<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 29, 1997
1933 ACT FILE NO. 33-572
1940 ACT FILE NO. 811-4409
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933 [X]
POST-EFFECTIVE AMENDMENT NO. 67 [X]
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 69 [X]
EATON VANCE MUNICIPALS TRUST
--------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
24 FEDERAL STREET, BOSTON, MASSACHUSETTS 02110
----------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
617-482-8260
-------------------------------------
(REGISTRANT'S TELEPHONE NUMBER)
ALAN R. DYNNER, 24 FEDERAL STREET, BOSTON, MASSACHUSETTS 02110
--------------------------------------------------------
(NAME AND ADDRESS OF AGENT FOR SERVICE)
It is proposed that this filing will become effective pursuant to rule 485
(check appropriate box):
[ ] immediately upon filing pursuant [ ] on (date) pursuant to paragraph
to paragraph (b) (a)(1)
[X] on August 1, 1997 pursuant to [ ] 75 days after filing pursuant to
paragraph (b) paragraph (a)(2)
[ ] 60 days after filing pursuant to [ ] on (date) pursuant to paragraph
paragraph (a)(1) (a)(2).
If appropriate, check the following box:
[ ] this post effective amendment designates a new effective date for a
previously filed post-effective amendment.
Arizona Municipals Portfolio, Colorado Municipals Portfolio, Connecticut
Municipals Portfolio, Michigan Municipals Portfolio, Minnesota Municipals
Portfolio, New Jersey Municipals Portfolio, Pennsylvania Municipals Portfolio
and Texas Municipals Portfolio have also executed this Registration Statement.
The Registrant has filed a Declaration pursuant to Rule 24f-2. On September
4, 1996, Registrant filed its "Notice" as required by that Rule for the series
of the Registrant with the fiscal year end of July 31, 1996, on October 15, 1996
filed its "Notice" for the series of the Registrant with the fiscal year end of
August 31, 1996, and on November 21, 1996 filed its "Notice" for the series of
the Registrant with the fiscal year end of September 30, 1996. Registrant
continues its election to register an indefinite number of shares of beneficial
interest pursuant to Rule 24f-2.
================================================================================
<PAGE>
This Amendment to the registration statement on Form N-1A consists of the
following documents and papers:
Cross Reference Sheets required by Rule 481(a) under Securities Act of
1933
Part A -- The Combined Prospectus of:
Eaton Vance Arizona Municipals Fund
Eaton Vance Colorado Municipals Fund
Eaton Vance Connecticut Municipals Fund
Eaton Vance Michigan Municipals Fund
Eaton Vance Minnesota Municipals Fund
Eaton Vance New Jersey Municipals Fund
Eaton Vance Pennsylvania Municipals Fund
Eaton Vance Texas Municipals Fund
Part B -- The Combined Statement of Additional Information of:
Eaton Vance Arizona Municipals Fund
Eaton Vance Colorado Municipals Fund
Eaton Vance Connecticut Municipals Fund
Eaton Vance Michigan Municipals Fund
Eaton Vance Minnesota Municipals Fund
Eaton Vance New Jersey Municipals Fund
Eaton Vance Pennsylvania Municipals Fund
Eaton Vance Texas Municipals Fund
Part C -- Other Information
Signatures
Exhibit Index Required by Rule 483(b) under the Securities Act of 1933
Exhibits
This Amendment is not intended to amend the Prospectuses and Statements of
Additional Information of any other Series of the Registrant not identified
above.
<PAGE>
EATON VANCE MUNICIPALS TRUST
CROSS REFERENCE SHEET
FOR ALL STATE MUNICIPAL FUNDS
ITEMS REQUIRED BY FORM N-1A
<TABLE>
<CAPTION>
PART A
ITEM NO. ITEM CAPTION PROSPECTUS CAPTION
- ------ -------- ---------------------------------------------
<S> <C> <C>
1. ..................... Cover Page Cover Page
2. ..................... Synopsis Shareholder and Fund Expenses
3. ..................... Condensed Financial Information The Funds' Financial Highlights; Performance
Information
4. ..................... General Description of Registrant The Funds' Investment Objectives; Investment
Policies and Risks; Organization of the
Funds and the Portfolios
5. ..................... Management of the Fund Management of the Funds and the Portfolios
5A...................... Management's Discussion of Fund Not Applicable
Performance
6. ..................... Capital Stock and Other Securities Organization of the Funds and the Portfolios;
Reports to Shareholders; The Lifetime
Investing Account/Distribution Options;
Distributions and Taxes
7. ..................... Purchase of Securities Being Offered Valuing Shares; How to Buy Shares; The
Lifetime Investing Account/Distribution
Options; Distribution and Service Plans;
The Eaton Vance Exchange Privilege; Eaton
Vance Shareholder Services
8. ..................... Redemption or Repurchase How to Redeem Shares
9. ..................... Pending Legal Proceedings Not Applicable
<CAPTION>
PART B
ITEM NO. ITEM CAPTION STATEMENT OF ADDITIONAL INFORMATION CAPTION
- ------ -------- ---------------------------------------------
<S> <C> <C>
10. ..................... Cover Page Cover Page
11. ..................... Table of Contents Table of Contents
12. ..................... General Information and History Other Information
13. ..................... Investment Objectives and Policies Additional Information about Investment
Policies; Investment Restrictions
14. ..................... Management of the Fund Trustees and Officers; Fees and Expenses
15. ..................... Control Persons and Principal Holders of Control Persons and Principal Holders of
Securities Securities
16. ..................... Investment Advisory and Other Investment Adviser and Administrator;
Services Distribution Plan - Class B Shares; Service
Plan - Class A Shares; 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 - Class A Shares;
Distribution Plan; Service Plan; Fees and
Expenses
20. ..................... Tax Status Taxes; Tax Equivalent Yield Table
21. ..................... Underwriters Principal Underwriter; Fees and Expenses
22. ..................... Calculation of Performance Data Investment Performance; Performance
Information
23. ..................... Financial Statements Financial Statements
</TABLE>
<PAGE>
PART A
INFORMATION REQUIRED IN A PROSPECTUS
EATON VANCE ARIZONA MUNICIPALS FUND
EATON VANCE COLORADO MUNICIPALS FUND
EATON VANCE CONNECTICUT MUNICIPALS FUND
EATON VANCE MICHIGAN MUNICIPALS FUND
EATON VANCE MINNESOTA MUNICIPALS FUND
EATON VANCE NEW JERSEY MUNICIPALS FUND
EATON VANCE PENNSYLVANIA MUNICIPALS FUND
EATON VANCE TEXAS MUNICIPALS FUND
THESE FUNDS (THE "FUNDS") ARE MUTUAL FUNDS SEEKING TO PROVIDE CURRENT INCOME
EXEMPT FROM REGULAR FEDERAL INCOME TAX AND THE STATE TAXES (IF ANY) DESCRIBED
UNDER "THE FUNDS" INVESTMENT OBJECTIVES" IN THIS PROSPECTUS. EACH FUND INVESTS
ITS ASSETS IN A CORRESPONDING NON-DIVERSIFIED OPEN-END INVESTMENT COMPANY (A
"PORTFOLIO") HAVING THE SAME INVESTMENT OBJECTIVE AS THE FUND, RATHER THAN BY
DIRECTLY INVESTING IN AND MANAGING ITS OWN PORTFOLIO OF SECURITIES. EACH FUND IS
A SERIES OF EATON VANCE MUNICIPALS TRUST (THE "TRUST").
Shares of the Funds are not deposits or obligations of, or guaranteed or
endorsed by, any bank or other insured depository institution, and are not
federally insured by the Federal Deposit Insurance Corporation, the Federal
Reserve Board or any other government agency. Shares of the Funds involve
investment risks, including fluctuations in value and the possible loss of some
or all of the principal investment.
This combined Prospectus is designed to provide you with information you should
know before investing. Please retain this document for future reference. A
combined Statement of Additional Information dated August 1, 1997 for the Funds,
as supplemented from time to time, has been filed with the Securities and
Exchange Commission (the "Commission") and is incorporated herein by reference.
This Statement of Additional Information is available without charge from the
Funds' principal underwriter, Eaton Vance Distributors, Inc. (the "Principal
Underwriter"), 24 Federal Street, Boston, MA 02110 (telephone (800) 225-6265).
The Portfolios' investment adviser is Boston Management and Research (the
"Investment Adviser"), a wholly-owned subsidiary of Eaton Vance Management, and
Eaton Vance Management is the administrator (the "Administrator") of the Funds.
The offices of the Investment Adviser and the Administrator are located at 24
Federal Street, Boston, MA 02110.
AS OF THE DATE OF THIS COMBINED PROSPECTUS, A FUND MAY NOT BE AVAILABLE FOR
PURCHASE IN CERTAIN STATES. PLEASE CONTACT THE PRINCIPAL UNDERWRITER OR YOUR
BROKER FOR FURTHER INFORMATION.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE PAGE
<S> <C> <C> <C>
Shareholder and Fund Expenses ......................... 2 How to Redeem Shares .............................. 23
The Funds' Financial Highlights ....................... 4 Reports to Shareholders ........................... 24
The Funds' Investment Objectives ..................... 12 The Lifetime Investing Account/Distribution
Investment Policies and Risks ........................ 12 Options ......................................... 25
Organization of the Funds and the Portfolios .......... 16 The Eaton Vance Exchange Privilege ................ 25
Management of the Funds and the Portfolios ............ 17 Eaton Vance Shareholder Services .................. 26
Distribution and Service Plans ........................ 19 Distributions and Taxes ........................... 27
Valuing Shares ........................................ 20 Performance Information ........................... 28
How to Buy Shares ..................................... 20 Appendix -- State Specific Information ............ 29
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
PROSPECTUS DATED AUGUST 1, 1997
<PAGE>
SHAREHOLDER AND FUND EXPENSES
- --------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES
- ------------------------------------------------------------------------------
CLASS A CLASS B
SHARES SHARES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) 4.75% None
Sales Charges Imposed on Reinvested Distributions None None
Fees to Exchange Shares None None
Maximum Contingent Deferred Sales Charge None 5.00%
ANNUAL FUND AND ALLOCATED PORTFOLIO OPERATING EXPENSES (as a percentage of
average daily net assets)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
ARIZONA COLORADO CONNECTICUT MICHIGAN
FUND FUND FUND FUND
-------------------- -------------------- -------------------- ------------------
CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B
SHARES SHARES SHARES SHARES SHARES SHARES SHARES SHARES
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment Adviser Fee 0.41% 0.41% 0.27% 0.27% 0.43% 0.43% 0.43% 0.43%
Rule 12b-1 Distribution and/or
Service Fees 0.18% 0.91% 0.20% 0.92% 0.06% 0.93% 0.15% 0.93%
Other Expenses 0.22% 0.24% 0.28% 0.31% 0.34% 0.22% 0.28% 0.25%
---- ---- ---- ---- ---- ---- ---- ----
Total Operating Expenses 0.81% 1.56% 0.75% 1.50% 0.83% 1.58% 0.86% 1.61%
==== ==== ==== ==== ==== ==== ==== ====
EXAMPLE
- -------------------------------------------------------------------------------
An investor would pay the following expenses and, in the case of Class A shares, maximum initial sales charge and in the
case of Class B shares, a contingent deferred sales charge on a $1,000 investment, assuming (a) 5% annual return and (b)
redemption at the end of each period:
<CAPTION>
ARIZONA COLORADO CONNECTICUT MICHIGAN
FUND FUND FUND FUND
-------------------- -------------------- -------------------- --------------------
CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B
SHARES SHARES SHARES SHARES SHARES SHARES SHARES SHARES
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 55 $ 66 $ 55 $ 65 $ 56 $ 66 $ 56 $ 66
3 Years $ 72 $ 89 $ 70 $ 87 $ 73 $ 90 $ 74 $ 91
5 Years $ 90 $105 $ 87 $102 $ 91 $106 $ 93 $108
10 Years $143 $186 $136 $179 $145 $188 $149 $191
An investor would pay the following expenses on the same investment, assuming (a) 5% annual return and (b) no redemptions:
<CAPTION>
ARIZONA COLORADO CONNECTICUT MICHIGAN
FUND FUND FUND FUND
-------------------- -------------------- -------------------- --------------------
CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B
SHARES SHARES SHARES SHARES SHARES SHARES SHARES SHARES
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 55 $ 16 $ 55 $ 15 $ 56 $ 16 $ 56 $ 16
3 Years $ 72 $ 49 $ 70 $ 47 $ 73 $ 50 $ 74 $ 51
5 Years $ 90 $ 85 $ 87 $ 82 $ 91 $ 86 $ 93 $ 88
10 Years $143 $186 $136 $179 $145 $188 $149 $191
ANNUAL FUND AND ALLOCATED PORTFOLIO OPERATING EXPENSES (as a percentage of average daily net assets)
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
MINNESOTA NEW JERSEY PENNSYLVANIA TEXAS
FUND FUND FUND FUND
-------------------- -------------------- -------------------- --------------------
CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B
SHARES SHARES SHARES SHARES SHARES SHARES SHARES SHARES
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment Adviser Fee (after any
applicable fee reduction) 0.36% 0.36% 0.47% 0.47% 0.47% 0.47% 0.10% 0.10%
Rule 12b-1 Distribution and/or
Service Fees 0.15% 0.92% 0.05% 0.92% 0.05% 0.92% 0.17% 0.92%
Other Expenses 0.30% 0.28% 0.30% 0.18% 0.31% 0.19% 0.41% 0.41%
---- ---- ---- ---- ---- ---- ---- ----
Total Operating Expenses
(after any applicable fee
reduction) 0.81% 1.56% 0.82% 1.57% 0.83% 1.58% 0.68% 1.43%
==== ==== ==== ==== ==== ==== ==== ====
EXAMPLE
- ---------------------------------------------------------------------------------------------------------------------------
An investor would pay the following expenses and, in the case of Class A shares, maximum initial sales charge and in the
case of Class B shares, a contingent deferred sales charge on a $1,000 investment, assuming (a) 5% annual return and (b)
redemption at the end of each period:
<CAPTION>
MINNESOTA NEW JERSEY PENNSYLVANIA TEXAS
FUND FUND FUND FUND
-------------------- -------------------- -------------------- --------------------
CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B
SHARES SHARES SHARES SHARES SHARES SHARES SHARES SHARES
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 55 $ 66 $ 55 $ 66 $ 56 $ 66 $ 54 $ 65
3 Years $ 72 $ 89 $ 72 $ 90 $ 73 $ 90 $ 68 $ 85
5 Years $ 90 $105 $ 91 $106 $ 91 $106 $ 84 $ 98
10 Years $143 $186 $144 $187 $145 $188 $128 $171
An investor would pay the following expenses on the same investment, assuming (a) 5% annual return and (b) no redemptions:
<CAPTION>
MINNESOTA NEW JERSEY PENNSYLVANIA TEXAS
FUND FUND FUND FUND
-------------------- -------------------- -------------------- --------------------
CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B
SHARES SHARES SHARES SHARES SHARES SHARES SHARES SHARES
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 55 $ 16 $ 55 $ 16 $ 56 $ 16 $ 54 $ 15
3 Years $ 72 $ 49 $ 72 $ 50 $ 73 $ 50 $ 68 $ 45
5 Years $ 90 $ 85 $ 91 $ 86 $ 91 $ 86 $ 84 $ 78
10 Years $143 $186 $144 $187 $145 $188 $128 $171
</TABLE>
NOTES:
The tables and Examples summarize the aggregate expenses of the Portfolio and
each Class of shares of the Funds and are designed to help investors understand
the costs and expenses they will bear, directly or indirectly, by investing in a
Fund. Information for Class A shares is estimated based upon the most recent
fiscal year of its predecessor fund adjusted for the multiple- class structure,
and Class B shares is for the most recent fiscal year, except for the Investment
Adviser Fee for the Class B shares of the Colorado Fund which is estimated for
the current fiscal year. Absent a fee reduction, the Investment Adviser Fee and
Total Operating Expenses would have been 0.20% and 1.53%, respectively, for the
Class B shares of the Texas Fund.
The Funds offer two classes of shares. Class A shares are sold subject to a
sales charge imposed at the time of purchase. No sales charge is payable at the
time of purchase on investments in Class A shares of $1 million or more.
However, a contingent deferred sales charge of 0.50% will be imposed on such
investments in the event of certain redemptions within 12 months of purchase.
Class B shares are sold subject to a declining contingent deferred sales charge
if redeemed within six years after purchase. The contingent deferred sales
charge on Class B shares (maximum 5%) is not 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 Buy Shares", and "How to Redeem Shares".
THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. Federal
regulations require the Examples to assume a 5% annual return, but actual return
will vary. Long-term holders of Class B shares 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. For further information
regarding the expenses of the Funds and the Portfolios, see "The Funds"
Financial Highlights", "Management of the Funds and the Portfolios",
"Distribution and Service Plans" and "How to Redeem Shares".
Each Portfolio's monthly advisory fee has two components, a fee based on daily
net assets and a fee based on daily gross income, as set forth in the fee
schedule on page 17.
Each Fund invests exclusively in its corresponding Portfolio. Other investment
companies with different distribution arrangements and fees may invest in the
Portfolios in the future. See "Organization of the Funds and the Portfolios".
<PAGE>
THE FUNDS' FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------
The following information should be read in conjunction with the audited
financial statements that appear in the Funds' annual report to shareholders.
The Funds' annual financial statements have been audited by Deloitte & Touche
LLP, independent certified public accountants, as experts in accounting and
auditing. The annual financial statements and the independent auditors' report
are incorporated by reference into the Statement of Additional Information.
Further information regarding the performance of a Fund is contained in its
annual report to shareholders which may be obtained without charge by
contacting the Principal Underwriter. The financial information for each of
the periods presented in the Funds' Financial Highlights are for each Fund
prior to reclassification of its shares as Class B shares on August 1, 1997.
Information for Class A shares is not presented because that class did not
exist prior to August 1, 1997. The Financial Highlights for Class A shares
will differ from the Financial Highlights of Class B shares due to the absence
of distribution fees for Class A shares.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
ARIZONA FUND -- CLASS B
-----------------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED JULY 31, YEAR ENDED SEPTEMBER 30,
JANUARY 31, 1997 ------------------------------------------ --------------------------------------
(UNAUDITED) 1996 1995 1994** 1993 1992 1991++
---------------- -------- -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
beginning of year $ 10.680 $ 10.530 $ 10.390 $ 11.570 $ 10.700 $10.320 $10.000
-------- -------- -------- -------- -------- ------- -------
INCOME (LOSS) FROM
OPERATIONS:
Net investment
income $ 0.241 $ 0.482 $ 0.492 $ 0.404 $ 0.496 $ 0.526 $ 0.088
Net realized and
unrealized gain
(loss) on
investments 0.143 0.161 0.164 (0.862) 1.076 0.520 0.339+++
-------- -------- -------- -------- -------- ------- -------
Total income
(loss) from
operations $ 0.384 $ 0.643 $ 0.656 $ (0.458) $ 1.572 $ 1.046 $ 0.427
-------- -------- -------- -------- -------- ------- -------
LESS DISTRIBUTIONS:
From net investment
income $(0.241) $ (0.488) $ (0.492) $ (0.404) $ (0.496) $(0.526) $(0.088)
In excess of
net investment
income(5) (0.003) (0.005) (0.024) (0.074) (0.127) (0.120) (0.019)
From net realized
gain on investment
transactions -- -- -- (0.233) (0.079) (0.020) --
In excess of net
realized gain on
investment
transactions -- -- -- (0.011) -- -- --
-------- -------- -------- -------- -------- ------- -------
Total distributions $(0.244) $ (0.493) $ (0.516) $ (0.722) $ (0.702) $(0.666) $(0.107)
-------- -------- -------- -------- -------- ------- -------
NET ASSET VALUE, end of
year $ 10.820 $ 10.680 $ 10.530 $ 10.390 $ 11.570 $10.700 $10.320
======== ======== ======== ======== ======== ======= =======
TOTAL RETURN (3) 3.62% 6.17% 6.64% (4.16)% 15.29% 10.43% 4.03%
RATIOS/SUPPLEMENTAL DATA*:
Net assets, end of
year (000 omitted) $117,671 $127,681 $141,859 $150,879 $135,524 $62,498 $11,501
Ratio of net expenses
to average daily
net assets(1)(4) 1.59%+ 1.56% 1.53% 1.46%+ 1.53% 1.52% 1.37%+
Ratio of net expenses
to average daily
net assets after
custodian fee
reduction(1) 1.58%+ 1.55% -- -- -- -- --
Ratio of net
investment income
to average daily
net assets 4.44%+ 4.49% 4.81% 4.47%+ 4.42% 4.83% 4.33%+
PORTFOLIO TURNOVER(2) -- -- -- -- 39% 133% 8%
* For the periods indicated, the operating expenses of the Arizona Fund reflect an allocation of expenses to the Administrator
and/or the Investment Adviser. Had such actions not been taken, net investment income per share and the ratios would have been as
follows:
NET INVESTMENT INCOME PER SHARE $ 0.513 $ 0.082
======= =======
RATIOS (As a percentage of average daily net assets):
Expenses (1)(4) 1.64% 1.65%+
Net investment income 4.71% 4.05%+
(See footnotes on page 11.)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE FUNDS' FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------------------------------------------------------
COLORADO FUND -- CLASS B
------------------------------------------------------------------------------------------
SIX MONTHS YEAR ENDED
ENDED YEAR ENDED JULY 31, SEPTEMBER 30,
JANUARY 31, 1997 ---------------------------------------- --------------------------
(UNAUDITED) 1996 1995 1994** 1993 1992++
---------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
beginning of year $10.170 $10.020 $10.010 $10.960 $10.060 $10.000
------- ------- ------- ------- ------- -------
INCOME (LOSS) FROM
OPERATIONS:
Net investment income $ 0.242 $ 0.480 $ 0.494 $ 0.403 $ 0.484 $ 0.026
Net realized and
unrealized gain
(loss) on investments 0.151 0.162 0.033 (0.880) 0.996 0.082+++
------- ------- ------- ------- ------- -------
Total income (loss)
from operations $ 0.393 $ 0.642 $ 0.527 $(0.477) $ 1.480 $ 0.108
------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
From net investment
income $(0.243) $(0.492) $(0.494) $(0.403) $(0.484) $(0.026)
In excess of net
investment income(5) -- -- (0.023) (0.070) (0.096) (0.022)
------- ------- ------- ------- ------- -------
Total distributions $(0.243) $(0.492) $(0.517) $(0.473) $(0.580) $(0.048)
------- ------- ------- ------- ------- -------
NET ASSET VALUE, end of
year $10.320 $10.170 $10.020 $10.010 $10.960 $10.060
======= ======= ======= ======= ======= =======
TOTAL RETURN(3) 3.90% 6.46% 5.58% (4.46)% 15.52% 0.60%
RATIOS/SUPPLEMENTAL DATA*:
Net assets, end of
year (000 omitted) $40,743 $42,972 $43,900 $42,085 $24,847 $ 2,464
Ratio of net expenses
to average daily net
assets(1)(4) 1.59%+ 1.49% 1.28% 1.09%+ 1.00% 1.00%+
Ratio of net expenses
to average daily net
assets after
custodian
fee reduction(1) 1.55%+ 1.45% -- -- -- --
Ratio of net
investment income to
average daily net
assets 4.69%+ 4.69% 5.03% 4.59%+ 4.49% 2.26%+
PORTFOLIO TURNOVER(2) -- -- -- -- 3% 0%
* For the periods indicated, the operating expenses of the Colorado Fund reflect an allocation of expenses to the Administrator
and/or the Investment Adviser. Had such actions not been taken, net investment income per share and the ratios would have been as
follows:
NET INVESTMENT INCOME
PER SHARE $ 0.478 $ 0.479 $ 0.373 $ 0.387 $ 0.011
======= ======= ======= ======= =======
RATIOS (As a percentage of average daily net
assets):
Expenses(1)(4) 1.51% 1.43% 1.42%+ 1.90% 2.34%+
Expenses after custodian
fee reduction(1) 1.46% -- -- -- --
Net investment income 4.67% 4.88% 4.26%+ 3.60% 0.92%+
(See footnotes on page 11.)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE FUNDS' FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------------------------------------------------------
CONNECTICUT FUND -- CLASS B
-----------------------------------------------------------------------------------------------
SIX MONTHS YEAR ENDED
ENDED YEAR ENDED JULY 31, SEPTEMBER 30,
JANUARY 31, 1997 ------------------------------------------ ---------------------------
(UNAUDITED) 1996 1995 1994** 1993 1992++
---------------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning
of year $ 10.120 $ 9.970 $ 10.050 $ 11.030 $ 10.270 $ 10.000
-------- -------- -------- -------- -------- --------
INCOME (LOSS) FROM OPERATIONS:
Net investment income $ 0.225 $ 0.452 $ 0.465 $ 0.388 $ 0.471 $ 0.192
Net realized and
unrealized gain (loss) on
investments 0.095 0.169 (0.037) (0.883) 0.885 0.331+++
-------- -------- -------- -------- -------- --------
Total income (loss) from
operations $ 0.320 $ 0.621 $ 0.428 $ (0.495) $ 1.356 $ 0.523
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
From net investment income $ (0.225) $ (0.452) $ (0.465) $ (0.388) $ (0.471) $ (0.192)
In excess of net investment
income(5) (0.005) (0.019) (0.043) (0.079) (0.120) (0.161)
From net realized gain on
investment transactions -- -- -- (0.018) (0.005) --
-------- -------- -------- -------- -------- --------
Total distributions (0.230) $ (0.471) $ (0.508) $ (0.485) $ (0.596) $ (0.253)
-------- -------- -------- -------- -------- --------
NET ASSET VALUE, end of year $ 10.210 $ 10.120 $ 9.970 $ 10.050 $ 11.030 $ 10.270
======== ======== ======== ======== ======== ========
TOTAL RETURN(3) 3.19% 6.30% 4.55% (4.61)% 13.62% 5.00%
RATIOS/SUPPLEMENTAL DATA*:
Net assets, end of
year (000 omitted) $178,199 $181,608 $188,900 $188,453 $160,790 $ 50,031
Ratio of net expenses to
average daily net
assets(1)(4) 1.61%+ 1.58% 1.55% 1.43%+ 1.56% 1.35%+
Ratio of net
expenses to average daily
net assets after custodian
fee reduction(1) 1.61%+ 1.57% -- -- -- --
Ratio of net
investment income to
average daily net assets 4.38%+ 4.45% 4.77% 4.42%+ 4.33% 4.13%+
PORTFOLIO TURNOVER(2) -- -- -- -- 14% 16%
* For the period indicated, the operating expenses of the Connecticut Fund reflect an allocation of expenses to the Administrator
and/or the Investment Adviser. Had such actions not been taken, net investment income per share and the ratios would have been as
follows:
NET INVESTMENT INCOME PER SHARE $ 0.184
========
RATIOS (As a percentage of average daily net assets):
Expenses(1)(4) 1.52%+
Net investment income 3.96%+
(See footnotes on page 11.)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE FUNDS' FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------------------------------------------------------
MICHIGAN FUND -- CLASS B
---------------------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED JULY 31, YEAR ENDED SEPTEMBER 30,
JANUARY 31, 1997 -------------------------------------------- -----------------------------------------
(UNAUDITED) 1996 1995 1994** 1993 1992 1991++
---------------- -------- -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
beginning of year $ 10.420 $ 10.250 $ 10.210 $ 11.110 $ 10.570 $10.220 $10.000
-------- -------- -------- -------- -------- ------- -------
INCOME (LOSS) FROM
OPERATIONS:
Net investment
income $ 0.230 $ 0.464 $ 0.486 $ 0.398 $ 0.480 $ 0.499 $ 0.247
Net realized and
unrealized gain
(loss) on
investments 0.074 0.195 0.059 (0.794) 0.745 0.507 0.267
-------- -------- -------- -------- -------- ------- -------
Total income (loss)
from operations $ 0.304 $ 0.659 $ 0.545 $ (0.396) $ 1.225 $ 1.006 $ 0.514
-------- -------- -------- -------- -------- ------- -------
LESS DISTRIBUTIONS:
From net investment
income (0.230) $ (0.481) $ (0.486) $ (0.398) $ (0.480) $(0.499) $(0.247)
-------- -------- -------- -------- -------- ------- -------
In excess of net
investment
income(5) (0.004) (0.008) (0.019) (0.062) (0.114) (0.144) (0.047)
From net realized
gain on investment
transactions -- -- -- (0.028) (0.058) (0.013) --
-------- -------- -------- -------- -------- ------- -------
In excess of net
realized gain on
investment
transactions -- -- -- (0.016) (0.033) -- --
-------- -------- -------- -------- -------- ------- -------
Total distributions (0.234) $ (0.489) $ (0.505) $ (0.504) $ (0.685) $(0.656) $(0.294)
-------- -------- -------- -------- -------- ------- -------
NET ASSET VALUE,
end of year $ 10.490 $ 10.420 $ 10.250 $ 10.210 $ 11.110 $10.570 $10.220
======== ======== ======== ======== ======== ======= =======
TOTAL RETURN(3) 2.93% 6.50% 5.61% (3.66)% 12.06% 10.13% 4.98%
RATIOS/SUPPLEMENTAL DATA*:
Net assets, end of
year (000
omitted) $159,930 $171,067 $186,363 $197,082 $188,290 $107,034 $31,222
Ratio of net
expenses to average
daily net
assets(1)(4) 1.59%+ 1.61% 1.51% 1.49%+ 1.54% 1.61% 1.29%+
Ratio of net
expenses to average
daily net assets
after custodian fee
reduction(1) 1.57%+ 1.60% -- -- -- -- --
Ratio of net
investment income
to average daily
net assets 4.35%+ 4.44% 4.84% 4.49%+ 4.40% 4.65% 5.12%+
PORTFOLIO TURNOVER(2) -- -- -- -- 28% 72% 5%
* For the period indicated, the operating expenses of the Michigan Fund reflect an allocation of expenses to the Administrator
and/or the Investment Adviser. Had such actions not been taken, net investment income per share and the ratios would have been as
follows:
NET INVESTMENT INCOME
PER SHARE $ 0.229
=======
RATIOS (As a percentage
of average daily net
assets):
Expenses(1)(4) 1.66%+
Net investment income 4.75%+
(See footnotes on page 11.)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE FUNDS' FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------------------------------------------------------
MINNESOTA FUND -- CLASS B
------------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED JULY 31, YEAR ENDED SEPTEMBER 30,
JANUARY 31, 1997 --------------------------------------- ---------------------------------------
(UNAUDITED) 1996 1995 1994** 1993 1992 1991++
---------------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
beginning of year $10.070 $ 9.950 $10.040 $10.910 $10.310 $10.080 $10.000
------- ------- ------- ------- ------- ------- -------
INCOME (LOSS) FROM
OPERATIONS:
Net investment income $ 0.232 $ 0.468 $ 0.470 $ 0.383 $ 0.473 $ 0.505 $ 0.051
Net realized and
unrealized gain (loss) on
investments 0.050 0.123 (0.053) (0.788) 0.749 0.361 0.129+++
------- ------- ------- ------- ------- ------- -------
Total income (loss) from
operations $ 0.282 $ 0.591 $ 0.417 $(0.405) $ 1.222 $ 0.866 $ 0.180
------- ------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
From net investment income $(0.232) $(0.468) $(0.470) $(0.383) $(0.473) $(0.505) $(0.051)
In excess of net
investment income(5) -- (0.003) (0.037) (0.073) (0.125) (0.131) (0.049)
From net realized gain
on investment
transactions -- -- -- (0.009) -- -- --
In excess of net
realized gain
on investment
transactions -- -- -- -- (0.024) -- --
------- ------- ------- ------- ------- ------- -------
Total distributions $(0.232) $(0.471) $(0.507) $(0.465) $(0.622) $(0.636) $(0.100)
------- ------- ------- ------- ------- ------- -------
NET ASSET VALUE, end of year $10.120 $10.070 $ 9.950 $10.040 $10.910 $10.310 $10.080
======= ======= ======= ======= ======= ======= =======
TOTAL RETURN(3) 2.83% 6.00% 4.41% (3.81)% 12.28% 8.82% 1.56%
RATIOS/SUPPLEMENTAL DATA*:
Net assets, end of year
(000 omitted) $68,931 $74,374 $78,970 $79,223 $68,004 $26,670 $ 2,467
Ratio of net expenses to
average daily net
assets(1)(4) 1.61%+ 1.56% 1.52% 1.54%+ 1.59% 1.42% 1.71%+
Ratio of net expenses to
average daily net
assets after custodian
fee reduction(1) 1.58%+ 1.54% -- -- -- -- --
Ratio of net investment
income to average daily
net assets 4.57%+ 4.63% 4.80% 4.38%+ 4.38% 4.74% 2.59%+
PORTFOLIO TURNOVER(2) -- -- -- -- 16% 25% 3%
* For the periods indicated, the operating expenses of the Minnesota Fund reflect an allocation of expenses to the Administrator
and/or the Investment Adviser. Had such actions not been taken, net investment income per share and the ratios would have been
as follows:
NET INVESTMENT INCOME PER SHARE $ 0.472 $ 0.438 $ 0.031
======= ======= =======
RATIOS (As a percentage of average daily net assets):
Expenses(1)(4) 1.61% 2.05% 2.72%+
Net investment income 4.37% 4.11% 1.58%+
(See footnotes on page 11.)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE FUNDS' FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------------------------------------------------------
NEW JERSEY FUND -- CLASS B
-------------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED JULY 31, YEAR ENDED SEPTEMBER 30,
JANUARY 31, 1997 ------------------------------------------ -------------------------------------
(UNAUDITED) 1996 1995 1994** 1993 1992 1991++
-------------- -------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
beginning of year $ 10.440 $ 10.360 $ 10.410 $ 11.350 $ 10.680 $ 10.380 $10.000
-------- -------- -------- -------- -------- -------- -------
INCOME (LOSS) FROM
OPERATIONS:
Net investment income $ 0.251 $ 0.505 $ 0.505 $ 0.421 $ 0.514 $ 0.516 $ 0.363
Net realized and
unrealized gain (loss)
on investments 0.100 0.084 (0.009) (0.836) 0.841 0.452 0.487+++
-------- -------- -------- -------- -------- -------- -------
Total income (loss)
from operations $ 0.351 $ 0.589 $ 0.496 $ (.415) $ 1.355 $ 0.968 $ 0.850
-------- -------- -------- -------- -------- -------- -------
LESS DISTRIBUTIONS:
From net investment
income $ (0.251) $ (0.505) $ (0.505) $ (0.421) $ (0.514) $ (0.516) $(0.363)
In excess of net
investment income(5) -- (0.004) (0.035) (0.075) (0.112) (0.124) (0.107)
From net realized gain on
investment transactions -- -- -- (0.029) (0.059) (0.028) --
In excess of net realized
gain on investment
transactions -- -- (0.006) -- -- -- --
-------- -------- -------- -------- -------- -------- -------
Total distributions $ (0.251) $ (0.509) $ (0.546) $ (0.525) $ (0.685) $ (0.668) $(0.470)
-------- -------- -------- -------- -------- -------- -------
NET ASSET VALUE, end of
year $ 10.540 $ 10.440 $ 10.360 $ 10.410 $ 11.350 $ 10.680 $10.380
======== ======== ======== ======== ======== ======== =======
TOTAL RETURN(3) 3.39% 5.74% 5.04% (3.77)% 13.15% 9.64% 8.47%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of
year (000 omitted) $362,649 $378,649 $404,861 $420,117 $395,421 $235,324 $99,590
Ratio of net expenses to
average daily net
assets(1)(4) 1.60%+ 1.57% 1.53% 1.48%+ 1.56% 1.63% 1.78%+
Ratio of net expenses
to average daily net
assets after custodian
fee reduction(1) 1.59%+ 1.56% -- -- -- -- --
Ratio of net investment
income to average daily
net assets 4.77%+ 4.80% 4.97% 4.64%+ 4.66% 4.83% 4.82%+
PORTFOLIO TURNOVER(2) -- -- -- -- 20% 74% 68%
(See footnotes on page 11.)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE FUNDS' FINANCIAL HIGHLIGHTS (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------
PENNSYLVANIA FUND -- CLASS B
---------------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED JULY 31, YEAR ENDED SEPTEMBER 30,
JANUARY 31, 1997 --------------------------------------- ---------------------------------
(UNAUDITED) 1996 1995 1994** 1993 1992 1991++
--------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning
of year $ 10.430 $ 10.320 $ 10.340 $ 11.310 $ 10.650 $ 10.350 $ 10.000
-------- -------- -------- -------- -------- -------- --------
INCOME (LOSS) FROM OPERATIONS:
Net investment income $ 0.260 $ 0.512 $ 0.507 $ 0.422 $ 0.520 $ 0.531 $ 0.378
Net realized and
unrealized gain (loss)
on investments 0.127 0.108 0.004+++ (0.841) 0.794 0.430 0.466+++
-------- -------- -------- -------- -------- -------- --------
Total income (loss)
from operations $ 0.387 $ 0.620 $ 0.511 $ (0.419) $ 1.314 $ 0.961 $ 0.844
-------- -------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
From net investment
income $ (0.257) $ (0.510) $ (0.507) $ (0.422) $ (0.520) $ (0.531) $ (0.378)
In excess of net
investment income(5) -- -- (0.024) (0.069) (0.115) (0.130) (0.116)
From net realized gain
on investment
transactions -- -- -- (0.042) (0.019) -- --
In excess of net
realized gain on
investment
transactions -- -- -- (0.018) -- -- --
-------- -------- -------- -------- -------- -------- --------
Total distributions $ (0.257) $ (0.510) $ (0.531) $ (0.551) $ (0.654) $ (0.661) $ (0.494)
-------- -------- -------- -------- -------- -------- --------
NET ASSET VALUE, end of year $ 10.560 $ 10.430 $ 10.320 $ 10.340 $ 11.310 $ 10.650 $ 10.350
======== ======== ======== ======== ======== ======== ========
TOTAL RETURN(3) 3.74% 6.08% 5.24% (3.84)% 12.76% 9.56% 8.37%
RATIOS/SUPPLEMENTAL DATA*:
Net assets, end of year
(000 omitted) $415,055 $441,104 $495,856 $530,115 $499,601 $280,193 $100,211
Ratio of net expenses to
average daily net
assets(1)(4) 1.59%+ 1.58% 1.51% 1.46%+ 1.56% 1.64% 1.56%+
Ratio of net expenses to
average daily net
assets after custodian
fee reduction(1) 1.56%+ 1.54% -- -- -- -- --
Ratio of net investment
income to average
daily net assets 4.89%+ 4.89% 5.04% 4.68%+ 4.70% 4.92% 4.93%+
PORTFOLIO TURNOVER(2) -- -- -- -- 6% 15% 2%
* For the period indicated, the operating expenses of the Pennsylvania Fund reflect an allocation of expenses to the
Administrator and/or the Investment Adviser. Had such actions not been taken, net investment income per share and the ratios
would have been as follows:
NET INVESTMENT INCOME PER SHARE $ 0.375
========
RATIOS (As a percentage of average daily net assets):
Expenses(1)(4) 1.60%+
Net investment income 4.89%+
(See footnotes on page 11.)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE FUNDS' FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------------------------------------------------
TEXAS FUND -- CLASS B
-------------------------------------------------------------------------------------
SIX MONTHS YEAR ENDED
ENDED YEAR ENDED JULY 31, SEPTEMBER 30,
JANUARY 31, 1997 --------------------------------------- ----------------------
(UNAUDITED) 1996 1995 1994** 1993 1992++
---------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of year $10.440 $10.280 $10.210 $11.110 $10.450 $10.000
------- ------- ------- ------- ------- -------
INCOME (LOSS) FROM OPERATIONS:
Net investment income $ 0.244 $ 0.492 $ 0.532 $ 0.436 $ 0.515 $ 0.255
Net realized and unrealized gain
(loss) on investments 0.135 0.177 0.084 (0.824) 0.787 0.516
------- ------- ------- ------- ------- -------
Total income (loss) from operations $ 0.379 $ 0.669 $ 0.616 $(0.388) $ 1.302 $ 0.771
------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
From net investment income $(0.249) $(0.509) $(0.532) $(0.436) $(0.515) $(0.255)
In excess of net investment income(5) -- -- (0.014) (0.076) (0.106) (0.066)
From net realized gain on investment
transactions -- -- -- -- -- --
In excess of net realized gain on
investment transactions -- -- -- -- (0.021) --
------- ------- ------- ------- ------- -------
Total distributions $(0.249) $(0.509) $(0.546) $(0.512) $(0.642) $(0.321)
------- ------- ------- ------- ------- -------
NET ASSET VALUE, end of year $10.570 $10.440 $10.280 $10.210 $11.110 $10.450
======= ======= ======= ======= ======= =======
TOTAL RETURN(3) 3.67% 6.60% 6.36% (3.65)% 12.90% 7.51%
RATIOS/SUPPLEMENTAL DATA*:
Net assets, end of year (000 omitted) $22,284 $23,996 $27,762 $26,677 $16,338 $ 4,020
Ratio of net expenses to average
daily net assets(1)(4) 1.52%+ 1.43% 0.99% 0.82%+ 1.06% 1.00%+
Ratio of net expenses to average daily
net assets after custodian
fee reduction(1) 1.48%+ 1.39% -- -- -- --
Ratio of net investment income to
average daily net assets 4.61%+ 4.70% 5.29% 4.81%+ 4.67% 4.61%+
PORTFOLIO TURNOVER(2) -- -- -- -- 7% 11%
* For the periods indicated, the operating expenses of the Texas Fund reflect an allocation of expenses to the Administrator
and/or the Investment Adviser. Had such actions not been taken, net investment income per share and the ratios would have been
as follows:
NET INVESTMENT INCOME PER SHARE $ 0.240 $ 0.482 $ 0.487 $ 0.359 $ 0.350 $ 0.180
======= ======= ======= ======= ======= =======
RATIOS (As a percentage of average
daily net assets):
Expenses(1)(4) 1.58%+ 1.53% 1.44% 1.67%+ 2.55% 2.35%+
Expenses after custodian fee
reduction(1) 1.55%+ 1.49% -- -- -- --
Net investment income 4.54%+ 4.60% 4.84% 3.96%+ 3.18% 3.26%+
** For the ten months ended July 31, 1994.
+ Annualized.
++ For the period from the start of business, July 25, 1991, July 29, 1991 and April 19, 1991, to September 30, 1991 for the
Arizona, Minnesota and Michigan Funds, respectively, and for the period from the start of business, August 25, 1992, May 1,
1992 and March 24, 1992, to September 30, 1992 for the Colorado, Connecticut and Texas Funds, respectively, and for the
period from the start of business, January 8, 1991, to September 30, 1991 for the New Jersey and Pennsylvania Funds.
+++ The per share amount is not in accord with the net realized and unrealized gain (loss) for the period because of the timing
of sales of the Fund shares and the amount of per share realized and unrealized gains and losses at such time.
(1) Includes the Fund's share of its corresponding Portfolio's allocated expenses subsequent to February 1, 1993.
(2) Portfolio turnover represents the rate of portfolio activity for the period while the Fund was making investments directly in
securities. The portfolio turnover rate for the period since the Fund transferred substantially all of its investable assets
to a Portfolio is shown in the Portfolio's financial statements which are included in the Fund's annual report.
(3) Total return is calculated assuming a purchase at the net asset value on the first day and a sale at the net asset value on
the last day of the period reported. Distributions, if any, are assumed to be reinvested at the net asset value on the
payable date. Total return is computed on a non-annualized basis.
(4) The expense ratios for the six months ended January 31, 1997 and the year ended July 31, 1996 have been adjusted to reflect a
change in reporting requirements. The new reporting guidelines require the Fund to increase its expense ratio by the effect
of any expense offset arrangements with its service providers or those of the Portfolio. The expense ratios for each of the
periods on or before July 31, 1995 have not been adjusted to reflect this change.
(5) The Funds have followed the Statement of Position (SOP) 93-2: Determination, Disclosure and Financial Statement Presentation
of Income, Capital Gain, and Return of Capital Distribution by Investment Companies. The SOP requires that differences in the
recognition or classification of income between the financial statements and tax earnings and profits that result in
temporary over-distributions for financial statement purposes, are classified as distributions in excess of net investment
income or accumulated net realized gains.
</TABLE>
<PAGE>
THE FUNDS' INVESTMENT OBJECTIVES
- ------------------------------------------------------------------------------
The investment objective of each Fund is set forth below. Each Fund currently
seeks to meet its investment objective by investing its assets in a separate
corresponding open-end management investment company (a "Portfolio"). Each
Portfolio invests primarily in municipal obligations (as described below) which
are rated at least investment grade by a major rating agency or, if unrated,
determined to be of at least investment grade quality by the Investment Adviser.
Each Portfolio has the same investment objective as its corresponding Fund.
EATON VANCE ARIZONA MUNICIPALS FUND (the "Arizona Fund") seeks to provide
current income exempt from regular federal income tax and Arizona State personal
income taxes. The Arizona Fund seeks to meet its objective by investing its
assets in the Arizona Municipals Portfolio (the "Arizona Portfolio").
EATON VANCE COLORADO MUNICIPALS FUND (the "Colorado Fund") seeks to provide
current income exempt from regular federal income tax and Colorado State
personal income taxes. The Colorado Fund seeks to meet its objective by
investing its assets in the Colorado Municipals Portfolio (the "Colorado
Portfolio").
EATON VANCE CONNECTICUT MUNICIPALS FUND (the "Connecticut Fund") seeks to
provide current income exempt from regular federal income tax and Connecticut
State personal income taxes. The Connecticut Fund seeks to meet its objective by
investing its assets in the Connecticut Municipals Portfolio (the "Connecticut
Portfolio").
EATON VANCE MICHIGAN MUNICIPALS FUND (the "Michigan Fund") seeks to provide
current income exempt from regular federal income tax and Michigan State and
City income and single business taxes in the form of an investment exempt from
Michigan intangibles tax. The Michigan Fund seeks to meet its objective by
investing its assets in the Michigan Municipals Portfolio (the "Michigan
Portfolio").
EATON VANCE MINNESOTA MUNICIPALS FUND (the "Minnesota Fund") seeks to provide
current income exempt from regular federal income tax and regular Minnesota
State personal income taxes. The Minnesota Fund seeks to meet its objective by
investing its assets in the Minnesota Municipals Portfolio (the "Minnesota
Portfolio").
EATON VANCE NEW JERSEY MUNICIPALS FUND (the "New Jersey Fund") seeks to provide
current income exempt from regular federal income tax and New Jersey State
personal income taxes. The New Jersey Fund seeks to meet its objective by
investing its assets in the New Jersey Municipals Porfolio (the "New Jersey
Portfolio").
EATON VANCE PENNSYLVANIA MUNICIPALS FUND (the "Pennsylvania Fund") seeks to
provide current income exempt from regular federal income tax and Pennsylvania
State and local taxes in the form of an investment exempt from Pennsylvania
personal property taxes. The Pennsylvania Fund seeks to meet its objective by
investing its assets in the Pennsylvania Municipals Portfolio (the "Pennsylvania
Portfolio").
EATON VANCE TEXAS MUNICIPALS FUND (the "Texas Fund") seeks to provide current
income exempt from regular federal income taxes. The Texas Fund seeks to meet
its objective by investing its assets in the Texas Municipals Portfolio (the
"Texas Portfolio"). The State of Texas does not impose a State income tax on
individuals.
INVESTMENT POLICIES AND RISKS
- --------------------------------------------------------------------------------
EACH FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY INVESTING EITHER DIRECTLY
OR INDIRECTLY THROUGH ANOTHER OPEN-END MANAGEMENT INVESTMENT COMPANY PRIMARILY
(I.E., AT LEAST 80% OF ITS NET ASSETS DURING PERIODS OF NORMAL MARKET
CONDITIONS) IN MUNICIPAL OBLIGATIONS, THE INTEREST ON WHICH IS EXEMPT FROM
REGULAR FEDERAL INCOME TAX AND FROM THE STATE TAXES WHICH, IN ACCORDANCE WITH
THE FUND'S INVESTMENT OBJECTIVE, THE FUND SEEKS TO AVOID. The foregoing policy
is a fundamental policy of each Fund and its corresponding Portfolio, which may
not be changed unless authorized by a vote of the Fund's shareholders or that
Portfolio's investors, as the case may be. The Minnesota Portfolio intends to
invest its assets so as to comply with the requirement that, in order for exempt
interest dividends that are derived from interest income from specified
Minnesota sources to be exempt from regular Minnesota State personal income
taxes, 95% or more of the exempt interest dividends that are paid to all
shareholders by the Minnesota Fund must be derived from such specified Minnesota
sources.
At least 80% of the net assets of the New Jersey Portfolio, at least 75% of the
net assets of the Colorado Portfolio, Connecticut Portfolio and Texas Portfolio,
and at least 70% of the net assets of the Arizona Portfolio, Michigan Portfolio,
Minnesota Portfolio and Pennsylvania Portfolio will normally be invested in
obligations rated at least investment grade at the time of investment (which are
those rated Baa or higher by Moody's Investors Service, Inc. ("Moody's") or BBB
or higher by either Standard & Poor's Ratings Group ("S&P") or Fitch Investors
Service, Inc. ("Fitch")) or, if unrated, determined by the Investment Adviser to
be of at least investment grade quality. The balance of each Portfolio's net
assets may be invested in municipal obligations rated below investment grade
(but not lower than B by Moody's, S&P or Fitch) and unrated municipal
obligations considered to be of comparable quality by the Investment Adviser.
Municipal obligations rated Baa or BBB may have speculative characteristics.
Also, changes in economic conditions or other circumstances are more likely to
lead to a weakened capacity to make principal and interest payments than in the
case of higher rated obligations. Securities rated below Baa or BBB are commonly
known as "junk bonds". A Portfolio may retain an obligation whose rating drops
below B after its acquisition if such retention is considered desirable by the
Investment Adviser. See "Additional Risk Considerations". For a description of
municipal obligation ratings, see the Statement of Additional Information.
MUNICIPAL OBLIGATIONS. Municipal obligations include bonds, notes and commercial
paper issued by a municipality for a wide variety of both public and private
purposes, the interest on which is, in the opinion of bond counsel, exempt from
regular federal income tax. Public purpose municipal bonds include general
obligation and revenue bonds. General obligation bonds are backed by the taxing
power of the issuing municipality. Revenue bonds are backed by the revenues of a
project or facility, or from the proceeds of a specific revenue source. Some
revenue bonds are payable solely or partly from funds which are subject to
annual appropriations by a State's legislature. Municipal notes include bond
anticipation, tax anticipation and revenue anticipation notes. Bond, tax and
revenue anticipation notes are short-term obligations that will be retired with
the proceeds of an anticipated bond issue, tax revenue or facility revenue,
respectively. Under normal market conditions, a Portfolio will invest at least
65% (in the case of the Minnesota Portfolio, generally 95% or more) of its total
assets in obligations issued by its respective State or its political
subdivisions.
Interest income from certain types of municipal obligations may be subject to
the federal alternative minimum tax (the "AMT") for individual investors. As at
July 31, 1996, the Portfolios had invested in such obligations as follows (as a
percentage of net assets): Arizona Portfolio (8.0%); Colorado Portfolio (22.5%);
Connecticut Portfolio (17.2%); Michigan Portfolio (6.3%); Minnesota Portfolio
(15.6%); New Jersey Portfolio (21.2%); Pennsylvania Portfolio (20.9%); and Texas
Portfolio (30.2%). Distributions to corporate investors of certain interest
income may also be subject to the AMT. For corporate shareholders of the
Minnesota Fund, exempt interest dividends attributable to interest on all
municipal obligations (whenever issued) eligible for exemption from regular
Minnesota State personal income taxes are included in taxable income and in
alternative minimum taxable income for purposes of determining the Minnesota
franchise tax imposed on corporations subject to Minnesota taxation. The Funds
may not be suitable for investors subject to the AMT.
CONCENTRATION. Each Portfolio will concentrate its investments in municipal
obligations issued by its respective State and that State's political
subdivisions. Each Portfolio is, therefore, more susceptible to factors
adversely affecting issuers in one State than mutual funds which do not
concentrate in a specific State. Municipal obligations of issuers in a single
State may be adversely effected by economic developments (including insolvency
of an issuer) and by legislation and other governmental activities in that
State. Municipal obligations that rely on an annual appropriation of funds by a
State's legislature for payment are also subject to the risk that the
legislature will not appropriate the necessary amounts or take other action
needed to permit the issuer of such obligations to make required payments. To
the extent that a Portfolio's assets are concentrated in municipal obligations
of issuers of a single State, that Portfolio may be subject to an increased risk
of loss. Each Portfolio may also invest in obligations issued by the governments
of Puerto Rico, the U.S. Virgin Islands and Guam. See the Appendix to this
Prospectus for a description of some of the economic and other factors relating
to the States and Puerto Rico.
In addition, each Portfolio may invest 25% or more of its total assets in
municipal obligations of the same type, including, without limitation, the
following: lease rental obligations of State and local authorities; obligations
dependent on annual appropriations by a State's legislature for payment;
obligations of State and local housing finance authorities, municipal utilities
systems or public housing authorities; obligations of hospitals or life care
facilities; or industrial development or pollution control bonds issued for
electric utility systems, steel companies, paper companies or other purposes.
This may make a Portfolio more susceptible to adverse economic, political, or
regulatory occurrences affecting a particular category of issuer. For example,
health care-related issuers are susceptible to medicaid reimbursement policies,
and national and State health care legislation. As a Portfolio's concentration
increases, so does the potential for fluctuation in the value of the
corresponding Fund's shares.
NON-DIVERSIFIED STATUS. As "non-diversified" investment companies, each
Portfolio may invest, with respect to 50% of its total assets, more than 5% (but
not more than 25%) of its total assets in the securities of any issuer. A
Portfolio is likely to invest a greater percentage of its assets in the
securities of a single issuer than would a diversified fund. Therefore, a
Portfolio is more susceptible to any single adverse economic or political
occurrence or development affecting issuers of the relevant State's municipal
obligations.
OTHER INVESTMENT PRACTICES
Each Portfolio may engage in the following investment practices, some of which
may be considered to involve "derivative" instruments because they derive their
value from another instrument, security or index. In addition, each Portfolio
may temporarily borrow up to 5% of the value of its total assets to satisfy
redemption requests or settle securities transactions.
WHEN-ISSUED SECURITIES. Each Portfolio may purchase securities on a "when-
issued" basis, which means that payment and delivery occur on a future
settlement date. The price and yield of such securities are generally fixed on
the date of commitment to purchase. However, the market value of the securities
may fluctuate prior to delivery and upon delivery the securities may be worth
more or less than a Portfolio agreed to pay for them. Each Portfolio may also
purchase instruments that give the Portfolio the option to purchase a municipal
obligation when and if issued.
INVERSE FLOATERS. Each Portfolio may invest in municipal securities whose
interest rates bear an inverse relationship to the interest rate on another
security or the value of an index ("inverse floaters"). An investment in inverse
floaters may involve greater risk than an investment in a fixed rate bond.
Because changes in the interest rate on the other security or index inversely
affect the residual interest paid on the inverse floater, the value of an
inverse floater is generally more volatile than that of a fixed rate bond.
Inverse floaters have interest rate adjustment formulas which generally reduce
or, in the extreme, eliminate the interest paid to a Portfolio when short-term
interest rates rise, and increase the interest paid to the Portfolio when
short-term interest rates fall. Inverse floaters have varying degrees of
liquidity, and the market for these securities is new and relatively volatile.
These securities tend to underperform the market for fixed rate bonds in a
rising interest rate environment, but tend to outperform the market for fixed
rate bonds when interest rates decline. Shifts in long-term interest rates may,
however, alter this tendency. Although volatile, inverse floaters typically
offer the potential for yields exceeding the yields available on fixed rate
bonds with comparable credit quality and maturity. These securities usually
permit the investor to convert the floating rate to a fixed rate (normally
adjusted downward), and this optional conversion feature may provide a partial
hedge against rising rates if exercised at an opportune time. Inverse floaters
are leveraged because they provide two or more dollars of bond market exposure
for every dollar invested.
