<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 3, 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. 66 [X]
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 68 [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 [X] on September 1, 1997 pursuant
to paragraph (b) to paragraph (a)(1)
[ ] on (date) pursuant to [ ] 75 days after filing pursuant
paragraph (b) to paragraph (a)(2)
[ ] 60 days after filing pursuant [ ] on (date) pursuant to
to paragraph (a)(1) paragraph (a)(2).
If appropriate, check the following box:
[ ] this post effective amendment designates a new effective date for a
previously filed post-effective amendment.
Alabama Municipals Portfolio, Arkansas Municipals Portfolio, Georgia
Municipals Portfolio, Kentucky Municipals Portfolio, Louisiana Municipals
Portfolio, Maryland Municipals Portfolio, Missouri Municipals Portfolio, North
Carolina Municipals Portfolio, Oregon Municipals Portfolio, South Carolina
Municipals Portfolio, Tennessee Municipals Portfolio and Virginia 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 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
Part B -- The Combined Statement of Additional Information of:
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
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 Control Persons and Principal Holders of
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
<TABLE>
<S> <C>
EATON VANCE ALABAMA MUNICIPALS FUND EATON VANCE MISSOURI MUNICIPALS FUND
EATON VANCE ARKANSAS MUNICIPALS FUND EATON VANCE NORTH CAROLINA MUNICIPALS FUND
EATON VANCE GEORGIA MUNICIPALS FUND EATON VANCE OREGON MUNICIPALS FUND
EATON VANCE KENTUCKY MUNICIPALS FUND EATON VANCE SOUTH CAROLINA MUNICIPALS FUND
EATON VANCE LOUISIANA MUNICIPALS FUND EATON VANCE TENNESSEE MUNICIPALS FUND
EATON VANCE MARYLAND MUNICIPALS FUND EATON VANCE VIRGINIA MUNICIPALS FUND
</TABLE>
THESE FUNDS (THE "FUNDS") ARE MUTUAL FUNDS SEEKING TO PROVIDE CURRENT INCOME
EXEMPT FROM REGULAR FEDERAL INCOME TAX AND THE STATE TAXES 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 September 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 .............................. 28
The Funds' Financial Highlights ....................... 5 Reports to Shareholders ........................... 30
The Funds' Investment Objectives ..................... 17 The Lifetime Investing Account/Distribution
Investment Policies and Risks ........................ 18 Options ......................................... 30
Organization of the Funds and the Portfolios .......... 21 The Eaton Vance Exchange Privilege ................ 31
Management of the Funds and the Portfolios ............ 22 Eaton Vance Shareholder Services .................. 32
Distribution and Service Plans ........................ 24 Distributions and Taxes ........................... 33
Valuing Shares ........................................ 25 Performance Information ........................... 34
How to Buy Shares ..................................... 26 Appendix -- State Specific Information ............ 35
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
PROSPECTUS DATED SEPTEMBER 1, 1997
<PAGE>
SHAREHOLDER AND FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
- --------------------------------------------------------------------------------------------------------------
CLASS A CLASS B
SHARES SHARES
------- -------
<S> <C> <C>
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) 3.75% None
Sales Charges Imposed on Reinvested Distributions None None
Fees to Exchange Shares None None
Maximum Contingent Deferred Sales Charge None 5.00%
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND AND ALLOCATED PORTFOLIO OPERATING EXPENSES (as a percentage of average daily net assets)
- --------------------------------------------------------------------------------------------------------------
ALABAMA ARKANSAS GEORGIA KENTUCKY
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 0.40% 0.40% 0.36% 0.36% 0.40% 0.40% 0.41% 0.41%
Rule 12b-1 Distribution and/or
Service Fees 0.09% 0.93% 0.09% 0.92% 0.11% 0.92% 0.14% 0.93%
Other Expenses 0.35% 0.24% 0.35% 0.28% 0.13% 0.26% 0.27% 0.23%
---- ---- ---- ---- ---- ---- ---- ----
Total Operating Expenses 0.84% 1.57% 0.80% 1.56% 0.84% 1.58% 0.82% 1.57%
==== ==== ==== ==== ==== ==== ==== ====
<CAPTION>
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:
ALABAMA ARKANSAS GEORGIA KENTUCKY
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 $ 46 $ 66 $ 45 $ 66 $ 46 $ 66 $ 46 $ 66
3 Years $ 63 $ 90 $ 62 $ 89 $ 63 $ 90 $ 63 $ 90
5 Years $ 82 $106 $ 80 $105 $ 82 $106 $ 81 $106
10 Years $137 $187 $133 $186 $137 $188 $135 $187
<CAPTION>
An investor would pay the following expenses on the same investment, assuming (a) 5% annual return and (b) no redemptions:
ALABAMA ARKANSAS GEORGIA KENTUCKY
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 $ 46 $ 16 $ 45 $ 16 $ 46 $ 16 $ 46 $ 16
3 Years $ 63 $ 50 $ 62 $ 49 $ 63 $ 50 $ 63 $ 50
5 Years $ 82 $ 86 $ 80 $ 85 $ 82 $ 86 $ 81 $ 86
10 Years $137 $187 $133 $186 $137 $188 $135 $187
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND AND ALLOCATED PORTFOLIO OPERATING EXPENSES (as a percentage of average daily net assets)
