of the Portfolio, which
may require the Fund to withdraw its investment in the Portfolio or take other
appropriate action. Any such withdrawal could result in a distribution "in kind"
of portfolio securities (as opposed to a cash distribution from the Portfolio).
If securities are distributed, the Fund could incur brokerage, tax or other
charges in converting the securities to cash. In addition, the distribution in
kind may result in a less diversified portfolio of investments or adversely
affect the liquidity of the Fund. Notwithstanding the above, there are other
means for meeting shareholder redemption requests, such as borrowing.
The 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 the Portfolio are the same. Such procedures require each Board
to take actions to resolve any conflict of interest between the Fund and the
Portfolio, and it is possible that the creation of separate Boards may be
considered. For further information concerning the Tustees and officers of the
Trust and the Portfolio, see the Statement of Additional Information.
MANAGEMENT OF THE FUND AND THE PORTFOLIO
- ------------------------------------------------------------------------------
THE PORTFOLIO ENGAGES BOSTON MANAGEMENT AND RESEARCH ("BMR"), A WHOLLY-OWNED
SUBSIDIARY OF EATON VANCE MANAGEMENT ("EATON VANCE"), AS ITS INVESTMENT ADVISER.
EATON VANCE, ITS AFFILIATES AND ITS PREDECESSOR COMPANIES HAVE BEEN MANAGING
ASSETS OF INDIVIDUALS AND INSTITUTIONS SINCE 1924 AND MANAGING INVESTMENT
COMPANIES SINCE 1931.
Acting under the general supervision of the Board of Trustees of the Portfolio,
BMR manages the Portfolio's investments and affairs and furnishes for the use of
the Portfolio office space and all necessary office facilities, equipment and
personnel for servicing the investments of the Portfolio. Under its investment
advisory agreement with the Portfolio, BMR receives a monthly advisory fee equal
to the aggregate of
(a) a daily asset based fee computed by applying the annual asset rate
applicable to that portion of the total daily net assets in each Category
as indicated below, plus
(b) a daily income based fee computed by applying the daily income rate
applicable to that portion of the total daily gross income (which portion
shall bear the same relationship to the total daily gross income on such day
as that portion of the total daily net assets in the same Category bears to
the total daily net assets on such day) in each Category as indicated below:
ANNUAL DAILY
CATEGORY DAILY NET ASSETS ASSET RATE INCOME RATE
------------------------------------------------------------------------------
1 up to $500 million 0.300% 3.00%
2 $500 million but less than $1 billion 0.275% 2.75%
3 $1 billion but less than $1.5 billion 0.250% 2.50%
4 $1.5 billion but less than $2 billion 0.225% 2.25%
5 $2 billion but less than $3 billion 0.200% 2.00%
6 $3 billion and over 0.175% 1.75%
As at September 30, 1995, the Portfolio had net assets of $2,260,646,363. For
the fiscal year ended September 30, 1995, the Portfolio paid BMR advisory fees
equivalent to 0.45% of the Portfolio's average net assets for such year.
BMR OR EATON VANCE ACTS AS INVESTMENT ADVISER TO INVESTMENT COMPANIES AND
VARIOUS INDIVIDUAL AND INSTITUTIONAL CLIENTS WITH ASSETS UNDER MANAGEMENT OF
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.
Thomas M. Metzold has acted as the portfolio manager of the Portfolio since
December 17, 1993. He has been a Vice President of Eaton Vance since 1991 and of
BMR since 1992, and an employee of Eaton Vance since 1987.
Municipal obligations are normally traded on a net basis (without commission)
through broker-dealers and banks acting for their own account. Such firms
attempt to profit from such transactions by buying at the bid price and selling
at the higher asked price of the market, and the difference is customarily
referred to as the spread. In selecting firms which will execute portfolio
transactions BMR judges their professional ability and quality of service and
uses its best efforts to obtain execution at prices which are advantageous to
the Portfolio and at reasonably competitive spreads. Subject to the foregoing,
BMR may consider sales of shares of the Fund or of other investment companies
sponsored by BMR or Eaton Vance as a factor in the selection of firms to execute
portfolio transactions.
The Trust has retained the services of Eaton Vance to act as administrator of
the Fund. The Trust has not retained the services of an investment adviser since
the Trust seeks to achieve the investment objective of the Fund by investing its
assets in the Portfolio. As Administrator, Eaton Vance provides the Fund with
general office facilities and supervises the overall administration of the Fund.
For these services Eaton Vance currently receives no compensation. The Trustees
of the Trust may determine, in the future, to compensate Eaton Vance for such
services.
The Portfolio and the Fund, as the case may be, will each be responsible for all
respective costs and expenses not expressly stated to be payable by BMR under
the investment advisory agreement, by Eaton Vance under the administrative
services agreement, or by EVD under the distribution agreement.
DISTRIBUTION PLAN
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THE FUND FINANCES DISTRIBUTION ACTIVITIES AND HAS ADOPTED A DISTRIBUTION PLAN
(THE "PLAN") PURSUANT TO RULE 12B-1 UNDER THE 1940 ACT. Rule 12b-1 permits a
mutual fund, such as the Fund, to finance distribution activities and bear
expenses associated with the distribution of its shares provided that any
payments made by the Fund are made pursuant to a written plan adopted in
accordance with the Rule. The Plan is subject to, and complies with, the sales
charge rule of the National Association of Securities Dealers, Inc. (the "NASD
Rule"). The Plan is described further in the Statement of Additional
Information, and the following is a description of the salient features of the
Plan. The Plan provides that the Fund, subject to the NASD Rule, will pay sales
commissions and distribution fees to the Principal Underwriter only after and as
a result of the sale of shares of the Fund. On each sale of Fund shares
(excluding reinvestment of distributions) the Fund will pay the Principal
Underwriter amounts representing (i) sales commissions equal to 5% of the amount
received by the Fund for each share sold and (ii) distribution fees calculated
by applying the rate of 1% over the prime rate then reported in The Wall Street
Journal to the outstanding balance of Uncovered Distribution Charges (as
described below) of the Principal Underwriter. The Principal Underwriter
currently expects to pay sales commissions (except on exchange transactions and
reinvestments) to a financial services firm (an "Authorized Firm") at the time
of sale equal to 4% of the purchase price of the shares sold by such Firm. The
Principal Underwriter will use its own funds (which may be borrowed from banks)
to pay such commissions. Because the payment of the sales commissions and
distribution fees to the Principal Underwriter is subject to the NASD Rule
described below, it will take the Principal Underwriter a number of years to
recoup the sales commissions paid by it to Authorized Firms from the payments
received by it from the Fund pursuant to the Plan.
THE NASD RULE REQUIRES THE FUND TO LIMIT ITS ANNUAL PAYMENTS OF SALES
COMMISSIONS AND DISTRIBUTION FEES TO AN AMOUNT NOT EXCEEDING .75% OF THE FUND'S
AVERAGE DAILY NET ASSETS FOR EACH FISCAL YEAR. Under its Plan, the Fund accrues
daily an amount at the rate of 1/365 of .75% of its net assets, and pays such
accrued amounts monthly to the Principal Underwriter. The Plan requires such
accruals to be automatically discontinued during any period in which there are
no outstanding Uncovered Distribution Charges under the Plan. Uncovered
Distribution Charges are calculated daily and, briefly, are equivalent to all
unpaid sales commissions and distribution fees to which the Principal
Underwriter is entitled under the Plan less all contingent deferred sales
charges theretofore paid to the Principal Underwriter. The Eaton Vance
organization may be considered to have realized a profit under the Plan if at
any point in time the aggregate amounts of all payments received by the
Principal Underwriter from the Fund pursuant to the Plan, including any
contingent deferred sales charges, have exceeded the total expenses theretofore
incurred by such organization in distributing shares of the Fund. Total expenses
for this purpose will include an allocable portion of the overhead costs of such
organization and its branch offices.
Because of the NASD Rule limitation on the amount of sales commissions and
distribution fees paid during any fiscal year, a high level of sales of Fund
shares during the initial years of the Fund's operations would cause a large
portion of the sales commissions attributable to a sale of Fund shares to be
accrued and paid by the Fund to the Principal Underwriter in fiscal years
subsequent to the year in which such shares were sold. This spreading of sales
commissions payments under the Plan over an extended period would result in the
incurrence and payment of increased distribution fees under the Plan.
For the fiscal year ended September 30, 1995, the Fund paid sales commissions
under the Plan to the Principal Underwriter equivalent to 0.75% of the Fund's
average daily net assets for such year. As at September 30, 1995, the
outstanding Uncovered Distribution Charges of the Principal Underwriter
calculated under the Plan amounted to approximately $49,681,000 (which amount
was equivalent to 2.3% of the Fund's net assets on such day).
THE PLAN ALSO AUTHORIZES THE FUND TO MAKE PAYMENTS OF SERVICE FEES TO THE
PRINCIPAL UNDERWRITER, AUTHORIZED FIRMS AND OTHER PERSONS IN AMOUNTS NOT
EXCEEDING .25% OF THE FUND'S AVERAGE DAILY NET ASSETS FOR EACH FISCAL YEAR. The
Trustees have implemented the Plan by authorizing the Fund to pay service fees
to Authorized Firms in amounts not exceeding .25% per annum of the Fund's
average daily net assets based on the value of Fund shares sold by such Firms
and remaining outstanding for at least one year. As permitted by the NASD Rule,
such payments are made for personal services and/or the maintenance of
shareholder accounts. Service fees paid to Authorized Firms are separate and
distinct from the sales commissions and distribution fees payable by the Fund to
the Principal Underwriter, and as such are not subject to automatic
discontinuance when there are no outstanding Uncovered Distribution Charges of
the Principal Underwriter. For the fiscal year ended September 30, 1995, the
Fund made service fee payments to Authorized Firms in an amount equivalent to
0.19% of the Fund's average daily net assets for such year.
The Principal Underwriter may, from time to time, at its own expense, provide
additional incentives to Authorized Firms which employ registered
representatives who sell the Fund's shares and/or shares of other funds
distributed by the Principal Underwriter. In some instances, such additional
incentives may be offered only to certain Authorized Firms whose representatives
sell or are expected to sell significant amounts of shares. In addition, the
Principal Underwriter may from time to time increase or decrease the sales
commissions payable to Authorized Firms.
The Fund may, in its absolute discretion, suspend, discontinue or limit the
offering of its shares at any time. In determining whether any such action
should be taken, the Fund's management intends to consider all relevant factors,
including without limitation the size of the Fund, the investment climate and
market conditions, the volume of sales and redemptions of Fund shares, and the
amount of Uncovered Distribution Charges of the Principal Underwriter. The Plan
may continue in effect and payments may be made under the Plan following any
such suspension, discontinuance or limitation of the offering of Fund shares;
however, the Fund is not contractually obligated to continue the Plan for any
particular period of time. Suspension of the offering of Fund shares would not,
of course, affect a shareholder's ability to redeem shares.
VALUING FUND SHARES
- ------------------------------------------------------------------------------
THE FUND VALUES ITS SHARES ONCE ON EACH DAY THE NEW YORK STOCK EXCHANGE (THE
"EXCHANGE") IS OPEN FOR TRADING, as of the close of regular trading on the
Exchange (normally 4:00 p.m. New York time). The Fund's net asset value per
share is determined by its custodian, Investors Bank & Trust Company ("IBT"),
(as agent for the Fund) in the manner authorized by the Trustees of the Trust.
Net asset value is computed by dividing the value of the Fund's total assets,
less its liabilities, by the number of shares outstanding. Because the Fund
invests its assets in an interest in the Portfolio, the Fund's net asset value
will reflect the value of its interest in the Portfolio (which, in turn,
reflects the underlying value of the Portfolio's assets and liabilities).
Authorized Firms must communicate an investor's order to the Principal
Underwriter prior to the close of the Principal Underwriter's business day to
receive that day's net asset value per Fund share. It is the Authorized Firms'
responsibility to transmit orders promptly to the Principal Underwriter, which
is a wholly-owned subsidiary of Eaton Vance.
The Portfolio's net asset value is also determined as of the close of regular
trading on the Exchange by IBT (as custodian and agent for the Portfolio) based
on market or fair value in the manner authorized by the Trustees of the
Portfolio. Net asset value is computed by subtracting the liabilities of the
Portfolio from the value of its total assets. Municipal obligations will
normally be valued on the basis of valuations furnished by a pricing service.
For further information regarding the valuation of the Portfolio's assets, see
"Determination of Net Asset Value" in the Statement of Additional Information.
SHAREHOLDERS MAY DETERMINE THE VALUE OF THEIR INVESTMENT BY MULTIPLYING THE
NUMBER OF FUND SHARES OWNED BY THE CURRENT NET ASSET VALUE PER SHARE.
HOW TO BUY FUND SHARES
- ------------------------------------------------------------------------------
SHARES OF THE FUND MAY BE PURCHASED FOR CASH OR MAY BE ACQUIRED IN EXCHANGE FOR
SECURITIES. Investors may purchase shares of the Fund through Authorized Firms
at the net asset value per share of the Fund next determined after an order is
effective. The Fund may suspend the offering of shares at any time and may
refuse an order for the purchase of shares. An Authorized Firm may charge its
customers a fee in connection with transactions executed by that Firm.
An initial investment in the Fund must be at least $1,000. Once an account has
been established the investor may send investments of $50 or more at any time
directly to the Fund's transfer agent (the "Transfer Agent") as follows: First
Data Investor Services Group, 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."
ACQUIRING FUND SHARES IN EXCHANGE FOR SECURITIES. IBT, as escrow agent, will
receive securities acceptable to Eaton Vance, as Administrator, in exchange for
Fund shares at their net asset value as determined above. The minimum value of
securities (or securities and cash) accepted for deposit is $5,000. Securities
accepted will be sold on the day of their receipt or as soon thereafter as
possible. The number of Fund shares to be issued in exchange for securities will
be the aggregate proceeds from the sale of such securities, divided by the
applicable net asset value per Fund share on the day such proceeds are received.
Eaton Vance will use reasonable efforts to obtain the then current price for
such securities but does not guarantee the best available. Eaton Vance will
absorb any transaction costs, such as commissions, on the sale of the
securities.
Securities determined to be acceptable should be transferred via book entry or
physically delivered, in proper form for transfer, through an Authorized Firm,
together with a completed and signed Letter of Transmittal in approved form
(available from Authorized Firms), as follows:
IN THE CASE OF BOOK ENTRY:
Deliver through Depository Trust Co.
Broker #2212
Investors Bank & Trust Company
For A/C EV Marathon National Municipals Fund
IN THE CASE OF PHYSICAL DELIVERY:
Investors Bank & Trust Company
Attention: EV Marathon National Municipals Fund
Physical Securities Processing Settlement Area
89 South Street
Boston, MA 02111
Investors who are contemplating an exchange of securities for shares of the
Fund, or their representatives, must contact Eaton Vance to determine whether
the securities are acceptable before forwarding such securities 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 Fund share 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, the Fund will make payment in cash for the shares
as of the date determined above, reduced by the amount of any applicable
contingent deferred sales charge (described below) and any federal income tax
required to be withheld. Although the Fund normally expects to make payment in
cash for redeemed shares, the Trust, subject to compliance with applicable
regulations, has reserved the right to pay the redemption price of shares of the
Fund, either totally or partially, by a distribution in kind of readily
marketable securities withdrawn by the Fund from the Portfolio. The securities
so distributed would be valued pursuant to the Portfolio's valuation procedures.
If a shareholder received a distribution in kind, the shareholder could incur
brokerage or other charges in converting the securities to cash.
To sell shares at their net asset value through an Authorized Firm (a
repurchase), a shareholder can place a repurchase order with the Authorized
Firm, which may charge a fee. The value of those shares is based upon the net
asset value calculated after EVD, as the Fund's 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, the Fund reserves the right
to redeem Fund accounts with balances of less than $1,000. Prior to such a
redemption, shareholders will be given 60 days' written notice to make an
additional purchase. Thus, an investor making an initial investment of $1,000
would not be able to redeem shares without being subject to this policy.
However, no such redemption would be required by the Fund if the cause of the
low account balance was a reduction in the net asset value of Fund shares. No
contingent deferred sales charge will be imposed with respect to such
involuntary redemptions.
CONTINGENT DEFERRED SALES CHARGE. Shares redeemed within the first six years of
their purchase (except shares acquired through the reinvestment of
distributions) generally will be subject to a contingent deferred sales charge.
This contingent deferred sales charge is imposed on any redemption the amount of
which exceeds the aggregate value at the time of redemption of (a) all shares in
the account purchased more than six years prior to the redemption, (b) all
shares in the account acquired through reinvestment of monthly distributions and
capital gains distributions, and (c) the increase, if any, in the value of all
other shares in the account (namely those purchased within the six years
preceding the redemption) over the purchase price of such shares. Redemptions
are processed in a manner to maximize the amount of redemption proceeds which
will not be subject to a contingent deferred sales charge. That is, each
redemption will be assumed to have been made first from the exempt amounts
referred to in clauses (a), (b) and (c) above, and second through liquidation of
those shares in the account referred to in clause (c) on a first-in-first-out
basis. Any contingent deferred sales charge which is required to be imposed on
share redemptions will be made in accordance with the following schedule:
CONTINGENT
YEAR OF REDEMPTION AFTER PURCHASE DEFERRED SALES CHARGE
------------------------------------------------------------------------------
First .................................................. 5%
Second ................................................. 5%
Third .................................................. 4%
Fourth ................................................. 3%
Fifth .................................................. 2%
Sixth .................................................. 1%
Seventh and following .................................. 0%
In calculating the contingent deferred sales charge upon the redemption of Fund
shares acquired in an exchange of shares of a fund in the Eaton Vance Marathon
Group of Funds (see "The Eaton Vance Exchange Privilege"), the contingent
deferred sales charge schedule applicable to the shares at the time of purchase
will apply and the purchase of Fund shares acquired in the exchange is deemed to
have occurred at the time of the original purchase of the exchanged shares.
No contingent deferred sales charge will be imposed on shares of the Fund which
have been sold to Eaton Vance or its affiliates, or to their respective
employees or clients. The contingent deferred sales charge will be waived for
shares redeemed (1) pursuant to a Withdrawal Plan (see "Eaton Vance Shareholder
Services"), (2) as part of a required distribution from a tax-sheltered
retirement plan or (3) following the death of all beneficial owners of such
shares, provided the redemption is requested within one year of death (a death
certificate and other applicable documents may be required). The contingent
deferred sales charge will be paid to the Principal Underwriter or the Fund.
When paid to the Principal Underwriter it will reduce the amount of Uncovered
Distribution Charges calculated under the Fund's Distribution Plan.
See "Distribution Plan."
THE FOLLOWING EXAMPLE ILLUSTRATES THE OPERATION OF THE CONTINGENT DEFERRED
SALES CHARGE. ASSUME THAT AN INVESTOR PURCHASES $10,000 OF THE FUND'S SHARES
AND THAT 16 MONTHS LATER THE VALUE OF THE ACCOUNT HAS GROWN THROUGH INVESTMENT
PERFORMANCE AND REINVESTMENT OF DIVIDENDS TO $12,000. THE INVESTOR THEN MAY
REDEEM UP TO $2,000 OF SHARES WITHOUT INCURRING A CONTINGENT DEFERRED SALES
CHARGE. IF THE INVESTOR SHOULD REDEEM $3,000 OF SHARES, A CHARGE WOULD BE
IMPOSED ON $1,000 OF THE REDEMPTION. THE RATE WOULD BE 5% BECAUSE THE
REDEMPTION WAS MADE IN THE SECOND YEAR AFTER THE PURCHASE WAS MADE AND THE
CHARGE WOULD BE $50.
REPORTS TO SHAREHOLDERS
- --------------------------------------------------------------------------------
THE FUND WILL ISSUE TO ITS SHAREHOLDERS SEMI-ANNUAL AND ANNUAL REPORTS
CONTAINING FINANCIAL STATEMENTS. Financial statements included in annual reports
are audited by the Fund's independent certified public accountants. Shortly
after the end of each calendar year, the Fund will furnish all shareholders with
information necessary for preparing federal and state income tax returns.
THE LIFETIME INVESTING ACCOUNT/DISTRIBUTION OPTIONS
- ------------------------------------------------------------------------------
AFTER AN INVESTOR MAKES AN INITIAL PURCHASE OF FUND SHARES, THE FUND'S TRANSFER
AGENT, FIRST DATA INVESTOR SERVICES GROUP, WILL SET UP A LIFETIME INVESTING
ACCOUNT FOR THE INVESTOR ON THE FUND'S RECORDS. This account is a complete
record of all transactions between the investor and the Fund which at all times
shows the balance of shares owned. The Fund will not issue share certificates
except upon request.
At least quarterly, the shareholder will receive a statement showing complete
details of any transaction and the current share balance in the account. THE
LIFETIME INVESTING ACCOUNT ALSO PERMITS A SHAREHOLDER TO MAKE ADDITIONAL
INVESTMENTS 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 Fund's
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 at the then current net asset value. Furthermore, the
distribution option on the account will be automatically changed to the Share
Option until such time as the shareholder selects a different option.
DISTRIBUTION INVESTMENT OPTION. In addition to the distribution options set
forth above, dividends and/or capital gains may be invested in additional shares
of another Eaton Vance fund. Before selecting this option, a shareholder should
obtain a prospectus of the other Eaton Vance fund and consider its objectives
and policies carefully.
"STREET NAME" ACCOUNTS. If shares of the Fund are held in a "street name"
account with an Authorized Firm, all recordkeeping, transaction processing and
payments of distributions relating to the beneficial owner's account will be
performed by the Authorized Firm, and not by the Fund and its Transfer Agent.
Since the Fund will have no record of the beneficial owner's transactions, a
beneficial owner should contact the Authorized Firm to purchase, redeem or
exchange shares, to make changes in or give instructions concerning the account,
or to obtain information about the account. The transfer of shares in a "street
name" account to an account with another dealer or to an account directly with
the Fund involves special procedures and will require the beneficial owner to
obtain historical purchase information about the shares in the account from the
Authorized Firm. Before establishing a "street name" account with an investment
firm, or transferring the account to another investment firm, an investor
wishing to reinvest distributions should determine whether the firm which will
hold the shares allows reinvestment of distributions in "street name" accounts.
THE EATON VANCE EXCHANGE PRIVILEGE
- ------------------------------------------------------------------------------
Shares of the Fund currently may be exchanged for shares of one or more other
funds in the Eaton Vance Marathon Group of Funds (except Eaton Vance Prime Rate
Reserves) or Eaton Vance Money Market Fund which are distributed with a
contingent deferred sales charge, on the basis of net asset value per share of
each fund at the time of the exchange, provided that such exchange offers are
available only in states where shares of the fund being acquired may be legally
sold.
Each exchange must involve shares which have a net asset value of at least
$1,000. The exchange privilege may be changed or discontinued without penalty.
Shareholders will be given sixty (60) days' notice prior to any termination or
material amendment of the exchange privilege. The Fund does not permit the
exchange privilege to be used for "Market Timing" and may terminate the exchange
privilege for any shareholder account engaged in Market Timing activity. Any
shareholder account for which more than two round-trip exchanges are made within
any twelve month period will be deemed to be engaged in Market Timing.
Furthermore, a group of unrelated accounts for which exchanges are entered
contemporaneously by a financial intermediary will be considered to be engaged
in Market Timing.
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
the other funds are available from Authorized Firms or from the Principal
Underwriter. The prospectus for each fund describes its investment objectives
and policies, and shareholders should obtain a prospectus and consider these
objectives and policies carefully before requesting an exchange.
No contingent deferred sales charge is imposed on exchanges. For purposes of
calculating the contingent deferred sales charge upon redemption of shares
acquired in an exchange, the contingent deferred sales charge schedule
applicable to the shares at the time of purchase will apply and the purchase of
shares acquired in one or more exchanges is deemed to have occurred at the time
of the original purchase of the exchanged shares. For the contingent deferred
sales charge schedule applicable to the EV Marathon Group of Funds (except EV
Marathon Strategic Income Fund and Class I shares of any EV Marathon Limited
Maturity Fund), see "How to Redeem Fund Shares". The contingent deferred sales
charge schedule applicable to EV Marathon Strategic Income Fund or Class I
shares of any EV Marathon Limited Maturity Fund is 3%, 2.5%, 2% or 1% in the
event of a redemption occurring in the first, second, third or fourth year,
respectively, after the original share purchase.
Shares of other funds in the Eaton Vance Marathon Group of Funds and shares of
Eaton Vance Money Market Fund may be exchanged for Fund shares on the basis of
the net asset value per share of the Fund at the time of exchange, but subject
to any restrictions or qualifications set forth in the current prospectus of any
such fund.
Telephone exchanges are accepted by 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 Fund, 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
- ------------------------------------------------------------------------------
THE FUND OFFERS THE FOLLOWING SERVICES WHICH ARE VOLUNTARY, INVOLVE NO EXTRA
CHARGE, AND MAY BE CHANGED OR DISCONTINUED WITHOUT PENALTY AT ANY TIME. Full
information on each of the services described below and an application, where
required, are available from Authorized Firms or the Principal Underwriter. The
cost of administering such services for the benefit of shareholders who
participate in them is borne by the Fund as an expense to all shareholders.
INVEST-BY-MAIL -- FOR PERIODIC SHARE ACCUMULATION: Once the $1,000 minimum
investment has been made, checks of $50 or more payable to the order of EV
Marathon National Municipals Fund may be mailed directly to First Data Investor
Services Group, BOS725, P.O. Box 1559, Boston, MA 02104 at any time -- whether
or not distributions are reinvested. The name of the shareholder, the Fund and
the account number should accompany each investment.
BANK AUTOMATED INVESTING -- FOR REGULAR SHARE ACCUMULATION: Cash investments of
$50 or more may be made automatically each month or quarter from a shareholder's
bank account. The $1,000 minimum initial investment and small account redemption
policy are waived for these accounts.
WITHDRAWAL PLAN: A shareholder may draw on shareholdings systematically with
monthly or quarterly checks in an aggregate amount that does not exceed annually
12% of the account balance at the time the plan is established. Such amount will
not be subject to a contingent deferred sales charge. See "How to Redeem Fund
Shares". A minimum deposit of $5,000 in shares is required.
REINVESTMENT PRIVILEGE: A SHAREHOLDER WHO HAS REPURCHASED OR REDEEMED SHARES MAY
REINVEST, WITH CREDIT FOR ANY CONTINGENT DEFERRED SALES CHARGES PAID ON THE
REPURCHASED OR REDEEMED SHARES, 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 THE FUND,
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 (or by the Fund's transfer agent). To the
extent that any shares of the Fund are sold at a loss and the proceeds are
reinvested in shares of the Fund (or other shares of the Fund are acquired
within the period beginning 30 days before and ending 30 days after the date of
redemption) some or all of the loss generally will not be allowed as a tax
deduction. Shareholders should consult their tax advisers concerning the tax
consequences of reinvestments.
DISTRIBUTIONS AND TAXES
- ------------------------------------------------------------------------------
SUBSTANTIALLY ALL OF THE INVESTMENT INCOME ALLOCATED TO THE FUND BY THE
PORTFOLIO, LESS THE FUND'S DIRECT AND ALLOCATED EXPENSES, WILL BE DECLARED DAILY
AS A DISTRIBUTION TO FUND SHAREHOLDERS OF RECORD AT THE TIME OF DECLARATION.
Such distributions, whether taken in cash or reinvested in additional shares,
will ordinarily be paid monthly on the fifteenth day of each month or the next
business day thereafter. The Fund anticipates that for tax purposes, the entire
distribution, whether paid in cash or additional shares of the Fund, will
constitute tax-exempt income to shareholders, except for the proportionate part
of the distribution that may be considered taxable income if the Fund has
taxable income during the calendar year. Shareholders reinvesting the monthly
distribution should treat the amount of the entire distribution as the tax cost
basis of the additional shares acquired by reason of such reinvestment. Daily
distribution crediting will commence on the day that collected funds for the
purchase of Fund shares are available at the Transfer Agent. Shareholders will
receive timely federal income tax information as to the tax-exempt or taxable
status of all distributions made by the Fund during the calendar year. The
Fund's net realized capital gains, if any, consist of the net realized capital
gains allocated to the Fund by the Portfolio for tax purposes, after taking into
account any available capital loss carryovers; the Fund's net realized capital
gains, if any, will be distributed at least once a year, usually in December.
The Fund intends to qualify as a regulated investment company under the Internal
Revenue Code of 1986, as amended, (the "Code") and to satisfy certain
requirements relating to the sources of its income, the distribution of its
income, and the diversification of its assets. In satisfying these requirements,
the Fund will treat itself as owning its proportionate share of each of the
Portfolio's assets and as entitled to the income of the Portfolio properly
attributable to such share.