FUTURES TRANSACTIONS. Each Portfolio may purchase and sell various kinds of
financial futures contracts and options thereon to hedge against changes in
interest rates. Futures contracts may be based on various debt securities (such
as U.S. Government securities and municipal obligations) and securities indices
(such as the Municipal Bond Index traded on the Chicago Board of Trade). Such
transactions involve a risk of loss or depreciation due to unanticipated adverse
changes in securities prices, which may exceed a Portfolio's initial investment
in these contracts. A Portfolio may not purchase or sell futures contracts or
related options, except for closing purchase or sale transactions, if
immediately thereafter the sum of the amount of margin deposits and premiums
paid on the Portfolio's outstanding positions would exceed 5% of the market
value of the Portfolio's net assets. These transactions involve transaction
costs. There can be no assurance that the Investment Adviser's use of futures
will be advantageous to a Portfolio. Distributions by a Fund of any gains
realized on its corresponding Portfolio's transactions in futures and options on
futures will be taxable.
INSURED OBLIGATIONS. Each Portfolio may purchase municipal bonds that are
additionally secured by insurance, bank credit agreements, or escrow accounts.
The credit quality of companies which provide such credit enhancements will
affect the value of those securities. Although the insurance feature reduces
certain financial risks, the premiums for insurance and the higher market price
paid for insured obligations may reduce a Fund's current yield. Insurance
generally will be obtained from insurers with a claims-paying ability rated Aaa
by Moody's or AAA by S&P or Fitch. The insurance does not guarantee the market
value of the insured obligations or the net asset value of a Fund's shares.
ADDITIONAL RISK CONSIDERATIONS
Many municipal obligations offering current income are rated investment grade or
below (Baa or BBB or lower) or are unrated. As indicated above, each Portfolio
may invest in municipal obligations rated below investment grade (but not lower
than B by Moody's, S&P or Fitch) and comparable unrated obligations. Municipal
obligations rated investment grade or below and comparable unrated municipal
obligations in which a Portfolio may invest will have speculative
characteristics in varying degrees. While such obligations may have some quality
and protective characteristics, these characteristics can be expected to be
offset or outweighed by uncertainties or major risk exposures to adverse
conditions. Lower rated and comparable unrated municipal obligations are subject
to the risk of an issuer's inability to meet principal and interest payments on
the obligations (credit risk) and may also be subject to greater price
volatility due to such factors as interest rate sensitivity, market perception
of the creditworthiness of the issuer and general market liquidity (market
risk). Lower rated or unrated municipal obligations are also more likely to
react to real or perceived developments affecting market and credit risk than
are more highly rated obligations, which react primarily to movements in the
general level of interest rates. The Investment Adviser seeks to minimize the
risks of investing in below investment grade securities through professional
investment analysis and attention to current developments in interest rates and
economic conditions. When a Portfolio invests in lower rated or unrated
municipal obligations, the achievement of the Portfolio's goals is more
dependent on the Investment Adviser's ability than would be the case if the
Portfolio were investing in municipal obligations in the higher rating
categories.
Municipal obligations held by a Portfolio which are rated below investment grade
but which, subsequent to the assignment of such rating, are backed by escrow
accounts containing U.S. Government obligations may be determined by the
Investment Adviser to be of investment grade quality for purposes of the
Portfolio's investment policies. A Portfolio may retain in its portfolio an
obligation whose rating drops below B after its acquisition, including defaulted
obligations, if such retention is considered desirable by the Investment
Adviser; provided, however, that holdings of obligations rated below Baa or BBB
will be less than 35% of net assets. In the event the rating of an obligation
held by a Portfolio is downgraded, causing the Portfolio to exceed this
limitation, the Investment Adviser will (in an orderly fashion within a
reasonable period of time) dispose of such obligations as it deems necessary in
order to comply with the Portfolio's credit quality limitations. In the case of
a defaulted obligation, a Portfolio may incur additional expense seeking
recovery of its investment.
The net asset value of shares will change in response to fluctuations in
prevailing interest rates and changes in the value of the securities held by its
corresponding Portfolio. When interest rates decline, the value of securities
held by a Portfolio can be expected to rise. Conversely, when interest rates
rise, the value of most portfolio security holdings can be expected to decline.
Changes in the credit quality of the issuers of municipal obligations held by a
Portfolio will affect the principal value of (and possibly the income earned on)
such obligations. In addition, the values of such securities are affected by
changes in general economic conditions and business conditions affecting the
specific industries of their issuers. Changes by recognized rating services in
their ratings of a security and in the ability of the issuer to make payments of
principal and interest may also affect the value of a Portfolio's investments.
The amount of information about the financial condition of an issuer of
municipal obligations may not be as extensive as that made available by
corporations whose securities are publicly traded. An investment in shares of a
Fund will not constitute a complete investment program.
At times, a substantial portion of the Portfolio's assets may be invested in
securities as to which the Portfolio, by itself or together with other accounts
managed by the Investment Adviser and its affiliates, holds a major portion or
all of such securities. Under adverse market or economic conditions or in the
event of adverse changes in the financial condition of the issuer, the Portfolio
could find it more difficult to sell such securities when the Investment Adviser
believes it advisable to do so or may be able to sell such securities only at
prices lower than if such securities were more widely held. Under such
circumstances, it may also be more difficult to determine the fair value of such
securities for purposes of computing the Portfolio's net asset value.
The secondary market for some municipal obligations issued within a State
(including issues which are privately placed with a Portfolio) is less liquid
than that for taxable debt obligations or other more widely traded municipal
obligations. No Portfolio will invest in illiquid securities if more than 15% of
its net assets would be invested in securities that are not readily marketable.
No established resale market exists for certain of the municipal obligations in
which a Portfolio may invest. The market for obligations rated below investment
grade is also likely to be less liquid than the market for higher rated
obligations. As a result, a Portfolio may be unable to dispose of these
municipal obligations at times when it would otherwise wish to do so at the
prices at which they are valued.
Certain securities held by the Portfolio may permit the issuer at its option to
"call", or redeem, its securities. If an issuer redeems securities held by the
Portfolio during a time of declining interest rates, the Portfolio may not be
able to reinvest the proceeds in securities providing the same investment return
as the securities redeemed.
Some of the securities in which a Portfolio invests may include so-called
"zero-coupon" bonds, whose values are subject to greater fluctuation in response
to changes in market interest rates than bonds which pay interest currently.
Zero-coupon bonds are issued at a significant discount from face value and pay
interest only at maturity rather than at intervals during the life of the
security. Each Portfolio is required to accrue income from zero- coupon bonds on
a current basis, even though it does not receive that income currently in cash
and each Fund is required to distribute its share of the Portfolio's income for
each taxable year. Thus, a Portfolio may have to sell other investments to
obtain cash needed to make income distributions.
Each Portfolio may invest in municipal leases, and participations in municipal
leases. The obligation of the issuer to meet its obligations under such leases
is often subject to the appropriation by the appropriate legislative body, on an
annual or other basis, of funds for the payment of the obligations. Investments
in municipal leases are thus subject to the risk that the legislative body will
not make the necessary appropriation and the issuer will not otherwise be
willing or able to meet its obligation.
EACH FUND AND PORTFOLIO HAVE ADOPTED CERTAIN FUNDAMENTAL INVESTMENT
RESTRICTIONS WHICH ARE ENUMERATED IN DETAIL IN THE STATEMENT OF ADDITIONAL
INFORMATION AND WHICH MAY NOT BE CHANGED UNLESS AUTHORIZED BY A SHAREHOLDER
VOTE AND AN INVESTOR VOTE, RESPECTIVELY. EXCEPT FOR SUCH ENUMERATED
RESTRICTIONS AND AS OTHERWISE INDICATED IN THIS PROSPECTUS, THE INVESTMENT
OBJECTIVE AND POLICIES OF EACH FUND AND PORTFOLIO ARE NOT FUNDAMENTAL POLICIES
AND ACCORDINGLY MAY BE CHANGED BY THE TRUSTEES OF THE TRUST AND THE PORTFOLIO
WITHOUT OBTAINING THE APPROVAL OF A FUND'S SHAREHOLDERS OR THE INVESTORS IN
THE CORRESPONDING PORTFOLIO, AS THE CASE MAY BE.
ORGANIZATION OF THE FUNDS AND THE PORTFOLIOS
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EACH FUND IS A NON-DIVERSIFIED SERIES OF EATON VANCE MUNICIPALS TRUST, A
BUSINESS TRUST ESTABLISHED UNDER MASSACHUSETTS LAW PURSUANT TO A DECLARATION OF
TRUST DATED SEPTEMBER 30, 1985, AS AMENDED. The Trustees of the Trust are
responsible for the overall management and supervision of its affairs. The Trust
may issue an unlimited number of shares of beneficial interest (no par value per
share) in one or more series (such as the Funds). The Trustees of the Trust have
divided the shares of each Fund into multiple classes, including Class A and
Class B shares. Each class represents an interest in a Fund, but is subject to
different expenses, rights and privileges. See "Distribution and Service Plans"
and "How to Buy Shares". The Trustees have the authority under the Declaration
of Trust to create additional classes of shares with differing rights and
privileges. As a result of a reorganization with separate series of the Trust,
the Funds commenced offering Class A and Class B shares on August 1, 1997.
When issued and outstanding, shares are fully paid and nonassessable by the
Trust and redeemable as described under "How to Redeem Shares". There are no
annual meetings of shareholders, but special meetings may be held as required by
law to elect Trustees and consider certain other matters. Shareholders are
entitled to one vote for each full share held. Fractional shares may be voted
proportionately. Shares of a Fund will be voted together except that only
shareholders of a particular class may vote on matters affecting only that
class. Shares have no preemptive or conversion rights and are freely
transferable. In the event of the liquidation of a Fund, shareholders of each
class are entitled to share pro rata in the net assets attributable to that
class available for distribution to shareholders.
The Trustees of the Trust have considered the advantages and disadvantages of
investing the assets of each Fund in its corresponding Portfolio, as well as the
advantages and disadvantages of the two-tier format. The Trustees believe that
the structure offers opportunities for substantial growth in the assets of the
Portfolios, affords the potential for economies of scale for each Fund, (at
least when the assets of its corresponding Portfolio exceed $500 million) and
may over time result in lower expenses for a Fund.
EACH PORTFOLIO IS ORGANIZED AS A TRUST UNDER THE LAWS OF THE STATE OF NEW YORK
AND INTENDS TO BE TREATED AS A PARTNERSHIP FOR FEDERAL TAX PURPOSES. In addition
to selling an interest to its corresponding Fund, a Portfolio may sell interests
to other affiliated and non-affiliated mutual funds or institutional investors.
Such investors will invest in a Portfolio on the same terms and conditions and
will pay a proportionate share of the Portfolio's expenses. However, the other
investors investing in a Portfolio are not required to sell their shares at the
same public offering price as the corresponding Fund or class due to variations
in sales commissions and other operating expenses. Therefore, these differences
may result in differences in returns experienced by investors in the various
classes and funds that invest in its corresponding Portfolio. Information
regarding other pooled investment entities or funds which invest in a Portfolio
may be obtained by contacting the Principal Underwriter, 24 Federal Street,
Boston, MA 02110, (617) 482-8260.
Whenever a Fund as an investor in a Portfolio is requested to vote on matters
pertaining to the Portfolio (other than the termination of the Portfolio's
business, which may be determined by the Trustees of the Portfolio without
investor approval), the Fund will hold a meeting of Fund shareholders and will
vote its interest in the Portfolio for or against such matters proportionately
to the instructions to vote for or against such matters received from Fund
shareholders. A Fund shall vote shares for which it receives no voting
instructions in the same proportion as the shares for which it receives voting
instructions. Other investors in a Portfolio may alone or collectively acquire
sufficient voting interests in the Portfolio to control matters relating to the
operation of the Portfolio, which may require the corresponding Fund to withdraw
its investment in the Portfolio or take other appropriate action. Any such
withdrawal could result in a distribution "in kind" of portfolio securities (as
opposed to a cash distribution from the Portfolio). If securities are
distributed, a Fund could incur brokerage, tax or other charges in converting
the securities to cash. In addition, the distribution in kind may result in a
less diversified portfolio of investments or adversely affect the liquidity of a
Fund. Notwithstanding the above, there are other means for meeting shareholder
redemption requests, such as borrowing.
A Fund may withdraw (completely redeem) all its assets from its corresponding
Portfolio at any time if the Board of Trustees of the Trust determines that it
is in the best interest of that Fund to do so. In the event a Fund withdraws all
of its assets from its corresponding Portfolio, or the Board of Trustees of the
Trust determines that the investment objective of such Portfolio is no longer
consistent with the investment objective of the Fund, the Trustees would
consider what action might be taken, including investing the assets of such Fund
in another pooled investment entity or retaining an investment adviser to manage
the Fund's assets in accordance with its investment objective. A Fund's
investment performance may be affected by a withdrawal of all its assets (or the
assets of another investor in the Portfolio) from its corresponding Portfolio.
Although each Fund offers only its own shares of beneficial interest, it is
possible that a Fund or class might become liable for a misstatement or omission
in this Prospectus regarding another Fund or class because the Funds use this
combined Prospectus. The Trustees of the Trust have considered this factor in
approving the use of a combined Prospectus.
MANAGEMENT OF THE FUNDS AND THE PORTFOLIOS
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EACH PORTFOLIO ENGAGES BOSTON MANAGEMENT AND RESEARCH ("BMR"), A WHOLLY-OWNED
SUBSIDIARY OF EATON VANCE MANAGEMENT ("EATON VANCE"), AS ITS INVESTMENT ADVISER.
EATON VANCE, ITS AFFILIATES AND ITS PREDECESSOR COMPANIES HAVE BEEN MANAGING
ASSETS OF INDIVIDUALS AND INSTITUTIONS SINCE 1924 AND MANAGING INVESTMENT
COMPANIES SINCE 1931.
Acting under the general supervision of the Board of Trustees of each Portfolio,
BMR manages each Portfolio's investments and affairs. BMR also furnishes for the
use of each Portfolio office space and all necessary office facilities,
equipment and personnel for servicing the investments of the Portfolios. Under
its investment advisory agreement with a Portfolio, BMR receives a monthly
advisory fee equal to the aggregate of
(a) a daily asset based fee computed by applying the annual asset rate
applicable to that portion of the total daily net assets in each Category as
indicated below, plus
(b) a daily income based fee computed by applying the daily income rate
applicable to that portion of the total daily gross income (which portion
shall bear the same relationship to the total daily gross income on such day
as that portion of the total daily net assets in the same Category bears to
the total daily net assets on such day) in each Category as indicated below:
ANNUAL DAILY
CATEGORY DAILY NET ASSETS ASSET RATE INCOME RATE
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1 up to $20 million 0.100% 1.00%
2 $20 million but less than $40 million 0.200% 2.00%
3 $40 million but less than $500 million 0.300% 3.00%
4 $500 million but less than $1 billion 0.275% 2.75%
5 $1 billion but less than $1.5 billion 0.250% 2.50%
6 $1.5 billion but less than $2 billion 0.225% 2.25%
7 $2 billion but less than $3 billion 0.200% 2.00%
8 $3 billion and over 0.175% 1.75%
For the fiscal year ended July 31, 1996, each Portfolio paid advisory fees
equivalent to the percentage of average daily net assets stated below.
NET ASSETS AS OF
PORTFOLIO JULY 31, 1996 ADVISORY FEE
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Arizona $129,861,547 0.41%
Colorado 45,415,574 0.26%(1)
Connecticut 187,616,885 0.43%
Michigan 173,464,608 0.43%
Minnesota 76,090,073 0.36%
New Jersey 386,244,341 0.47%
Pennsylvania 448,181,861 0.47%
Texas 24,366,836 0.10%(2)
(1) Absent a fee reduction, the Colorado Portfolio would have paid BMR advisory
fees equivalent to 0.28% of average daily net asssets.
(2) Absent a fee reduction, the Texas Portfolio would have paid BMR advisory
fees equivalent to 0.20% of average daily net asssets.
BMR OR EATON VANCE ACTS AS INVESTMENT ADVISER TO INVESTMENT COMPANIES AND
VARIOUS INDIVIDUAL AND INSTITUTIONAL CLIENTS WITH ASSETS UNDER MANAGEMENT OF
OVER $17 BILLION. Eaton Vance is a wholly-owned subsidiary of Eaton Vance Corp.,
a publicly-held holding company which through its subsidiaries and affiliates
engages primarily in investment management, administration and marketing
activities. The Principal Underwriter is a wholly-owned subsidiary of Eaton
Vance.
William H. Ahern has acted as portfolio manager of the Colorado Portfolio since
June 1, 1997. Mr. Ahern manages other Eaton Vance Portfolios, has been a Vice
President of Eaton Vance and BMR since 1996, and served as an analyst/ trader at
Eaton Vance beginning in 1989.
Nicole Anderes has acted as the portfolio manager of the Connecticut Portfolio
since January, 1994 and the Texas Portfolio since December 1, 1995. She joined
Eaton Vance and BMR as a Vice President in January 1994 and manages other Eaton
Vance Portfolios. Prior to joining Eaton Vance, she was a Vice President and
portfolio manager at Lazard Freres Asset Management (1992-1994).
Timothy T. Browse has acted as the portfolio manager of the Michigan Portfolio
since it commenced operations and the Pennsylvania Portfolio since December 1,
1995. He has been a Vice President of Eaton Vance and of BMR since 1993 and a
portfolio manager of other Eaton Vance Portfolios since 1992.
Cynthia J. Clemson has acted as the portfolio manager of the Arizona Portfolio
since January 1, 1994. Ms. Clemson manages other Eaton Vance Portfolios, has
been a Vice President of Eaton Vance and BMR since 1993, and served as a high
yield municipal bond analyst at Eaton Vance beginning in 1985.
Robert B. MacIntosh has acted as the portfolio manager of the New Jersey
Portfolio since it commenced operations and the Minnesota Portfolio since
November 1, 1996. Mr. MacIntosh has been a Vice President of Eaton Vance since
1991 and of BMR since 1992 and manages other Eaton Vance Portfolios.
Municipal obligations are normally traded on a net basis (without commission)
through broker-dealers and banks acting for their own account. Such firms
attempt to profit from such transactions by buying at the bid price and selling
at the higher asked price of the market, and the difference is customarily
referred to as the spread. In selecting firms which will execute portfolio
transactions, BMR judges their professional ability and quality of service and
uses its best efforts to obtain execution at prices which are advantageous to
the Portfolios and at reasonably competitive spreads. Subject to the foregoing,
BMR may consider sales of shares of the Funds or of other investment companies
sponsored by BMR or Eaton Vance as a factor in the selection of firms to execute
portfolio transactions. The Trust, each Portfolio and BMR have adopted Codes of
Ethics relating to personal securities transactions. The Codes permit Eaton
Vance personnel to invest in securities (including securities that may be
purchased or held by a Portfolio) for their own accounts, subject to certain
pre-clearance, reporting and other restrictions and procedures contained in such
Codes.
The Trust has retained the services of Eaton Vance to act as Administrator of
the Funds. The Trust has not retained the services of an investment adviser
since the Trust seeks to achieve the investment objective of each Fund by
investing its assets in the corresponding Portfolio. As Administrator, Eaton
Vance provides the Funds with general office facilities and supervises the
overall administration of the Funds. For these services Eaton Vance currently
receives no compensation. The Trustees of the Trust may determine, in the
future, to compensate Eaton Vance for such services.
The Portfolios and the Funds, as the case may be, will each be responsible for
all respective costs and expenses not expressly stated to be payable by BMR
under the investment advisory agreement, by Eaton Vance under the administrative
services agreement, or by the Principal Underwriter under the distribution
agreement.
DISTRIBUTION AND SERVICE PLANS
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The Trust has adopted a Service Plan (the "Class A Plan") for each Fund's Class
A shares that is designed to meet the service fee requirements of the sales
charge rule of the National Association of Securities Dealers, Inc. THE CLASS A
PLAN PROVIDES THAT EACH CLASS A 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 ITS AVERAGE DAILY NET ASSETS FOR ANY FISCAL YEAR.
The Trustees of the Trust have initially implemented the Class A Plan by
authorizing Class A to make quarterly service fee payments to the Principal
Underwriter and Authorized Firms in amounts not expected to exceed .20% of its
average daily net assets for any fiscal year which is based on the value of
Class A shares sold by such persons and remaining outstanding for at least
twelve months. However, the Class A Plan authorizes the Trustees of the Trust to
increase payments without action by Class A shareholders of any Fund, provided
that the aggregate amount of payments made in any fiscal year does not exceed
.25% of average daily net assets.
The Trust has also adopted a Distribution Plan ("Class B Plan") pursuant to Rule
12b-1 under the Investment Company Act of 1940 ("1940 Act") for each Fund's
Class B shares. The Plan is designed to permit an investor to purchase 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 therewith. UNDER SUCH PLAN, EACH CLASS B PAYS THE PRINCIPAL
UNDERWRITER A FEE, ACCRUED DAILY AND PAID MONTHLY, AT AN ANNUAL RATE NOT
EXCEEDING .75% OF ITS AVERAGE DAILY NET ASSETS TO FINANCE THE DISTRIBUTION OF
ITS SHARES. Such fees compensate the Principal Underwriter for sales commissions
paid by it to Authorized Firms on the sale of Class B shares and for interest
expenses. The Principal Underwriter uses its own funds to pay sales commissions
(except on exchange transactions and reinvestments) to Authorized Firms at the
time of sale equal to 4% of the purchase price of the Class B shares sold by
such Firms. Contingent deferred sales charges paid to the Principal Underwriter
will be used to reduce amounts owed to it. Because payments to the Principal
Underwriter under the Class B Plan are limited, uncovered distribution charges
(sales commissions paid by the Principal Underwriter plus interest, less the
above fees and contingent deferred sales charges received by it) may exist
indefinitely. During the fiscal year ended July 31, 1996, each Class B (which
was then a seperate series fund) paid or accrued sales commissions equivalent to
.75% of average daily net assets. As at July 31, 1996, the outstanding uncovered
distribution charges of the Principal Underwriter on such day calculated under
the Class B Plan amounted to approximately $4,265,000 (equivalent to 3.3% of net
assets on such day) in the case of Arizona Class B, $1,766,000 (equivalent to
4.1% of net assets on such day) in the case of Colorado Class B, $6,538,000
(equivalent to 3.6% of net assets on such day) in the case of Connecticut Class
B, $5,075,000 (equivalent to 3.0% of net assets on such day) in the case of
Michigan Class B, $2,539,000 (equivalent to 3.4% of net assets on such day) in
the case of Minnesota Class B, $11,266,000 (equivalent to 3.0% of net assets on
such day) in the case of New Jersey Class B, $13,539,000 (equivalent to 3.1% of
net assets on such day) in the case of Pennsylvania Class B, and $757,000
(equivalent to 3.2% of net assets on such day) in the case of Texas Class B.
THE CLASS B PLAN ALSO AUTHORIZES EACH CLASS B TO MAKE PAYMENTS OF SERVICE FEES
TO THE PRINCIPAL UNDERWRITER, AUTHORIZED FIRMS AND OTHER PERSONS IN AMOUNTS NOT
EXCEEDING .25% OF ITS AVERAGE DAILY NET ASSETS FOR PERSONAL SERVICES, AND/ OR
THE MAINTENANCE OF SHAREHOLDER ACCOUNTS. The Trustees of the Trust have
initially implemented this provision of the Class B Plan by authorizing each
Class B to make quarterly service fee payments to the Principal Underwriter and
Authorized Firms in amounts not expected to exceed .20% of the average daily net
assets for any fiscal year which is based on the value of Class B shares sold by
such persons and remaining outstanding for at least 12 months. This fee is paid
quarterly in arrears based on the value of Class B shares sold by such persons
and remaining outstanding for at least twelve months. For the fiscal year ended
July 31, 1996, each Class B paid or accrued service fees as follows (as an
annualized percentage of average daily net assets): Arizona Class B (0.16%);
Colorado Class B (0.17%); Connecticut Class B (0.18%); Michigan Class B (0.18%);
Minnesota Class B (0.17%); New Jersey Class B (0.17%); Pennsylvania Class B
(0.17%); and Texas Class B (0.17%).
The Principal Underwriter may, from time to time, at its own expense, provide
additional incentives to Authorized Firms which employ registered
representatives who sell Fund shares and/or shares of other funds distributed by
the Principal Underwriter. In some instances, such additional incentives may be
offered only to certain Authorized Firms whose representatives sell or are
expected to sell significant amounts of shares. In addition, the Principal
Underwriter may from time to time increase or decrease the sales commissions
payable to Authorized Firms.
The Trust may, in its absolute discretion, suspend, discontinue or limit the
offering of one or more of its classes of shares at any time. In determining
whether any such action should be taken, the Trust's management intends to
consider all relevant factors, including (without limitation) the size of a Fund
or class, the investment climate and market conditions, the volume of sales and
redemptions of shares, and in the case of Class B shares, the amount of
uncovered distribution charges of the Principal Underwriter. The Plans may
continue in effect and payments may be made under the Plans following any such
suspension, discontinuance or limitation of the offering of shares; however,
there is no contractual obligation to continue any Plans for any particular
period of time. Suspension of the offering of shares would not, of course,
affect a shareholder's ability to redeem shares.
VALUING SHARES
- --------------------------------------------------------------------------------
EACH FUND VALUES ITS SHARES ONCE EACH DAY THE NEW YORK STOCK EXCHANGE (THE
"EXCHANGE") IS OPEN FOR TRADING, as of the close of regular trading on the
Exchange (normally 4:00 p.m. New York time). Each Class's net asset value per
share is determined by the Trust's custodian, Investors Bank & Trust Company
("IBT"), (as agent for the Trust) in the manner authorized by the Trustees of
the Trust. The net asset value of each Class is computed by dividing the value
of that Class's pro rata share of each Fund's total assets, less its
liabilities, by the number of shares of that Class outstanding. Because each
Fund invests its assets in an interest in its corresponding Portfolio, each
Class's net asset value will reflect the value of each Fund's 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, for Class A shares, the
public offering price based thereon. It is the Authorized Firms' responsibility
to transmit orders promptly to the Principal Underwriter.
Each Portfolio's net asset value is also determined as of the close of regular
trading on the Exchange by IBT (as custodian and agent for the Portfolio) based
on market or fair value in the manner authorized by the Trustees of the
Portfolio. Net asset value is computed by subtracting the liabilities of a
Portfolio from the value of its total assets. Municipal obligations will
normally be valued on the basis of valuations furnished by a pricing service.
SHAREHOLDERS MAY DETERMINE THE VALUE OF THEIR INVESTMENT BY MULTIPLYING THE
NUMBER OF SHARES OWNED BY THE CURRENT NET ASSET VALUE PER SHARE.
HOW TO BUY SHARES
- --------------------------------------------------------------------------------
SHARES OF A FUND MAY BE PURCHASED FOR CASH OR MAY BE ACQUIRED IN EXCHANGE FOR
ACCEPTABLE SECURITIES. Class A shares are purchased at the effective public
offering price, which price is based on the effective net asset value per share
plus the applicable sales charge. The sales charge is divided between the
Authorized Firm and the Principal Underwriter. Class B shares are purchased at
the net asset value per share next determined after an order is effective. An
Authorized Firm may charge its customers a fee in connection with transactions
executed by that Firm. The Trust may suspend the offering of shares at any time
and may refuse an order for the purchase of shares. Shares of each Fund are
offered for sale only in States where such shares may be legally sold.
An initial investment 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 Trust's transfer agent (the "Transfer Agent") as follows: First
Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123. The
$1,000 minimum initial investment is waived for Bank Automated Investing
accounts, which may be established with an investment of $50 or more. See "Eaton
Vance Shareholder Services".
CLASS A SHARES. The sales charge may vary depending on the size of the purchase
and the number of Class A shares of Eaton Vance funds the investor may already
own, any arrangement to purchase additional shares during a 13- month period or
special purchase programs. Complete details of how investors may purchase shares
at reduced sales charges under a Statement of Intention or Right of Accumulation
are available from Authorized Firms or the Principal Underwriter.
The current sales charges and dealer commissions are:
<TABLE>
<CAPTION>
SALES CHARGE SALES CHARGE DEALER COMMISSION
AS PERCENTAGE OF AS PERCENTAGE OF AS PERCENTAGE OF
AMOUNT OF PURCHASE OFFERING PRICE AMOUNT INVESTED OFFERING PRICE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Less than $25,000 4.75% 4.99% 4.50%
$25,000 but less than $100,000 4.50 4.71 4.25
$100,000 but less than $250,000 3.75 3.90 3.50
$250,000 but less than $500,000 3.00 3.09 2.75
$500,000 but less than $1,000,000 2.00 2.04 2.00
$1,000,000 or more 0.00* 0.00* 0.50
* No sales charge is payable at the time of purchase on investments of $1 million or more or where the amount invested
represents redemption proceeds from a mutual fund unaffiliated with Eaton Vance, if the redemption occurred no more than 60
days' prior to the purchase of Fund shares and the redeemed shares were potentially subject to a sales charge. A contingent
deferred sales charge ("CDSC") of 0.50% will be imposed on such investments (as described below) in the event of certain
redemptions within 12 months of purchase.
</TABLE>
The Principal Underwriter may at times allow discounts up to the full sales
charge. During periods when the discount includes the full sales charge,
Authorized Firms may be deemed to be underwriters as that term is defined in the
Securities Act of 1933. The Principal Underwriter may, from time to time, at its
own expense, provide additional incentives to Authorized Firms which employ
registered representatives who sell Fund shares and/or shares of other funds
distributed by the Principal Underwriter. In some instances, such additional
incentives may be offered only to certain Authorized Firms whose representatives
sell or are expected to sell significant amounts of shares.
Class A shares may be sold at net asset value to current and retired Directors
and Trustees of Eaton Vance funds, including the Portfolios; to clients and
current and retired officers and employees of Eaton Vance, its affiliates and
other investment advisers of Eaton Vance sponsored funds; to registered
representatives and employees of Authorized Firms and bank employees who refer
customers to registered representatives of Authorized Firms; to officers and
employees of IBT and the Transfer Agent; and to such persons' spouses and
children under the age of 21 and their beneficial accounts. Class A shares may
also be issued at net asset value (1) in connection with the merger of an
investment company or series thereof with a Fund, (2) to investors making an
investment as part of a fixed fee program whereby an entity unaffiliated with
the Investment Adviser provides multiple investment services, such as
management, brokerage and custody, and (3) to investment advisors, financial
planners or other intermediaries who place trades for their own accounts or the
accounts of their clients and who charge a management, consulting or other fee
for their services; clients of such investment advisors, financial planners or
other intermediaries who place trades for their own accounts if the accounts are
linked to the master account of such investment advisor, financial planner or
other intermediary on the books and records of the broker or agent; and
retirement and deferred compensation plans and trusts used to fund those plans,
including, but not limited to, those defined in Section 401(a), 403(b) or 457 of
the Internal Revenue Code of 1986, as amended (the "Code") and "rabbi trusts".
STATEMENT OF INTENTION AND ESCROW AGREEMENT. If the investor, on an application,
makes a Statement of Intention to invest a specified amount over a thirteen
month period in Class A shares, 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 such shares (computed
to the nearest full share at the public offering price applicable to the initial
purchase hereunder) registered in the investor's name. All income dividends and
capital gains distributions on escrowed shares will be paid to the investor or
to the investor's order. When the minimum investment so specified is completed,
the escrowed shares will be delivered to the investor. If the investor has an
accumulation account the shares will remain on deposit under the investor's
account.
If total purchases under this Statement of Intention are less than the amount
specified, the investor will promptly remit to the Principal Underwriter any
difference between the sales charge on the amount specified and on the amount
actually purchased. If the investor does not within 20 days after written
request by the Principal Underwriter or the Authorized Firm pay such difference
in sales charge, the escrow agent will redeem an appropriate number of the
escrowed shares in order to realize such difference. Full shares remaining after
any such redemption together with any excess cash proceeds of the shares so
redeemed will be delivered to the investor or to the investor's order by the
escrow agent.
If total purchases made under this Statement are large enough to qualify for a
lower sales charge than that applicable to the amount specified, all
transactions will be computed at the expiration date of this Statement to give
effect to the lower charge. Any difference in sales charge will be refunded to
the investor in cash, or applied to the purchase of additional shares at the
lower charge if specified by the investor. This refund will be made by the
Authorized Firm and by the Principal Underwriter. If at the time of the
recomputation an Authorized 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.
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. The minimum value of securities (or securities and cash) accepted
for deposit is $5,000. Securities accepted will be sold on the day of their
receipt or as soon thereafter as possible. The number of Fund shares to be
issued in exchange for securities will be the aggregate proceeds from the sale
of such securities, divided by the applicable public offering price of Class A
shares or net asset value of Class B shares on the day such proceeds are
received. Eaton Vance will use reasonable efforts to obtain the then current
market price for such securities but does not guarantee the best available
price. Eaton Vance will absorb any transaction costs, such as commissions, on
the sale of the securities.
Securities determined to be acceptable should be transferred via book entry or
physically delivered, in proper form for transfer, through an Authorized Firm,
together with a completed and signed Letter of Transmittal in approved form
(available from Authorized Firms), as follows:
IN THE CASE OF BOOK ENTRY:
Deliver through Depository Trust Co.
Broker #2212
Investors Bank & Trust Company
For A/C Eaton Vance [State name] Municipals Fund (and Class)
IN THE CASE OF PHYSICAL DELIVERY:
Investors Bank & Trust Company
Attention: Eaton Vance [State name] Municipals Fund (and Class)
Physical Securities Processing Settlement Area
200 Clarendon Street
Boston, MA 02116
Investors who are contemplating an exchange of securities for shares, or their
representatives, must contact Eaton Vance to determine whether the securities
are acceptable before forwarding such securities. Eaton Vance reserves the right
to reject any securities. Exchanging securities for 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.
IF YOU DON'T HAVE AN AUTHORIZED FIRM, EATON VANCE CAN RECOMMEND ONE.
HOW TO REDEEM SHARES
- ------------------------------------------------------------------------------
A SHAREHOLDER MAY REDEEM SHARES IN ONE OF THREE WAYS -- BY MAIL, BY TELEPHONE OR
THROUGH AN AUTHORIZED FIRM. The redemption price will be based on the net asset
value per share next computed after a redemption request is received in the
proper form as described below. The redemption price will be reduced by any
applicable contingent deferred sales charge as described below.
REDEMPTION BY MAIL: Shares may be redeemed by delivering to the Transfer Agent,
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123,
during its business hours a written request for redemption in good order, plus
any share certificates with executed stock powers. Good order means that all
relevant documents must be endorsed by the record owner(s) exactly as the shares
are registered and the signature(s) must be guaranteed by a member of either the
Securities Transfer Association's STAMP program or the New York Stock Exchange's
Medallion Signature Program, or certain banks, savings and loan institutions,
credit unions, securities dealers, securities exchanges, clearing agencies and
registered securities associations as required by a Commission regulation and
acceptable to the Transfer Agent. In addition, in some cases, good order may
require the furnishing of additional documents such as where shares are
registered in the name of a corporation, partnership or fiduciary.
REDEMPTION BY TELEPHONE: Shares may be redeemed by telephone provided the
investor has not disclaimed in writing the use of the privilege. Such
redemptions can be effected by calling the Transfer Agent at 800-262-1122,
Monday through Friday, 9:00 a.m. to 4:00 p.m. (Eastern Standard Time). The
proceeds of a telephone redemption may be no greater than the maximum amount
established by the Principal Underwriter (currently $50,000) and may be mailed
only to the account address of record. Shares held by corporations, trusts or
certain other entities, or subject to fiduciary arrangements, may not be
redeemed by telephone. Neither the Trust, the Principal Underwriter nor the
Transfer Agent will be responsible for the authenticity of redemption
instructions received by telephone, provided that reasonable procedures to
confirm that instructions communicated by telephone are genuine have been
followed. Telephone instructions will be tape recorded. In times of drastic
economic or market changes, a telephone redemption may be difficult to
implement.
REDEMPTION THROUGH AN AUTHORIZED FIRM: To sell shares at their net asset value
through an Authorized Firm (a repurchase), a shareholder can place a repurchase
order with the Authorized Firm, which may charge a fee. The value of such shares
is based upon the net asset value calculated after the Principal Underwriter, as
the Trust's agent, receives the order. It is the Authorized Firm's
responsibility to transmit promptly repurchase orders to the Principal
Underwriter. Throughout this Prospectus, the word "redemption" is generally
meant to include a repurchase.
Within seven days after receipt of a redemption request in good order by the
Transfer Agent, the Trust will make payment in cash for the net asset value of
the shares as of the date determined above, reduced by the amount of any federal
income tax required to be withheld. While normally payments will be made in cash
for redeemed shares, the Trust, subject to compliance with applicable
regulations, has reserved the right to pay the redemption price of shares of a
Fund, either totally or partially, by a distribution in kind of readily
marketable securities withdrawn from its corresponding Portfolio. The securities
so distributed would be valued pursuant to the Portfolio's valuation procedures.
If a shareholder received a distribution in kind, the shareholder could incur
brokerage or other charges in converting the securities to cash.
If shares were recently purchased, the proceeds of a redemption will not be sent
until the check (including a certified or cashier's check) received for the
shares purchased has cleared. Payment for shares tendered for redemption may be
delayed up to 15 days from the purchase date when the purchase check has not yet
cleared. Redemptions may result in a taxable gain or loss.
Due to the high cost of maintaining small accounts, the Trust reserves the right
to redeem accounts with balances of less than $750. Prior to such a redemption,
shareholders will be given 60 days' written notice to make an additional
purchase. However, no such redemption would be required if the cause of the low
account balance was a reduction in the net asset value of shares.
CONTINGENT DEFERRED SALES CHARGE -- CLASS A. If Class A shares have been
purchased at net asset value with no initial sales charge by virtue of the
purchase having been in the amount of $1 million or more, or if shares were
purchased at net asset value because the amount invested represents redemption
proceeds from a mutual fund unaffiliated with Eaton Vance (as described under
"How to Buy Shares"), and are redeemed within 12 months of purchase, a CDSC of
0.50% will be imposed on such redemption. The CDSC will be imposed on an amount
equal to the lesser of the current market value or the original purchase price
of the shares redeemed. Accordingly, no CDSC will be imposed on increases in
account value above the initial purchase price, including any distributions that
have been reinvested in additional shares. In determining whether a CDSC is
applicable to a redemption, the calculation will be made in a manner that
results in the lowest possible rate being charged. It will be assumed that
redemptions are made first from any shares in the shareholder's account that are
not subject to a CDSC. The CDSC will be retained by the Principal Underwriter.
The CDSC is waived for redemptions involving certain liquidation, merger or
acquisition transactions involving other investment companies. If a shareholder
reinvests redemption proceeds 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.
CONTINGENT DEFERRED SALES CHARGE -- CLASS B. Class B shares redeemed within the
first six years of their purchase (except shares acquired through the
reinvestment of distributions) generally will be subject to a CDSC. This CDSC is
imposed on any redemption, the amount of which exceeds the aggregate value at
the time of redemption of (a) all shares in the account purchased more than six
years prior to the redemption, (b) all shares in the account acquired through
reinvestment of distributions, and (c) the increase, if any, in the value of all
other shares in the account (namely those purchased within the six years
preceding the redemption) over the purchase price of such shares. Redemptions
are processed in a manner to maximize the amount of redemption proceeds which
will not be subject to a CDSC. That is, each redemption will be assumed to have
been made first from the exempt amounts referred to in clauses (a), (b) and (c)
above, and second through liquidation of those shares in the account referred to
in clause (c) on a first-in-first-out basis. Any CDSC which is required to be
imposed on Class B share redemptions will be made in accordance with the
following schedule:
YEAR OF REDEMPTION
AFTER PURCHASE CDSC
- ------------------------------------------------------------------------
First or Second 5%
Third 4%
Fourth 3%
Fifth 2%
Sixth 1%
Seventh and following 0%
In calculating the CDSC upon the redemption of Class B shares acquired in an
exchange of shares of a fund currently listed under "The Eaton Vance Exchange
Privilege", the CDSC schedule applicable to the shares at the time of purchase
will apply and the purchase of shares acquired in the exchange is deemed to have
occurred at the time of the original purchase of the exchanged shares.
No CDSC will be imposed on Class B shares which have been sold to Eaton Vance or
its affiliates, or to their respective employees or clients. The CDSC will also
be waived for shares redeemed (1) pursuant to a Withdrawal Plan (see "Eaton
Vance Shareholder Services"), (2) as part of a required distribution from a
tax-sheltered retirement plan or (3) following the death of all beneficial
owners of such shares, provided the redemption is requested within one year of
death (a death certificate and other applicable documents may be required). In
addition, shares acquired as a result of a merger or liquidation of another
Eaton Vance sponsored fund will have a CDSC imposed at the same rate as would
have been imposed in the prior fund.
REPORTS TO SHAREHOLDERS
- --------------------------------------------------------------------------------
EACH FUND WILL ISSUE TO ITS SHAREHOLDERS SEMI-ANNUAL AND ANNUAL REPORTS
CONTAINING FINANCIAL STATEMENTS. Financial statements included in annual reports
are audited by the Funds' independent certified public accountants. Shortly
after the end of each calendar year, each Fund will furnish its shareholders
with information necessary for preparing federal and State tax returns.
Consistent with applicable law, duplicate mailings of shareholder reports and
certain other Fund information to shareholders residing at the same address may
be eliminated.
THE LIFETIME INVESTING ACCOUNT/DISTRIBUTION OPTIONS
- --------------------------------------------------------------------------------
AFTER AN INVESTOR MAKES AN INITIAL PURCHASE OF SHARES, THE TRANSFER AGENT WILL
SET UP A LIFETIME INVESTING ACCOUNT FOR THE INVESTOR ON THE TRUST'S RECORDS.
This account is a complete record of all transactions which at all times shows
the balance of shares owned. The Trust will not issue share certificates except
upon request.
At least quarterly, shareholders will receive a statement showing complete
details of any transaction and the current share balance in the account. THE
LIFETIME INVESTING ACCOUNT ALSO PERMITS A SHAREHOLDER TO MAKE ADDITIONAL
INVESTMENTS IN SHARES BY SENDING A CHECK FOR $50 OR MORE to the Transfer Agent.
Any questions concerning a shareholder's account or services available may be
directed by telephone to EATON VANCE SHAREHOLDER SERVICES at 800-225-6265,
extension 2, or in writing to the Transfer Agent, First Data Investor Services
Group, P.O. Box 5123, Westborough, MA 01581-5123 (please provide the name of the
shareholder, the Fund and Class, 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 Trust's
dividend disbursing agent, First Data Investor Services Group, P.O. Box 5123,
Westborough, MA 01581-5123. The currently effective option will appear on each
account statement.
Share Option -- Dividends and capital gains will be reinvested in additional
shares.
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 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 Trust and its Transfer Agent. Since the
Trust 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 Authorized Firm or to an account directly with the
Trust 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 Authorized
Firm, or transferring the account to another Authorized Firm, an investor
wishing to reinvest distributions should determine whether the Authorized Firm
which will hold the shares allows reinvestment of distributions in "street name"
accounts.
THE EATON VANCE EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
Shares of each Fund currently may be exchanged for shares of the same class of
one or more other funds in the Eaton Vance Group of Funds. Class A shares may
also be exchanged for shares of Eaton Vance Cash Management Fund, Eaton Vance
Income Fund of Boston, Eaton Vance Municipal Bond Fund L.P., and Eaton Vance Tax
Free Reserves. Class B shares may also be exchanged for shares of Eaton Vance
Prime Rate Reserves, which are subject to an early withdrawal charge, Class B
shares of any Limited Maturity Fund or shares of Eaton Vance Money Market Fund,
which are subject to a CDSC, and shares of a money market fund sponsored by an
Authorized Firm and approved by the Principal Underwriter (an "Authorized Firm
fund"). Any such exchange will be made on the basis of the net asset value per
share of each fund/class at the time of the exchange (plus, in the case of an
exchange made within six months of the date of purchase of Class A shares
subject to an initial sales charge, an amount equal to the difference, if any,
between the sales charge previously paid on the shares being exchanged and the
sales charge payable on the shares being acquired). Exchange offers are
available only in States where shares of the fund being acquired may be legally
sold. Exchanges are subject to any restrictions or qualifications set forth in
the current prospectus of any such fund.
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 Trust 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.
The Transfer Agent makes exchanges at the next determined net asset value after
receiving an exchange request in good order (see "How to Redeem Shares").
Consult the Transfer Agent for additional information concerning the exchange
privilege. Applications and prospectuses of other funds are available from
Authorized Firms or the Principal Underwriter. The prospectus for each fund
describes its investment objectives and policies, and shareholders should obtain
a prospectus and consider these objectives and policies carefully before
requesting an exchange.
No CDSC is imposed on exchanges. For purposes of calculating the CDSC upon
redemption of shares acquired in an exchange, the CDSC schedule applicable to
the shares at the time of purchase will apply and the purchase of shares
acquired in one or more exchanges is deemed to have occurred at the time of the
original purchase of the exchanged shares, except that time during which shares
are held in an Authorized Firm fund will not be credited toward completion of
the CDSC period. For the CDSC schedule applicable to the Class B shares (except
Prime Rate Reserves and Class B shares of the Limited Maturity Funds), see "How
to Redeem Shares". The CDSC or early withdrawal charge schedule applicable to
Eaton Vance Prime Rate Reserves and Class B shares of the Limited Maturity Funds
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.
Telephone exchanges are accepted by the Transfer Agent provided the investor has
not disclaimed in writing the use of the privilege. To effect such exchanges,
call the Transfer Agent at 800-262-1122, Monday through Friday, 9:00 a.m. to
4:00 p.m. (Eastern Standard Time). Shares acquired by telephone exchange must be
registered in the same name(s) and with the same address as the shares being
exchanged. Neither the Trust, the Principal Underwriter nor the Transfer Agent
will be responsible for the authenticity of exchange instructions received by
telephone, provided that reasonable procedures to confirm that instructions
communicated are genuine have been followed. Telephone instructions will be tape
recorded. In times of drastic economic or market changes, a telephone exchange
may be difficult to implement. An exchange may result in a taxable gain or loss.
EATON VANCE SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
THE TRUST 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 applicable Fund or Class as an expense to
all shareholders.
INVEST-BY-MAIL -- FOR PERIODIC SHARE ACCUMULATION: Once the $1,000 minimum
investment has been made, checks of $50 or more payable to the order of the Fund
and Class being purchased may be mailed directly to the Transfer Agent, First
Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123 at any
time -- whether or not dividends are reinvested. The name of the shareholder,
the Fund and Class 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, in the case of
Class B shares, exceed annually 12% of the account balance at the time the plan
is established. Such amount will not be subject to a CDSC. See "How to Redeem
Shares". A minimum deposit of $5,000 in shares is required. The maintenance of a
withdrawal plan concurrently with purchases of additional Class A shares would
be disadvantageous because of the sales charge included in such purchases.
STATEMENT OF INTENTION: Purchases of $50,000 or more of Class A shares made
over a 13-month period are eligible for reduced sales charges. See "How to Buy
Shares -- Statement of Intention and Escrow Agreement."
RIGHT OF ACCUMULATION: Purchases may qualify for reduced sales charges on Class
A shares when the current market value of holdings (shares at current offering
price), plus new purchases, reaches $50,000 or more. Class A shares of the Eaton
Vance funds listed under "The Eaton Vance Exchange Privilege" may be combined
under the Statement of Intention and Right of Accumulation.
REINVESTMENT PRIVILEGE: A shareholder who has redeemed shares may reinvest, with
credit for any CDSC paid on the redeemed shares, any portion or all of the
redemption proceeds (plus that amount necessary to acquire a fractional share to
round off the purchase to the nearest full share) in the same shares (or for
Class A shares in Class A shares of any other Eaton Vance fund), provided that
the reinvestment is effected within 60 days after such redemption, and the
privilege has not been used more than once in the prior 12 months. Shares are
sold to a reinvesting shareholder at the next determined net asset value
following timely receipt of a written purchase order by the Principal
Underwriter or by the Trust (or by the Trust's Transfer Agent). To the extent
that any shares are sold at a loss and the proceeds are reinvested in shares (or
other shares are acquired) within the period beginning 30 days before and ending
30 days after the date of the redemption some or all of the loss generally will
not be allowed as a tax deduction. Shareholders should consult their tax
advisers concerning the tax consequences of reinvestments.
DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
SUBSTANTIALLY ALL OF THE INVESTMENT INCOME ALLOCATED TO A FUND AND ITS CLASSES
BY ITS CORRESPONDING PORTFOLIO, LESS THE FUND'S AND CLASSES' DIRECT AND
ALLOCATED EXPENSES, WILL BE DECLARED DAILY AS A DISTRIBUTION TO RELEVANT
SHAREHOLDERS OF RECORD AT THE TIME OF DECLARATION. Distributions on Class A
shares, whether taken in cash or reinvested in additional shares, will
ordinarily be paid on the last day of each month or the next business day
thereafter. Distributions on Class B shares will ordinarily be paid on the
fifteenth day of each month or the next business day thereafter. Each Fund
anticipates that for tax purposes the entire distribution, whether paid in cash
or reinvested in additional shares, 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 business day after collected funds for the purchase of 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 their Fund during the calendar year. A Fund's net realized
capital gains, if any, consist of the net realized capital gains allocated to
the Fund by its corresponding Portfolio for tax purposes, after taking into
account any available capital loss carryovers; a Fund's net realized capital
gains, if any, will be distributed at least once a year, usually in December.
Sales charges paid upon a purchase of Class A shares cannot be taken into
account for purposes of determining gain or loss on a redemption or exchange of
the shares before the 91st day after their purchase to the extent a sales charge
is reduced or eliminated in a subsequent acquisition of such shares of a Fund or
of another fund pursuant to a Fund's reinvestment or exchange privilege. Any
disregarded amounts will result in an adjustment to the shareholder's tax basis
in some or all of any other shares acquired.
Each Fund intends to qualify as a regulated investment company under the Code
and to satisfy all requirements necessary to avoid paying federal income taxes
on the part of its investment company taxable income (consisting generally of
taxable net investment income and net short-term capital gain) and net capital
gain that it distributes to shareholders. In satisfying these requirements, each
Fund will treat itself as owning its proportionate share of each of its
corresponding Portfolio's assets and as entitled to the income of the Portfolio
properly attributable to such share.
As a regulated investment company under the Code, each Fund does not pay federal
income or excise taxes to the extent that it distributes to shareholders
substantially all of its ordinary income and capital gain net income in
accordance with the timing requirements imposed by the Code. As partnerships
under the Code, the Portfolios do not pay federal income or excise taxes.
Distributions of interest on certain municipal obligations constitute a tax
preference item under the AMT provisions applicable to individuals and
corporations. Distributions of taxable income (including a portion of any
original issue discount with respect to certain stripped municipal obligations
and stripped coupons and accretion of certain market discount) and net
short-term capital gains will be taxable to shareholders as ordinary income.
Distributions of long-term capital gains are taxable to shareholders as such for
federal income tax purposes, regardless of the length of time shares have been
owned by the shareholder. If shares are purchased shortly before the record date
of such a distribution, the shareholder will pay the full price for the shares
and then receive some portion of the price back as a taxable distribution.
Distributions are taxed in the manner described above whether paid in cash or
reinvested in additional shares. Tax-exempt distributions received from a Fund
are includable in the tax base for determining the taxability of social security
and railroad retirement benefits.
The Code provides that interest on indebtedness incurred or continued by a
shareholder to purchase or carry shares is not deductible to the extent it is
deemed related to a Fund's distributions of tax-exempt interest dividends to the
shareholder. 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. "Substantial user" is defined in applicable Treasury
regulations to include a "non-exempt person" who regularly uses in trade or
business a part of a facility financed from the proceeds of industrial
development bonds and would likely be interpreted to include private activity
bonds issued to finance similar facilities.
SEE THE APPENDIX TO THIS PROSPECTUS FOR INFORMATION CONCERNING STATE TAXES.
Shareholders should consult with their tax advisers concerning the applicability
of State, local and other taxes to an investment.
PERFORMANCE INFORMATION
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FROM TIME TO TIME, YIELD AND/OR AVERAGE ANNUAL TOTAL RETURN MAY BE ADVERTISED.
Current yield is calculated separately for each Class by dividing the net
investment income per share earned during a recent 30-day period by the maximum
offering price per share or 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. Average
annual total return is determined separately for each Class by computing the
average annual percentage change in value of $1,000 invested at the maximum
public offering price (including maximum sales charge for Class A; net asset
value for Class B) for specified periods, assuming reinvestment of all
distributions. Total return may be quoted for the period prior to commencement
of operations which would reflect the Class's total return (or that of its
predecessor) adjusted to reflect any applicable sales charge. The average annual
total return calculation assumes a complete redemption of the investment and the
deduction of any applicable CDSC at the end of the period. Each Fund may publish
annual and cumulative total return figures from time to time.
Each Fund may also publish total return figures for each Class which do not take
into account any sales charge. Any performance figure which does not take into
account a sales charge would be reduced to the extent such charge is imposed
upon a redemption.
Investors should note that investment results will fluctuate over time, and any
presentation of yield or total return for any prior period should not be
considered a representation of what an investment may earn or what the yield or
total return may be in any future period. If expenses are allocated to Eaton
Vance, performance will be higher.
<PAGE>
APPENDIX
STATE SPECIFIC INFORMATION
Because each Portfolio will normally invest at least 65% of its assets (and, in
the case of the Minnesota Portfolio, generally 95% or more) in the obligations
of issuers in its corresponding State, it is susceptible to factors affecting
that State. Each Portfolio may also invest up to 5% of its net assets in
obligations issued by the governments of Guam and the U.S. Virgin Islands and up
to 35% of its assets in obligations issued by the government of Puerto Rico. The
Minnesota Portfolio has no intention of investing in such obligations. The
Connecticut Portfolio may invest in municipal obligations of Puerto Rico, the
U.S. Virgin Islands and Guam, the interest on which cannot be taxed by any State
under federal law. Set forth below is certain economic and tax information
concerning the States in which the Portfolios invest and Puerto Rico.
The bond ratings provided below are current as of the date of this Prospectus
and are based on economic conditions which may not continue; moreover, there can
be no assurance that particular bond issues may not be adversely affected by
changes in economic, political or other conditions. Unless stated otherwise, the
ratings indicated are for obligations of the State. A State's political
subdivisions may have different ratings which are unrelated to the ratings
assigned to State obligations.
ARIZONA. Arizona's economy is primarily based on the service, high-tech
manufacturing, construction and tourism industries, as well as the military. The
State experienced rapid economic and population growth in the 1980s, which has
slowed somewhat in the 1990s. The problems associated with such growth (air
quality, transportation and public infrastructure) continue to be addressed by
the State legislature. The State's unemployment rate in April 1997 was 4.7%,
below the national rate of 4.9%.
The State's ability to raise revenues is limited by Constitutional and
legislative restrictions on property tax increases. There is also a limit on
annual spending. The State does not issue general obligation bonds, but relies
on pay-as-you-go capital outlays, revenue bonds and certificates of
participation to finance projects. Each of these projects is individually rated
based on its specific creditworthiness.
ARIZONA TAXES. Based upon the advice of Arizona tax counsel, the management of
the Fund believes that under Arizona law, dividends paid by the Fund will be
exempt from Arizona income tax imposed on individuals, corporations and estates
and trusts that are subject to Arizona taxation to the extent such dividends are
excluded from gross income for federal income tax purposes and are derived from
interest payments on Arizona obligations. In addition, dividends paid by the
Fund will be exempt from Arizona income tax imposed on such persons, though
included in gross income for federal income tax purposes, to the extent such
dividends are derived from interest payments on direct obligations of the United
States. Other distributions from the Fund, including distributions derived from
net short-term and long-term capital gains, are generally not exempt from
Arizona income tax.