AS A REGULATED INVESTMENT COMPANY UNDER THE CODE, THE FUND DOES NOT PAY
FEDERAL INCOME OR EXCISE TAXES TO THE EXTENT THAT IT DISTRIBUTES TO
SHAREHOLDERS ITS NET INVESTMENT INCOME AND NET REALIZED CAPITAL GAINS IN
ACCORDANCE WITH THE TIMING REQUIREMENTS IMPOSED BY THE CODE. AS A PARTNERSHIP
UNDER THE CODE, THE PORTFOLIO ALSO DOES NOT PAY FEDERAL INCOME OR EXCISE
TAXES.
Distributions of interest on certain municipal obligations constitute a tax
preference item under the alternative minimum tax provisions applicable to
individuals and corporations. Distributions of taxable income (including a
portion of any original issue discount with respect to certain stripped
municipal obligations and stripped coupons and accretion of certain market
discount) and net short-term capital gains will be taxable to shareholders as
ordinary income. Distributions of long-term capital gains included therein are
taxable to shareholders as such for federal income tax purposes, regardless of
the length of time Fund shares have been owned by the shareholder. Tax-exempt
distributions received from the Fund are includable in the tax base for
determining the taxability of social security and railroad retirement benefits.
Interest on indebtedness incurred or continued by a shareholder to purchase or
carry shares of the Fund is not deductible. Further, entities or persons who are
"substantial users" (or persons related to "substantial users") of facilities
financed by industrial development or private activity bonds should consult
their tax advisers before purchasing shares of the Fund. "Substantial user" is
defined in applicable Treasury regulations to include a "non-exempt person" who
regularly uses in trade or business a part of a facility financed from the
proceeds of industrial development bonds and would likely be interpreted to
include private activity bonds issued to finance similar facilities.
Shareholders should consult their own tax advisers with respect to the state,
local and foreign tax consequences of investing in the Fund.
PERFORMANCE INFORMATION
- ------------------------------------------------------------------------------
FROM TIME TO TIME, THE FUND MAY ADVERTISE ITS YIELD AND/OR AVERAGE ANNUAL TOTAL
RETURN. The 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 (net asset value) on the last day of the period and
annualizing the resulting figure. A taxable-equivalent yield is computed by
using the tax-exempt yield figure and dividing by 1 minus the tax rate. The
Fund's average annual total return is determined by computing the average annual
percentage change in value of $1,000 invested at the maximum sales charge (net
asset value) for specified periods ending with the most recent calendar quarter,
assuming reinvestment of all distributions. The average annual total return
calculation assumes a complete redemption of the investment and the deduction of
any applicable contingent deferred sales charge at the end of the period. The
Fund may publish annual and cumulative total return figures from time to time.
The Principal Underwriter may publish to Authorized Firms the Fund's
distribution rate and/or its effective distribution rate. The Fund's
distribution rate is computed by dividing the most recent monthly distribution
per share annualized by the current net asset value per share. The Fund's
effective distribution rate is computed by dividing the distribution rate by the
ratio used to annualize the most recent monthly distribution and reinvesting the
resulting amount for a full year on the basis of such ratio. The effective
distribution rate will be higher than the distribution rate because of the
compounding effect of the assumed reinvestment. Investors should note that the
Fund's yield is calculated using a standardized formula, the income component of
which is computed from the yields to maturity of all debt obligations held by
the Portfolio based on prescribed methods (with all purchases and sales of
securities during such period included in the income calculation on a settlement
date basis), whereas the distribution rate is based on the Fund's last monthly
distribution which tends to be relatively stable and may be more or less than
the amount of net investment income and short-term capital gain actually earned
by the Fund during the month.
The Fund may also publish total return figures which do not take into account
any contingent deferred sales charge which may be imposed upon redemptions at
the end of the specific period. Any performance figure which does not take into
account the contingent deferred sales charge would be reduced to the extent such
charge is imposed upon a redemption.
Investors should note that the investment results of the Fund will fluctuate
over time, and any presentation of the Fund's current yield or total return for
any prior period should not be considered a representation of what an investment
may earn or what the Fund's yield or total return may be in any future period.
<PAGE>
APPENDIX
NATIONAL MUNICIPALS PORTFOLIO
ASSET COMPOSITION INFORMATION
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1995
<TABLE>
RATINGS OF RATINGS OF
MUNICIPAL BONDS MUNICIPAL BONDS
BY MOODY'S BY S&P
<CAPTION>
PERCENT OF PERCENT OF
NET ASSETS NET ASSETS
---------- ----------
<S> <C> <S> <C>
Aaa ....................................... 19.25 AAA ................................... 21.48
Aa2 ....................................... 3.61 AA+ ................................... 0.02
Aa3 ....................................... 2.13 AA .................................... 2.36
A1 ........................................ 2.14 AA- ................................... 2.60
A2 ........................................ 3.37 A+ .................................... 0.72
Baa1 ...................................... 7.63 A ..................................... 1.73
Baa2 ...................................... 11.23 A- .................................... 2.63
Baa3 ...................................... 4.59 BBB+ .................................. 3.64
Ba1 ....................................... 3.03 BBB ................................... 9.43
Ba2 ....................................... 0.37 BBB- .................................. 3.03
B1 ........................................ 0.88 BB+ ................................... 6.31
B2 ........................................ 0.55 BB .................................... 6.23
Unrated ................................... 41.22 B ..................................... 0.21
------ Unrated ............................... 39.61
100.00% ------
100.00%
</TABLE>
The chart above indicates the weighted average composition of the securities
held by the Portfolio for the period ended September 30, 1995, with the debt
securities rated by Moody's and S&P separated into the indicated categories. The
above was calculated on a dollar weighted basis and was computed as at the end
of each month during the fiscal year. The chart does not necessarily indicate
what the composition of the securities held by the Portfolio's will be in the
current and subsequent fiscal years. Securities that are rated by one rating
agency may be "unrated" by the other.
For a description of Moody's and S&P's municipal bond ratings, see the Appendix
to the Statement of Additional Information.
<PAGE>
[Logo]
EATON VANCE
- ------------------
Mutual Funds
EV MARATHON
NATIONAL MUNICIPALS
FUND
PROSPECTUS
FEBRUARY 1, 1996
EV MARATHON NATIONAL
MUNICIPALS FUND
24 FEDERAL STREET
BOSTON, MA 02110
- --------------------------------------------------------------------------------
PORTFOLIO INVESTMENT ADVISER
Boston Management and Research, 24 Federal Street, Boston, MA 02110
FUND ADMINISTRATOR
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111
TRANSFER AGENT
First Data Investor Services Group, BOS725, P.O. Box 1559, Boston, MA 02104
(800) 262-1122
AUDITORS
Deloitte & Touche LLP, 125 Summer Street, Boston, MA 02110
M-HMP
<PAGE>
Part A
Information Required in a Prospectus
EV TRADITIONAL
NATIONAL MUNICIPALS FUND
- ------------------------------------------------------------------------------
EV TRADITIONAL NATIONAL MUNICIPALS FUND (THE "FUND") IS A MUTUAL FUND SEEKING TO
PROVIDE CURRENT INCOME EXEMPT FROM THE REGULAR FEDERAL INCOME TAX. THE FUND
INVESTS ITS ASSETS IN NATIONAL MUNICIPALS PORTFOLIO (THE "PORTFOLIO"), A
DIVERSIFIED OPEN-END INVESTMENT COMPANY HAVING THE SAME INVESTMENT OBJECTIVE AS
THE FUND, RATHER THAN BY DIRECTLY INVESTING IN AND MANAGING ITS OWN PORTFOLIO OF
SECURITIES AS WITH HISTORICALLY STRUCTURED MUTUAL FUNDS. THE FUND IS A SERIES OF
EATON VANCE MUNICIPALS TRUST (THE "TRUST").
Shares of the Fund are not deposits or obligations of, or guaranteed or endorsed
by, any bank or other insured depository institution, and are not federally
insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board
or any other government agency. Shares of the Fund involve investment risks,
including fluctuations in value and the possible loss of some or all of the
principal investment.
This Prospectus is designed to provide you with information you should know
before investing. Please retain this document for future reference. A
Statement of Additional Information dated February 1, 1996 for the Fund, as
supplemented from time to time, has been filed with the Securities and
Exchange Commission and is incorporated herein by reference. This Statement of
Additional Information is available without charge from the Fund's principal
underwriter, Eaton Vance Distributors, Inc. (the "Principal Underwriter"), 24
Federal Street, Boston, MA 02110 (telephone (800) 225-6265). The Portfolio's
investment adviser is Boston Management and Research (the "Investment
Adviser"), a wholly-owned subsidiary of Eaton Vance Management, and Eaton
Vance Management is the administrator (the "Administrator") of the Fund. The
offices of the Investment Adviser and the Administrator are located at 24
Federal Street, Boston, MA 02110.
- ------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<TABLE>
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
PAGE PAGE
<S> <C> <S> <C>
Shareholder and Fund Expenses ........................ 2 Reports to Shareholders ............................... 13
The Fund's Financial Highlights ...................... 3 The Lifetime Investing Account/Distribution Options ... 13
The Fund's Investment Objective ...................... 4 The Eaton Vance Exchange Privilege .................... 14
How the Fund and the Portfolio Invest their Assets ... 4 Eaton Vance Shareholder Services ...................... 15
Organization of the Fund and the Portfolio ........... 7 Distributions and Taxes ............................... 16
Management of the Fund and the Portfolio ............. 9 Performance Information ............................... 17
Service Plan ......................................... 10 Statement of Intention and Escrow Agreement ........... 18
Valuing Fund Shares .................................. 10 Appendix .............................................. 19
How to Buy Fund Shares ............................... 11
How to Redeem Fund Shares ............................ 12
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
PROSPECTUS DATED FEBRUARY 1, 1996
<PAGE>
SHAREHOLDER AND FUND EXPENSES
- -------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES
------------------------------------------------------------------------------
Maximum Sales Charge Imposed on Purchases of Shares
(as a percentage of offering price) 3.75%
Sales Charges Imposed on Reinvested Distributions None
Fees to Exchange Shares None
ANNUAL FUND AND ALLOCATED PORTFOLIO OPERATING EXPENSES
(as a percentage of average daily net assets)
- -------------------------------------------------------------------------------
Investment Adviser Fee 0.45%
Other Expenses (including Service Plan Fees of .15%
and after expense reduction) 0.35
----
Total Operating Expenses (after reduction) 0.80%
====
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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: $45 $62 $80 $133
</TABLE>
NOTES:
The table and Example summarize the aggregate expenses of the Fund and the
Portfolio and are designed to help investors understand the costs and expenses
they will bear, directly or indirectly, by investing in the Fund. Information
for the Fund is based on its expenses for the most recent fiscal year (except
for Service Plan Fees which are estimated for the current fiscal year). Absent
an expense allocation, Other Expenses would have been 0.63% of the Fund's
average daily net assets and Total Operating Expenses would have been 1.09% of
the Fund's average daily net assets. The Fund invests exclusively in the
Portfolio. The Trustees believe the aggregate per share expenses of the Fund and
the 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 the 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 Fund and the Portfolio see "The Fund's Financial
Highlights," "Organization of the Fund and the Portfolio," "Management of the
Fund and the Portfolio" 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." The Portfolio's monthly advisory
fee has two components, a fee based on daily net assets and a fee based on daily
gross income, as set forth in the fee schedule on page 9. Other investment
companies with different distribution arrangements and fees are investing in the
Portfolio and others may do so in the future. See "Organization of the Fund and
the Portfolio."
THE FUND'S FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following information should be read in conjunction with the audited
financial statements included in the Fund's annual report to Shareholders 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 the Fund is contained in the Fund's annual report
to shareholders which may be obtained without charge by contacting the Principal
Underwriter, Eaton Vance Distributors, Inc.
- ------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
-------------------------
1995 1994*
------ ------
NET ASSET VALUE, beginning of year $10.000 $10.000
------- -------
INCOME FROM OPERATIONS:
Net investment income $ 0.691 $ 0.334
Net realized and unrealized gain on
investments 0.471 0.002++
------- -------
Total income from operations $ 1.162 $ 0.336
------- -------
LESS DISTRIBUTIONS:
From net investment income $(0.691) $(0.334)
In excess of net investment income(3) (0.001) (0.002)
------- -------
Total distributions $(0.692) $(0.336)
------- -------
NET ASSET VALUE, end of year $10.470 $10.000
======= =======
TOTAL RETURN(2) 12.10% 3.34%
RATIOS/SUPPLEMENTAL DATA**:
Net assets, end of period (000 omitted) $26,524 $ 4,281
Ratio of net expenses to average daily net
assets(1) 0.66% 0.43%+
Ratio of net investment income to average
daily net assets 6.60% 5.97%+
**For the period from the start of business, April 5, 1994, to September 30,
1994, and for the year ended September 30, 1995, the operating expenses of
the Fund reflect an allocation of expenses to the Administrator. Had such
action not been taken, net investment income per share and the ratios
would have been as follows:
NET INVESTMENT INCOME PER SHARE $ 0.646 $ 0.255
======= =======
RATIOS
(As a percentage of average daily net assets):
Expenses (1) 1.09% 1.84%+
Net investment income 6.17% 4.56%+
+ Annualized.
++ The per share amount is not in accord with the net realized and unrealized
gains and losses for the period because of the timing of sales of Fund
shares and the amount of per share realized and unrealized gains and losses
at such time.
(1) Includes the Fund's share of the Portfolio's allocated expenses.
(2) Total return is calculated assuming a purchase at the net asset value on the
first day and a sale at the net asset value on the last day of each period
reported. 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.
(3) The Fund has followed the Statement of Position (SOP) 93-2: Determination,
Disclosure and Financial Statement Presentation of Income, Capital Gain, and
Return of Capital Distributions by Investment Companies. The SOP requires
that differences in the recognition or classification of income between the
financial statements and tax earnings and profits that result in temporary
over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or accumulated net realized
gains.
* For the period from the start of business, April 5, 1994, to September 30,
1994.
THE FUND'S INVESTMENT OBJECTIVE
- --------------------------------------------------------------------------------
THE FUND'S INVESTMENT OBJECTIVE IS TO PROVIDE CURRENT INCOME EXEMPT FROM REGULAR
FEDERAL INCOME TAX. The Fund currently seeks to meet its investment objective by
investing its assets in the National Municipals Portfolio (the "Portfolio"), a
separate registered investment company which invests primarily in municipal
obligations (described below) which are rated at least investment grade by a
major rating agency or, if unrated, determined to be of at least investment
grade quality by the Investment Adviser.
HOW THE FUND AND THE PORTFOLIO INVEST THEIR ASSETS
- ------------------------------------------------------------------------------
THE FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY INVESTING EITHER DIRECTLY
OR INDIRECTLY THROUGH ANOTHER OPEN-END MANAGEMENT INVESTMENT COMPANY PRIMARILY
(I.E., AT LEAST 80% OF ITS ASSETS DURING PERIODS OF NORMAL MARKET CONDITIONS) IN
DEBT OBLIGATIONS ISSUED BY OR ON BEHALF OF STATES, TERRITORIES AND POSSESSIONS
OF THE UNITED STATES, AND THE DISTRICT OF COLUMBIA AND THEIR POLITICAL
SUBDIVISIONS, AGENCIES OR INSTRUMENTALITIES, THE INTEREST ON WHICH IS EXEMPT
FROM REGULAR FEDERAL INCOME TAX. The foregoing policy is a fundamental policy of
both the Fund and the Portfolio, which may not be changed unless authorized by a
vote of the shareholders of the Fund or the investors in the Portfolio, as the
case may be.
At least 65% of the net assets of the Portfolio will normally be invested in
obligations rated at least investment grade at the time of investment (which are
those rated Baa or higher by Moody's Investors Service, Inc. ("Moody's") or BBB
or higher by either Standard & Poor's Ratings Group ("S&P") or by Fitch
Investors Service, Inc. ("Fitch")), or, if unrated, determined by the Investment
Adviser to be of at least investment grade quality. The Portfolio may invest
less than 35% of its net assets in municipal obligations rated below investment
grade (but not lower than B by Moody's, S&P or Fitch) and unrated municipal
obligations considered to be of comparable quality by the Investment Adviser.
Municipal obligations rated Baa or BBB may have speculative characteristics.
Also, changes in economic conditions or other circumstances are more likely to
lead to a weakened capacity to make principal and interest payments than in the
case of higher rated obligations. Securities rated below BBB or Baa are commonly
known as "junk bonds". The Portfolio may retain an obligation whose rating drops
below B after its acquisition if such retention is considered desirable by the
Investment Adviser. See "Additional Risk Considerations." For a description of
municipal obligation ratings, see the Statement of Additional Information.
MUNICIPAL OBLIGATIONS. Municipal obligations include bonds, notes and commercial
paper issued by a municipality for a wide variety of both public and private
purposes, the interest on which is, in the opinion of bond counsel, exempt from
regular federal income tax. Public purpose municipal bonds include general
obligation and revenue bonds. General obligation bonds are backed by the taxing
power of the issuing municipality. Revenue bonds are backed by the revenues of a
project or facility. Municipal notes include bond anticipation, tax anticipation
and revenue anticipation notes, which are short-term obligations that will be
retired with the proceeds of an anticipated bond issue, tax revenue or facility
revenue, respectively.
Interest on certain types of municipal obligations may be subject to the federal
alternative minimum tax (the "AMT") for individual investors. As at September
30, 1995, the Portfolio had 24.8% of its net assets invested in such
obligations. Distributions to corporate investors of certain interest income may
also be subject to the AMT. The Fund may not be suitable for investors subject
to the AMT.
CONCENTRATION. The Portfolio may invest 25% or more of its total assets in
municipal obligations of issuers located in the same state or in municipal
obligations of the same type, including without limitation the following: lease
rental obligations of state and local authorities; obligations of state and
local housing finance authorities, municipal utilities systems or public housing
authorities; obligations of hospitals or life care facilities; or industrial
development or pollution control bonds issued for electric utility systems,
steel companies, paper companies or other purposes. This may make the Portfolio
more susceptible to adverse economic, political, or regulatory occurrences
affecting a particular category of issuers. For example, health-care related
issuers are susceptible to medicaid reimbursement policies, and national and
state health care legislation. As the Portfolio's concentration increases, so
does the potential for fluctuation in the value of the Fund's shares.
DIVERSIFIED STATUS. The Portfolio is a "diversified" investment company under
the Investment Company Act of 1940 (the "1940 Act"). This means that with
respect to 75% of its total assets (1) the Portfolio may not invest more than 5%
of its total assets in the securities of any one issuer (except U.S. Government
obligations) and (2) the Portfolio may not own more than 10% of the outstanding
voting securities of any one issuer. Since municipal obligations are not voting
securities, there is no limit on the percentage of a single issuer's obligations
which the Portfolio may own so long as it does not invest more than 5% of its
total assets in the securities of that issuer. Consequently, the Portfolio may
invest in a greater percentage of the outstanding securities of a single issuer
than would an investment company which invests in voting securities. There is no
diversification requirement with respect to the remaining 25% of the Portfolio's
total assets, so that all of such assets may be invested in the securities of
any one issuer. To the extent that the Portfolio is less diversified than that
of other investment companies, it may be subject to an increased risk of loss if
the issuer is unable to make interest or principal payments or if the market
value of such securities declines.
OTHER INVESTMENT PRACTICES
The Portfolio may engage in the following investment practices, some of which
may be considered to involve "derivative" instruments because they derive their
value from another instrument, security or index. In addition, the Portfolio may
temporarily borrow up to 5% of the value of its total assets to satisfy
redemption requests or settle securities transactions.
WHEN-ISSUED SECURITIES. The Portfolio may purchase securities on a "when-
issued" basis, which means that payment and delivery occur on a future
settlement date. The price and yield of such securities are generally fixed on
the date of commitment to purchase. However, the market value of the securities
may fluctuate prior to delivery and upon delivery the securities may be worth
more or less than the Portfolio agreed to pay for them. The Portfolio may also
purchase instruments that give the Portfolio the option to purchase a municipal
obligation when and if issued.
INVERSE FLOATERS. The Portfolio may invest in municipal securities whose
interest rates bear an inverse relationship to the interest rate on another
security or the value of an index ("inverse floaters"). An investment in inverse
floaters may involve greater risk than an investment in a fixed rate bond.
Because changes in the interest rate on the other security or index inversely
affect the residual interest paid on the inverse floater, the value of an
inverse floater is generally more volatile than that of a fixed rate bond.
Inverse floaters have interest rate adjustment formulas which generally reduce
or, in the extreme, eliminate the interest paid to the Portfolio when short-term
interest rates rise, and increase the interest paid to the Portfolio when
short-term interest rates fall. Inverse floaters have varying degrees of
liquidity, and the market for these securities is new and relatively volatile.
These securities tend to underperform the market for fixed rate bonds in a
rising interest rate environment, but tend to outperform the market for fixed
rate bonds when interest rates decline. Shifts in long-term interest rates may,
however, alter this tendency. Although volatile, inverse floaters typically
offer the potential for yields exceeding the yields available on fixed rate
bonds with comparable credit quality and maturity. These securities usually
permit the investor to convert the floating rate to a fixed rate (normally
adjusted downward), and this optional conversion feature may provide a partial
hedge against rising rates if exercised at an opportune time. Inverse floaters
are leveraged because they provide two or more dollars of bond market exposure
for every dollar invested.
FUTURES TRANSACTIONS. The Portfolio may purchase and sell varous kinds of
financial futures contracts and options thereon to hedge against changes in
interest rates. Futures contracts may be based on various debt securities (such
as U.S. Government securities and municipal obligations) and securities indices
(such as the Municipal Bond Index traded on the Chicago Board of Trade). Such
transactions involve a risk of loss or depreciation due to unanticipated adverse
changes in securities prices, which may exceed the Portfolio's initial
investment in these contracts. The Portfolio may not purchase or sell futures
contracts or related options, except for closing purchase or sale transactions,
if immediately thereafter the sum of the amount of margin deposits and premiums
paid on the Portfolio's outstanding positions would exceed 5% of the market
value of the Portfolio's net assets. These transactions involve transaction
costs. There can be no assurance that the Investment Adviser's use of futures
will be advantageous to the Portfolio. Distributions by the Fund of any gains
realized on the Portfolio's transactions in futures and options on futures will
be taxable.
INSURED OBLIGATIONS. The Portfolio may purchase municipal bonds that are
additionally secured by insurance, bank credit agreements, or escrow accounts.
The credit quality of companies which provide such credit enhancements will
affect the value of those securities. Although the insurance feature reduces
certain financial risks, the premiums for insurance and the higher market price
paid for insured obligations may reduce the Fund's current yield. Insurance
generally will be obtained from insurers with a claims-paying ability rated Aaa
by Moody's or AAA by S&P or Fitch. The insurance does not guarantee the market
value of the insured obligations or the net asset value of the Fund's shares.
ADDITIONAL RISK CONSIDERATIONS
Many municipal obligations offering current income are in the lowest investment
grade category (Baa or BBB), lower categories or may be unrated. As indicated
above, the Portfolio may invest in municipal obligations rated below investment
grade (but not lower than B by Moody's, S&P or Fitch) and comparable unrated
obligations. See the Appendix to this Prospectus for the asset composition of
the Portfolio for the fiscal year ended September 30, 1995. The lowest
investment grade, lower rated and comparable unrated municipal obligations in
which the Portfolio may invest will have speculative characteristics in varying
degrees. While such obligations may have some quality and protective
characteristics, these characteristics can be expected to be offset or
outweighed by uncertainties or major risk exposures to adverse conditions. Lower
rated and comparable unrated municipal obligations are subject to the risk of an
issuer's inability to meet principal and interest payments on the obligations
(credit risk) and may also be subject to greater price volatility due to such
factors as interest rate sensitivity, market perception of the creditworthiness
of the issuer and general market liquidity (market risk). Lower rated or unrated
municipal obligations are also more likely to react to real or perceived
developments affecting market and credit risk than are more highly rated
obligations, which react primarily to movements in the general level of interest
rates. The Investment Adviser seeks to minimize the risks of investing in below
investment grade securities through professional investment analysis and
attention to current developments in interest rates and economic conditions.
When the Portfolio invests in lower rated or unrated municipal obligations, the
achievement of the Portfolio's goals is more dependent on the Investment
Adviser's ability than would be the case if the Portfolio were investing in
municipal obligations in the higher rating categories.
The Portfolio may retain defaulted obligations in its portfolio when such
retention is considered desirable by the Investment Adviser. In the case of a
defaulted obligation, the Portfolio may incur additional expense seeking
recovery of its investment. Municipal obligations held by the Portfolio which
are rated below investment grade but which, subsequent to the assignment of such
rating, are backed by escrow accounts containing U.S. Government obligations may
be determined by the Investment Adviser to be of investment grade quality for
purposes of the Portfolio's investment policies. The Portfolio may retain in its
portfolio an obligation whose rating drops below B after its acquisition, if
such retention is considered desirable by the Investment Adviser; provided,
however, that holdings of obligations rated below Baa or BBB will be less than
35% of net assets. In the event the rating of an obligation held by the
Portfolio is downgraded, causing the Portfolio to exceed this limitation, the
Investment Adviser will (in an orderly fashion within a reasonable period of
time) dispose of such obligations as it deems necessary in order to comply with
the Portfolio's credit quality limitations.
The net asset value of shares of the Fund will change in response to
fluctuations in prevailing interest rates and changes in the value of the
securities held by the Portfolio. When interest rates decline, the value of
securities held by the Portfolio can be expected to rise. Conversely, when
interest rates rise, the value of most portfolio security holdings can be
expected to decline. Changes in the credit quality of the issuers of municipal
obligations held by the Portfolio will affect the principal value of (and
possibly the income earned on) such obligations. In addition, the values of such
securities are affected by changes in general economic conditions and business
conditions affecting the specific industries of their issuers. Changes by
recognized rating services in their ratings of a security and in the ability of
the issuer to make payments of principal and interest may also affect the value
of the Portfolio's investments. The amount of information about the financial
condition of an issuer of municipal obligations may not be as extensive as that
made available by corporations whose securities are publicly traded. An
investment in shares of the Fund will not constitute a complete investment
program.
At times, a substantial portion of the Portfolio's assets may be invested in
securities as to which the Portfolio, by itself or together with other accounts
managed by the Investment Adviser and its affiliates, holds a major portion or
all of such securities. Under adverse market or economic conditions or in the
event of adverse changes in the financial condition of the issuer, the Portfolio
could find it more difficult to sell such securities when the Investment Adviser
believes it advisable to do so or may be able to sell such securities only at
prices lower than if such securities were more widely held. Under such
circumstances, it may also be more difficult to determine the fair value of such
securities for purposes of computing the Portfolio's net asset value.
The secondary market for some municipal obligations (including issues which are
privately placed with the Portfolio) is less liquid than that for taxable debt
obligations or other more widely traded municipal obligations. The Portfolio
will not invest in illiquid securities if more than 15% of its net assets would
be invested in securities that are not readily marketable. No established resale
market exists for certain of the municipal obligations in which the Portfolio
may invest. The market for obligations rated below investment grade is also
likely to be less liquid than the market for higher rated obligations. As a
result, the Portfolio may be unable to dispose of these municipal obligations at
times when it would otherwise wish to do so at the prices at which they are
valued.
Certain securities held by the Portfolio may permit the issuer at its option to
"call," or redeem, its securities. If an issuer redeems securities held by the
Portfolio during a time of declining interest rates, the Portfolio may not be
able to reinvest the proceeds providing the same investment return as the
securities redeemed.
Some of the securities in which the Portfolio invests may include so-called
"zero-coupon" bonds, whose values are subject to greater fluctuation in response
to changes in market interest rates than bonds which pay interest currently.
Zero-coupon bonds are issued at a significant discount from face value and pay
interest only at maturity rather than at intervals during the life of the
security. The Portfolio is required to accrue and distribute income from
zero-coupon bonds on a current basis, even though it does not receive that
income currently in cash. Thus, the Portfolio may have to sell other investments
to obtain cash needed to make income distributions.
The Portfolio may invest in municipal leases, and participations in municipal
leases. The obligation of the issuer to meet its obligations under such leases
is often subject to the appropriation by the appropriate legislative body, on an
annual or other basis, of funds for the payment of the obligations. Investments
in municipal leases are thus subject to the risk that the legislative body will
not make the necessary appropriation and the issuer will not otherwise be
willing or able to meet its obligation.