Interest or indebtedness and other related expenses which are incurred or
continued by a shareholder to purchase or carry shares of the Fund generally
will not be deductible for Arizona income tax purposes.
COLORADO. Colorado's economy began to improve in the late 1980s, recovering from
a recession largely caused by contractions in the energy, high technology and
construction industries. The recovery has been fueled, in part, by large public
construction projects, net in-migration, a healthy tourist economy, and
increases in the wholesale and retail trade sector and the general services
sector. Momentum is sufficient that the Office of State Planning and Budgeting
has pronounced that Colorado's "slower growth pattern mimics that of the United
States, although it is not as severe as the nation's", even though most of the
large public works projects are completed and the boom in net migration begins
to ease. Employment in the service and trade industries represents approximately
54.8% of the State's nonagricultural wage and salary jobs, and government
employment represents approximately 16.0%. Manufacturing represents only 10.2%
and, while total jobs in the sector is increasing, manufacturing is slowly
falling as a percentage of total employment, due in part to a concentration in
defense-related production. Colorado's unemployment rate was 3.3% in April 1997,
below the national rate of 4.9%. Colorado added 49,200 jobs in the twelve months
ended April 1997. There is no State general obligation debt outstanding.
COLORADO TAXES. In the opinion of Kutak Rock, special Colorado tax counsel to
the Fund, provided that the Fund qualifies as a regulated investment company
under the Code, and the Portfolio is treated as a partnership for federal income
tax purposes, individuals, trusts, estates, and corporations who are holders of
the Fund and who are subject to the Colorado income tax will not be subject to
Colorado tax on Fund dividends to the extent that: (a) such dividends qualify as
exempt-interest dividends of a regulated investment company under Section
852(b)(5) of the Code and are derived from interest received by the Fund on
obligations of Colorado or any of its political subdivisions issued on or after
May 1, 1980 or (b) obligations of the United States or its possessions to the
extent included in federal taxable income. To the extent that Fund distributions
are attributable to sources not described in the preceding sentences, such as
long or short-term capital gains, such distributions will not be exempt from
Colorado income tax. There are no municipal income taxes in Colorado. As
intangibles, shares in the Fund will be exempt from Colorado property taxes.
CONNECTICUT. Historically, Connecticut's economic structure has been
concentrated in manufacturing, including a heavy component of defense-related
industries, which increases the State's vulnerability to economic cycles and to
declines in federal government defense spending. More recently, Connecticut's
level of manufacturing activity has declined, but this has been partially offset
by extensive urban development, a large insurance sector, relocations of
corporate headquarters to Connecticut (specifically to Fairfield County), and
the extension of other service sectors. For 1996, the unemployment rate in
Connecticut on a seasonally adjusted basis was 5.0%, as compared to a rate of
5.3% nationwide.
General obligation bonds issued by Connecticut municipalities are payable
primarily only from ad valorem taxes on property subject to taxation by the
municipality. The State has about $6 billion of general obligation bonds
outstanding, of which more than half have been issued for general State
purposes. The remaining general obligation bonds were issued for highway
construction, mass transit, and rental housing. Debt indicators have been rising
and are high at $1,963 of net direct debt per capita. Certain Connecticut
municipalities have experienced severe fiscal difficulties and have reported
operating and accumulated deficits in recent years. Regional economic
difficulties, reductions in revenues, and increased expenses could lead to
further fiscal problems for the State and its political subdivisions,
authorities, and agencies. This could result in declines in the value of their
outstanding obligations, reductions in their ability to pay interest and
principal thereon, and increases in their future borrowing costs.
General obligations of the State of Connecticut are rated AA-, Aa and AA by S&P,
Moody's and Fitch, respectively.
CONNECTICUT TAXES. In the opinion of Day, Berry & Howard, special Connecticut
tax counsel to the Connecticut Fund, shareholders of the Connecticut Fund will
not be subject to the Connecticut personal income tax on the Connecticut taxable
income of individuals, trusts, and estates in the case of distributions received
from the Connecticut Fund to the extent that such distributions qualify as
exempt-interest dividends for federal income tax purposes and are derived from
interest on tax-exempt obligations issued by or on behalf of the State of
Connecticut and its political subdivisions or the authorities,
instrumentalities, or districts of any of them, or on tax-exempt obligations the
interest on which Connecticut is prohibited from taxing by federal law, e.g.,
tax-exempt obligations that are issued by the governments of Puerto Rico, the
U.S. Virgin Islands and Guam.
Other distributions from the Connecticut Fund, including dividends attributable
to obligations of issuers in other states and all long-term and short-term
capital gains, will not be exempt from the Connecticut personal income tax,
except that capital gain dividends derived from obligations issued by or on
behalf of the State of Connecticut or its political subdivisions or the
authorities, instrumentalities or districts of any of them will not be subject
to such tax. Distributions from the Connecticut Fund that constitute items of
tax preference for purposes of the federal alternative minimum tax will not be
subject to the net Connecticut minimum tax applicable to taxpayers subject to
the Connecticut personal income tax and required to pay the federal alternative
minimum tax, to the extent qualifying as exempt-interest dividends derived from
obligations issued by or on behalf of the State of Connecticut and its political
subdivisions or the authorities, instrumentalities, or districts of any of them,
or from obligations the interest on which Connecticut is prohibited from taxing
by federal law, but other distributions from the Connecticut Fund could cause or
increase liability for the net Connecticut minimum tax. The Connecticut Fund
will report annually to its shareholders the percentage and source, on a
state-by-state basis, of interest income received by the Connecticut Fund on
municipal bonds during the preceding year.
Distributions from investment income and capital gains, including exempt-
interest dividends derived from interest that is exempt from Connecticut
personal income tax and federal income tax, will be subject to the Connecticut
Corporation Business Tax if received by a corporation subject to such tax,
except for any portion therof other than amounts qualifying as exempt-interest
dividends or capital gain dividends for federal income tax purposes that might
qualify for the dividends-received deduction provided under that Connecticut
tax, and all such distributions may be subject to state and local taxes in
states other than Connecticut.
MICHIGAN. Michigan has long had a large representation in and is dominated by
the automobile industry and related industries and tends to be more vulnerable
to economic cycles than other states and the nation as a whole. For January
1997, Michigan's unemployment rate was 4.9%, as compared to the national rate of
5.4%. In March, 1994, Michigan voters approved changes to the tax system
resulting in, among other things, an increase in the sales tax rate, a reduction
in the income tax rate and the creation of a statewide property tax.
Michigan's general obligation debt is rated A1, AA and AA, by Moody's, S&P and
Fitch, respectively.
MICHIGAN TAXES. The Michigan Fund has received an opinion from Butzel Long,
special Michigan tax counsel to the Michigan Fund, to the effect that
shareholders of the Michigan Fund who are subject to the Michigan state income
tax, municipal income tax or single business tax will not be subject to such
taxes on their Michigan Fund dividends to the extent that such distributions are
exempt-interest dividends for federal income tax purposes and are attributable
to interest on obligations held by the Michigan Portfolio and allocated to the
Michigan Fund which is exempt from regular federal income tax and is exempt from
Michigan State and City income taxes, Michigan single business tax and in the
form of an investment exempt from the Michigan intangibles tax ("Michigan
tax-exempt obligations"). Other distributions with respect to shares of the
Michigan Fund including, but not limited to, long or short-term capital gains,
will be subject to the Michigan income tax or single business tax and may be
subject to the city income taxes imposed by certain Michigan cities. The opinion
also provides that shares of the Michigan Fund will be exempt from the Michigan
intangibles tax to the extent the Michigan Portfolio's assets consist of
Michigan tax-exempt obligations and any other securities or obligations that are
exempt from the Michigan intangibles tax. The Michigan intangibles tax is being
phased out, thus, even if it applies to a portion of income from the Fund (for
instance, due to non-Michigan investments), it is now reduced and will be
eliminated by 1998.
MINNESOTA. Minnesota relies heavily on a progressive individual income tax and a
retail sales tax for revenue, which results in a fiscal system unusually
sensitive to economic conditions. Economic and State fiscal conditions have
improved. As of April 1997, the State's adjusted unemployment rate was 3.4%
compared with a national rate of 4.9%. The State ended fiscal year 1996 with a
General Fund balance of $845 million.
The State's general obligation bonds are rated Aaa, AA+ and AAA, by Moody's, S&P
and Fitch, respectively.
MINNESOTA TAXES. In the opinion of Faegre & Benson, special Minnesota tax
counsel to the Fund, provided that the Fund qualifies as a "regulated investment
company" under the Code, and subject to the discussion in the paragraph below,
exempt-interest dividends paid by the Fund will be exempt from the regular
Minnesota personal income tax imposed on individuals, estates and trusts that
are subject to Minnesota taxation to the extent that such dividends qualify as
exempt-interest dividends of a regulated investment company under section
852(b)(5) of the Internal Revenue Code which are derived from interest income on
tax-exempt obligations of Minnesota, or its political or governmental
subdivisions, municipalities, governmental agencies or instrumentalities
("Minnesota Sources"); provided, however, such exemption from the regular
Minnesota personal income tax is available only if the portion of the
exempt-interest dividends from such Minnesota Sources that is paid to all
shareholders represents 95% or more of the exempt-interest dividends that are
paid by the Fund. For this purpose, provided that the Portfolio is taxed
federally as a partnership and not as a corporation, the Fund will be treated as
owning its proportionate share of the assets of the Portfolio and the income
derived from such assets. The Fund and the Portfolio intend to invest their
respective assets so that each will meet the 95% test. However, if the 95% test
is not met, all exempt-interest dividends that are paid by the Fund will be
subject to the regular Minnesota personal income tax. Even if the 95% test is
met, to the extent that exempt-interest dividends paid by the Fund are not
derived from the Minnesota Sources referred to in the first sentence of this
paragraph, they will be subject to the regular Minnesota personal income tax.
Other distributions of the Fund, including distributions derived from net
short-term and long-term capital gains, are generally not exempt from the
regular Minnesota personal income tax imposed on individuals, estates and
trusts.
Legislation enacted in 1995 provides that it is the intent of the Minnesota
legislature that interest income on obligations of Minnesota governmental units,
including obligations of the Minnesota Sources described above, and
exempt-interest dividends that are derived from interest income on such
obligations, be included in the net income of individuals, estates, and trusts
for Minnesota income tax purposes if it is judicially determined that the
exemption by Minnesota of such interest or such exempt-interest dividends
unlawfully discriminates against interstate commerce because interest income on
obligations of governmental issuers located in other states, or exempt- interest
dividends derived from such obligations, is so included. This provision applies
to taxable years that begin during or after the calendar year in which such
judicial decision becomes final, regardless of the date on which the obligations
were issued, and other remedies apply for previous taxable years. The United
States Supreme Court in 1995 denied certiorari in a case in which an Ohio state
court upheld an exemption for interest income on obligations of Ohio
governmental issuers, even though interest income on obligations of non-Ohio
governmental issuers was subject to tax. The Ohio Supreme Court, in a subsequent
case involving the same taxpayer and the same issue, recently refused to
reconsider the merits of the case on the ground that the previous final state
court judgment barred any claim arising out of the transaction that was the
subject of the previous action. It cannot be predicted whether a similar case
will be brought in Minnesota or elsewhere, or what the outcome of such case
would be.
Minnesota imposes an alternative minimum tax on individuals, estates, and trusts
that is based, in part, on such taxpayers' federal alternative minimum taxable
income. Accordingly, exempt-interest dividends that constitute tax preference
items for purposes of the federal alternative minimum tax, even though they are
derived from the Minnesota Sources described above, will be included in the base
upon which such Minnesota alternative minimum tax is computed. In addition, the
entire portion of exempt-interest dividends that is derived from sources other
than the Minnesota Sources described above also is subject to the Minnesota
alternative minimum tax imposed on such individuals, estates and trusts.
Furthermore, should the 95% test that is described above fail to be met, all of
the exempt-interest dividends that are paid by the Fund, including all of those
derived from the Minnesota Sources described above, will be subject to the
Minnesota alternative minimum tax imposed on such shareholders.
Distributions from the Fund will be included in taxable income and in
alternative minimum taxable income, for purposes of determining the Minnesota
franchise tax imposed on corporations subject to Minnesota taxation. Such
distributions may also be taken into account in certain cases in determining the
minimum fee that is imposed on corporations, S corporations, and partnerships.
Interest on indebtedness which is incurred or continued by an individual, a
trust or an estate to purchase or carry shares of the Fund generally will not be
deductible for regular Minnesota personal income tax purposes or Minnesota
alternative minimum tax purposes.
NEW JERSEY. Fiscal year 1996 ended with total revenues up 4.3% to $15.6 billion.
However, total spending increased to $16.3 billion. As of January 1, 1996, New
Jersey fulfilled Governor Whitman's promised personal income tax cut of 30%.
Even so, tax revenues were up in all categories with income tax receipts up by
4.3%. The higher spending level resulted in a decrease of total fund balances to
$880 million, down 7.5%.
The legislature is now debating a controversial Whitman proposal to issue $2.8
billion of bonds to fund the state's pension liability. The plan would free up
$647 million of funds for the current year but has raised budgetary sleight-
of-hand concerns. Largely, however, the New Jersey economy has performed well,
growing faster than its Mid-Atlantic neighbors, though slower than the nation as
a whole.
New Jersey's general obligation debt is rated Aa1, AA+ and AA+ by Moody's, S&P
and Fitch, respectively.
NEW JERSEY TAXES. The New Jersey Fund intends to satisfy New Jersey's statutory
requirements for treatment as a "Qualified Investment Fund." The Fund has
obtained an opinion of its special tax counsel, Wilentz, Goldman & Spitzer,
P.A., that, provided the New Jersey Fund limits its investments to those
described in this Prospectus and otherwise satisfies such statutory
requirements, shareholders of the New Jersey Fund which are individuals, estates
or trusts will not be required to include in their New Jersey gross income
distributions from the New Jersey Fund that are attributable to interest or gain
realized by the New Jersey Fund from obligations the interest on which is exempt
from regular federal income tax and is exempt from New Jersey State personal
income tax or other obligations statutorily free from New Jersey taxation.
However, with regard to corporate shareholders, such counsel is also of the
opinion that distributions from the New Jersey Fund will not be excluded from
net income and shares of the New Jersey Fund will not be excluded from
investment capital in determining New Jersey corporation business (franchise)
and corporation income taxes for corporate shareholders.
PENNSYLVANIA. Pennsylvania has long had a large representation in the steel,
mining and manufacturing industries and adverse conditions in those or other
significant industries within Pennsylvania may from time to time have a
correspondingly adverse effect on specific issuers within Pennsylvania or on
anticipated revenue to the Commonwealth. In recent years Pennsylvania's economy
has become more diversified with major new sources of growth in the service
sector, including trade, medical and the health services, education and
financial institutions. The unadjusted unemployment rate for Pennsylvania in
March 1997 was 5.4%.
The Governor's fiscal year 1997 proposed budget contained tax reductions and
certain cost reduction programs, particularly in the areas of public health and
welfare. The fiscal year 1997 budget projects a small fiscal year-end
unappropriated surplus. All budgetary proposals require legislative enactment.
Pennsylvania's general obligation debt is rated "AA-" by S&P and Fitch and "A1"
by Moody's.
PENNSYLVANIA TAXES. Interest derived by the Pennsylvania Fund from obligations
which are statutorily free from state taxation in Pennsylvania ("Exempt
Obligations") are not taxable on pass through to shareholders for purposes of
the Pennsylvania personal income tax. The term "Exempt Obligations" includes (i)
those obligations issued by the Commonwealth of Pennsylvania and its political
subdivisions, agencies and instrumentalities, the interest from which is
statutorily free from state taxation in the Commonwealth of Pennsylvania, and
(ii) certain qualifying obligations of U.S. territories and possessions, or U.S.
Government obligations. Distributions attributable to most other sources,
including capital gains, will not be exempt from Pennsylvania personal income
tax.
Corporate shareholders that are subject to the Pennsylvania corporate net income
tax will not be subject to corporate net income tax on distributions of interest
made by the Pennsylvania Fund, provided such distributions are attributable to
Exempt Obligations. Distributions of capital gain attributable to Exempt
Obligations are subject to the Pennsylvania corporate net income tax. An
investment in the Pennsylvania Fund is also exempt from the Pennsylvania Gross
Premiums tax.
Shares of the Pennsylvania Fund which are held by individual shareholders who
are Pennsylvania residents and subject to the Pennsylvania county personal
property tax will be exempt from such tax to the extent that the obligations
held by the Pennsylvania Portfolio consist of Exempt Obligations on the annual
assessment date. Corporations are not subject to Pennsylvania personal property
taxes.
For individual shareholders who are residents of the City of Philadelphia,
distributions of interest derived from Exempt Obligations will not be taxable
for purposes of the Philadelphia School District Investment Net Income Tax
("Philadelphia School District Tax"), provided that the Pennsylvania Portfolio
reports to its investors the percentage of Exempt Obligations held by it for the
year. The Pennsylvania Portfolio will report such percentage to its investors.
TEXAS. Employment in Texas continued to expand during the 1990s. During April
1997, non-farm employment in Texas was 8.4 million. Over the past year, Texas
has gained more than 220,000 jobs, an increase of 2.7%, with most of the growth
occurring in the services and trade sectors of the economy. Unemployment as of
April 1997 was 5.5% versus the national rate of 4.9%.
The State is expected to end the fiscal year ended August 31, 1997 with a $1.235
million operating surplus in the General Revenue Fund. The General Revenue Fund
balance was $2.27 billion at the end of fiscal year 1996.
General obligations of Texas are rated AA, Aa2 and AA+ by S&P, Moody's and
Fitch, respectively. Both S&P and Fitch have a stable outlook for the State.
TEXAS TAXES. Texas does not impose a state income tax on individuals. To the
extent that distributions from the Texas Fund are included in a corporate
shareholder's surplus, they will be subject to the Texas franchise tax that is
based on net worth.
PUERTO RICO. The economy of Puerto Rico is dominated by the manufacturing and
service sectors. Although the economy of Puerto Rico expanded significantly from
fiscal 1984 through fiscal 1990, the rate of this expansion has slowed through
1996. Growth is dependent on the state of the U.S. economy and the relative
stability in the price of oil, the exchange rate of the U.S. dollar and the cost
of borrowing. Section 936 (a tax incentive that has encouraged economic growth
in Puerto Rico) will be phased out over a ten year period. At this time, it is
uncertain as to the implication the change will have on the Puerto Rican
economy. Although the Puerto Rico unemployment rate has declined substantially
since 1985, the seasonally adjusted unemployment rate for 1996 was approximately
13.8%. The North American Free Trade Agreement (NAFTA), which became effective
January 1, 1994, could lead to the loss of Puerto Rico's lower salaried or labor
intensive jobs to Mexico.
S&P rates Puerto Rico general obligations debt A, while Moody's rates it Baa1;
these ratings have been in place since 1956 and 1976, respectively. S&P assigned
a negative outlook on Puerto Rico's rating on April 26, 1994 which was changed
to stable on December 16, 1996.
<PAGE>
[LOGO]
EATON VANCE
- --------------------
Mutual Funds
- ------------------------------------------------------------------------------
EATON VANCE ARIZONA MUNICIPALS FUND
EATON VANCE COLORADO MUNICIPALS FUND
EATON VANCE CONNECTICUT MUNICIPALS FUND
EATON VANCE MICHIGAN MUNICIPALS FUND
EATON VANCE MINNESOTA MUNICIPALS FUND
EATON VANCE NEW JERSEY MUNICIPALS FUND
EATON VANCE PENNSYLVANIA MUNICIPALS FUND
EATON VANCE TEXAS MUNICIPALS FUND
PROSPECTUS
AUGUST 1, 1997
- ------------------------------------------------------------------------------
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, 200 Clarendon Street, Boston, MA 02116
TRANSFER AGENT
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123
(800) 262-1122
AUDITORS
Deloitte & Touche LLP, 125 Summer Street, Boston, MA 02110
C8/1ABP
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
August 1, 1997
EATON VANCE ARIZONA MUNICIPALS FUND
EATON VANCE COLORADO MUNICIPALS FUND
EATON VANCE CONNECTICUT MUNICIPALS FUND
EATON VANCE MICHIGAN MUNICIPALS FUND
EATON VANCE MINNESOTA MUNICIPALS FUND
EATON VANCE NEW JERSEY MUNICIPALS FUND
EATON VANCE PENNSYLVANIA MUNICIPALS FUND
EATON VANCE TEXAS MUNICIPALS FUND
24 Federal Street
Boston, Massachusetts 02110
(800) 225-6265
This Statement of Additional Information provides general information about
the Funds listed above and their corresponding Portfolios. This Statement of
Additional Information is sometimes referred to herein as the "SAI".
TABLE OF CONTENTS
Page
Additional Information about Investment Policies ..................... 1
Investment Restrictions .............................................. 7
Trustees and Officers ................................................ 8
Investment Adviser and Administrator ................................. 11
Custodian ............................................................ 14
Services for Accumulation -- Class A Shares .......................... 15
Service for Withdrawal ............................................... 15
Determination of Net Asset Value ..................................... 15
Investment Performance ............................................... 16
Taxes ................................................................ 18
Principal Underwriter ................................................ 20
Service Plan -- Class A Shares ....................................... 21
Distribution Plan -- Class B Shares .................................. 21
Portfolio Security Transactions ...................................... 23
Other Information .................................................... 25
Independent Certified Public Accountants ............................. 26
Financial Statements ................................................. 27
Appendix A: Class A Shares ........................................... a-1
Appendix B: Class B Shares ........................................... b-1
Appendix C: State Specific Information ............................... c-1
Appendix D: Tax Equivalent Yield Tables .............................. d-1
Appendix E: Ratings .................................................. e-1
Although each Fund offers only its shares of beneficial interest, it is
possible that a Fund (or Class) might become liable for a misstatement or
omission in this Statement of Additional Information regarding another Fund (or
Class) because the Funds use this combined Statement of Additional Information.
The Trustees of the Trust have considered this factor in approving the use of a
combined Statement of Additional Information.
THIS COMBINED STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY THE FUNDS' PROSPECTUS DATED AUGUST 1, 1997, AS SUPPLEMENTED FROM
TIME TO TIME, WHICH IS INCORPORATED HEREIN BY REFERENCE. THIS COMBINED STATEMENT
OF ADDITIONAL INFORMATION SHOULD BE READ IN CONJUNCTION WITH SUCH PROSPECTUS, A
COPY OF WHICH MAY BE OBTAINED WITHOUT CHARGE BY CONTACTING EATON VANCE
DISTRIBUTORS, INC. (THE "PRINCIPAL UNDERWRITER") (SEE BACK COVER FOR ADDRESS AND
PHONE NUMBER).
<PAGE>
This SAI provides information about the Funds and the Portfolios.
Capitalized terms used in this SAI and not otherwise defined have the meanings
given them in the Prospectus. The Funds are subject to the same investment
policies as those of the Portfolio. Each Fund currently seeks to achieve its
objective by investing in its corresponding Portfolio.
ADDITIONAL INFORMATION ABOUT INVESTMENT POLICIES
MUNICIPAL OBLIGATIONS
Municipal obligations are issued to obtain funds for various public and
private purposes. Such obligations include bonds as well as tax-exempt
commercial paper, project notes and municipal notes such as tax, revenue and
bond anticipation notes of short maturity, generally less than three years. In
general, there are three categories of municipal obligations the interest on
which is exempt from federal income tax and is not a tax preference item for
purposes of the AMT: (i) certain "public purpose" obligations (whenever issued),
which include obligations issued directly by state and local governments or
their agencies to fulfill essential governmental functions; (ii) certain
obligations issued before August 8, 1986 for the benefit of non-governmental
persons or entities; and (iii) certain "private activity bonds" issued after
August 7, 1986 which include "qualified Section 501(c)(3) bonds" or refundings
of certain obligations included in the second category. In assessing the federal
income tax treatment of interest on any municipal obligation, the Portfolio will
generally rely on an opinion of the issuer's counsel (when available) and will
not undertake any independent verification of the basis for the opinion. The two
principal classifications of municipal bonds are "general obligation" and
"revenue" bonds.
Interest on certain "private activity bonds" issued after August 7, 1986 is
exempt from regular federal income tax, but such interest (including a
distribution by a Fund derived from such interest) is treated as a tax
preference item which could subject the recipient to or increase the recipient's
liability for the AMT. For corporate shareholders, a Fund's distributions
derived from interest on all municipal obligations (whenever issued) is included
in "adjusted current earnings" for purposes of the AMT as applied to
corporations (to the extent not already included in alternative minimum taxable
income as income attributable to private activity bonds).
Any recognized gain or income attributable to market discount on long-term
tax-exempt municipal obligations (i.e., obligations with a term of more than one
year) purchased after April 30, 1993 other than, in general, at their original
issue, is taxable as ordinary income. A long-term debt obligation is generally
treated as acquired at a market discount if purchased after its original issue
at a price less than (i) the stated principal amount payable at maturity, in the
case of an obligation that does not have original issue discount or (ii) in the
case of an obligation that does have original issue discount, the sum of the
issue price and any original issue discount that accrued before the obligation
was purchased, subject to a de minimis exclusion.
Issuers of general obligation bonds include states, counties, cities, towns
and regional districts. The proceeds of these obligations are used to fund a
wide range of public projects including the construction or improvement of
schools, highways and roads, water and sewer systems and a variety of other
public purposes. The basic security of general obligation bonds is the issuer's
pledge of its faith, credit, and taxing power for the payment of principal and
interest. The taxes that can be levied for the payment of debt service may be
limited or unlimited as to rate and amount.
The principal security for a revenue bond is generally the net revenues
derived from a particular facility or group of facilities or, in some cases,
from the proceeds of a special excise or other specific revenue source. Revenue
bonds have been issued to fund a wide variety of capital projects including:
electric, gas, water, sewer and solid waste disposal systems; highways, bridges
and tunnels; port, airport and parking facilities; transportation systems;
housing facilities, colleges and universities and hospitals. Although the
principal security behind these bonds varies widely, many provide additional
security in the form of a debt service reserve fund whose monies may be used to
make principal and interest payments on the issuer's obligations. Housing
finance authorities have a wide range of security including partially or fully
insured, rent subsidized and/or collateralized mortgages, and/or the net
revenues from housing or other public projects. In addition to a debt service
reserve fund, some authorities provide further security in the form of a state's
ability (without legal obligation) to make up deficiencies in the debt service
reserve fund. Lease rental revenue bonds issued by a state or local authority
for capital projects are normally secured by annual lease rental payments from
the state or locality to the authority sufficient to cover debt service on the
authority's obligations. Such payments are usually subject to annual
appropriations by the state or locality.
Industrial development and pollution control bonds, although nominally
issued by municipal authorities, are in most cases revenue bonds and are
generally not secured by the taxing power of the municipality, but are usually
secured by the revenues derived by the authority from payments of the industrial
user or users.
Each 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. Each 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 a Portfolio as a result of any such event, and a
Portfolio may also manage (or engage other persons to manage) or otherwise deal
with any real estate, facilities or other assets so acquired. The Portfolio
anticipates that real estate consulting and management services may be required
with respect to properties securing various municipal obligations in its
portfolio or subsequently acquired by the Portfolio. The Portfolio will incur
additional expenditures in taking protective action with respect to portfolio
obligations in default and assets securing such obligations.
The yields on municipal obligations will be dependent on a variety of
factors, including purposes of issue and source of funds for repayment, general
money market conditions, general conditions of the municipal bond market, size
of a particular offering, maturity of the obligation and rating of the issue.
The ratings of Moody's, S&P and Fitch represent their opinions as to the quality
of the municipal obligations which they undertake to rate. It should be
emphasized, however, that ratings are based on judgment and are not absolute
standards of quality. Consequently, municipal obligations with the same
maturity, coupon and rating may have different yields while obligations of the
same maturity and coupon with different ratings may have the same yield. In
addition, the market price of such obligations will normally fluctuate with
changes in interest rates, and therefore the net asset value of a Portfolio will
be affected by such changes.
RISKS OF CONCENTRATION
Municipal Obligations of a Particular State. For a discussion of the risks
associated with a Portfolio's policy of concentrating its investments in
particular State issuers of municipal obligations, see "Risks of Concentration"
in Appendix C.
Obligations of Particular Types of Issuers. Each Portfolio may invest 25% or
more of its total assets in municipal obligations of the same type. There could
be economic, business or political developments which might affect all municipal
obligations of the same type. In particular, investments in industrial revenue
bonds might involve (without limitation) the following risks.
Hospital bond ratings are often based on feasibility studies which contain
projections of expenses, revenues and occupancy levels. Among the influences
affecting a hospital's gross receipts and net income available to service its
debt are demand for hospital services, the ability of the hospital to provide
the services required, management capabilities, economic developments in the
service area, efforts by insurers and government agencies to limit rates and
expenses, confidence in the hospital, service area economic developments,
competition, availability and expense of malpractice insurance, Medicaid and
Medicare funding and possible federal legislation limiting the rates of increase
of hospital charges.
Electric utilities face problems in financing large construction programs in
an inflationary period, cost increases and delay occasioned by safety and
environmental considerations (particularly with respect to nuclear facilities),
difficulty in obtaining fuel at reasonable prices, and in achieving timely and
adequate rate relief from regulatory commissions, effects of energy conservation
and limitations on the capacity of the capital market to absorb utility debt.
Life care facilities are an alternative form of long-term housing for the
elderly which offer residents the independence of a condominium life style and,
if needed, the comprehensive care of nursing home services. Bonds to finance
these facilities have been issued by various state and local authorities. Since
the bonds are normally secured only by the revenues of each facility and not by
state or local government tax payments, they are subject to a wide variety of
risks. Primarily, the projects must maintain adequate occupancy levels to be
able to provide revenues sufficient to meet debt service payments. Moreover,
since a portion of housing, medical care and other services may be financed by
an initial deposit, it is important that the facility maintain adequate
financial reserves to secure estimated actuarial liabilities. The ability of
management to accurately forecast inflationary cost pressures is an important
factor in this process. The facilities may also be affected adversely by
regulatory cost restrictions applied to health care delivery in general,
particularly state regulations or changes in Medicare and Medicaid payments or
qualifications, or restrictions imposed by medical insurance companies. They may
also face competition from alternative health care or conventional housing
facilities in the private or public sector.
Obligations of Puerto Rico, the U.S. Virgin Islands and Guam. Subject to each
Fund's investment policies as set forth in the Prospectus, each Portfolio may
invest in the obligations of Puerto Rico, the U.S. Virgin Islands and Guam.
Accordingly, the Portfolio may be adversely affected by local political and
economic conditions and developments within Puerto Rico, the U.S. Virgin Islands
and Guam affecting the issuers of such obligations.
Puerto Rico has a diversified economy dominated by the manufacturing and
service sectors. Manufacturing is the largest sector in terms of gross domestic
product and is more diversified than during earlier phases of Puerto Rico's
industrial development. The three largest sectors of the economy (as a
percentage of employment) are services (47%), government (22%) and manufacturing
(16.4%). These three sectors represent 37.5%, 11% and 41.8%, respectively, of
the gross domestic product. The service sector is the fastest growing, followed
by manufacturing which has begun to show signs of expansion. The North American
Free Trade Agreement ("NAFTA"), which became effective January 1, 1994, could
lead to the loss of Puerto Rico's lower salaried or labor intensive jobs to
Mexico.
The Commonwealth of Puerto Rico exercises virtually the same control over
its internal affairs as do the fifty states; however, it differs from the states
in its relationship with the federal government. Most federal taxes, except
those such as social security taxes that are imposed by mutual consent, are not
levied in Puerto Rico. However, in conjunction with the 1993 U.S. budget plan,
Section 936 of the Code was amended and provided for two alternative limitations
to the Section 936 credit. The first option limited the credit against such
income to 40% of the credit allowable under then current law, with a five year
phase-in period starting at 60% of the allowable credit. The second option was a
wage and depreciation based credit. Additional amendments to Section 936 in 1996
imposed caps on these credits, beginning in 1998 for the first option and
beginning in 2002 for the second option. More importantly, the 1996 amendments
eliminated both options for taxable years beginning in 2006. The eventual
elimination of tax benefits to those U.S. companies with operations in Puerto
Rico may lead to slower growth in the future. There can be no assurance that
this will not lead to a weakened economy, a lower rating on Puerto Rico's debt
or lower prices for Puerto Rican bonds that may be held by the Portfolio in the
long-term. Short-term affects are minimal.
Puerto Rico's financial reporting was first conformed to generally accepted
accounting principles in fiscal 1990. Nonrecurring revenues have been used
frequently to balance recent years' budgets. In November, 1993 Puerto Ricans
voted on whether they wished to retain their Commonwealth status, become a state
or establish an independent nation. Puerto Ricans voted to retain Commonwealth
status, leaving intact the current relationship with the federal government.
There can be no assurance that the statehood issue will not be brought to a vote
in the future. A successful statehood vote in Puerto Rico would then require the
U.S. Congress to ratify the election.
The United States Virgin Islands (USVI) are located approximately 1,100
miles east-southeast of Miami and are made up of St. Croix, St. Thomas and St.
John. The economy is heavily reliant on the tourism industry, with roughly 43%
of non-agricultural employment in tourist-related trade and services. In 1996,
unemployment stood at 13.8%. The tourism industry is economically sensitive
and would likely be adversely affected by a recession in either the United
States or Europe.
An important component of the USVI revenue base is the federal excise tax on
rum exports. Tax revenues rebated by the federal government to the USVI provide
the primary security of many outstanding USVI bonds. Since more than 90% of the
rum distilled in the USVI is distilled at one plant, any interruption in its
operations (as occurred after Hurricane Hugo in 1989) would adversely affect
these revenues. Consequently, there can be no assurance that rum exports to the
United States and the rebate of tax revenues to the USVI will continue at their
present levels. The preferential tariff treatment the USVI rum industry
currently enjoys could be reduced under NAFTA. Increased competition from
Mexican rum producers could reduce USVI rum imported to the U.S., decreasing
excise tax revenues generated. The USVI is periodically hit by hurricanes.
Several hurricanes have caused extensive damage, which has had a negative impact
on revenue collections. There is currently no rated, unenhanced Virgin Islands
debt outstanding (although there is unrated debt outstanding).
Guam, an unincorporated U.S. territory, is located 1,500 miles southeast of
Tokyo. The U.S. military is a key component of Guam's economy. The federal
government directly comprises more than 10% of the employment base, with a
substantial component of the service sector to support these personnel. The
Naval Air Station, one of several U.S. military facilities on the island, has
been slated for closure by the Defense Base Closure and Realignment Committee;
however, the administration plans to use these facilities to expand the island's
commercial airport. Guam is also heavily reliant on tourists, particularly the
Japanese. For 1995, the government realized a General Fund operating surplus.
The administration has taken steps to improve its financial position; however,
there are no guarantees that an improvement will be realized. Guam's general
obligation debt is rated BBB by S&P with a negative outlook.
MUNICIPAL LEASES
Each 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 each 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 a 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 a Portfolio. In the
event a 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 a 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 a
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
Each 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 a
Portfolio.
SHORT-TERM TRADING
Each Portfolio may sell (and later purchase) securities in anticipation of a
market decline (a rise in interest rates) or purchase (and later sell)
securities in anticipation of a market rise (a decline in interest rates). In
addition, a security may be sold and another purchased at approximately the same
time to take advantage of what a 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. A Portfolio cannot
accurately predict its portfolio turnover rate, but it is anticipated that the
annual portfolio turnover rate will generally not exceed 100% (excluding
turnover of securities having a maturity of one year or less). A 100% annual
turnover rate would occur, for example, if all the securities held by a
Portfolio were replaced once in a period of one year. A high turnover rate (100%
or more) necessarily involves greater expenses to the Portfolio. Each 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. For the portfolio turnover rate of each Portfolio in prior fiscal
years, see "Supplementary Data" in the "Financial Statements".
WHEN-ISSUED SECURITIES
New issues of municipal obligations are sometimes offered on a "when-
issued" basis, that is, delivery and payment for the securities normally take
place within a specified number of days after the date of a Portfolio's
commitment and are subject to certain conditions such as the issuance of
satisfactory legal opinions. Each 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 a Portfolio to buy such securities on a
settlement date that could be several months or several years in the future.
Each 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 a Portfolio enters into the
purchase commitment. When a 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 a 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 a 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
Each Portfolio may purchase variable rate obligations. Variable rate
instruments provide for adjustments in the interest rate at specified intervals
(weekly, monthly, semi-annually, etc.). The revised rates are usually set at the
issuer's discretion, in which case the investor normally enjoys the right to
"put" the security back to the issuer or his agent. Rate revisions may
alternatively be determined by formula or in some other contractual fashion.
Variable rate obligations normally provide that the holder can demand payment of
the obligation on short notice at par with accrued interest and are frequently
secured by letters of credit or other credit support arrangements provided by
banks. To the extent that such letters of credit or other arrangements
constitute an unconditional guarantee of the issuer's obligations, a bank may be
treated as the issuer of a security for the purpose of complying with the
diversification requirements set forth in Section 5(b) of the 1940 Act and Rule
5b-2 thereunder. Each Portfolio would anticipate using these obligations as cash
equivalents pending longer term investment of its funds.
REDEMPTION, DEMAND AND PUT FEATURES
Most municipal bonds have a fixed final maturity date. However, it is
commonplace for the issuer to reserve the right to call the bond earlier. Also,
some bonds may have "put" or "demand" features that allow early redemption by
the bondholder. Longer term fixed-rate bonds may give the holder a right to
request redemption at certain times (often annually after the lapse of an
intermediate term). These bonds are more defensive than conventional long term
bonds (protecting to some degree against a rise in interest rates) while
providing greater opportunity than comparable intermediate term bonds, because
the Portfolio may retain the bond if interest rates decline. By acquiring these
kinds of obligations a 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
Each 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. Each
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 a Portfolio or that selling institutions will be willing to permit
a 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. A Portfolio does not expect to assign
any value to any separate put option which may be acquired to facilitate
portfolio liquidity, inasmuch as the value (if any) of the put will be reflected
in the value assigned to the associated security; any put acquired for hedging
purposes would be valued in good faith under methods or procedures established
by the Trustees of the Portfolio after consideration of all relevant factors,
including its expiration date, the price volatility of the associated security,
the difference between the market price of the associated security and the
exercise price of the put, the creditworthiness of the issuer of the put and the
market prices of comparable put options. Interest income generated by certain
bonds having put or demand features may not qualify as tax-exempt interest.
SECURITIES LENDING
Each Portfolio may seek to increase its income by lending portfolio
securities to broker-dealers or other institutional borrowers. A 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. A 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, net of
administrative expenses and any finders' fees, justifies the attendant risk.
Distributions by a Fund of any income realized by a 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 a Portfolio's total assets. Each 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 a Portfolio (or of securities that a Portfolio expects to
purchase). To hedge against changes in rates, a 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 a
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.
Each 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. Each Portfolio will engage in transactions in
futures and related options contracts only to the extent such transactions are
consistent with the requirements of the Code for maintaining qualification of a
Fund as a regulated investment company for federal income tax purposes (see
"Taxes").
ASSET COVERAGE REQUIREMENTS
Transactions involving when-issued securities, futures contracts and options
(other than options that the Portfolio has purchased) expose the Portfolio to an
obligation to another party. A Portfolio will not enter into any such
transactions unless it owns either (1) an offsetting ("covered") position in
securities or other options or futures contracts, or (2) cash or liquid
securities (such as readily marketable obligations and money market instruments)
with a value sufficient at all times to cover its potential obligations not
covered as provided in (1) above. Each Portfolio will comply with Commission
guidelines regarding cover for these instruments and, if the guidelines so
require, set aside cash or liquid securities in a segregated account with its
custodian in the prescribed amount. The securities in the segregated account
will be marked to market daily.
Assets used as cover or held in a segregated account maintained by the
custodian cannot be sold while the position requiring coverage or segregation is
outstanding unless they are replaced with other appropriate assets. As a result,
the commitment of a large portion of a Portfolio's assets to segregated accounts
or to cover could impede portfolio management or a Portfolio's ability to meet
redemption requests or other current obligations.
INVESTMENT RESTRICTIONS
The following investment restrictions of each Fund are designated as
fundamental policies and as such cannot be changed without the approval of the
holders of a majority of a Fund's outstanding voting securities, which as used
in this SAI means the lesser of (a) 67% of the shares of a 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
a Fund. Accordingly, each Fund may not:
(1) Borrow money or issue senior securities except as permitted by the
Investment Company Act of 1940;
(2) Purchase securities on margin (but the Fund may obtain such short-term
credits as may be necessary for the clearance of purchases and sales of
securities). The deposit or payment by the Fund of initial or maintenance margin
in connection with futures contracts or related options transactions is not
considered the purchase of a security on margin;
(3) Underwrite or participate in the marketing of securities of others,
except insofar as it may technically be deemed to be an underwriter in selling a
portfolio security under circumstances which may require the registration of the
same under the Securities Act of 1933;
(4) Purchase or sell real estate (including limited partnership interests in
real estate but excluding readily marketable interests in real estate investment
trusts or readily marketable securities of companies which invest or deal in
real estate or securities which are secured by real estate);
(5) Purchase or sell physical commodities or contracts for the purchase or
sale of physical commodities; or
(6) Make loans to any person except by (a) the acquisition of debt
instruments and making portfolio investments, (b) entering into repurchase
agreements and (c) lending portfolio securities.
Notwithstanding the investment policies and restrictions of the Fund, the
Fund may invest all of its investable assets in an open-end management
investment company with substantially the same investment objective, policies
and restrictions as the Fund.
Each Portfolio has adopted substantially the same fundamental investment
restrictions as the foregoing investment restrictions adopted by each Fund; such
restrictions cannot be changed without the approval of a "majority of the
outstanding voting securities" of a Portfolio.
The Funds and the Portfolios have adopted the following investment policies
which may be changed by the Trust with respect to a Fund without approval by
that Fund's shareholders or with respect to the Portfolio without approval of a
Fund or its other investors. As a matter of nonfundamental policy, the Fund and
the Portfolio will not: (a) engage in options, futures or forward transactions
if more than 5% of its net assets, as measured by the aggregate of the premiums
paid by the Fund or the Portfolio, would be so invested; (b) make short sales of
securities or maintain a short position, unless at all times when a short
position is open it owns an equal amount of such securities or securities
convertible into or exchangeable, without payment of any further consideration,
for securities of the same issue as, and equal in amount to, the securities sold
short and unless not more than 25% of the Fund's net assets (taken at current
value) is held as collateral for such sales at any one time. (The Fund and the
Portfolio will make such sales only for the purpose of deferring realization of
gain or loss for federal income tax purposes); (c) invest more than 15% of its
net assets in investments which are not readily marketable, including restricted
securities and repurchase agreements maturing in more than seven days.
Restricted securities for the purposes of this limitation do not include
securities eligible for resale pursuant to Rule 144A under the Securities Act of
1933 and commercial paper issued pursuant to Section 4(2) of said Act that the
Board of Trustees of the Trust or the Portfolio, or its delegate, determines to
be liquid; or (d) purchase or retain in its portfolio any securities issued by
an issuer any of whose officers, directors, trustees or security holders is an
officer or Trustee of the Trust or the Portfolio or is a member, officer,
director or trustee of any investment adviser of the Trust or the Portfolio, if
after the purchase of the securities of such issuer by the Fund or the Portfolio
one or more of such persons owns beneficially more than 1/2 of 1% of the shares
or securities or both (all taken at market value) of such issuer and such
persons owning more than 1/2 of 1% of such shares or securities together own
beneficially more than 5% of such shares or securities or both (all taken at
market value).
For purposes of a Portfolio's investment restrictions, the determination of
the "issuer" of a municipal obligation which is not a general obligation bond
will be made by the Portfolio's Investment Adviser on the basis of the
characteristics of the obligation and other relevant factors, the most
significant of which is the source of funds committed to meeting interest and
principal payments of such obligations.
Whenever an investment policy or investment restriction set forth in the
Prospectus or this SAI states a maximum percentage of assets that may be
invested in any security or other asset, or describes a policy regarding quality
standards, such percentage limitation or standard shall be determined
immediately after and as a result of the Fund's or the Portfolio's acquisition
of such security or asset. Accordingly, any later increase or decrease resulting
from a change in values, assets or other circumstances, or any subsequent rating
change below investment grade made by a rating service, will not compel the Fund
or the Portfolio, as the case may be, to dispose of such security or other
asset. Where applicable and notwithstanding the foregoing, under normal market
conditions the Fund and the Portfolio must take actions necessary to comply with
the policy of investing at least 65% of total assets in a particular State.
Moreover, the Fund and Portfolio must always be in compliance with the borrowing
policies set forth above.
TRUSTEES AND OFFICERS
The Trustees and officers of the Trust and the Portfolios 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 Investment Adviser, BMR, a
wholly-owned subsidiary of Eaton Vance Management ("Eaton Vance"); of Eaton
Vance's parent, Eaton Vance Corp. ("EVC"); and of BMR's and Eaton Vance's
trustee, Eaton Vance, Inc. ("EV"). Eaton Vance and EV are both wholly-owned
subsidiaries of EVC. Those Trustees who are "interested persons" of the Trust or
the Portfolio, as defined in the 1940 Act by virtue of their affiliation with
BMR, Eaton Vance, EVC or EV, are indicated by an asterisk(*).
TRUSTEES OF THE TRUST AND THE PORTFOLIOS
DONALD R. DWIGHT (66), Trustee
President of Dwight Partners, Inc. (a corporate relations and communications
company); Chairman of the Board of Newspapers of New England, Inc. Director
or Trustee of various investment companies managed by Eaton Vance or BMR.
Address: Clover Mill Lane, Lyme, New Hampshire 03768
JAMES B. HAWKES (55), Vice President and Trustee*
President and Chief Executive Officer of BMR, Eaton Vance, EVC and EV, and a
Director of EVC and EV. Director, Trustee and officer of various investment
companies managed by Eaton Vance or BMR.
SAMUEL L. HAYES, III (62), Trustee
Jacob H. Schiff Professor of Investment Banking, Harvard University Graduate
School of Business Administration. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: Harvard University Graduate School of Business Administration,
Soldiers Field Road, Boston, Massachusetts 02163
NORTON H. REAMER (61), Trustee
President and Director, United Asset Management Corporation (a holding company
owning institutional investment management firms); Chairman, President and
Director, UAM Funds (mutual funds). Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: One International Place, Boston, Massachusetts 02110
JOHN L. THORNDIKE (70), Trustee
Formerly Director of 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 (67), 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 PORTFOLIOS
THOMAS J. FETTER (53), President
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR. Mr. Fetter was elected President of
the Trust and the Portfolio on December 13, 1993.
ROBERT B. MACINTOSH (40), Vice President
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR. Mr. MacIntosh was elected Vice
President of the Trust on March 22, 1993.
JAMES L. O'CONNOR (52), Treasurer
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
ALAN R. DYNNER (56), Secretary
Vice President and Chief Legal Officer of BMR, Eaton Vance, EVC and EV since
November 1, 1996. Previously, he was a Partner of the law firm of Kirkpatrick
& Lockhart LLP, New York and Washington, D.C., and was Executive Vice
President of Neuberger & Berman Management, Inc., a mutual fund management
company. Officer of various investment companies managed by Eaton Vance or
BMR. Mr. Dynner was elected Secretary on June 23, 1997.
JANET E. SANDERS (61), Assistant Secretary
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
A. JOHN MURPHY (34), Assistant Secretary
Assistant Vice President of BMR, Eaton Vance and EV since March 1, 1994;
employee of Eaton Vance since March 1993. State Regulations Supervisor, The
Boston Company (1991-1993). Officer of various investment companies managed by
Eaton Vance or BMR. Mr. Murphy was elected Assistant Secretary on March 27,
1995.
ERIC G. WOODBURY (40), Assistant Secretary
Vice President of BMR, Eaton Vance and EV since February 1993; formerly,
associate attorney at Dechert, Price & Rhoads. Officer of various investment
companies managed by Eaton Vance or BMR. Mr. Woodubury was elected Assistant
Secretary on June 19, 1995.
In addition, William H. Ahern, Jr. (38), Vice President of Eaton Vance and
BMR, is a Vice President of the Colorado Portfolio. Mr. Ahern has served as
Vice President of the Colorado Portfolio since June 23, 1997. Nicole Anderes
(35) is a Vice President of the Connecticut and Texas Portfolios. Ms. Anderes
has served as a Vice President of the Connecticut Portfolio since June 19,
1995 and of the Texas Portfolio since December 1, 1995. Ms. Anderes has been a
Vice President of BMR and Eaton Vance since 1994. Prior to joining Eaton
Vance, Ms. Anderes was Vice President and portfolio manager, Lazard Freres
Asset Management (1992-1994) and Vice President and Manager -- Municipal
Research, Roosevelt & Cross (1987-1992). Timothy T. Browse (38), Vice
President of Eaton Vance and BMR, is a Vice President of the Michigan and
Pennsylvania Portfolios. Mr. Browse has served as a Vice President of the
Michigan Portfolio since June 19, 1995 and of the Pennsylvania Portfolio since
December 1, 1995. Cynthia J. Clemson (34), Vice President of Eaton Vance and
BMR, is a Vice President of the Arizona Portfolio. Ms. Clemson has served as a
Vice President of the Arizona Portfolio since June 19, 1995. Ms. Anderes and
Ms. Clemson, and Messrs. Ahern and Browse are officers of various investment
companies managed by Eaton Vance or BMR.
Messrs. Hayes (Chairman), Reamer and Thorndike are members of the Special
Committee of the Board of Trustees of the Trust and of the Portfolios. The
purpose of the Special Committee is to consider, evaluate and make
recommendations to the full Board of Trustees concerning (i) all contractual
arrangements with service providers to the Funds and the Portfolios, including
investment advisory (Portfolio only), administrative, transfer agency, custodial
and fund accounting and distribution services, and (ii) all other matters in
which Eaton Vance or its affiliates has any actual or potential conflict of
interest with the Funds, the Portfolios or investors therein.
The Nominating Committee of the Board of Trustees of the Trust and the
Portfolios is comprised of four Trustees who are not "interested persons" as
that term is defined under the 1940 Act ("noninterested Trustees"). The
Committee has four-year staggered terms, with one member rotating off the
Committee to be replaced by another noninterested Trustee. The purpose of the
Committee is to recommend to the Board nominees for the position of
noninterested Trustee and to assure that at least a majority of the Board of
Trustees is independent of Eaton Vance and its affiliates.
Messrs. Treynor (Chairman) and Dwight are members of the Audit Committee of
the Board of Trustees of the Trust and of the Portfolios. The Audit Committee's
functions include making recommendations to the Trustees regarding the selection
of the independent certified public accountants, and reviewing matters relative
to trading and brokerage policies and practices, accounting and auditing
practices and procedures, accounting records, internal accounting controls, and
the functions performed by the custodian, transfer agent and dividend disbursing
agent of the Trust and of the Portfolios.
Trustees of the Portfolios 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
"Trustees" Plan"). Under the Trustees' Plan, an eligible Trustee may elect to
have his deferred fees invested by a 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 Trustees' Plan will be determined based upon the performance of such
investments. Deferral of Trustees' fees in accordance with the Trustees' Plan
will have a negligible effect on the Portfolios' assets, liabilities, and net
income per share, and will not obligate a Portfolio to retain the services of
any Trustee or obligate a Portfolio to pay any particular level of compensation
to the Trustee. Neither the Portfolios nor the Trust has a retirement plan for
its Trustees.
The fees and expenses of those Trustees of the Trust and of the Portfolios
who are not members of the Eaton Vance organization (the noninterested Trustees)
are paid by the Funds (and the other series of the Trust) and the Portfolios,
respectively. (The Trustees of the Trust and the Portfolios who are members of
the Eaton Vance organization receive no compensation from the Trust or the
Portfolios). During the fiscal year ended July 31, 1996, the noninterested
Trustees of the Trust and the Portfolio received the following compensation in
their capacities as Trustees from the Trust and the Portfolio, and, for the year
ended September 30, 1996, earned the following compensation in their capacities
as Trustees of the funds in the Eaton Vance fund complex (1):
<TABLE>
<CAPTION>
DONALD R. SAMUEL L. NORTON H. JOHN L. JACK L.
SOURCE OF COMPENSATION DWIGHT(3) HAYES, III(4) REAMER THORNDIKE TREYNOR
- ---------------------- --------- ------------- ------ --------- -------
<S> <C> <C> <C> <C> <C>
Trust(2) $ 14,739 $ 13,514 $ 13,412 $ 13,633 $ 14,616
Arizona Portfolio $ 1,542 $ 1,687 $ 1,645 $ 1,729 $ 1,683
Colorado Portfolio 343 316 314 318 341
Connecticut Portfolio 2,197 2,288 2,242 2,334 2,330
Michigan Portfolio 2,091 2,192 2,147 2,238 2,228
Minnesota Portfolio 1,129 1,308 1,268 1,348 1,274
New Jersey Portfolio 3,634 3,613 3,560 3,668 3,761
Pennsylvania Portfolio 3,845 3,807 3,753 3,864 3,971
Texas Portfolio 343 316 314 318 341
------- ------- ------- ------- -------
Trust and Fund Complex $142,500(5) $153,750(6) $142,500 $147,500 $147,500
- ----------
(1) The Eaton Vance fund complex consists of 212 registered investment companies or series thereof.
(2) The Trust consisted of 60 Funds as of July 31, 1996.
(3) Mr. Dwight received deferred compensation from each Portfolio as follows: Arizona - $578; Colorado - $129; Connecticut -
$819; Michigan - $784; Minnesota - $424; New Jersey - $1,351; Pennsylvania - $1,439; and Texas - $129.
(4) Mr. Hayes received deferred compensation from each Portfolio as follows: Arizona - $570; Colorado - $104; Connecticut - $773;
Michigan - $737; Minnesota - $446; New Jersey - $1,236; Pennsylvania - $1,439; and Texas - $129.
(5) Includes $42,500 of deferred compensation.
(6) Includes $37,500 of deferred compensation.
</TABLE>
INVESTMENT ADVISER AND ADMINISTRATOR
Each Portfolio engages BMR as investment adviser pursuant to an Investment
Advisory Agreement, which is substantially the same for each Portfolio. BMR or
Eaton Vance acts as investment adviser to investment companies and various
individual and institutional clients with combined assets under management of
over $17 billion.
Eaton Vance, its affiliates and its predecessor companies have been managing
assets of individuals and institutions since 1924 and managing investment
companies since 1931. They maintain a large staff of experienced fixed-income
and equity investment professionals to service the needs of their clients. The
fixed-income division focuses on all kinds of taxable investment- grade and
high-yield securities, tax-exempt investment-grade and high-yield securities,
and U.S. Government securities. The equity division covers stocks ranging from
blue chip to emerging growth companies.
Eaton Vance and its affiliates act as adviser to over 150 mutual funds, and
individual and various institutional accounts, including corporations,
hospitals, retirement plans, universities, foundations and trusts. Eaton Vance
mutual funds feature international equities, domestic equities, tax-free
municipal bonds, and U.S. government and corporate bonds. Lloyd George
Management has advised Eaton Vance's international equity funds since 1992.
Founded in 1991, Lloyd George is headquartered in Hong Kong with offices in
London and Mumbai, India. It has established itself as a leader in investment
management in Asian equities and other global markets. Lloyd George features an
experienced team of investment professionals that began working together in the
mid-1980s. Lloyd George analysts cover East Asia, the India subcontinent, Russia
and Eastern Europe, Latin America, Australia and New Zealand from offices in
Hong Kong, London and Mumbai. Together Eaton Vance and Lloyd George manage over
$18 billion in assets. Eaton Vance mutual funds are distributed by the Principal
Underwriter both within the United States and offshore.
The Principal Underwriter believes that an investment professional can
provide valuable services to you to help you reach your investment goals.