THE FUND AND PORTFOLIO HAVE ADOPTED CERTAIN FUNDAMENTAL INVESTMENT
RESTRICTIONS WHICH ARE ENUMERATED IN DETAIL IN THE STATEMENT OF ADDITIONAL
INFORMATION AND WHICH MAY NOT BE CHANGED UNLESS AUTHORIZED BY A SHAREHOLDER
VOTE AND AN INVESTOR VOTE, RESPECTIVELY. EXCEPT FOR SUCH ENUMERATED
RESTRICTIONS AND AS OTHERWISE INDICATED IN THIS PROSPECTUS, THE INVESTMENT
OBJECTIVE AND POLICIES OF THE FUND AND PORTFOLIO ARE NOT FUNDAMENTAL POLICIES
AND ACCORDINGLY MAY BE CHANGED BY THE TRUSTEES OF THE TRUST AND THE PORTFOLIO
WITHOUT OBTAINING THE APPROVAL OF THE FUND'S SHAREHOLDERS OR THE INVESTORS IN
THE PORTFOLIO, AS THE CASE MAY BE. IF ANY CHANGES WERE MADE IN THE FUND'S
INVESTMENT OBJECTIVE, THE FUND MIGHT HAVE INVESTMENT OBJECTIVES DIFFERENT FROM
THE OBJECTIVE WHICH AN INVESTOR CONSIDERED APPROPRIATE AT THE TIME THE
INVESTOR BECAME A SHAREHOLDER IN THE FUND.
ORGANIZATION OF THE FUND AND THE PORTFOLIO
- ------------------------------------------------------------------------------
THE FUND IS A SERIES OF EATON VANCE MUNICIPALS TRUST (THE "TRUST"), A BUSINESS
TRUST ESTABLISHED UNDER MASSACHUSETTS LAW PURSUANT TO A DECLARATION OF TRUST
DATED SEPTEMBER 30, 1985, AS AMENDED AND RESTATED. 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 Fund) it is known as a "series company." Each share represents an
equal proportionate beneficial interest in the Fund. When issued and
outstanding, the shares are fully paid and nonassessable by the Trust and
redeemable as described under "How to Redeem Fund Shares". Shareholders are
entitled to one vote for each full share held. Fractional shares may be voted
proportionately. Shares have no preemptive or conversion rights and are freely
transferable. In the event of the liquidation of the Fund, shareholders are
entitled to share pro rata in the net assets of the Fund available for
distribution to shareholders.
THE PORTFOLIO IS ORGANIZED AS A TRUST UNDER THE LAWS OF THE STATE OF NEW YORK
AND INTENDS TO BE TREATED AS A PARTNERSHIP FOR FEDERAL TAX PURPOSES. The
Portfolio, as well as the Trust, intends to comply with all applicable federal
and state securities laws. The Portfolio's Declaration of Trust provides that
the Fund and other entities investing in the Portfolio (e.g., other U.S. and
foreign investment companies, and common and commingled trust funds) will each
be liable for all obligations of the Portfolio. However, the risk of the Fund
incurring financial loss on account of such liability is limited to
circumstances in which both inadequate insurance exists and the Portfolio itself
is unable to meet its obligations. Accordingly, the Trustees of the Trust
believe that neither the Fund nor its shareholders will be adversely affected by
reason of the Fund investing in the Portfolio.
SPECIAL INFORMATION ON THE FUND/PORTFOLIO INVESTMENT STRUCTURE. An investor in
the 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 the Portfolio
(although the Fund may temporarily hold a de minimus amount of cash), which is a
separate investment company with an identical investment objective. Therefore,
the Fund's interest in securities owned by the Portfolio is indirect. In
addition to selling an interest to the Fund, the Portfolio may sell interests to
other affiliated and non-affiliated mutual funds or institutional investors.
Such investors will invest in the Portfolio on the same terms and conditions and
will pay a proportionate share of the Portfolio's expenses. However, the other
investors investing in the Portfolio are not required to sell their shares at
the same public offering price as the Fund due to variations in sales
commissions and other operating expenses. Therefore, investors in the Fund
should be aware that these differences may result in differences in returns
experienced by investors in the various funds that invest in the Portfolio. Such
differences in returns are also present in other mutual fund structures,
including funds that have multiple classes of shares. For information regarding
the investment objective, policies and restrictions of the Portfolio, see "The
Fund's Investment Objective" and "How the Fund and the Portfolio 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 the Fund in the Portfolio, as well as the advantages and
disadvantages of the two-tier format. The Trustees believe that the structure
offers opportunities for substantial growth in the assets of the Portfolio, and
affords the potential for economies of scale for the Fund, at least when the
assets of the Portfolio exceed $500 million.
The Fund may withdraw (completely redeem) all its assets from the Portfolio at
any time if the Board of Trustees of the Trust determines that it is in the best
interest of the Fund to do so. The investment objective and the nonfundamental
investment policies of the Fund and the Portfolio may be changed by the Trustees
of the Trust and the Portfolio without obtaining the approval of the
shareholders of the Fund or the investors in the Portfolio, as the case may be.
Any such change of the investment objective of the Fund or the Portfolio 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 the Fund
withdraws all of its assets from the Portfolio, or the Board of Trustees of the
Trust determines that the investment objective of the Portfolio is no longer
consistent with the investment objective of the Fund, the Board of Trustees of
the Trust would consider what action might be taken, including investing the
assets of the Fund in another pooled investment entity or retaining an
investment adviser to manage the Fund's assets in accordance with its investment
objective. The Fund's investment performance may be affected by a withdrawal of
all its assets from the Portfolio.
Information regarding other pooled investment entities or funds which invest in
the 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 the Portfolio may be adversely affected by the
actions of a larger investor in the Portfolio. For example, if a large investor
withdraws from the Portfolio, the remaining investors may experience higher pro
rata operating expenses, thereby producing lower returns. Additionally, the
Portfolio may become less diverse, resulting in increased portfolio risk, and
experience decreasing economies of scale. However, this possibility exists as
well for historically structured 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 Fund may be subject to additional regulations than historically
structured funds.
The Declaration of Trust of the Portfolio provides that the Portfolio will
terminate 120 days after the complete withdrawal of the Fund or any other
investor in the Portfolio, unless either the remaining investors, by unanimous
vote at a meeting of such investors, or a majority of the Trustees of the
Portfolio, by written instrument consented to by all investors, agree to
continue the business of the Portfolio. This provision is consistent with
treatment of the Portfolio as a partnership for federal income tax purposes. See
"Distributions and Taxes" for further information. Whenever the Fund as an
investor in the Portfolio is requested to vote on matters pertaining to the
Portfolio (other than the termination of the Portfolio's business, which may be
determined by the Trustees of the Portfolio without investor approval), the Fund
will hold a meeting of Fund shareholders and will vote its interest in the
Portfolio for or against such matters proportionately to the instructions to
vote for or against such matters received from Fund shareholders. The Fund shall
vote shares for which it receives no voting instructions in the same proportion
as the shares for which it receives voting instructions. Other investors in the
Portfolio may alone or collectively acquire sufficient voting interests in the
Portfolio to control matters relating to the operation of the Portfolio, which
may require the Fund to withdraw its investment in the Portfolio or take other
appropriate action. Any such withdrawal could result in a distribution "in kind"
of portfolio securities (as opposed to a cash distribution from the Portfolio).
If securities are distributed, the Fund could incur brokerage, tax or other
charges in converting the securities to cash. In addition, the distribution in
kind may result in a less diversified portfolio of investments or adversely
affect the liquidity of the Fund. Notwithstanding the above, there are other
means for meeting shareholder redemption requests, such as borrowing.
The 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 the Portfolio are the same. Such procedures require each Board
to take actions to resolve any conflict of interest between the Fund and the
Portfolio, and it is possible that the creation of separate Boards may be
considered. For further information concerning the Tustees and officers of the
Trust and the Portfolio, see the Statement of Additional Information.
MANAGEMENT OF THE FUND AND THE PORTFOLIO
- ------------------------------------------------------------------------------
THE PORTFOLIO ENGAGES BOSTON MANAGEMENT AND RESEARCH ("BMR"), A WHOLLY-OWNED
SUBSIDIARY OF EATON VANCE MANAGEMENT ("EATON VANCE"), AS ITS INVESTMENT ADVISER.
EATON VANCE, ITS AFFILIATES AND ITS PREDECESSOR COMPANIES HAVE BEEN MANAGING
ASSETS OF INDIVIDUALS AND INSTITUTIONS SINCE 1924 AND MANAGING INVESTMENT
COMPANIES SINCE 1931.
Acting under the general supervision of the Board of Trustees of the Portfolio,
BMR manages the Portfolio's investments and affairs and furnishes for the use of
the Portfolio office space and all necessary office facilities, equipment and
personnel for servicing the investments of the Portfolio. Under its investment
advisory agreement with the Portfolio, BMR receives a monthly advisory fee equal
to the aggregate of
(a) a daily asset based fee computed by applying the annual asset rate
applicable to that portion of the total daily net assets in each Category
as indicated below, plus
(b) a daily income based fee computed by applying the daily income rate
applicable to that portion of the total daily gross income (which portion
shall bear the same relationship to the total daily gross income on such day
as that portion of the total daily net assets in the same Category bears to
the total daily net assets on such day) in each Category as indicated below:
ANNUAL DAILY
CATEGORY DAILY NET ASSETS ASSET RATE INCOME RATE
------------------------------------------------------------------------------
1 up to $500 million 0.300% 3.00%
2 $500 million but less than $1 billion 0.275% 2.75%
3 $1 billion but less than $1.5 billion 0.250% 2.50%
4 $1.5 billion but less than $2 billion 0.225% 2.25%
5 $2 billion but less than $3 billion 0.200% 2.00%
6 $3 billion and over 0.175% 1.75%
As at September 30, 1995, the Portfolio had net assets of $2,260,646,363. For
the fiscal year ended September 30, 1995, the Portfolio paid BMR advisory fees
equivalent to 0.45% of the Portfolio's average net assets for such year.
BMR OR EATON VANCE ACTS AS INVESTMENT ADVISER TO INVESTMENT COMPANIES AND
VARIOUS INDIVIDUAL AND INSTITUTIONAL CLIENTS WITH ASSETS UNDER MANAGEMENT OF
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.
Thomas M. Metzold has acted as the portfolio manager of the Portfolio since
December 17, 1993. He has been a Vice President of Eaton Vance since 1991 and of
BMR since 1992, and an employee of Eaton Vance since 1987.
Municipal obligations are normally traded on a net basis (without commission)
through broker-dealers and banks acting for their own account. Such firms
attempt to profit from such transactions by buying at the bid price and selling
at the higher asked price of the market, and the difference is customarily
referred to as the spread. In selecting firms which will execute portfolio
transactions BMR judges their professional ability and quality of service and
uses its best efforts to obtain execution at prices which are advantageous to
the Portfolio and at reasonably competitive spreads. Subject to the foregoing,
BMR may consider sales of shares of the Fund or of other investment companies
sponsored by BMR or Eaton Vance as a factor in the selection of firms to execute
portfolio transactions.
The Trust has retained the services of Eaton Vance to act as administrator of
the Fund. The Trust has not retained the services of an investment adviser since
the Trust seeks to achieve the investment objective of the Fund by investing its
assets in the Portfolio. As Administrator, Eaton Vance provides the Fund with
general office facilities and supervises the overall administration of the Fund.
For these services Eaton Vance currently receives no compensation. The Trustees
of the Trust may determine, in the future, to compensate Eaton Vance for such
services.
The Portfolio and the Fund, as the case may be, will each be responsible for all
respective costs and expenses not expressly stated to be payable by BMR under
the investment advisory agreement, by Eaton Vance under the administrative
services agreement, or by EVD under the distribution agreement.
SERVICE PLAN
- --------------------------------------------------------------------------------
In addition to advisory fees and other expenses, the Fund pays service fees
pursuant to a Service Plan (the "Plan") designed to meet the service fee
requirements of the revised sales charge rule of the National Association of
Securities Dealers, Inc. THE PLAN PROVIDES THAT THE FUND MAY MAKE SERVICE FEE
PAYMENTS FOR PERSONAL SERVICES AND/OR THE MAINTENANCE OF SHAREHOLDER ACCOUNTS TO
THE PRINCIPAL UNDERWRITER, FINANCIAL SERVICE FIRMS ("AUTHORIZED FIRMS") AND
OTHER PERSONS IN AMOUNTS NOT EXCEEDING .25% OF THE FUND'S AVERAGE DAILY NET
ASSETS FOR ANY FISCAL YEAR. The Trustees of the Trust have initially implemented
the Plan by authorizing the Fund to make service fee payments to the Principal
Underwriter and Authorized firms in amounts not expected to exceed .25% of the
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. The Fund commenced accruing service fee payments during the
quarter ending June 30, 1995. The Plan is further described in the Statement of
Additional Information.
VALUING FUND SHARES
- ------------------------------------------------------------------------------
THE FUND VALUES ITS SHARES ONCE ON EACH DAY THE NEW YORK STOCK EXCHANGE (THE
"EXCHANGE") IS OPEN FOR TRADING, as of the close of regular trading on the
Exchange (normally 4:00 p.m. New York time). The Fund's net asset value per
share is determined by its custodian, Investors Bank & Trust Company ("IBT"),
(as agent for the Fund) in the manner authorized by the Trustees of the Trust.
Net asset value is computed by dividing the value of the Fund's total assets,
less its liabilities, by the number of shares outstanding. Because the Fund
invests its assets in an interest in the Portfolio, the Fund's net asset value
will reflect the value of its interest in the Portfolio (which, in turn,
reflects the underlying value of the Portfolio's assets and liabilities).
Authorized Firms must communicate an investor's order to the Principal
Underwriter prior to the close of the Principal Underwriter's business day to
receive that day's net asset value per share and 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.
The Portfolio's net asset value is also determined as of the close of regular
trading on the Exchange by IBT (as custodian and agent for the Portfolio) based
on market or fair value in the manner authorized by the Trustees of the
Portfolio. Net asset value is computed by subtracting the liabilities of the
Portfolio from the value of its total assets. Municipal obligations will
normally be valued on the basis of valuations furnished by a pricing service.
For further information regarding the valuation of the Portfolio's assets, see
"Determination of Net Asset Value" in the Statement of Additional Information.
SHAREHOLDERS MAY DETERMINE THE VALUE OF THEIR INVESTMENT BY MULTIPLYING THE
NUMBER OF FUND SHARES OWNED BY THE CURRENT NET ASSET VALUE PER SHARE.
HOW TO BUY FUND SHARES
- ------------------------------------------------------------------------------
SHARES OF THE FUND MAY BE PURCHASED FOR CASH OR MAY BE ACQUIRED IN EXCHANGE FOR
SECURITIES. Investors may purchase shares of the Fund through Authorized Firms
at the effective public offering price, which price is based on the effective
net asset value per share plus the applicable sales charge. The Fund receives
the net asset value, while the sales charge is divided between the Authorized
Firm and the Principal Underwriter. The Principal Underwriter will furnish the
names of Authorized Firms to an investor upon request. An Authorized Firm may
charge its customers a fee in connection with transactions executed by that
Firm. The Fund may suspend the offering of shares at any time and may refuse an
order for the purchase of shares.
The sales charge may vary depending on the size of the purchase and the number
of shares of Eaton Vance funds the investor may already own, any arrangement to
purchase additional shares during a 13-month period or special purchase
programs. Complete details of how investors may purchase shares at reduced sales
charges under a Statement of Intention, Right of Accumulation, are available
from Authorized Firms or the Principal Underwriter.
The current sales charges and dealer commissions are:
<TABLE>
<CAPTION>
SALES CHARGE SALES CHARGE DEALER COMMISSION
AS PERCENTAGE OF AS PERCENTAGE OF AS PERCENTAGE OF
AMOUNT OF PURCHASE OFFERING PRICE AMOUNT INVESTED OFFERING PRICE
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000 3.75% 3.90% 4.00%
$50,000 but less than $100,000 2.75% 2.83% 3.00%
$100,000 but less than $250,000 2.25% 2.30% 2.50%
$250,000 but less than $500,000 1.75% 1.78% 2.00%
$500,000 but less than $1,000,000 1.25% 1.27% 1.50%
$1,000,000 or more 0.00%* 0.00%* 0.50%
</TABLE>
*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. Such purchases made before March 27, 1995 will be
subject to a CDSC of 1% in the event of certain redemptions within 18 months of
purchase.
The Principal Underwriter may at times allow discounts up to the full sales
charge. During periods when the discount includes the full sales charge,
Authorized Firms may be deemed to be underwriters as that term is defined in the
Securities Act of 1933. The Principal Underwriter may, from time to time, at its
own expense, provide additional incentives to Authorized Firms which employ
registered representatives who sell Fund shares and/or shares of other funds
distributed by the Principal Underwriter. In some instances, such additional
incentives may be offered only to certain Authorized Firms whose representatives
sell or are expected to sell significant amounts of shares.
An initial investment in the Fund must be at least $1,000. Once an account has
been established the investor may send investments of $50 or more at any time
directly to the Fund's transfer agent (the "Transfer Agent") as follows: First
Data Investor Services Group, 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 the Fund may be sold at net asset value to current and retired
Directors and Trustees of Eaton Vance funds, including the Portfolio; to
officers and employees and clients of Eaton Vance and its affiliates; to
registered representatives and employees of Authorized Firms; 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 the Fund, (2) to investors making an investment as
part of a fixed fee program whereby an entity unaffiliated with the investment
adviser provides multiple investment services, such as management, brokerage and
custody, (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 the 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 as determined above. The
minimum value of securities (or securities and cash) accepted for deposit is
$5,000. Securities accepted will be sold for the account of their owner on the
day of their receipt or as soon thereafter as possible. The number of Fund
shares to be issued in exchange for securities will be the aggregate proceeds
from the sale of such securities, divided by the applicable public offering
price per Fund share on the day such proceeds are received. Eaton Vance will use
reasonable efforts to obtain the current market price for such securities but
does not guarantee the best available price. Eaton Vance will absorb any
transaction costs, such as commissions, on the sale of the securities.
Securities determined to be acceptable should be transferred via book entry or
physically delivered, in proper form for transfer, through an Authorized Firm,
together with a completed and signed Letter of Transmittal in approved form
(available from Authorized Firms), as follows:
IN THE CASE OF BOOK ENTRY:
Deliver through Depository Trust Co.
Broker #2212
Investors Bank & Trust Company
For A/C EV Traditional National Municipals Fund
IN THE CASE OF PHYSICAL DELIVERY:
Investors Bank & Trust Company
Attention: EV Traditional National Municipals Fund
Physical Securities Processing Settlement Area
89 South Street
Boston, MA 02111
Investors who are contemplating an exchange of securities for shares of the
Fund, or their representatives, must contact Eaton Vance to determine whether
the securities are acceptable before forwarding such securities 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
- --------------------------------------------------------------------------------
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 Fund share 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, the Fund will make payment in cash for the shares
as of the date determined above, reduced by the amount of any federal income tax
required to be withheld. Although the Fund normally expects to make payment in
cash for redeemed shares, the Trust, subject to compliance with applicable
regulations, has reserved the right to pay the redemption price of shares of the
Fund, either totally or partially, by a distribution in kind of readily
marketable securities withdrawn by the Fund from the Portfolio. The securities
so distributed would be valued pursuant to the Portfolio's valuation procedures.
If a shareholder received a distribution in kind, the shareholder could incur
brokerage or other charges in converting the securities to cash.
To sell shares at their net asset value through an Authorized Firm (a
repurchase), a shareholder can place a repurchase order with the Authorized
Firm, which may charge a fee. The value of those shares is based upon the net
asset value calculated after EVD, as the Fund's 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, the Fund reserves the right
to redeem Fund accounts with balances of less than $1,000. Prior to such a
redemption, shareholders will be given 60 days' written notice to make an
additional purchase. Thus, an investor making an initial investment of $1,000
would not be able to redeem shares without being subject to this policy.
However, no such redemption would be required by the Fund if the cause of the
low account balance was a reduction in the net asset value of Fund shares.
If shares have been purchased at net asset value with no initial sales charge by
virtue of the purchase having been in the amount of $1 million or more and are
redeemed within 12 months of purchase, a CDSC of 0.50% will be imposed on such
redemption. (Such purchases made before March 27, 1995 will be subject to a CDSC
of 1% in the event of certain redemptions made within 18 months of purchase.)
The CDSC will be retained by the Principal Underwriter.
The CDSC will be imposed on an amount equal to the lesser of the current market
value or the original purchase price of the shares redeemed. Accordingly, no
CDSC will be imposed on increases in account value above the initial purchase
price, including any distributions that have been reinvested in additional
shares. In determining whether a CDSC is applicable to a redemption, the
calculation will be made in a manner that results in the lowest possible rate
being charged. It will be assumed that redemptions are made first from any
shares in the shareholder's account that are not subject to a CDSC.
The CDSC is waived for redemptions involving certain liquidation, merger or
acquisition transactions involving other investment companies. If a shareholder
reinvests redemption proceeds within a 60-day period and in accordance with the
conditions set forth under "Eaton Vance Shareholder Services -- Reinvestment
Privilege," the shareholder's account will be credited with the amount of any
CDSC paid on such redeemed shares.
REPORTS TO SHAREHOLDERS
- ------------------------------------------------------------------------------
THE FUND WILL ISSUE TO ITS SHAREHOLDERS SEMI-ANNUAL AND ANNUAL REPORTS
CONTAINING FINANCIAL STATEMENTS. Financial statements included in annual reports
are audited by the Fund's independent certified public accountants. Shortly
after the end of each calendar year, the Fund will furnish all shareholders with
information necessary for preparing federal and state income tax returns.
Consistent with applicable law, duplicate mailings of shareholder reports and
certain other Fund information to shareholders residing at the same address may
be eliminated.
THE LIFETIME INVESTING ACCOUNT/DISTRIBUTION OPTIONS
- ------------------------------------------------------------------------------
AFTER AN INVESTOR MAKES AN INITIAL PURCHASE OF FUND SHARES, THE FUND'S TRANSFER
AGENT, FIRST DATA INVESTOR SERVICES GROUP, WILL SET UP A LIFETIME INVESTING
ACCOUNT FOR THE INVESTOR ON THE FUND'S RECORDS. This account is a complete
record of all transactions between the investor and the Fund which at all times
shows the balance of shares owned. The Fund will not issue share certificates
except upon request.
At least quarterly, the shareholder will receive a statement showing complete
details of any transaction and the current share balance in the account. THE
LIFETIME INVESTING ACCOUNT ALSO PERMITS A SHAREHOLDER TO MAKE ADDITIONAL
INVESTMENTS 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 Fund's
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 at the then current net asset value. Furthermore, the
distribution option on the account will be automatically changed to the Share
Option until such time as the shareholder selects a different option.
DISTRIBUTION INVESTMENT OPTION. In addition to the distribution options set
forth above, dividends and/or capital gains may be invested in additional shares
of another Eaton Vance fund. Before selecting this option, a shareholder should
obtain a prospectus of the other Eaton Vance fund and consider its objectives
and policies carefully.
"STREET NAME" ACCOUNTS. If shares of the Fund are held in a "street name"
account with an Authorized Firm, all recordkeeping, transaction processing and
payments of distributions relating to the beneficial owner's account will be
performed by the Authorized Firm, and not by the Fund and its Transfer Agent.
Since the Fund will have no record of the beneficial owner's transactions, a
beneficial owner should contact the Authorized Firm to purchase, redeem or
exchange shares, to make changes in or give instructions concerning the account,
or to obtain information about the account. The transfer of shares in a "street
name" account to an account with another dealer or to an account directly with
the Fund involves special procedures and will require the beneficial owner to
obtain historical purchase information about the shares in the account from the
Authorized Firm. Before establishing a "street name" account with an investment
firm, or transferring the account to another investment firm, an investor
wishing to reinvest distributions should determine whether the firm which will
hold the shares allows reinvestment of distributions in "street name" accounts.
THE EATON VANCE EXCHANGE PRIVILEGE
- ------------------------------------------------------------------------------
Shares of the Fund currently may be exchanged for shares of 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 Fund does not permit the
exchange privilege to be used for "Market Timing" and may terminate the exchange
privilege for any shareholder account engaged in Market Timing activity. Any
shareholder account for which more than two round-trip exchanges are made within
any twelve month period will be deemed to be engaged in Market Timing.
Furthermore, a group of unrelated accounts for which exchanges are entered
contemporaneously by a financial intermediary will be considered to be engaged
in Market Timing.
Shares of the Fund which are subject to a CDSC may be exchanged into any of the
above funds without incurring the CDSC. The shares acquired in an exchange may
be subject to a CDSC upon redemption. For purposes of computing the CDSC payable
upon redemption of shares acquired in an exchange, the holding period of the
original shares is added to the holding period of the shares acquired in the
exchange.
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
the other funds are available from Authorized Firms or from the Principal
Underwriter. The prospectus for each fund describes its investment objectives
and policies, and shareholders should obtain a prospectus and consider these
objectives and policies carefully before requesting an exchange.
Shares of certain other funds for which Eaton Vance acts as investment adviser
or administrator may be exchanged for Fund shares on the basis of the net asset
value per share of each fund at the time of the exchange (plus, in the case of
an exchange made within six months of the date of purchase, 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 Fund shares being acquired).
Any such exchange is subject to any restrictions or qualifications set forth in
the current prospectus of any such fund.
Telephone exchanges are accepted by 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 Fund, 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
- ------------------------------------------------------------------------------
THE FUND OFFERS THE FOLLOWING SERVICES WHICH ARE VOLUNTARY, INVOLVE NO EXTRA
CHARGE, AND MAY BE CHANGED OR DISCONTINUED WITHOUT PENALTY AT ANY TIME. Full
information on each of the services described below and an application, where
required, are available from Authorized Firms or the Principal Underwriter. The
cost of administering such services for the benefit of shareholders who
participate in them is borne by the Fund as an expense to all shareholders.
INVEST-BY-MAIL -- FOR PERIODIC SHARE ACCUMULATION: Once the $1,000 minimum
investment has been made, checks of $50 or more payable to the order of EV
Traditional National Municipals Fund may be mailed directly to First Data
Investor Services Group, BOS725, P.O. Box 1559, Boston, MA 02104 at any time --
whether or not distributions are reinvested. The name of the shareholder, the
Fund and the account number should accompany each investment.
BANK AUTOMATED INVESTING -- FOR REGULAR SHARE ACCUMULATION: Cash investments of
$50 or more may be made automatically each month or quarter from a shareholder's
bank account. The $1,000 minimum initial investment and small account redemption
policy are waived for these accounts.
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 mentioned
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 THE 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 to be purchased (or by such fund's transfer agent). The privilege is
also available to shareholders of the Funds listed under "The Eaton Vance
Exchange Privilege" who wish to reinvest such redemption or repurchase proceeds
in shares of the Fund. To the extent that any shares of the Fund are sold at a
loss and the proceeds are reinvested in shares of the Fund (or other shares of
the Fund are acquired within the period beginning 30 days before and ending 30
days after the date of redemption) some or all of the loss generally will not be
allowed as a tax deduction. Shareholders should consult their tax advisers
concerning the tax consequences of reinvestments.
DISTRIBUTIONS AND TAXES
- ------------------------------------------------------------------------------
SUBSTANTIALLY ALL OF THE INVESTMENT INCOME ALLOCATED TO THE FUND BY THE
PORTFOLIO, LESS THE FUND'S DIRECT AND ALLOCATED EXPENSES, WILL BE DECLARED DAILY
AS A DISTRIBUTION TO FUND SHAREHOLDERS OF RECORD AT THE TIME OF DECLARATION.
Such distributions, whether taken in cash or reinvested in additional shares,
will ordinarily be paid monthly on the last day of each month or the next
business day thereafter. The Fund anticipates that for tax purposes, the entire
distribution, whether paid in cash or additional shares of the Fund, will
constitute tax-exempt income to shareholders, except for the proportionate part
of the distribution that may be considered taxable income if the Fund has
taxable income during the calendar year. Shareholders reinvesting the monthly
distribution should treat the amount of the entire distribution as the tax cost
basis of the additional shares acquired by reason of such reinvestment. Daily
distribution crediting will commence on the day that collected funds for the
purchase of Fund shares are available at the Transfer Agent. Shareholders will
receive timely federal income tax information as to the tax-exempt or taxable
status of all distributions made by the Fund during the calendar year. The
Fund's net realized capital gains, if any, consist of the net realized capital
gains allocated to the Fund by the Portfolio for tax purposes, after taking into
account any available capital loss carryovers; the Fund's net realized capital
gains, if any, will be distributed at least once a year, usually in December.
Sales charges paid upon a purchase of Fund shares cannot be taken into account
for purposes of determining gain or loss on a redemption or exchange of the
shares before the 91st day after their purchase to the extent shares of the Fund
or of another fund are subsequently acquired pursuant to the Fund's reinvestment
or exchange privilege. Any disregarded amounts will result in an adjustment to
the shareholder's tax basis in some or all of any other shares acquired.