Meeting investment goals requires time, objectivity and investment savvy. Before
making an investment recommendation, a representative can help you carefully
consider your short- and long-term financial goals, your tolerance for
investment risk, your investment time frame, and other investments you may
already own. Your professional investment representatives are knowledgeable
about financial markets, as well as the wide range of investment opportunities
available. A representative can help you decide when to buy, sell or persevere
with your investments. A professional investment representative can provide you
with tailored financial advice.
Eaton Vance offers single-state tax-free portfolios in more states than any
other sponsor of mutual funds. There are 32 long-term state portfolios, 5
national portfolios and 9 limited maturity portfolios, which serve as investment
vehicles for over 100 mutual funds with varying pricing options. A staff of 29
(including 7 portfolio managers and 9 credit specialists) is responsible for the
day-to-day management of over 3,500 issues in 46 mutual fund portfolios. Assets
managed by the municipal investment group are currently over $7.6 billion. The
investment philosophy of the municipal investment group is to: seek value by
avoiding unnecessary credit risk; build portfolios one security at a time; and
take a long-term approach to managing market risk. Over the long-term, the group
seeks to maximize tax-free income by keeping portfolios fully invested (rather
than trying to "time the market" for short-term results) and reduce potential
capital losses due to poor credit quality. Diligent and continuing research and
analysis are a critical component of the municipal investment group's investment
philosophy and long-term strategy.
The following persons manage one or more of the Eaton Vance municipal
portfolios. For the identity of a Portfolio's portfolio manager, see the
Prospectus.
William H. Ahern, Jr. is a Vice President of Eaton Vance and BMR. Mr.
Ahern graduated from Boston College in 1981 with a B.A. in Economics, and
received his M.B.A. degree in Finance from Babson College in 1987. Mr. Ahern
is a member of the Boston Security Analysts Society.
Nicole Anderes is a Vice President of Eaton Vance and BMR. Ms. Anderes
graduated from Brown University with a B.A. in Women's Studies/Economics. She
has been an active member of MAGNY/National Federation of Municipal Analysts,
the Public Securities Association and the Municipal Forum, and served as the
General Secretary of MAGNY from 1992 to 1993.
Timothy T. Browse is a Vice President of Eaton Vance and BMR. Mr. Browse
graduated from St. Lawrence University in 1981 and received his M.B.A. degree
from Boston University in 1990.
Cynthia J. Clemson is a Vice President of Eaton Vance and BMR. Ms. Clemson
graduated from Mount Holyoke College with a B.A. in 1985 and received her
M.B.A., cum laude, from Boston University in 1990. She is a member of the
Boston Municipal Analysts Forum, the Boston Securities Analyst Society and the
Financial Analysts Federation.
Thomas J. Fetter is a Vice President of Eaton Vance and BMR, and Director
of Municipal Investments. Mr. Fetter graduated with a degree in Business
Administration from Kent State University. He is a Chartered Financial Analyst
and member of the Boston Security Analysts Society. He is also a member of the
Boston Municipal Analysts Forum.
Robert B. MacIntosh is a Vice President of Eaton Vance and BMR, and the
portfolio manager of single-state, tax-exempt funds in six states: Hawaii,
Louisiana, Massachusetts, Minnesota, New Jersey and North Carolina. He also
serves as economic spokesman for the Eaton Vance organization.
Thomas M. Metzold is a Vice President of Eaton Vance and BMR. He is a
Chartered Financial Analyst and a member of the Boston Security Analysts
Society, the Association for Investment Management & Research, the Boston
Municipal Analysts Forum, and the National Federation of Municipal Analysts.
BMR manages the investments and affairs of each Portfolio subject to the
supervision of the Portfolio's Board of Trustees. BMR furnishes to the
Portfolios 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. Each 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. A Portfolio is responsible for all expenses
not expressly stated to be payable by BMR under its Investment Advisory
Agreement, including, without implied limitation, (i) expenses of maintaining
the Portfolio and continuing its existence, (ii) registration of the Portfolio
under the 1940 Act, (iii) commissions, fees and other expenses connected with
the acquisition, holding and disposition of securities and other investments,
(iv) auditing, accounting and legal expenses, (v) taxes and interest, (vi)
governmental fees, (vii) expenses of issue, sale and redemption of interests in
the Portfolio, (viii) expenses of registering and qualifying the Portfolio and
interests in the Portfolio under federal and state securities laws and of
preparing and printing registration statements or other offering statements or
memoranda for such purposes and for distributing the same to investors, and fees
and expenses of registering and maintaining registrations of the Portfolio and
of the Portfolio's placement agent as broker-dealer or agent under state
securities laws, (ix) expenses of reports and notices to investors and of
meetings of investors and proxy solicitations therefor, (x) expenses of reports
to governmental officers and commissions, (xi) insurance expenses, (xii)
association membership dues, (xiii) fees, expenses and disbursements of
custodians and subcustodians for all services to the Portfolio (including
without limitation safekeeping of funds, securities and other investments,
keeping of books, accounts and records, and determination of net asset values,
book capital account balances and tax capital account balances), (xiv) fees,
expenses and disbursements of transfer agents, dividend disbursing agents,
investor servicing agents and registrars for all services to the Portfolio, (xv)
expenses for servicing the accounts of investors, (xvi) any direct charges to
investors approved by the Trustees of the Portfolio, (xvii) compensation and
expenses of Trustees of the Portfolio who are not members of BMR's organization,
and (xviii) such non-recurring items as may arise, including expenses incurred
in connection with litigation, proceedings and claims and any legal obligation
of the Portfolio to indemnify its Trustees, officers and investors with respect
thereto, to the extent not covered by insurance.
For a description of the compensation that each Portfolio pays BMR, see the
Prospectus. The following table sets forth the net assets of each Portfolio and
the advisory fees earned during the fiscal years ended July 31, 1996, 1995 and
1994.
<TABLE>
<CAPTION>
ADVISORY FEE FOR FISCAL YEARS ENDED
NET ASSETS
PORTFOLIO AT 7/31/96 JULY 31, 1996 JULY 31, 1995 JULY 31, 1994*
- --------- ---------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Arizona $129,861,547 $ 574,999 $ 629,148 $ 505,544
Colorado(1) 45,415,574 130,068 128,496 67,224
Connecticut 187,616,885 841,092 835,605 635,227
Michigan 173,464,608 795,032 856,258 721,041
Minnesota 76,090,073 295,178 310,489 228,154
New Jersey 386,244,341 1,878,801 1,944,340 1,609,137
Pennsylvania 448,181,861 2,262,320 2,416,419 2,054,802
Texas(2) 24,366,836 55,086 56,319 31,214
- ----------
* For the ten months ended July 31, 1994
(1) To enhance the net income of the Colorado Portfolio, BMR made a reduction of its advisory fee for the periods ended July 31,
1996, 1995 and 1994 in the amount of $7,886, $69,064 and $67,224, respectively. For the period ended July 31, 1994, BMR was
allocated a portion of the expenses related to the operation of the Portfolio in the amount of $31,504.
(2) To enhance the net income of the Texas Portfolio, BMR made a reduction of its advisory fee for the periods ended July 31,
1996, 1995 and 1994 in the amount $27,295, $56,319 and $31,214, respectively. For the periods ended July 31, 1995 and 1994,
BMR was allocated a portion of the expenses related to the operation of the Portfolio in the amounts of $18,606 and $35,347,
respectively.
</TABLE>
Each Investment Advisory Agreement with BMR continues in effect from year to
year so long as such continuance is approved at least annually (i) by the vote
of a majority of the noninterested Trustees of the Portfolio 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. Each 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. Each Agreement provides that BMR may render
services to others. Each 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 each
Fund, but currently receives no compensation for providing administrative
services to the Fund. Under its Administrative Services Agreement with the
Trust, Eaton Vance has been engaged to administer the Funds' affairs, subject to
the supervision of the Trustees of the Trust, and shall furnish for the use of
the Funds office space and all necessary office facilities, equipment and
personnel for administering the affairs of the Funds.
Each 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 the Trust's registration under the 1940 Act, (iii) commissions, fees
and other expenses connected with the purchase or sale of securities and other
investments, (iv) auditing, accounting and legal expenses, (v) taxes and
interest, (vi) governmental fees, (vii) expenses of issue, sale, repurchase and
redemption of shares, (viii) expenses of registering and qualifying the Fund and
its shares under federal and state securities laws and of preparing and printing
prospectuses for such purposes and for distributing the same to shareholders and
investors, and fees and expenses of registering and maintaining registrations of
the Fund and of the Fund's principal underwriter, if any, as broker-dealer or
agent under state securities laws, (ix) expenses of reports and notices to
shareholders and of meetings of shareholders and proxy solicitations therefor,
(x) expenses of reports to governmental officers and commissions, (xi) insurance
expenses, (xii) association membership dues, (xiii) fees, expenses and
disbursements of custodians and subcustodians for all services to the Fund
(including without limitation safekeeping of funds, securities and other
investments, keeping of books and accounts and determination of net asset
values), (xiv) fees, expenses and disbursements of transfer agents, dividend
disbursing agents, shareholder servicing agents and registrars for all services
to the Fund, (xv) expenses for servicing shareholder accounts, (xvi) any direct
charges to shareholders approved by the Trustees of the Trust, (xvii)
compensation and expenses of Trustees of the Trust who are not members of the
Eaton Vance organization, and (xviii) such non-recurring items as may arise,
including expenses incurred in connection with litigation, proceedings and
claims and any legal obligation of the Trust to indemnify its Trustees and
officers with respect thereto, to the extent not covered by insurance.
BMR is a wholly-owned subsidiary of Eaton Vance. Eaton Vance and EV are
both wholly-owned subsidiaries of EVC. BMR and Eaton Vance are both
Massachusetts business trusts, and EV is the trustee of BMR and Eaton Vance.
The Directors of EV are Landon T. Clay, 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, Mr. Gardner is
vice chairman and Mr. Hawkes is president and chief executive officer of EVC,
BMR, Eaton Vance and EV. All of the issued and outstanding shares of Eaton
Vance and EV are owned by EVC. All of the issued and outstanding shares of BMR
are owned by Eaton Vance. All shares of the outstanding Voting Common Stock of
EVC are deposited in a Voting Trust which expires on December 31, 1997, the
Voting Trustees of which are Messrs. Clay, Gardner, Hawkes and Rowland and
Thomas E. Faust, Jr. 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 or officers and Directors of EVC and EV. As
of July 31, 1997, Messrs. Clay, Gardner and Hawkes each owned 24% of such
voting trust receipts, and Messrs. Rowland and Faust owned 15% and 13%,
respectively, of such voting trust receipts. Messrs. Hawkes and Otis are
officers or Trustees of the Trust and the Portfolios and are members of the
EVC, BMR, Eaton Vance and EV organizations. Messrs. Ahern, Browse, Fetter,
MacIntosh, Metzold, Murphy, O'Connor and Woodbury and Ms. Anderes, Ms. Clemson
and Ms. Sanders, are officers of the Trust and/or the Portfolios and are also
members of the BMR, Eaton Vance and EV organizations.
Eaton Vance owns all the stock of Northeast Properties, Inc., which is
engaged in real estate investment. EVC owns all the stock of Fulcrum Management,
Inc., and MinVen Inc., which are engaged in precious metal mining venture
investment and management. EVC also owns 22% of the Class A shares of Lloyd
George Management (B.V.I.) Limited, a registered investment adviser. EVC, BMR,
Eaton Vance and EV may also enter into other businesses.
EVC and its affiliates and their officers and employees from time to time
have transactions with various banks, including the custodian of the Fund and
the Portfolio, IBT. It is Eaton Vance's opinion that the terms and conditions of
such transactions were not and will not be influenced by existing or potential
custodial or other relationships between the Fund or the Portfolio and such
banks.
CUSTODIAN
IBT acts as custodian for the Trust and the Portfolios. IBT has the custody
of all cash and securities representing a Fund's interest in a Portfolio, has
custody of each Portfolio's assets, maintains the general ledger of each
Portfolio and each Fund and computes the daily net asset value of interests in
each 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 Portfolios' investments, receives and
disburses all funds and performs various other ministerial duties upon receipt
of proper instructions from the Trust and the Portfolios. 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 Trust or a Portfolio and IBT under the 1940 Act.
IBT also provides services in connection with the preparation of shareholder
reports and the electronic filing of such reports with the Commission, for which
it receives a separate fee.
SERVICES FOR ACCUMULATION -- CLASS A SHARES
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 Class A Fund shares and shares of the other continuously
offered open-end funds listed under "The Eaton Vance Exchange Privilege" in the
Prospectus 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 Shares" in the
Prospectus. Any investor considering signing a Statement of Intention should
read it carefully.
Right of Accumulation -- Cumulative Quantity Discount. The applicable sales
charge level for the purchase of Class A Fund shares is calculated by taking the
dollar amount of the current purchase and adding it to the value (calculated at
the maximum current offering price) of the shares the shareholder owns in his or
her account(s) in the Fund and in the other continuously offered open-end funds
listed under "The Eaton Vance Exchange Privilege" in the Prospectus for which
Eaton Vance acts as 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 sales charges on quantity purchases, see "How to Buy Shares" in
the Prospectus. Shares purchased (i) by an individual, his or her spouse and
their children under the age of twenty-one, and (ii) by a trustee, guardian or
other fiduciary of a single trust estate or a single fiduciary account, will be
combined for the purpose of determining whether a purchase will qualify for the
Right of Accumulation and if qualifying, the applicable sales charge level.
For any such discount to be made available, at the time of purchase a
purchaser or his or her Authorized Firm must provide the Principal Underwriter
(in the case of a purchase made through an Authorized Firm) or the Transfer
Agent (in the case of an investment made by mail) with sufficient information to
permit verification that the purchase order qualifies for the accumulation
privilege. Confirmation of the order is subject to such verification. The Right
of Accumulation privilege may be amended or terminated at any time as to
purchases occurring thereafter.
SERVICE FOR WITHDRAWAL
The Transfer Agent will send to the shareholder regular monthly or quarterly
payments of any permitted amount designated by the shareholder (see "Eaton Vance
Shareholder Services -- Withdrawal Plan" in the Prospectus) based upon the value
of the shares held. The checks will be drawn from share redemptions and hence,
although they are a return of principal may require the recognition of taxable
gain or loss. Income dividends and capital gains distributions in connection
with withdrawal plan accounts will be credited at net asset value as of the
record date for each distribution. Continued withdrawals in excess of current
income will eventually use up principal, particularly in a period of declining
market prices. A shareholder may not have a withdrawal plan in effect at the
same time he or she has authorized Bank Automated Investing or is otherwise
making regular purchases of Fund shares. The shareholder, the Transfer Agent or
the Principal Underwriter will be able to terminate the withdrawal plan at any
time without penalty.
DETERMINATION OF NET ASSET VALUE
The net asset value of the Portfolio is computed by IBT (as agent and
custodian for the Portfolio) by subtracting the liabilities of the Portfolio
from the value of its total assets. Inasmuch as the market for municipal
obligations is a dealer market with no central trading location or continuous
quotation system, it is not feasible to obtain last transation prices for most
municipal obligations held by the Portfolio, and such obligations, including
those purchased on a when-issued basis, will normally be valued on the basis of
valuations furnished by a pricing service. The pricing service uses information
with respect to transactions in bonds, quotations from bond dealers, market
transactions in comparable securities, various relationships between securities,
and yield to maturity in determining value. Taxable obligations for which price
quotations are readily available normally will be valued at the mean between the
latest available bid and asked prices. Open futures positions on debt securities
are valued at the most recent settlement prices, unless such price does not
reflect the fair value of the contract, in which case the positions will be
valued by or at the direction of the Trustees of the Portfolio. Other assets are
valued at fair value using methods determined in good faith by or at the
direction of the Trustees of the Portfolio. The Fund and the Portfolio will be
closed for business and will not price their respective shares or interests on
the following business holidays: New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Each investor in the Portfolio, including the Fund, may add to or reduce its
investment in the Portfolio on each day the Exchange is open for trading
("Portfolio Business Day") as of the close of regular trading on the Exchange
(the "Portfolio Valuation Time"). The value of each investor's interest in the
Portfolio will be determined by multiplying the net asset value of the Portfolio
by the percentage, determined on the prior Portfolio Business Day, which
represented that investor's share of the aggregate interests in the Portfolio on
such prior day. Any additions or withdrawals for the current Portfolio Business
Day will then be recorded. Each investor's percentage of the aggregate interest
in the Portfolio will then be recomputed as a percentage equal to a fraction (i)
the numerator of which is the value of such investor's investment in the
Portfolio as of the Portfolio Valuation Time on the prior Portfolio Business Day
plus or minus, as the case may be, the amount of any additions to or withdrawals
from the investor's investment in the Portfolio on the current Portfolio
Business Day and (ii) the denominator of which is the aggregate net asset value
of the Portfolio as of the Portfolio Valuation Time on the prior Portfolio
Business Day plus or minus, as the case may be, the amount of the net additions
to or withdrawals from the aggregate investment in the Portfolio on the current
Portfolio Business Day by all investors in the Portfolio. The percentage so
determined will then be applied to determine the value of the investor's
interest in the Portfolio for the current Portfolio Business Day.
INVESTMENT PERFORMANCE
Average annual total return is determined separately for each Class of a
Fund by multiplying a hypothetical initial purchase order of $1,000 by the
average annual compound rate of return (including capital appreciation/
depreciation, and distributions paid and reinvested) for the stated period and
annualizing the result. The calculation assumes (i) that all distributions are
reinvested at net asset value on the reinvestment dates during the period, (ii)
the deduction of the maximum sales charge from the initial $1,000 purchase order
for Class A shares, (iii) a complete redemption of the investment and, (iv) the
deduction of any CDSC at the end of the period. For further information
concerning the total return of the Classes of a Fund, see Appendix A and B.
Yield is computed separately for each Class of a Fund 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; the
maximum initial sales charge for Class A shares) 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 and Class
expenses for the period with the resulting number being divided by the average
daily number of Class shares outstanding and entitled to receive distributions
during the period. This yield figure does not reflect the deduction of any CDSCs
which (if applicable) are imposed upon certain redemptions at the rates set
forth under "How to Redeem Shares" in the Prospectus. Yield calculations assume
the current maximum initial sales charge for Class A shares set forth under "How
to Buy Shares" in the Prospectus. (Actual yield may be affected by variations in
sales charges on investments). A taxable-equivalent yield is computed by using
the tax-exempt yield and dividing by 1 minus a stated rate. For the yield and
taxable-equivalent yield of the Classes of a Fund, see Appendix A and B.
A 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. A Fund's
performance may differ from that of other investors in its corresponding
Portfolio, including other investment companies.
The Trust (or Principal Underwriter) may provide investors with information
on municipal bond investing, which may include comparative performance
information, evaluations of Fund performance, charts and/or illustrations
prepared by independent sources (such as Lipper Analytical Services Inc.,
CDA/Wiesenberger, Morningstar, Inc., The Bond Buyer, the Federal Reserve Board
or The Wall Street Journal). The Trust may also refer in investor publications
to Tax Freedom Day, as computed by the Tax Foundation, Washington, DC 20005, to
help illustrate the value of tax free investing, as well as other tax-related
information. Information, charts and illustrations showing the effects of
inflation and taxes (including their effects on the dollar and the return on
various investments) and compounding earnings may also be included in
advertisements and materials furnished to present and prospective investors.
Information about portfolio allocation and holdings of a 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 a Fund and
about average rates of return on certificates of deposit, bank money market
deposit accounts, money market mutual funds and other short-term investments may
also be included in advertisements, supplemental sales literature or
communications of the Fund. Such information may also compare the tax equivalent
yield (or value) of the Fund to the after-tax yield (or value) of such other
investment vehicles. Such information may be in the form of hypothetical
illustrations. A bank certificate of deposit, unlike the Fund's shares, pays a
fixed rate of interest and entitles the depositor to receive the face amount of
the certificate of deposit at maturity. A bank money market deposit account is a
form of savings account which pays a variable rate of interest. Unlike the
Fund's shares, bank certificates of deposit and bank money market deposit
accounts are insured by the Federal Deposit Insurance Corporation. A money
market mutual fund is designed to maintain a constant value of $1.00 per share
and, thus, a money market fund's shares are subject to less price fluctuation
than the Fund's shares.
The average rates of return of money market mutual funds, certificates of
deposit and bank money market deposit accounts referred to in advertisements,
supplemental sales literature or communications of the Fund will be based on
rates published by the Federal Reserve Bank, Donoghues Money Fund Averages,
RateGram or The Wall Street Journal.
Information used in advertisements and materials furnished to present and
prospective investors may include statements or illustrations relating to the
appropriateness of certain types of securities and/or mutual funds to meet
specific financial goals. Such information may address:
- cost associated with aging parents;
- funding a college education (including its actual and estimated
cost);
- health care expenses (including actual and projected expenses); -
long-term disabilities (including the availability of, and coverage
provided by, disability insurance); and
- retirement (including the availability of social security benefits,
the tax treatment of such benefits and statistics and other
information relating to maintaining a particular standard of living
and outliving existing assets).
Such information may also address different methods for saving money and the
results of such methods, as well as the benefits of investing in municipal bond
funds. Such information may describe the following advantages of investing in a
municipal bond mutual fund versus individual municipal bonds: regular monthly
income; free reinvestment of distributions; potential for increased income; bond
diversification; liquidity; low-cost easy access; and active management and in
depth credit analysis by investment professionals. In addition, by investing in
a municipal bond fund instead of individual bonds, an investor can avoid dealing
with the complexities of the municipal bond market, while benefitting from the
market access and lower transactions costs enjoyed by municipal bond funds.
The Trust (or Principal Underwriter) may provide information about Eaton
Vance, its affiliates and other investment advisers to the funds in the Eaton
Vance Family of Funds in sales material or advertisements provided to investors
or prospective investors. Such material or advertisements may also provide
information on the use of investment professionals by such investors.
TAXES
Each series of the Trust is treated as a separate entity for federal income
tax purposes. Each Fund has elected to be treated and intends to qualify each
year, as a regulated investment company ("RIC") under the Code. Accordingly,
each Fund intends to satisfy certain requirements relating to sources of its
income and diversification of its assets and to distribute substantially all of
its ordinary income (including tax-exempt income) and net income (after
reduction by any available capital loss carryforwards) in accordance with the
timing requirements imposed by the Code, so as to maintain its RIC status and to
avoid paying any federal income or excise tax. Each Fund so qualified for its
fiscal year ended July 31, 1996. Because each Fund invests its assets in a
Portfolio, the Portfolio normally must satisfy the applicable source of income
and diversification requirements in order for the Fund to also satisfy these
requirements. Each Portfolio will allocate at least annually among its
investors, including a Fund, each investor's distributive share of the
Portfolio's net taxable (if any) and tax-exempt investment income, net realized
capital gains, and any other items of income, gain, loss, deduction or credit.
For purposes of applying the requirements of the Code regarding qualification as
a RIC, each Fund (i) will be deemed to own its proportionate share of each of
the assets of the corresponding Portfolio and (ii) will be entitled to the gross
income of that Portfolio attributable to such share.
In order to avoid incurring a federal excise tax obligation, the Code
requires that each Fund distribute (or be deemed to have distributed) by
December 31 of each calendar year at least 98% of its ordinary income (not
including tax-exempt income) for such year, at least 98% of its capital gain net
income (which is 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 (i) any available capital loss
carryforwards and (ii) 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 a Fund qualifies as a RIC
and a Portfolio is treated as a partnership for Massachusetts and federal tax
purposes, neither the Fund nor the Portfolio should be liable for any income,
corporate excise or franchise tax in the Commonwealth of Massachusetts.
A Portfolio's investment in zero coupon and certain other securities will
cause it to realize income prior to the receipt of cash payments with respect to
these securities. Such income will be allocated daily to interests in the
Portfolio and, in order to enable the relevant Fund to distribute its
proportionate share of this income and avoid a tax payable by the Fund, the
Portfolio may be required to liquidate securities that it might otherwise have
continued to hold in order to generate cash that the Fund may withdraw from the
Portfolio to make distributions to Fund shareholders.
Investments in lower-rated or unrated securities may present special tax
issues for a Portfolio (and, hence, for the relevant Fund) to the extent that
the issuers of these securities default on their obligations pertaining thereto.
The Code is not entirely clear regarding the federal income tax consequences of
a Fund's taking certain positions in connection with ownership of such
distressed securities. For example, the Code is unclear regarding: (i) when a
Portfolio may cease to accrue interest, original issue discount, or market
discount; (ii) when and to what extent deductions may be taken for bad debts or
worthless securities; (iii) how payments received on obligations in default
should be allocated between principal and income; and (iv) whether exchanges of
debt obligations in a workout context are taxable.
Distributions by a Fund of net tax-exempt interest income that are properly
designated as "exempt-interest dividends" may be treated by shareholders as
interest excludable from gross income under Section 103(a) of the Code. In order
for a Fund to be entitled to pay the tax-exempt interest income allocated to it
by its corresponding Portfolio as exempt-interest dividends to its shareholders,
the Fund must and intends to satisfy certain requirements, including the
requirement that, at the close of each quarter of its taxable year, at least 50%
of the value of its total assets consists of obligations the interest on which
is exempt from regular federal income tax under Code Section 103(a). For
purposes of applying this 50% requirement, the Fund will be deemed to own its
proportionate share of each of the assets of the Portfolio, and the Portfolio
currently intends to invest its assets in a manner such that the Fund can meet
this 50% requirement. Interest on certain municipal obligations is treated as a
tax preference item for purposes of the AMT. Shareholders of each 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 a
Portfolio and the value of the securities held by it may be affected.
In the course of managing its investments, a 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. A Portfolio may also realize
taxable income from certain short-term taxable obligations, securities loans, a
portion of discount with respect to certain stripped municipal obligations or
their stripped coupons, and certain realized gains or income attributable to
accrued market discount. Any distributions by a Fund of its share of such
capital gains (after reduction by any capital loss carryforwards) or taxable
income would be taxable to shareholders of the Fund. However, it is expected
that such amounts, if any, would normally be insubstantial in relation to the
tax exempt interest earned by the corresponding Portfolio and allocated to the
Fund. Certain distributions of a Fund, if declared in October, November or
December and paid the following January, may be taxed to shareholders as if
received on December 31 of the year in which they are declared.
A 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 a
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 a Portfolio that substantially diminish the
Portfolio's risk of loss with respect to other positions in its portfolio may
constitute "straddles," which are subject to tax rules that may cause deferral
of Portfolio losses, adjustments in the holding periods of Portfolio securities,
and conversion of short-term capital losses into long-term capital losses. A
Portfolio may have to limit its activities in options and futures contracts in
order to enable the relevant Fund to maintain its RIC status.
Any loss realized upon the sale or exchange of shares of a Fund with a tax
holding period of 6 months or less will be disallowed to the extent the
shareholder has received tax-exempt interest with respect to such shares and, to
the extent the loss exceeds the disallowed amount, will be treated as a
long-term capital loss to the extent of any distribution treated as net
long-term capital gains with respect to such shares. In addition, a loss
realized on a redemption or other disposition of Fund shares may be disallowed
to the extent the shareholder acquired other Fund shares (whether through the
reinvestment of distributions or otherwise) within the period beginning 30 days
before the redemption of the loss shares and ending 30 days after such date.
Amounts paid by a Fund to individuals and certain other shareholders who
have not provided the Fund with their correct taxpayer identification number
("TIN") and certain certifications required by the Internal Revenue Service (the
"IRS") as well as shareholders with respect to whom the Fund has received
certain information from the IRS or a broker, may be subject to "backup"
withholding of federal income tax arising from the Fund's taxable dividends and
other distributions as well as the proceeds of redemption transactions
(including repurchases and exchanges), at a rate of 31%. An individual's TIN is
generally his or her social security number.
Non-resident alien individuals, foreign corporations and certain other
foreign entities generally will be subject to a U.S. withholding tax at a rate
of 30% on a 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 convention. Distributions from the
excess of a 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 arise if: (i) the
shareholder is engaged in a trade or business in the United States; (ii) the
shareholder is present in the United States for a sufficient period of time
during a taxable year to be treated as a U.S. resident, (generally 180 days or
more); or (iii) the shareholder fails to provide any required certifications
regarding its 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 a Fund.
TEXAS TAXES. In most every state which has an income tax, dividends paid by
a mutual fund attributable to investments in a particular state's municipal
obligations are exempt from both federal and such state's income tax. If Texas
adopts an income tax in the future, and assuming that its income tax policy with
respect to mutual funds investing in Texas state and local municipal obligations
would be similar to the general tax policy of other states, dividends paid by
the Fund would be exempt from Texas state income tax.
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, and, where applicable, foreign tax
consequences of investing in a Fund.
PRINCIPAL UNDERWRITER
CLASS A SHARES. Class A shares of the Fund may be continuously purchased at
the public offering price through Authorized Firms which have agreements with
the Principal Underwriter. The Trust reserves the right to suspend or limit the
offering of its shares to the public at any time. 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 Prospectus (see
"How to Buy Shares"). Such table is applicable to purchases of a Fund alone or
in combination with purchases of certain other funds offered by the Principal
Underwriter, made at a single time by (i) an individual, or an individual, his
spouse and their children under the age of twenty-one, purchasing shares for his
or their own account, and (ii) a trustee or other fiduciary purchasing shares
for a single trust estate or a single fiduciary account.
The table is also presently applicable to (1) purchases of Class A shares,
alone or in combination with purchases of any of the other funds offered by the
Principal Underwriter, through one dealer aggregating $50,000 or more made by
any of the persons enumerated above within a thirteen-month period starting with
the first purchase pursuant to a written Statement of Intention, in the form
provided by the Principal Underwriter, which includes provisions for a price
adjustment depending upon the amount actually purchased within such period (a
purchase not made pursuant to such Statement may be included thereunder if the
Statement is filed within 90 days of such purchase); or (2) purchases of Class A
shares pursuant to the Right of Accumulation and declared as such at the time of
purchase.
Subject to the applicable provisions of the 1940 Act, the Trust may issue
Class A shares at net asset value in the event that an investment company
(whether a regulated or private investment company or a personal holding
company) is merged or consolidated with or acquired by the Class. Normally no
sales charges will be paid in connection with an exchange of Class A shares for
the assets of such investment company. Class A shares may be sold at net asset
value to any officer, director, trustee, general partner or employee of the
Trust, a Portfolio or any investment company for which Eaton Vance or BMR acts
as investment adviser, any investment advisory, agency, custodial or trust
account managed or administered by Eaton Vance or by any parent, subsidiary or
other affiliate of Eaton Vance, or any officer, director or employee of any
parent, subsidiary or other affiliate of Eaton Vance. The terms "officer,"
"director," "trustee," "general partner" or "employee" as used in this paragraph
include any such person's spouse and minor children, and also retired officers,
directors, trustees, general partners and employees and their spouses and minor
children. Class A shares may also be sold at net asset value to registered
representatives and employees of Authorized Firms and to the spouses and
children under the age of 21 and beneficial accounts of such persons.
The Principal Underwriter acts as principal in selling Class A shares under
a Distribution Agreement with the Trust. 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 Class A shares under
federal and state securities laws are borne by the Class. The Distribution
Agreement is renewable annually by the Board of Trustees of the Trust (including
a majority of the noninterested Trustees) may be terminated on six months'
notice by either party and is automatically terminated upon assignment. The
Principal Underwriter distributes Class A 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. 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.
The Trust 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 Trust will exceed
the amounts paid therefor.
CLASS B SHARES. Under a Distribution Agreement, the Principal Underwriter
acts as principal in selling Class B shares. 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 Class B shares under federal and state
securities laws are borne by the Class. In addition, each Class B makes payments
to the Principal Underwriter pursuant to a Distribution Plan as described in the
Prospectus; the provisions of the plan relating to such payments are included in
the Distribution Agreement. The Distribution Agreement is renewable annually by
the Trust's Board of Trustees (including a majority of the noninterested
Trustees who have no direct or indirect financial interest in the operation of
the 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
Class B shares or on six months' notice by the Principal Underwriter and is
automatically terminated upon assignment. The Principal Underwriter distributes
Class B shares on a "best efforts" basis under which it is required to take and
pay for only such shares as may be sold. The Trust 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 Trust will exceed the amounts paid therefor. For the amount paid
by the Trust to the Principal Underwriter for acting as repurchase agent, see
Appendix B.
SERVICE PLAN -- CLASS A SHARES
The Trust on behalf of each of its Class A shares has adopted a Service Plan
(the "Plan") designed to meet the service fee requirements of the sales charge
rule of the National Association of Securities Dealers, Inc. (the "NASD").
(Management believes service fee payments are not distribution expenses governed
by Rule 12b-1 under the 1940 Act, but has chosen to have the Plan approved as if
that Rule were applicable.) The following supplements the discussion of the Plan
contained in the Prospectus.
The Plan continues in effect from year to year, for so long as such
continuance is approved by a vote of both a majority of (i) the noninterested
Trustees who have no direct or indirect financial interest in the operation of
the Plan or any agreements related to it (the "Plan Trustees") and (ii) all of
the Trustees then in office, cast in person at a meeting (or meetings) called
for the purpose of voting on this Plan. The Plan may be terminated any time by
vote of the Plan Trustees or by a vote of a majority of the outstanding Class A
shares of a Fund. The Plan has been approved by the Board of Trustees of the
Trust, including the Plan Trustees.
Under the Plan, an officer of the Trust shall provide to the Trustees for
their review, and the Trustees shall review at least quarterly, a written report
of the amount expended under the Plan and the purposes for which such
expenditures were made. The Plan may not be amended to increase materially the
payments described herein without approval of the affected shareholders of Class
A shares, and all material amendments of the Plan must also be approved by the
Trustees of the Trust in the manner described above. So long as the Plan is in
effect, the selection and nomination of Trustees who are not interested persons
of the Trust shall be committed to the discretion of the Trustees who are not
such interested persons. The Trustees have determined that in their judgment
there is a reasonable likelihood that the Plan will benefit each Fund and its
Class A shareholders.
DISTRIBUTION PLAN -- CLASS B SHARES
The Trust has adopted a Distribution Plan (the "Plan") on behalf of its
Class B shares. The Plan is designed to meet the requirements of Rule 12b-1
under the 1940 Act and the sales charge rule of the NASD. The purpose of the
Plan is to compensate the Principal Underwriter for its distribution services
and facilities provided with respect to Class B shares.
The Plan provides that each Fund will pay sales commissions and distribution
fees to the Principal Underwriter only after and as a result of the sale of
Class B 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 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 respective Class and will accordingly reduce
the Class'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 a Class's net assets on such day. The level of a Class's net
assets changes each day and depends upon the amount of sales and redemptions of
shares, the changes in the value of the investments held by the Portfolio, the
expenses of the Class, Fund and the Portfolio accrued and allocated to the Fund
and Class 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 Trust does not accrue possible future payments as a
liability of a Class or reduce a Class'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 Class 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 Trust to the Principal Underwriter
whenever there exist uncovered distribution charges.
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 Trust 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 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 shares upon which a
CDSC will be imposed, the level and timing of redemptions of shares upon which
no CDSC will be imposed (including redemptions of shares pursuant to the
exchange privilege which result in a reduction of uncovered distribution
charges), changes in the level of the net assets of the Class, and changes in
the interest rate used in the calculation of the distribution fee under the
Plan. Periods with a high level of sales of Class shares accompanied by a low
level of early redemptions of Class 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.
Currently, payments of sales commissions and distribution fees and of
service fees may equal 1% of a Class's average daily net assets per annum. For
actual payments made and the outstanding uncovered distribution charges of the
Principal Underwriter, see Appendix B. The Trust 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 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 Class B 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 Trust.
The Plan continues in effect from year to year so long as such continuance
is approved at least annually by the vote of both a majority of (i) the
noninterested Trustees of the Trust 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
applicable Class. The Plan requires quarterly Trustee review of 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 affected
Class and the Trustees. So long as the Plan is in effect, the selection and
nomination of the noninterested Trustees shall be committed to the discretion of
such Trustees.
The Trustees of the Trust believe that the Plan will be a significant factor
in the expected growth of each Fund's assets, and will result in increased
investment flexibility and advantages which have benefitted and will continue to
benefit the Fund and its Class B 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 Class B 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 Class B shareholders.
PORTFOLIO SECURITY TRANSACTIONS
Decisions concerning the execution of portfolio security transactions,
including the selection of the market and the executing firm, are made by BMR.
BMR is also responsible for the execution of transactions for all other accounts
managed by it.
BMR places the portfolio security transactions of each 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 each 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
Portfolios 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 Portfolios 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 each 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 Portfolios and BMR's
other clients for providing brokerage and research services to BMR.
The following table shows, for each of the fiscal years ended July 31, 1996,
1995 and 1994 brokerage commission paid by each Portfolio:
PORTFOLIO 7/31/96 7/31/95 7/31/94*
Arizona .................. $ 22,534 $ -0- $ -0-
Colorado ................. 13,997 -0- -0-
Connecticut .............. 33,097 -0- -0-
Michigan ................. -0- -0- -0-
Minnesota ................ 21,625 -0- -0-
New Jersey ............... 41,780 -0- -0-
Pennsylvania ............. 106,001 -0- -0-
Texas .................... 5,915 -0- -0-
*Ten months ended July 31, 1994
All of such portfolio security transactions were directed to firms which
provided some research services to BMR or its affiliates (although many of such
firms may have been selected in any particular transaction primarily because of
their execution capabilities), and the amounts of such transactions for the
fiscal year ended July 31, 1996 were as follows: Arizona -- $181,351,480;
Colorado -- $72,328,156; Connecticut -- $237,056,390; Michigan -- $-0-;
Minnesota -- $104,595,026; New Jersey -- $276,203,309; Pennsylvania --
$688,954,042; and Texas -- $40,706,177.
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 a 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 compensation was reasonable in relation to
the value of the brokerage and research services provided. This determination
may be made either on the basis of that particular transaction or on the basis
of overall responsibilities which BMR and its affiliates have for accounts over
which they exercise investment discretion. In making any such determination, BMR
will not attempt to place a specific dollar value on the brokerage and research
services provided or to determine what portion of the commission should be
related to such services. Brokerage and research services may include advice as
to the value of securities, the advisability of investing in, purchasing, or
selling securities, and the availability of securities or purchasers or sellers
of securities; furnishing analyses and reports concerning issuers, industries,
securities, economic factors and trends, portfolio strategy and the performance
of accounts; effecting securities transactions and performing functions
incidental thereto (such as clearance and settlement); and the "Research
Services" referred to in the next paragraph.
It is a common practice of the investment advisory industry and of the
advisers of investment companies, institutions and other investors to receive
research, statistical and quotation services, data, information and other
services, products and materials which assist such advisers in the performance
of their investment responsibilities ("Research Services") from broker-dealer
firms which execute portfolio transactions for the clients of such advisers and
from third parties with which such broker-dealers have arrangements. Consistent
with this practice, BMR receives Research Services from many broker-dealer firms
with which BMR places the Portfolios' 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 each
Portfolio is not reduced because BMR receives such Research Services. BMR
evaluates the nature and quality of the various Research Services obtained
through broker-dealer firms and attempts to allocate sufficient commissions to
such firms to ensure the continued receipt of Research Services which BMR
believes are useful or of value to it in rendering investment advisory services
to its clients.
Subject to the requirement that BMR shall use its best efforts to seek and
execute portfolio security transactions at advantageous prices and at reasonably
competitive spreads or commission rates, BMR is authorized to consider as a
factor in the selection of any broker-dealer firm with whom portfolio orders may
be placed the fact that such firm has sold or is selling shares of the Funds or
of other investment companies sponsored by BMR or Eaton Vance. This policy is
not inconsistent with a rule of the NASD, which rule provides that no firm which
is a member of the NASD shall favor or disfavor the distribution of shares of
any particular investment company or group of investment companies on the basis
of brokerage commissions received or expected by such firm from any source.
Municipal obligations considered as investments for the Portfolios may also
be appropriate for other investment accounts managed by BMR or its affiliates.
Whenever decisions are made to buy or sell securities by a Portfolio and one or
more of such other accounts simultaneously, BMR will allocate the security
transactions (including "hot" issues) in a manner which it believes to be
equitable under the circumstances. As a result of such allocations, there may be
instances where a Portfolio will not participate in a transaction that is
allocated among other accounts. If an aggregated order cannot be filled
completely, allocations will generally be made on a pro rata basis. An order may
not be allocated on a pro rata basis where, for example: (i) consideration is
given to portfolio managers who have been instrumental in developing or
negotiating a particular investment; (ii) consideration is given to an account
with specialized investment policies that coincide with the particulars of a
specific investment; (iii) pro rata allocation would result in odd-lot or de
minimis amounts being allocated to a portfolio or other client; or (iv) where
BMR reasonably determines that departure from a pro rata allocation is
advisable. While these aggregation and allocation policies 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 Portfolios that the benefits from the BMR organization outweigh any
disadvantage that may arise from exposure to simultaneous transactions.
OTHER INFORMATION
Eaton Vance, pursuant to its agreement with the Trust, controls the use of
the words "Eaton Vance" or "EV" in the Fund's name and may use the words "Eaton
Vance" or "EV" in other connections and for other purposes.
As permitted by Massachusetts law, there will normally be no meetings of
shareholders for the purpose of electing Trustees unless and until such time as
less than a majority of the Trustees of the Trust holding office have been
elected by shareholders. In such an event the Trustees then in office will call
a shareholders' meeting for the election of Trustees. Except for the foregoing
circumstances and unless removed by action of the shareholders in accordance
with the Trust's by-laws, the Trustees shall continue to hold office and may
appoint successor Trustees.
The Trust's By-laws provide that no person shall serve as a Trustee if
shareholders holding two-thirds of the outstanding shares have removed him from
that office either by a written declaration filed with the Trust's custodian or
by votes cast at a meeting called for that purpose. The By-laws further provide
that under certain circumstances the shareholders may call a meeting to remove a
Trustee and that the Trust is required to provide assistance in communication
with shareholders about such a meeting.
The Trust's Declaration of Trust may be amended by the Trustees when
authorized by vote of a majority of the outstanding voting securities of the
Trust, the financial interests of which are affected by the amendment. The
Trustees may also amend the Declaration of Trust without the vote or consent of
shareholders to change the name of the Trust or any series or to make such other
changes (such as reclassifying series of classes of shares or restructuring the
Trust) 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.
Under Massachusetts law, if certain conditions prevail, shareholders of a
Massachusetts business trust (such as the Trust) could be deemed to have
personal liability for the obligations of the Trust. Numerous investment
companies registered under the 1940 Act have been formed as Massachusetts
business trusts, and management is not aware of an instance where such liability
has been imposed. The Trust's Declaration of Trust contains an express
disclaimer of liability on the part of the Fund shareholders and the Trust's
By-laws provide that the Trust shall assume the defense on behalf of any Fund
shareholders. The Declaration of Trust also contains provisions limiting the
liability of a series or class to that series or class. Moreover, the Trust's
By-laws also provide for indemnification out of the property of the Fund of any
shareholder held personally liable solely by reason of being or having been a
shareholder for all loss or expense arising from such liability. The assets of
the Fund are readily marketable and will ordinarily substantially exceed its
liabilities. In light of the nature of the Fund's business and the nature of its
assets, management believes that the possibility of the Fund's liability
exceeding its assets, and therefore the shareholder's risk of personal
liability, is extremely remote.
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 of the
Portfolio holding office have been elected by investors. In such an event the
Trustees of the Portfolio then in office will call an investors' meeting for the
election of Trustees. Except for the foregoing circumstances and unless removed
by action of the investors in accordance with the Portfolio's Declaration of
Trust, the Trustees shall continue to hold office and may appoint successor
Trustees.
The Declaration of Trust of the Portfolio provides that no person shall
serve as a Trustee if investors holding two-thirds of the outstanding interest
have removed him from that office either by a written declaration filed with the
Portfolio's custodian or by votes cast at a meeting called for that purpose. The
Declaration of Trust further provides that under certain circumstances the
investors may call a meeting to remove a Trustee and that the Portfolio is
required to provide assistance in communicating with investors about such a
meeting.
The Portfolio's Declaration of Trust provides that the Fund and other
entities permitted to invest in the Portfolio (e.g., other U.S. and foreign
investment companies, and common and commingled trust funds) will each be liable
for all obligations of the Portfolio. However, the risk of the Fund incurring
financial loss on account of such liability is limited to circumstances in which
both inadequate insurance exists and the Portfolio itself is unable to meet its
obligations. Accordingly, the Trustees of the Trust believe that neither the
Fund nor its shareholders will be adversely affected by reason of the Fund
investing in the Portfolio.
The Portfolio's Declaration of Trust provides that the Portfolio will
terminate 120 days after the complete withdrawal of the Fund or any other
investor in the Portfolio, unless either the remaining investors, by unanimous
vote at a meeting of such investors, or a majority of the Trustees of the
Portfolio, by written instrument consented to by all investors, agree to
continue the business of the Portfolio. This provision is consistent with
treatment of the Portfolio as a partnership for federal income tax purposes.
The right to redeem shares of the Fund can be suspended and the payment of
the redemption price deferred when the Exchange is closed (other than for
customary weekend and holiday closings), during periods when trading on the
Exchange is restricted as determined by the Commission, or during any emergency
as determined by the Commission which makes it impracticable for the Portfolio
to dispose of its securities or value its assets, or during any other period
permitted by order of the Commission for the protection of investors.
Each Fund changed its name from Eaton Vance [state name] Tax Free Fund to EV
Marathon [state name] Tax Free Fund on February 1, 1994 and to EV Marathon
[state name] Municipals Fund on December 1, 1994. Each Fund was reorganized into
multiple classes and changed its name to Eaton Vance [state name] Municipals
Fund on August 1, 1997. The operations of the Class B reflect the operations of
a Fund prior to August 1, 1997. Class A is a successor to the operations of a
separate series of the Trust.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Deloitte & Touche LLP, 125 Summer Street, Boston, Massachusetts, are the
independent certified public accountants of the Funds and the Portfolios,
providing audit services, tax return preparation, and assistance and
consultation with respect to the preparation of filings with the Commission.
FINANCIAL STATEMENTS
The audited financial statements of and independent auditors' reports for
the Funds and the Portfolios, appear in the Funds' most recent annual report to
shareholders, the unaudited financial statements of the Funds and the Portfolios
appear in the Funds' most recent semiannual report to shareholders both of which
are incorporated by reference into this SAI. A copy of the Funds' semiannual and
annual report accompanies this SAI.
Registrant incorporates by reference the audited financial information for
the Funds and the Portfolios listed below for the fiscal year ended July 31,
1996, as previously filed electronically with the Commission:
<TABLE>
<S> <C>
EV Marathon Arizona Municipals Fund Arizona Municipals Portfolio
EV Marathon Colorado Municipals Fund Colorado Municipals Portfolio
EV Marathon Connecticut Municipals Fund Connecticut Municipals Portfolio
EV Marathon Michigan Municipals Fund Michigan Municipals Portfolio
EV Marathon Minnesota Municipals Fund Minnesota Municipals Portfolio
EV Marathon New Jersey Municipals Fund New Jersey Municipals Portfolio
EV Marathon Pennsylvania Municipals Fund Pennsylvania Municipals Portfolio
EV Marathon Texas Municipals Fund Texas Municipals Portfolio
(Accession No. 0000950135-96-004171)
</TABLE>
Registrant incorporates by reference the unaudited financial information for
the Funds and the Portfolios listed below for the six months ended January 31,
1997, as previously filed electronically with the Commission:
<TABLE>
<S> <C>
EV Marathon Arizona Municipals Fund Arizona Municipals Portfolio
EV Marathon Colorado Municipals Fund Colorado Municipals Portfolio
EV Marathon Connecticut Municipals Fund Connecticut Municipals Portfolio
EV Marathon Michigan Municipals Fund Michigan Municipals Portfolio
EV Marathon Minnesota Municipals Fund Minnesota Municipals Portfolio
EV Marathon New Jersey Municipals Fund New Jersey Municipals Portfolio
EV Marathon Pennsylvania Municipals Fund Pennsylvania Municipals Portfolio
EV Marathon Texas Municipals Fund Texas Municipals Portfolio
(Accession No. 0000950135-97-001655)
</TABLE>
<PAGE>
APPENDIX A: CLASS A SHARES
PERFORMANCE INFORMATION
The tables below indicate the cumulative and average total return on a
hypothetical investment of $1,000 in a predecessor fund reorganized August 1,
1997 into Class A shares for the periods shown in each table. The total for part
of the period reflects the Portfolio's total return (or that of its predecessor)
adjusted to reflect any applicable Fund sales charge. Total return for this time
period has not been adjusted to reflect a Fund's distribution fees and and/or
service fees and certain other expenses. The Amount of Investment reflects the
deduction of the maximum sales charge of 4.75%. 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. Information presented with two asterisks (**) includes the effect of
subsidizing expenses. Returns would have been lower without subsidies.
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT -- ARIZONA
TOTAL RETURN TOTAL RETURN
EXCLUDING MAXIMUM INCLUDING MAXIMUM
VALUE OF VALUE OF SALES CHARGE SALES CHARGE
INVESTMENT INVESTMENT INITIAL INVESTMENT ---------------------------- ---------------------------
PERIOD DATE INVESTMENT ON 1/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ----------------------- ------------- -------------- ------------- ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of the Fund** 7/25/91 $952.23 $1,412.57 48.34% 7.41% 41.26% 6.46%
5 Years Ended
1/31/97** 1/31/92 $952.97 $1,309.60 37.43% 6.57% 30.96% 5.54%
1 Year Ended
1/31/97** 1/31/96 $952.47 $ 977.48 2.63% 2.63% -2.25% -2.25%
- ------------
*Commencement of Fund operations December 13, 1993.
VALUE OF A $1,000 INVESTMENT -- COLORADO
<CAPTION>
TOTAL RETURN TOTAL RETURN
EXCLUDING MAXIMUM INCLUDING MAXIMUM
VALUE OF VALUE OF SALES CHARGE SALES CHARGE
INVESTMENT INVESTMENT INITIAL INVESTMENT ---------------------------- ---------------------------
PERIOD DATE INVESTMENT ON 1/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ----------------------- ------------- -------------- ------------- ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of the Fund** 8/25/92 $952.17 $1,245.64 30.82% 6.24% 24.56% 5.07%
1 Year Ended
1/31/97** 1/31/96 $952.94 $ 984.72 3.34% 3.34% -1.53% -1.53%
- ------------
*Commencement of Fund operations December 10, 1993.
VALUE OF A $1,000 INVESTMENT -- CONNECTICUT
<CAPTION>
TOTAL RETURN TOTAL RETURN
EXCLUDING MAXIMUM INCLUDING MAXIMUM
VALUE OF VALUE OF SALES CHARGE SALES CHARGE
INVESTMENT INVESTMENT INITIAL INVESTMENT ---------------------------- ---------------------------
PERIOD DATE INVESTMENT ON 1/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ----------------------- ------------- -------------- ------------- ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of the Fund** 5/1/92 $952.74 $1,271.40 33.45% 6.25% 27.14% 5.17%
1 Year Ended
1/31/97** 1/31/96 $952.08 $ 982.10 3.15% 3.15% -1.79% -1.79%
- ------------
*Commencement of Fund operations April 19, 1994.
VALUE OF A $1,000 INVESTMENT -- MICHIGAN
<CAPTION>
TOTAL RETURN TOTAL RETURN
EXCLUDING MAXIMUM INCLUDING MAXIMUM
VALUE OF VALUE OF SALES CHARGE SALES CHARGE
INVESTMENT INVESTMENT INITIAL INVESTMENT ---------------------------- ---------------------------
PERIOD DATE INVESTMENT ON 1/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ----------------------- ------------- -------------- ------------- ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of the Fund** 4/19/91 $952.89 $1,373.50 44.14% 6.52% 37.35% 5.63%
5 Years Ended
1/31/97** 1/31/92 $952.82 $1,257.46 31.98% 5.71% 25.75% 4.69%
1 Year Ended
1/31/97** 1/31/96 $952.38 $ 970.85 1.94% 1.94% -2.92% -2.92%
- ------------
*Commencement of Fund operations December 7, 1993.
VALUE OF A $1,000 INVESTMENT -- MINNESOTA
<CAPTION>
TOTAL RETURN TOTAL RETURN
EXCLUDING MAXIMUM INCLUDING MAXIMUM
VALUE OF VALUE OF SALES CHARGE SALES CHARGE
INVESTMENT INVESTMENT INITIAL INVESTMENT ---------------------------- ---------------------------
PERIOD DATE INVESTMENT ON 1/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ----------------------- ------------- -------------- ------------- ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of the Fund** 7/29/91 $952.56 $1,320.27 38.60% 6.10% 32.03% 5.17%
5 Years Ended
1/31/97** 1/31/92 $952.77 $1,256.13 31.84% 5.68% 25.61% 4.67%
1 Year Ended
1/31/97** 1/31/96 $952.10 $ 975.66 2.47% 2.47% -2.43% -2.43%
- ------------
*Commencement of Fund operations December 9, 1993.
VALUE OF A $1,000 INVESTMENT -- NEW JERSEY
<CAPTION>
TOTAL RETURN TOTAL RETURN
EXCLUDING MAXIMUM INCLUDING MAXIMUM
VALUE OF VALUE OF SALES CHARGE SALES CHARGE
INVESTMENT INVESTMENT INITIAL INVESTMENT ---------------------------- ---------------------------
PERIOD DATE INVESTMENT ON 1/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ----------------------- ------------- -------------- ------------- ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of the Fund** 1/8/91 $952.43 $1,463.72 53.69% 7.34% 46.37% 6.48%
5 Years Ended
1/31/97** 1/31/92 $952.39 $1,308.28 37.37% 6.56% 30.83% 5.52%
1 Year Ended
1/31/97** 1/31/96 $952.47 $ 984.02 3.31% 3.31% -1.60% -1.60%
- ------------
*Commencement of Fund operations April 13, 1994.
VALUE OF A $1,000 INVESTMENT -- PENNSYLVANIA
<CAPTION>
TOTAL RETURN TOTAL RETURN
EXCLUDING MAXIMUM INCLUDING MAXIMUM
VALUE OF VALUE OF SALES CHARGE SALES CHARGE
INVESTMENT INVESTMENT INITIAL INVESTMENT ---------------------------- ---------------------------
PERIOD DATE INVESTMENT ON 1/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ----------------------- ------------- -------------- ------------- ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of the Fund** 1/8/91 $952.88 $1,458.48 53.06% 7.26% 45.85% 6.41%
5 Years Ended
1/31/97** 1/31/92 $952.50 $1,301.86 36.68% 6.45% 30.19% 5.42%
1 Year Ended
1/31/97** 1/31/96 $952.46 $ 989.51 3.88% 3.88% -1.05% -1.05%
- ------------
*Commencement of Fund operations June 1, 1994.
VALUE OF A $1,000 INVESTMENT -- TEXAS
<CAPTION>
TOTAL RETURN TOTAL RETURN
EXCLUDING MAXIMUM INCLUDING MAXIMUM
VALUE OF VALUE OF SALES CHARGE SALES CHARGE
INVESTMENT INVESTMENT INITIAL INVESTMENT ---------------------------- ---------------------------
PERIOD DATE INVESTMENT ON 1/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ----------------------- ------------- -------------- ------------- ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of the Fund** 3/24/92 $952.46 $1,293.20 35.77% 6.49% 29.32% 5.43%
1 Year Ended
1/31/97** 1/31/96 $952.48 $ 986.46 3.57% 3.57% -1.35% -1.35%
- ------------
*Commencement of Fund operations December 8, 1993.
</TABLE>
The following shows the yield of Class A shares for the thirty-day period
ended January 31, 1997 and the yield required of a taxable security that would
produce an after-tax yield equivalent to the thirty-day yield, assuming a
certain combined federal and State tax rate. If a Portfolio's or Fund's expenses
had not been subsidized, yield would be lower. Appendix D contains
state-specific applicable tax rates and income brackets.