The Fund intends to qualify as a regulated investment company under the Internal
Revenue Code of 1986, as amended, (the "Code") and to satisfy certain
requirements relating to the sources of its income, the distribution of its
income, and the diversification of its assets. In satisfying these requirements,
the Fund will treat itself as owning its proportionate share of each of the
Portfolio's assets and as entitled to the income of the Portfolio properly
attributable to such share.
AS A REGULATED INVESTMENT COMPANY UNDER THE CODE, THE FUND DOES NOT PAY
FEDERAL INCOME OR EXCISE TAXES TO THE EXTENT THAT IT DISTRIBUTES TO
SHAREHOLDERS ITS NET INVESTMENT INCOME AND NET REALIZED CAPITAL GAINS IN
ACCORDANCE WITH THE TIMING REQUIREMENTS IMPOSED BY THE CODE. AS A PARTNERSHIP
UNDER THE CODE, THE PORTFOLIO ALSO DOES NOT PAY FEDERAL INCOME OR EXCISE
TAXES.
Distributions of interest on certain municipal obligations constitute a tax
preference item under the alternative minimum tax provisions applicable to
individuals and corporations. Distributions of taxable income (including a
portion of any original issue discount with respect to certain stripped
municipal obligations and stripped coupons and accretion of certain market
discount) and net short-term capital gains will be taxable to shareholders as
ordinary income. Distributions of long-term capital gains included therein are
taxable to shareholders as such for federal income tax purposes, regardless of
the length of time Fund shares have been owned by the shareholder. Distributions
are taxed in the manner described above whether paid in cash or reinvested in
additional shares of the Fund. Tax-exempt distributions received from the Fund
are includable in the tax base for determining the taxability of social security
and railroad retirement benefits.
Interest on indebtedness incurred or continued by a shareholder to purchase or
carry shares of the Fund is not deductible. Further, entities or persons who are
"substantial users" (or persons related to "substantial users") of facilities
financed by industrial development or private activity bonds should consult
their tax advisers before purchasing shares of the Fund. "Substantial user " is
defined in applicable Treasury regulations to include a "non-exempt person" who
regularly uses in trade or business a part of a facility financed from the
proceeds of industrial development bonds and would likely be interpreted to
include private activity bonds issued to finance similar facilities.
Shareholders should consult their own tax advisers with respect to the state,
local and foreign tax consequences of investing in the Fund.
PERFORMANCE INFORMATION
- ------------------------------------------------------------------------------
FROM TIME TO TIME, THE FUND MAY ADVERTISE ITS YIELD AND/OR AVERAGE ANNUAL TOTAL
RETURN. The Fund's current yield is calculated by dividing the net investment
income per share earned during a recent 30-day period by the maximum offering
price per share (net asset value) of the Fund on the last day of the period and
annualizing the resulting figure. A taxable-equivalent yield is computed by
using the tax-exempt yield figure and dividing by 1 minus the tax rate. The
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 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 distributions are reinvested at
the net asset value on the reinvestment dates during the period. The Fund may
publish annual and cumulative total return figures from time to time. The Fund
may also quote total return for the period prior to commencement of operations
which would reflect the Portfolio's total return (or that of its predecessor)
adjusted to reflect any applicable Fund sales charge.
The Principal Underwriter may publish to Authorized Firms the Fund's
distribution rate and/or 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 used to annualize the most recent monthly distribution and reinvesting the
resulting amount for a full year on the basis of such ratio. The effective
distribution rate will be higher than the distribution rate because of the
compounding effect of the assumed reinvestment. Investors should note that the
Fund's yield is calculated using a standardized formula the income component of
which is computed from the yields to maturity of all debt obligations held by
the Portfolio based on prescribed methods (with all purchases and sales of
securities during such period included in the income calculation on a settlement
date basis), whereas the distribution rate is based on the Fund's last monthly
distribution which tends to be relatively stable and may be more or less than
the amount of net investment income and short-term capital gain actually earned
by the Fund during the month.
The Fund may also furnish total return calculations based on investments at
various sales charge levels or at net asset value. Any performance data which is
based on the Fund's net asset value per share would be 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 the Fund will fluctuate
over time, and any presentation of the Fund's current yield or total return for
any prior period should not be considered a representation of what an investment
may earn or what the Fund's yield or total return may be in any future period.
If the expenses of the Fund or the Portfolio are paid by Eaton Vance, the Fund's
performance will be higher.
STATEMENT OF INTENTION AND ESCROW AGREEMENT
- ------------------------------------------------------------------------------
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
NATIONAL MUNICIPALS PORTFOLIO
ASSET COMPOSITION INFORMATION
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
RATINGS OF RATINGS OF
MUNICIPAL BONDS MUNICIPAL BONDS
BY MOODY'S BY S&P
PERCENT OF PERCENT OF
NET ASSETS NET ASSETS
---------- ----------
<S> <C> <S> <C>
Aaa ....................................... 19.25 AAA ................................... 21.48
Aa2 ....................................... 3.61 AA+ ................................... 0.02
Aa3 ....................................... 2.13 AA .................................... 2.36
A1 ........................................ 2.14 AA- ................................... 2.60
A2 ........................................ 3.37 A+ .................................... 0.72
Baa1 ...................................... 7.63 A ..................................... 1.73
Baa2 ...................................... 11.23 A- .................................... 2.63
Baa3 ...................................... 4.59 BBB+ .................................. 3.64
Ba1 ....................................... 3.03 BBB ................................... 9.43
Ba2 ....................................... 0.37 BBB- .................................. 3.03
B1 ........................................ 0.88 BB+ ................................... 6.31
B2 ........................................ 0.55 BB .................................... 6.23
Unrated ................................... 41.22 B ..................................... 0.21
------ Unrated ............................... 39.61
100.00% ------
100.00%
</TABLE>
The chart above indicates the weighted average composition of the securities
held by the Portfolio for the period ended September 30, 1995, with the debt
securities rated by Moody's and S&P separated into the indicated categories. The
above was calculated on a dollar weighted basis and was computed as at the end
of each month during the fiscal year. The chart does not necessarily indicate
what the composition of the securities held by the Portfolio's will be in the
current and subsequent fiscal years. Securities that are rated by one rating
agency may be "unrated" by the other.
For a description of Moody's and S&P's municipal bond ratings, see the Appendix
to the Statement of Additional Information.
<PAGE>
[Logo]
EATON VANCE
EV TRADITIONAL ------------------
Mutual Funds
NATIONAL
MUNICIPALS FUND
PROSPECTUS
FEBRUARY 1, 1996
EV TRADITIONAL
MUNICIPALS FUND
24 FEDERAL STREET
BOSTON, MA 02110
PORTFOLIO INVESTMENT ADVISER
- --------------------------------------------------------------------------------
Boston Management and Research, 24 Federal Street, Boston, MA 02110
FUND ADMINISTRATOR
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111
TRANSFER AGENT
First Data Investor Services Group, BOS725, P.O. Box 1559, Boston, MA 02104
(800) 262-1122
AUDITORS
Deloitte & Touche LLP, 125 Summer Street, Boston, MA 02110
T-HMP
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
February 1, 1996
EV CLASSIC NATIONAL MUNICIPALS FUND
24 Federal Street
Boston, Massachusetts 02110
(800) 225-6265
This Statement of Additional Information consists of two parts. Part I
provides information about EV Classic National Municipals Fund (the "Fund") and
certain other series of Eaton Vance Municipals Trust (the "Trust"). Part II
provides information solely about the Fund and the Portfolio. Where appropriate,
Part I includes cross-references to the relevant sections of Part II. This
Statement of Additional Information is sometimes referred to as the "SAI."
TABLE OF CONTENTS
Page
PART I
Additional Information about Investment Policies ..................... 1
Investment Restrictions .............................................. 6
Trustees and Officers ................................................ 8
Investment Adviser and Administrator ................................. 10
Custodian ............................................................ 12
Service for Withdrawal ............................................... 13
Determination of Net Asset Value ..................................... 13
Investment Performance ............................................... 14
Taxes ................................................................ 15
Portfolio Security Transactions ...................................... 17
Other Information .................................................... 19
Independent Certified Public Accountants ............................. 20
Financial Statements ................................................. 20
Tax Equivalent Yield Table ........................................... 21
Appendix ............................................................. 22
PART II
Fees and Expenses .................................................... a-1
Principal Underwriter ................................................ a-1
Distribution Plan .................................................... a-2
Performance Information .............................................. a-4
Control Persons and Principal Holders of Securities .................. a-4
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY THE FUND'S PROSPECTUS DATED FEBRUARY 1, 1996, AS SUPPLEMENTED
FROM TIME TO TIME. THIS STATEMENT OF ADDITIONAL INFORMATION SHOULD BE READ IN
CONJUNCTION WITH SUCH PROSPECTUS, A COPY OF WHICH MAY BE OBTAINED WITHOUT CHARGE
BY CONTACTING EATON VANCE DISTRIBUTORS, INC. (THE "PRINCIPAL UNDERWRITER") (SEE
BACK COVER FOR ADDRESS AND PHONE NUMBER).
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
February 1, 1996
EV MARATHON NATIONAL MUNICIPALS FUND
24 Federal Street
Boston, Massachusetts 02110
(800) 225-6265
This Statement of Additional Information consists of two parts. Part I
provides information about EV Marathon National Municipals Fund (the "Fund") and
certain other series of Eaton Vance Municipals Trust (the "Trust"). Part II
provides information solely about the Fund and the Portfolio. Where appropriate,
Part I includes cross-references to the relevant sections of Part II. This
Statement of Additional Information is sometimes referred to as the "SAI."
TABLE OF CONTENTS
Page
PART I
Additional Information about Investment Policies ....................... 1
Investment Restrictions ................................................ 6
Trustees and Officers .................................................. 8
Investment Adviser and Administrator ................................... 10
Custodian .............................................................. 12
Service for Withdrawal ................................................. 13
Determination of Net Asset Value ....................................... 13
Investment Performance ................................................. 14
Taxes .................................................................. 15
Portfolio Security Transactions ........................................ 17
Other Information ...................................................... 19
Independent Certified Public Accountants ............................... 20
Financial Statements ................................................... 20
Tax Equivalent Yield Table ............................................. 21
Appendix ............................................................... 22
PART II
Fees and Expenses ...................................................... a-1
Principal Underwriter .................................................. a-2
Distribution Plan ...................................................... a-2
Performance Information ................................................ a-4
Control Persons and Principal Holders of Securities .................... a-4
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY THE FUND'S PROSPECTUS DATED FEBRUARY 1, 1996, AS SUPPLEMENTED
FROM TIME TO TIME. THIS STATEMENT OF ADDITIONAL INFORMATION SHOULD BE READ IN
CONJUNCTION WITH SUCH PROSPECTUS, A COPY OF WHICH MAY BE OBTAINED WITHOUT CHARGE
BY CONTACTING EATON VANCE DISTRIBUTORS, INC. (THE "PRINCIPAL UNDERWRITER") (SEE
BACK COVER FOR ADDRESS AND PHONE NUMBER).
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
February 1, 1996
EV TRADITIONAL NATIONAL MUNICIPALS FUND
24 Federal Street
Boston, Massachusetts 02110
(800) 225-6265
This Statement of Additional Information consists of two parts. Part I
provides information about EV Traditional National Municipals Fund (the "Fund")
and certain other series of Eaton Vance Municipals Trust (the "Trust"). Part II
provides information solely about the Fund and the Portfolio. Where appropriate,
Part I includes cross-references to the relevant sections of Part II. This
Statement of Additional Information is sometimes referred to as the "SAI."
TABLE OF CONTENTS
Page
PART I
Additional Information about Investment Policies ....................... 1
Investment Restrictions ................................................ 6
Trustees and Officers .................................................. 8
Investment Adviser and Administrator ................................... 10
Custodian .............................................................. 12
Service for Withdrawal ................................................. 13
Determination of Net Asset Value ....................................... 13
Investment Performance ................................................. 14
Taxes .................................................................. 15
Portfolio Security Transactions ........................................ 17
Other Information ...................................................... 19
Independent Certified Public Accountants ............................... 20
Financial Statements ................................................... 20
Tax Equivalent Yield Table ............................................. 21
Appendix ............................................................... 22
PART II
Fees and Expenses ...................................................... a-1
Services for Accumulation .............................................. a-1
Principal Underwriter .................................................. a-2
Service Plan ........................................................... a-3
Performance Information ................................................ a-3
Control Persons and Principal Holders of Securities .................... a-4
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY THE FUND'S PROSPECTUS DATED FEBRUARY 1, 1996, AS SUPPLEMENTED
FROM TIME TO TIME. THIS STATEMENT OF ADDITIONAL INFORMATION SHOULD BE READ IN
CONJUNCTION WITH SUCH PROSPECTUS, A COPY OF WHICH MAY BE OBTAINED WITHOUT CHARGE
BY CONTACTING EATON VANCE DISTRIBUTORS, INC. (THE "PRINCIPAL UNDERWRITER") (SEE
BACK COVER FOR ADDRESS AND PHONE NUMBER).
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART I
The investment objective of the Fund is to provide current income exempt
from the regular federal income tax. The Fund seeks to meet its investment
objective by investing its assets in the National Municipals Portfolio (the
"Portfolio"), a separate registered investment company with the same investment
objective as the Fund. 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.
ADDITIONAL INFORMATION ABOUT INVESTMENT POLICIES
MUNICIPAL OBLIGATIONS
Municipal obligations are issued to obtain funds for various public and
private purposes. Such obligations include bonds as well as tax-exempt
commercial paper, project notes and municipal notes such as tax, revenue and
bond anticipation notes of short maturity, generally less than three years. In
general, there are three categories of municipal obligations, the interest of
which is exempt from federal income tax and is not a tax preference item for
purposes of the federal alternative minimum tax: (i) certain "public purpose"
obligations (whenever issued), which include obligations issued directly by
state and local governments or their agencies to fulfill essential governmental
functions; (ii) certain obligations issued before August 8, 1986 for the benefit
of non-governmental persons or entities; and (iii) certain "private activity
bonds" issued before August 7, 1986, which include "qualified Section 501(c)(3)
bonds" or refundings of certain obligations included in the second category. In
assessing the federal income tax treatment of interest on any municipal
obligation, the Portfolio will generally rely on an opinion of the issuer's
counsel (when available) and will not undertake any independent verification of
the basis for the opinion. The two principal classifications of municipal bonds
are "general obligation" and "revenue" bonds.
Interest on certain "private activity bonds" issued after August 7, 1986 is
exempt from regular federal income tax but such interest (including a
distribution by the Fund derived from such interest) is treated as a tax
preference item which could subject the recipient to or increase the recipient's
liability for the federal alternative minimum tax. For corporate shareholders,
the Fund's distributions derived from interest on all municipal obligations
(whenever issued) is included in "adjusted current earnings" for purposes of the
federal alternative minimum tax as applied to corporations (to the extent not
already included in alternative minimum taxable income as income attributable to
private activity bonds).
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 minimus exclusion.
Issuers of general obligation bonds include states, counties, cities, towns
and regional districts. The proceeds of these obligations are used to fund a
wide range of public projects including the construction or improvement of
schools, highways and roads, water and sewer systems and a variety of other
public purposes. The basic security of general obligation bonds is the issuer's
pledge of its faith, credit, and taxing power for the payment of principal and
interest. The taxes that can be levied for the payment of debt service may be
limited or unlimited as to rate and amount.
The principal security for a revenue bond is generally the net revenues
derived from a particular facility or group of facilities or, in some cases,
from the proceeds of a special excise or other specific revenue source. Revenue
bonds have been issued to fund a wide variety of capital projects including:
electric, gas, water, sewer and solid waste disposal systems; highways, bridges
and tunnels; port, airport and parking facilities; transportation systems;
housing facilities, colleges and universities and hospitals. Although the
principal security behind these bonds varies widely, many provide additional
security in the form of a debt service reserve fund whose monies may be used to
make principal and interest payments on the issuer's obligations. Housing
finance authorities have a wide range of security including partially or fully
insured, rent subsidized and/or collateralized mortgages, and/or the net
revenues from housing or other public projects. In addition to a debt service
reserve fund, some authorities provide further security in the form of a state's
ability (without legal obligation) to make up deficiencies in the debt service
reserve fund. Lease rental revenue bonds issued by a state or local authority
for capital projects are normally secured by annual lease rental payments from
the state or locality to the authority sufficient to cover debt service on the
authority's obligations. Such payments are usually subject to annual
appropriations by the state or locality.
Industrial development and pollution control bonds are in most cases revenue
bonds and are generally not secured by the taxing power of the municipality, but
are usually secured by the revenues derived by the authority from payments of
the industrial user or users.
The Portfolio may on occasion acquire revenue bonds which carry warrants or
similar rights covering equity securities. Such warrants or rights may be held
indefinitely, but if exercised, the Portfolio anticipates that it would, under
normal circumstances, dispose of any equity securities so acquired within a
reasonable period of time.
While most municipal bonds pay a fixed rate of interest semi-annually in
cash, there are exceptions. Some bonds pay no periodic cash interest, but rather
make a single payment at maturity representing both principal and interest.
Bonds may be issued or subsequently offered with interest coupons materially
greater or less than those then prevailing, with price adjustments reflecting
such deviation.
The obligations of any person or entity to pay the principal of and interest
on a municipal obligation are subject to the provisions of bankruptcy,
insolvency and other laws affecting the rights and remedies of creditors, such
as the Federal Bankruptcy Act, and laws, if any, which may be enacted by
Congress or state legislatures extending the time for payment of principal or
interest, or both, or imposing other constraints upon enforcement of such
obligations. There is also the possibility that as a result of litigation or
other conditions the power or ability of any person or entity to pay when due
principal of and interest on a municipal obligation may be materially affected.
There have been recent instances of defaults and bankruptcies involving
municipal obligations which were not foreseen by the financial and investment
communities. The Portfolio will take whatever action it considers appropriate in
the event of anticipated financial difficulties, default or bankruptcy of either
the issuer of any municipal obligation or of the underlying source of funds for
debt service. Such action may include retaining the services of various persons
or firms (including affiliates of the Investment Adviser) to evaluate or protect
any real estate, facilities or other assets securing any such obligation or
acquired by the Portfolio as a result of any such event, and the Portfolio may
also manage (or engage other persons to manage) or otherwise deal with any real
estate, facilities or other assets so acquired. The Portfolio anticipates that
real estate consulting and management services may be required with respect to
properties securing various municipal obligations in its portfolio or
subsequently acquired by the Portfolio. The Portfolio will incur additional
expenditures in taking protective action with respect to portfolio obligations
in default and assets securing such obligations.
The yields on municipal obligations are dependent on a variety of factors,
including purposes of issue and source of funds for repayment, general money
market conditions, general conditions of the municipal bond market, size of a
particular offering, maturity of the obligation and rating of the issue. The
ratings of Moody's, S&P and Fitch represent their opinions as to the quality of
the municipal obligations which they undertake to rate. It should be emphasized,
however, that ratings are based on judgment and are not absolute standards of
quality. Consequently, municipal obligations with the same maturity, coupon and
rating may have different yields while obligations of the same maturity and
coupon with different ratings may have the same yield. In addition, the market
price of municipal obligations will normally fluctuate with changes in interest
rates, and therefore the net asset value of the Portfolio will be affected by
such changes.
RISKS OF CONCENTRATION
The Portfolio may invest 25% or more of its total assets in municipal
obligations whose issuers are located in the same state or in municipal
obligations of the same type. There could be economic, business or political
developments which might affect all municipal obligations of a similar type. In
particular, investments in industrial revenue bonds might involve (without
limitation) the following risks.
Hospital bond ratings are often based on feasibility studies which contain
projections of expenses, revenues and occupancy levels. Among the influences
affecting a hospital's gross receipts and net income available to service its
debt are demand for hospital services, the ability of the hospital to provide
the services required, management capabilities, economic developments in the
service area, efforts by insurers and government agencies to limit rates and
expenses, confidence in the hospital, service area economic developments,
competition, availability and expense of malpractice insurance, Medicaid and
Medicare funding and possible Federal legislation limiting the rates of increase
of hospital charges.
Electric utilities face problems in financing large construction programs in
an inflationary period, cost increases and delay occasioned by safety and
environmental considerations (particularly with respect to nuclear facilities),
difficulty in obtaining fuel at reasonable prices and in achieving timely and
adequate rate relief from regulatory commissions, effect of energy conservation
and limitations on the capacity of the capital market to absorb utility debt.
Life care facilities are an alternative form of long-term housing for the
elderly which offer residents the independence of a condominium life style and,
if needed, the comprehensive care of nursing home services. Bonds to finance
these facilities have been issued by various state industrial development
authorities. Since the bonds are normally secured only by the revenues of each
facility and not by state or local government tax payments, they are subject to
a wide variety of risks. Primarily, the projects must maintain adequate
occupancy levels to be able to provide revenues sufficient to meet debt service
payments. Moreover, since a portion of housing, medical care and other services
may be financed by an initial deposit, it is important that the facility
maintain adequate financial reserves to secure estimated actuarial liabilities.
The ability of management to accurately forecast inflationary cost pressures is
an important factor in this process. The facilities may also be affected
adversely by regulatory cost restrictions applied to health care delivery in
general, particularly state regulations or changes in Medicare and Medicaid
payments or qualifications, or restrictions imposed by medical insurance
companies. They may also face competition from alternative health care or
conventional housing facilities in the private or public sector.
MUNICIPAL LEASES
The Portfolio may invest in municipal leases and participations therein,
which arrangements frequently involve special risks. Municipal leases are
obligations in the form of a lease or installment purchase arrangement which is
issued by state or local governments to acquire equipment and facilities.
Interest income from such obligations is generally exempt from local and state
taxes in the state of issuance. "Participations" in such leases are undivided
interests in a portion of the total obligation. Participations entitle their
holders to receive a pro rata share of all payments under the lease. A trustee
is usually responsible for administering the terms of the participation and
enforcing the participants' rights in the underlying lease. Leases and
installment purchase or conditional sale contracts (which normally provide for
title to the leased assets to pass eventually to the governmental issuer) have
evolved as a means for governmental issuers to acquire property and equipment
without meeting the constitutional and statutory requirements for the issuance
of debt. State debt-issuance limitations are deemed to be inapplicable to these
arrangements because of the inclusion in many leases or contracts of
"non-appropriation" clauses that provide that the governmental issuer has no
obligation to make future payments under the lease or contract unless money is
appropriated for such purpose by the appropriate legislative body on a yearly or
other periodic basis. Such arrangements are, therefore, subject to the risk that
the governmental issuer will not appropriate funds for lease payments.
Certain municipal lease obligations owned by the Portfolio may be deemed
illiquid for the purpose of the Portfolio's 15% limitation on investments in
illiquid securities, unless determined by the Investment Adviser, pursuant to
guidelines adopted by the Trustees of the Portfolio, to be liquid securities for
the purpose of such limitation. In determining the liquidity of municipal lease
obligations, the Investment Adviser will consider a variety of factors
including: (1) the willingness of dealers to bid for the security; (2) the
number of dealers willing to purchase or sell the obligation and the number of
other potential buyers; (3) the frequency of trades and quotes for the
obligation; and (4) the nature of the marketplace trades. In addition, the
Investment Adviser will consider factors unique to particular lease obligations
affecting the marketability thereof. These include the general creditworthiness
of the municipality, the importance of the property covered by the lease to the
municipality, and the likelihood that the marketability of the obligation will
be maintained throughout the time the obligation is held by the Portfolio. In
the event the Portfolio acquires an unrated municipal lease obligation, the
Investment Adviser will be responsible for determining the credit quality of
such obligation on an on-going basis, including an assessment of the likelihood
that the lease may or may not be cancelled.
ZERO COUPON BONDS
Zero coupon bonds are debt obligations which do not require the periodic
payment of interest and are issued at a significant discount from face value.
The discount approximates the total amount of interest the bonds will accrue and
compound over the period until maturity at a rate of interest reflecting the
market rate of the security at the time of issuance. Zero coupon bonds benefit
the issuer by mitigating its need for cash to meet debt service, but also
require a higher rate of return to attract investors who are willing to defer
receipt of such cash.
INSURANCE
Insured municipal obligations held by the Portfolio (if any) will be insured
as to their scheduled payment of principal and interest under either (i) an
insurance policy obtained by the issuer or underwriter of the obligation at the
time of its original issuance or (ii) an insurance policy obtained by the
Portfolio or a third party subsequent to the obligation's original issuance
(which may not be reflected in the obligation's market value. In either event,
such insurance may provide that in the event of non-payment of interest or
principal when due with respect to an insured obligation, the insurer is not
required to make such payment until a specified time has lapsed (which may be 30
days or more after notice).
CREDIT QUALITY
The Portfolio is dependent on the Investment Adviser's judgment, analysis
and experience in evaluating the quality of municipal obligations. In evaluating
the credit quality of a particular issue, whether rated or unrated, the
Investment Adviser will normally take into consideration, among other things,
the financial resources of the issuer (or, as appropriate, of the underlying
source of funds for debt service), its sensitivity to economic conditions and
trends, any operating history of and the community support for the facility
financed by the issue, the ability of the issuer's management and regulatory
matters. The Investment Adviser will attempt to reduce the risks of investing in
the lowest investment grade, below investment grade and comparable unrated
obligations through active portfolio management, credit analysis and attention
to current developments and trends in the economy and the financial markets.
See "Portfolio of Investments" in the "Financial Statements" incorporated by
reference into this SAI with respect to any defaulted obligations held by the
Portfolio.
SHORT-TERM TRADING
The Portfolio may sell securities in anticipation of a market decline (a
rise in interest rates) or purchase and later sell securities in anticipation of
a market rise (a decline in interest rates). In addition, a security may be sold
and another purchased at approximately the same time to take advantage of what
the Portfolio believes to be a temporary disparity in the normal yield
relationship between the two securities. Yield disparities may occur for reasons
not directly related to the investment quality of particular issues or the
general movement of interest rates, such as changes in the overall demand for or
supply of various types of municipal obligations or changes in the investment
objectives of investors. Such trading may be expected to increase the portfolio
turnover rate, which may increase capital gains and the expenses incurred in
connection with such trading. The Portfolio cannot accurately predict its
portfolio turnover rate, but it is anticipated that the annual turnover rate
will generally not exceed 100% (excluding turnover of securities having a
maturity of one year or less). A 100% annual turnover rate would occur, for
example, if all the securities held by the Portfolio were replaced once in a
period of one year. A high turnover rate (100% or more) necessarily involves
greater expenses to the Portfolio. The Portfolio engages in portfolio trading
(including short-term trading) if it believes that a transaction including all
costs will help in achieving its investment objective.
WHEN-ISSUED SECURITIES
New issues of municipal obligations are sometimes offered on a "when-
issued" basis, that is, delivery and payment for the securities normally taking
place within a specified number of days after the date of the Portfolio's
commitment and are subject to certain conditions such as the issuance of
satisfactory legal opinions. The Portfolio may also purchase securities on a
when-issued basis pursuant to refunding contracts in connection with the
refinancing of an issuer's outstanding indebtedness. Refunding contracts
generally require the issuer to sell and the Portfolio to buy such securities on
a settlement date that could be several months or several years in the future.
The Portfolio will make commitments to purchase when-issued securities only
with the intention of actually acquiring the securities, but may sell such
securities before the settlement date if it is deemed advisable as a matter of
investment strategy. The payment obligation and the interest rate that will be
received on the securities are fixed at the time the Portfolio enters into the
purchase commitment. 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 which are
frequently secured by letters of credit or other credit support arrangements
provided by banks. To the extent that such letters of credit or other
arrangements constitute an unconditional guarantee of the issuer's obligations,
a bank may be treated as the issuer of a security for the purpose of complying
with the diversification requirements set forth in Section 5(b) of the 1940 Act
and Rule 5b-2 thereunder. The Portfolio would anticipate using these obligations
as cash equivalents pending longer term investment of its funds.
REDEMPTION, DEMAND AND PUT FEATURES
Most municipal bonds have a fixed final maturity date. However, it is
commonplace for the issuer to reserve the right to call the bond earlier. Also,
some bonds may have "put" or "demand" features that allow early redemption by
the bondholder. 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. Because this right is
assignable with the security, which is readily marketable and valued in the
customary manner, the Portfolio will not assign any separate value to such
right.
LIQUIDITY AND PROTECTIVE PUT OPTIONS
The Portfolio may also enter into a separate agreement with the seller of
the security or some other person granting the Portfolio the right to put the
security to the seller thereof or the other person at an agreed upon price. The
Portfolio intends to limit this type of transaction to institutions (such as
banks or securities dealers) which the Investment Adviser believes present
minimal credit risks and would engage in this type of transaction to facilitate
portfolio liquidity or (if the seller so agrees) to hedge against rising
interest rates. There is no assurance that this kind of put option will be
available to the Portfolio or that selling institutions will be willing to
permit the Portfolio to exercise a put to hedge against rising interest rates. A
separate put option may not be marketable or otherwise assignable, and sale of
the security to a third party or lapse of time with the put unexercised may
terminate the right to exercise the put. The Portfolio does not expect to assign
any value to any separate put option which may be acquired to facilitate
portfolio liquidity, inasmuch as the value (if any) of the put will be reflected
in the value assigned to the associated security; any put acquired for hedging
purposes would be valued in good faith under methods or procedures established
by the Trustees of the Portfolio after consideration of all relevant factors,
including its expiration date, the price volatility of the associated security,
the difference between the market price of the associated security and the
exercise price of the put, the creditworthiness of the issuer of the put and the
market prices of comparable put options. Interest income generated by certain
bonds having put 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 and (ii) futures
contracts on securities indices. All futures contracts entered into by the
Portfolio are traded on exchanges or boards of trade that are licensed and
regulated by the Commodity Futures Trading Commission ("CFTC") and must be
executed through a futures commission merchant or brokerage firm which is a
member of the relevant exchange. The Portfolio may purchase and write call and
put options on futures contracts which are traded on a United States or foreign
exchange or board of trade. The Portfolio will be required, in connection with
transactions in futures contracts and the writing of options on futures, to make
margin deposits, which will be held by the Portfolio's custodian for the benefit
of the futures commission merchant through whom the Portfolio engages in such
futures and options transactions.
Some futures contracts and options thereon may become illiquid under adverse
market conditions. In addition, during periods of market volatility, a commodity
exchange may suspend or limit transactions in an exchange-traded instrument,
which may make the instrument temporarily illiquid and difficult to price.
Commodity exchanges may also establish daily limits on the amount that the price
of a futures contract or futures option can vary from the previous day's
settlement price. Once the daily limit is reached, no trades may be made that
day at a price beyond the limit. This may prevent the Portfolio from closing out
positions and limiting its losses.
The Portfolio will engage in futures and related options transactions only
for bona fide hedging purposes as defined in or permitted by CFTC regulations.
The Portfolio will determine that the price fluctuations in the futures
contracts and options on futures are substantially related to price fluctuations
in securities held by the Portfolio or which it expects to purchase. The
Portfolio's futures transactions will be entered into for traditional hedging
purposes -- that is, futures contracts will be sold to protect against a decline
in the price of securities that the Portfolio owns, or futures contracts will be
purchased to protect the Portfolio against an increase in the price of
securities it intends to purchase. As evidence of this hedging intent, the
Portfolio expects that on 75% or more of the occasions on which it takes a long
futures (or option) position (involving the purchase of futures contracts), the
Portfolio will have purchased, or will be in the process of purchasing,
equivalent amounts of related securities in the cash market at the time when the
futures (or option) position is closed out. However, in particular cases, when
it is economically advantageous for the Portfolio to do so, a long futures
position may be terminated (or an option may expire) without the corresponding
purchase of securities. The Portfolio will engage in transactions in futures and
related options contracts only to the extent such transactions are consistent
with the requirements of the Internal Revenue Code for maintaining qualification
of the Fund as a regulated investment company for federal income tax purposes
(see "Taxes").
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) Purchase any security (other than U.S. Government securities) if such
purchase, at the time thereof, would cause more than 5% of the total assets of
the Fund (taken at market value) to be invested in the securities of a single
issuer; provided, however, that the Fund may invest all or part of its
investable assets in an open-end management investment company with
substantially the same investment objective, policies and restrictions as the
Fund;
(2) Purchase securities on margin (but the Fund may obtain such short-term
credits as may be necessary for the clearance of purchases and sales of
securities). The deposit or payment by the Fund of initial or maintenance margin
in connection with futures contracts or related options transactions is not
considered the purchase of a security on margin;
(3) Make short sales of securities or maintain a short position, unless at
all times when a short position is open the Fund owns an equal amount of such
securities or securities convertible into or exchangeable, without payment of
any further consideration, for securities of the same issue as, and equal in
amount to, the securities sold short, and unless not more than 25% of the Fund's
net assets (taken at current value) is held as collateral for such sales at any
one time. (The Fund will make such sales only for the purpose of deferring
realization of gain or loss for federal income tax purposes);
(4) Purchase securities of any issuer if such purchase, at the time thereof,
would cause more than 10% of the total outstanding voting securities of such
issuer to be held by the Fund; provided, however, that the Fund may invest all
or part of its investable assets in an open-end management investment company
with substantially the same investment objective, policies and restrictions as
the Fund;
(5) Purchase securities issued by any other open-end investment company or
investment trust; provided, however, that the Fund may invest all or part of its
investable assets in an open-end management investment company with
substantially the same investment objective, policies and restrictions as the
Fund;
(6) Purchase or retain in its portfolio any securities issued by an issuer
any of whose officers, directors, trustees or security holders is an officer or
Trustee of the Trust or is a member, officer, director or trustee of any
investment adviser of the Fund, if after the purchase of the securities of such
issuer by the Fund one or more of such persons owns beneficially more than 1/2
of 1% of the shares or securities or both (all taken at market value) of such
issuer and such persons owning more than 1/2 of 1% of such shares or securities
together own beneficially more than 5% of such shares or securities or both (all
taken at market value);
(7) Underwrite or participate in the marketing of securities of others,
except insofar as it may technically be deemed to be an underwriter in selling a
portfolio security under circumstances which may require the registration of the
same under the Securities Act of 1933, or participate on a joint or a joint and
several basis in any trading account in securities;
(8) Lend any of its funds or other assets to any person, directly or
indirectly, except (i) through repurchase agreements and (ii) through the loan
of a portfolio security; (The purchase of a portion of an issue of debt
obligations, whether or not the purchase is made on the original issuance, is
not considered the making of a loan);
(9) Borrow money or pledge its assets in excess of 1/3 of the value of its
net assets (excluding the amount borrowed) and then only if such borrowing is
incurred as a temporary measure for extraordinary or emergency purposes or to
facilitate the orderly sale of portfolio securities to accommodate redemption
requests; or issue securities other than its shares of beneficial interest,
except as appropriate to evidence indebtedness, including reverse repurchase
agreements, which the Fund is permitted to incur. The Fund will not purchase
securities while outstanding temporary bank borrowings exceed 5% of its total
assets; provided, however, that the Fund may increase its interest in an
open-end management investment company with substantially the same investment
objective, policies and restrictions as the Fund while such borrowings are
outstanding. The deposit of cash, cash equivalents and liquid debt securities in
a segregated account with the custodian and/or with a broker in connection with
futures contracts or related options transactions and the purchase of securities
on a "when-issued" basis is not deemed to be a pledge;
(10) Invest for the purpose of exercising control or management of other
companies; provided, however, that the Fund may invest all or part of its
investable assets in an open-end management investment company with
substantially the same investment objective, policies and restrictions as the
Fund;
(11) Purchase or sell real estate, although it may purchase and sell
securities which are secured by real estate and securities of companies which
invest or deal in real estate;
(12) Purchase or sell physical commodities or contracts for the purchase
or sale of physical commodities;
(13) Buy investment securities from or sell them to any of the officers or
Trustees of the Trust, its investment adviser or its underwriter, as principal;
however, any such person or concerns may be employed as a broker upon customary
terms; or
(14) Purchase oil, gas or other mineral leases or purchase partnership
interests in oil, gas or other mineral exploration or development programs.
The Portfolio has adopted substantially the same fundamental investment
restrictions as the foregoing investment restrictions adopted by the Fund; such
restrictions cannot be changed without the approval of a "majority of the
outstanding voting securities" of the Portfolio, 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 as 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. Except for debt obligations
issued by or on behalf of states, territories and possessions of the United
States, and the District of Columbia and their political subdivisions, agencies
or instrumentalities, neither the Fund nor the Portfolio may invest more than 5%
of its total assets (taken at current value) in obligations where the payments
of principal and interest thereon is the responsibility of a company (including
predecessors) with less than three years operating history unless such
obligations are rated at the time of purchase by a nationally recognized rating
service; provided, however, that the Fund may invest without limitation in the
Portfolio or in another investment company with substantially the same
investment objective. Neither the Fund nor the Portfolio may invest more than
15% of net assets in investments which are not readily marketable, including
restricted securities and repurchase agreements maturing in more than seven
days. Restricted securities for the purposes of this limitation do not include
securities eligible for resale pursuant to Rule 144A of the Securities Act of
1933 and commercial paper issued pursuant to Section 4(2) of said Act that the
Board of Trustees of the Trust or the Portfolio, or its delegate, determine to
be liquid; provided, however, that the Fund may invest without limitation in the
Portfolio or in another investment company with substantially the same
investment objective. Neither the Fund nor the Portfolio may engage in options,
futures or forward transactions if more than 5% of its net assets, as measured
by the aggregate of the premiums paid by the Fund or the Portfolio, would be so
invested. The Fund and the Portfolio may purchase put options on municipal
obligations only if after such purchase not more than 5% of its net assets, as
measured by the aggregate of the premiums paid for such options held by it would
be so invested. In addition, neither the Fund nor the Portfolio will purchase
any put options, long futures contracts, or call options on a futures contract
if at the date of such purchase realized net losses from such transactions
during the fiscal year to date exceed 5% of its average net assets during such
period. Neither the Fund nor the Portfolio intend to invest in reverse
repurchase agreements during the current fiscal year.
For purposes of the Portfolio's investment restrictions, the determination
of the "issuer" of a municipal obligation which is not a general obligation bond
will be made by the Portfolio's Investment Adviser on the basis of the
characteristics of the obligation and other relevant factors, the most
significant of which is the source of funds committed to meeting interest and
principal payments of such obligation.
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"); 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 (64), 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 (60), Trustee
Jacob H. Schiff, Professor of Investment Banking at Harvard University Graduate
School of Business Administration. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: Harvard University Graduate School of Business Administration,
Soldiers Field Road, Boston, Massachusetts 02163
NORTON H. REAMER (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 (65), 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 then elected President of the
Trust and the Portfolio on December 13, 1993. Officer of various investment
companies managed by Eaton Vance or BMR.
ROBERT B. MACINTOSH (39), Vice President
Vice President of Eaton Vance and EV, and BMR (since August 11, 1992), employee
of Eaton Vance since March 8, 1991. Fidelity Investments -- Portfolio Manager
(1986-1991). Officer of various investment companies managed by Eaton Vance or
BMR. Mr. MacIntosh was elected Vice President of the Trust on March 22, 1993.
THOMAS M. METZOLD (37), Vice President
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR. Mr. Metzold was elected Vice
President of the Portfolio on June 19, 1995.
JAMES L. O'CONNOR (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 (33), Assistant Secretary
Assistant Vice President of BMR, Eaton Vance and EV since March 1, 1994;
employee of Eaton Vance since March 1993. State Regulations Supervisor, The
Boston Company (1991-1993) and Registration Specialist, Fidelity Management &
Research Co. (1986-1991). Officer of various investment companies managed by
Eaton Vance or BMR. Mr. Murphy was elected Assistant Secretary of the Trust
and the Portfolio on March 27, 1995.
ERIC G. WOODBURY (38), Assistant Secretary
Vice President of Eaton Vance since February 1993; formerly, associate attorney
at Dechert, Price & Rhoads and Gaston & Snow. Officer of various investment
companies managed by Eaton Vance or BMR. Mr. Woodbury was elected Assistant
Secretary on June 19, 1995.
Messrs. 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 functions include a continuous review of the Trust's
contractual relationship with the Administrator on behalf of the Fund, 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 Trust and of the Portfolio.
Trustees of the Portfolio who are not affiliated with the Investment Adviser
may elect to defer receipt of all or a percentage of their annual fees in
accordance with the terms of a Trustees Deferred Compensation Plan (the "Plan").
Under the Plan, an eligible Trustee may elect to have his deferred fees invested
by the Portfolio in the shares of one or more funds in the Eaton Vance Family of
Funds, and the amount paid to the Trustees under the Plan will be determined
based upon the performance of such investments. Deferral of Trustees' fees in
accordance with the Plan will have a negligible effect on the Portfolio's
assets, liabilities, and net income per share, and will not obligate the
Portfolio to retain the services of any Trustee or obligate the Portfolio to pay
any particular level of compensation to the Trustee. Neither the Fund nor the
Portfolio has a retirement plan for its Trustees.
The fees and expenses of those Trustees of the Trust and the Portfolio who
are not members of the Eaton Vance organization (the noninterested Trustees) are
paid by the Fund (and the other series of the Trust) and the Portfolio,
respectively. For the compensation received by the noninterested Trustees of the
Trust and the Portfolio, see "Fees and Expenses" in the Fund's Part II.
INVESTMENT ADVISER AND ADMINISTRATOR
The Portfolio engages BMR as investment adviser pursuant to an Investment
Advisory Agreement dated October 13, 1992. BMR or Eaton Vance acts as investment
adviser to investment companies and various individual and institutional clients
with combined assets under management of 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 state tax-free portfolios in more states than any other
mutual fund organization. It features 31 long-term state portfolios, 3 national
portfolios and 12 limited maturity portfolios -- all with an average credit
quality of A to Aa -- plus a national municipals portfolio and a high yield
municipals portfolio of lower-rated securities. A staff of 32 is responsible for
the day-to-day management of over 3,500 issues in 48 mutual fund portfolios.
Assets managed by the Company's municipal investment group are currently over
$9.1 billion.
Thomas M. Metzold is the manager of the Portfolio. He is a Chartered
Financial Analyst and a Vice President of EVM and BMR. Mr. Metzold graduated
in 1980 from Siena College with a B.S. in finance. In 1987, he received his
M.B.A. in finance from the State University of New York at Albany. He also is
a member of the Boston Security Analysts Society, the Association for
Investment Management & Research, the Boston Municipal Analysts Forum, and the
National Federation of Municipal Analysts.
BMR manages the investments and affairs of the Portfolio subject to the
supervision of the Portfolio's Board of Trustees. BMR furnishes to the Portfolio
investment research, advice and supervision, furnishes an investment program and
determines what securities will be purchased, held or sold by the Portfolio and
what portion, if any, of the Portfolio's assets will be held uninvested. The
Investment Advisory Agreement requires BMR to pay the salaries and fees of all
officers and Trustees of the Portfolio who are members of the BMR organization
and all personnel of BMR performing services relating to research and investment
activities. The Portfolio is responsible for all expenses not expressly stated
to be payable by BMR under the Investment Advisory Agreement, including, without
implied limitation, (i) expenses of maintaining the Portfolio and continuing its
existence, (ii) registration of the Portfolio under the 1940 Act, (iii)
commissions, fees and other expenses connected with the acquisition, holding and
disposition of securities and other investments, (iv) auditing, accounting and
legal expenses, (v) taxes and interest, (vi) governmental fees, (vii) expenses
of issue, sale and redemption of interests in the Portfolio, (viii) expenses of
registering and qualifying the Portfolio and interests in the Portfolio under
Federal and state securities laws and of preparing and printing registration
statements or other offering statements or memoranda for such purposes and for
distributing the same to investors, and fees and expenses of registering and
maintaining registrations of the Portfolio and of the Portfolio's placement
agent as broker-dealer or agent under state securities laws, (ix) expenses of
reports and notices to investors and of meetings of investors and proxy
solicitations therefor, (x) expenses of reports to governmental officers and
commissions, (xi) insurance expenses, (xii) association membership dues, (xiii)
fees, expenses and disbursements of custodians and subcustodians for all
services to the Portfolio (including without limitation safekeeping of funds,
securities and other investments, keeping of books, accounts and records, and
determination of net asset values, book capital account balances and tax capital
account balances), (xiv) fees, expenses and disbursements of transfer agents,
dividend disbursing agents, investor servicing agents and registrars for all
services to the Portfolio, (xv) expenses for servicing the accounts of
investors, (xvi) any direct charges to investors approved by the Trustees of the
Portfolio, (xvii) compensation and expenses of Trustees of the Portfolio who are
not members of BMR's organization, and (xviii) such non-recurring items as may
arise, including expenses incurred in connection with litigation, proceedings
and claims and 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. As at
September 30, 1995, the Portfolio had net assets of $2,260,646,363. For the
period from the start of business, February 1, 1993, to the fiscal year ended
September 30, 1993, and for the fiscal years ended September 30, 1994 and 1995,
the Portfolio paid BMR advisory fees of $5,557,586, $9,648,375 and $9,944,026,
respectively, (equivalent to 0.45%, 0.44% and 0.45% (annualized) of the
Portfolio's average net assets for such period).
A commitment has been 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 remains in effect until February
28, 1996. It may be continued indefinitely thereafter so long as such
continuance after February 28, 1996 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 Administrative Services Agreement with the Fund,
Eaton Vance has been engaged to administer the Fund's affairs, subject to the
supervision of the Trustees of the Trust, and shall furnish for the use of the
Fund office space and all necessary office facilities, equipment and personnel
for administering the affairs of the Fund. For additional information about the
Administrator, see "Fees and Expenses" in the Fund's Part II.
The Fund pays all of its own expenses including, without limitation, (i)
expenses of maintaining the Fund and continuing its existence, (ii) its pro rata
share of registration of the Trust under the 1940 Act, (iii) commissions, fees
and other expenses connected with the purchase or sale of securities and other
investments, (iv) auditing, accounting and legal expenses, (v) taxes and
interest, (vi) governmental fees, (vii) expenses of issue, sale, repurchase and
redemption of shares, (viii) expenses of registering and qualifying the Fund and
its shares under federal and state securities laws and of preparing and printing
prospectuses for such purposes and for distributing the same to shareholders and
investors, and fees and expenses of registering and maintaining registrations of
the Fund and of the Fund's principal underwriter, if any, as broker-dealer or
agent under state securities laws, (ix) expenses of reports and notices to
shareholders and of meetings of shareholders and proxy solicitations therefor,
(x) expenses of reports to governmental officers and commissions, (xi) insurance
expenses, (xii) association membership dues (xiii) fees, expenses and
disbursements of custodians and subcustodians for all services to the Fund
(including without limitation safekeeping of funds, securities and other
investments, keeping of books and accounts and determination of net asset
values), (xiv) fees, expenses and disbursements of transfer agents, dividend
disbursing agents, shareholder servicing agents and registrars for all services
to the Fund, (xv) expenses for servicing shareholder accounts, (xvi) any direct
charges to shareholders approved by the Trustees of the Trust, (xvii)
compensation and expenses of Trustees of the Trust who are not members of the
Eaton Vance organization, and (xviii) such non-recurring items as may arise,
including expenses incurred in connection with litigation, proceedings and
claims and 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 January 31, 1996, Messrs. Clay, Gardner and Hawkes each owned 24% of
such voting trust receipts, and Messrs. Rowland and Brigham owned 15% and 13%,
respectively, of such voting trust receipts. Messrs. Hawkes and Otis are
officers or Trustees of the Trust and the Portfolio and are members of the EVC,
BMR, Eaton Vance and EV organizations. Messrs. Fetter, MacIntosh, Metzold,
Murphy, O'Connor and Woodbury, and Ms. Sanders who are officers or Trustees of
the Trust and/or the Portfolio and are also members of the BMR, Eaton Vance and
EV organizations. BMR will receive the fees paid under the Investment Advisory
Agreement and Eaton Vance's wholly-owned subsidiary, Eaton Vance Distributors,
Inc., as Principal Underwriter, will receive its portion of the sales charge on
shares of the Fund sold through Authorized Firms.
EVC owns all of the stock of Energex Energy Corporation, which 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. Eaton Vance, BMR, EVC and EV may also enter into
other businesses.
EVC and its affiliates and their officers and employees from time to time
have transactions with various banks, including the custodian of the Fund and
the Portfolio, Investors Bank & Trust Company. It is Eaton Vance's opinion that
the terms and conditions of such transactions were not and will not be
influenced by existing or potential custodial or other relationships between the
Fund or the Portfolio and such banks.
CUSTODIAN
Investors Bank & Trust Company ("IBT"), 89 South Street, Boston,
Massachusetts acts as custodian for the Fund and the Portfolio. IBT has the
custody of all cash and securities representing the Fund's interest in the
Portfolio, has custody of all the Portfolio's assets, maintains the general
ledger of the Portoflio and the Fund and computes the daily net asset value of
interests in the Portfolio and the net asset value of shares of the Fund. In
such capacity it attends to details in connection with the sale, exchange,
substitution, transfer or other dealings with the Portfolio's investments,
receives and disburses all funds and performs various other ministerial duties
upon receipt of proper instructions from the Fund and the Portfolio. IBT charges
fees which are competitive within the industry. A portion of the fee relates to
custody, bookkeeping and valuation services and is based upon a percentage of
Fund and Portfolio net assets, and a portion of the fee relates to activity
charges, primarily the number of portfolio transactions. These fees are then
reduced by a credit for cash balances of the particular investment company at
the custodian equal to 75% of the 91-day, U.S. Treasury Bill auction rate
applied to the particular investment company's average daily collected balances
for the week. Landon T. Clay, a Director of EVC and an officer, Trustee or
Director of other entities in the Eaton Vance organization, owns approximately
13% of the voting stock of Investors Financial Services Corp., the holding
company parent of IBT. Management believes that such ownership does not create
an affiliated person relationship between the Fund or the Portfolio and IBT
under the Investment Company Act of 1940. During the fiscal year ended September
30, 1995, the Portfolio paid IBT custody fees of $374,289. For the custody fees
that the Fund paid to IBT, see "Fees and Expenses" in the Fund's Part II.
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 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 if a sales charge is 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 services use information with respect to transactions in bonds,
quotations from bond dealers, market transactions in comparable securities,
various relationships between securities, and yield to maturity in determining
value. Taxable obligations for which price quotations are readily available
normally will be valued at the mean between the latest available bid and asked
prices. Open futures positions on debt securities are valued at the most recent
settlement prices, unless such price does not reflect the fair value of the
contract, in which case the positions will be valued by or at the direction of
the Trustees of the Portfolio. Other assets are valued at fair value using
methods determined in good faith by or at the direction of the Trustees of the
Portfolio. The Fund and the Portfolio will be closed for business and will not
price their respective shares or interests on the following business holidays:
New Year's Day, Presidents' Day, Good Friday (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. Each investor's
percentage of the aggregate interest in the Portfolio will then be recomputed as
a percentage equal to a fraction (i) the numerator of which is the value of such
investor's investment in the Portfolio as of the Portfolio Valuation Time on the
prior Portfolio Business Day plus or minus, as the case may be, the amount of
any additions to or withdrawals from the investor's investment in the Portfolio
on the current Portfolio Business Day and (ii) the denominator of which is the
aggregate net asset value of the Portfolio as of the Portfolio Valuation Time on
the prior Portfolio Business Day plus or minus, as the case may be, the amount
of the net additions to or withdrawals from the aggregate investment in the
Portfolio on the current Portfolio Business Day by all investors in the
Portfolio. The percentage so determined will then be applied to determine the
value of the investor's interest in the Portfolio for the current Portfolio
Business Day.
INVESTMENT PERFORMANCE
Average annual total return is determined by multiplying a hypothetical
initial purchase order of $1,000 by the average annual compound rate of return
(including capital appreciation/depreciation, and dividends and distributions
paid and reinvested) for the stated period and annualizing the results. The
calculation assumes that all distributions are reinvested at net asset value on
the reinvestment dates during the period, and either (i) the deduction of the
maximum initial sales charge from the initial $1,000 purchase order or (ii) a
complete redemption of the investment and, if applicable, the deduction of the
contingent deferred sales charge at the end of the period. For further
information concerning the total return of the Fund, see "Performance
Information" in the Fund's Part II.
Yield is computed pursuant to a standardized formula by dividing the net
investment income per share earned during a recent thirty-day period by the
maximum offering price (including, if applicable, the maximum initial sales
charge) per share on the last day of the period and annualizing the resulting
figure. Net investment income per share is calculated from the yields to
maturity of all debt obligations held by the Portfolio based on prescribed
methods, reduced by accrued Fund expenses for the period with the resulting
number being divided by the average daily number of Fund shares outstanding and
entitled to receive distributions during the period. This yield figure does not
reflect the deduction of any contingent deferred sales charges (if applicable)
imposed on certain redemptions at the rate set forth under "How to Redeem Fund
Shares" in the Fund's current prospectus. Yield calculations assume the current
maximum initial sales charge (if applicable) set forth under "How to Buy Fund
Shares" in the Fund's current Prospectus. (Actual yield may be affected by
variations in sales charges on investments.) A taxable-equivalent yield is
computed by dividing the tax-exempt yield by 1 minus a stated rate. For the
yield and taxable-equivalent yield of the Fund, see "Performance Information" in
the Fund's Part II.
The Principal Underwriter may publish to Authorized Firms the Fund's
distribution rate and/or its effective distribution rate. The Fund's
distribution rate is computed by dividing the most recent monthly distribution
per share annualized, by the current net asset value per share or, where
applicable, the maximum public offering price per share (which includes the
maximum initial sales charge). The Fund's effective distribution rate is
computed by dividing the distribution rate by the ratio (the days in a year
divided by the accrual days of the monthly period) used to annualize the most
recent monthly distribution and reinvesting the resulting amount for a full year
on the basis of such ratio. The effective distribution rate will be higher than
the distribution rate because of the compounding effect of the assumed
reinvestment. Investors should note that the Fund's yield is calculated using a
standardized formula, the income component of which is computed from the yields
to maturity of all debt obligations held by the Portfolio based on prescribed
methods (with all purchases and sales of securities during such period included
in the income calculation on a settlement date basis), whereas the distribution
rate is based on the Fund's last monthly distribution which tends to be
relatively stable and may be more or less than the amount of net investment
income and short-term capital gain actually earned by the Fund during the month.
See "Distribution 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
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 the portfolio allocation and holdings of the Portfolio at
a particular date (including ratings assigned by independent ratings services
such as Moody's, S&P and Fitch) may be included in advertisements and other
material furnished to present and prospective shareholders. Such information may
be stated as a percentage of the Portfolio's bond holdings on such date.
Comparative information about the yield or distribution rate of the Fund and
about average rates of return on certificates of deposit, bank money market
deposit accounts, money market mutual funds and other short-term investments may
also be included in advertisements, supplemental sales literature or
communications of the Fund. Such information may also compare the taxable
equivalent yield (or value) of the Fund to the after-tax yield (or value) of
such other investment vehicles. 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
FEDERAL INCOME TAXES
Each series of the Trust is treated as a separate entity for federal income
tax purposes. The Fund has elected to be treated, has qualified and intends to
continue to qualify each year as a regulated investment company under the
Internal Revenue Code (the "Code"). Accordingly, the Fund intends to satisfy
certain requirements relating to sources of its income and diversification of
its assets and to distribute its net investment income (including tax-exempt
income) and net realized capital gains in accordance with the timing
requirements imposed by the Code, so as to avoid any federal income or excise
tax on the Fund. The Fund so qualified for its fiscal year ended September 30,
1995 (see the Notes to the Financial Statements incorporated by reference into
this SAI). Because the Fund invests substantially all of its assets in the
Portfolio, the Portfolio normally must satisfy the applicable source of income
and diversification requirements in order for the Fund to satisfy them. The
Portfolio will allocate at least annually among its investors, including the
Fund, each investor's distributive share of the Portfolio's net taxable (if any)
and tax-exempt investment income, net realized capital gains, and any other
items of income, gain, loss, deduction or credit. For purposes of applying the
requirements of the Code regarding qualification as a regulated investment
company, the Fund will be deemed (i) to own its proportionate share of each of
the assets of the Portfolio and (ii) to be entitled to the gross income of the
Portfolio attributable to such share.
In order to avoid federal excise tax, the Code requires that the Fund
distribute by December 31 of each calendar year at least 98% of its ordinary
income (not including tax-exempt income) for such year, at least 98% of the
excess of its realized capital gains over its realized capital losses, generally
computed on the basis of the one-year period ending on October 31 of such year,
after reduction by any available capital loss carryforwards, and 100% of any
income from the prior year (as previously computed) that was not paid out during
such year and on which the Fund paid no federal income tax. Under current law,
provided that the Fund qualifies as a regulated investment company for federal
income tax purposes and the Portfolio is treated as a partnership for
Massachusetts and federal tax purposes, neither the Fund nor the Portfolio is
liable for any income, corporate excise or franchise tax in the Commonwealth of
Massachusetts.