TAXABLE SECURITY ASSUMED
CLASS A 30-DAY YIELD EQUIVALENT YIELD TAX RATE
- ------- ------------ ---------------- --------
Arizona ............. 4.79% 7.32% 34.59%
Colorado ............ 5.21% 7.95% 34.45%
Connecticut ......... 5.05% 7.66% 34.11%
Michigan ............ 4.73% 7.38% 35.93%
Minnesota ........... 4.99% 7.90% 36.87%
New Jersey .......... 5.64% 8.73% 35.40%
Pennsylvania ........ 5.16% 8.36% 38.28%
Texas ............... 5.11% 7.41% 31.00%
<PAGE>
APPENDIX B: CLASS B SHARES
FEES AND EXPENSES
DISTRIBUTION PLANS
Each Distribution Plan and Distribution Agreement remains in effect until
April 28, 1998 and may be continued as described under "Distribution Plan".
Pursuant to Rule 12b-1, the Plan has been approved by the relevant Fund's
shareholders and by the Board of Trustees of the Trust, as required by Rule
12b-1.
The following table shows, for the fiscal year ended July 31, 1996, (1)
sales commissions paid by the Principal Underwriter to Authorized Firms on sales
of Class B shares, (2) Fund (Class B) distribution payments to the Principal
Underwriter under the Plan, (3) CDSC payments to the Principal Underwriter, (4)
service fees on Class B shares paid or accrued under the Plan, and (5) amount of
service fees on Class B shares paid to Authorized Firms (the balance of which
being retained by the Principal Underwriter).
<TABLE>
<CAPTION>
DISTRIBUTION CDSC SERVICE
PAYMENTS TO PAYMENTS TO FEES TO
SALES THE PRINCIPAL THE PRINCIPAL SERVICE AUTHORIZED
CLASS B COMMISSIONS UNDERWRITER UNDERWRITER FEES FIRMS
- ------- ----------- ----------- ----------- ---- -----
<S> <C> <C> <C> <C> <C>
Arizona ......................... $247,645 $1,028,216 $ 623,000 $217,493 $216,342
Colorado ........................ 151,854 335,453 194,000 73,771 73,703
Connecticut ..................... 288,971 1,415,229 580,000 332,082 330,320
Michigan ........................ 163,807 1,364,186 655,000 332,353 330,741
Minnesota ....................... 152,015 585,606 351,000 132,036 131,927
New Jersey ...................... 619,140 2,975,687 1,352,000 680,396 677,550
Pennsylvania .................... 430,940 3,552,652 1,882,000 814,722 812,144
Texas ........................... 30,561 199,982 110,000 44,196 44,186
</TABLE>
PRINCIPAL UNDERWRITER
For the fiscal year ended July 31, 1996, each Fund paid the Principal
Underwriter for repurchase transactions handled by it $2.50 for each such
transaction which aggregated as follows: Arizona -- $1,432.50; Colorado -- $900;
Connecticut -- $1,747.50; Michigan -- $2,147.50; Minnesota -- $1,137.50; New
Jersey -- $4,345; Pennsylvania -- $6,050; and Texas -- $260.
ADMINISTRATOR
As stated under "Investment Adviser and Administrator", the Administrator
currently receives no compensation for providing administrative services to each
Fund. For the fiscal year ended July 31, 1995 and for the ten months ended July
31, 1994, $46,683 and $85,239, respectively, of the Texas Fund's Class B shares
operating expenses were allocated to the Administrator.
PERFORMANCE INFORMATION
The tables below indicate the cumulative and average annual total return on
a hypothetical investment of $1,000 in Class B shares for the periods shown in
each 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. Information presented with two asterisks
(**) includes the effect of subsidizing expenses. Return would have been lower
without subsidies.
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT -- ARIZONA
VALUE OF
INVESTMENT VALUE OF TOTAL RETURN BEFORE TOTAL RETURN AFTER
BEFORE INVESTMENT DEDUCTING DEDUCTING
DEDUCTING AFTER DEDUCTING THE MAXIMUM CDSC THE MAXIMUM CDSC
INVESTMENT INVESTMENT AMOUNT OF THE MAXIMUM THE MAXIMUM -------------------------- --------------------------
PERIOD DATE INVESTMENT CDSC ON 1/31/97 CDSC ON 1/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------- ------------ ----------- --------------- --------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of
the Fund** 7/25/91 $1,000 $1,489.15 $1,479.15 48.92% 7.48% 47.92% 7.35%
5 Years
Ended
1/31/97** 1/31/92 $1,000 $1,379.68 $1,359.68 37.97% 6.65% 35.97% 6.34%
1 Year
Ended
1/31/97 1/31/96 $1,000 $1,019.18 $ 970.48 1.92% 1.92% -2.95% -2.95%
- ------------
* Investment operations began on July 25, 1991.
VALUE OF A $1,000 INVESTMENT -- COLORADO
<CAPTION>
VALUE OF
INVESTMENT VALUE OF TOTAL RETURN BEFORE TOTAL RETURN AFTER
BEFORE INVESTMENT DEDUCTING DEDUCTING
DEDUCTING AFTER DEDUCTING THE MAXIMUM CDSC THE MAXIMUM CDSC
INVESTMENT INVESTMENT AMOUNT OF THE MAXIMUM THE MAXIMUM -------------------------- --------------------------
PERIOD DATE INVESTMENT CDSC ON 1/31/97 CDSC ON 1/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------- ------------ ----------- --------------- --------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of the
Fund** 8/25/92 $1,000 $1,296.63 $1,276.63 29.66% 6.02% 27.66% 5.66%
1 Year
Ended
1/31/97** 1/31/96 $1,000 $1,023.85 $ 975.03 2.38% 2.38% -2.50% -2.50%
- ------------
* Investment operations began on August 25, 1992.
VALUE OF A $1,000 INVESTMENT -- CONNECTICUT
<CAPTION>
VALUE OF
INVESTMENT VALUE OF TOTAL RETURN BEFORE TOTAL RETURN AFTER
BEFORE INVESTMENT DEDUCTING DEDUCTING
DEDUCTING AFTER DEDUCTING THE MAXIMUM CDSC THE MAXIMUM CDSC
INVESTMENT INVESTMENT AMOUNT OF THE MAXIMUM THE MAXIMUM -------------------------- --------------------------
PERIOD DATE INVESTMENT CDSC ON 1/31/97 CDSC ON 1/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------- ------------ ----------- --------------- --------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of
the Fund** 5/1/92 $1,000 $1,305.05 $1,285.05 30.50% 5.76% 28.50% 5.41%
1 Year
Ended
1/31/97 1/31/96 $1,000 $1,022.57 $ 973.72 2.26% 2.26% -2.63% -2.63%
- ------------
* Investment operations began on May 1, 1992.
VALUE OF A $1,000 INVESTMENT -- MICHIGAN
<CAPTION>
VALUE OF
INVESTMENT VALUE OF TOTAL RETURN BEFORE TOTAL RETURN AFTER
BEFORE INVESTMENT DEDUCTING DEDUCTING
DEDUCTING AFTER DEDUCTING THE MAXIMUM CDSC THE MAXIMUM CDSC
INVESTMENT INVESTMENT AMOUNT OF THE MAXIMUM THE MAXIMUM -------------------------- --------------------------
PERIOD DATE INVESTMENT CDSC ON 1/31/97 CDSC ON 1/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------- ------------ ----------- --------------- --------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of
the Fund** 4/19/91 $1,000 $1,445.02 $1,435.02 44.50% 6.56% 43.50% 6.44%
5 Years
Ended
1/31/97** 1/31/92 $1,000 $1,303.12 $1,303.12 32.31% 5.76% 30.31% 5.44%
1 Year
Ended
1/31/97 1/31/96 $1,000 $1,013.53 $ 965.10 1.35% 1.35% -3.49% -3.49%
- ------------
* Investment operations began on April 19, 1991.
VALUE OF A $1,000 INVESTMENT -- MINNESOTA
<CAPTION>
VALUE OF
INVESTMENT VALUE OF TOTAL RETURN BEFORE TOTAL RETURN AFTER
BEFORE INVESTMENT DEDUCTING DEDUCTING
DEDUCTING AFTER DEDUCTING THE MAXIMUM CDSC THE MAXIMUM CDSC
INVESTMENT INVESTMENT AMOUNT OF THE MAXIMUM THE MAXIMUM -------------------------- --------------------------
PERIOD DATE INVESTMENT CDSC ON 1/31/97 CDSC ON 1/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------- ------------ ----------- --------------- --------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of
the Fund** 7/29/91 $1,000 $1,358.48 $1,348.48 35.85% 5.72% 34.85% 5.58%
5 Years
Ended
1/31/97** 1/31/92 $1,000 $1,292.19 $1,272.39 29.22% 5.26% 27.24% 4.94%
1 Year
Ended
1/31/97 1/31/96 $1,000 $1,015.06 $ 966.59 1.51% 1.51% -3.34% -3.34%
- ----------
* Investment operations began on July 29, 1991.
VALUE OF A $1,000 INVESTMENT -- NEW JERSEY
<CAPTION>
VALUE OF
INVESTMENT VALUE OF TOTAL RETURN BEFORE TOTAL RETURN AFTER
BEFORE INVESTMENT DEDUCTING DEDUCTING
DEDUCTING AFTER DEDUCTING THE MAXIMUM CDSC THE MAXIMUM CDSC
INVESTMENT INVESTMENT AMOUNT OF THE MAXIMUM THE MAXIMUM -------------------------- --------------------------
PERIOD DATE INVESTMENT CDSC ON 1/31/97 CDSC ON 1/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------- ------------ ----------- --------------- --------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of
the Fund** 1/8/91 $1,000 $1,487.09 $1,487.09 48.71% 6.76% 48.71% 6.76%
5 Years
Ended
1/31/97** 1/31/92 $1,000 $1,329.16 $1,309.16 32.92% 5.86% 30.92% 5.54%
1 Year
Ended
1/31/97 1/31/96 $1,000 $1,021.87 $ 973.16 2.19% 2.19% -2.68% -2.68%
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.
- ----------
* Investment operations began on January 8, 1991.
VALUE OF A $1,000 INVESTMENT -- PENNSYLVANIA
<CAPTION>
VALUE OF
INVESTMENT VALUE OF TOTAL RETURN BEFORE TOTAL RETURN AFTER
BEFORE INVESTMENT DEDUCTING DEDUCTING
DEDUCTING AFTER DEDUCTING THE MAXIMUM CDSC THE MAXIMUM CDSC
INVESTMENT INVESTMENT AMOUNT OF THE MAXIMUM THE MAXIMUM -------------------------- --------------------------
PERIOD DATE INVESTMENT CDSC ON 1/31/97 CDSC ON 1/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------- ------------ ----------- --------------- --------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of the
Fund** 1/8/91 $1,000 $1,490.83 $1,490.83 49.08% 6.80% 49.08% 6.80%
5 Years
Ended
1/31/97** 1/31/92 $1,000 $1,331.34 $1,311.34 33.13% 5.89% 31.13% 5.57%
1 Year
Ended
1/31/97 1/31/96 $1,000 $1,027.38 $ 978.45 2.74% 2.74% -2.15% -2.15%
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.
- ----------
* Investment operations began on January 8, 1991.
VALUE OF A $1,000 INVESTMENT -- TEXAS
<CAPTION>
VALUE OF
INVESTMENT VALUE OF TOTAL RETURN BEFORE TOTAL RETURN AFTER
BEFORE INVESTMENT DEDUCTING DEDUCTING
DEDUCTING AFTER DEDUCTING THE MAXIMUM CDSC THE MAXIMUM CDSC
INVESTMENT INVESTMENT AMOUNT OF THE MAXIMUM THE MAXIMUM -------------------------- --------------------------
PERIOD DATE INVESTMENT CDSC ON 1/31/97 CDSC ON 1/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------- ------------ ----------- --------------- --------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of
the Fund** 3/24/92 $1,000 $1,374.35 $1,354.35 37.44% 6.76% 35.44% 6.44%
1 Year
Ended
1/31/97** 1/31/96 $1,000 $1,028.51 $ 979.48 2.85% 2.85% -2.05% -2.05%
- ----------
* Investment operations began on March 24, 1992.
</TABLE>
The following shows the yield of Class B shares for the thirty-day period
ended January 31, 1997 and the yield required of a taxable security that would
produce an after-tax yield equivalent to the thirty-day yield, assuming a
certain combined federal and State tax rate. If a Portfolio's or Fund's expenses
had not been subsidized, yield would be lower. Appendix D contains state
specific applicable tax rates and income brackets.
<TABLE>
<CAPTION>
TAXABLE SECURITY ASSUMED
CLASS B 30-DAY YIELD EQUIVALENT YIELD TAX RATE
<S> <C> <C> <C>
Arizona ................................ 4.34% 6.64% 34.59%
Colorado ............................... 4.35% 6.64% 34.45%
Connecticut ............................ 4.32% 6.56% 34.11%
Michigan ............................... 4.12% 6.43% 35.93%
Minnesota .............................. 4.33% 6.86% 36.87%
New Jersey ............................. 4.54% 7.03% 35.40%
Pennsylvania ........................... 4.71% 7.69% 38.79%
Texas .................................. 4.71% 6.83% 31.00%
</TABLE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As at June 30, 1997, the Trustees and officers of the Trust, as a group,
owned in the aggregate less than 1% of the outstanding shares of each Class B
and of each Fund. As of June 30, 1997, Merrill Lynch, Pierce, Fenner & Smith,
Inc., Jacksonville, FL was the record owner of the following amounts of the
Class B shares, which are 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: Arizona -- 11.4%; Colorado -- 6.7%; Connecticut -- 18.2%;
Michigan -- 22.5%; Minnesota -- 8.4%; New Jersey -- 11.1%; Pennsylvania --
14.1%; and Texas -- 27.4%. To the knowledge of the Trust, no other person owned
of record or beneficially 5% or more of any Fund's outstanding Class B shares as
of such date.
<PAGE>
APPENDIX C: STATE SPECIFIC INFORMATION
RISKS OF CONCENTRATION
The following information as to certain State specific considerations is
given to investors in view of a Portfolio's policy of concentrating its
investments in particular State issuers. Such information supplements the
information in the Prospectus. It is derived from sources that are generally
available to investors and is believed to be accurate. Such information
constitutes only a brief summary, does not purport to be a complete description
and is based on information from official statements relating to securities
offerings of issuers of each particular State. Neither the Trust nor the
Portfolios have independently verified this information.
ARIZONA
The ability of Arizona and its political subdivisions to respond to the
ever-increasing burdens placed upon them by the growth of the 1980's has been
limited, in part, by Constitutional and legislative restrictions on property tax
increases and limitations on annual expenditure increases. Subject to certain
exceptions, the maximum amount of property taxes levied by any Arizona county,
city, town or community college district for their operations and maintenance
expenditures cannot exceed the amount levied in a preceding year by more than
two percent. Certain taxes are specifically exempt from this limit, including
taxes levied for debt service payments. Annual property tax levies for the
payment of general obligation bonded indebtedness are unlimited as to rate or
amount. However, there are Constitutional limitations on the aggregate amount of
general obligation bonded indebtedness an Arizona municipality may incur, and
these limitations could impede a municipality's ability to respond to the needs
of a fast-growing population for additional public facilities and services.
Arizona State government general fund revenue growth in fiscal year 1995
increased 4.6%, while expenditures increased 12.5%. The State general fund ended
fiscal year 1995 with a fund balance of $305.0 million. Fiscal year 1996 closed
with a general fund balance of $335 million. The 1997 budget shows a slight
slowdown in growth.
The 1995 legislature enacted a $200 million income tax reduction package and
has committed to enact a $200 million property tax reduction package in 1996. In
1992, Arizona voters passed a measure that requires a two-thirds vote of the
legislature to increase State revenue. Accordingly, it will be more difficult to
reverse the current and planned tax reductions, which may adversely affect State
fund balances and fiscal conditions.
COLORADO
Large public works projects, a pickup in the housing sector and growth in
the trade and services industries led to moderate employment gains for the State
during the early 1990's. For April 1997, the adjusted unemployment rate was 3.3%
versus the 4.9% national average for the same month. Certain areas of
manufacturing, however, have been adversely impacted by the prolonged U.S.
downturn and by relatively heavy reliance on defense contracts and military
payroll. For the twelve months ended April 1997, the State's job growth was
2.6%.
The major revenue sources of the State are the individual income tax and the
general sales and use tax. Because of limitations contained in the State
constitution, the State of Colorado issues no general obligation bonds. Several
agencies and instrumentalities of State government, however, are authorized by
statute to issue bonds secured by revenues from specific projects and activities
or to enter into lease-purchase financings which are subject to annual
appropriation. Additionally, the State is authorized to issue short-term revenue
anticipation notes. To the extent the Portfolio holds debt of local units of
government whose revenues may rely in part on distributions from the State, the
fiscal health of the State will have an indirect affect on the Portfolio. The
State is required to have a balanced budget each fiscal year. Therefore, in the
event of a funding gap, the State must cut expenditures and/or raise revenues.
The latter is difficult, especially since the passage of the TABOR Amendment
(see below). Strong growth in income tax and sales tax collections recently
contributed to larger increases in the unreserved fund balance in fiscal year
1994. The State had revenue collections which exceeded expenditures by $38
million. In fiscal year 1994-95, revenues exceeded expenditures by $94 million.
The general fund reserve was $276 million, or roughly 7.6% of total annual
appropriations. Revenues for the 1995-96 fiscal year increased 6.8%, a slowdown
from the 7.3% pace in fiscal year 1995. This moderate slowdown continued into
fiscal year 1996-97 with budgeted revenue growth of 6.5%. The creation of the
Controlled Maintenance Trust Fund per a new statute required a $196 million
transfer. This is reflected in increased expenditures in fiscal years 1996 and
1997. The Controlled Maintenance Trust Fund will be used for maintenance on
State administration buildings, courts, and higher education facilities.
There are approximately 1,800 units of local government in Colorado,
including counties, statutory cities and towns, home-rule cities and counties,
school districts and a variety of water, sewer and other special districts, all
with various constitutional and statutory authority to levy taxes and incur
indebtedness. The major sources of revenue for payment of indebtedness are the
ad valorem property tax, which presently is imposed and collected solely at the
local level, although the State is also authorized to levy the tax, sales and
use taxes, and revenue from special projects. Residential real property is
presently assessed at 10.36% of its actual value. All other property is assessed
at 29% of its actual value except producing mines and oil and gas properties.
Oil and gas properties are assessed at 87.5%.
A 1992 amendment to the State Constitution (the "TABOR Amendment") restricts
growth of State and local government spending to the rate of inflation plus
growth (as measured by population, school enrollment, or construction depending
on the government entity); and requires voter approval of all new taxes or tax
increases and the issuance of most types of debt. Though the TABOR Amendment is
not expected to have an immediate effect on the credit quality of state and
local governments, it will likely reduce the financial flexibility of all levels
of government in Colorado over time. In particular, local governments dependent
on taxes on residential property are being squeezed between the TABOR Amendment
requirements of voter approval for increased mill levies and an earlier State
Constitutional amendment which has had the effect of lowering the assessment
rate on residential property from 21% to 10.36% over the past 8 years. Younger
or rapidly growing municipalities with large infrastructure requirements may
have particular difficulty finding the revenues needed to finance their growth.
CONNECTICUT
Connecticut's manufacturing industry, which has historically been of prime
economic importance to the State, its municipalities and its residents, has been
in decline for several years. Although Connecticut's manufacturing industry is
diversified between transportation equipment (primarily aircraft engines,
helicopters and submarines), non-electrical machinery, fabricated metal products
and electrical machinery, defense-related business represents a relatively high
proportion of manufacturing receipts. As a result, reductions in defense
spending have had a substantial adverse effect on Connecticut's manufacturing
industry.
Connecticut's manufacturing employment peaked in 1970 at over 441,000
workers but had declined 36.5% by 1995. Although the loss of manufacturing jobs
was partially offset by a 69.7% rise in other non-agricultural employment during
the same period, Connecticut's growth in non-manufacturing employment has lagged
behind the New England region and the nation as a whole. Moreover, Connecticut's
largest defense contractors have announced plans to reduce their labor forces
substantially over the next few years.
From 1986 through 1996, Connecticut's unemployment rate was generally lower
than the unemployment rate for the U.S. as a whole, and average per capita
personal income of Connecticut residents was higher than that of residents of
other states. The average unemployment rate (seasonally adjusted) in Connecticut
increased from a low of 3.0% in 1988 to 7.5% in 1992 and, after a number of
important changes in the method of calculation, was reported to be 5.0% in 1996.
Average per capita personal income of Connecticut residents increased in every
year from 1985 to 1995, rising from $18,268 to $31,776. However, pockets of
significant unemployment and poverty exist in some Connecticut cities and towns,
and Connecticut is now in a recession, the depth and duration of which are
uncertain.
For the four fiscal years ended June 30, 1991, the General Fund ran
operating deficits of approximately $115,600,000, $28,000,000, $259,000,000 and
$808,500,000, respectively. At the end of the 1990-1991 fiscal year, the General
Fund had an accumulated unappropriated deficit of $965,712,000. For the five
fiscal years ended June 30, 1996, the General Fund ran operating surpluses of
approximately $110,200,000, $113,500,000, $19,700,000, $80,500,000, and
$250,000,000, respectively. General Fund budgets for the biennium ending June
30, 1997, were adopted in 1995 and amended in 1996. General Fund expenditures
and revenues are budgeted to be approximately $9,200,000,000 for the 1996-1997
fiscal year.
In 1991, to address the General Fund's growing deficit, legislation was
enacted by which the State imposed an the income tax on individuals, trusts and
estates for taxable years generally commencing in 1992. For each fiscal year
starting with the 1991-1992 fiscal year, the General Fund has operated at a
surplus with over 60% of the State's tax revenues being generated by the income
tax and the sales and use tax. However, the State's budgeted expenditures have
almost doubled from approximately $4,300,000,000 for the 1986-1987 fiscal year
to approximately $9,200,000,000 for the 1996-1997 fiscal year.
The 1991 legislation also authorized the State Treasurer to issue Economic
Recovery Notes to fund the General Fund's accumulated deficit of $965,712,000 as
of June 30, 1991, and during 1991 the State issued a total of $965,710,000
Economic Recovery Notes, of which $196,555,000 were outstanding as of May 1,
1997. The notes were to be payable no later than June 30, 1996, but as part of
the budget adopted for the biennium ending June 30, 1997, payment of the
remaining notes scheduled to be paid during the 1995-96 fiscal year was
rescheduled to be paid over the four fiscal years ending June 30, 1999.
The State's primary method for financing capital projects is through the
sale of general obligation bonds. As of May 1, 1997, the State had authorized
general obligation bonds totaling $10,813,448,000, of which $9,673,240,000 had
been approved for issuance by the State Bond Commission, $8,797,072,000 had been
issued, and $6,384,716,267 were outstanding.
In 1995, the State established the University of Connecticut as a separate
corporate entity to issue bonds and construct certain infrastructure
improvements. The improvements are to be financed by $18 million of general
obligation bonds of the State and $962 million bonds of the University. The
University's bonds will be secured by a State debt service commitment, the
aggregate amount of which is limited to $382 million for the four fiscal years
ending June 30, 1999, and $580 million for the six fiscal years ending June 30,
2005.
In addition to the bonds described above, the State also has limited or
contingent liability on a significant amount of other bonds. Such bonds have
been issued by the following quasi-public agencies: the Connecticut Housing
Finance Authority, the Connecticut Development Authority, the Connecticut Higher
Education Supplemental Loan Authority, the Connecticut Resources Recovery
Authority and the Connecticut Health and Educational Facilities Authority. Such
bonds have also been issued by the cities of Bridgeport and West Haven and the
Southeastern Connecticut Water Authority. As of October 15, 1996, the amount of
bonds outstanding on which the State has limited or contingent liability totaled
$3,985,400,000.
In 1984, the State established a program to plan, construct and improve the
State's transportation system (other than Bradley International Airport). The
total cost of the program through June 30, 2000, is currently estimated to be
$11.2 billion, to be met from federal, state, and local funds. The State expects
to finance most of its $4.7 billion share of such cost by issuing $4.2 billion
of special tax obligation ("STO") bonds. The STO bonds are payable solely from
specified motor fuel taxes, motor vehicle receipts, and license, permit and fee
revenues pledged therefor and credited to the Special Transportation Fund, which
was established to budget and account for such revenues.
As of October 15, 1996, the General Assembly had authorized $4,157,900,000
of such STO bonds, of which $3,594,700,000 new money borrowings had been issued.
It is anticipated that additional STO bonds will be authorized annually in
amounts necessary to finance and to complete the infrastructure program. Such
additional bonds may have equal rank with the outstanding bonds provided certain
pledged revenue coverage requirements are met. The State expects to continue to
offer bonds for this program.
On March 29, 1990, S&P reduced its ratings of the State's general obligation
bonds from AA+ to AA, and on April 9, 1990, Moody's reduced its ratings from Aa1
to Aa. On September 13, 1991, S&P further reduced its ratings of the State's
general obligation bonds and certain obligations that depend in part on the
creditworthiness of the State to AA-. On March 17, 1995, Fitch reduced its
ratings of the State's general obligation bonds from AA+ to AA.
The State, its officers and its employees are defendants in numerous
lawsuits. Although it is not possible to determine the outcome of these
lawsuits, the Attorney General has opined that an adverse decision in any of the
following cases might have a significant impact on the State's financial
position: (i) a class action by the Connecticut Criminal Defense Lawyers
Association claiming a campaign of illegal surveillance activity and seeking
damages and injunctive relief; (ii) an action on behalf of all persons with
traumatic brain injury, claiming that their constitutional rights are violated
by placement in State hospitals alleged not to provide adequate treatment and
training, and seeking placement in community residential settings with
appropriate support services; and (iii) litigation involving claims by Indian
tribes to a portion of the State's land area.
As a result of litigation on behalf of black and Hispanic school children in
the City of Hartford seeking "integrated education" within the Greater Hartford
metropolitan area, on July 9, 1996, the State Supreme Court directed the
legislature to develop appropriate measures to remedy the racial and ethnic
segregation in the Hartford public schools. The fiscal impact of this decision
might be significant but is not determinable at this time.
General obligation bonds issued by municipalities are payable primarily from
ad valorem taxes on property located in the municipality. A municipality's
property tax base is subject to many factors outside the control of the
municipality, including the decline in Connecticut's manufacturing industry. In
addition to general obligation bonds backed by the full faith and credit of the
municipality, certain municipal authorities finance projects by issuing bonds
that are not considered to be debts of the municipality. Such bonds may be
repaid only from revenues of the financed project, the revenues from which may
be insufficient to service the related debt obligations.
In recent years, certain Connecticut municipalities have experienced severe
fiscal difficulties and have reported operating and accumulated deficits. The
most notable of these is the City of Bridgeport, which filed a bankruptcy
petition on June 7, 1991. The State opposed the petition. The United States
Bankruptcy Court for the District of Connecticut held that Bridgeport has
authority to file such a petition but that its petition should be dismissed on
the grounds that Bridgeport was not insolvent when the petition was filed.
Regional economic difficulties, reductions in revenues and increases in
expenses could lead to further fiscal problems for the State and its political
subdivisions, authorities and agencies. Difficulties in payment of debt service
on borrowings could result in declines, possibly severe, in the value of their
outstanding obligations, increases in their future borrowing costs, and
impairment of their ability to pay debt service on their obligations.
MICHIGAN
The State's economy is overly dependent on the manufacturing sector, more
specifically the auto industry. Manufacturing accounts for 23% of total
employment as compared to the national average of 17%. The dependency on
manufacturing makes the State economy overly susceptible to economic downturns.
For January 1997, the State unemployment rate was 4.9% as compared to the
national average of 5.4%. Modest employment growth is projected for 1997. An
improving economy and successful cost containment have enabled the State to
improve its financial position. For 1995, the Budget Stabilization Fund was
slightly greater than $1.0 billion and is projected to reach $1.1 billion for
1996. The Governor has proposed reducing individual and business income taxes.
Following this reduction, revenues were budgeted to decline 1.2% in 1997.
In March, 1994, Michigan voters approved a change in the tax system. The
most significant provisions were an increase in the sales tax rate from 4% to
6%, a reduction in the income tax rate from 4.6% to 4.4% and the creation of a
statewide property tax. These changes are expected to provide sufficient
revenues to offset the elimination of property taxes for school district
operating purposes. There can be no assurance that school districts will receive
sufficient revenues to be able to service any limited tax bonds they may have
outstanding and which may be held by the Portfolio.
Under the State Constitution, the raising of taxes by the Legislature is
limited if doing so would cause the ratio of Total State Revenues (except
federal aid) to Personal Income of Michigan (as such terms are defined in the
State Constitution) to exceed certain limits. The only exceptions to this
revenue limit are a majority approval of a referendum question or a specific
emergency declared by a two-thirds vote of the Legislature. However, this limit
does not apply to taxes imposed for the payment of principal and interest on
bonds of the State, if the bonds are approved by voters and authorized by a vote
of two-thirds of the members of each House of the Legislature and certain school
district loans. Local units of government and local authorities are authorized
to issue bonds and other evidences of indebtedness in a variety of situations
without the approval of electors, but the ability of the obligor to levy taxes
for the payment of such obligations is subject to the foregoing limitations
unless the obligations were authorized before December 23, 1978 or approved by
the electors. The Constitution prohibits the State from reducing the proportion
of total State spending paid to all local units of government, taken as a group,
below that proportion in effect in the 1978-79 fiscal year. The State may not
mandate new or increased levels of services to be provided by local units
without making appropriations to cover any increased costs.
Under the State Constitution, the total amount of general ad valorem taxes
imposed on taxable property in any year cannot exceed certain millage
limitations specified by the Constitution, statute or charter. The Constitution
prohibits local units of government from levying any tax not authorized by law
or charter, or from increasing the rate of an existing tax above the rate
authorized by law or charter. The Constitution also contains millage reduction
provisions. Under such provisions, should the value of taxable property
(exclusive of new construction and improvements) increase at a percentage
greater than the percentage increase in the Consumer Price Index, the maximum
authorized tax rate would be reduced by a factor which would result in the same
maximum potential tax revenues to the local taxing unit as if the valuation of
taxable property (less new construction and improvements) had grown only at the
Consumer Price Index rate instead of at the higher actual growth rate. Thus, if
taxable property values rise faster than consumer prices, the maximum authorized
tax rate would be increased at the Consumer Price Index rate. Conversely, if
taxable property values rise slower than consumer prices, tax rates may be
raised accordingly, but never higher than the rate authorized on December 23,
1978, without elector approval.
The ability of the State to pay the principal and interest on its general
obligation bonds may be affected by the limitations described above. Similarly,
the ability of local units to levy taxes to pay the principal of and interest on
their general obligations is subject to the constitutional, statutory and
charter limits described below.
MINNESOTA
The State's diverse economy has continued to outperform the nation, as
evidenced by the State's employment growth in the early 1990s. For April 1997,
the unemployment rate was 3.4% compared to the national average of 4.9%. The
State of Minnesota has no obligation to pay any bonds of its political or
governmental subdivisions, municipalities, governmental agencies, or
instrumentalities. The creditworthiness of local general obligation bonds is
dependent upon the financial condition of the local government issuer, and the
creditworthiness of revenue bonds is dependent upon the availability of
particular designated revenue sources or the financial conditions of the
underlying obligors. Although most of the bonds owned by the Portfolio are
expected to be obligations other than general obligations of the State of
Minnesota itself, there can be no assurance that the same factors that adversely
affect the economy of the State generally will not also affect adversely the
market value or marketability of such other obligations, or the ability of the
obligors to pay the principal of or interest on such obligations.
At the local level, the property tax base has recovered after its growth was
slowed in many communities in the early 1990s by an overcapacity in certain
segments of the commercial real estate market. Local finances are also affected
by the amount of state aid that is made available. Further, various of the
issuers within the State of Minnesota, as well as the State of Minnesota itself,
whose securities may be purchased by the Portfolio, may now or in the future be
subject to lawsuits involving material amounts. It is impossible to predict the
outcome of these lawsuits. Any losses with respect to these lawsuits may have an
adverse impact on the ability of these issuers to meet their obligations.
NEW JERSEY
New Jersey has a well diversified economy and high wealth levels. Per capita
income ranks as the second highest in the nation at 28% above the U.S. average.
The State's economy benefits from its proximity to New York and other major
eastern seaboard cities. New Jersey's economy, like most states, suffered during
the recent recession with unemployment increasing and surpassing the national
average. New Jersey's adjusted unemployment rate for April 1997 was 5.2%
compared to 4.9% nationally.
The State ended fiscal 1993 with an $855 million surplus, approximately half
of which was used in the 1994 budget. 1994 had an appropriation for all funds of
$15.7 billion, up 4.8% from fiscal 1993 revised appropriations of $14.7 billion.
Both years benefited from $412 million in nonrecurring revenues from retroactive
federal Medicaid payments. After the Legislature reduced the Governor's fiscal
1994 requests by $182 million, about half the $855 million fiscal 1993 total
surplus was used for fiscal 1994, with a June 30, 1994 forecast of $416 million
- -- $110 million allocated to the General Fund and over $305 million to rainy day
and taxpayer relief funds.
In 1994, New Jersey adopted a 5% personal income tax cut retroactive to
January 1, 1994. In 1995, New Jersey adopted a 10% personal income tax cut
retroactive to January 1, 1995. On June 26, 1995, the New Jersey State
Legislature passed an additional 15% reduction to take effect January 1, 1996.
Fiscal year 1996 ended with total revenues up 4.3% to $15.6 billion.
However, total spending increased to $16.3 billion. As of January 1, 1996, New
Jersey fulfilled Governor Whitman's promised personal income tax cut of 30%.
Even so, tax revenues were up in all categories with income tax receipts up by
4.3%. The higher spending level resulted in a decrease of total fund balances to
$880 million, down 7.5%.
The legislature is now debating a controversial Whitman proposal to issue
$2.8 billion of bonds to fund the state's pension liability. The plan would free
up $647 million of funds for the current year but has raised budgetary
sleight-of-hand concerns. Largely, however, the New Jersey economy has performed
well, growing faster than its Mid-Atlantic neighbors, though slower than the
nation as a whole.
General obligation bonds of New Jersey are the primary method for New Jersey
financing of capital projects. These bonds are backed by the full faith and
credit of New Jersey. New Jersey tax revenues and certain other fees are pledged
to meet the principal and interest payments required to fully pay the debt. No
general obligation debt can be issued by New Jersey without prior voter
approval, except that, pursuant to a constitutional amendment, no voter approval
is required for any law authorizing the creation of a debt for the purpose of
refinancing all or a portion of the outstanding debt of New Jersey, so long as
such law requires that the refinancing provides debt service savings. The New
Jersey Constitution also provides that no voter approval is required for debt
issued for purposes of war, to repel invasion, to suppress insurrection or to
meet an emergency caused by disaster or act of God. Capital construction can
also be funded by appropriation of current revenues on a pay- as-you-go basis.
All appropriations for capital projects and all proposals for State bond
authorizations are subject to the review and recommendation of the New Jersey
Commission on Capital Budgeting and Planning.
Other State-related obligations include those created pursuant to the New
Jersey Building Authority Act, which has the power to construct facilities for
leasing to the State. The rental for such buildings is equal to the debt service
relating thereto plus payments in lieu of real estate taxes. Legislation
provides for future appropriations for State aid to local school districts equal
to debt service on a maximum principal amount of $280,000,000 of bonds issued by
such local school districts for construction and renovation of school facilities
and for State aid to counties equal to debt service on up to $80,000,000 of
bonds issued by counties for construction of county college facilities.
The authorizing legislation for various State entities provides for specific
budgetary procedures with respect to certain obligations issued by such
entities. Bonds issued pursuant to authorizing legislation of this type are
sometimes referred to as "moral obligation" bonds. There is no statutory
limitation on the amount of moral obligation bonds which may be issued by
eligible State entities. Currently, there are two such entities available for
State appropriations to meet moral obligations. The New Jersey Housing and
Mortgage Finance Agency has not had a deficiency in a debt service reserve which
required New Jersey to appropriate funds. It is anticipated that the agency's
revenue will continue to be sufficient to cover debt service on its bonds. The
State provides the South Jersey Port Corporation with funds to cover all debt
service and property tax requirements when earned revenues are anticipated to be
insufficient to cover these obligations. In the past, anticipated revenues have,
in some cases, been insufficient to cover debt service and/or all property tax
requirements. There are numerous other State- created entities with outstanding
debt. This debt is supported by revenues derived from or assets of the various
projects financed by such entities.
The Local Budget Law imposes specific budgetary procedures upon counties and
municipalities, subject to review by the Director of the Division of Local
Government Services. State law also regulates the issuance of debt by counties
and municipalities by limiting the amount of tax anticipation notes that may be
issued and requiring their repayment within three months of the end of the
fiscal year in which they are issued. The Local Bond Law governs the issuance of
bonds and notes and bars the issuance of bonds for the payment of current
expenses or to pay outstanding obligations, except where permitted by the Local
Finance Board. State law also authorizes State officials to supervise fiscal
administration in any municipality facing financial difficulties.
PENNSYLVANIA
Pennsylvania historically has been identified as a heavy industry state,
although that reputation has changed with the decline of the coal, steel and
railroad industries and the resulting diversification of Pennsylvania's
industrial composition. The major new sources of growth are in the service
sector, including trade, medical and health services, education and financial
institutions. Pennsylvania continues, however, to have a greater percentage of
its workers employed in manufacturing than the national average, leaving the
economy somewhat cyclical and vulnerable to recessionary forces. During 1995,
manufacturing accounted for 18% of employment. For March 1997, the adjusted
unemployment rate for Pennsylvania was 5.4%. Per capita income in Pennsylvania
for 1995 of $23,558 was higher than the per capita income of the United States
of $23,208.
Revenues and Expenditures. Pennsylvania utilizes the fund method of accounting.
The General Fund, the State's largest fund, receives all tax receipts, revenues,
federal grants and reimbursements that are not specified by law to be deposited
elsewhere. Debt service on all obligations, except those issued for highway
purposes or for the benefit of other special revenue funds, is payable from the
General Fund. The General Fund closed fiscal year 1996 with a balance of $635
million.
For 1997, the Commonwealth expects a slight improvement in the State's
financial position. The 1997 budget provides for only a 0.6% increase in
expenditures. As of date, revenues were better than expected but a slow down in
collections is expected. State enacted welfare reform has enabled the
Administration to limit expenditure growth. The 1998 proposed budget calls for a
2.9% increase in expenditures.
The Pennsylvania Constitution requires all proceeds of motor fuels taxes,
vehicle registration fees, license taxes, operators' license fees and other
excise taxes imposed on products used in motor transportation to be used
exclusively for construction, reconstruction, maintenance and repair of and
safety on highways and bridges and for the payment of debt service on
obligations incurred for such purposes. The Motor License Fund is the fund
through which such revenues are accounted for and expended.
Pennsylvania Debt. The current Constitutional provisions pertaining to the
Pennsylvania debt permit the issuance of the following types of debt: (i) debt
to suppress insurrection or rehabilitate areas affected by disaster, (ii)
electorate approved debt, (iii) debt for capital projects subject to an
aggregate debt limit of 1.75 times the annual average tax revenues of the
preceding five fiscal years (this debt need not be approved by the electorate)
and (iv) tax anticipation notes payable in the fiscal year of issuance. All debt
except tax anticipation notes must be amortized in substantial and regular
amounts.
Pennsylvania engages in short-term borrowing to fund expenses within a
fiscal year through the sale of tax anticipation notes, which must mature within
the fiscal year of issuance. The principal amount issued, when added to that
outstanding, may not exceed in the aggregate 20% of the revenues estimated to
accrue to the appropriate fund in the fiscal year. The State is not permitted to
fund deficits between fiscal years with any form of debt. All year end deficit
balances must be funded within the succeeding fiscal year's budget.
Pending the issuance of bonds, Pennsylvania may issue bond anticipation
notes subject to the applicable statutory and constitutional limitations
generally imposed on bonds. The term of such borrowings may not exceed three
years.
State-Related Obligations. Certain state-created agencies have statutory
authorization to incur debt for which no legislation providing for state
appropriations to pay debt service thereon is required. The debt of these
agencies is supported by assets of or revenues derived from the various projects
financed; it is not an obligation of the State. Some of these agencies, however,
are indirectly dependent on state appropriations. State- related agencies and
their outstanding debt as of December 31, 1996 include the Delaware River Joint
Toll Bridge Commission ($53.9 million), the Delaware River Port Authority
($523.8 million), the Pennsylvania Economic Development Financing Authority
($1,371.5 million), the Pennsylvania Energy Development Authority ($118.0
million), the Pennsylvania Higher Education Assistance Agency ($1,408.8
million), the Pennsylvania Higher Education Facilities Authority ($2,667.1
million), the Pennsylvania Industrial Development Authority ($416.2 million),
the Pennsylvania Infrastructure Investment Authority ($205.9 million), the
Pennsylvania Turnpike Commission ($1,205.8 million), the Philadelphia Regional
Port Authority ($61.1 million) and the State Public School Building Authority
($324.0 million).
The only obligations of state-created agencies in Pennsylvania which bear a
moral obligation of the state are those issued by the Pennsylvania Housing
Finance Agency, a state-created agency which provides housing for lower and
moderate income families in the state, which had $2,357.9 million of bonds
outstanding at December 31, 1996, and the Hospitals and Higher Education
Facilities Authority of Philadelphia which issued $21.1 million in bonds in
1993.
Litigation. Pennsylvania is currently involved in certain litigation where
adverse decisions could have an adverse impact on its ability to pay debt
service. In Baby Neal v. Commonwealth, the American Civil Liberties Union filed
a lawsuit against the Commonwealth seeking an order that would require the
Commonwealth to provide additional funding for child welfare services. County of
Allegheny v. Commonwealth of Pennsylvania involves litigation regarding the
state constitutionality of the statutory scheme for county funding of the
judicial system. In Pennsylvania Association of Rural and Small Schools v.
Casey, the constitutionality of Pennsylvania's system for funding local school
districts has been challenged. No estimates for the amount of these claims are
available.
Local Government Debt. Local government in Pennsylvania consists of numerous
individual units. Each unit is distinct and independent of other local units,
although they may overlap geographically.
There is extensive general legislation applying to local government. For
example, the Local Government Unit Debt Act provides for uniform debt limits for
local government units, including municipalities and school districts, and
prescribes methods of incurring, evidencing, securing and collecting debt. Under
the Local Government Unit Debt Act, the ability of Pennsylvania municipalities
and school districts to engage in general obligation borrowing without electoral
approval is generally limited by their recent revenue collection experience.
Generally such subdivisions can levy real property taxes unlimited as to rate or
amount to pay debt service on general obligation borrowings.
Municipalities may also issue revenue obligations without limit and without
affecting their general obligation borrowing capacity if the obligations are
projected to be paid solely from project revenues.
Municipal authorities and industrial development authorities are widespread
in Pennsylvania. An authority is organized by a municipality acting singly or
jointly with another municipality and is governed by a board appointed by the
governing unit of the creating municipality or municipalities. Typically,
authorities are established to acquire, own and lease or operate one or more
projects and to borrow money and issue revenue bonds to finance them.
As of the date of this Statement of Additional Information, the City of
Philadelphia's general obligations are rated Ba, B and BB, by Moody's, S&P and
Fitch, respectively.
TEXAS
Once largely dependent on the drilling, production, refining, chemical and
energy-related manufacturing sectors, the economy of Texas has diversified with
the major source of job growth in the State now being the service- producing
sector (which includes transportation and public utilities, finance, insurance
and real estate, trade, services, and government). The Texas economy continues
to outpace the nation, adding 219,000 jobs in 1996. Continued job growth is
expected. The unemployment rate of 5.5% for April 1997, is above the national
average of 4.9%. Over the past decade, the population of Texas grew at a rate
twice as fast as that of the entire United States. Currently the third largest
state in the nation, Texas is expected to move into second place by the late
1990's.
The Texas legislature passed a $80 billion biennial budget for fiscal years
1996 and 1997. The new budget includes no new tax increases. Historically, the
primary sources of the State's revenues have been sales taxes, mineral severance
taxes and Federal grants. The beginning fiscal 1996 cash balance was $2.1
billion. The State has no personal or corporate income tax, although the State
does impose a corporate franchise tax based on the amount of a corporation's
capital and surplus. A bill was passed by the legislature reforming educational
aid. Also, the State provided additional funding construction for poor
districts. For the fiscal year ended August 1995, net revenues increased 7.3%
while net expenditures increased 12.1%, this decreased the general fund balance
to $2.1 billion from $2.2 billion in 1994.
<PAGE>
APPENDIX D: TAX EQUIVALENT YIELD TABLES
The tables below give the approximate yield a taxable security must earn at
various income brackets to produce after-tax yields equivalent to those of tax
exempt bonds yielding from 4% to 7% (6% for Pennsylvania) under the regular
federal income tax and applicable state and local taxes at tax rates applicable
for 1997.
Note: The federal income tax portion of the indicated combined income tax
brackets in the tables does not take into account the effect of a reduction in
the deductibility of itemized deductions (including applicable state and local
taxes) for taxpayers with adjusted gross income in excess of $121,200. The tax
brackets also do not show the effects of phaseout of personal exemptions for
single filers with adjusted gross income in excess of $121,200 and joint filers
with adjusted gross income in excess of $181,800. The effective tax brackets and
equivalent taxable yields of such taxpayers will be higher than those indicated
in the tables.
Yields shown are for illustration purposes only and are not meant to represent a
Fund's actual yield. No assurance can be given that any specific tax exempt
yield will be achieved. While it is expected that each Portfolio will invest
principally in obligations, the interest from which is exempt from the regular
federal income tax and applicable state and local taxes described in the
Prospectus, other income received by a Portfolio and allocated to a Fund may be
taxable. The tables do not take into account state or local taxes, if any,
payable on Fund distributions except for those described in the footnote to the
tables. Also, 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 herein 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.
<TABLE>
ARIZONA
<CAPTION>
COMBINED
FEDERAL A FEDERAL AND ARIZONA STATE
AND TAX EXEMPT YIELD OF:
SINGLE RETURN JOINT RETURN ARIZONA 4% 4.5% 5% 5.5% 6% 6.5% 7%
- ----------------------- --------------------- STATE TAX ------------------------------------------------------------------------
(TAXABLE INCOME*) BRACKET+ IS EQUIVALENT TO A FULLY TAXABLE YIELD OF:
- ---------------------------------------------- --------- ------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Up to $ 24,650 Up to $ 41,200 17.98% 4.88% 5.49% 6.10% 6.71% 7.31% 7.92% 8.53%
$ 24,651 - $ 59,750 $ 41,201 - $ 99,600 31.74 5.86 6.59 7.33 8.06 8.79 9.52 10.26
$ 59,751 - $124,650 $ 99,601 - $151,750 34.59 6.12 6.88 7.64 8.41 9.17 9.94 10.70
$124,651 - $271,050 $151,751 - $271,050 39.58 6.62 7.45 8.28 9.10 9.93 10.76 11.59
Over $271,050 Over $271,050 42.98 7.02 7.89 8.77 9.65 10.52 11.40 12.28
* Net amount subject to federal and Arizona personal income tax after deductions and exemptions.
+ The combined federal and Arizona tax brackets are calculated using the highest Arizona tax rate within each bracket. Taxpayers
with taxable income within such brackets may have lower combined tax brackets and taxable equivalent yields than indicated
above. The combined tax brackets assume that Arizona taxes are itemized deductions for federal income tax purposes. Investors
who do not itemize deductions on their federal income tax return will have a higher combined bracket and higher taxable
equivalent yield than those indicated above. The applicable federal tax rates within the brackets are 15%, 28%, 31%, 36% and
39.6%, over the same ranges of income.
COLORADO
<CAPTION>
COMBINED A FEDERAL AND COLORADO STATE
COMBINED TAX EXEMPT YIELD OF:
SINGLE RETURN JOINT RETURN FEDERAL AND 4% 4.5% 5% 5.5% 6% 6.5% 7%
- ----------------------- --------------------- CO STATE --------------------------------------------------------------------
(TAXABLE INCOME*) TAX BRACKET+ IS EQUIVALENT TO A FULLY TAXABLE YIELD OF:
- ------------------------------------------------ ------------- ------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Up to $ 24,650 Up to $ 41,200 19.25% 4.95% 5.57% 6.19% 6.81% 7.43% 8.05% 8.67%
$ 24,651 - $ 59,750 $ 41,201 - $ 99,600 31.60 5.85 6.58 7.31 8.04 8.77 9.50 10.23
$ 59,751 - $124,650 $ 99,601 - $151,750 34.45 6.10 6.86 7.63 8.39 9.15 9.92 10.68
$124,651 - $271,050 $151,751 - $271,050 39.20 6.58 7.40 8.22 9.05 9.87 10.69 11.51
Over $271,050 Over $271,050 42.62 6.97 7.84 8.71 9.59 10.46 11.33 12.20
* Net amount subject to federal and Colorado personal income tax after deductions and exemptions.
+ The Colorado income tax rate is 5%. The combined tax brackets assume that Colorado taxes are itemized deductions for federal
income tax purposes. Investors who do not itemize deductions on their federal income tax return will have a higher combined
bracket and higher taxable equivalent yield than those indicated above. The applicable federal tax rates within the brackets
are 15%, 28%, 31%, 36% and 39.6%, over the same ranges of income.
Note: The federal income tax portion of above-indicated combined income tax brackets does not take into account the effect of a
reduction in the deductibility of itemized deductions (including Colorado State income taxes) for taxpayers with adjusted gross
income in excess $117,950. The tax brackets also do not show the effects of phaseout of personal exemptions for single filers
with adjusted gross income in excess of $117,950 and joint filers with adjusted gross income in excess of $176,950. The effective
tax brackets and equivalent taxable yields of such taxpayers will be higher than those indicated above.
CONNECTICUT
<CAPTION>
A FEDERAL AND CONNECTICUT STATE
COMBINED TAX EXEMPT YIELD OF:
SINGLE RETURN JOINT RETURN FEDERAL AND 4% 4.5% 5% 5.5% 6% 6.5% 7%
- ------------------------- ---------------------- CT STATE -----------------------------------------------------------------
(TAXABLE INCOME*) TAX BRACKET+ IS EQUIVALENT TO A FULLY TAXABLE YIELD OF:
- ------------------------------------------------- ------------- -----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Up to $ 24,650 Up to $ 41,200 18.25% 4.89% 5.50% 6.12% 6.73% 7.34% 7.95% 8.56%
$ 24,651 - $ 59,750 $ 41,201 - $ 99,600 31.24 5.82 6.54 7.27 8.00 8.73 9.45 10.18
$ 59,751 - $124,650 $ 99,601 - $151,750 34.11 6.07 6.83 7.59 8.35 9.11 9.86 10.62
$124,651 - $271,050 $151,751 - $271,050 38.88 6.54 7.36 8.18 9.00 9.82 10.63 11.45
Over $271,050 Over $271,050 42.32 6.93 7.80 8.67 9.54 10.40 11.27 12.14
* Net amount subject to federal and Connecticut personal income tax after deductions and exemptions.
+ The combined federal and Connecticut tax brackets are calculated using the highest Connecticut tax rate within each bracket,
reduced by available tax credits. Taxpayers with taxable income within these brackets may have a lower combined tax bracket and
taxable equivalent yield than indicated above. Tax credits reduce the effective Connecticut tax rate for single filers with
taxable income up to $52,500 and joint filers up to $100,500. The combined tax brackets assume that Connecticut taxes are
itemized deductions for federal income tax purposes. Investors who do not itemize deductions on their federal income tax return
will have a higher combined bracket and higher taxable equivalent yield than those indicated above. The applicable federal tax
rates within the brackets are 15%, 28%, 31%, 36% and 39.6%, over the same ranges of income.
MICHIGAN
<CAPTION>
A FEDERAL AND MICHIGAN STATE
COMBINED TAX EXEMPT YIELD OF:
SINGLE RETURN JOINT RETURN FEDERAL AND 4% 4.5% 5% 5.5% 6% 6.5% 7%
- ------------------------- ---------------------- MI STATE -----------------------------------------------------------------
(TAXABLE INCOME*) TAX BRACKET+ IS EQUIVALENT TO A FULLY TAXABLE YIELD OF:
- ------------------------------------------------- ------------- -----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Up to $ 24,650 Up to $ 41,200 20.33% 5.02% 5.65% 6.28% 6.90% 7.53% 8.16% 8.79%
$ 24,651 - $ 59,750 $ 41,201 - $ 99,600 32.52 5.93 6.67 7.41 8.15 8.89 9.63 10.37
$ 59,751 - $124,650 $ 99,601 - $151,750 35.33 6.19 6.96 7.73 8.50 9.28 10.05 10.82
$124,651 - $271,050 $151,751 - $271,050 40.02 6.67 7.50 8.34 9.17 10.00 10.84 11.67
Over $271,050 Over $271,050 43.39 7.07 7.95 8.83 9.72 10.60 11.48 12.37
* Net amount subject to federal and Michigan personal income tax after deductions and exemptions.
+ The combined tax brackets include a Michigan tax rate of 4.4%, Michigan City income tax rate of 1% (which may vary by city),
and a Michigan intangibles tax rate of .875%, and assume that Michigan State and local taxes are itemized deductions for federal
income tax purposes. Investors who do not itemize deductions on their federal income tax return will have a higher combined
bracket and higher taxable equivalent yield than those indicated above. The applicable federal tax rates within the brackets are
15%, 28%, 31%, 36% and 39.6%, over the same ranges of income.
MINNESOTA
<CAPTION>
A FEDERAL AND MINNESOTA STATE
COMBINED TAX EXEMPT YIELD OF:
SINGLE RETURN JOINT RETURN FEDERAL AND 4% 4.5% 5% 5.5% 6% 6.5% 7%
- ------------------------- -------------------- MN STATE -----------------------------------------------------------------
(TAXABLE INCOME*) TAX BRACKET+ IS EQUIVALENT TO A FULLY TAXABLE YIELD OF:
- ----------------------------------------------- ------------- -----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Up to $ 24,650 Up to $ 41,200 21.80% 5.12% 5.75% 6.39% 7.03% 7.67% 8.31% 8.95%
$ 24,651 - $ 59,750 $ 41,201 - $ 99,600 34.12 6.07 6.83 7.59 8.35 9.11 9.87 10.63
$ 59,751 - $124,650 $ 99,601 - $151,750 36.87 6.34 7.13 7.92 8.71 9.50 10.30 11.09
$124,651 - $271,050 $151,751 - $271,050 41.44 6.83 7.68 8.54 9.39 10.25 11.10 11.95
Over $271,050 Over $271,050 44.73 7.24 8.14 9.05 9.95 10.86 11.76 12.67
* Net amount subject to federal and Minnesota personal income tax after deductions and exemptions.
+ The first two combined tax brackets are calculated using the highest Minnesota tax rate within each bracket. Taxpayers with
taxable income within such brackets may have lower combined tax brackets and taxable equivalent yields than indicated above. The
combined tax brackets assume that Minnesota taxes are itemized deductions for federal income tax purposes. Investors who do not
itemize deductions on their federal income tax return will have a higher combined bracket and higher taxable equivalent yield
than those indicated above. The applicable federal tax rates within the brackets are 15%, 28%, 31%, 36% and 39.6%, over the same
ranges of income.
NEW JERSEY
<CAPTION>
A FEDERAL AND NEW JERSEY STATE
COMBINED TAX EXEMPT YIELD OF:
SINGLE RETURN JOINT RETURN FEDERAL AND 4% 4.5% 5% 5.5% 6% 6.5% 7%
- ------------------------- -------------------- NJ STATE -----------------------------------------------------------------
(TAXABLE INCOME*) TAX BRACKET+ IS EQUIVALENT TO A FULLY TAXABLE YIELD OF:
- ----------------------------------------------- ------------- -----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Up to $ 24,650 Up to $ 41,200 16.49% 4.79% 5.39% 5.99% 6.59% 7.18% 7.78% 8.38%
$ 24,651-$ 59,750 $ 41,201-$ 99,600 31.98% 5.88 6.62 7.35 8.09 8.82 9.56 10.29
$ 59,751-$124,650 $ 99,601-$151,750 35.40% 6.19 6.97 7.74 8.51 9.29 10.06 10.84
$124,651-$271,050 $151,751-$271,050 40.08% 6.68 7.51 8.34 9.18 10.01 10.85 11.68
Over $271,050 Over $271,050 43.45% 7.07 7.96 8.84 9.73 10.61 11.49 12.38
* Net amount subject to federal and New Jersey personal income tax after deductions and exemptions.