The Portfolio's investment in zero coupon and certain other securities will
cause it to realize income prior to the receipt of cash payments with respect to
these securities. Such income will be allocated daily to interests in the
Portfolio, and in order to distribute its proportionate share of this income and
avoid a tax payable by the Fund, the Portfolio may be required to liquidate
portfolio securities that it might otherwise have continued to hold in order to
generate cash that the Fund may withdraw from the Portfolio for subsequent
distribution to Fund shareholders.
Investments in lower-rated or unrated securities may present special tax
issues for the Portfolio and hence for the Fund to the extent actual or
anticipated defaults may be more likely with respect to such securities. Tax
rules are not entirely clear about issues such as when the Portfolio may cease
to accrue interest, original issue discount, or market discount, when and to
what extent deductions may be taken for bad debts or worthless securities; how
payments received on obligations in default should be allocated between
principal and income; and whether exchanges of debt obligations in a workout
context are taxable.
Distributions of net tax-exempt interest income that are properly designated
as "exempt-interest dividends" may be treated by shareholders as interest
excludable from gross income under Section 103(a) of the Code. In order for the
Fund to be entitled to pay the tax-exempt interest income allocated to it by the
Portfolio as exempt-interest dividends to its shareholders, the Fund must and
intends to satisfy certain requirements, including the requirement that, at the
close of each quarter of its taxable year, at least 50% of the value of its
total assets consists of obligations, the interest on which is exempt from
regular Federal income tax. 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 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 regulated investment company.
Any loss realized upon the sale or exchange of shares of the Fund with a tax
holding period of 6 months or less will be 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.
STATE AND LOCAL TAXES
The exemption of interest income for federal income tax purposes does not
necessarily result in exemption under the income or other tax laws of any state
or local taxing authority. Shareholders of the Fund may be exempt from state and
local taxes on distributions of tax-exempt interest income derived from
obligations of the state and/or municipalities of the state in which they are
resident, but taxable generally on income derived from obligations of other
jurisdictions. The Fund will report annually to shareholders, with respect to
net tax exempt income earned, the percentages representing the proportionate
ratio of such income earned in each state.
Shareholders should consult their own tax advisers with respect to the
state, local and foreign tax consequences of investing in the Fund.
PORTFOLIO SECURITY TRANSACTIONS
Decisions concerning the execution of Portfolio security transactions,
including the selection of the market and the executing firm, are made by BMR.
BMR is also responsible for the execution of transactions for all other accounts
managed by it.
BMR places the portfolio security transactions of the Portfolio and of all
other accounts managed by it for execution with many firms. BMR uses its best
efforts to obtain execution of portfolio security transactions at prices which
are advantageous to the Portfolio and at reasonably competitive spreads or (when
a disclosed commission is being charged) at reasonably competitive commission
rates. In seeking such execution, BMR will use its best judgment in evaluating
the terms of a transaction, and will give consideration to various relevant
factors, including without limitation the size and type of the transaction, the
nature and character of the market for the security, the confidentiality, speed
and certainty of effective execution required for the transaction, the general
execution and operational capabilities of the executing firm, the reputation,
reliability, experience and financial condition of the firm, the value and
quality of the services rendered by the firm in this and other transactions, and
the reasonableness of the spread or commission, if any. Municipal obligations,
including state obligations, purchased and sold by the Portfolio are generally
traded in the over-the-counter market on a net basis (i.e., without commission)
through broker-dealers and banks acting for their own account rather than as
brokers, or otherwise involve transactions directly with the issuer of such
obligations. Such firms attempt to profit from such transactions by buying at
the bid price and selling at the higher asked price of the market for such
obligations, and the difference between the bid and asked price is customarily
referred to as the spread. The Portfolio may also purchase municipal obligations
from underwriters, the cost of which may include undisclosed fees and
concessions to the underwriters. While it is anticipated that the Portfolio will
not pay significant brokerage commissions in connection with such portfolio
security transactions, on occasion it may be necessary or appropriate to
purchase or sell a security through a broker on an agency basis, in which case
the Portfolio will incur a brokerage commission. Although spreads or commissions
on portfolio security transactions will, in the judgment of BMR, be reasonable
in relation to the value of the services provided, spreads or commissions
exceeding those which another firm might charge may be paid to firms who were
selected to execute transactions on behalf of the Portfolio and BMR's other
clients for providing brokerage and research services to BMR.
As authorized in Section 28(e) of the Securities Exchange Act of 1934, a
broker or dealer who executes a portfolio transaction on behalf of the Portfolio
may receive a commission which is in excess of the amount of commission another
broker or dealer would have charged for effecting that transaction if BMR
determines in good faith that such commission was reasonable in relation to the
value of the brokerage and research services provided. This determination may be
made on the basis of either that particular transaction or on the basis of
overall responsibilities which BMR and its affiliates have for accounts over
which they exercise investment discretion. In making any such determination, BMR
will not attempt to place a specific dollar value on the brokerage and research
services provided or to determine what portion of the commission should be
related to such services. Brokerage and research services may include advice as
to the value of securities, the advisability of investing in, purchasing, or
selling securities, and the availability of securities or purchasers or sellers
of securities; furnishing analyses and reports concerning issuers, industries,
securities, economic factors and trends, portfolio strategy and the performance
of accounts; effecting securities transactions and performing functions
incidental thereto (such as clearance and settlement); and the "Research
Services" referred to in the next paragraph.
It is a common practice of the investment advisory industry and of the
advisers of investment companies, institutions and other investors to receive
research, statistical and quotation services, data, information and other
services, products and materials which assist such advisers in the performance
of their investment responsibilities ("Research Services") from broker-dealer
firms which execute portfolio transactions for the clients of such advisers and
from third parties with which such broker-dealers have arrangements. Consistent
with this practice, BMR receives Research Services from many broker-dealer firms
with which BMR places the Portfolio transactions and from third parties with
which these broker-dealers have arrangements. These Research Services include
such matters as general economic and market reviews, industry and company
reviews, evaluations of securities and portfolio strategies and transactions and
recommendations as to the purchase and sale of securities and other portfolio
transactions, financial, industry and trade publications, news and information
services, pricing and quotation equipment and services, and research oriented
computer hardware, software, data bases and services. Any particular Research
Service obtained through a broker-dealer may be used by BMR in connection with
client accounts other than those accounts which pay commissions to such
broker-dealer. Any such Research Service may be broadly useful and of value to
BMR in rendering investment advisory services to all or a significant portion of
its clients, or may be relevant and useful for the management of only one
client's account or of a few clients' accounts, or may be useful for the
management of merely a segment of certain clients' accounts, regardless of
whether any such account or accounts paid commissions to the broker-dealer
through which such Research Service was obtained. The advisory fee paid by the
Portfolio is not reduced because BMR receives such Research Services. BMR
evaluates the nature and quality of the various Research Services obtained
through broker-dealer firms and attempts to allocate sufficient commissions to
such firms to ensure the continued receipt of Research Services which BMR
believes are useful or of value to it in rendering investment advisory services
to its clients.
Subject to the requirement that BMR shall use its best efforts to seek and
execute portfolio security transactions at advantageous prices and at reasonably
competitive spreads or commission rates, BMR is authorized to consider as a
factor in the selection of any firm with whom Portfolio orders may be placed the
fact that such firm has sold or is selling shares of the Fund or of other
investment companies sponsored by BMR or Eaton Vance. This policy is not
inconsistent with a rule of the National Association of Securities Dealers,
Inc., which rule provides that no firm which is a member of the Association
shall favor or disfavor the distribution of shares of any particular investment
company or group of investment companies on the basis of brokerage commissions
received or expected by such firm from any source.
Municipal obligations considered as investments for the Portfolio may also
be appropriate for other investment accounts managed by BMR or its affiliates.
BMR will attempt to allocate 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 fiscal year
ended September 30, 1995 and 1994, and during 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. For the
brokerage commissions paid by the Fund on portfolio transactions (if any), see
"Fees and Expenses" in the Fund's Part II.
OTHER INFORMATION
The Trust is a Massachusetts business trust established in 1985. On February
1, 1994 the Fund changed its name to EV Marathon National Municipals Fund. Eaton
Vance, pursuant to its agreement with the Trust, controls the use of the words
"Eaton Vance" and "EV" in the Fund's name and may use the words "Eaton Vance" or
"EV" in other connections and for other purposes.
As permitted by Massachusetts law, there will normally be no meetings of
shareholders for the purpose of electing Trustees unless and until such time as
less than a majority of the Trustees of the Trust holding office have been
elected by shareholders. In such an event, the Trustees then in office will call
a shareholders' meeting for the election of Trustees. Except for the foregoing
circumstances and unless removed by action of the shareholders in accordance
with the Trust's by-laws, the Trustees shall continue to hold office and may
appoint successor Trustees.
The Trust's by-laws provide that no person shall serve as a Trustee if
shareholders holding two-thirds of the outstanding shares have removed him from
that office either by a written declaration filed with the Trust's custodian or
by votes cast at a meeting called for that purpose. The by-laws further provide
that under certain circumstances the shareholders may call a meeting to remove a
Trustee and that the Trust is required to provide assistance in communication
with shareholders about such a meeting.
The Trust's Declaration of Trust may be amended by the Trustees when
authorized by vote of a majority of the outstanding voting securities of the
Trust, the financial interests of which are affected by the amendment. The
Trustees may also amend the Declaration of Trust without the vote or consent of
shareholders to change the name of the Trust or any series or to make such other
changes as do not have a materially adverse effect on the financial interests of
shareholders or if they deem it necessary to conform it to applicable federal or
state laws or regulations. The Trust or any series or class thereof may be
terminated by: (1) the affirmative vote of the holders of not less than
two-thirds of the Shares outstanding and entitled to vote at any meeting of
shareholders of the Trust or the appropriate series or class thereof, or by an
instrument or instruments in writing without a meeting, consented to by the
holders of two-thirds of the Shares of the Trust or a series or class thereof,
provided, however, that, if such termination is recommended by the Trustees, the
vote of a majority of the outstanding voting securities of the Trust or a series
or class thereof entitled to vote thereon shall be sufficient authorization; or
(2) by means of an instrument in writing signed by a majority of the Trustees,
to be followed by a written notice to shareholders stating that a majority of
the Trustees has determined that the continuation of the Trust or a series or a
class thereof is not in the best interest of the Trust, such series or class or
of their respective shareholders.
The Declaration of Trust further provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law; but nothing in the
Declaration of Trust protects a Trustee against any liability to which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
office. In addition, the By-Laws of the Trust provide that no natural person
shall serve as a Trustee of the Trust after the holders of record of not less
than two-thirds of the outstanding shares have declared that he be removed from
office either by declaration in writing filed with the custodian of the assets
of the Trust or by votes cast in person or by proxy at a meeting called for the
purpose.
In accordance with the Declaration of Trust of the Portfolio, there will
normally be no meetings of the investors for the purpose of electing Trustees
unless and until such time as less than a majority of the Trustees holding
office have been elected by investors. In such an event the Trustees of the
Portfolio then in office will call an investors' meeting for the election of
Trustees. Except for the foregoing circumstances and unless removed by action of
the investors in accordance with the Portfolio's Declaration of Trust, the
Trustees shall continue to hold office and may appoint successor Trustees.
The Declaration of Trust of the Portfolio provides that no person shall
serve as a Trustee if investors holding two-thirds of the outstanding interests
have removed him from that office either by a written declaration filed with the
Portfolio's custodian or by votes cast at a meeting called for that purpose. The
Declaration of Trust further provides that under certain circumstances the
investors may call a meeting to remove a Trustee and that the Portfolio is
required to provide assistance in communicating with investors about such a
meeting.
The right to redeem shares of the Fund can be suspended and the payment of
the redemption price deferred when the Exchange is closed (other than for
customary weekend and holiday closings), during periods when trading on the
Exchange is restricted as determined by the Commission, or during any emergency
as determined by the Commission which makes it impracticable for the Portfolio
to dispose of its securities or value its assets, or during any other period
permitted by order of the Commission for the protection of investors.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Deloitte & Touche LLP, 125 Summer Street, Boston, Massachusetts, are the
independent certified public accountants of the Fund and the Portfolio,
providing audit services, tax return preparation, and assistance and
consultation with respect to the preparation of filings with the Commission.
FINANCIAL STATEMENTS
The financial statements of the Fund and the Portfolio, which are included
in the Fund's Annual Report to Shareholders, are incorporated by reference into
this Statement of Additional Information and have been so incorporated in
reliance on the report of Deloitte & Touche LLP, independent certified public
accountants, as experts in accounting and auditing. A copy of the Fund's most
recent Annual Report accompanies this SAI.
Registrant incorporates by reference the audited financial information for
the Funds and Portfolio listed below for the fiscal year ended September 30,
1995 as previously filed electronically with the Securities and Exchange
Commission:
EV Classic National Municipals Fund
(Accession No. 0000950156-95-000812)
EV Marathon National Municipals Fund
(Accession No. 0000950156-95-000813)
EV Traditional National Municipals Fund
(Accession No. 0000950156-95-000814)
National Municipals Portfolio
(Accession No. 0000950156-95-000818)
<PAGE>
TAX EQUIVALENT YIELD TABLE
The table below gives the approximate yield a taxable security must earn at
various income brackets to produce after-tax yields to those of tax-exempt bonds
yielding from 4% to 7% under the regular federal income tax laws and tax rates
applicable to 1996.
<TABLE>
<CAPTION>
MARGINAL
SINGLE RETURN JOINT RETURN INCOME TAX-EXEMPT YIELD
- -------------------------------------------- TAX -----------------------------------------------------------------------
(TAXABLE INCOME)* BRACKET 4% 4.5% 5% 5.5% 6% 6.5% 7%
- -------------------------------------------------------------------------------------------------------------------------------
Equivalent Taxable Yield
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Up to $ 24,00 Up to $ 40,10 15.00% 4.71% 5.29% 5.88% 6.47% 7.06% 7.65% 8.24%
$ 24,001-$ 58,15 $ 40,101-$ 96,90 28.00 5.56 6.25 6.94 7.64 8.33 9.03 9.72
$ 58,151-$121,30 $ 96,901-$147,70 31.00 5.80 6.52 7.25 7.97 8.70 9.42 10.14
$121,301-$263,75 $147,701-$263,75 36.00 6.25 7.03 7.81 8.59 9.38 10.16 10.94
Over $263,75 Over $263,75 39.60 6.62 7.45 8.28 9.11 9.93 10.76 11.59
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Net amount subject to federal personal income tax after deductions and
exemptions.
Note: The above indicated federal income tax brackets do not take into account
the effect of a reduction in the deductibility of itemized deductions for
taxpayers with adjusted gross income in excess of $117,950. The tax brackets
also do not show the effects of phase out of personal exemptions for single
filers with adjusted gross incomes in excess of $117,950 and joint filers with
adjusted gross income in excess of $176,950. The effective tax brackets and
equivalent taxable yields of such taxpayers will be higher than those indicated
above.
Yields shown are for illustration purposes only and are not meant to represent
the Fund's actual yield. No assurance can be given that the Fund will achieve
any specific tax exempt yield. While it is expected that the Portfolio will
invest principally in obligations, the interest from which is exempt from the
regular federal income tax, other income received by the Portfolio and allocated
to the Fund may be taxable. The table does not take into account state or local
taxes, if any, payable on Fund distributions. It should also be noted that the
interest earned on certain "private activity bonds" issued after August 7, 1986,
while exempt from the regular federal income tax, is treated as a tax preference
item which could subject the recipient to the federal alternative minimum tax.
The illustrations assume that the federal alternative minimum tax is not
applicable and do not take into account any tax credits that may be available.
The information set forth above is as of the date of this SAI. Subsequent tax
law changes could result in prospective or retroactive changes in the tax
brackets, tax rates, and tax equivalent yields set forth above. Investors should
consult their tax adviser for additional information.
<PAGE>
APPENDIX
DESCRIPTION OF SECURITIES RATINGS+
MOODY'S INVESTORS SERVICE, INC.
MUNICIPAL BONDS
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long term risk appear somewhat larger than the Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa: Bonds which are rated Baa are considered as medium-grade obligations (i.e.,
they are neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during other good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
or interest.
Ca: Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
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.
- ----------
+ 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.
Suspension or withdrawal may occur if new and material circumstances arise, the
effects of which preclude satisfactory analysis; if there is no longer available
reasonable up-to-date data to permit a judgment to be formed; if a bond is
called for redemption; or for other reasons.
NOTE: Moody's applies numerical modifiers, 1, 2, and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
MUNICIPAL SHORT-TERM OBLIGATIONS
RATINGS: Moody's ratings for state and municipal short-term obligations will be
designated Moody's Investment Grade or (MIG). Such rating recognizes the
differences between short term credit risk and long term risk. Factors effecting
the liquidity of the borrower and short term cyclical elements are critical in
short term ratings, while other factors of major importance in bond risk, long
term secular trends for example, may be less important over the short run.
A short term rating may also be assigned on an issue having a demand feature,
variable rate demand obligation (VRDO). Such ratings will be designated as
VMIG1, SG or if the demand feature is not rated, NR. A short term rating on
issues with demand features are differentiated by the use of the VMIG1 symbol to
reflect such characteristics as payment upon periodic demand rather than fixed
maturity dates and payment relying on external liquidity. Additionally,
investors should be alert to the fact that the source of payment may be limited
to the external liquidity with no or limited legal recourse to the issuer in the
event the demand is not met.
STANDARD & POOR'S RATINGS GROUP
INVESTMENT GRADE
AAA: Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the highest rated issues only in small degree.
A: Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB: Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibit adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay interest and repay principal for debt in this
category than in higher rated categories.
SPECULATIVE GRADE
Debt rated BB, B, CCC, CC, and C is regarded as having predominantly speculative
characteristics with respect to capacity to pay interest and repay principal. BB
indicates the least degree of speculation and C the highest. While such debt
will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major exposures to adverse conditions.
BB: Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB-rating.
B: Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB or BB-
rating.
CCC: Debt rated CCC has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The CCC rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
B or B- rating.
CC: The rating CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC debt rating.
C: The rating C is typically applied to debt subordinated to senior debt which
is assigned an actual or implied CCC- debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed, but debt service
payments are continued.
C1: The Rating C1 is reserved for income bonds on which no interest is being
paid.
D: Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The D rating also will be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.
PLUS (+) OR MINUS (-): The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
P: The letter "p" indicates that the rating is provisional. A provisional rating
assumes the successful completion of the project being financed by the debt
being rated and indicates that payment of debt service requirements is largely
or entirely dependent upon the successful and timely completion of the project.
This rating, however, while addressing credit quality subsequent to completion
of the project, makes no comment on the likelihood of, or the risk of default
upon failure of such completion. The investor should exercise his own judgment
with respect to such likelihood and risk.
L: The letter "L" indicates that the rating pertains to the principal amount of
those bonds to the extent that the underlying deposit collateral is insured by
the Federal Deposit Insurance Corp. and interest is adequately collateralized.
In the case of certificates of deposit, the letter "L" indicates that the
deposit, combined with other deposits being held in the same right and capacity,
will be honored for principal and accrued pre-default interest up to the federal
insurance limits within 30 days after closing of the insured institution or, in
the event that the deposit is assumed by a successor insured institution, upon
maturity.
NR: NR indicates no rating has been requested, that there is insufficient
information on which to base a rating, or that S&P does not rate a particular
type of obligation as a matter of policy.
MUNICIPAL NOTES
S&P note ratings reflect the liquidity concerns and market access risks unique
to notes. Notes due in 3 years or less will likely receive a note rating. Notes
maturing beyond 3 years will most likely receive a long-term debt rating. The
following criteria will be used in making that assessment:
-- Amortization schedule (the larger the final maturity relative to other
maturities the more likely it will be treated as a note).
-- Sources of payment (the more dependent the issue is on the market for its
refinancing, the more likely it will be treated as a note).
Note rating symbols are as follows:
SP-1: Strong capacity to pay principal and interest. Those issues determined
to possess very strong characteristics will be given a plus(+) designation.
SP-2: Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse financial and economic changes over the term of the
notes.
SP-3: Speculative capacity to pay principal and interest.
FITCH INVESTORS SERVICE, INC.
INVESTMENT GRADE BOND RATINGS
AAA: Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA: Bonds considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated "AAA". Because bonds rated in the "AAA" and
"AA" categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated "F-1+".
A: Bonds considered to be investment grade and of high credit quality. The
obligors ability to pay interest and repay principal is considered to be strong,
but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB: Bonds considered to be investment grade and of satisfactory credit quality.
The obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however, are
more likely to have adverse impact on these bonds, and therefore, impair timely
payment. The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.
HIGH YIELD BOND RATINGS
AAA: Bonds are considered speculative. The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified that could assist the
obligor in satisfying its debt service requirements.
B: Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue.
CCC: Bonds have certain identifiable characteristics which, if not remedied,
may lead to default. The ability to meet obligations requires an advantageous
business and economic environment.
CC: Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C: Bonds are in imminent default in payment of interest or principal.
DDD, DD, AND D: Bonds are in default on interest and/or principal payments. Such
bonds are extremely speculative and should be valued on the basis of their
ultimate recovery value in liquidation or reorganization of the obligor. "DDD"
represents the highest potential for recovery on these bonds, and "D" represents
the lowest potential for recovery.
PLUS (+) OR MINUS (-): The ratings from AA to C may be modified by the addition
of a plus or minus sign to indicate the relative position of a credit within the
rating category.
NR: Indicates that Fitch does not rate the specific issue.
CONDITIONAL: A conditional rating is premised on the successful completion of
a project or the occurrence of a specific event.
INVESTMENT GRADE SHORT-TERM RATINGS
Fitch's short-term ratings apply to debt obligations that are payable on demand
or have original maturities of generally up to three years, including commercial
paper, certificates of deposit, medium-term notes, and municipal and investment
notes.
F-1+: Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1: Very Stong Credit Quality. Issues assigned this rating reflect an assurance
of timely payment only slightly less in degree than issues rated "F-1+".
F-2: Good Credit Quality. Issues carrying this rating have a satisfactory
degree of assurance for timely payment, but the margin of safety is not as
great as the "F-1+" and "F-1" categories.
F-3: Fair Credit Quality. Issues carrying this rating have characteristics
suggesting that the degree of assurance for timely payment is adequate, however,
near-term adverse change could cause these securities to be rated below
investment grade.
* * * * * * * *
NOTES: Bonds which are unrated expose the investor to risks with respect to
capacity to pay interest or repay principal which are similar to the risks of
lower-rated speculative bonds. The Portfolio is dependent on the Investment
Adviser's judgment, analysis and experience in the evaluation of such bonds.
Investors should note that the assignment of a rating to a bond by a
rating service may not reflect the effect of recent developments on the issuer's
ability to make interest and principal payments.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EV CLASSIC NATIONAL MUNICIPALS FUND.
FEES AND EXPENSES
ADMINISTRATOR
As stated under "Investment Adviser and Administrator" Part I of this SAI,
the Administrator currently receives no compensation for providing
administrative services to the Fund.
DISTRIBUTION PLAN
During the fiscal year ended September 30, 1995, the Principal Underwriter
paid to Authorized Firms sales commissions of $267,832 on sales of shares of the
Fund. During the same period, the Fund made sales commission payments under the
Plan to the Principal Underwriter aggregating $288,714 and the Principal
Underwriter received $2,153 in contingent deferred sales charges ("CDSCs") which
were imposed on early redeeming shareholders. These sales commissions and CDSC
payments reduced Uncovered Distribution Charges under the Plan. As at September
30, 1995 the outstanding Uncovered Distribution Charges of the Principal
Underwriter calculated under the Plan amounted to approximately $4,059,000
(which amount was equivalent to 9.8% of the Fund's net assets on such day).
During the fiscal year ending September 30, 1995, the Fund made service fee
payments to the Principal Underwriter and Authorized Firms aggregating $95,762
of which $89,094 was paid to Authorized Firms and the balance was retained by
the Principal Underwriter.
PRINCIPAL UNDERWRITER
The Fund paid the Principal Underwriter $757.50 for the fiscal year ended
September 30, 1995 (being $2.50 for each repurchase transaction handled by the
Principal Underwriter).
CUSTODIAN
During the fiscal year ended September 30, 1995, the Fund paid IBT $1,798.
TRUSTEES
The fees and expenses of those Trustees of the Trust and of the Portfolio
who are not members of the Eaton Vance organization (the noninterested Trustees)
are paid by the Fund (and the other series of the Trust) and the Portfolio,
respectively. (The Trustees of the Trust and of the Portfolio who are members of
the Eaton Vance organization receive no compensation from the Trust or the
Portfolio.) During the fiscal year ended September 30, 1995, the noninterested
Trustees of the Trust and the Portfolio earned the following compensation in
their capacities as Trustees from the Fund, the Portfolio, and the funds in the
Eaton Vance Fund Complex\1/:
<TABLE>
<CAPTION>
AGGREGATE AGGREGATE TOTAL COMPENSATION
COMPENSATION COMPENSATION FROM TRUST AND
NAME FROM FUND FROM PORTFOLIO FUND COMPLEX
---- --------- -------------- ------------
<S> <C> <C> <C>
Donald R. Dwight .............................. $34 $5,840\2/ $135,000\4/
Samuel L. Hayes, III .......................... 32 5,732\3/ 150,000\5/
Norton H. Reamer .............................. 32 5,657 135,000
John L. Thorndike ............................. 32 5,800 140,000
Jack L. Treynor ............................... 35 6,058 140,000
\1/ The Eaton Vance Fund Complex consists of 211 registered investment companies or series thereof.
\2/ Includes $1,958 of deferred compensation.
\3/ Includes $1,839 of deferred compensation.
\4/ Includes $35,000 of deferred compensation.
\5/ Includes $33,750 of deferred compensation.
</TABLE>
PRINCIPAL UNDERWRITER
Under the Distribution Agreement the Principal Underwriter acts as principal
in selling shares of the Fund. The expenses of printing copies of prospectuses
used to offer shares to Authorized Firms or investors and other selling
literature and of advertising is borne by the Principal Underwriter. The fees
and expenses of qualifying and registering and maintaining qualifications and
registrations of the Fund and its shares under federal and state securities laws
is borne by the Fund. In addition, the Fund makes payments to the Principal
Underwriter pursuant to its Distribution Plan as described in the Fund's current
Prospectus; the provisions of the Fund's Distribution Plan relating to such
payments are included in the Distribution Agreement. The Distribution Agreement
is renewable annually by the Trust's Board of Trustees (including a majority of
its Trustees who are not interested persons of the Trust and who have no direct
or indirect financial interest in the operation of the Fund's Distribution Plan
or the Distribution Agreement), may be terminated on sixty days' notice either
by such Trustees or by vote of a majority of the outstanding voting securities
of the Fund or on six months' notice by the Principal Underwriter and is
automatically terminated upon assignment. The Principal Underwriter distributes
Fund shares on a "best efforts" basis under which it is required to take and pay
for only such shares as may be sold.
The Fund has authorized the Principal Underwriter to act as its agent in
repurchasing shares at the rate of $2.50 for each repurchase transaction handled
by the Principal Underwriter. The Principal Underwriter estimates that the
expenses incurred by it in acting as repurchase agent for the Fund will exceed
the amounts paid therefor by the Fund. For the amount paid by the Fund to the
Principal Underwriter for acting as repurchase agent, see "Fees and Expenses" in
this Part II.
DISTRIBUTION PLAN
The Distribution Plan (the "Plan") is described in the Prospectus and is
designed to meet the requirements of Rule 12b-1 under the 1940 Act and the NASD
Rule. The purpose of the Plan is to compensate the Principal Underwriter for its
distribution services and facilities provided to the Fund by paying the
Principal Underwriter sales commissions and a separate distribution fee in
connection with sales of Fund shares. The following supplements the discussion
of the Plan contained in the Fund's Prospectus.
The amount payable by the Fund to the Principal Underwriter pursuant to the
Plan as sales commissions and distribution fees with respect to each day will be
accrued on such day as a liability of the Fund and will accordingly reduce the
Fund's net assets upon such accrual, all in accordance with generally accepted
accounting principles. The amount payable on each day is limited to 1/365 of
.75% of the Fund's net assets on such day. The level of the Fund's net assets
changes each day and depends upon the amount of sales and redemptions of Fund
shares, the changes in the value of the investments held by the Portfolio, the
expenses of the Fund and the Portfolio accrued and allocated to the Fund on such
day, income on portfolio investments of the Portfolio accrued and allocated to
the Fund on such day, and any dividends and distributions declared on Fund
shares. The Fund does not accrue possible future payments as a liability of the
Fund or reduce the Fund's current net assets in respect of unknown amounts which
may become payable under the Plan in the future because the standards for
accrual of such a liability under accounting principles have not been satisfied.
The Plan provides that the Fund will receive all CDSCs and will make no
payments to the Principal Underwriter in respect of any day on which there are
no outstanding Uncovered Distribution Charges of the Principal Underwriter.
CDSCs and accrued amounts will be paid by the Fund to the Principal Underwriter
whenever there exist Uncovered Distribution Charges under the Fund's Plan.
Periods with a high level of sales of Fund shares accompanied by a low level
of early redemptions of Fund shares resulting in the imposition of CDSCs will
tend to increase the time during which there will exist Uncovered Distribution
Charges of the Principal Underwriter. Conversely, periods with a low level of
sales of Fund shares accompanied by a high level of early redemptions of Fund
shares resulting in the imposition of CDSCs will tend to reduce the time during
which there will exist Uncovered Distribution Charges of the Principal
Underwriter.
In calculating daily the amount of Uncovered Distribution Charges,
distribution charges will include the aggregate amount of sales commissions and
distribution fees theretofore paid plus the aggregate amount of sales
commissions and distribution fees which the Principal Underwriter is entitled to
be paid under the Plan since its inception. Payments theretofore paid or payable
under the Plan by the Fund to the Principal Underwriter and CDSCs theretofore
paid or payable to the Principal Underwriter will be subtracted from such
distribution charges; if the result of such subtraction is positive, a
distribution fee (computed at 1% over the prime rate then reported in The Wall
Street Journal) will be computed on such amount and added thereto, with the
resulting sum constituting the amount of outstanding Uncovered Distribution
Charges with respect to such day. The amount of outstanding Uncovered
Distribution Charges of the Principal Underwriter calculated on any day does not
constitute a liability recorded on the financial statements of the Fund.
The amount of Uncovered Distribution Charges of the Principal Underwriter at
any particular time depends upon various changing factors, including the level
and timing of sales of Fund shares, the nature of such sales (i.e., whether they
result from exchange transactions, reinvestments or from cash sales through
Authorized Firms), the level and timing of redemptions of Fund shares upon which
a CDSC will be imposed, the level and timing of redemptions of Fund shares upon
which no CDSC will be imposed (including redemptions involving exchanges of Fund
shares for shares of another fund in the Eaton Vance Classic Group of Funds
which result in a reduction of Uncovered Distribution Charges), changes in the
level of the net assets of the Fund, and changes in the interest rate used in
the calculation of the distribution fee under the Plan. (For shares sold prior
to January 30, 1995, Plan payments are as follows: the Principal Underwriter
pays monthly sales commissions and service fee payments to Authorized Firms
equivalent to approximately .75% and .25%, respectively, annualized of the
assets maintained in the Fund by their customers beginning at the time of sale.
No payments were made at the time of sale and there is no CDSC.)
As currently implemented by the Trustees, the Plan authorizes payments of
sales commissions, distribution fees and service fees to the Principal
Underwriter which may be equivalent, on an aggregate basis during any fiscal
year of the Fund, to 1% of the Fund's average daily net assets for such year.
For the sales commissions and service fee payments made by the Fund and the
outstanding Uncovered Distribution Charges of the Principal Underwriter, see
"Fees and Expenses -- Distribution Plan" in this Part II. The Fund believes that
the combined rate of all these payments may be higher than the rate of payments
made under distribution plans adopted by other investment companies pursuant to
Rule 12b-1. Although the Principal Underwriter will use its own funds (which may
be borrowed from banks) to pay sales commissions at the time of sale, it is
anticipated that the Eaton Vance organization will profit by reason of the
operation of the Plan through an increase in the Fund's assets (thereby
increasing the advisory fee payable to BMR by the Portfolio) resulting from sale
of Fund shares and through the amounts paid to the Principal Underwriter,
including CDSCs, pursuant to the Plan. The Eaton Vance organization may be
considered to have realized a profit under the Plan if at any point in time the
aggregate amounts theretofore received by the Principal Underwriter pursuant to
the Plan and from CDSCs have exceeded the total expenses theretofore incurred by
such organization in distributing shares of the Fund. Total expenses for this
purpose will include an allocable portion of the overhead costs of such
organization and its branch offices, which costs will include without limitation
leasing expense, depreciation of building and equipment, utilities,
communication and postage expense, compensation and benefits of personnel,
travel and promotional expense, stationery and supplies, literature and sales
aids, interest expense, data processing fees, consulting and temporary help
costs, insurance, taxes other than income taxes, legal and auditing expense and
other miscellaneous overhead items. Overhead is calculated and allocated for
such purpose by the Eaton Vance organization in a manner deemed equitable to the
Fund.
The provisions of the Plan relating to payments of sales commissions and
distribution fees to the Principal Underwriter are also included in the
Distribution Agreement between the Trust on behalf of the Fund and the Principal
Underwriter. Pursuant to Rule 12b-1, 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 Rule 12b-1 Trustees. The Plan continues in effect through
and including April 28, 1996, and shall continue in effect indefinitely
thereafter for so long as such continuance is approved at least annually by the
vote of both a majority of (i) the Trustees of the Trust who are not interested
persons of the Trust and who have no direct or indirect financial interest in
the operation of the Plan or any agreements related to the Plan (the "Rule 12b-1
Trustees") and (ii) all of the Trustees then in office, and the Distribution
Agreement contains a similar provision. The Plan and Distribution Agreement may
be terminated at any time by vote of a majority of the Rule 12b-1 Trustees or by
vote of a majority of the outstanding voting securities of the Fund. Under the
Plan, the President or a Vice President of the Trust shall provide to the
Trustees for their review, and the Trustees shall review at least quarterly, a
written report of the amount expended under the Plan and the purposes for which
such expenditures were made. The Plan may not be amended to increase materially
the payments described therein without approval of the shareholders of the Fund,
and all material amendments of the Plan must also be approved by the Trustees as
required by Rule 12b-1. So long as the Plan is in effect, the selection and
nomination of Trustees who are not interested persons of the Trust shall be
committed to the discretion of the Trustees who are not such interested persons.
The Trustees of the Trust believe that the Plan will be a significant factor
in the expected growth of the Fund's assets, and will result in increased
investment flexibility and advantages which will benefit the Fund and its
shareholders. Payments for sales commissions and distribution fees made to the
Principal Underwriter under the Plan will compensate the Principal Underwriter
for its services and expenses in distributing shares of the Fund. Service fee
payments made to the Principal Underwriter and Authorized Firms under the Plan
provide incentives to provide continuing personal services to investors and the
maintenance of shareholder accounts. By providing incentives to the Principal
Underwriter and Authorized Firms, the Plan is expected to result in the
maintenance of, and possible future growth in, the assets of the Fund. Based on
the foregoing and other relevant factors, the Trustees of the Trust have
determined that in their judgment there is a reasonable likelihood that the Plan
will benefit the Fund and its shareholders.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return on
a hypothetical investment of $1,000 in the Fund from December 19, 1985 through
September 30, 1995 and for the one- and five-year periods ended September 30,
1995. The total return for the period prior to the Fund's commencement of
operations on December 3, 1993 reflects the Portfolio's total return (or that of
its predecessor) adjusted to reflect any applicable Fund CDSC. The total return
for such prior period has not been adjusted to reflect the Fund's distribution
fees and certain other expenses. If such an adjustment were made, the
performance would be lower.
<TABLE>
<CAPTION>
Value before Value after Total Return Total Return after
deducting deducting before deducting CDSC deducting CDSC**
Investment Investment Amount of CDSC on CDSC** on -------------------------- --------------------------
Period Date Investment 9/30/95 9/30/95 Cumulative Annualized Cumulative Annualized
- -------------- ------------ ----------- --------------- --------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of the
Fund* 12/19/85 $1,000 $1,961.81 $1,961.81 96.18% 7.13% 96.18% 7.13%
5 Years
Ended
9/30/95 9/30/90 $1,000 $1,481.64 $1,481.64 48.16% 8.16% 48.16% 8.16%
1 Year
Ended
9/30/95 9/30/94 $1,000 $1,101.14 $1,091.14 10.11% 10.11% 9.11% 9.11%
- ----------
*Investment operations began on December 19, 1985.
**No CDSC is imposed on certain redemptions. See the Fund's current Prospectus.
</TABLE>
See the Tax Equivalent Yield Table in Part I for information concerning
applicable tax rates and income brackets.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As at 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: Merrill Lynch, Pierce, Fenner &
Smith, Inc., Jacksonville, FL 32246 (37.87%), 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; and June M. and Henry S. Lesh,
Trustees, June M. Lesh Trust, u/a 6/20/91, Naples, FL 33940 (8.00%). 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.
<PAGE>
[LOGO]
EATON VANCE
MUTUAL FUNDS
EV CLASSIC
NATIONAL MUNICIPALS FUND
- --------------------------------------------------------------------------------
STATEMENT OF
ADDITIONAL INFORMATION
FEBRUARY 1, 1996
EV CLASSIC
NATIONAL MUNICIPALS FUND
24 FEDERAL STREET
BOSTON, MA 02110
- -------------------------------------------------------------------------------
INVESTMENT ADVISER OF NATIONAL MUNICIPALS PORTFOLIO
Boston Management and Research, 24 Federal Street, Boston, MA 02110
ADMINISTRATOR OF EV CLASSIC NATIONAL MUNICIPALS FUND
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111
TRANSFER AGENT
First Data Investor Services Group, BOS725, P.O. Box 1559, Boston, MA 02104
(800) 262-1122
AUDITORS
Deloitte & Touche LLP, 125 Summer Street, Boston, MA 02110
C-HMSAI
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EV MARATHON NATIONAL MUNICIPALS
FUND.
FEES AND EXPENSES
INVESTMENT ADVISER
Prior to February 1, 1993 (when the Fund transferred its assets to the
Portfolio in exchange for an interest in the Portfolio), the Fund retained Eaton
Vance as its investment adviser. For the period from October 1, 1992 to February
1, 1993, the Fund paid Eaton Vance advisory fees of $2,440,157 (equivalent to
0.52% (annualized) of the Fund's average net assets for such period).
ADMINISTRATOR
As stated under "Investment Adviser and Administrator" Part I of this SAI,
the Administrator currently receives no compensation for providing
administrative services to the Fund.
DISTRIBUTION PLAN
During the fiscal year ended September 30, 1995, the Principal Underwriter
paid to Authorized Firms sales commissions of $5,229,627 on sales of shares of
the Fund. During the same period, the Fund made sales commission payments under
the Plan to the Principal Underwriter aggregating $16,159,449 and the Principal
Underwriter received $5,985,000 in contingent deferred sales charges ("CDSCs")
imposed on early redeeming shareholders. These sales commissions and CDSC
payments reduced Uncovered Distribution Charges under the Plan. As at September
30, 1995 the outstanding Uncovered Distribution Charges of the Principal
Underwriter calculated under the Plan amounted to approximately $49,681,000
(which amount was equivalent to 2.3% of the Fund's net assets on such day).
During the fiscal year ending September 30, 1995, the Fund made service fee
payments to the Principal Underwriter and Authorized Firms aggregating
$3,810,373 of which $3,785,575 was paid to Authorized Firms and the balance was
retained by the Principal Underwriter.
PRINCIPAL UNDERWRITER
The Fund paid the Principal Underwriter $16,577.50 for the fiscal year ended
September 30, 1995 (being $2.50 for each repurchase transaction handled by the
Principal Underwriter).
CUSTODIAN
During the fiscal year ended September 30, 1995, the Fund paid IBT $9,199.
TRUSTEES
The fees and expenses of those Trustees of the Trust and of the Portfolio
who are not members of the Eaton Vance organization (the noninterested Trustees)
are paid by the Fund (and the other series of the Trust) and the Portfolio,
respectively. (The Trustees of the Trust and of the Portfolio who are members of
the Eaton Vance organization receive no compensation from the Trust or the
Portfolio.) During the fiscal year ended September 30, 1995, the noninterested
Trustees of the Trust and the Portfolio earned the following compensation in
their capacities as Trustees from the Fund, the Portfolio, and the funds in the
Eaton Vance Fund Complex\1/:
<TABLE>
<CAPTION>
AGGREGATE AGGREGATE TOTAL COMPENSATION
COMPENSATION COMPENSATION FROM TRUST AND
NAME FROM FUND FROM PORTFOLIO FUND COMPLEX
---- ------------ -------------- ---------------
<S> <C> <C> <C>
Donald R. Dwight .............................. $672 $5,840\2/ $135,000\4/
Samuel L. Hayes, III .......................... 648 5,732\3/ 150,000\5/
Norton H. Reamer .............................. 633 5,657 135,000
John L. Thorndike ............................. 641 5,800 140,000
Jack L. Treynor ............................... 693 6,058 140,000
\1/ The Eaton Vance Fund Complex consists of 211 registered investment companies or series thereof.
\2/ Includes $1,958 of deferred compensation.
\3/ Includes $1,839 of deferred compensation.
\4/ Includes $35,000 of deferred compensation.
\5/ Includes $33,750 of deferred compensation.
</TABLE>
PRINCIPAL UNDERWRITER
Under the Distribution Agreement the Principal Underwriter acts as principal
in selling shares of the Fund. The expenses of printing copies of prospectuses
used to offer shares to Authorized Firms or investors and other selling
literature and of advertising is borne by the Principal Underwriter. The fees
and expenses of qualifying and registering and maintaining qualifications and
registrations of the Fund and its shares under Federal and state securities laws
is borne by the Fund. In addition, the Fund makes payments to the Principal
Underwriter pursuant to its Distribution Plan as described in the Fund's current
Prospectus; the provisions of the Fund's Distribution Plan relating to such
payments are included in the Distribution Agreement. The Distribution Agreement
is renewable annually by the Trust's Board of Trustees (including a majority of
its Trustees who are not interested persons of the Trust and who have no direct
or indirect financial interest in the operation of the Fund's Distribution Plan
or the Distribution Agreement), may be terminated on sixty days' notice either
by such Trustees or by vote of a majority of the outstanding voting securities
of the Fund or on six months' notice by the Principal Underwriter and is
automatically terminated upon assignment. The Principal Underwriter distributes
Fund shares on a "best efforts" basis under which it is required to take and pay
for only such shares as may be sold.
The Fund has authorized the Principal Underwriter to act as its agent in
repurchasing shares at the rate of $2.50 for each repurchase transaction handled
by the Principal Underwriter. The Principal Underwriter estimates that the
expenses incurred by it in acting as repurchase agent for the Fund will exceed
the amounts paid therefor by the Fund. For the amount paid by the Fund to the
Principal Underwriter for acting as repurchase agent, see "Fees and Expenses" in
this Part II.
DISTRIBUTION PLAN
The Distribution Plan (the "Plan") is described in the Prospectus and is
designed to meet the requirements of Rule 12b-1 under the 1940 Act and the NASD
Rule. The purpose of the Plan is to compensate the Principal Underwriter for its
distribution services and facilities provided to the Fund by paying the
Principal Underwriter sales commissions and a separate distribution fee in
connection with sales of Fund shares. The following supplements the discussion
of the Plan contained in the Fund's Prospectus.
The amount payable to the Principal Underwriter pursuant to the Plan as
sales commissions and distribution fees with respect to each day will be accrued
on such day as a liability of the Fund and will accordingly reduce the Fund's
net assets upon such accrual, all in accordance with generally accepted
accounting principles. The amount payable on each day is limited to 1/365 of
.75% of the Fund's net assets on such day. The level of the Fund's net assets
changes each day and depends upon the amount of sales and redemptions of Fund
shares, the changes in the value of the investments held by the Portfolio, the
expenses of the Fund and the Portfolio accrued and allocated to the Fund on such
day, income on portfolio investments of the Portfolio accrued and allocated to
the Fund on such day, and any dividends and distributions declared on Fund
shares. The Fund does not accrue possible future payments as a liability of the
Fund or reduce the Fund's current net assets in respect of unknown amounts which
may become payable under the Plan in the future because the standards for
accrual of such a liability under accounting principles have not been satisfied.
The Plan provides that the Fund will receive all CDSCs and will make no
payments to the Principal Underwriter in respect of any day on which there are
no outstanding Uncovered Distribution Charges of the Principal Underwriter.
CDSCs and accrued amounts will be paid by the Fund to the Principal Underwriter
whenever there exist Uncovered Distribution Charges under the Fund's Plan.
Periods with a high level of sales of Fund shares accompanied by a low level
of early redemptions of Fund shares resulting in the imposition of CDSCs will
tend to increase the time during which there will exist Uncovered Distribution
Charges of the Principal Underwriter. Conversely, periods with a low level of
sales of Fund shares accompanied by a high level of early redemptions of Fund
shares resulting in the imposition of CDSCs will tend to reduce the time during
which there will exist Uncovered Distribution Charges of the Principal
Underwriter.
In calculating daily the amount of Uncovered Distribution Charges,
distribution charges will include the aggregate amount of sales commissions and
distribution fees theretofore paid plus the aggregate amount of sales
commissions and distribution fees which the Principal Underwriter is entitled to
be paid under the Plan since its inception. Payments theretofore paid or payable
under the Plan by the Fund to the Principal Underwriter and CDSCs theretofore
paid or payable to the Principal Underwriter will be subtracted from such
distribution charges; if the result of such subtraction is positive, a
distribution fee (computed at 1% over the prime rate then reported in The Wall
Street Journal) will be computed on such amount and added thereto, with the
resulting sum constituting the amount of outstanding Uncovered Distribution
Charges with respect to such day. The amount of outstanding Uncovered
Distribution Charges of the Principal Underwriter calculated on any day does not
constitute a liability recorded on the financial statements of the Fund.
The amount of Uncovered Distribution Charges of the Principal Underwriter at
any particular time depends upon various changing factors, including the level
and timing of sales of Fund shares, the nature of such sales (i.e., whether they
result from exchange transactions, reinvestments or from cash sales through
Authorized Firms), the level and timing of redemptions of Fund shares upon which
a CDSC will be imposed, the level and timing of redemptions of Fund shares upon
which no CDSC will be imposed (including redemptions involving exchanges of Fund
shares for shares of another fund in the Eaton Vance Marathon Group of Funds
which result in a reduction of Uncovered Distribution Charges), changes in the
level of the net assets of the Fund, and changes in the interest rate used in
the calculation of the distribution fee under the Plan.
As currently implemented by the Trustees, the Plan authorizes payments of
sales commissions and distribution fees to the Principal Underwriter and service
fees to the Principal Underwriter and Authorized Firms which may be equivalent,
on an aggregate basis during any fiscal year of the Fund, to 1% of the Fund's
average daily net assets for such year. For the sales commissions and service
fee payments made by the Fund and the outstanding Uncovered Distribution Charges
of the Principal Underwriter, see "Fees and Expenses -- Distribution Plan" in
this Part II. The Fund believes that the combined rate of all these payments may
be higher than the rate of payments made under distribution plans adopted by
other investment companies pursuant to Rule 12b-1. Although the Principal
Underwriter will use its own funds (which may be borrowed from banks) to pay
sales commissions at the time of sale, it is anticipated that the Eaton Vance
organization will profit by reason of the operation of the Plan through an
increase in the Fund's assets (thereby increasing the advisory fee payable to
BMR by the Portfolio) resulting from sale of Fund shares and through the amounts
paid to the Principal Underwriter, including CDSCs, pursuant to the Plan. The
Eaton Vance organization may be considered to have realized a profit under the
Plan if at any point in time the aggregate amounts theretofore received by the
Principal Underwriter pursuant to the Plan and from CDSCs have exceeded the
total expenses theretofore incurred by such organization in distributing shares
of the Fund. Total expenses for this purpose will include an allocable portion
of the overhead costs of such organization and its branch offices, which costs
will include without limitation leasing expense, depreciation of building and
equipment, utilities, communication and postage expense, compensation and
benefits of personnel, travel and promotional expense, stationery and supplies,
literature and sales aids, interest expense, data processing fees, consulting
and temporary help costs, insurance, taxes other than income taxes, legal and
auditing expense and other miscellaneous overhead items. Overhead is calculated
and allocated for such purpose by the Eaton Vance organization in a manner
deemed equitable to the Fund.
The Plan continues in effect through and including April 28, 1996, and shall
continue in effect indefinitely thereafter for so long as such continuance is
approved at least annually by the vote of both a majority of (i) the Trustees of
the Trust who are not interested persons of the Trust and who have no direct or
indirect financial interest in the operation of the Plan or any agreements
related to the Plan (the "Rule 12b-1 Trustees") and (ii) all of the Trustees
then in office, and the Distribution Agreement contains a similar provision. The
Plan and Distribution Agreement may be terminated at any time by vote of a
majority of the Rule 12b-1 Trustees or by a vote of a majority of the
outstanding voting securities of the Fund. The provisions of the Plan relating
to payments of sales commissions and distribution fees to the Principal
Underwriter are also included in the Distribution Agreement between the Trust on
behalf of the Fund and the Principal Underwriter. Pursuant to Rule 12b-1, 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 Rule 12b-1 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 therein without approval of the shareholders of the Fund,
and all material amendments of the Plan must also be approved by the Trustees as
required by Rule 12b-1. So long as the Plan is in effect, the selection and
nomination of 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 believe that the Plan will be a significant factor in the
expected growth of the Fund's assets, and will result in increased investment
flexibility and advantages which will benefit the Fund and its shareholders.
Payments for sales commissions and distribution fees made to the Principal
Underwriter under the Plan will compensate the Principal Underwriter for its
services and expenses in distributing shares of the Fund. Service fee payments
made to the Principal Underwriter and Authorized Firms under the Plan provide
incentives to provide continuing personal services to investors and the
maintenance of shareholder accounts. By providing incentives to the Principal
Underwriter and Authorized Firms, the Plan is expected to result in the
maintenance of, and possible future growth in, the assets of the Fund. Based on
the foregoing and other relevant factors, the Trustees have determined that in
their judgment there is a reasonable likelihood that the Plan will benefit the
Fund and its shareholders.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average total return on a
hypothetical investment of $1,000 in the Fund covering the life of the Fund from
December 19, 1985 through September 30, 1995 and for the one- and five-year
periods ended September 30, 1995.
<TABLE>
<CAPTION>
VALUE OF INVEST- VALUE OF INVEST-
MENT BEFORE MENT AFTER TOTAL RETURN BEFORE TOTAL RETURN AFTER
DEDUCTING THE DEDUCTING THE DEDUCTING THE CDSC DEDUCTING THE CDSC**
INVESTMENT INVESTMENT AMOUNT OF CDSC ON CDSC** ON -------------------------- --------------------------
PERIOD DATE INVESTMENT 9/30/95 9/30/95 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------- ------------ ----------- --------------- --------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of the
Fund* 12/19/85 $1,000 $1,991.92 $1,991.92 99.19% 7.29% 99.19% 7.29%
5 Years
Ended
9/30/95 9/30/90 $1,000 $1,504.43 $1,484.43 50.44% 8.49% 48.44% 8.20%
1 Year
Ended
9/30/95 9/30/94 $1,000 $1,106.45 $1,056.45 10.64% 10.64% 5.64% 5.64%
- ----------
*Investment operations began on December 19, 1985.
**No CDSC is imposed on certain redemptions. See the Fund's current Prospectus.
</TABLE>
See the Tax Equivalent Yield Table in Part I for information concerning
applicable tax rates and income brackets.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As at 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
32246 was the record owner of approximately 25.39% 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.
<PAGE>
[LOGO]
EV MARATHON
NATIONAL
MUNICIPALS FUND
STATEMENT OF
ADDITIONAL INFORMATION
FEBRUARY 1, 1996
EV MARATHON
NATIONAL MUNICIPALS FUND
24 FEDERAL STREET
BOSTON, MA 02110
- -------------------------------------------------------------------------------
INVESTMENT ADVISER OF NATIONAL MUNICIPALS PORTFOLIO
Boston Management and Research, 24 Federal Street, Boston, MA 02110
ADMINISTRATOR OF EV MARATHON NATIONAL MUNICIPALS FUND
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111
TRANSFER AGENT
First Data Investor Services Group, BOS725, P.O. Box 1559, Boston, MA 02104
(800) 262-1122
AUDITORS
Deloitte & Touche LLP, 125 Summer Street, Boston, MA 02110
H-HMSAI
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EV TRADITIONAL NATIONAL MUNICIPALS
FUND.
FEES AND EXPENSES
ADMINISTRATOR
As stated under "Investment Adviser and Administrator" Part I of this
Statement of Additional Information, the Administrator receives no
compensation for providing administrative services to the Fund. For the period
from the start of business, April 5, 1994, to the fiscal year ended September
30, 1994 and for the fiscal year ended September 30, 1995, $10,747 and
$63,405, respectively, of the Fund's expenses were allocated to the
Administrator.
SERVICE PLAN
During the fiscal year ended September 30, 1995, the Fund made no service
fee payments under the Plan. The Fund commenced accruing service fee payments
during the quarter ending June 30, 1995.
PRINCIPAL UNDERWRITER
The total sales charges for sale of shares of the Fund for the fiscal year
ended September 30, 1995 was $562,644, all of which was received by Authorized
Firms.
For the fiscal year ended September 30, 1995, the Fund paid the Principal
Underwriter $130.00 for repurchase transactions handled by the Principal
Underwriter (being $2.50 for each such transaction).
CUSTODIAN
For the fiscal year ended September 30, 1995, the Fund paid IBT $1,288.
TRUSTEES
The fees and expenses of those Trustees of the Trust and of the Portfolio
who are not members of the Eaton Vance organization (the noninterested
Trustees) are paid by the Fund (and the other series of the Trust) and the
Portfolio, respectively. (The Trustees of the Trust and of the Portfolio who
are members of the Eaton Vance organization receive no compensation from the
Trust or the Portfolio.) During the fiscal year ended September 30, 1995, the
noninterested Trustees of the Trust and the Portfolio earned the following
compensation in their capacities as Trustees from the Fund, the Portfolio, and
the funds in the Eaton Vance Fund Complex\1/:
<TABLE>
<CAPTION>
AGGREGATE AGGREGATE TOTAL COMPENSATION
COMPENSATION COMPENSATION FROM TRUST AND
NAME FROM FUND FROM PORTFOLIO FUND COMPLEX
---- ----------- -------------- ------------
<S> <C> <C> <C>
Donald R. Dwight .............................. $26 $5,840\2/ $135,000\4/
Samuel L. Hayes, III .......................... 24 5,732\3/ 150,000\5/
Norton H. Reamer .............................. 24 5,657 135,000
John L. Thorndike ............................. 24 5,800 140,000
Jack L. Treynor ............................... 26 6,058 140,000
\1/ The Eaton Vance Fund Complex consists of 211 registered investment companies or series thereof.
\2/ Includes $1,958 of deferred compensation.
\3/ Includes $1,839 of deferred compensation.
\4/ Includes $35,000 of deferred compensation.
\5/ Includes $33,750 of deferred compensation.
</TABLE>
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 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 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. Corfirmation of the order is
subject to such verification. The Right of Accumulation privilege may be
amended or terminated at any time as to purchases occurring thereafter.
PRINCIPAL UNDERWRITER
Shares of 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. 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 or her spouse and their children
under the age of twenty-one, purchasing shares for his or their own account;
and (ii) a trustee or other fiduciary purchasing shares for a single trust
estate or a single fiduciary account.
The table is also presently applicable to (1) purchases of Fund shares,
alone or in combination with purchases of any of the other funds offered by
the Principal Underwriter through one dealer aggregating $100,000 or more made
by any of the persons enumerated above within a thirteen-month period starting
with first purchase pursuant to a written Statement of Intention, in the form
provided by the Principal Underwriter, which includes provisions for a price
adjustment depending upon the amount actually purchased within such period (a
purchase not made pursuant to such Statement may be included thereunder if the
Statement is filed within 90 days of such purchase); or (2) purchases of 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 certain Authorized Firms and to such persons'
spouses and children under the age of 21 and their beneficial accounts.
The Trust reserves the right to suspend or limit the offering of shares of
the Fund to the public at any time.
The Principal Underwriter acts as principal in selling shares of the Fund
under the distribution agreement with the Trust on behalf of the Fund. The
expenses of printing copies of prospectuses used to offer shares to Authorized
Firms or investors and other selling literature and of advertising are borne
by the Principal Underwriter. The fees and expenses of qualifying and
registering and maintaining qualifications and registrations of the Fund and
its shares under federal and state securities laws are borne by the Fund. The
distribution agreement is renewable annually by the Board of Trustees of the
Trust (including a majority of its Trustees who are not interested persons of
the Principal Underwriter or the Trust), may be terminated on six months'
notice by either party, and is automatically terminated upon assignment. The
Principal Underwriter distributes Fund shares on a "best efforts" basis under
which it is required to take and pay for only such shares as may be sold. 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. See "Fees and Expenses" for the sales charge paid
to the Principal Underwriter and Authorized Firms.
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.