+ The combined federal and New Jersey tax brackets are calculated using the highest New Jersey tax rate applicable within each
bracket. Taxpayers with taxable income within such brackets may have lower combined tax brackets and taxable equivalent yields
than indicated above. The combined tax brackets assume that New Jersey taxes are itemized deductions for federal income tax
purposes. Investors who do not itemize deductions on their federal income tax return will have a higher combined bracket and
higher taxable equivalent yield then those indicated above. The applicable federal tax rates within the brackets are 15%, 28%,
31%, 36% and 39.6%, over the same ranges of income.
PENNSYLVANIA
<CAPTION>
TAXABLE YIELD NEEDED TO MATCH 6% FREE OF
---------------------------------------------
FEDERAL,
STATE,
1994 TAXABLE INCOME FEDERAL FEDERAL, STATE COUNTY AND
- ---------------------------------------------------- FEDERAL STATE AND STATE AND COUNTY PHILADELPHIA
SINGLE RETURN JOINT RETURN INCOME TAX INCOME TAX TAXES TAXES (1) TAXES (2)
- --------------------------- ----------------------- -------------- -------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Up to $ 24,650 Up to $ 41,200 15.00% 2.80% 7.26% 7.80% 8.24%
$ 24,651 - $ 59,750 $ 41,201 - $ 99,600 28.00 2.80 8.57 9.20 9.72
$ 59,751 - $124,650 $ 99,601 - $151,750 31.00 2.80 8.95 9.60 10.15
$124,651 - $271,050 $151,751 - $271,050 36.00 2.80 9.65 10.36 10.94
Over $271,050 Over $271,050 39.60 2.80 10.22 10.97 11.59
- -----------------------------------------------------------------------------------------------------------------------------------
Equivalent yields are based on a fixed $1,000 investment with all taxes deducted from income. Included in all areas are the
effects of: federal income tax and a 2.8% Pennsylvania income tax. (1) Includes a 4 mil county personal property tax imposed by
most counties. (2) Includes a 4 mil county personal property and a 4.84% Philadelphia school income tax. The equivalent yields
assume that the Pennsylvania state and local taxes referred to above are itemized deductions for federal income tax purposes.
Investors who do not itemize deductions on their federal income tax return will have a higher equivalent yield than indicated.
TEXAS
<CAPTION>
IF THE TAXABLE OR THE TAXABLE YOU ARE IN
INCOME ON INCOME ON THIS IN YOUR BRACKET, A TAX-FREE YIELD OF
YOUR SINGLE YOUR JOINT FEDERAL 4% 4.5% 5% 5.5% 6% 6.5% 7%
RETURN IS* RETURN IS* BRACKET EQUALS THAT OF A TAXABLE INVESTMENT YIELDING
- ---------------------------------------------- --------- ------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Up to $ 24,650 Up to $ 41,200 15.0% 4.71% 5.29% 5.88% 6.47% 7.06% 7.65% 8.24%
$ 24,651 - $ 59,750 $ 41,201 - $ 99,600 28.0 5.56 6.25 6.94 7.64 8.33 9.03 9.72
$ 59,751 - $124,650 $ 99,601 - $151,750 31.0 5.80 6.52 7.25 7.97 8.70 9.42 10.14
$124,651 - $271,050 $151,751 - $271,050 36.0 6.25 7.03 7.81 8.59 9.38 10.16 10.94
Over $271,050 Over $271,050 39.6 6.62 7.45 8.28 9.11 9.93 10.76 11.59
* Net amount subject to federal personal income tax after deductions and exemptions.
</TABLE>
<PAGE>
APPENDIX E: RATINGS
DESCRIPTION OF SECURITIES RATINGS+
MOODY'S INVESTORS SERVICE, INC.
MUNICIPAL BONDS
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long term risk appear somewhat larger than the Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa: Bonds which are rated Baa are considered as medium-grade obligations (i.e.,
they are neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during other good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
or interest.
Ca: Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
ABSENCE OF RATING: Where no rating has been assigned or where a rating has
been suspended or withdrawn, it may be for reasons unrelated to the quality of
the issue.
- ------------
+The ratings indicated herein are believed to be the most recent ratings
available at the date of this SAI for the securities listed. Ratings are
generally given to securities at the time of issuance. While the rating
agencies may from time to time revise such ratings, they undertake no
obligation to do so, and the ratings indicated do not necessarily represent
ratings which would be given to these securities on the date of a Portfolio's
fiscal year end.
Should no rating be assigned, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities or companies that
are not rated as a matter of policy.
3. There is a lack of essential data pertaining to the issue or issuer.
4. The issue was privately placed, in which case the rating is not
published in Moody's publications.
Suspension or withdrawal may occur if new and material circumstances arise, the
effects of which preclude satisfactory analysis; if there is no longer available
reasonable up-to-date data to permit a judgment to be formed; if a bond is
called for redemption; or for other reasons.
NOTE: Moody's applies numerical modifiers, 1, 2, and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
MUNICIPAL SHORT-TERM OBLIGATIONS
RATINGS: Moody's ratings for state and municipal short-term obligations will be
designated Moody's Investment Grade or (MIG). Such rating recognizes the
differences between short term credit risk and long term risk. Factors effecting
the liquidity of the borrower and short term cyclical elements are critical in
short term ratings, while other factors of major importance in bond risk, long
term secular trends for example, may be less important over the short run.
A short term rating may also be assigned on an issue having a demand feature,
variable rate demand obligation (VRDO). Such ratings will be designated as
VMIG1, SG or if the demand feature is not rated, NR. A short term rating on
issues with demand features are differentiated by the use of the VMIG1 symbol to
reflect such characteristics as payment upon periodic demand rather than fixed
maturity dates and payment relying on external liquidity. Additionally,
investors should be alert to the fact that the source of payment may be limited
to the external liquidity with no or limited legal recourse to the issuer in the
event the demand is not met.
STANDARD & POOR'S RATINGS GROUP
INVESTMENT GRADE
AAA: Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the highest rated issues only in small degree.
A: Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB: Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibit adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay interest and repay principal for debt in this
category than in higher rated categories.
SPECULATIVE GRADE
Debt rated BB, B, CCC, CC, and C is regarded as having predominantly speculative
characteristics with respect to capacity to pay interest and repay principal. BB
indicates the least degree of speculation and C the highest. While such debt
will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major exposures to adverse conditions.
BB: Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB- rating.
B: Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB or BB-
rating.
CCC: Debt rated CCC has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The CCC rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
B or B- rating.
CC: The rating CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC debt rating.
C: The rating C is typically applied to debt subordinated to senior debt which
is assigned an actual or implied CCC- debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed, but debt service
payments are continued.
C1: The Rating C1 is reserved for income bonds on which no interest is being
paid.
D: Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The D rating also will be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.
PLUS (+) OR MINUS (-): The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
P: The letter "p" indicates that the rating is provisional. A provisional rating
assumes the successful completion of the project being financed by the debt
being rated and indicates that payment of debt service requirements is largely
or entirely dependent upon the successful and timely completion of the project.
This rating, however, while addressing credit quality subsequent to completion
of the project, makes no comment on the likelihood of, or the risk of default
upon failure of such completion. The investor should exercise his own judgment
with respect to such likelihood and risk.
L: The letter "L" indicates that the rating pertains to the principal amount of
those bonds to the extent that the underlying deposit collateral is insured by
the Federal Deposit Insurance Corp. and interest is adequately collateralized.
In the case of certificates of deposit, the letter "L" indicates that the
deposit, combined with other deposits being held in the same right and capacity,
will be honored for principal and accrued pre-default interest up to the federal
insurance limits within 30 days after closing of the insured institution or, in
the event that the deposit is assumed by a successor insured institution, upon
maturity.
NR: NR indicates no rating has been requested, that there is insufficient
information on which to base a rating, or that S&P does not rate a particular
type of obligation as a matter of policy.
MUNICIPAL NOTES
S&P note ratings reflect the liquidity concerns and market access risks unique
to notes. Notes due in 3 years or less will likely receive a note rating. Notes
maturing beyond 3 years will most likely receive a long-term debt rating. The
following criteria will be used in making that assessment:
-- Amortization schedule (the larger the final maturity relative to other
maturities the more likely it will be treated as a note).
-- Sources of payment (the more dependent the issue is on the market for its
refinancing, the more likely it will be treated as a note).
Note rating symbols are as follows:
SP-1: Strong capacity to pay principal and interest. Those issues determined
to possess very strong characteristics will be given a plus(+) designation.
SP-2: Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse financial and economic changes over the term of the
notes.
SP-3: Speculative capacity to pay principal and interest.
FITCH INVESTORS SERVICE, INC.
INVESTMENT GRADE BOND RATINGS
AAA: Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA: Bonds considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated "AAA". Because bonds rated in the "AAA" and
"AA" categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated "F-1+".
A: Bonds considered to be investment grade and of high credit quality. The
obligors ability to pay interest and repay principal is considered to be strong,
but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB: Bonds considered to be investment grade and of satisfactory credit quality.
The obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however, are
more likely to have adverse impact on these bonds, and therefore, impair timely
payment. The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.
HIGH YIELD BOND RATINGS
BB: Bonds are considered speculative. The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified that could assist the
obligor in satisfying its debt service requirements.
B: Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue.
CCC: Bonds have certain identifiable characteristics which, if not remedied,
may lead to default. The ability to meet obligations requires an advantageous
business and economic environment.
CC: Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C: Bonds are in imminent default in payment of interest or principal.
DDD, DD, AND D: Bonds are in default on interest and/or principal payments. Such
bonds are extremely speculative and should be valued on the basis of their
ultimate recovery value in liquidation or reorganization of the obligor. "DDD"
represents the highest potential for recovery on these bonds, and "D" represents
the lowest potential for recovery.
PLUS (+) OR MINUS (-): The ratings from AA to C may be modified by the addition
of a plus or minus sign to indicate the relative position of a credit within the
rating category.
NR: Indicates that Fitch does not rate the specific issue.
CONDITIONAL: A conditional rating is premised on the successful completion of
a project or the occurrence of a specific event.
INVESTMENT GRADE SHORT-TERM RATINGS
Fitch's short-term ratings apply to debt obligations that are payable on demand
or have original maturities of generally up to three years, including commercial
paper, certificates of deposit, medium-term notes, and municipal and investment
notes.
F-1+: Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1: Very Stong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated
"F-1+".
F-2: Good Credit Quality. Issues carrying this rating have a satisfactory
degree of assurance for timely payment, but the margin of safety is not as
great as the "F-1+" and "F-1" categories.
F-3: Fair Credit Quality. Issues carrying this rating have characteristics
suggesting that the degree of assurance for timely payment is adequate, however,
near-term adverse change could cause these securities to be rated below
investment grade.
* * * * * * * *
NOTES: Bonds which are unrated expose the investor to risks with respect to
capacity to pay interest or repay principal which are similar to the risks of
lower-rated speculative bonds. Each 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>
[LOGO]
EATON VANCE
- --------------------
Mutual Funds
- ------------------------------------------------------------------------------
EATON VANCE ARIZONA MUNICIPALS FUND
EATON VANCE COLORADO MUNICIPALS FUND
EATON VANCE CONNECTICUT MUNICIPALS FUND
EATON VANCE MICHIGAN MUNICIPALS FUND
EATON VANCE MINNESOTA MUNICIPALS FUND
EATON VANCE NEW JERSEY MUNICIPALS FUND
EATON VANCE PENNSYLVANIA MUNICIPALS FUND
EATON VANCE TEXAS MUNICIPALS FUND
STATEMENT OF ADDITIONAL INFORMATION
AUGUST 1, 1997
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, 200 Clarendon Street, Boston, MA 02116
TRANSFER AGENT
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123
(800) 262-1122
AUDITORS
Deloitte & Touche LLP, 125 Summer Street, Boston, MA 02110
C8/1ABSAI
<PAGE>
PART C
OTHER INFORMATION
ITEM 24: FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS
INCLUDED IN PART A FOR THE FUNDS LISTED BELOW ARE "FINANCIAL
HIGHLIGHTS" FOR THE PERIOD FROM THE START OF BUSINESS TO THE
FISCAL YEAR ENDED JULY 31, 1996 AND FOR THE SIX MONTHS ENDED
JANUARY 31, 1997 (UNAUDITED):
EV Marathon Arizona Municipals Fund (start of business July
25, 1991)
EV Marathon Colorado Municipals Fund (start of business
August 25, 1992)
EV Marathon Connecticut Municipals Fund (start of business
May 1, 1992)
EV Marathon Michigan Municipals Fund (start of business
April 19, 1991)
EV Marathon Minnesota Municipals Fund (start of business
July 29, 1991)
EV Marathon New Jersey Municipals Fund (start of business
January 8, 1991)
EV Marathon Pennsylvania Municipals Fund (start of business
January 8, 1991)
EV Marathon Texas Municipals Fund (start of business March
24, 1992)
INCORPORATED BY REFERENCE INTO PART B ARE THE FINANCIAL
STATEMENTS CONTAINED IN THE SEMI-ANNUAL REPORT FOR THE FUNDS,
DATED JANUARY 31, 1997 (WHICH WAS PREVIOUSLY FILED
ELECTRONICALLY PURSUANT TO SECTION 30(b)(2) OF THE INVESTMENT
COMPANY ACT OF 1940):
<TABLE>
<S> <C>
EV Marathon Arizona Municipals Fund EV Marathon New Jersey Municipals Fund
EV Marathon Colorado Municipals Fund EV Marathon Pennsylvania Municipals Fund
EV Marathon Connecticut Municipals Fund EV Marathon Texas Municipals Fund
EV Marathon Michigan Municipals Fund (Accession No. 0000950135-97-001655)
EV Marathon Minnesota Municipals Fund
</TABLE>
THE FINANCIAL STATEMENTS CONTAINED IN THE FUNDS SEMI-ANNUAL
REPORT ARE AS FOLLOWS:
Statement of Assets and Liabilities (Unaudited)
Statement of Operations (Unaudited)
Statements of Changes in Net Assets (Unaudited)
Financial Highlights (Unaudited)
Notes to Financial Statements (Unaudited)
INCORPORATED BY REFERENCE INTO PART B ARE THE FINANCIAL
STATEMENTS CONTAINED IN THE ANNUAL REPORT FOR THE FUNDS,
DATED JULY 31, 1996 (WHICH WAS PREVIOUSLY FILED
ELECTRONICALLY PURSUANT TO SECTION 30(b)(2) OF THE INVESTMENT
COMPANY ACT OF 1940):
<TABLE>
<S> <C>
EV Marathon Arizona Municipals Fund EV Marathon New Jersey Municipals Fund
EV Marathon Colorado Municipals Fund EV Marathon Pennsylvania Municipals Fund
EV Marathon Connecticut Municipals Fund EV Marathon Texas Municipals Fund
EV Marathon Michigan Municipals Fund (Accession No. 0000950135-96-004171)
EV Marathon Minnesota Municipals Fund
</TABLE>
THE FINANCIAL STATEMENTS CONTAINED IN THE FUNDS ANNUAL REPORT
ARE AS FOLLOWS:
Statement of Assets and Liabilities
Statement of Operations
Statements of Changes in Net Assets
Financial Highlights
Notes to Financial Statements
Independent Auditors' Report
ALSO INCORPORATED BY REFERENCE INTO PART B ARE THE FOLLOWING
FINANCIAL STATEMENTS OF ARIZONA MUNICIPALS PORTFOLIO, COLORADO
MUNICIPALS PORTFOLIO, CONNECTICUT MUNICIPALS PORTFOLIO, MICHIGAN
MUNICIPALS PORTFOLIO, MINNESOTA MUNICIPALS PORTFOLIO, NEW JERSEY
MUNICIPALS PORTFOLIO, PENNSYLVANIA MUNICIPALS PORTFOLIO AND
TEXAS MUNICIPALS PORTFOLIO, WHICH ARE CONTAINED IN THE ANNUAL
REPORT DATED JULY 31, 1996 OF THE CORRESPONDING FUNDS:
THE FINANCIAL STATEMENTS FOR EACH PORTFOLIO CONTAINED IN THE
FUNDS ANNUAL REPORT ARE AS FOLLOWS:
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
ALSO INCORPORATED BY REFERENCE INTO PART B ARE THE FOLLOWING
FINANCIAL STATEMENTS OF ARIZONA MUNICIPALS PORTFOLIO, COLORADO
MUNICIPALS PORTFOLIO, CONNECTICUT MUNICIPALS PORTFOLIO, MICHIGAN
MUNICIPALS PORTFOLIO, MINNESOTA MUNICIPALS PORTFOLIO, NEW JERSEY
MUNICIPALS PORTFOLIO, PENNSYLVANIA MUNICIPALS PORTFOLIO AND
TEXAS MUNICIPALS PORTFOLIO, WHICH ARE CONTAINED IN THE
SEMI-ANNUAL REPORT DATED JANUARY 31, 1997 OF THE CORRESPONDING
FUNDS:
THE FINANCIAL STATEMENTS FOR EACH PORTFOLIO CONTAINED IN THE
FUNDS SEMI-ANNUAL REPORT ARE AS FOLLOWS:
Portfolio of Investments (Unaudited)
Statement of Assets and Liabilities (Unaudited)
Statement of Operations (Unaudited)
Statements of Changes in Net Assets (Unaudited)
Supplementary Data (Unaudited)
Notes to Financial Statements (Unaudited)
(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 dated June 23, 1997 to the Declaration of
Trust filed herewith.
(c) Establishment and Designation of Classes of Shares of
Beneficial Interest, without Par Value, dated
November 18, 1996 filed as Exhibit (1)(c) to
Post-Effective Amendment No. 62 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) Distribution Agreement between Eaton Vance Municipals
Trust (on behalf of its Classic Series) and Eaton
Vance Distributors, Inc. effective November 1, 1996
with attached Schedule A effective November 1, 1996)
filed as Exhibit (6)(a)(1) to Post- Effective
Amendment No. 61 and incorporated herein by
reference.
(2) Distribution Agreement between Eaton Vance Municipals
Trust (on behalf of its Marathon Series) and Eaton
Vance Distributors, Inc. effective November 1, 1996
with attached Schedule A effective November 1, 1996)
filed as Exhibit (6)(a)(2) to Post- Effective
Amendment No. 61 and incorporated herein by
reference.
(3) Amendment to the Distribution Agreement between Eaton
Vance Municipals Trust (on behalf of its Marathon
Series) and Eaton Vance Distributors, Inc. to be
filed by amendment.
(4) Distribution Agreement between Eaton Vance Municipals
Trust (on behalf of its Traditional Series) and Eaton
Vance Distributors, Inc. effective November 1, 1996
with attached Schedule A effective November 1, 1996)
filed as Exhibit (6)(a)(3) to Post-Effective
Amendment No. 61 and incorporated herein by
reference.
(5) Amendment to the Distribution Agreement between Eaton
Vance Municipals Trust (on behalf of its Traditional
Series) and Eaton Vance Distributors, Inc. to be
filed by amendment.
(6) Distribution Agreement between Eaton Vance Municipals
Trust on behalf of Massachusetts Municipal Bond
Portfolio and Eaton Vance Distributors, Inc.
effective November 1, 1996 filed as Exhibit (6)(a)(4)
to Post-Effective Amendment No. 61 and incorporated
herein by reference.
(7) Distribution Agreement between Eaton Vance Municipals
Trust and Eaton Vance Distributors, Inc. effective
June 23, 1997 with attached Schedule A effective June
23, 1997 filed herewith.
(b) Selling Group Agreement between Eaton Vance
Distributors, Inc. and Authorized Dealers filed as
Exhibit (6)(b) to Post-Effective Amendment No. 61 to
the Registration Statement of Eaton Vance Growth
Trust (File Nos. 2-22019, 811-1241) and incorporated
herein by reference.
(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)(1) 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.
(2) Amendment to Schedule A dated June 23, 1997 to the
Amended Administrative Services Agreement dated June
19, 1995 filed herewith.
(b) Transfer Agency Agreement dated June 7, 1989 filed as
Exhibit 9(d) to Post- Effective Amendment No. 65 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. 65 to the Registration Statement of
Eaton Vance Growth Trust (File Nos. 2-22019,
811-1241) and incorporated herein by reference.
(10) Not applicable.
(11) Consent of Independent Auditors for EV Marathon
Arizona Municipals Fund, EV Marathon Colorado
Municipals Fund, EV Marathon Connecticut Municipals
Fund, EV Marathon Michigan Municipals Fund, EV
Marathon Minnesota Municipals Fund, EV Marathon New
Jersey Municipals Fund, EV Marathon Pennsylvania
Municipals Fund and EV Marathon Texas Municipals Fund
filed herewith.
(12) Not applicable
(13) Not applicable
(14) Not applicable
(15)(a) Amended Distribution Plan pursuant to Rule 12b-1
under the Investment Company Act of 1940, as amended,
for Eaton Vance Municipals Trust (on behalf of its
Classic Series) dated January 27, 1995 with attached
schedules (including Amended Schedule A dated
February 1, 1996) filed as Exhibit (15)(a) to
Post-Effective Amendment No. 55 and incorporated
herein by reference.
(b) Amendment to Amended Distribution Plan for Eaton
Vance Municipals Trust (on behalf of its Classic
Series) adopted June 24, 1996 filed as Exhibit
(15)(b) to Post- Effective Amendment No. 61 and
incorporated herein by reference.
(c) Amended Distribution Plan pursuant to Rule 12b-1
under the Investment Company Act of 1940, as amended,
for Eaton Vance Municipals Trust (on behalf of its
Marathon series) dated June 19, 1995 with attached
schedules (including Amended Schedule A dated
September 29, 1995) filed as Exhibit (15)(b) to
Post-Effective Amendment No. 55 and incorporated
herein by reference.
(d) Amendment to Amended Distribution Plan for Eaton
Vance Municipals Trust (on behalf of its Marathon
Series) adopted June 24, 1996 filed as Exhibit
(15)(d) to Post- Effective Amendment No. 61 and
incorporated herein by reference.
(e) Amended Service Plan pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended, for Eaton
Vance Municipals Trust (on behalf of its Traditional
series) dated June 19, 1995 with attached schedules
(including Amended Schedule A dated February 1, 1996)
filed as Exhibit (15)(c) to Post-Effective Amendment
No. 55 and incorporated herein by reference.
(f) Amendment to Amended Service Plan for Eaton Vance
Municipals Trust (on behalf of its Traditional
Series) adopted June 24, 1996 filed as Exhibit
(15)(f) to Post- Effective Amendment No. 61 and
incorporated herein by reference.
(g) Eaton Vance Municipals Trust Class A Service Plan
adopted June 23, 1997 with attached Schedule A
effective June 23, 1997 filed herewith.
(h) Eaton Vance Municipals Trust Class B Distribution
Plan adopted June 23, 1997 with attached Schedule A
effective June 23, 1997 filed herewith.
(i) Eaton Vance Municipals Trust Class C Distribution
Plan adopted June 23, 1997 with attached Schedule A
effective June 23, 1997 filed herewith.
(16) Schedule for Computation of Performance Quotations
filed herewith.
(17)(a) Power of Attorney for Eaton Vance Municipals Trust
dated April 22, 1997 filed as Exhibit (17)(a) to
Post-Effective Amendment No. 65 and incorporated
herein by reference.
(b) Power of Attorney for Alabama Municipals Portfolio,
Arizona Municipals Portfolio, Arkansas Municipals
Portfolio, California Municipals Portfolio, Colorado
Municipals Portfolio, Connecticut Municipals
Portfolio, Florida Municipals Portfolio, Georgia
Municipals Portfolio, Kentucky Municipals Portfolio,
Louisiana Municipals Portfolio, Maryland Municipals
Portfolio, Massachusetts Municipals Portfolio,
Michigan Municipals Portfolio, Minnesota Municipals
Portfolio, Mississippi Municipals Portfolio, Missouri
Municipals Portfolio, National Municipals Portfolio,
New Jersey Municipals Portrfolio, New York Municipals
Portfolio, North Carolina Municipals Portfolio, Ohio
Municipals Portfolio, Oregon Municipals Portfolio,
Pennsylvania Municipals Portfolio, Rhode Island
Municipals Portfolio, South Carolina Municipals
Portfolio, Tennessee Municipals Portfolio, Texas
Municipals Portfolio, Virginia Municipals Portfolio
and West Virginia Municipals Portfolio dated April
22, 1997 filed as Exhibit (17)(b) to Post-Effective
Amendment No. 65 and incorporated herein by
reference.
(18) Multiple Class Plan for Eaton Vance Funds dated June
23, 1997 filed herewith.
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 June 30, 1997
EV Classic National Municipals Fund 1,136
EV Marathon Alabama Municipals Fund 1,767
EV Marathon Arizona Municipals Fund 2,418
EV Marathon Arkansas Municipals Fund 1,726
EV Marathon California Municipals Fund 6,323
EV Marathon Colorado Municipals Fund 1,008
EV Marathon Connecticut Municipals Fund 3,927
EV Marathon Florida Municipals Fund 10,713
EV Marathon Georgia Municipals Fund 2,233
EV Marathon Kentucky Municipals Fund 3,041
EV Marathon Louisiana Municipals Fund 550
EV Marathon Maryland Municipals Fund 2,712
EV Marathon Massachusetts Municipals Fund 5,962
EV Marathon Michigan Municipals Fund 3,596
EV Marathon Minnesota Municipals Fund 2,070
EV Marathon Mississippi Municipals Fund 554
EV Marathon Missouri Municipals Fund 2,329
EV Marathon National Municipals Fund 38,440
EV Marathon New Jersey Municipals Fund 9,120
EV Marathon New York Municipals Fund 12,865
EV Marathon North Carolina Municipals Fund 3,876
EV Marathon Ohio Municipals Fund 6,411
EV Marathon Oregon Municipals Fund 3,027
EV Marathon Pennsylvania Municipals Fund 11,233
EV Marathon Rhode Island Municipals Fund 771
EV Marathon South Carolina Municipals Fund 1,208
EV Marathon Tennessee Municipals Fund 1,338
EV Marathon Texas Municipals Fund 364
EV Marathon Virginia Municipals Fund 4,198
EV Marathon West Virginia Municipals Fund 1,053
EV Traditional Alabama Municipals Fund 54
EV Traditional Arizona Municipals Fund 48
EV Traditional Arkansas Municipals Fund 34
EV Traditional California Municipals Fund 63
EV Traditional Colorado Municipals Fund 75
EV Traditional Connecticut Municipals Fund 69
EV Traditional Florida Municipals Fund 116
EV Traditional Georgia Municipals Fund 47
EV Traditional Kentucky Municipals Fund 32
EV Traditional Louisiana Municipals Fund 32
EV Traditional Maryland Municipals Fund 50
EV Traditional Massachusetts Municipals Fund 92
EV Traditional Michigan Municipals Fund 35
EV Traditional Minnesota Municipals Fund 78
EV Traditional Mississippi Municipals Fund 28
EV Traditional Missouri Municipals Fund 82
EV Traditional National Municipals Fund 762
EV Traditional New Jersey Municipals Fund 127
EV Traditional New York Municipals Fund 199
EV Traditional North Carolina Municipals Fund 95
EV Traditional Ohio Municipals Fund 43
EV Traditional Oregon Municipals Fund 41
EV Traditional Pennsylvania Municipals Fund 128
EV Traditional Rhode Island Municipals Fund 37
EV Traditional South Carolina Municipals Fund 24
EV Traditional Tennessee Municipals Fund 36
EV Traditional Texas Municipals Fund 7
EV Traditional Virginia Municipals Fund 44
EV Traditional West Virginia Municipals Fund 44
Massachusetts Municipal Bond Portfolio 33
ITEM 27. INDEMNIFICATION
Article IV of the Trust's Amended and Restated Declaration of Trust, dated
January 11, 1993, permits Trustee and officer indemnification by By-law,
contract and vote. Article XI of the By-laws contains indemnification
provisions. Registrant's Trustees and officers are insured under a standard
mutual fund errors and omissions insurance policy covering insured by reason of
negligent errors and omissions committed in their capacities as such.
The distribution agreements of the Trust also provide for reciprocal
indemnity of the principal underwriter, on the one hand, and the Trustees and
officers, on the other.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Reference is made to the information set forth under the caption
"Investment Adviser and Administrator" in the Statement of Additional
Information, which information is incorporated herein by reference.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Registrant's principal underwriter, Eaton Vance Distributors, Inc., a
wholly-owned subsidiary of Eaton Vance Management, is the principal
underwriter for each of the investment companies named below:
Eaton Vance Growth Trust Eaton Vance Municipal Bond Fund L.P.
Eaton Vance Income Fund of Boston Eaton Vance Mutual Funds Trust
Eaton Vance Investment Trust Eaton Vance Prime Rate Reserves
Eaton Vance Municipals Trust Eaton Vance Special Investment Trust
Eaton Vance Municipals Trust II EV Classic Senior Floating-Rate Fund
(b)
<TABLE>
<CAPTION>
(1) (2) (3)
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICE
BUSINESS ADDRESS* WITH PRINCIPAL UNDERWRITER WITH REGISTRANT
----------------- -------------------------- ---------------
<S> <C> <C>
James B. Hawkes Vice President and Director Vice President and Trustee
William M. Steul Vice President and Director None
Wharton P. Whitaker President and Director None
Chris Berg Vice President None
Kate B. Bradshaw Vice President None
David B. Carle Vice President None
Daniel C. Cataldo Vice President None
Raymond Cox Vice President None
Mark P. Doman Vice President None
Alan R. Dynner Vice President None
James Foley Vice President None
Michael A. Foster Vice President None
William M. Gillen Senior Vice President None
Hugh S. Gilmartin Vice President None
Perry D. Hooker Vice President None
Brian Jacobs Senior Vice President None
Thomas P. Luka Vice President None
John Macejka Vice President None
Timothy D. McCarthy Vice President None
Joseph T. McMenamin Vice President None
Morgan C. Mohrman Senior Vice President None
James A. Naughton Vice President None
Mark D. Nelson Vice President None
Linda D. Newkirk Vice President None
James L. O'Connor Vice President Treasurer
Thomas Otis Secretary and Clerk Secretary
George D. Owen II Vice President None
F. Anthony Robinson Vice President None
Jay S. Rosoff Vice President None
Benjamin A. Rowland, Jr. Vice President, Treasurer and Director None
Stephen M. Rudman Vice President None
John P. Rynne Vice President None
Kevin Schrader Vice President None
George V.F. Schwab, Jr. Vice President None
Cornelius J. Sullivan Vice President None
John M. Trotsky Vice President None
David M. Thill Vice President None
Chris Volf Vice President None
Sue Wilder Vice President None
</TABLE>
- ----------
*Address is 24 Federal Street, Boston, MA 02110
(c) Not applicable
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All applicable accounts, books and documents required to be maintained by
the Registrant by Section 31(a) of the 1940 Act and the Rules promulgated
thereunder are in the possession and custody of the Registrant's custodian,
Investors Bank & Trust Company, 200 Clarendon Street, 16th Floor Mail Code
ADM27, Boston, MA 02116 and its transfer agent, First Data Investor Services
Group, 4400 Computer Drive, Westborough, MA 01581-5123, with the exception of
certain corporate documents and portfolio trading documents which are in the
possession and custody, Eaton Vance Management, 24 Federal Street, Boston, MA
02110. Registrant is informed that all applicable accounts, books and documents
required to be maintained by registered investment advisers are in the custody
and possession of Eaton Vance Management and Boston Management and Research.
ITEM 31. MANAGEMENT SERVICES
Not applicable
ITEM 32. UNDERTAKINGS
The Registrant undertakes to furnish to each person to whom a prospectus is
delivered a copy of the latest annual report to shareholders, upon request and
without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Amendment to the Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this Amendment to its Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized in the City of Boston, and the
Commonwealth of Massachusetts, on the 28th day of July, 1997.
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) July 28, 1997
- -------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and Accounting
/s/ JAMES L. O'CONNOR Officer July 28, 1997
- -------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee July 28, 1997
- -------------------------------
DONALD R. DWIGHT
/s/ JAMES B. HAWKES Trustee July 28, 1997
- -------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee July 28, 1997
- -------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee July 28, 1997
- -------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee July 28, 1997
- -------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee July 28, 1997
- -------------------------------
JACK L. TREYNOR
*By: /s/ ALAN R. DYNNER
- -------------------------------
ALAN R. DYNNER
As attorney-in-fact
<PAGE>
SIGNATURES
Arizona Municipals Portfolio has duly caused this Amendment to the
Registration Statement on Form N-1A of Eaton Vance Municipals Trust (File No.
33-572) to be signed on its behalf by the undersigned, thereunto duly authorized
in the City of Boston and the Commonwealth of Massachusetts on the 28th day of
July, 1997.
ARIZONA MUNICIPALS PORTFOLIO
By /s/ THOMAS J. FETTER
--------------------------------------
THOMAS J. FETTER, President
This Amendment to the Registration Statement on Form N-1A of Eaton Vance
Municipals Trust (File No. 33-572) has been signed below by the following
persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
President (Chief
/s/ THOMAS J. FETTER Executive Officer) July 28, 1997
- -------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and Accounting
/s/ JAMES L. O'CONNOR Officer July 28, 1997
- -------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee July 28, 1997
- -------------------------------
DONALD R. DWIGHT
/s/ JAMES B. HAWKES Trustee July 28, 1997
- -------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee July 28, 1997
- -------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee July 28, 1997
- -------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee July 28, 1997
- -------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee July 28, 1997
- -------------------------------
JACK L. TREYNOR
*By: /s/ ALAN R. DYNNER
- -------------------------------
ALAN R. DYNNER
As attorney-in-fact
<PAGE>
SIGNATURES
Colorado Municipals Portfolio has duly caused this Amendment to the
Registration Statement on Form N-1A of Eaton Vance Municipals Trust (File No.
33-572) to be signed on its behalf by the undersigned, thereunto duly authorized
in the City of Boston and the Commonwealth of Massachusetts on the 28th day of
July, 1997.
COLORADO MUNICIPALS PORTFOLIO
By /s/ THOMAS J. FETTER
--------------------------------------
THOMAS J. FETTER, President
This Amendment to the Registration Statement on Form N-1A of Eaton Vance
Municipals Trust (File No. 33-572) has been signed below by the following
persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
President (Chief
/s/ THOMAS J. FETTER Executive Officer) July 28, 1997
- -------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and Accounting
/s/ JAMES L. O'CONNOR Officer July 28, 1997
- -------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee July 28, 1997
- -------------------------------
DONALD R. DWIGHT
/s/ JAMES B. HAWKES Trustee July 28, 1997
- -------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee July 28, 1997
- -------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee July 28, 1997
- -------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee July 28, 1997
- -------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee July 28, 1997
- -------------------------------
JACK L. TREYNOR
*By: /s/ ALAN R. DYNNER
- -------------------------------
ALAN R. DYNNER
As attorney-in-fact
<PAGE>
SIGNATURES
Connecticut Municipals Portfolio has duly caused this Amendment to the
Registration Statement on Form N-1A of Eaton Vance Municipals Trust (File No.
33-572) to be signed on its behalf by the undersigned, thereunto duly authorized
in the City of Boston and the Commonwealth of Massachusetts on the 28th day of
July, 1997.
CONNECTICUT MUNICIPALS PORTFOLIO
By /s/ THOMAS J. FETTER
--------------------------------------
THOMAS J. FETTER, President
This Amendment to the Registration Statement on Form N-1A of Eaton Vance
Municipals Trust (File No. 33-572) has been signed below by the following
persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
President (Chief
/s/ THOMAS J. FETTER Executive Officer) July 28, 1997
- -------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and Accounting
/s/ JAMES L. O'CONNOR Officer July 28, 1997
- -------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee July 28, 1997
- -------------------------------
DONALD R. DWIGHT
/s/ JAMES B. HAWKES Trustee July 28, 1997
- -------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee July 28, 1997
- -------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee July 28, 1997
- -------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee July 28, 1997
- -------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee July 28, 1997
- -------------------------------
JACK L. TREYNOR
*By: /s/ ALAN R. DYNNER
- -------------------------------
ALAN R. DYNNER
As attorney-in-fact
<PAGE>
SIGNATURES
Michigan Municipals Portfolio has duly caused this Amendment to the
Registration Statement on Form N-1A of Eaton Vance Municipals Trust (File No.
33-572) to be signed on its behalf by the undersigned, thereunto duly authorized
in the City of Boston and the Commonwealth of Massachusetts on the 28th day of
July, 1997.
MICHIGAN MUNICIPALS PORTFOLIO
By /s/ THOMAS J. FETTER
--------------------------------------
THOMAS J. FETTER, President
This Amendment to the Registration Statement on Form N-1A of Eaton Vance
Municipals Trust (File No. 33-572) has been signed below by the following
persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
President (Chief
/s/ THOMAS J. FETTER Executive Officer) July 28, 1997
- -------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and Accounting
/s/ JAMES L. O'CONNOR Officer July 28, 1997
- -------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee July 28, 1997
- -------------------------------
DONALD R. DWIGHT
/s/ JAMES B. HAWKES Trustee July 28, 1997
- -------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee July 28, 1997
- -------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee July 28, 1997
- -------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee July 28, 1997
- -------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee July 28, 1997
- -------------------------------
JACK L. TREYNOR
*By: /s/ ALAN R. DYNNER
- -------------------------------
ALAN R. DYNNER
As attorney-in-fact
<PAGE>
SIGNATURES
Minnesota Municipals Portfolio has duly caused this Amendment to the
Registration Statement on Form N-1A of Eaton Vance Municipals Trust (File No.
33-572) to be signed on its behalf by the undersigned, thereunto duly authorized
in the City of Boston and the Commonwealth of Massachusetts on the 28th day of
July, 1997.
MINNESOTA MUNICIPALS PORTFOLIO
By /s/ THOMAS J. FETTER
--------------------------------------
THOMAS J. FETTER, President
This Amendment to the Registration Statement on Form N-1A of Eaton Vance
Municipals Trust (File No. 33-572) has been signed below by the following
persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
President (Chief
/s/ THOMAS J. FETTER Executive Officer) July 28, 1997
- -------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and Accounting
/s/ JAMES L. O'CONNOR Officer July 28, 1997
- -------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee July 28, 1997
- -------------------------------
DONALD R. DWIGHT
/s/ JAMES B. HAWKES Trustee July 28, 1997
- -------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee July 28, 1997
- -------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee July 28, 1997
- -------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee July 28, 1997
- -------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee July 28, 1997
- -------------------------------
JACK L. TREYNOR
*By: /s/ ALAN R. DYNNER
- -------------------------------
ALAN R. DYNNER
As attorney-in-fact
<PAGE>
SIGNATURES
New Jersey Municipals Portfolio has duly caused this Amendment to the
Registration Statement on Form N-1A of Eaton Vance Municipals Trust (File No.
33-572) to be signed on its behalf by the undersigned, thereunto duly authorized
in the City of Boston and the Commonwealth of Massachusetts on the 28th day of
July, 1997.
NEW JERSEY MUNICIPALS PORTFOLIO
By /s/ THOMAS J. FETTER
--------------------------------------
THOMAS J. FETTER, President
This Amendment to the Registration Statement on Form N-1A of Eaton Vance
Municipals Trust (File No. 33-572) has been signed below by the following
persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
President (Chief
/s/ THOMAS J. FETTER Executive Officer) July 28, 1997
- -------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and Accounting
/s/ JAMES L. O'CONNOR Officer July 28, 1997
- -------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee July 28, 1997
- -------------------------------
DONALD R. DWIGHT
/s/ JAMES B. HAWKES Trustee July 28, 1997
- -------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee July 28, 1997
- -------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee July 28, 1997
- -------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee July 28, 1997
- -------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee July 28, 1997
- -------------------------------
JACK L. TREYNOR
*By: /s/ ALAN R. DYNNER
- -------------------------------
ALAN R. DYNNER
As attorney-in-fact
<PAGE>
SIGNATURES
Pennsylvania Municipals Portfolio has duly caused this Amendment to the
Registration Statement on Form N-1A of Eaton Vance Municipals Trust (File No.
33-572) to be signed on its behalf by the undersigned, thereunto duly authorized
in the City of Boston and the Commonwealth of Massachusetts on the 28th day of
July, 1997.
PENNSYLVANIA MUNICIPALS PORTFOLIO
By /s/ THOMAS J. FETTER
--------------------------------------
THOMAS J. FETTER, President
This Amendment to the Registration Statement on Form N-1A of Eaton Vance
Municipals Trust (File No. 33-572) has been signed below by the following
persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
President (Chief
/s/ THOMAS J. FETTER Executive Officer) July 28, 1997
- -------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and Accounting
/s/ JAMES L. O'CONNOR Officer July 28, 1997
- -------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee July 28, 1997
- -------------------------------
DONALD R. DWIGHT
/s/ JAMES B. HAWKES Trustee July 28, 1997
- -------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee July 28, 1997
- -------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee July 28, 1997
- -------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee July 28, 1997
- -------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee July 28, 1997
- -------------------------------
JACK L. TREYNOR
*By: /s/ ALAN R. DYNNER
- -------------------------------
ALAN R. DYNNER
As attorney-in-fact
<PAGE>
SIGNATURES
Texas Municipals Portfolio has duly caused this Amendment to the
Registration Statement on Form N-1A of Eaton Vance Municipals Trust (File No.
33-572) to be signed on its behalf by the undersigned, thereunto duly authorized
in the City of Boston and the Commonwealth of Massachusetts on the 28th day of
July, 1997.
TEXAS MUNICIPALS PORTFOLIO
By /s/ THOMAS J. FETTER
--------------------------------------
THOMAS J. FETTER, President
This Amendment to the Registration Statement on Form N-1A of Eaton Vance
Municipals Trust (File No. 33-572) has been signed below by the following
persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
President (Chief
/s/ THOMAS J. FETTER Executive Officer) July 28, 1997
- -------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and Accounting
/s/ JAMES L. O'CONNOR Officer July 28, 1997
- -------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee July 28, 1997
- -------------------------------
DONALD R. DWIGHT
/s/ JAMES B. HAWKES Trustee July 28, 1997
- -------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee July 28, 1997
- -------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee July 28, 1997
- -------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee July 28, 1997
- -------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee July 28, 1997
- -------------------------------
JACK L. TREYNOR
*By: /s/ ALAN R. DYNNER
- -------------------------------
ALAN R. DYNNER
As attorney-in-fact
<PAGE>
EXHIBIT INDEX
The following exhibits are filed as part of this amendment to the
Registration Statement pursuant to General Instructions E of Form N-1A.
PAGE IN
SEQUENTIAL
NUMBERING
EXHIBIT NO. DESCRIPTION SYSTEM
- ----------- ----------- ------
(1)(b) Amendment dated June 23, 1997 to the Declaration
of Trust.
(6)(a)(7) Distribution Agreement between Eaton Vance
Municipals Trust and Eaton Vance Distributors,
Inc. effective June 23, 1997 with attached
Schedule A effective June 23, 1997.
(9)(a)(2) Amendment to Schedule A dated June 23, 1997 to the
Amended Administrative Services Agreement dated
June 19, 1995.
(11) Consent of Independent Auditors for EV Marathon
Arizona Municipals Fund, EV Marathon Colorado
Municipals Fund, EV Marathon Connecticut
Municipals Fund, EV Marathon Michigan Municipals
Fund, EV Marathon Minnnesota Municipals Fund, EV
Marathon New Jersey Municipals Fund, EV Marathon
Pennsylvania Municipals Fund and EV Marathon Texas
Municipals Fund.
(15)(g) Eaton Vance Municipals Trust Class A Service Plan
adopted June 23, 1997 with attached Schedule A
effective June 23, 1997.
(15)(h) Eaton Vance Municipals Trust Class B Distribution
Plan adopted June 23, 1997 with attached Schedule
A effective June 23, 1997.
(15)(i) Eaton Vance Municipals Trust Class C Distribution
Plan adopted June 23, 1997 with attached Schedule
A effective June 23, 1997.
(16) Schedule for Computation of Performance
Quotations.
(18) Multiple Class Plan for Eaton Vance Funds dated
June 23, 1997.
<PAGE>
EXHIBIT 99.(1)(B)
EATON VANCE MUNICIPALS TRUST
Amendment dated June 23, 1997 to Declaration of Trust
WHEREAS, the Trustees of Eaton Vance Municipals Trust, a Massachusetts
business trust (the "Trust"), have previously designated separate series (or
"Funds"); and
WHEREAS, in connection with a reorganization of the Funds the Trustees
now desire to rename certain of the Funds, establish and designate classes of
shares for such Funds, and terminate certain other Funds effective with the end
of their current fiscal year ends pursuant to the Trust's Amended and Restated
Declaration of Trust dated January 11, 1993 (the "Declaration of Trust");
NOW, THEREFORE, the undersigned, being at least a majority of the duly
elected and qualified Trustees presently in office of the Trust, hereby:
1. Rename the Funds listed below as follows:
Eaton Vance Alabama Municipals Fund
(formerly EV Marathon Alabama Municipals Fund - Effective September 1, 1997)
Eaton Vance Arizona Municipals Fund
(formerly EV Marathon Arizona Municipals Fund - Effective August 1, 1997)
Eaton Vance Arkansas Municipals Fund
(formerly EV Marathon Arkansas Municipals Fund - Effective September 1, 1997)
Eaton Vance California Municipals Fund
(formerly EV Marathon California Municipals Fund - Effective October 1, 1997)
Eaton Vance Colorado Municipals Fund
(formerly EV Marathon Colorado Municipals Fund - Effective August 1, 1997)
Eaton Vance Connecticut Municipals Fund
(formerly EV Marathon Connecticut Municipals Fund - Effective August 1, 1997)
Eaton Vance Florida Municipals Fund
(formerly EV Marathon Florida Municipals Fund - Effective October 1, 1997)
Eaton Vance Georgia Municipals Fund
(formerly EV Marathon Georgia Municipals Fund - Effective September 1, 1997)
Eaton Vance Kentucky Municipals Fund
(formerly EV Marathon Kentucky Municipals Fund - Effective September 1, 1997)
Eaton Vance Louisiana Municipals Fund
(formerly EV Marathon Louisiana Municipals Fund - Effective September 1, 1997)
Eaton Vance Maryland Municipals Fund
(formerly EV Marathon Maryland Municipals Fund - Effective September 1, 1997)
Eaton Vance Massachusetts Municipals Fund
(formerly EV Marathon Massachusetts Municipals Fund - Effective October 1, 1997)
Eaton Vance Michigan Municipals Fund
(formerly EV Marathon Michigan Municipals Fund - Effective August 1, 1997)
Eaton Vance Minnesota Municipals Fund
(formerly EV Marathon Minnesota Municipals Fund - Effective August 1, 1997)
Eaton Vance Mississippi Municipals Fund
(formerly EV Marathon Mississippi Municipals Fund - Effective October 1, 1997)
Eaton Vance Missouri Municipals Fund
(formerly EV Marathon Missouri Municipals Fund - Effective September 1, 1997)
Eaton Vance National Municipals Fund
(formerly EV Marathon National Municipals Fund - Effective October 1, 1997)
Eaton Vance New Jersey Municipals Fund
(formerly EV Marathon New Jersey Municipals Fund - Effective August 1, 1997)
Eaton Vance New York Municipals Fund
(formerly EV Marathon New York Municipals Fund - Effective October 1, 1997)
Eaton Vance North Carolina Municipals Fund
(formerly EV Marathon North Carolina Municipals Fund -
Effective September 1, 1997)
Eaton Vance Ohio Municipals Fund
(formerly EV Marathon Ohio Municipals Fund - Effective October 1, 1997)
Eaton Vance Oregon Municipals Fund
(formerly EV Marathon Oregon Municipals Fund - Effective September 1, 1997)
Eaton Vance Pennsylvania Municipals Fund
(formerly EV Marathon Pennsylvania Municipals Fund - Effective August 1, 1997)
Eaton Vance Rhode Island Municipals Fund
(formerly EV Marathon Rhode Island Municipals Fund - Effective October 1, 1997)
Eaton Vance South Carolina Municipals Fund
(formerly EV Marathon South Carolina Municipals Fund -
Effective September 1, 1997)
Eaton Vance Tennessee Municipals Fund
(formerly EV Marathon Tennessee Municipals Fund - Effective September 1, 1997)
Eaton Vance Texas Municipals Fund
(formerly EV Marathon Texas Municipals Fund - Effective August 1, 1997)
Eaton Vance Virginia Municipals Fund
(formerly EV Marathon Virginia Municipals Fund - Effective September 1, 1997)
Eaton Vance West Virginia Municipals Fund
(formerly EV Marathon West Virginia Municipals Fund - Effective October 1, 1997)
2. Each Fund shall have classes of shares established and designated as
Class A, Class B, Class C and Class I shares on the dates indicated in paragraph
1, and the Trustees may designate additional classes in the future. For purposes
of allocating liabilities among classes, each class of a series shall be treated
in the same manner as a separate series.
3. All series of Trust with the designation "Traditional" or "Classic"
shall be terminated, and the series designated "Massachusetts Municipal Bond
Portfolio" shall be terminated, on the dates indicated in paragraph 1.
Dated: June 23, 1997
/s/ Donald R. Dwight /s/ Norton H. Reamer
- ---------------------------------- ----------------------------------
Donald R. Dwight Norton H. Reamer
/s/ James B. Hawkes /s/ John L. Thorndike
- ---------------------------------- ----------------------------------
James B. Hawkes John L. Thorndike
/s/ Samuel L. Hayes, III /s/ Jack L. Treynor
- ---------------------------------- ----------------------------------
Samuel L. Hayes, III Jack L. Treynor
EXHIBIT 99.(6)(A)(7)
EATON VANCE MUNICIPALS TRUST
DISTRIBUTION AGREEMENT
AGREEMENT effective June 23, 1997 between EATON VANCE MUNICIPALS TRUST,
a Massachusetts business trust having its principal place of business in Boston
in the Commonwealth of Massachusetts, hereinafter called the "Trust," on behalf
of each of its series listed on Schedule A (a "Fund"), and EATON VANCE
DISTRIBUTORS, INC., a Massachusetts corporation having its principal place of
business in said Boston, hereinafter sometimes called the "Principal
Underwriter." The Trustees of the Trust have established four classes of shares
of each of the Funds, such classes having been designated Class A, Class B,
Class C and Class I (the "Classes").
IN CONSIDERATION of the mutual promises and undertakings herein
contained, the parties hereto agree with respect to each Fund:
1. The Trust grants to the Principal Underwriter the right to purchase
all classes of shares of the Fund upon the terms hereinbelow set forth during
the term of this Agreement. While this Agreement is in force, the Principal
Underwriter agrees to use its best efforts to find purchasers for shares of the
Fund.
The Principal Underwriter shall have the right to buy from the Fund the
shares needed, but not more than the shares needed (except for clerical errors
and errors of transmission) to fill unconditional orders for shares of the Fund
placed with the Principal Underwriter by financial service firms or investors as
set forth in the current Prospectus relating to shares of the Fund. The price
which the Principal Underwriter shall pay for Class A shares so purchased shall
be the net asset value used in determining the public offering price on which
such orders were based; the price for Class B, Class C and Class I shares so
purchased shall be equal to the price paid by investors upon purchasing such
shares. The Principal Underwriter shall notify Investors Bank & Trust Company,
Custodian of the Trust ("IBT"), and First Data Investor Services Group, Transfer
Agent of the Trust ("First Data"), or a successor transfer agent, at the end of
each business day, or as soon thereafter as the orders placed with it have been
compiled, of the number of shares and the prices thereof which the Principal
Underwriter is to purchase as principal for resale. The Principal Underwriter
shall take down and pay for shares ordered from the Fund on or before the
eleventh business day (excluding Saturdays) after the shares have been so
ordered.
The right granted to the Principal Underwriter to buy shares from the
Fund shall be exclusive, except that said exclusive right shall not apply to
shares issued in connection with the merger or consolidation of any other
investment company or personal holding company with the Fund or the acquisition
by purchase or otherwise of all (or substantially all) the assets or the
outstanding shares of any such company, by the Fund; nor shall it apply to
shares, if any, issued by the Fund in distribution of income or realized capital
gains of the Fund payable in shares or in cash at the option of the shareholder.
2. The shares may be resold by the Principal Underwriter to or through
financial service firms having agreements with the Principal Underwriter, and to
investors, upon the following terms and conditions.
CLASS A SHARES. The public offering price, i.e., the price per Class A
share at which the Principal Underwriter or financial service firm purchasing
shares from the Principal Underwriter may sell shares to the public, shall be
the public offering price as set forth in the current Prospectus relating to
said Class A shares, but not to exceed the net asset value at which the
Principal Underwriter is to purchase the Class A shares, plus a sales charge not
to exceed 7.25% of the public offering price (the net asset value divided by
.9275). If the resulting public offering price does not come out to an even
cent, the public offering price shall be adjusted to the nearer cent.
The Principal Underwriter may also sell Class A shares at the net asset
value at which the Principal Underwriter is to purchase such Class A shares,
provided such sales are not inconsistent with the provisions of Section 22(d) of
the Investment Company Act of 1940, as amended from time to time (the "1940
Act"), and the rules thereunder, including any applicable exemptive orders or
administrative interpretations or "no-action" positions with respect thereto.
CLASS B, CLASS C AND CLASS I SHARES. The public offering price, i.e.,
the price per Class B, Class C and Class I shares at which the Principal
Underwriter or financial service firm purchasing shares from the Principal
Underwriter may sell shares to the public, shall be equal to the net asset value
at which the Principal Underwriter is to purchase the Class B, Class C and Class
I shares.
The net asset value of shares of each Class of the Fund shall be
determined by the Trust or IBT, as the agent of the Trust, as of the close of
regular trading on the New York Stock Exchange (the "Exchange") on each business
day on which said Exchange is open, or as of such other time on each such
business day as may be determined by the Trustees of the Trust, in accordance
with the methodology and procedures for calculating such net asset value
authorized by the Trustees. The Trust may also cause the net asset value to be
determined in substantially the same manner or estimated in such manner and as
of such other time or times as may from time to time be agreed upon by the Trust
and Principal Underwriter. The Trust will notify the Principal Underwriter each
time the net asset value of a Class of shares is determined and when such value
is so determined it shall be applicable to transactions as set forth in the
current Prospectus(es) and Statement(s) of Additional Information (hereafter the
"Prospectus") relating to the Fund's shares.
No Class of shares of the Fund shall be sold by the Fund during any
period when the determination of that Class's net asset value is suspended
pursuant to the Declaration of Trust, except to the Principal Underwriter, in
the manner and upon the terms above set forth to cover contracts of sale made by
the Principal Underwriter with its customers prior to any such suspension, and
except as provided in paragraph 1 hereof. The Trust shall also have the right to
suspend the sale of any Class of shares if in the judgment of the Trust
conditions obtaining at any time render such action advisable. The Principal
Underwriter shall have the right to suspend sales at any time, to refuse to
accept or confirm any order from an investor or financial service firm, or to
accept or confirm any such order in part only, if in the judgment of the
Principal Underwriter such action is in the best interests of the Fund.
3. The Trust covenants and agrees that it will, from time to time, but
subject to the necessary approval of the Fund's shareholders, take such steps as
may be necessary to register the Fund's shares under the federal Securities Act
of 1933, as amended from time to time (the "1933 Act"), to the end that there
will be available for sale such number of shares as the Principal Underwriter
may reasonably be expected to sell. The Trust covenants and agrees to indemnify
and hold harmless the Principal Underwriter and each person, if any, who
controls the Principal Underwriter within the meaning of Section 15 of the 1933
Act against any loss, liability, claim, damages or expense (including the
reasonable cost of investigating or defending any alleged loss, liability,
claim, damages or expense and reasonable counsel fees incurred in connection
therewith), arising by reason of any person acquiring any shares of the Fund,
which may be based upon the 1933 Act or on any other statute or at common law,
on the ground that the Registration Statement or Prospectus, as from time to
time amended and supplemented, includes an untrue statement of a material fact
or omits to state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading, unless such statement or
omission was made in reliance upon, and in conformity with, information
furnished in writing to the Trust in connection therewith by or on behalf of the
Principal Underwriter; provided, however, that in no case (i) is the indemnity
of the Trust in favor of the Principal Underwriter and any such controlling
person to be deemed to protect such Principal Underwriter or any such
controlling person against any liability to the Trust or the Fund or its
security holders to which such Principal Underwriter or any such controlling
person would otherwise be subject by reason of willful misfeasance, bad faith,
or gross negligence in the performance of its duties or by reason of its
reckless disregard of its obligations and duties under this Agreement, or (ii)
is the Trust or the Fund to be liable under its indemnity agreement contained in
this paragraph with respect to any claim made against the Principal Underwriter
or any such controlling person unless the Principal Underwriter or any such
controlling person, as the case may be, shall have notified the Trust in writing
within a reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon the Principal
Underwriter or such controlling person (or after such Principal Underwriter or
such controlling person shall have received notice of such service on any
designated agent), but failure to notify the Trust of any such claim shall not
relieve it from any liability which the Fund may have to the person against whom
such action is brought otherwise than on account of its indemnity agreement
contained in this paragraph. The Trust shall be entitled to participate, at the
expense of the Fund, in the defense, or, if the Trust so elects, to assume the
defense of any suit brought to enforce any such liability, but if the Trust
elects to assume the defense, such defense shall be conducted by counsel chosen
by it and satisfactory to the Principal Underwriter or controlling person or
persons, defendant or defendants in the suit. In the event the Trust elects to
assume the defense of any such suit and retains such counsel, the Principal
Underwriter or controlling person or persons, defendant or defendants in the
suit, shall bear the fees and expenses of any additional counsel retained by
them, but, in case the Trust does not elect to assume the defense of any such
suit, the Fund shall reimburse the Principal Underwriter or controlling person
or persons, defendant or defendants in the suit, for the reasonable fees and
expenses of any counsel retained by them. The Trust agrees promptly to notify
the Principal Underwriter of the commencement of any litigation or proceedings
against it or any of its officers or Trustees in connection with the issuance or
sale of any of the Fund's shares.
4. The Principal Underwriter covenants and agrees that, in selling the
shares of the Fund, it will use its best efforts in all respects duly to conform
with the requirements of all state and federal laws relating to the sale of such
shares, and will indemnify and hold harmless the Trust and each of its Trustees
and officers and each person, if any, who controls the Trust within the meaning
of Section 15 of the 1933 Act, against any loss, liability, damages, claim or
expense (including the reasonable cost of investigating or defending any alleged
loss, liability, damages, claim or expense and reasonable counsel fees incurred
in connection therewith), arising by reason of any person acquiring any shares
of the Fund, which may be based upon the 1933 Act or any other statute or at
common law, on account of any wrongful act of the Principal Underwriter or any
of its employees (including any failure to conform with any requirement of any
state or federal law relating to the sale of such shares) or on the ground that
the Registration Statement or Prospectus, as from time to time amended and
supplemented, includes an untrue statement of a material fact or omits to state
a material fact required to be stated therein or necessary in order to make the
statements therein not misleading, insofar as any such statement or omission was
made in reliance upon, and in conformity with information furnished in writing
to the Trust in connection therewith by or on behalf of the Principal
Underwriter, provided, however, that in no case (i) is the indemnity of the
Principal Underwriter in favor of any person indemnified to be deemed to protect
the Fund or any such person against any liability to which the Fund or any such
person would otherwise be subject by reason of willful misfeasance, bad faith,
or gross negligence in the performance of its or his duties or by reason of its
or his reckless disregard of its obligations and duties under this Agreement, or
(ii) is the Principal Underwriter to be liable under its indemnity agreement
contained in this paragraph with respect to any claim made against the Fund or
any person indemnified unless the Trust or such person, as the case may be,
shall have notified the Principal Underwriter in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon the Trust, the Fund or upon such
person (or after the Trust, the Fund or such person shall have received notice
of such service on any designated agent), but failure to notify the Principal
Underwriter of any such claim shall not relieve it from any liability which it
may have to the Fund or any person against whom such action is brought otherwise
than on account of its indemnity agreement contained in this paragraph. The
Principal Underwriter shall be entitled to participate, at its own expense, in
the defense, or, if it so elects, to assume the defense of any suit brought to
enforce any such liability, but if the Principal Underwriter elects to assume
the defense, such defense shall be conducted by counsel chosen by it and
satisfactory to the Trust, or to its officers or Trustees, or to any controlling
person or persons, defendant or defendants in the suit. In the event that the
Principal Underwriter elects to assume the defense of any such suit and retains
such counsel, the Fund or such officers or Trustees or controlling person or
persons, defendant or defendants in the suit, shall bear the fees and expenses
of any additional counsel retained by them or the Trust, but, in case the
Principal Underwriter does not elect to assume the defense of any such suit, it
shall reimburse the Fund, any such officers and Trustees or controlling person
or persons, defendant or defendants in such suit, for the reasonable fees and
expenses of any counsel retained by them or the Trust. The Principal Underwriter
agrees promptly to notify the Trust of the commencement of any litigation or
proceedings against it in connection with the issue and sale of any of the
Fund's shares.
Neither the Principal Underwriter nor any financial service firm nor
any other person is authorized by the Trust to give any information or to make
any representations, other than those contained in the Registration Statement or
Prospectus filed with the Securities and Exchange Commission (the "Commission")
under the 1933 Act, (as said Registration Statement and Prospectus may be
amended or supplemented from time to time), covering the shares of the Fund.
Neither the Principal Underwriter nor any financial service firm nor any other
person is authorized to act as agent for the Trust or the Fund in connection
with the offering or sale of shares of the Fund to the public or otherwise. All
such sales made by the Principal Underwriter shall be made by it as principal,
for its own account. The Principal Underwriter may, however, act as agent in
connection with the repurchase of shares as provided in paragraph 6 below, or in
connection with "exchanges" between investment companies for which the Principal
Underwriter (or an affiliate thereof) acts as principal underwriter or
investment adviser.
5(a). The Fund will pay, or cause to be paid (by one or more classes) -
(i) all the costs and expenses of the Fund, including fees and
disbursements of its counsel, in connection with the preparation and filing of
any required Registration Statement and/or Prospectus under the 1933 Act, or the
1940 Act, covering its shares and all amendments and supplements thereto, and
preparing and mailing periodic reports to shareholders (including the expense of
setting up in type any such Registration Statement, Prospectus or periodic
report);
(ii) the cost of preparing temporary and permanent share
certificates (if any) for shares of the Fund;
(iii) the cost and expenses of delivering to the Principal
Underwriter at its office in Boston, Massachusetts, all shares of the Fund
purchased by it as principal hereunder; and
(iv) all the federal and state (if any) issue and/or transfer
taxes payable upon the issue by or (in the case of treasury shares) transfer
from the Fund to the Principal Underwriter of any and all shares of the Fund
purchased by the Principal Underwriter hereunder.
(v) the fees, costs and expenses of the registration or
qualification of shares for sale in the various states, territories or other
jurisdictions (including without limitation the registering or qualifying the
Fund as a broker or dealer or any officer of the Fund as agent or salesman in
any state, territory or other jurisdiction); and
(vi) all payments to be made pursuant to any written plan
approved in accordance with Rule 12b-1 under the 1940 Act or any written service
plan.
(b) The Principal Underwriter agrees that, after the Prospectus (other
than to existing shareholders of the Fund) and periodic reports have been set up
in type, it will bear the expense of printing and distributing any copies
thereof which are to be used in connection with the offering of shares of the
Fund to financial service firms or investors. The Principal Underwriter further
agrees that it will bear the expenses of preparing, printing and distributing
any other literature used by the Principal Underwriter or furnished by it for
use by financial service firms in connection with the offering of the shares of
the Fund for sale to the public and any expenses of advertising in connection
with such offering.
(c) In addition, the Trust agrees, in accordance with the Fund's
Distribution Plans (the "Plans"), adopted pursuant to Rule 12b-1 under the 1940
Act with respect to Class B and Class C shares, to make certain payments as
follows. The Principal Underwriter shall be entitled to be paid by the Fund a
sales commission equal to an amount not exceeding 5% of the price received by
the Fund for each sale of Class B shares and 6.25% of the price received by the
Fund for each sale of Class C shares (excluding in each case the reinvestment of
dividends and distributions), such payment to be made out of Class B or Class C
assets as applicable and in the manner set forth in this paragraph 5. The
Principal Underwriter shall also be entitled to be paid by the Fund a separate
distribution fee (calculated in accordance with paragraph 5(d)) out of the
relevant Class' assets, such payment to be made in the manner set forth and
subject to the terms of this paragraph 5.
(d) The sales commissions and distribution fees referred to in
paragraph 5(c) shall be accrued and paid by the Fund in the following manner.
Each Class B and Class C shall accrue daily an amount calculated at the rate of
.75% per annum of its daily net assets, which net assets shall be computed as
described in paragraph 2. The daily amounts so accrued throughout the month
shall be paid to the Principal Underwriter on the last day of each month. The
amount of such daily accrual, as so calculated, shall first be applied and
charged to all unpaid sales commissions, and the balance, if any, shall then be
applied and charged to all unpaid distribution fees. No amount shall be accrued
with respect to any day on which there exist no outstanding uncovered
distribution charges of the Principal Underwriter due from the relevant Class.
The amount of such uncovered distribution charges shall be calculated daily. For
purposes of this calculation, distribution charges of the Principal Underwriter
shall include (a) the aggregate of all sales commissions which the Principal
Underwriter has been paid pursuant to this paragraph (d) (and pursuant to
paragraph 5(d) of the Prior Agreements) plus all sales commissions which it is
entitled to be paid pursuant to paragraph 5(c) (and pursuant to paragraph 5(c)
of the Prior Agreements) since inception of the Prior Agreements through and
including the day next preceding the date of calculation, and (b) an amount
equal to the aggregate of all distribution fees referred to below which the
Principal Underwriter has been paid pursuant to this paragraph (d) (and pursuant
to paragraph 5(d) of the Prior Agreements) plus all such fees which it is
entitled to be paid pursuant to paragraph 5(c) (and pursuant to paragraph 5(c)
of the Prior Agreements) since inception of the Prior Agreements through and
including the day next preceding the date of calculation. From this sum
(distribution charges) there shall be subtracted (i) the aggregate amount paid
or payable to the Principal Underwriter pursuant to this paragraph (d) (and
pursuant to paragraph (d) of the Prior Agreements) since inception of the Prior
Agreements through and including the day next preceding the date of calculation
and (ii) the aggregate amount of all contingent deferred sales charges paid or
payable to the Principal Underwriter since inception of the Prior Agreements
through and including the day next preceding the date of calculation. In
addition, the calculation shall include amounts under the Prior Agreements when
a predecessor principal underwriter existed. If the result of such subtraction
is a positive amount, a distribution fee [computed at the rate of 1% per annum
above the prime rate (being the base rate on corporate loans posted by at least
75% of the nation's 30 largest banks) then being reported in the Eastern Edition
of The Wall Street Journal or if such prime rate is not so reported such other
rate as may be designated from time to time by vote or other action of a
majority of (i) those Trustees of the Trust who are not "interested persons" of
the Trust (as defined in the 1940 Act) and have no direct or indirect financial
interest in the operation of the Plan or any agreements related to it (the "Rule
12b-1 Trustees") and (ii) all of the Trustees then in office] shall be computed
on such amount and added to such amount, with the resulting sum constituting the
amount of outstanding uncovered distribution charges of the Principal
Underwriter due from a Class with respect to such day for all purposes of this
Agreement. If the result of such subtraction is a negative amount, there shall
exist no outstanding uncovered distribution charges of the Principal Underwriter
due from that Class with respect to such day and no amount shall be accrued or
paid to the Principal Underwriter with respect to such day. The aggregate
amounts accrued and paid pursuant to this paragraph (d) during any fiscal year
of the Fund shall not exceed .75% of the average daily net assets of a Class for
such year. The term "Principal Underwriter" as used in this paragraph (d) shall
include the current Principal Underwriter's predecessor, a Massachusetts
corporation called Eaton Vance Distributors, Inc. that served as principal
underwriter for the Trust prior to November 1, 1996.
(e) The Principal Underwriter shall be entitled to receive all
contingent deferred sales charges paid or payable with respect to any day on
which there exist outstanding uncovered distribution charges due from a Class of
the Principal Underwriter. Each Class B and Class C shall be entitled to receive
all remaining contingent deferred sales charges paid or payable by its
shareholders with respect to any day on which there exist no outstanding
uncovered distribution charges of the Principal Underwriter due from that Class,
provided that no such sales charge which would cause the Fund to exceed the
maximum applicable cap imposed thereon by paragraph (2) of subsection (d) of
Rule 2830 of the Conduct Rules of the National Association of Securities
Dealers, Inc. shall be imposed.
(f) The Principal Underwriter shall be entitled to receive all
contingent deferred sales charges imposed in accordance with the Prospectus on
early redemption of Class A shares.
(g) The persons authorized to direct the disposition of monies paid or
payable by the Fund pursuant to the Plan or this Agreement shall be the
President or any Vice President or the Treasurer of the Trust. Such persons
shall provide to the Trust's Trustees and the Trustees shall review, at least
quarterly, a written report of the amounts so expended and the purposes for
which such expenditures were made.
(h) In addition to the payments to the Principal Underwriter provided
for in paragraph 5(d), the Fund may make payments from the assets of each Class
of service fees to the Principal Underwriter, Authorized Firms and other
persons. The aggregate of such payments during any fiscal year of the Fund shall
not exceed .25% of a class' average daily net assets for such year.
6. The Trust hereby authorizes the Principal Underwriter to repurchase,
upon the terms and conditions set forth in written instructions given by the
Trust to the Principal Underwriter from time to time, as agent of the Trust and
for its account, such shares of the Fund as may be offered for sale to the Fund
from time to time.
(a) The Principal Underwriter shall notify in writing IBT and First
Data at the end of each business day, or as soon thereafter as the repurchases
in each pricing period have been compiled, of the number of shares of each Class
repurchased for the account of the Fund since the last previous report, together
with the prices at which such repurchases were made, and upon the request of any
officer or Trustee of the Trust shall furnish similar information with respect
to all repurchases made up to the time of the request on any day.
(b) The Trust reserves the right to suspend or revoke the foregoing
authorization at any time; unless otherwise stated, any such suspension or
revocation shall be effective forthwith upon receipt of notice thereof by an
officer of the Principal Underwriter, by telegraph or by written instrument from
an officer of the Trust duly authorized by its Trustees. In the event that the
authorization of the Principal Underwriter is, by the terms of such notice,
suspended for more than twenty-four hours or until further notice, the
authorization given by this paragraph 6 shall not be revived except by action of
a majority of the Trustees of the Trust.
(c) The Principal Underwriter shall have the right to terminate the
operation of this paragraph 6 upon giving to the Trust thirty (30) days' written
notice thereof.
(d) The Trust agrees to authorize and direct IBT to pay, for the
account of the Fund, the purchase price of any shares so repurchased against
delivery of the certificates in proper form for transfer to the Trust or for
cancellation by the Trust.
(e) The Principal Underwriter shall receive no commission in respect of
any repurchase of shares under the foregoing authorization and appointment as
agent, except for any sales commission, distribution fee or contingent deferred
sales charges payable under paragraph 5.
(f) The Trust agrees that the Fund will reimburse the Principal
Underwriter, from time to time on demand, for any reasonable expenses incurred
in connection with the repurchase of shares of the Fund pursuant to this
paragraph 6.
7. If, at any time during the existence of this Agreement, the Trust
shall deem it necessary or advisable in the best interests of the Fund that any
amendment of this Agreement be made in order to comply with the recommendations
or requirements of the Commission or other governmental authority or to obtain
any advantage under Massachusetts or federal tax laws, and shall notify the
Principal Underwriter of the form of amendment which it deems necessary or
advisable and the reasons therefor, and, if the Principal Underwriter declines
to assent to such amendment, the Trust may terminate this Agreement forthwith by
written notice to the Principal Underwriter. If, at any time during the
existence of its agreement upon request by the Principal Underwriter, the Trust
fails (after a reasonable time) to make any changes in its Declaration of Trust,
as amended, or in its methods of doing business which are necessary in order to
comply with any requirement of federal law or regulations of the Commission or
of a national securities association of which the Principal Underwriter is or
may be a member, relating to the sale of the shares of the Fund, the Principal
Underwriter may terminate this Agreement forthwith by written notice to the
Trust.
8(a). The Principal Underwriter is a corporation in the United States
organized under the laws of Massachusetts and holding membership in the National
Association of Securities Dealers, Inc., a securities association registered
under Section 15A of the Securities Exchange Act of 1934, as amended from time
to time, and during the life of this Agreement will continue to be so resident
in the United States, so organized and a member in good standing of said
Association. The Principal Underwriter covenants that it and its officers and
directors will comply with the Trust's Declaration of Trust and By-Laws, and the
1940 Act and the rules promulgated thereunder, insofar as they are applicable to
the Principal Underwriter.
(b) The Principal Underwriter shall maintain in the United States and
preserve therein for such period or periods as the Commission shall prescribe by
rules and regulations applicable to it as Principal Underwriter of an open-end
investment company registered under the 1940 Act such accounts, books and other
documents as are necessary or appropriate to record its transactions with the
Fund. Such accounts, books and other documents shall be subject at any time and
from time to time to such reasonable periodic, special and other examinations by
the Commission or any member or representative thereof as the Commission may
prescribe. The Principal Underwriter shall furnish to the Commission within such
reasonable time as the Commission may prescribe copies of or extracts from such
records which may be prepared without effort, expense or delay as the Commission
may by order require.
9. This Agreement shall continue in force indefinitely until terminated
as in this Agreement above provided, except that:
(a) this Agreement shall remain in effect through and including April
28, 1998 (or, if applicable, the next April 28 which follows the day on which a
Fund has become a Fund hereunder by amendment to Schedule A subsequent to April
28, 1998), and shall continue in full force and effect indefinitely thereafter,
but only so long as such continuance after April 28, 1998 (or, if applicable,
said next April 28) is specifically approved at least annually (i) by the vote
of a majority of the Rule 12b-1 Trustees cast in person at a meeting called for
the purpose of voting on such approval, and (ii) by the Trustees of the Trust or
by vote of a majority of the outstanding voting securities of the Fund;
(b) this Agreement may be terminated with respect to a Class with a
12b-1 plan 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 Class on not more
than sixty (60) days' notice to the Principal Underwriter. The Principal
Underwriter shall be entitled to receive all contingent deferred sales charges
paid or payable from such class with respect to any day subsequent to such
termination;
(c) either party shall have the right to terminate this Agreement with
respect to any Class on six (6) months' written notice thereof given in writing
to the other;
(d) the Trust shall have the right to terminate this Agreement
forthwith in the event that it shall have been established by a court of
competent jurisdiction that the Principal Underwriter or any director or officer
of the Principal Underwriter has taken any action which results in a breach of
the covenants set out in paragraph 9 hereof;
(e) if this Agreement is terminated with respect of any Class or Fund,
it shall not terminate the Agreement with respect to any other Class or Fund;
and
(f) additional series of the Trust will become Funds hereunder upon
approval by the Trustees of the Trust and amendment of Schedule A.
10. In the event of the assignment of this Agreement by the Principal
Underwriter, this Agreement shall automatically terminate.
11. Any notice under this Agreement shall be in writing, addressed and
delivered, or mailed postage paid, to the other party, at such address as such
other party may designate for the receipt of such notices. Until further notice
to the other party, it is agreed that the record address of the Trust and that
of the Principal Underwriter, shall be 24 Federal Street, Boston, Massachusetts
02110.
12. The services of the Principal Underwriter to the Trust hereunder
are not to be deemed to be exclusive, the Principal Underwriter being free to
(a) render similar service to, and to act as principal underwriter in connection
with the distribution of shares of, other series of the Trust or other
investment companies, and (b) engage in other business and activities from time
to time.
13. The terms "vote of a majority of the outstanding voting
securities," "assignment" and "interested persons," when used herein, shall have
the respective meanings specified in the 1940 Act, subject, however, to such
exemptions as may be granted by the Commission by any rule, regulation or order.
14. The Principal Underwriter expressly acknowledges the provision in
the Trust's Declaration of Trust limiting the personal liability of the
shareholders of the Trust and the Trustees of the Trust. The Principal
Underwriter hereby agrees that it shall have recourse only to the assets of the
relevant Fund or Class thereof for payment of claims or obligations as between
the Trust and the Principal Underwriter arising out of this Agreement and shall
not seek satisfaction from any shareholders or from the Trustees. No Fund or
Class shall not be responsible for obligations of any other fund or class of the
Trust.
15. On June 23, 1997, the Trust adopted a Plan of reorganization and a
Multiple Class Plan on behalf of its series and in connection therewith the
Trustees of the Trust amended the Declaration of Trust to terminate certain
series, to rename its Marathon series and to establish four classes of shares
within each renamed series. Pursuant to such reorganization the assets of each
Marathon series will be converted to Class B assets of the renamed series, the
shares of each Marathon series will be converted to Class B shares of the
renamed series, the assets of EV Classic National Municipals Fund ("Classic
National") will be converted to Class C assets of the renamed series designated
as Eaton Vance National Municipals Fund and the shares of Classic National will
be converted to Class C shares of that renamed series. All references in this
Agreement to the "Prior Agreements" shall mean (i) with respect to the Class B
assets or shares of a particular Fund, all prior distribution agreements of the
Trust applicable to the converted assets and shares of the relevant Marathon
series, and (ii) with respect to the Class C assets or shares of Eaton Vance
National Municipals Fund, all prior distribution agreements of the Trust
applicable to the converted assets and shares of Classic National. All
references in this Agreement to the "Prior Agreements" shall not be applicable
to any additional series of the Trust which becomes a Fund hereunder by
amendment of Schedule A subsequent to June 23, 1997.
16. This Agreement shall be effective with respect to a specific Class
of shares for a particular Fund on the date that Fund begins offering shares of
that Class. As of such effective date, this Agreement shall be deemed to amend,
replace and be substituted for the Prior Agreements previously applicable to the
relevant Class assets of that Fund. The outstanding uncovered distribution
charges of the Principal Underwriter with respect to a specific Class calculated
under the Prior Agreements as of the close of business on the date a Fund begins
offering shares of that Class shall be the outstanding uncovered distribution
charges of the Principal Underwriter with respect to such Class calculated under
this Agreement as of the opening of business on the date such shares are
offered.
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement
on the 23rd day June, 1997.
EATON VANCE MUNICIPALS TRUST
By /s/ Thomas J. Fetter
-------------------------
President
EATON VANCE DISTRIBUTORS, INC.
By /s/ Alan R. Dynner
-------------------------
Vice President
<PAGE>
SCHEDULE A
EATON VANCE MUNICIPALS TRUST
DISTRIBUTION AGREEMENT
EFFECTIVE: JUNE 23, 1997
<TABLE>
<S> <C>
Name of Fund Adopting this Agreement Prior Agreements Relating to Class B Assets
- ------------------------------------ -------------------------------------------
Eaton Vance Alabama Municipals Fund April 24, 1992/July 7, 1993/June 19, 1995
Eaton Vance Arizona Municipals Fund July 22, 1991/July 7, 1993/June 19, 1995
Eaton Vance Arkansas Municipals Fund October 1, 1992/July 7, 1993/June 19, 1995
Eaton Vance California Municipals Fund* December 19, 1985/July 7, 1993/June 19, 1995
Eaton Vance Colorado Municipals Fund August 20, 1992/July 7, 1993/June 19, 1995
Eaton Vance Connecticut Municipals Fund April 24, 1997/July 7, 1993/June 19, 1995
Eaton Vance Florida Municipals Fund August 20, 1990/July 7, 1993/June 19, 1995
Eaton Vance Georgia Municipals Fund December 16, 1991/July 7, 1993/June 19, 1995
Eaton Vance Kentucky Municipals Fund December 16, 1991/July 7, 1993/June 19, 1995
Eaton Vance Louisiana Municipals Fund October 1, 1992/July 7, 1993/June 19, 1995
Eaton Vance Maryland Municipals Fund December 16, 1991/July 7, 1993/June 19, 1995
Eaton Vance Massachusetts Municipals Fund April 15, 1991/July 7, 1993/June 19, 1995
Eaton Vance Michigan Municipals Fund April 15, 1991/July 7, 1993/June 19, 1995
Eaton Vance Minnesota Municipals Fund July 22, 1991/July 7, 1993/June 19, 1995
Eaton Vance Mississippi Municipals Fund June 7, 1993/June 19, 1995
Eaton Vance Missouri Municipals Fund April 24, 1992/July 7, 1993/June 19, 1995
Eaton Vance National Municipals Fund** December 19, 1985/July 7, 1993/June 19, 1995
Eaton Vance New Jersey Municipals Fund January 7, 1991/July 7, 1993/June 19, 1995
Eaton Vance New York Municipals Fund August 20, 1990/July 7, 1993/June 19, 1995
Eaton Vance North Carolina Municipals Fund October 10, 1991/July 7, 1993/June 19, 1995
Eaton Vance Ohio Municipals Fund April 16, 1991/July 7, 1993/June 19, 1995
Eaton Vance Oregon Municipals Fund December 16, 1991/July 7, 1993/June 19, 1995
Eaton Vance Pennsylvania Municipals Fund January 7, 1991/July 7, 1993/June 19, 1995
Eaton Vance Rhode Island Municipals Fund June 7, 1993/June 19, 1995
Eaton Vance South Carolina Municipals Fund October 1, 1992/July 7, 1993
Eaton Vance Tennessee Municipals Fund August 20, 1992/July 7, 1993/June 19, 1995
Eaton Vance Texas Municipals Fund January 31, 1992/July 7, 1993/June 19, 1995
Eaton Vance Virginia Municipals Fund July 22, 1991/July 7, 1993/June 19, 1995
Eaton Vance West Virginia Municipals Fund June 7, 1993/June 19, 1995
</TABLE>
- ---------------------------------
* This fund is a successor in operations to a fund which was reorganized,
Effective October 1, 1995, and the outstanding uncovered distribution charges
of the predecessor fund were assumed by the above fund.
** The Prior Agreements relating to this Fund's Class C assets are dated
November 22, 1993, January 27, 1995 and November 1, 1996.
Note: All Funds adopted a Distribution Agreement dated November 1, 1996.
<PAGE>
EXHIBIT 99.(9)(A)(2)
EATON VANCE MUNICIPALS TRUST
ADMINISTRATIVE SERVICES AGREEMENT
dated June 19, 1995
June 23, 1997
Amendment to Schedule A
Effective with the fiscal year end of each respective Fund which is a series of
Eaton Vance Municipals Trust, all Traditional and Classic Funds will become
Class A and Class C, respectively of the existing Marathon version of the
corresponding Funds and the current Marathon Fund will change its name to that
indicated on Schedule A hereto. Marathon shares will become Class B shares of
the renamed Fund. In addition, Massachusetts Municipal Bond Portfolio shares
will become Class I of the Eaton Vance Massachusetts Municipals Fund.
A revised Schedule A reflecting the above is attached.
<PAGE>
June 23, 1997
SCHEDULE A
Eaton Vance Arizona Municipals Fund
Eaton Vance Colorado Municipals Fund
Eaton Vance Connecticut Municipals Fund
Eaton Vance Michigan Municipals Fund
Eaton Vance Minnesota Municipals Fund
Eaton Vance New Jersey Municipals Fund
Eaton Vance Pennsylvania Municipals Fund
Eaton Vance Texas Municipals Fund
Effective September 2, 1997
Eaton Vance Alabama Municipals Fund
Eaton Vance Arkansas Municipals Fund
Eaton Vance Georgia Municipals Fund
Eaton Vance Kentucky Municipals Fund
Eaton Vance Louisiana Municipals Fund
Eaton Vance Maryland Municipals Fund
Eaton Vance Missouri Municipals Fund
Eaton Vance North Carolina Municipals Fund
Eaton Vance Oregon Municipals Fund
Eaton Vance South Carolina Municipals Fund
Eaton Vance Tennessee Municipals Fund
Eaton Vance Virginia Municipals Fund
Effective October 1, 1997
Eaton Vance California Municipals Fund
Eaton Vance Florida Municipals Fund
Eaton Vance Massachusetts Municipals Fund
Eaton Vance Mississippi Municipals Fund
Eaton Vance National Municipals Fund
Eaton Vance New York Municipals Fund
Eaton Vance Ohio Municipals Fund
Eaton Vance Rhode Island Municipals Fund
Eaton Vance West Virginia Municipals Fund
<PAGE>
EXHIBIT (11)
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 67 to the
Registration Statement of Eaton Vance Municipals Trust (1933 Act File No.
33-572) on behalf of EV Marathon Arizona Municipals Fund, EV Marathon Colorado
Municipals Fund, EV Marathon Connecticut Municipals Fund, EV Marathon Michigan
Municipals Fund, EV Marathon Minnesota Municipals Fund, EV Marathon New Jersey
Municipals Fund, EV Marathon Pennsylvania Municipals Fund and EV Marathon Texas
Municipals Fund of our report dated August 23, 1996, relating to EV Marathon
Arizona Municipals Fund, EV Marathon Colorado Municipals Fund, EV Marathon
Connecticut Municipals Fund, EV Marathon Michigan Municipals Fund, EV Marathon
Minnesota Municipals Fund, EV Marathon New Jersey Municipals Fund, EV Marathon
Pennsylvania Municipals Fund and EV Marathon Texas Municipals Fund, and of our
report dated August 23, 1996, relating to Arizona Municipals Portfolio, Colorado
Municipals Portfolio, Connecticut Municipals Portfolio, Michigan Municipals
Portfolio, Minnesota Municipals Portfolio, New Jersey Municipals Portfolio,
Pennsylvania Municipals Portfolio and Texas Municipals Portfolio, which reports
are included in the Annual Report to Shareholders for the year ended July 31,
1996 which is incorporated by reference in the Statement of Additional
Information, which is part of such Registration Statement.
We also consent to the reference to our Firm under the heading "The Funds"
Financial Highlights" in the Prospectus and under the captions "Independent
Certified Public Accountants" and "Financial Statements" in the Statement of
Additional Information of the Registration Statement.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
July 28, 1997
Boston, Massachusetts
<PAGE>
EXHIBIT 99.(15(G)
EATON VANCE MUNICIPALS TRUST
CLASS A SERVICE PLAN
WHEREAS, Eaton Vance Municipals Trust (the "Trust") engages in business
as an open-end management investment company with multiple series (each with
multiple classes), and is registered as such under the Investment Company Act of
1940, as amended (the "Act");
WHEREAS, on June 23, 1997 the Trust adopted a Plan of Reorganization
and a Multiple Class Plan on behalf of its series and in connection therewith
the Trustees amended the Declaration of Trust to terminate certain series
(including its Traditional series), and to establish four classes of shares
(including Class A shares) within each renamed series;
WHEREAS, the assets of each terminated Traditional series will be
converted to Class A assets of the renamed series and the shares of each
Traditional series will be converted to Class A shares of the renamed series
pursuant to such reorganization;
WHEREAS, the Trust on behalf of each of its series listed on Schedule A
(a "Fund") desires to adopt a Service Plan with respect to each Fund's Class A
shares pursuant to which each Fund intends to pay service fees out of Class A
assets as contemplated in subsections (b) and (d) of Rule 2830 of the Conduct
Rules of the National Association of Securities Dealers, Inc. (the "NASD
Rules");
WHEREAS, the Trust employs Eaton Vance Distributors, Inc. to act as
Principal Underwriter (as defined in the Act) of Class A shares of each Fund;
and
WHEREAS, the Trustees of the Trust have determined that there is a
reasonable likelihood that adoption of this Service Plan will benefit the Trust,
each Fund listed on Schedule A and the holders of Class A shares of each such
Fund.
NOW, THEREFORE, the Trust hereby adopts this Service Plan (the "Plan")
on behalf of each Fund with Class A shares containing the following terms and
conditions:
1. The Fund may make payments of service fees out of Class A assets to
the Principal Underwriter, Authorized Firms and other persons. The aggregate of
such payments during any fiscal year of the Fund shall not exceed .25% of
average daily net assets of Class A for such year. Appropriate adjustment of
service fee payments shall be made whenever necessary to ensure that no such
payment shall cause the Class to exceed the applicable maximum cap imposed
thereon by subsection (d)(5) of Rule 2830 of the NASD Rules.
2. This Plan shall not take effect until after it has been approved by
both a majority of (i) those Trustees of the Trust who are not "interested
persons" of the Trust (as defined in the Act) and have no direct or indirect
financial interest in the operations of this Plan or any agreements related to
it (the "Rule 12b-1 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.
3. Any agreements between the Trust on behalf of the Fund and any
person relating to this Plan shall be in writing and shall not take effect until
approved in the manner provided for Trustee approval of this Plan in Section 2.
4. This Plan shall continue in effect with respect to each Class A for
so long as such continuance is specifically approved at least annually in the
manner provided for Trustee approval of this Plan in Section 2.
5. The persons authorized to direct the disposition of monies paid or
payable by the Trust pursuant to this Plan or any related agreement shall be the
President or any Vice President or the Treasurer of the Trust. Such persons
shall provide to the Trustees of the Trust and the Trustees shall review, at
least quarterly, a written report of the amounts so expended and the purposes
for which such expenditures were made.
6. This Plan may be terminated as to any Fund with respect to its Class
A shares at any time by vote of a majority of the Rule 12b-1 Trustees, or by
vote of a majority of the outstanding Class A voting securities of the Fund.
7. This Plan may not be amended to increase materially the payments to
be made by the Class A shares of the Fund as provided in Section 1 unless such
amendment, if required by law, is approved by a vote of at least a majority of
the Class A outstanding voting securities of the Fund. In addition, all material
amendments to this Plan shall be approved in the manner provided for in Section
2. Additional series of the Trust which are to become a Fund hereunder will
become subject to this Plan and governed hereby upon approval by the Trustees of
the Trust and amendment of Schedule A.
8. While this Plan is in effect, the selection and nomination of the
Rule 12b-1 Trustees shall be committed to the discretion of the Rule 12b-1
Trustees.
9. The Trust shall preserve copies of this Plan and any related
agreements made by the Trust and all reports made pursuant to Section 5, for a
period of not less than six years from the date of this Plan, the first two
years in an easily accessible place.
10. Consistent with the limitation of shareholder, officer and Trustee
liability as set forth in the Trust's Declaration of Trust, any obligations
assumed by the Class A shares of a Fund pursuant to this Plan shall be limited
in all cases to the assets of such Class A shares and no person shall seek
satisfaction thereof from the shareholders of the Fund or officers or Trustees
of the Trust or any other class or series of the Trust.
11. When used in this Plan, the term "service fees" shall have the same
meaning as such term has in subsections (b) and (d) of Rule 2830 of the NASD
Rules. When used in this Plan, the term "vote of a majority of the outstanding
Class A voting securities of the Fund" shall mean the vote of the lesser of (a)
67 per centum or more of the Class A shares of the Fund present or represented
by proxy at the meeting if the holders of more than 50 per centum of the
outstanding Class A shares of the Fund are present or represented by proxy at
the meeting, or (b) more than 50 per centum of the outstanding Class A shares of
the Fund.
12. If any provision of this Plan shall be held or made invalid by a
court decision, statute, rule or regulation of the Securities and Exchange
Commission or otherwise, the remainder of this Plan shall not be affected
thereby.
13. This Plan shall be effective with respect to a specific Fund on the
date that Fund begins offering its Class A shares. As of such effective date
this Plan shall amend, replace and be substituted for any service plan
previously applicable to the Class A assets of such Fund.
Adopted June 23, 1997
* * *
<PAGE>
SCHEDULE A
EATON VANCE MUNICIPALS TRUST
CLASS A SERVICE PLAN
EFFECTIVE: JUNE 23, 1997
Name of Fund Adopting this Plan
-------------------------------
Eaton Vance Alabama Municipals Fund
Eaton Vance Arizona Municipals Fund
Eaton Vance Arkansas Municipals Fund
Eaton Vance California Municipals Fund
Eaton Vance Colorado Municipals Fund
Eaton Vance Connecticut Municipals Fund
Eaton Vance Florida Municipals Fund
Eaton Vance Georgia Municipals Fund
Eaton Vance Kentucky Municipals Fund
Eaton Vance Louisiana Municipals Fund
Eaton Vance Maryland Municipals Fund
Eaton Vance Massachusetts Municipals Fund
Eaton Vance Michigan Municipals Fund
Eaton Vance Minnesota Municipals Fund
Eaton Vance Mississippi Municipals Fund
Eaton Vance Missouri Municipals Fund
Eaton Vance National Municipals Fund
Eaton Vance New Jersey Municipals Fund
Eaton Vance New York Municipals Fund
Eaton Vance North Carolina Municipals Fund
Eaton Vance Ohio Municipals Fund
Eaton Vance Oregon Municipals Fund
Eaton Vance Pennsylvania Municipals Fund
Eaton Vance Rhode Island Municipals Fund
Eaton Vance South Carolina Municipals Fund
Eaton Vance Tennessee Municipals Fund
Eaton Vance Texas Municipals Fund
Eaton Vance Virginia Municipals Fund
Eaton Vance West Virginia Municipals Fund
<PAGE>
EXHIBIT 99.(15)(H)
EATON VANCE MUNICIPALS TRUST
CLASS B DISTRIBUTION PLAN
WHEREAS, Eaton Vance Municipals Trust (the "Trust") engages in business
as an open-end investment company with multiple series (each with multiple
classes) and is registered as such under the Investment Company Act of 1940, as
amended (the "Act");
WHEREAS, on June 23, 1997 the Trust adopted a Plan of Reorganization
and a Multiple Class Plan on behalf of its series and in connection therewith
the Trustees of the Trust amended the Declaration of Trust to terminate certain
series, to rename its Marathon series and to establish four classes of shares
(including Class B shares) within each renamed series;
WHEREAS, the assets of each Marathon series will be converted to Class
B assets of the renamed series and the shares of each Marathon series will be
converted to Class B shares of the renamed series pursuant to such
reorganization;
WHEREAS, the Trust adopted separate Distribution Plans and an Amended
Distribution Plan (collectively the "Original Plans") on behalf of its Marathon
series which are the predecessors to its Class B shares pursuant to which each
Marathon series made payments in connection with the distribution of its shares;
WHEREAS, the Trust employs Eaton Vance Distributors, Inc. to act as
Principal Underwriter (as defined in the Act) of Class B shares of each of its
series listed on Schedule A (a "Fund"), but does not intend to remunerate the
Principal Underwriter under this Class B Distribution Plan unless and until the
Principal Underwriter sells Class B shares of the Fund;
WHEREAS, each Fund will pay the Principal Underwriter sales commissions
and distribution fees out of Class B assets only in connection with the sale of
Class B shares;
WHEREAS, each Fund intends to pay service fees out of Class B assets as
contemplated in subsections (b) and (d) of Rule 2830 of the Conduct Rules of the
National Association of Securities Dealers, Inc. (the "NASD Rules");
WHEREAS, the Trustees of the Trust have determined that it is desirable
to adopt this Class B Distribution Plan as a successor to the Original Plans;
and
WHEREAS, the Trustees of the Trust have determined that there is a
reasonable likelihood that adoption of this Class B Distribution Plan will
benefit the Trust, each Fund listed on Schedule A, and the holders of Class B
shares of each such Fund.
NOW, THEREFORE, the Trust hereby adopts this Class B Distribution Plan
(this "Plan") on behalf of each Fund in accordance with Rule 12b-1 under the Act
and containing the following terms and conditions:
1. The Fund will pay sales commissions and distribution fees out of
Class B assets to the Principal Underwriter only after and as a result of the
sale of Class B shares. The Principal Underwriter will provide such distribution
services and facilities as the Trust may from time to time consider necessary to
accomplish the sale of Class B shares. It is understood that the Principal
Underwriter may pay such sales commissions and make such other payments to
Authorized Firms and other persons as it considers appropriate to encourage
distribution of such shares.
2. On each sale of Class B shares (excluding reinvestment of dividends
and distributions), the Fund shall pay the Principal Underwriter a sales
commission out of Class B assets in an amount not exceeding 5% of the price
received by the Fund therefor, such payment to be made in the manner set forth
and subject to the terms of this Plan. The amount of the sales commission shall
be established from time to time by vote or other action of a majority of (i)
those Trustees of the Trust who are not "interested persons" (as defined in the
Act) of the Trust and have no direct or indirect financial interest in the
operation of this Plan or any agreements related to it (the "Rule 12b-1
Trustees") and (ii) all of the Trustees then in office. The Fund shall also pay
the Principal Underwriter out of Class B assets a separate distribution fee
(calculated in accordance with Section 3), such payment to be made in the manner
set forth and subject to the terms of this Plan.
3. The sales commissions and distribution fees referred to in Section 2
shall be accrued and paid in the following manner. Each Class B shall accrue
daily an amount calculated at the rate of .75% per annum of its daily net
assets, which net assets shall be computed in accordance with the governing
documents of the Trust and applicable votes and determinations of the Trustees
of the Trust. The daily amounts so accrued throughout the month shall be paid to
the Principal Underwriter on the last day of each month. The amount of such
daily accrual, as so calculated, shall first be applied and charged to all
unpaid sales commissions, and the balance, if any, shall then be applied and
charged to all unpaid distribution fees. No amount shall be accrued with respect
to any day on which there exist no outstanding uncovered distribution charges of
the Principal Underwriter due from Class B shares. The amount of such uncovered
distribution charges shall be calculated daily. For purposes of this
calculation, distribution charges of the Principal Underwriter shall include (a)
the aggregate of all sales commissions which the Principal Underwriter has been
paid pursuant to this Section 3 (and pursuant to Section 3 of the Original
Plans) plus all sales commissions which it is entitled to be paid pursuant to
Section 2 (and pursuant to Section 2 of the Original Plans) since inception of
the Original Plans through and including the day next preceding the date of
calculation, and (b) an amount equal to the aggregate of all distribution fees
referred to below which the Principal Underwriter has been paid pursuant to this
Section 3 (and pursuant to Section 3 of the Original Plans) plus all such fees
which it is entitled to be paid pursuant to Section 2 (and pursuant to Section 2
of the Original Plans) since inception of the Original Plans through and
including the day next preceding the date of calculation. From this sum
(distribution charges) there shall be subtracted (i) the aggregate amount paid
or payable to the Principal Underwriter pursuant to this Section 3 (and pursuant
to Section 3 of the Original Plans) since inception of the Original Plans
through and including the day next preceding the date of calculation and (ii)
the aggregate amount of all contingent deferred sales charges paid or payable to
the Principal Underwriter since inception of the Original Plans through and
including the day next preceding the date of calculation. If the result of such
subtraction is a positive amount, a distribution fee [computed at the rate of 1%
per annum above the prime rate (being the base rate on corporate loans posted by
at least 75% of the nation's 30 largest banks) then being reported in the
Eastern Edition of The Wall Street Journal or if such prime rate is not so
reported such other rate as may be designated from time to time by vote or other
action of a majority of (i) the Rule 12b-1 Trustees and (ii) all of the Trustees
then in office] shall be computed on such amount and added to such amount, with
the resulting sum constituting the amount of outstanding uncovered distribution
charges of the Principal Underwriter due from Class B shares with respect to
such day for all purposes of this Plan. In addition, the calculation shall
include amounts under the Original Plans when a predecessor principal
underwriter existed. If the result of such subtraction is a negative amount,
there shall exist no outstanding uncovered distribution charges of the Principal
Underwriter due from Class B shares with respect to such day and no amount shall
be accrued or paid to the Principal Underwriter with respect to such day. The
aggregate amounts accrued and paid pursuant to this Section 3 during any fiscal
year of the Fund shall not exceed .75% of the average daily net assets of Class
B for such year.
4. The Principal Underwriter shall be entitled to receive all
contingent deferred sales charges paid or payable with respect to any day on
which there exist outstanding uncovered distribution charges of the Principal
Underwriter due from Class B shares. Class B shall be entitled to receive all
remaining contingent deferred sales charges paid or payable by Class B
shareholders with respect to any day on which there exist no outstanding
uncovered distribution charges of the Principal Underwriter due from Class B
shares, provided that no such sales charge which would cause the Class B to
exceed the maximum applicable cap imposed thereon by paragraph (2) of subsection
(d) of Rule 2830 of the NASD Rules shall be imposed.
5. The Fund may make payments of service fees out of Class B assets to
the Principal Underwriter, Authorized Firms and other persons. The aggregate of
such payments during any fiscal year of the Fund shall not exceed .25% of the
average daily net assets of Class B for such year. Appropriate adjustment of
service fee payments shall be made whenever necessary to ensure that no such
payment shall cause the Class B to exceed the applicable maximum cap imposed
thereon by paragraph (5) of subsection (d) of Rule 2830 of the NASD Rules.
6. This Plan shall not take effect until after it has been approved by
both a majority of (i) the Rule 12b-1 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.
7. Any agreements between the Trust on behalf of the Funds and any
person relating to this Plan shall be in writing and shall not take effect until
approved in the manner provided for Trustee approval of this Plan in Section 6.
8. This Plan shall continue in effect with respect to each Class B
until April 28, 1998 (or, if applicable, the next April 28 which follows the day
on which the Fund has become a Fund hereunder by amendment to Schedule A
subsequent to April 28, 1998) and from year to year thereafter, but only for so
long as such continuance after April 28, 1998 (or if applicable, said next April
28) is specifically approved at least annually in the manner provided for
Trustee approval of this Plan in Section 6.
9. The persons authorized to direct the disposition of monies paid or
payable pursuant to this Plan or any related agreement shall be the President or
any Vice President or the Treasurer of the Trust. Such persons shall provide to
the Trustees of the Trust and the Trustees shall review, at least quarterly, a
written report of the amounts so expended and the purposes for which such
expenditures were made.
10. This Plan may be terminated as to any Fund with respect to its
Class B shares at any time by vote of a majority of the Rule 12b-1 Trustees, or
by vote of a majority of the outstanding Class B voting securities of the Fund.
The Principal Underwriter shall also be entitled to receive all contingent
deferred sales charges paid or payable with respect to any day subsequent to
termination of this Plan on which there exist outstanding uncovered distribution
charges of the Principal Underwriter due from Class B shares.
11. This Plan may not be amended to increase materially the payments to
be made by the Class B shares of the Fund as provided in Sections 2, 3 and 5
unless such amendment is approved by a vote of at least a majority of the
outstanding voting securities of the Class B shares of the Fund. In addition,
all material amendments to this Plan shall be approved in the manner provided
for Trustee approval of this Plan in Section 6. Additional series of the Trust
which are to become a Fund hereunder will become subject to this Plan and
governed hereby upon approval by the Trustees of the Trust and amendment of
Schedule A. All references in this Plan to the "Original Plans" shall not be
applicable to any such additional series of the Trust which becomes a Fund
hereunder by amendment of Schedule A subsequent to June 23, 1997.
12. While this Plan is in effect, the selection and nomination of the
Rule 12b-1 Trustees shall be committed to the discretion of the Rule 12b-1
Trustees.
13. The Trust shall preserve copies of this Plan and any related
agreements made by the Trust and all reports made pursuant to Section 9, for a
period of not less than six years from the date of this Plan, the first two
years in an easily accessible place.
14. Consistent with the limitation of shareholder, officer and Trustee
liability as set forth in the Trust's Declaration of Trust, any obligations
assumed by the Class B shares of a Fund pursuant to this Plan shall be limited
in all cases to the assets of such Class B shares and no person shall seek
satisfaction thereof from the shareholders, officers or Trustees of the Trust or
any other class or series of the Trust.
15. When used in this Plan, the term "service fees" shall have the same
meaning as such term has in subsections (b) and (d) of Rule 2830 of the NASD
Rules. When used in this Plan, the term "vote of a majority of the outstanding
Class B voting securities of the Fund" shall mean the vote of the lesser of (a)
67 per centum or more of the Class B shares of the Fund present or represented
by proxy at the meeting if the holders of more than 50 per centum of the
outstanding Class B shares of the Fund are present or represented by proxy at
the meeting, or (b) more than 50 per centum of the outstanding Class B shares of
the Fund.
16. If any provision of this Plan shall be held or made invalid by a
court decision, statute, rule or regulation of the Securities and Exchange
Commission or otherwise, the remainder of this Plan shall not be affected
thereby.
17. This Plan shall be effective with respect to a specific Fund on the
date that Fund begins offering its Class B shares. As of such effective date
this Plan shall amend, replace and be substituted for the Original Plans
previously applicable to the Class B assets of that Fund. The outstanding
uncovered distribution charges of the Principal Underwriter calculated under the
Original Plans as of the close of business on the day preceding the date a Fund
begins offering Class B shares shall be the outstanding uncovered distribution
charges of the Principal Underwriter with respect to such Class B calculated
under this Plan as of the opening of business on the date such shares are
offered.
Adopted June 23, 1997
* * *
<PAGE>
SCHEDULE A
EATON VANCE MUNICIPALS TRUST
CLASS B DISTRIBUTION PLAN
EFFECTIVE: JUNE 23, 1997
<TABLE>
<S> <C>
Name of Fund Adopting This Plan Inception Date of Original Plans
- ------------------------------- --------------------------------
Eaton Vance Alabama Municipals Fund April 24, 1992
Eaton Vance Arizona Municipals Fund July 22, 1991
Eaton Vance Arkansas Municipals Fund October 1, 1992
Eaton Vance California Municipals Fund* December 19, 1985/September 29, 1995
Eaton Vance Colorado Municipals Fund August 20, 1992
Eaton Vance Connecticut Municipals Fund April 24, 1992
Eaton Vance Florida Municipals Fund August 20, 1990
Eaton Vance Georgia Municipals Fund December 16, 1991
Eaton Vance Kentucky Municipals Fund December 16, 1991
Eaton Vance Louisiana Municipals Fund October 1, 1992
Eaton Vance Maryland Municipals Fund December 16, 1991
Eaton Vance Massachusetts Municipals Fund April 15, 199
Eaton Vance Michigan Municipals Fund April 15, 1991
Eaton Vance Minnesota Municipals Fund July 22, 1991
Eaton Vance Mississippi Municipals Fund June 7, 1993
Eaton Vance Missouri Municipals Fund April 24, 1992
Eaton Vance National Municipals Fund December 19, 1985
Eaton Vance New Jersey Municipals Fund January 7, 1991
Eaton Vance New York Municipals Fund August 20, 1990
Eaton Vance North Carolina Municipals Fund October 10, 1991
Eaton Vance Ohio Municipals Fund April 16, 1991
Eaton Vance Oregon Municipals Fund December 16, 1991
Eaton Vance Pennsylvania Municipals Fund January 7, 1991
Eaton Vance Rhode Island Municipals Fund June 7, 1993
Eaton Vance South Carolina Municipals Fund October 1, 1992
Eaton Vance Tennessee Municipals Fund August 20, 1992
Eaton Vance Texas Municipals Fund January 31, 1992
Eaton Vance Virginia Municipals Fund July 22, 1991
Eaton Vance West Virginia Municipals Fund June 7, 1993
</TABLE>
- --------------------
* This fund is a successor in operations to a fund which was reorganized,
effective October 1, 1995, and the outstanding uncovered distribution charges
of the predecessor fund were assumed by the above fund.
Note: All of the foregoing Funds except Eaton Vance Rhode Island Municipals
Fund, Eaton Vance Mississippi Municipals Fund and Eaton Vance West
Virginia Municipals Fund adopted an Amended Distribution Plan on July 7,
1993. In addition, all of the foregoing Funds except Eaton Vance
California Municipals Fund adopted an Amended Distribution Plan on June
19, 1995.
<PAGE>
EXHIBIT 99.(15)(I)
EATON VANCE MUNICIPALS TRUST
CLASS C DISTRIBUTION PLAN
WHEREAS, Eaton Vance Municipals Trust (the "Trust") engages in business
as an open-end investment company with multiple series (each with multiple
classes) and is registered as such under the Investment Company Act of 1940, as
amended (the "Act");
WHEREAS, on June 23, 1997 the Trust adopted a Plan of Reorganization
and a Multiple Class Plan on behalf of its series and in connection therewith
the Trustees amended the Declaration of Trust to terminate certain series
(including its Classic series), and to establish four classes of shares
(including Class C shares) within each renamed series;
WHEREAS, the assets of each terminated Classic series will be converted
to Class C assets of the renamed series and the shares of each Classic series
will be converted to Class C shares of the renamed series pursuant to such
reorganization;
WHEREAS, the Trust adopted separate Distribution Plans and an Amended
Distribution Plan (collectively the "Original Plans") on behalf of its Classic
series which are the predecessors to its Class C shares pursuant to which each
Classic series made payments in connection with the distribution of its shares;
WHEREAS, the Trust employs Eaton Vance Distributors, Inc. to act as
Principal Underwriter (as defined in the Act) of Class C shares of each of its
series listed in Schedule A (a "Fund"), but does not intend to remunerate the
Principal Underwriter under this Class C Distribution Plan unless and until the
Principal Underwriter sells Class C shares of the Fund;
WHEREAS, each Fund will pay the Principal Underwriter sales commissions
and distribution fees out of Class C assets only in connection with the sale of
Class C shares;
WHEREAS, each Fund intends to pay service fees out of Class C assets as
contemplated in subsections (b) and (d) of Rule 2830 of the Conduct Rules of the
National Association of Securities Dealers, Inc. (the "NASD Rules");
WHEREAS, the Trustees of the Trust have determined that it is desirable
to adopt this Class C Distribution Plan as a successor to the Original Plans;
and
WHEREAS, the Trustees of the Trust have determined that there is a
reasonable likelihood that adoption of this Class C Distribution Plan will
benefit the Trust, each Fund listed on Schedule A and the holders of Class C
shares of each such Fund.
NOW, THEREFORE, the Trust hereby adopts this Class C Distribution Plan
(this "Plan") on behalf of each Fund in accordance with Rule 12b-1 under the Act
and containing the following terms and conditions:
1. The Fund will pay sales commissions and distribution fees out of
Class C assets to the Principal Underwriter only after and as a result of the
sale of Class C shares. The Principal Underwriter will provide such distribution
services and facilities as the Trust may from time to time consider necessary to
accomplish the sale of Class C shares. It is understood that the Principal
Underwriter may pay such sales commissions and make such other payments to
Authorized Firms and other persons as it considers appropriate to encourage
distribution of such shares.
2. On each sale of Class C shares (excluding reinvestment of dividends
and distributions), the Fund shall pay the Principal Underwriter a sales
commission out of Class C assets in an amount not exceeding 6.25% of the price
received by the Fund therefor, such payment to be made in the manner set forth
and subject to the terms of this Plan. The amount of the sales commission shall
be established from time to time by vote or other action of a majority of (i)
those Trustees of the Trust who are not "interested persons" (as defined in the
Act) of the Trust and have no direct or indirect financial interest in the
operation of this Plan or any agreements related to it (the "Rule 12b-1
Trustees") and (ii) all of the Trustees then in office. The Fund shall also pay
the Principal Underwriter out of Class C assets a separate distribution fee
(calculated in accordance with Section 3), such payment to be made in the manner
set forth and subject to the terms of this Plan.