SERVICE PLAN
The Trust on behalf of the Fund has adopted a Service Plan (the "Plan")
designed to meet the service fee requirements of the revised sales charge rule
of the National Association of Securities Dealers, Inc. Pursuant to such Rule,
the Plan has been approved by the independent Trustees of the Trust, who have
no direct or indirect financial interest in the Plan and by all of the
Trustees of the Trust on behalf of the Fund. The Plan amends and replaces the
Trust's original distribution plan which was approved by the Fund's
shareholders. (Management believes service fee payments are not distribution
expenses governed by the Rule, but has chosen to have the Plan approved as if
the Rule were applicable.)
The Plan remains in effect through April 28, 1996, and from year to year
thereafter, provided such continuance is approved by a vote of the Board of
Trustees and by both a majority of (i) those Trustees who are not interested
persons of the Trust and who have no direct or indirect financial interest in
the operation of the Plan or any agreements related to it (the "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 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 in the manner
described above. 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.
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. 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 noninterested
Trustees. The Trustees have determined that in their judgment there is a
reasonable likelihood that the Plan will benefit the Fund and its
shareholders.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return
on a hypothetical investment of $1,000 in the Fund from December 19, 1985
through September 30, 1995 and for the one- and five-year periods ended
September 30, 1995. The total return for the period prior to the Fund's
commencement of operations on April 5, 1994 reflects the Portfolio's total
return (or that of its predecessor) adjusted to reflect any applicable Fund
sales charge. The total return for such prior period has not been adjusted to
reflect the Fund's service fees and certain other expenses.
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT
TOTAL RETURN TOTAL RETURN
VALUE OF VALUE OF EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
INVESTMENT INVESTMENT INITIAL INVESTMENT ------------------------------ ------------------------------
---------- ---------- INVESTMENT* ON 9/30/95 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
PERIOD DATE ----------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of
the Fund** 12/19/85 $962.44 $1,944.06 101.99% 7.45% 94.41% 7.03%
5 Years
Ended
9/30/95** 9/30/90 $962.38 $1,468.18 52.55% 8.80% 46.82% 7.97%
1 Year
Ended
9/30/95** 9/30/94 $962.46 $1,078.43 12.05% 12.05% 7.84% 7.84%
</TABLE>
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 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.
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 32246 was the record owner of approximately 17.78% 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.
<PAGE>
[LOGO]
EATON VANCE
MUTUAL FUNDS
EV TRADITIONAL
NATIONAL
MUNICIPALS FUND
STATEMENT OF
ADDITIONAL INFORMATION
FEBRUARY 1, 1996
EV TRADITIONAL NATIONAL
MUNICIPAL FUND
24 FEDERAL STREET
BOSTON, MA 02110
- -------------------------------------------------------------------------------
INVESTMENT ADVISER OF NATIONAL MUNICIPALS PORTFOLIO
Boston Management and Research, 24 Federal Street, Boston, MA 02110
ADMINISTRATOR OF EV TRADITIONAL NATIONAL MUNICIPALS FUND
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111
TRANSFER AGENT
First Data Investor Services Group, BOS725, P.O. Box 1559, Boston, MA 02104
(800) 262-1122
AUDITORS
Deloitte & Touche LLP, 125 Summer Street, Boston, MA 02110
T-HMSAI
<PAGE>
PART C
OTHER INFORMATION
ITEM 24: FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS
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 SEPTEMBER 30, 1995:
EV Classic National Municipals Fund (start of business December 3,
1993)
EV Marathon National Municipals Fund (start of business December
19, 1985)
EV Traditional National Municipals Fund (start of business April
5, 1994)
INCLUDED IN PART B:
INCORPORATED BY REFERENCE TO THE ANNUAL REPORTS FOR THE FUNDS, EACH
DATED SEPTEMBER 30, 1995, FILED ELECTRONICALLY PURSUANT TO SECTION
30(B)(2) OF THE INVESTMENT COMPANY ACT OF 1940 ARE THE FOLLOWING:
For:
EV Classic National Municipals Fund
(Accession No. 0000950156-95-000812)
EV Marathon National Municipals Fund
(Accession No. 0000950156-95-000813)
EV Traditional National Municipals Fund
(Accession No. 0000950156-95-000814)
The Financial Statements for the above-referenced Funds for the
time periods set forth in the Funds' Annual Reports dated
September 30, 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
INCORPORATED BY REFERENCE TO THE ANNUAL REPORT FOR THE NATIONAL
MUNICIPALS FUNDS, DATED SEPTEMBER 30, 1995, FILED ELECTRONICALLY
PURSUANT TO SECTION 30(B)(2) OF THE INVESTMENT COMPANY ACT OF 1940,
ARE THE FOLLOWING FINANCIAL STATEMENTS FOR THE NATIONAL MUNICIPALS
PORTFOLIO:
Portfolio of Investments
Statement of Assets and Liabilities
Statement of Operations
Statements of Changes in Net Assets
Supplementary Data
Notes to Financial Statements
Independent Auditors' Report
(b) EXHIBITS:
(1)(a) Amended and Restated Declaration of Trust of Eaton Vance
Municipals Trust dated January 11, 1993, filed as Exhibit
(1)(a) to Post-Effective Amendment No. 55 and incorporated
herein by reference.
(b) Amendment and Restatement of Establishment and Designation
of Series dated 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.
(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.
(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)(a) Consent of Independent Certified Public Accountants for
EV Classic National Municipals Fund filed herewith.
(b) Consent of Independent Certified Public Accountants for EV
Marathon National Municipals Fund filed herewith.
(c) Consent of Independent Certified Public Accountants for EV
Traditional National 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.
(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.
(16) Schedules for Computation of Performance Quotations filed
herewith.
(17)(a) Power of Attorney for Eaton Vance Municipals Trust dated
December 29, 1993 filed as Exhibit (17)(a) to Post-Effective
Amendment No. 55 and incorporated herein by reference.
(b) Power of Attorney for Alabama Tax Free Portfolio, Arizona
Tax Free Portfolio, Arkansas Tax Free Portfolio, Colorado
Tax Free Portfolio, Connecticut Tax Free Portfolio, Florida
Tax Free Portfolio, Georgia Tax Free Portfolio, Kentucky Tax
Free Portfolio, Louisiana Tax Free Portfolio, Maryland Tax
Free Portfolio, Massachusetts Tax Free Portfolio, Michigan
Tax Free Portfolio, Minnesota Tax Free Portfolio,
Mississippi Tax Free Portfolio, Missouri Tax Free Portfolio,
National Municipals Portfolio, New Jersey Tax Free
Portrfolio, New York Tax Free Portfolio, North Carolina Tax
Free Portfolio, Ohio Tax Free Portfolio, Oregon Tax Free
Portfolio, Pennsylvania Tax Free Portfolio, Rhode Island Tax
Free Portfolio, South Carolina Tax Free Portfolio, Tennessee
Tax Free Portfolio, Texas Tax Free Portfolio, Virginia Tax
Free Portfolio and West Virginia Tax Free Portfolio dated
December 29, 1993 filed as Exhibit (17)(b) to Post-Effective
Amendment No. 55 and incorporated herein by reference.
(c) Power of Attorney for California Tax Free Portfolio dated
June 19, 1995 filed as Exhibit (17)(c) to Post-Effective
Amendment No. 55 and incorporated herein by reference.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not applicable
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
(1) (2)
TITLE OF CLASS NUMBER OF RECORD HOLDERS
Shares of beneficial interest as of 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.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Registrant's principal underwriter, Eaton Vance Distributors, Inc., a
wholly-owned subsidiary of Eaton Vance Management, is the principal
underwriter for each of the mutual funds named below:
<TABLE>
<CAPTION>
<S> <C>
EV Classic Alabama Municipals Fund EV Classic Michigan Limited Maturity
EV Classic Arizona Municipals Fund Municipals Fund
EV Classic Arkansas Municipals Fund EV Classic Michigan Municipals Fund
EV Classic California Limited Maturity EV Classic Minnesota Municipals Fund
Municipals Fund EV Classic Mississippi Municipals Fund
EV Classic California Municipals Fund EV Classic Missouri Municipals Fund
EV Classic Colorado Municipals Fund EV Classic National Limited Maturity
EV Classic Connecticut Limited Maturity Municipals Fund
Municipals Fund EV Classic National Municipals Fund
EV Classic Connecticut Municipals Fund EV Classic New Jersey Limited Maturity
EV Classic Florida Insured Municipals Fund Municipals Fund
EV Classic Florida Limited Maturity EV Classic New Jersey Municipals Fund
Municipals Fund EV Classic New York Limited Maturity
EV Classic Florida Municipals Fund Municipals Fund
EV Classic Georgia Municipals Fund EV Classic New York Municipals Fund
EV Classic Government Obligations Fund EV Classic North Carolina Municipals Fund
EV Classic Greater China Growth Fund EV Classic Ohio Limited Maturity Municipals Fund
EV Classic Growth Fund EV Classic Ohio Municipals Fund
EV Classic Hawaii Municipals Fund EV Classic Oregon Municipals Fund
EV Classic High Income Fund EV Classic Pennsylvania Limited Maturity
EV Classic Information Age Fund Municipals Fund
EV Classic Investors Fund EV Classic Pennsylvania Municipals Fund
EV Classic Kansas Municipals Fund EV Classic Rhode Island Municipals Fund
EV Classic Kentucky Municipals Fund EV Classic Senior Floating-Rate Fund
EV Classic Louisiana Municipals Fund EV Classic Strategic Income Fund
EV Classic Maryland Municipals Fund EV Classic South Carolina Municipals Fund
EV Classic Massachusetts Limited Maturity EV Classic Special Equities Fund
Municipals Fund EV Classic Stock Fund
EV Classic Massachusetts Municipals Fund EV Classic Tennessee Municipals Fund
<PAGE>
EV Classic Texas Municipals Fund EV Marathon North Carolina Municipals Fund
EV Classic Total Return Fund EV Marathon Ohio Limited Maturity
EV Classic Virginia Municipals Fund Municipals Fund
EV Classic West Virginia Municipals Fund EV Marathon Ohio Municipals Fund
EV Marathon Alabama Municipals Fund EV Marathon Oregon Municipals Fund
EV Marathon Arizona Limited Maturity EV Marathon Pennsylvania Limited Maturity
Municipals Fund Municipals Fund
EV Marathon Arizona Municipals Fund EV Marathon Pennsylvania Municipals Fund
EV Marathon Arkansas Municipals Fund EV Marathon Rhode Island Municipals Fund
EV Marathon California Limited Maturity EV Marathon Strategic Income Fund
Municipals Fund EV Marathon South Carolina Municipals Fund
EV Marathon California Municipals Fund EV Marathon Special Equities Fund
EV Marathon Colorado Municipals Fund EV Marathon Stock Fund
EV Marathon Connecticut Limited Maturity EV Marathon Tennessee Municipals Fund
Municipals Fund EV Marathon Texas Municipals Fund
EV Marathon Connecticut Municipals Fund EV Marathon Total Return Fund
EV Marathon Emerging Markets Fund EV Marathon Virginia Limited Maturity
EV Marathon Florida Insured Municipals Fund Tax Free Fund
EV Marathon Florida Limited Maturity EV Marathon Virginia Municipals Fund
Municipals Fund EV Marathon West Virginia Municipals Fund
EV Marathon Florida Municipals Fund EV Traditional California Municipals Fund
EV Marathon Georgia Municipals Fund EV Traditional Connecticut Municipals Fund
EV Marathon Gold & Natural Resources Fund EV Traditional Emerging Markets Fund
EV Marathon Government Obligations Fund EV Traditional Florida Insured Municipals Fund
EV Marathon Greater China Growth Fund EV Traditional Florida Limited Maturity
EV Marathon Greater India Fund Municipals Fund
EV Marathon Growth Fund EV Traditional Florida Municipals Fund
EV Marathon Hawaii Municipals Fund EV Traditional Government Obligations Fund
EV Marathon High Income Fund EV Traditional Greater China Growth Fund
EV Marathon High Yield Municipals Fund EV Traditional Greater India Fund
EV Marathon Information Age Fund EV Traditional Growth Fund
EV Marathon Investors Fund EV Traditional High Yield Municipals Fund
EV Marathon Kansas Municipals Fund Eaton Vance Income Fund of Boston
EV Marathon Kentucky Municipals Fund EV Traditional Information Age Fund
EV Marathon Louisiana Municipals Fund EV Traditional Investors Fund
EV Marathon Maryland Municipals Fund Eaton Vance Municipal Bond Fund L.P.
EV Marathon Massachusetts Limited Maturity EV Traditional National Limited Maturity
Municipals Fund Municipals Fund
EV Marathon Massachusetts Municipals Fund EV Traditional National Municipals Fund
EV Marathon Michigan Limited Maturity EV Traditional New Jersey Municipals Fund
Municipals Fund EV Traditional New York Limited Maturity
EV Marathon Michigan Municipals Fund Municipals Fund
EV Marathon Minnesota Municipals Fund EV Traditional New York Municipals Fund
EV Marathon Mississippi Municipals Fund EV Traditional Pennsylvania Municipals Fund
EV Marathon Missouri Municipals Fund EV Traditional Special Equities Fund
EV Marathon National Limited Maturity EV Traditional Stock Fund
Municipals Fund EV Traditional Total Return Fund
EV Marathon National Municipals Fund Eaton Vance Cash Management Fund
EV Marathon New Jersey Limited Maturity Eaton Vance Liquid Assets Fund
Municipals Fund Eaton Vance Money Market Fund
EV Marathon New Jersey Municipals Fund Eaton Vance Prime Rate Reserves
EV Marathon New York Limited Maturity Eaton Vance Short-Term Treasury Fund
Municipals Fund Eaton Vance Tax Free Reserves
EV Marathon New York Municipals Fund Massachusetts Municipal Bond Portfolio
EV Marathon North Carolina Limited Maturity
Tax Free Fund
</TABLE>
<TABLE>
<CAPTION>
(b)
(1) (2) (3)
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICE
BUSINESS ADDRESS WITH PRINCIPAL UNDERWRITER WITH REGISTRANT
---------------- -------------------------- ---------------------
<S> <C> <C>
James B. Hawkes* Vice President and Director Vice President and
Trustee
William M. Steul* Vice President and Director None
Wharton P. Whitaker* President and Director None
Chris Berg Vice President None
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
</TABLE>
(c) Not applicable
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All applicable accounts, books and documents required to be maintained by
the Registrant by Section 31(a) of the Investment Company Act of 1940 and the
Rules promulgated thereunder are in the possession and custody of the
Registrant's custodian, Investors Bank & Trust Company, 89 South Street, Boston,
MA 02111 and its transfer agent, First Data Investor Services Group, 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 certifies that it meets all of
the requirements for effectiveness of this Amendment to the Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this Amendment to its Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized in the City of Boston, and the
Commonwealth of Massachusetts, on the 26th 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 26, 1996
- -------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and Accounting
/s/JAMES L. O'CONNOR Officer January 26, 1996
- -------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee January 26, 1996
- -------------------------------
DONALD R. DWIGHT
/s/JAMES B. HAWKES Trustee January 26, 1996
- -------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee January 26, 1996
- -------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee January 26, 1996
- -------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee January 26, 1996
- -------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee January 26, 1996
- -------------------------------
JACK L. TREYNOR
*By: /s/ H. DAY BRIGHAM, JR.
--------------------------
H. DAY BRIGHAM, JR.
As attorney-in-fact
<PAGE>
SIGNATURES
National Municipals Portfolio has duly caused this Amendment to the
Registration Statement on Form N-1A of Eaton Vance Municipals Trust (File No.
33-572) to be signed on its behalf by the undersigned, thereunto duly authorized
in the City of Boston and the Commonwealth of Massachusetts on the 26th day of
January, 1996.
NATIONAL MUNICIPALS PORTFOLIO
By /s/ THOMAS J. FETTER
-----------------------------------
THOMAS J. FETTER, President
This Amendment to the Registration Statement on Form N-1A of Eaton Vance
Municipals Trust (File No. 33-572) has been signed below by the following
persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
President, (Chief
/s/THOMAS J. FETTER Executive Officer) January 26, 1996
- -------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and Accounting
/s/JAMES L. O'CONNOR Officer January 26, 1996
- ------------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee January 26, 1996
- ------------------------------------
DONALD R. DWIGHT
/s/JAMES B. HAWKES Trustee January 26, 1996
- ------------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee January 26, 1996
- ------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee January 26, 1996
- ------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee January 26, 1996
- ------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee January 26, 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
- ----------- ----------- -------------
(11)(a) Consent of Independent Certified Public
Accountants for EV Classic
National Municipals Fund.
(b) Consent of Independent Certified Public
Accountants for EV Marathon
National Municipals Fund.
(c) Consent of Independent Certified Public
Accountants for EV Traditional
National Municipals Fund.
(16) Schedules for Computation of Performance Quotations.
<PAGE>
EXHIBIT (11)(A)
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 59 to the
Registration Statement of Eaton Vance Municipals Trust (1933 Act File
No. 33-572) on behalf of EV Classic National Municipals Fund of our report
dated October 27, 1995 relating to EV Classic National Municipals Fund, and of
our report dated October 27, 1995 relating to National Municipals Portfolio,
which reports are included in the Annual Report to Shareholders for the year
ended September 30, 1995 which is incorporated by reference in the Statement of
Additional Information.
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 26, 1996
Boston, Massachusetts
<PAGE>
EXHIBIT (11)(B)
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 59 to the
Registration Statement of Eaton Vance Municipals Trust (1933 Act File
No. 33- 572) on behalf of EV Marathon National Municipals Fund of our report
dated October 27, 1995 relating to EV Marathon National Municipals Fund, and of
our report dated October 27, 1995 relating to National Municipals Portfolio,
which reports are included in the Annual Report to Shareholders for the year
ended September 30, 1995 which is incorporated by reference in the Statement of
Additional Information.
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 26, 1996
Boston, Massachusetts
EXHIBIT (11)(C)
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 59 to the
Registration Statement of Eaton Vance Municipals Trust (1933 Act File
No. 33- 572) on behalf of EV Traditional National Municipals Fund of our report
dated October 27, 1995 relating to EV Traditional National Municipals Fund, and
of our report dated October 27, 1995 relating to National Municipals Portfolio,
which reports are included in the Annual Report to Shareholders for the year
ended September 30, 1995 which is incorporated by reference in the Statement of
Additional Information.
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 26, 1996
Boston, Massachusetts
<PAGE>
<TABLE>
EXHIBIT 99.16
INVESTMENT PERFORMANCE -- EV CLASSIC NATIONAL MUNICIPALS FUND
The table below indicates the total return (capital changes plus reinvestment of all distributions) on a hypothetical investment of
$1,000 in the Fund covering the period from December 19, 1985 through September 30, 1995 and for the 1 and 5 year periods ended
September 30, 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.
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC BEFORE DEDUCTING CDSC AFTER DEDUCTING CDSC
PERIOD DATE ON 09/30/95 ON 09/30/95 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 12/19/85 $1,961.81 $1,961.81 96.18% 7.13% 96.18% 7.13%
5 YEARS ENDED
09/30/95 09/30/90 $1,481.64 $1,481.64 48.16% 8.16% 48.16% 8.16%
1 YEAR ENDED
09/30/95 09/30/94 $1,101.14 $1,091.14 10.11% 10.11% 9.11% 9.11%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC *
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC **
P = an initial investment of $1,000
* The average annual total return not including the CDSC is calculated based on the ending investment value
before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based on the ending investment value before
deducting the CDSC.
CALCULATION OF DISTRIBUTION RATE AND EFFECTIVE DISTRIBUTION RATE
The distribution rate as of 09/30/95 was 5.77% and was calculated by annualizing the most recent dividend
distribution ($0.045608223) and dividing the result by the current maximum offering price ($9.31).
The effective distribution rate as of 09/30/95 was 5.92% 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
</TABLE>
<PAGE>
EXHIBIT 16
EV CLASSIC NATIONAL MUNICIPALS FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 9/30/95:
Interest Income Earned: $230,816
Plus Dividend Income Earned:
---------
Equal Gross Income: $230,816
Minus Expenses: $61,530
---------
Equal Net Investment Income: $169,286
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 4,366,611
---------
Equal Net Investment Income Earned Per Share: $0.0388
Net Asset Value Per Share 9/30/95: $9.31
30 Day Yield*: 5.05%
Divided by One minus the Tax Rate of 31%: 0.69
---------
Equal Tax Equivalent Yield **: 7.32%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0388/$9.31)+1)-1]
** Assuming a tax rate of 31%
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EV MARATHON NATIONAL MUNICIPALS FUND
The table below indicates the total return (capital changes plus reinvestment of all distributions) on a hypothetical investment of
$1,000 in the Fund covering the period from December 19, 1985 through September 30, 1995 and for the 1 and 5 year periods ended
September 30, 1995.
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC BEFORE DEDUCTING CDSC AFTER DEDUCTING CDSC
PERIOD DATE ON 09/30/95 ON 09/30/95 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 12/19/85 $1,991.92 $1,991.92 99.19% 7.29% 99.19% 7.29%
5 YEARS ENDED
09/30/95 09/30/90 $1,504.43 $1,484.43 50.44% 8.49% 48.44% 8.20%
1 YEAR ENDED
09/30/95 09/30/94 $1,106.45 $1,056.45 10.64% 10.64% 5.64% 5.64%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC *
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC **
P = an initial investment of $1,000
* The average annual total return not including the CDSC is calculated based on the ending investment value
before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based on the ending investment value before
deducting the CDSC.
CALCULATION OF DISTRIBUTION RATE AND EFFECTIVE DISTRIBUTION RATE
The distribution rate as of 09/30/95 was 5.82% and was calculated by annualizing the most recent dividend
distribution ($0.048410964) and dividing the result by the current maximum offering price ($9.80).
The effective distribution rate as of 09/30/95 was 5.97% 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
</TABLE>
<PAGE>
EXHIBIT 16
EV MARATHON NATIONAL MUNICIPALS FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 9/30/95:
Interest Income Earned: $12,482,707
Plus Dividend Income Earned:
-----------
Equal Gross Income: $12,482,707
Minus Expenses: $2,770,046
-----------
Equal Net Investment Income: $9,712,661
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 224,024,563
-----------
Equal Net Investment Income Earned Per Share: $0.0434
Net Asset Value Per Share 9/30/95: $9.80
30 Day Yield*: 5.37%
Divided by One minus the Tax Rate of 31%: 0.69
-----------
Equal Tax Equivalent Yield **: 7.78%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0434/$9.80)+1)-1]
** Assuming a tax rate of 31%
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EV TRADITIONAL NATIONAL MUNICIPALS FUND
The table below indicates the total return (capital changes plus reinvestment of all distributions) on a hypothetical investment of
$1,000 in the Fund covering the period from December 19, 1985 through September 30, 1995 and for the 1 and 5 year periods ended
September 30, 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.
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT INITIAL INVESTMENT EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
PERIOD DATE INVESTMENT* ON 09/30/95 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 12/19/85 $962.44 $1,944.06 101.99% 7.45% 94.41% 7.03%
5 YEARS ENDED
09/30/95 09/30/90 $962.38 $1,468.18 52.55% 8.80% 46.82% 7.97%
1 YEAR ENDED
09/30/95 09/30/94 $962.46 $1,078.43 12.05% 12.05% 7.84% 7.84%
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 09/30/95 was 6.39% and was calculated by annualizing the most recent dividend
distribution ($0.057123300) and dividing the result by the current maximum offering price ($10.88).
The effective distribution rate as of 09/30/95 was 6.58% and was calculated by dividing the distribtion rate by the compounding
period (365/30), 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:
(365/30)
EFFECTIVE DISTRIBUTION RATE = [(DISTRIBUTION RATE/(365/30))+1] - 1
</TABLE>
<PAGE>
EXHIBIT 16
EV TRADITIONAL NATIONAL MUNICIPALS FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 9/30/95:
Interest Income Earned: $139,702
Plus Dividend Income Earned:
---------
Equal Gross Income: $139,702
Minus Expenses: $10,361
---------
Equal Net Investment Income: $129,341
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 2,355,786
---------
Equal Net Investment Income Earned Per Share: $0.0549
Net Asset Value Per Share 9/30/95: $10.88
30 Day Yield*: 6.13%
Divided by One minus the Tax Rate of 31%: 0.69
---------
Equal Tax Equivalent Yield **: 8.88%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0549/$10.88)+1)-1]
** Assuming a tax rate of 31%
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 30
<NAME> EV CLASSIC NATIONAL MUNICIPAL FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 40182
<INVESTMENTS-AT-VALUE> 41213
<RECEIVABLES> 119
<ASSETS-OTHER> 33
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 41365
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 68
<TOTAL-LIABILITIES> 68
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 42533
<SHARES-COMMON-STOCK> 41298
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 26
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (2293)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1031
<NET-ASSETS> 41297
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 2675
<EXPENSES-NET> 494
<NET-INVESTMENT-INCOME> 2181
<REALIZED-GAINS-CURRENT> (1608)
<APPREC-INCREASE-CURRENT> 3378
<NET-CHANGE-FROM-OPS> 3951
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2181)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (111)
<NUMBER-OF-SHARES-SOLD> 2252
<NUMBER-OF-SHARES-REDEEMED> 1767
<SHARES-REINVESTED> 164
<NET-CHANGE-IN-ASSETS> 7317
<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> 494
<AVERAGE-NET-ASSETS> 38199
<PER-SHARE-NAV-BEGIN> 8.98
<PER-SHARE-NII> .517
<PER-SHARE-GAIN-APPREC> .356
<PER-SHARE-DIVIDEND> (.517)
<PER-SHARE-DISTRIBUTIONS> (.026)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.31
<EXPENSE-RATIO> 1.78
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> EV MARATHON NATIONAL MUNICIPAL FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 2056633
<INVESTMENTS-AT-VALUE> 2190117
<RECEIVABLES> 10971
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2201088
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 9848
<TOTAL-LIABILITIES> 9848
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2150772
<SHARES-COMMON-STOCK> 2191240
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 1892
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (94908)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 133484
<NET-ASSETS> 2191240
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 151495
<EXPENSES-NET> 22200
<NET-INVESTMENT-INCOME> 129295
<REALIZED-GAINS-CURRENT> (85227)
<APPREC-INCREASE-CURRENT> 173009
<NET-CHANGE-FROM-OPS> 217077
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (129295)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (1302)
<NUMBER-OF-SHARES-SOLD> 40973
<NUMBER-OF-SHARES-REDEEMED> 53271
<SHARES-REINVESTED> 5227
<NET-CHANGE-IN-ASSETS> 19339
<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> 22200
<AVERAGE-NET-ASSETS> 2155458
<PER-SHARE-NAV-BEGIN> 9.41
<PER-SHARE-NII> .570
<PER-SHARE-GAIN-APPREC> .395
<PER-SHARE-DIVIDEND> (.570)
<PER-SHARE-DISTRIBUTIONS> (.005)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.80
<EXPENSE-RATIO> 1.52
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 59
<NAME> EV TRADITIONAL NATIONAL MUNICIPALS FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 25490
<INVESTMENTS-AT-VALUE> 26248
<RECEIVABLES> 395
<ASSETS-OTHER> 31
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 26674
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<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 150
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<PAID-IN-CAPITAL-COMMON> 25899
<SHARES-COMMON-STOCK> 26524
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (2)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (132)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 759
<NET-ASSETS> 26524
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 1009
<EXPENSES-NET> 29
<NET-INVESTMENT-INCOME> 980
<REALIZED-GAINS-CURRENT> (130)
<APPREC-INCREASE-CURRENT> 834
<NET-CHANGE-FROM-OPS> 1684
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (980)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (1)
<NUMBER-OF-SHARES-SOLD> 2266
<NUMBER-OF-SHARES-REDEEMED> 198
<SHARES-REINVESTED> 37
<NET-CHANGE-IN-ASSETS> 22243
<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> 92
<AVERAGE-NET-ASSETS> 14852
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> .691
<PER-SHARE-GAIN-APPREC> .471
<PER-SHARE-DIVIDEND> (.691)
<PER-SHARE-DISTRIBUTIONS> (.001)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.47
<EXPENSE-RATIO> .66
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 2148345
<INVESTMENTS-AT-VALUE> 2283720
<RECEIVABLES> 75823
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<OTHER-ITEMS-LIABILITIES> 102560
<TOTAL-LIABILITIES> 102560
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2125272
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 135375
<NET-ASSETS> 2260647
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 166062
<OTHER-INCOME> 0
<EXPENSES-NET> 10776
<NET-INVESTMENT-INCOME> 155286
<REALIZED-GAINS-CURRENT> (86966)
<APPREC-INCREASE-CURRENT> 177321
<NET-CHANGE-FROM-OPS> 245641
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 49710
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 9944
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 11093
<AVERAGE-NET-ASSETS> 2218464
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