3. The sales commissions and distribution fees referred to in Section 2
shall be accrued and paid in the following manner. Each Class C shall accrue
daily an amount calculated at the rate of .75% per annum of its daily net
assets, which net assets shall be computed in accordance with the governing
documents of the Trust and applicable votes and determinations of the Trustees
of the Trust. The daily amounts so accrued throughout the month shall be paid to
the Principal Underwriter on the last day of each month. The amount of such
daily accrual, as so calculated, shall first be applied and charged to all
unpaid sales commissions, and the balance, if any, shall then be applied and
charged to all unpaid distribution fees. No amount shall be accrued with respect
to any day on which there exist no outstanding uncovered distribution charges of
the Principal Underwriter due from Class C shares. The amount of such uncovered
distribution charges shall be calculated daily. For purposes of this
calculation, distribution charges of the Principal Underwriter shall include (a)
the aggregate of all sales commissions which the Principal Underwriter has been
paid pursuant to this Section 3 (and pursuant to Section 3 of the Original
Plans) plus all sales commissions which it is entitled to be paid pursuant to
Section 2 (and pursuant to Section 2 of the Original Plans) since inception of
the Original Plans through and including the day next preceding the date of
calculation, and (b) an amount equal to the aggregate of all distribution fees
referred to below which the Principal Underwriter has been paid pursuant to this
Section 3 (and pursuant to Section 3 of the Original Plans) plus all such fees
which it is entitled to be paid pursuant to Section 2 (and pursuant to Section 2
of the Original Plans) since inception of the Original Plans through and
including the day next preceding the date of calculation. From this sum
(distribution charges) there shall be subtracted (i) the aggregate amount paid
or payable to the Principal Underwriter pursuant to this Section 3 (and pursuant
to Section 3 of the Original Plans) since inception of the Original Plans
through and including the day next preceding the date of calculation and (ii)
the aggregate amount of all contingent deferred sales charges paid or payable to
the Principal Underwriter since inception of the Original Plans through and
including the day next preceding the date of calculation. If the result of such
subtraction is a positive amount, a distribution fee [computed at the rate of 1%
per annum above the prime rate (being the base rate on corporate loans posted by
at least 75% of the nation's 30 largest banks) then being reported in the
Eastern Edition of The Wall Street Journal or if such prime rate is not so
reported such other rate as may be designated from time to time by vote or other
action of a majority of (i) the Rule 12b-1 Trustees and (ii) all of the Trustees
then in office] shall be computed on such amount and added to such amount, with
the resulting sum constituting the amount of outstanding uncovered distribution
charges of the Principal Underwriter due from Class C shares with respect to
such day for all purposes of this Plan. In addition, the calculation shall
include amounts under the Original Plans when a predecessor principal
underwriter existed. If the result of such subtraction is a negative amount,
there shall exist no outstanding uncovered distribution charges of the Principal
Underwriter due from Class C shares with respect to such day and no amount shall
be accrued or paid to the Principal Underwriter with respect to such day. The
aggregate amounts accrued and paid pursuant to this Section 3 during any fiscal
year of the Fund shall not exceed .75% of the average daily net assets of Class
C for such year.
4. The Principal Underwriter shall be entitled to receive all
contingent deferred sales charges paid or payable with respect to any day on
which there exist outstanding uncovered distribution charges of the Principal
Underwriter due from Class C shares. Class C shall be entitled to receive all
remaining contingent deferred sales charges paid or payable by Class C
shareholders with respect to any day on which there exist no outstanding
uncovered distribution charges of the Principal Underwriter due from Class C
shares, provided that no such sales charge which would cause the Class C to
exceed the maximum applicable cap imposed thereon by paragraph (2) of subsection
(d) of Rule 2830 of the NASD Rules shall be imposed.
5. The Fund may make payments of service fees out of Class C assets to
the Principal Underwriter, Authorized Firms and other persons. The aggregate of
such payments during any fiscal year of the Fund shall not exceed .25% of the
average daily net assets of Class C for such year. Appropriate adjustment of
service fee payments shall be made whenever necessary to ensure that no such
payment shall cause the Class C to exceed the applicable maximum cap imposed
thereon by paragraph (5) of subsection (d) of Rule 2830 of the NASD Rules.
6. This Plan shall not take effect until after it has been approved by
both a majority of (i) the Rule 12b-1 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.
7. Any agreements between the Trust on behalf of the Funds and any
person relating to this Plan shall be in writing and shall not take effect until
approved in the manner provided for Trustee approval of this Plan in Section 6.
8. This Plan shall continue in effect with respect to each Class C
until April 28, 1998 (or, if applicable, the next April 28 which follows the day
on which the Fund has become a Fund hereunder by amendment to Schedule A
subsequent to April 28, 1998) and from year to year thereafter, but only for so
long as such continuance after April 28, 1998 (or if applicable, said next April
28) is specifically approved at least annually in the manner provided for
Trustee approval of this Plan in Section 6.
9. The persons authorized to direct the disposition of monies paid or
payable pursuant to this Plan or any related agreement shall be the President or
any Vice President or the Treasurer of the Trust. Such persons shall provide to
the Trustees of the Trust and the Trustees shall review, at least quarterly, a
written report of the amounts so expended and the purposes for which such
expenditures were made.
10. This Plan may be terminated as to any Fund with respect to its
Class C shares at any time by vote of a majority of the Rule 12b-1 Trustees, or
by vote of a majority of the outstanding Class C voting securities of the Fund.
The Principal Underwriter shall also be entitled to receive all contingent
deferred sales charges paid or payable with respect to any day subsequent to
termination of this Plan on which there exist outstanding uncovered distribution
charges of the Principal Underwriter due from Class C shares.
11. This Plan may not be amended to increase materially the payments to
be made by the Class C shares of the Fund as provided in Sections 2, 3 and 5
unless such amendment is approved by a vote of at least a majority of the
outstanding voting securities of the Class C shares of the Fund. In addition,
all material amendments to this Plan shall be approved in the manner provided
for Trustee approval of this Plan in Section 6. Additional series of the Trust
which are to become a Fund hereunder will become subject to this Plan and
governed hereby upon approval by the Trustees of the Trust and amendment of
Schedule A. All references in this Plan to the "Original Plans" shall not be
applicable to any such additional series of the Trust which becomes a Fund
hereunder by amendment of Schedule A subsequent to June 23, 1997.
12. While this Plan is in effect, the selection and nomination of the
Rule 12b-1 Trustees shall be committed to the discretion of the Rule 12b-1
Trustees.
13. The Trust shall preserve copies of this Plan and any related
agreements made by the Trust and all reports made pursuant to Section 9, for a
period of not less than six years from the date of this Plan, the first two
years in an easily accessible place.
14. Consistent with the limitation of shareholder, officer and Trustee
liability as set forth in the Trust's Declaration of Trust, any obligations
assumed by the Class C shares of a Fund pursuant to this Plan shall be limited
in all cases to the assets of such Class C shares and no person shall seek
satisfaction thereof from the shareholders, officers or Trustees of the Trust or
any other class or series of the Trust.
15. When used in this Plan, the term "service fees" shall have the same
meaning as such term has in subsections (b) and (d) of Rule 2830 of the NASD
Rules. When used in this Plan, the term "vote of a majority of the outstanding
Class C voting securities of the Fund" shall mean the vote of the lesser of (a)
67 per centum or more of the Class C shares of the Fund present or represented
by proxy at the meeting if the holders of more than 50 per centum of the
outstanding Class C shares of the Fund are present or represented by proxy at
the meeting, or (b) more than 50 per centum of the outstanding Class C shares of
the Fund.
16. If any provision of this Plan shall be held or made invalid by a
court decision, statute, rule or regulation of the Securities and Exchange
Commission or otherwise, the remainder of this Plan shall not be affected
thereby.
17. This Plan shall be effective with respect to a specific Fund on the
date that Fund begins offering its Class C shares. As of such effective date
this Plan shall amend, replace and be substituted for the Original Plans
previously applicable to the Class C assets of that Fund. The outstanding
uncovered distribution charges of the Principal Underwriter calculated under the
Original Plans as of the close of business on the day preceding the date a Fund
begins offering its Class C shares shall be the outstanding uncovered
distribution charges of the Principal Underwriter with respect to such Class C
calculated under this Plan as of the opening of business on the date such shares
are offered.
Adopted June 23, 1997
* * *
<PAGE>
SCHEDULE A
EATON VANCE MUNICIPALS TRUST
CLASS C DISTRIBUTION PLAN
EFFECTIVE: JUNE 23, 1997
Name of Fund Adopting this Plan Inception Date of Original Plan
- ------------------------------- -------------------------------
Eaton Vance National Municipals Fund November 22, 1993/January 27, 1995
<PAGE>
Exhibit 16
EV MARATHON ARIZONA MUNICIPALS FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 1/31/97
Interest Income Earned: $581,161
Plus Dividend Income Earned:
----------
Equal Gross Income: $581,161
Minus Expenses: $151,946
----------
Equal Net Investment Income: $429,215
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 11,058,901
----------
Equal Net Investment Income Earned Per Share: $0.0388
Net Asset Value Per Share 1/31/97 $10.82
30 Day Yield*: 4.34%
Divided by One minus the Tax Rate of 31%: 0.69
----------
Equal Tax Equivalent Yield **: 6.29%
Divided by one minus a tax rate of 34.59%: 0.6541
----------
Equal Tax Equivalent Yield***: 6.64%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0388/$10.82)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and Arizona tax rate of 34.59%
<PAGE>
INVESTMENT PERFORMANCE -- EV MARATHON ARIZONA MUNICIPALS FUND
The table below indicates the total return (capital changes plus reinvestment of
all distributions) on a hypothetical investment of $1,000 in the Fund covering
the period from July 25, 1991 through January 31, 1997 and for the 1 and 5 year
periods ended January 31, 1997.
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
PERIOD DATE ON 01/31/97 ON 01/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------- ---------- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 07/25/91 $1,489.15 $1,479.15 48.92% 7.48% 47.92% 7.35%
5 YEARS ENDED
01/31/97 01/31/92 $1,379.68 $1,359.68 37.97% 6.65% 35.97% 6.34%
1 YEAR ENDED
01/31/97 01/31/96 $1,019.18 $970.48 1.92% 1.92% -2.95% -2.95%
</TABLE>
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial
investment at the end of the period 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
the ending investment value before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based the
ending investment value before deducting the CDSC.
<PAGE>
Exhibit 16
EV MARATHON COLORADO MUNICIPALS FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 1/31/97
Interest Income Earned: $206,605
Plus Dividend Income Earned:
---------
Equal Gross Income: $206,605
Minus Expenses: $58,948
---------
Equal Net Investment Income: $147,657
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 3,984,219
---------
Equal Net Investment Income Earned Per Share: $0.0371
Net Asset Value Per Share 1/31/97 $10.32
30 Day Yield*: 4.35%
Divided by One minus the Tax Rate of 31%: 0.69
---------
Equal Tax Equivalent Yield **: 6.30%
Divided by one minus a tax rate of 34.45%: 0.6555
---------
Equal Tax Equivalent Yield***: 6.64%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0371/$10.32)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and Colorado tax rate of 34.45%
<PAGE>
INVESTMENT PERFORMANCE -- EV MARATHON COLORADO MUNICIPALS FUND
The table below indicates the total return (capital changes plus reinvestment of
all distributions) on a hypothetical investment of $1,000 in the Fund covering
the period from August 25, 1992 through January 31, 1997 and for the 1 year
period ended January 31, 1997.
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
PERIOD DATE ON 01/31/97 ON 01/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------- ---------- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 08/25/92 $1,296.63 $1,276.63 29.66% 6.02% 27.66% 5.66%
1 YEAR ENDED
01/31/97 01/31/96 $1,023.85 $975.03 2.38% 2.38% -2.50% -2.50%
</TABLE>
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial
investment at the end of the period 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
the ending investment value before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based the
ending investment value before deducting the CDSC.
<PAGE>
Exhibit 16
EV MARATHON CONNECTICUT MUNICIPALS FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 1/31/97
Interest Income Earned: $872,656
Plus Dividend Income Earned:
----------
Equal Gross Income: $872,656
Minus Expenses: $233,505
----------
Equal Net Investment Income: $639,151
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 17,544,969
----------
Equal Net Investment Income Earned Per Share: $0.0364
Net Asset Value Per Share 1/31/97 $10.21
30 Day Yield*: 4.32%
Divided by One minus the Tax Rate of 31%: 0.69
----------
Equal Tax Equivalent Yield **: 6.26%
Divided by one minus a tax rate of 34.11%: 0.6589
----------
Equal Tax Equivalent Yield***: 6.56%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0364/$10.21)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and Connecticut tax rate of 34.11%
<PAGE>
INVESTMENT PERFORMANCE -- EV MARATHON CONNECTICUT MUNICIPALS FUND
The table below indicates the total return (capital changes plus reinvestment of
all distributions) on a hypothetical investment of $1,000 in the Fund covering
the period from May 1, 1992 through January 31, 1997 and for the 1 year period
ended January 31, 1997.
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
PERIOD DATE ON 01/31/97 ON 01/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------- ---------- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 05/01/92 $1,305.05 $1,285.05 30.50% 5.75% 28.50% 5.41%
1 YEAR ENDED
01/31/97 01/31/96 $1,022.57 $973.72 2.26% 2.26% -2.63% -2.63%
</TABLE>
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial
investment at the end of the period 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
the ending investment value before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based the
ending investment value before deducting the CDSC.
<PAGE>
Exhibit 16
EV MARATHON MICHIGAN MUNICIPALS FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 1/31/97
Interest Income Earned: $762,958
Plus Dividend Income Earned:
----------
Equal Gross Income: $762,958
Minus Expenses: $212,181
----------
Equal Net Investment Income: $550,777
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 15,424,135
----------
Equal Net Investment Income Earned Per Share: $0.0357
Net Asset Value Per Share 1/31/97 $10.49
30 Day Yield*: 4.12%
Divided by One minus the Tax Rate of 31%: 0.69
----------
Equal Tax Equivalent Yield **: 5.97%
Divided by one minus a tax rate of 35.93%: 0.6407
----------
Equal Tax Equivalent Yield***: 6.43%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0357/$10.49)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and Michigan tax rate of 35.93%
<PAGE>
INVESTMENT PERFORMANCE -- EV MARATHON MICHIGAN MUNICIPALS FUND
The table below indicates the total return (capital changes plus reinvestment of
all distributions) on a hypothetical investment of $1,000 in the Fund covering
the period from April 19, 1991 through January 31, 1997 and for the 1 and 5 year
periods ended January 31, 1997.
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
PERIOD DATE ON 01/31/97 ON 01/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------- ---------- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 04/19/91 $1,445.02 $1,435.02 44.50% 6.56% 43.50% 6.44%
5 YEARS ENDED
01/31/97 01/31/92 $1,303.12 $1,303.12 32.31% 5.76% 30.31% 5.44%
1 YEAR ENDED
01/31/97 01/31/96 $1,013.53 $965.10 1.35% 1.35% -3.49% -3.49%
</TABLE>
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial
investment at the end of the period 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
the ending investment value before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based the
ending investment value before deducting the CDSC.
<PAGE>
Exhibit 16
EV MARATHON MINNESOTA MUNICIPALS FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 1/31/97
Interest Income Earned: $343,810
Plus Dividend Income Earned:
---------
Equal Gross Income: $343,810
Minus Expenses: $91,194
---------
Equal Net Investment Income: $252,616
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 6,975,147
---------
Equal Net Investment Income Earned Per Share: $0.0362
Net Asset Value Per Share 1/31/97 $10.12
30 Day Yield*: 4.33%
Divided by One minus the Tax Rate of 31%: 0.69
---------
Equal Tax Equivalent Yield **: 6.28%
Divided by one minus a tax rate of 36.87%: 0.6313
---------
Equal Tax Equivalent Yield***: 6.86%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0362/$10.12)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and Minnesota tax rate of 36.87%
<PAGE>
INVESTMENT PERFORMANCE -- EV MARATHON MINNESOTA MUNICIPALS FUND
The table below indicates the total return (capital changes plus reinvestment of
all distributions) on a hypothetical investment of $1,000 in the Fund covering
the period from July 29, 1991 through January 31, 1997 and for the 1 and 5 year
periods ended January 31, 1997.
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
PERIOD DATE ON 01/31/97 ON 01/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------- ---------- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 07/29/91 $1,358.48 $1,348.48 35.85% 5.72% 34.85% 5.58%
5 YEARS ENDED
01/31/97 01/31/92 $1,292.19 $1,272.39 29.22% 5.26% 27.24% 4.94%
1 YEAR ENDED
01/31/97 01/31/96 $1,015.06 $966.59 1.51% 1.51% -3.34% -3.34%
</TABLE>
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial
investment at the end of the period 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
the ending investment value before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based the
ending investment value before deducting the CDSC.
<PAGE>
Exhibit 16
EV MARATHON NEW JERSEY MUNICIPALS FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 1/31/97
Interest Income Earned: 1,838,746
Plus Dividend Income Earned:
----------
Equal Gross Income: 1,838,746
Minus Expenses: $468,552
----------
Equal Net Investment Income: 1,370,194
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 34,685,717
----------
Equal Net Investment Income Earned Per Share: $0.0395
Net Asset Value Per Share 1/31/97 $10.54
30 Day Yield*: 4.54%
Divided by One minus the Tax Rate of 31%: 0.69
----------
Equal Tax Equivalent Yield **: 6.58%
Divided by one minus a tax rate of 35.40%: 0.6460
----------
Equal Tax Equivalent Yield***: 7.03%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0395/$10.54)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and New Jersey tax rate of 35.40%
<PAGE>
INVESTMENT PERFORMANCE -- EV MARATHON NEW JERSEY MUNICIPALS FUND
The table below indicates the total return (capital changes plus reinvestment of
all distributions) on a hypothetical investment of $1,000 in the Fund covering
the period from January 8, 1991 through January 31, 1997 and for the 1 and 5
year periods ended January 31, 1997.
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
PERIOD DATE ON 01/31/97 ON 01/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------- ---------- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 01/08/91 $1,487.09 $1,487.09 48.71% 6.76% 48.71% 6.76%
5 YEARS ENDED
01/31/97 01/31/92 $1,329.16 $1,309.16 32.92% 5.86% 30.92% 5.54%
1 YEAR ENDED
01/31/97 01/31/96 $1,021.87 $ 973.16 2.19% 2.19% -2.68% -2.68%
</TABLE>
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial
investment at the end of the period 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
the ending investment value before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based the
ending investment value before deducting the CDSC.
<PAGE>
Exhibit 16
EV MARATHON PENNSYLVANIA MUNICIPALS FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 1/31/97
Interest Income Earned: $2,168,317
Plus Dividend Income Earned:
----------
Equal Gross Income: $2,168,317
Minus Expenses: $538,200
----------
Equal Net Investment Income: $1,630,117
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 39,681,153
----------
Equal Net Investment Income Earned Per Share: $0.0411
Net Asset Value Per Share 1/31/97 $10.56
30 Day Yield*: 4.71%
Divided by One minus the Tax Rate of 31%: 0.69
----------
Equal Tax Equivalent Yield **: 6.83%
Divided by one minus a tax rate of 38.79%: 0.6121
----------
Equal Tax Equivalent Yield***: 7.69%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0411/$10.56)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and Pennsylvania tax rate of 38.79%
<PAGE>
INVESTMENT PERFORMANCE -- EV MARATHON PENNSYLVANIA MUNICIPALS FUND
The table below indicates the total return (capital changes plus reinvestment of
all distributions) on a hypothetical investment of $1,000 in the Fund covering
the period from January 8, 1991 through January 31, 1997 and for the 1 and 5
year periods ended January 31, 1997.
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
PERIOD DATE ON 01/31/97 ON 01/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------- ---------- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 01/08/91 $1,490.83 $1,490.83 49.08% 6.80% 49.08% 6.80%
5 YEARS ENDED
01/31/97 01/31/92 $1,331.34 $1,311.34 33.13% 5.89% 31.13% 5.57%
1 YEAR ENDED
01/31/97 01/31/96 $1,027.38 $ 978.45 2.74% 2.74% -2.15% -2.15%
</TABLE>
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial
investment at the end of the period 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
the ending investment value before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based the
ending investment value before deducting the CDSC.
<PAGE>
Exhibit 16
EV MARATHON TEXAS MUNICIPALS FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 1/31/97
Interest Income Earned: $113,627
Plus Dividend Income Earned:
---------
Equal Gross Income: $113,627
Minus Expenses: $26,380
---------
Equal Net Investment Income: $87,247
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 2,120,394
---------
Equal Net Investment Income Earned Per Share: $0.0411
Net Asset Value Per Share 1/31/97 $10.57
30 Day Yield*: 4.71%
Divided by One minus the Tax Rate of 31%: 0.69
---------
Equal Tax Equivalent Yield **: 6.83%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0411/$10.57)+1)-1]
** Assuming a tax rate of 31%
<PAGE>
INVESTMENT PERFORMANCE -- EV MARATHON TEXAS MUNICIPALS FUND
The table below indicates the total return (capital changes plus reinvestment of
all distributions) on a hypothetical investment of $1,000 in the Fund covering
the period from March 24, 1992 through January 31, 1997 and for the 1 year
period ended January 31, 1997.
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
PERIOD DATE ON 01/31/97 ON 01/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------- ---------- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 03/24/92 $1,374.35 $1,354.35 37.44% 6.76% 35.44% 6.44%
1 YEAR ENDED
01/31/97 01/31/96 $1,028.51 $979.48 2.85% 2.85% -2.05% -2.05%
</TABLE>
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial
investment at the end of the period 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
the ending investment value before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based the
ending investment value before deducting the CDSC.
<PAGE>
Exhibit 16
EV TRADITIONAL ARIZONA MUNICIPALS FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 1/31/97
Interest Income Earned: $8,171
Plus Dividend Income Earned:
-------
Equal Gross Income: $8,171
Minus Expenses: $1,216
-------
Equal Net Investment Income: $6,955
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 173,833
-------
Equal Net Investment Income Earned Per Share: $0.0400
Net Asset Value Per Share 1/31/97 $10.12
30 Day Yield*: 4.79%
Divided by One minus the Tax Rate of 31%: 0.69
-------
Equal Tax Equivalent Yield **: 6.94%
Divided by one minus a tax rate of 34.59%: 0.6541
-------
Equal Tax Equivalent Yield***: 7.32%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.04 1/$.12)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and Arizona tax rate of 34.59%
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EV TRADITIONAL ARIZONA MUNICIPALS FUND
The table below indicates the total return (capital changes plus reinvestment of all distributions) on a hypothetical investment of
$1,000 in the Fund covering the period from July 25, 1991 through January 31, 1997 and for the 1 and 5 year periods ended
January 31, 1997. 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 01/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------- ---------- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 07/25/91 $952.23 $1,412.57 48.34% 7.41% 41.26% 6.46%
5 YEARS ENDED
01/31/97 01/31/92 $952.97 $1,309.60 37.43% 6.57% 30.96% 5.54%
1 YEAR ENDED
01/31/97 01/31/96 $952.47 $ 977.48 2.63% 2.63% -2.25% -2.25%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000 **
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period
P = an initial investment of $1,000 ***
* Initial investment less the current maximum sales charge of 4.75%.
** 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 4.75%.
*** The cumulative total return including the sales charge is calculated based on an initial investment of $1,000 less
maximum initial sales charge of 4.75%.
</TABLE>
<PAGE>
Exhibit 16
EV TRADITIONAL COLORADO MUNICIPALS FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 1/31/97
Interest Income Earned: $13,671
Plus Dividend Income Earned:
-------
Equal Gross Income: $13,671
Minus Expenses: $1,508
-------
Equal Net Investment Income: $12,163
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 286,904
-------
Equal Net Investment Income Earned Per Share: $0.0424
Net Asset Value Per Share 1/31/97 $9.87
30 Day Yield*: 5.21%
Divided by One minus the Tax Rate of 31%: 0.69
-------
Equal Tax Equivalent Yield **: 7.55%
Divided by one minus a tax rate of 34.45%: 0.6555
-------
Equal Tax Equivalent Yield***: 7.95%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0424/$9.87)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and Colorado tax rate of 34.45%
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EV TRADITIONAL COLORADO MUNICIPALS FUND
The table below indicates the total return (capital changes plus reinvestment of all distributions) on a hypothetical investment of
$1,000 in the Fund covering the period from August 25, 1992 through January 31, 1997 and for the 1 year period ended
January 31, 1997. 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 01/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------- ---------- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 08/25/92 $952.17 $1,245.64 30.82% 6.24% 24.56% 5.07%
1 YEAR ENDED
01/31/97 01/31/96 $952.94 $ 984.72 3.34% 3.34% -1.53% -1.53%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000 **
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period
P = an initial investment of $1,000 ***
* Initial investment less the current maximum sales charge of 4.75%.
** 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 4.75%.
*** The cumulative total return including the sales charge is calculated based on an initial investment of $1,000 less
maximum initial sales charge of 4.75%.
</TABLE>
<PAGE>
Exhibit 16
EV TRADITIONAL CONNECTICUT MUNICIPALS FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 1/31/97
Interest Income Earned: $10,781
Plus Dividend Income Earned:
-------
Equal Gross Income: $10,781
Minus Expenses: $1,182
-------
Equal Net Investment Income: $9,599
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 215,783
-------
Equal Net Investment Income Earned Per Share: $0.0445
Net Asset Value Per Share 1/31/97 $10.68
30 Day Yield*: 5.05%
Divided by One minus the Tax Rate of 31%: 0.69
-------
Equal Tax Equivalent Yield **: 7.32%
Divided by one minus a tax rate of 34.11%: 0.6589
-------
Equal Tax Equivalent Yield***: 7.66%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0445/$10.68)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and Connecticut tax rate of 34.11%
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EV TRADITIONAL CONNECTICUT MUNICIPALS FUND
The table below indicates the total return (capital changes plus reinvestment of all distributions) on a hypothetical investment of
$1,000 in the Fund covering the period from May 1, 1992 through January 31, 1997 and for the 1 year period ended
January 31, 1997. 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 01/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------- ---------- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 05/01/92 $952.74 $1,271.40 33.45% 6.25% 27.14% 5.17%
1 YEAR ENDED
01/31/97 01/31/96 $952.08 $ 982.10 3.15% 3.15% -1.79% -1.79%
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 4.75%.
** 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 4.75%.
*** The cumulative total return including the sales charge is calculated based on an initial investment of $1,000 less
maximum initial sales charge of 4.75%.
</TABLE>
<PAGE>
Exhibit 16
EV TRADITIONAL MICHIGAN MUNICIPALS FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 1/31/97
Interest Income Earned: $6,233
Plus Dividend Income Earned:
-------
Equal Gross Income: $6,233
Minus Expenses: $830
-------
Equal Net Investment Income: $5,403
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 140,861
-------
Equal Net Investment Income Earned Per Share: $0.0384
Net Asset Value Per Share 1/31/97 $9.84
30 Day Yield*: 4.73%
Divided by One minus the Tax Rate of 31%: 0.69
-------
Equal Tax Equivalent Yield **: 6.86%
Divided by one minus a tax rate of 35.93%: 0.6407
-------
Equal Tax Equivalent Yield***: 7.38%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0384/$9.84)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and Michigan tax rate of 35.93%
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EV TRADITIONAL MICHIGAN MUNICIPALS FUND
The table below indicates the total return (capital changes plus reinvestment of all distributions) on a hypothetical investment of
$1,000 in the Fund covering the period from April 19, 1991 through January 31, 1997 and for the 1 and 5 year periods ended
January 31, 1997. 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 01/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------- ---------- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 04/19/91 $952.89 $1,373.50 44.14% 6.52% 37.35% 5.63%
5 YEARS ENDED
01/31/97 01/31/92 $952.82 $1,257.46 31.98% 5.71% 25.75% 4.69%
1 YEAR ENDED
01/31/97 01/31/96 $952.38 $ 970.85 1.94% 1.94% -2.92% -2.92%
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 4.75%.
** 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 4.75%.
*** The cumulative total return including the sales charge is calculated based on an initial investment of $1,000 less
maximum initial sales charge of 4.75%.
</TABLE>
<PAGE>
Exhibit 16
EV TRADITIONAL MINNESOTA MUNICIPALS FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 1/31/97
Interest Income Earned: $8,851
Plus Dividend Income Earned:
-------
Equal Gross Income: $8,851
Minus Expenses: $1,028
-------
Equal Net Investment Income: $7,823
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 193,710
-------
Equal Net Investment Income Earned Per Share: $0.0404
Net Asset Value Per Share 1/31/97 $9.81
30 Day Yield*: 4.99%
Divided by One minus the Tax Rate of 31%: 0.69
-------
Equal Tax Equivalent Yield **: 7.23%
Divided by one minus a tax rate of 36.87%: 0.6313
-------
Equal Tax Equivalent Yield***: 7.90%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0404/$9.81)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and Minnesota tax rate of 36.87%
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EV TRADITIONAL MINNESOTA MUNICIPALS FUND
The table below indicates the total return (capital changes plus reinvestment of all distributions) on a hypothetical investment of
$1,000 in the Fund covering the period from July 29, 1991 through January 31, 1997 and for the 1 and 5 year periods ended
January 31, 1997. 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 01/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------- ---------- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 07/29/91 $952.56 $1,320.27 38.60% 6.10% 32.03% 5.17%
5 YEARS ENDED
01/31/97 01/31/92 $952.77 $1,256.13 31.84% 5.68% 25.61% 4.67%
1 YEAR ENDED
01/31/97 01/31/96 $952.10 $ 975.66 2.47% 2.47% -2.43% -2.43%
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 4.75%.
** 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 4.75%.
*** The cumulative total return including the sales charge is calculated based on an initial investment of $1,000 less
maximum initial sales charge of 4.75%.
</TABLE>
<PAGE>
Exhibit 16
EV TRADITIONAL NEW JERSEY MUNICIPALS FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 1/31/97
Interest Income Earned: $23,678
Plus Dividend Income Earned:
-------
Equal Gross Income: $23,678
Minus Expenses: $929
-------
Equal Net Investment Income: $22,749
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 463,103
-------
Equal Net Investment Income Earned Per Share: $0.0491
Net Asset Value Per Share 1/31/97 $10.56
30 Day Yield*: 5.64%
Divided by One minus the Tax Rate of 31%: 0.69
-------
Equal Tax Equivalent Yield **: 8.17%
Divided by one minus a tax rate of 35.40%: 0.6460
-------
Equal Tax Equivalent Yield***: 8.73%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0491/$10.56)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and New Jersey tax rate of 35.40%
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EV TRADITIONAL NEW JERSEY MUNICIPALS FUND
The table below indicates the total return (capital changes plus reinvestment of all distributions) on a hypothetical investment of
$1,000 in the Fund covering the period from January 8, 1991 through January 31, 1997 and for the 1 and 5 year periods ended
January 31, 1997. 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 01/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------- ---------- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 01/08/91 $952.43 $1,463.72 53.69% 7.34% 46.37% 6.48%
5 YEARS ENDED
01/31/97 01/31/92 $952.39 $1,308.28 37.37% 6.56% 30.83% 5.52%
1 YEAR ENDED
01/31/97 01/31/96 $952.47 $ 984.02 3.31% 3.31% -1.60% -1.60%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000 **
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period
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 4.75%.
** 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 4.75%.
*** The cumulative total return including the sales charge is calculated based on an initial investment of $1,000 less
maximum initial sales charge of 4.75%.
</TABLE>
<PAGE>
Exhibit 16
EV TRADITIONAL PENNSYLVANIA MUNICIPALS FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 1/31/97
Interest Income Earned: $19,853
Plus Dividend Income Earned:
-------
Equal Gross Income: $19,853
Minus Expenses: $2,996
-------
Equal Net Investment Income: $16,857
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 372,253
-------
Equal Net Investment Income Earned Per Share: $0.0453
Net Asset Value Per Share 1/31/97 $10.64
30 Day Yield*: 5.16%
Divided by One minus the Tax Rate of 31%: 0.69
-------
Equal Tax Equivalent Yield **: 7.48%
Divided by one minus a tax rate of 38.28%: 0.6172
-------
Equal Tax Equivalent Yield***: 8.36%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0453/$10.64)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and Pennsylvania tax rate of 38.28%
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EV TRADITIONAL PENNSYLVANIA MUNICIPALS FUND
The table below indicates the total return (capital changes plus reinvestment of all distributions) on a hypothetical investment of
$1,000 in the Fund covering the period from January 8, 1991 through January 31, 1997 and for the 1 and 5 year periods ended
January 31, 1997. 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 01/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------- ---------- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 01/08/91 $952.88 $1,458.48 53.06% 7.26% 45.85% 6.41%
5 YEARS ENDED
01/31/97 01/31/92 $952.50 $1,301.86 36.68% 6.45% 30.19% 5.42%
1 YEAR ENDED
01/31/97 01/31/96 $952.56 $ 989.51 3.88% 3.88% -1.05% -1.05%
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 4.75%.
** 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 4.75%.
*** The cumulative total return including the sales charge is calculated based on an initial investment of $1,000 less
maximum initial sales charge of 4.75%.
</TABLE>
<PAGE>
Exhibit 16
EV TRADITIONAL TEXAS MUNICIPALS FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 1/31/97
Interest Income Earned: $1,853
Plus Dividend Income Earned:
-------
Equal Gross Income: $1,853
Minus Expenses: $205
-------
Equal Net Investment Income: $1,648
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 39,884
-------
Equal Net Investment Income Earned Per Share: $0.0413
Net Asset Value Per Share 1/31/97 $9.80
30 Day Yield*: 5.11%
Divided by One minus the Tax Rate of 31%: 0.69
-------
Equal Tax Equivalent Yield **: 7.41%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0413/$9.8)+1)-1]
** Assuming a tax rate of 31%
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EV TRADITIONAL TEXAS MUNICIPALS FUND
The table below indicates the total return (capital changes plus reinvestment of all distributions) on a hypothetical investment of
$1,000 in the Fund covering the period from March 24, 1992 through January 31, 1997 and for the 1 year period ended
January 31, 1997. 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 01/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------- ---------- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 03/24/92 $952.46 $1,293.20 35.77% 6.49% 29.32% 5.43%
1 YEAR ENDED
01/31/97 01/31/96 $952.48 $ 986.46 3.57% 3.57% -1.35% -1.35%
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 4.75%.
** 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 4.75%.
*** The cumulative total return including the sales charge is calculated based on an initial investment of $1,000 less
maximum initial sales charge of 4.75%.
</TABLE>
<PAGE>
EXHIBIT 99.(18)
MULTIPLE CLASS PLAN FOR EATON VANCE FUNDS
Dated June 23, 1997
WHEREAS, each trust (each a "Trust") listed on Schedule A engages in
business as an open-end investment company and is registered as such under the
Investment Company Act of 1940, as amended (the "Act");
WHEREAS, the Trustees (hereafter the "Trustees") of each Trust have
established four classes of shares of the series of the Trust (each a "Fund")
which series are listed on Schedule A hereto, such classes having been
designated Class A, Class B, Class C and Class I (the "Classes");
WHEREAS, each Fund is established in accordance with Section 18(f)(2)
of the Act, its shares are registered on Form N-1A under the Securities Act of
1933, and it is entitled to have a multiple class plan adopted on its behalf by
the Trust pursuant to Rule 18f-3 under the Act;
WHEREAS, the Trustees of the Trust desire to set forth herein the
separate arrangements, expense allocations, and any related conversion features
or exchange privileges of the Classes; and
WHEREAS, the Trustees of the Trust (including a majority of those
Trustees who are not interested persons of the Trust) have determined that
adoption of this Multiple Class Plan, including the expense allocations set
forth herein, is in the best interests of each Class individually and each Fund
as a whole.
NOW, THEREFORE, each Trust hereby adopts this Multiple Class Plan (the
"Plan") on behalf of each Fund in accordance with Rule 18f-3 under the Act and
containing the following terms and conditions:
1. Pursuant to each Fund's contractual arrangements and various actions
taken by the Trustees and as described in the Fund's prospectuses, each Class of
shares is subject to different distribution arrangements and accordingly is
subject to different expenses related thereto, including distribution fees and
shareholder service expenses. Class A shares are offered subject to an initial
sales charge and are subject to service fee payments in amounts not exceeding
.25% of the average daily net assets attributable to such Class for each fiscal
year. Class B shares are offered subject to a declining contingent deferred
sales charge, a distribution fee of .75% of its average daily net assets and
service fee payments in amounts not exceeding .25% of the average daily net
assets attributable to such Class for each fiscal year. Class C shares are
offered subject to a 1% contingent deferred sales charge for redemption within
the first year, a distribution fee of .75% of its average daily net assets and
service fee payments in amounts not exceeding .25% of the average daily net
assets attributable to such Class for each fiscal year. Class I shares are
offered at net asset value to certain investors and are not subject to
distribution or service fee payments. These fees and sales charges may change
over time. As described in the Fund's prospectuses, the sales charges described
above may be reduced or waived under certain circumstances.
2. At the discretion of the Treasurer of the Trust, each Class may pay
a different share of other expenses (not including advisory or custodial fees or
other expenses related to the management of the Fund's assets) that are actually
incurred in a different amount by that Class or if the Class receives services
of a different kind or to a different degree than another Class. Such expenses
include, but are not limited to, the following (a) transfer agency costs
(including entities performing account maintenance, dividend disbursing or
subaccounting activities and administration of dividend reinvestment, systematic
investment and withdrawal plans) attributable to a Class, (b) the cost of
preparing, printing and mailing materials such as shareholder reports,
prospectuses and proxy materials to current shareholders of a Class, (c) any
registration, notice or filing fees of the Securities and Exchange Commission
and state securities agencies, (d) the expense of administrative personnel and
services required to support the shareholders of a Class, (e) Trustees' fees or
expenses incurred as a result of issues or matters relating to a Class, and (f)
legal, auditing and accounting expenses relating to a Class. Such expense
allocation is subject to the continuing availability of a revenue procedure of
the Internal Revenue Service to the effect that the payments made under a Fund's
contractual arrangements and other Class specific expenses with respect to a
Class of shares do not result in such Fund's dividends or distributions
constituting "preferential dividends" under the Internal Revenue Code.
3. Income, realized and unrealized capital gains and losses, and
expenses of the Fund not allocated to a particular Class pursuant to the
foregoing shall be allocated to each Class on the basis of the net asset value
of that Class in relation to the net asset value of the Fund.
4. For shares purchased prior to April 26, 1996, Class I shares of an
EV Marathon series of Eaton Vance Investment Trust (to be renamed "Class B
shares") shall automatically convert to Class II shares of such series (to be
renamed "Class A shares") on the fourth anniversary on which Class I shares were
purchased. For shares purchased thereafter, such Class I shares held for the
longer of (i) four years or (ii) the time at which the contingent deferred sales
charge applicable to such shares expires will automatically convert to such
Class II shares. Such conversion will occur during the month following the
expiration of the holding period. Such conversion shall be effected on the basis
of the relative net asset values per share of the two Classes without the
imposition of any sales load, fee or other charge. For purposes of this
conversion, all distributions paid on such Class I shares which the shareholder
elects to reinvest in Class I shares will be considered to be held in a separate
sub-account. Upon the conversion of such Class I shares not acquired through the
reinvestment of distributions, a pro rata portion of the Class I shares held in
the sub-account will also convert to such Class II shares. This portion will be
determined by the ratio that such Class I shares being converted bear to the
total of Class I shares (excluding shares acquired through reinvestment) in the
account.
5. Each Class of shares may be exchanged for shares of the same type of
other funds in the Eaton Vance family of funds, which may change from time to
time, subject to terms, conditions and limitations set forth in the relevant
prospectuses.
6. This Plan shall not take effect until after it has been approved by
both a majority of Trustees and a majority of those Trustees who are not
interested persons of a Trust.
7. This Plan shall continue indefinitely, unless terminated or amended.
All material amendments to this Plan shall be approved in the manner provided
for Trustee approval of this Plan in Section 6. Additional series of a Trust
with Classes of shares may become subject to this Plan upon Trustee approval as
provided for in Section 6 and amendment of Schedule A hereto.
* * *
<PAGE>
Schedule A
Eaton Vance Growth Trust
<TABLE>
<S> <C>
Eaton Vance Asian Small Companies Fund Eaton Vance Information Age Fund
Eaton Vance Greater China Growth Fund Eaton Vance Worldwide Developing Resources Fund
Eaton Vance Growth Fund Eaton Vance Worldwide Health Sciences Fund
<CAPTION>
Eaton Vance Investment Trust
<S> <C>
Eaton Vance California Limited Maturity Municipals Fund Eaton Vance National Limited Maturity Municipals Fund
Eaton Vance Connecticut Limited Maturity Municipals Fund Eaton Vance New Jersey Limited Maturity Municipals Fund
Eaton Vance Florida Limited Maturity Municipals Fund Eaton Vance New York Limited Maturity Municipals Fund
Eaton Vance Massachusetts Limited Maturity Municipals Fund Eaton Vance Ohio Limited Maturity Municipals Fund
Eaton Vance Michigan Limited Maturity Municipals Fund Eaton Vance Pennsylvania Limited Maturity Municipals Fund
<CAPTION>
Eaton Vance Municipals Trust
<S> <C>
Eaton Vance Alabama Municipals Fund Eaton Vance Missouri Municipals Fund
Eaton Vance Arizona Municipals Fund Eaton Vance National Municipals Fund
Eaton Vance Arkansas Municipals Fund Eaton Vance New Jersey Municipals Fund
Eaton Vance California Municipals Fund Eaton Vance New York Municipals Fund
Eaton Vance Colorado Municipals Fund Eaton Vance North Carolina Municipals Fund
Eaton Vance Connecticut Municipals Fund Eaton Vance Ohio Municipals Fund
Eaton Vance Florida Municipals Fund Eaton Vance Oregon Municipals Fund
Eaton Vance Georgia Municipals Fund Eaton Vance Pennsylvania Municipals Fund
Eaton Vance Kentucky Municipals Fund Eaton Vance Rhode Island Municipals Fund
Eaton Vance Louisiana Municipals Fund Eaton Vance South Carolina Municipals Fund
Eaton Vance Maryland Municipals Fund Eaton Vance Tennessee Municipals Fund
Eaton Vance Massachusetts Municipals Fund Eaton Vance Texas Municipals Fund
Eaton Vance Michigan Municipals Fund Eaton Vance Virginia Municipals Fund
Eaton Vance Minnesota Municipals Fund Eaton Vance West Virginia Municipals Fund
Eaton Vance Mississippi Municipals Fund
<CAPTION>
Eaton Vance Municipals Trust II
<S> <C>
Eaton Vance Florida Insured Municipals Fund Eaton Vance High Yield Municipals Fund
Eaton Vance Hawaii Municipals Fund Eaton Vance Kansas Municipals Fund
<CAPTION>
Eaton Vance Mutual Funds Trust
<S> <C>
Eaton Vance Government Obligations Fund Eaton Vance Strategic Income Fund
Eaton Vance High Income Fund Eaton Vance Tax-Managed Growth Fund
<CAPTION>
Eaton Vance Special Investment Trust
<S> <C>
Eaton Vance Emerging Markets Fund Eaton Vance Special Equities Fund
Eaton Vance Greater India Fund Eaton Vance Stock Fund
Eaton Vance Investors Fund Eaton Vance Total Return Fund
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 9
<NAME> EV MARATHON ARIZONA MUNICIPALS FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-END> JAN-31-1997
<INVESTMENTS-AT-COST> 111205
<INVESTMENTS-AT-VALUE> 118874
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 118874
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1203
<TOTAL-LIABILITIES> 1203
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 115900
<SHARES-COMMON-STOCK> 10871
<SHARES-COMMON-PRIOR> 11959
<ACCUMULATED-NII-CURRENT> (105)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (5793)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 7669
<NET-ASSETS> 117671
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3737
<OTHER-INCOME> (310)
<EXPENSES-NET> 668
<NET-INVESTMENT-INCOME> 2759
<REALIZED-GAINS-CURRENT> (836)
<APPREC-INCREASE-CURRENT> 2577
<NET-CHANGE-FROM-OPS> 4499
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2759)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (32)
<NUMBER-OF-SHARES-SOLD> 335
<NUMBER-OF-SHARES-REDEEMED> 1520
<SHARES-REINVESTED> 98
<NET-CHANGE-IN-ASSETS> (10010)
<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> 668
<AVERAGE-NET-ASSETS> 123125
<PER-SHARE-NAV-BEGIN> 10.68
<PER-SHARE-NII> .241
<PER-SHARE-GAIN-APPREC> .143
<PER-SHARE-DIVIDEND> (.241)
<PER-SHARE-DISTRIBUTIONS> (.003)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.82
<EXPENSE-RATIO> 1.58
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 9
<NAME> EV MARATHON ARIZONA MUNICIPALS FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-END> JUL-31-1996
<INVESTMENTS-AT-COST> 123148
<INVESTMENTS-AT-VALUE> 128240
<RECEIVABLES> 1
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 128241
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 561
<TOTAL-LIABILITIES> 561
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 127619
<SHARES-COMMON-STOCK> 11959
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (74)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (4957)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5092
<NET-ASSETS> 127680
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 7590
<EXPENSES-NET> 1440
<NET-INVESTMENT-INCOME> 6150
<REALIZED-GAINS-CURRENT> 892
<APPREC-INCREASE-CURRENT> 1224
<NET-CHANGE-FROM-OPS> 8266
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (6223)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (74)
<NUMBER-OF-SHARES-SOLD> 786
<NUMBER-OF-SHARES-REDEEMED> 2524
<SHARES-REINVESTED> 230
<NET-CHANGE-IN-ASSETS> (14179)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1440
<AVERAGE-NET-ASSETS> 136897
<PER-SHARE-NAV-BEGIN> 10.53
<PER-SHARE-NII> .482
<PER-SHARE-GAIN-APPREC> .161
<PER-SHARE-DIVIDEND> (.488)
<PER-SHARE-DISTRIBUTIONS> (.005)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.68
<EXPENSE-RATIO> 1.56
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 21
<NAME> EV MARATHON COLORADO MUNICIPALS FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-END> JAN-31-1997
<INVESTMENTS-AT-COST> 38923
<INVESTMENTS-AT-VALUE> 41139
<RECEIVABLES> 142
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 41281
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 537
<TOTAL-LIABILITIES> 537
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 40897
<SHARES-COMMON-STOCK> 3948
<SHARES-COMMON-PRIOR> 4224
<ACCUMULATED-NII-CURRENT> 39
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (2409)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2216
<NET-ASSETS> 40743
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1312
<OTHER-INCOME> (88)
<EXPENSES-NET> 238
<NET-INVESTMENT-INCOME> 987
<REALIZED-GAINS-CURRENT> (66)
<APPREC-INCREASE-CURRENT> 672
<NET-CHANGE-FROM-OPS> 1592
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (991)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 127
<NUMBER-OF-SHARES-REDEEMED> 452
<SHARES-REINVESTED> 49
<NET-CHANGE-IN-ASSETS> (2229)
<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> 238
<AVERAGE-NET-ASSETS> 41802
<PER-SHARE-NAV-BEGIN> 10.17
<PER-SHARE-NII> .242
<PER-SHARE-GAIN-APPREC> .151
<PER-SHARE-DIVIDEND> (.243)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.32
<EXPENSE-RATIO> 1.55
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 21
<NAME> EV MARATHON COLORADO MUNICIPALS FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-END> JUL-31-1996
<INVESTMENTS-AT-COST> 41558
<INVESTMENTS-AT-VALUE> 43102
<RECEIVABLES> 0
<ASSETS-OTHER> 2
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 43104
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 132
<TOTAL-LIABILITIES> 132
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 43727
<SHARES-COMMON-STOCK> 4224
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 43
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (2342)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1544
<NET-ASSETS> 42972
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 2577
<EXPENSES-NET> 484
<NET-INVESTMENT-INCOME> 2093
<REALIZED-GAINS-CURRENT> 302
<APPREC-INCREASE-CURRENT> 394
<NET-CHANGE-FROM-OPS> 2789
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2146)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 452
<NUMBER-OF-SHARES-REDEEMED> 709
<SHARES-REINVESTED> 102
<NET-CHANGE-IN-ASSETS> (928)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 484
<AVERAGE-NET-ASSETS> 44673
<PER-SHARE-NAV-BEGIN> 10.02
<PER-SHARE-NII> .480
<PER-SHARE-GAIN-APPREC> .162
<PER-SHARE-DIVIDEND> (.492)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.17
<EXPENSE-RATIO> 1.49
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 19
<NAME> EV MARATHON CONNECTICUT MUNICIPALS FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-END> JAN-31-1997
<INVESTMENTS-AT-COST> 174381
<INVESTMENTS-AT-VALUE> 178626
<RECEIVABLES> 28
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 178654
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 455
<TOTAL-LIABILITIES> 455
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 180378
<SHARES-COMMON-STOCK> 17457
<SHARES-COMMON-PRIOR> 17941
<ACCUMULATED-NII-CURRENT> (452)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (5972)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4245
<NET-ASSETS> 178199
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5446
<OTHER-INCOME> (494)
<EXPENSES-NET> 967
<NET-INVESTMENT-INCOME> 3985
<REALIZED-GAINS-CURRENT> (810)
<APPREC-INCREASE-CURRENT> 2395
<NET-CHANGE-FROM-OPS> 5570
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (3985)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (92)
<NUMBER-OF-SHARES-SOLD> 589
<NUMBER-OF-SHARES-REDEEMED> 1283
<SHARES-REINVESTED> 211
<NET-CHANGE-IN-ASSETS> 3409
<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> 967
<AVERAGE-NET-ASSETS> 180376
<PER-SHARE-NAV-BEGIN> 10.12
<PER-SHARE-NII> .225
<PER-SHARE-GAIN-APPREC> .095
<PER-SHARE-DIVIDEND> (.225)
<PER-SHARE-DISTRIBUTIONS> (.005)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.21
<EXPENSE-RATIO> 1.61
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 19
<NAME> EV MARATHON CONNECTICUT MUNICIPALS FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-END> JUL-31-1996
<INVESTMENTS-AT-COST> 180117
<INVESTMENTS-AT-VALUE> 181967
<RECEIVABLES> 137
<ASSETS-OTHER> 2
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 182106
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 498
<TOTAL-LIABILITIES> 498
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 185280
<SHARES-COMMON-STOCK> 17941
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (360)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (5162)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1850
<NET-ASSETS> 181608
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 10381
<EXPENSES-NET> 2004
<NET-INVESTMENT-INCOME> 8377
<REALIZED-GAINS-CURRENT> (21)
<APPREC-INCREASE-CURRENT> 3340
<NET-CHANGE-FROM-OPS> 11696
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (8377)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (361)
<NUMBER-OF-SHARES-SOLD> 920
<NUMBER-OF-SHARES-REDEEMED> 2340
<SHARES-REINVESTED> 477
<NET-CHANGE-IN-ASSETS> (7292)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2004
<AVERAGE-NET-ASSETS> 188461
<PER-SHARE-NAV-BEGIN> 9.97
<PER-SHARE-NII> .452
<PER-SHARE-GAIN-APPREC> .169
<PER-SHARE-DIVIDEND> (.452)
<PER-SHARE-DISTRIBUTIONS> (.019)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.12
<EXPENSE-RATIO> 1.58
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 7
<NAME> EV MARATHON MICHIGAN MUNICIPALS FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-END> JAN-31-1997
<INVESTMENTS-AT-COST> 153031
<INVESTMENTS-AT-VALUE> 160708
<RECEIVABLES> 41
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 160749
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 820
<TOTAL-LIABILITIES> 820
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 157281
<SHARES-COMMON-STOCK> 15243
<SHARES-COMMON-PRIOR> 16413
<ACCUMULATED-NII-CURRENT> (206)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (4822)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 7677
<NET-ASSETS> 159930
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4977
<OTHER-INCOME> (429)
<EXPENSES-NET> 894
<NET-INVESTMENT-INCOME> 3654
<REALIZED-GAINS-CURRENT> (916)
<APPREC-INCREASE-CURRENT> 2176
<NET-CHANGE-FROM-OPS> 4869
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (3654)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (65)
<NUMBER-OF-SHARES-SOLD> 153
<NUMBER-OF-SHARES-REDEEMED> 1497
<SHARES-REINVESTED> 175
<NET-CHANGE-IN-ASSETS> (11137)
<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> 894
<AVERAGE-NET-ASSETS> 166808
<PER-SHARE-NAV-BEGIN> 10.42
<PER-SHARE-NII> .230
<PER-SHARE-GAIN-APPREC> .074
<PER-SHARE-DIVIDEND> (.230)
<PER-SHARE-DISTRIBUTIONS> (.004)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.49
<EXPENSE-RATIO> 1.57
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 7
<NAME> EV MARATHON MICHIGAN MUNICIPALS FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-END> JUL-31-1996
<INVESTMENTS-AT-COST> 166334
<INVESTMENTS-AT-VALUE> 171835
<RECEIVABLES> 1
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 171836
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 770
<TOTAL-LIABILITIES> 770
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 169568
<SHARES-COMMON-STOCK> 16413
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (142)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (3861)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5501
<NET-ASSETS> 171066
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 10020
<EXPENSES-NET> 1959
<NET-INVESTMENT-INCOME> 8061
<REALIZED-GAINS-CURRENT> 2769
<APPREC-INCREASE-CURRENT> 859
<NET-CHANGE-FROM-OPS> 11689
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (8357)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (142)
<NUMBER-OF-SHARES-SOLD> 583
<NUMBER-OF-SHARES-REDEEMED> 2773
<SHARES-REINVESTED> 421
<NET-CHANGE-IN-ASSETS> (15296)
<ACCUMULATED-NII-PRIOR> 0
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<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1959
<AVERAGE-NET-ASSETS> 181639
<PER-SHARE-NAV-BEGIN> 10.25
<PER-SHARE-NII> .464
<PER-SHARE-GAIN-APPREC> .195
<PER-SHARE-DIVIDEND> (.481)
<PER-SHARE-DISTRIBUTIONS> (.008)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.42
<EXPENSE-RATIO> 1.61
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 10
<NAME> EV MARATHON MINNESOTA MUNICIPALS FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-END> JAN-31-1997
<INVESTMENTS-AT-COST> 66518
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<SHARES-COMMON-PRIOR> 7386
<ACCUMULATED-NII-CURRENT> (128)
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<NET-ASSETS> 68931
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<INTEREST-INCOME> 2240
<OTHER-INCOME> (173)
<EXPENSES-NET> 401
<NET-INVESTMENT-INCOME> 1665
<REALIZED-GAINS-CURRENT> (273)
<APPREC-INCREASE-CURRENT> 620
<NET-CHANGE-FROM-OPS> 2010
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1665)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (3)
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<SHARES-REINVESTED> 87
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<OVERDISTRIB-NII-PRIOR> 0
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<GROSS-EXPENSE> 401
<AVERAGE-NET-ASSETS> 72406
<PER-SHARE-NAV-BEGIN> 10.07
<PER-SHARE-NII> .232
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<PER-SHARE-DIVIDEND> (.232)
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<PER-SHARE-NAV-END> 10.12
<EXPENSE-RATIO> 1.58
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 10
<NAME> EV MARATHON MINNESOTA MUNICIPALS FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-END> JUL-31-1996
<INVESTMENTS-AT-COST> 71377
<INVESTMENTS-AT-VALUE> 74533
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
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<NAME> EV MARATHON NEW JERSEY MUNICIPALS FUND
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<S> <C>
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
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<NAME> EV MARATHON NEW JERSEY MUNICIPALS FUND
<MULTIPLIER> 1000
<S> <C>
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 5
<NAME> EV MARATHON PENNSYLVANIA MUNICIPALS FUND
<MULTIPLIER> 1000
<S> <C>
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 5
<NAME> EV MARATHON PENNSYLVANIA MUNICIPALS FUND
<MULTIPLIER> 1000
<S> <C>
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 17
<NAME> EV MARATHON TEXAS MUNICIPALS FUND
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<S> <C>
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
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<NAME> EV MARATHON TEXAS MUNICIPALS FUND
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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