- ---------------------------------------------------------------------------------------------------------------------------
LOUISIANA MARYLAND MISSOURI NORTH CAROLINA
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(1) 0.23% 0.23% 0.40% 0.40% 0.37% 0.37% 0.43% 0.43%
Rule 12b-1 Distribution and/or
Service Fees 0.10% 0.92% 0.09% 0.91% 0.06% 0.92% 0.20% 0.93%
Other Expenses 0.45% 0.37% 0.32% 0.26% 0.38% 0.27% 0.21% 0.23%
---- ---- ---- ---- ---- ---- ---- ----
Total Operating Expenses 0.78% 1.52% 0.81% 1.57% 0.81% 1.56% 0.84% 1.59%
==== ==== ==== ==== ==== ==== ==== ====
<CAPTION>
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:
LOUISIANA MARYLAND MISSOURI NORTH CAROLINA
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 $ 45 $ 65 $ 45 $ 66 $ 45 $ 66 $ 46 $ 66
3 Years $ 61 $ 88 $ 62 $ 90 $ 62 $ 89 $ 63 $ 90
5 Years $ 79 $103 $ 81 $106 $ 81 $105 $ 82 $107
10 Years $130 $181 $134 $187 $134 $186 $137 $189
An investor would pay the following expenses on the same investment, assuming (a) 5% annual return and (b) no redemptions:
LOUISIANA MARYLAND MISSOURI NORTH CAROLINA
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 $ 45 $ 15 $ 45 $ 16 $ 45 $ 16 $ 46 $ 16
3 Years $ 61 $ 48 $ 62 $ 50 $ 62 $ 49 $ 63 $ 50
5 Years $ 79 $ 83 $ 81 $ 86 $ 81 $ 85 $ 82 $ 87
10 Years $130 $181 $134 $187 $134 $186 $137 $189
</TABLE>
<TABLE>
ANNUAL FUND AND ALLOCATED PORTFOLIO OPERATING EXPENSES (as a percentage of average daily net assets)
- ---------------------------------------------------------------------------------------------------------------------------
OREGON SOUTH CAROLINA TENNESSEE VIRGINIA
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% 0.33% 0.33% 0.31% 0.31% 0.43% 0.43%
Rule 12b-1 Distribution and/or
Service Fees 0.09% 0.92% 0.09% 0.92% 0.14% 0.91% 0.14% 0.92%
Other Expenses 0.31% 0.23% 0.43% 0.35% 0.33% 0.31% 0.24% 0.21%
---- ---- ---- ---- ---- ---- ---- ----
Total Operating Expenses 0.81% 1.56% 0.85% 1.60% 0.78% 1.53% 0.81% 1.56%
==== ==== ==== ==== ==== ==== ==== ====
<CAPTION>
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:
OREGON SOUTH CAROLINA TENNESSEE VIRGINIA
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 $ 45 $ 66 $ 46 $ 66 $ 45 $ 66 $ 45 $ 66
3 Years $ 62 $ 89 $ 64 $ 90 $ 61 $ 88 $ 62 $ 89
5 Years $ 81 $105 $ 82 $107 $ 79 $103 $ 81 $105
10 Years $134 $186 $138 $190 $130 $182 $134 $186
An investor would pay the following expenses on the same investment, assuming (a) 5% annual return and (b) no redemptions:
OREGON SOUTH CAROLINA TENNESSEE VIRGINIA
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 $ 45 $ 16 $ 46 $ 16 $ 45 $ 16 $ 45 $ 16
3 Years $ 62 $ 49 $ 64 $ 50 $ 61 $ 48 $ 62 $ 49
5 Years $ 81 $ 87 $ 82 $ 87 $ 79 $ 83 $ 81 $ 85
10 Years $134 $190 $138 $190 $130 $182 $134 $186
(1) Advisory fee of Class A and B for the Louisiana Portfolio is based on estimates for the year ended August 31, 1997.
</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 each Class B is based on its expenses for the most recent
fiscal year. Information for each Class A is estimated based on expenses of its
predecessor. Absent a fee reduction, the Investment Adviser Fee and Total
Operating Expenses would have been 0.23% and 1.53%, respectively, for the Class
B shares of the Louisiana 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 equaling a percentage of the
purchase price of the shares being redeemed. The maximum 5% contingent deferred
sales charge on Class B shares is imposed on (a) shares purchased more than six
years prior to redemption, (b) shares acquired through the reinvestment of
distributions or (c) any appreciation in value of other shares in the account.
See "How to 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 shareholders in 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 23.
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 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 their
reorganization as Class B shares on September 1, 1997. Information for Class A
shares is not presented because that class did not exist prior to September 1,
1997.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ALABAMA FUND -- CLASS B
----------------------------------------------------------------------------
YEAR ENDED
SIX MONTHS -----------------------------------------------------------
ENDED AUGUST 31, SEPTEMBER 30,
FEBRUARY 28, 1997 --------------------------- ------------------------
(UNAUDITED) 1996 1995 1994** 1993 1992++
----------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of period $ 10.460 $ 10.440 $ 10.210 $ 11.060 $ 10.340 $ 10.000
-------- -------- -------- -------- -------- --------
INCOME (LOSS) FROM OPERATIONS:
Net investment income $ 0.234 $ 0.470 $ 0.479 $ 0.425 $ 0.475 $ 0.208
Net realized and unrealized gain
(loss) on investments 0.246 0.030 0.244 (0.769) 0.837 0.385+++
-------- -------- -------- -------- -------- --------
Total income (loss) from operations $ 0.480 $ 0.500 $ 0.723 $ (0.344) $ 1.312 $ 0.593
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
From net investment income $ (0.230) $ (0.480) $ (0.479) $ (0.425) $ (0.475) $ (0.208)
In excess of net investment income(5) -- -- (0.014) (0.081) (0.117) (0.045)
-------- -------- -------- -------- -------- --------
Total distributions $ (0.230) $ (0.480) $ (0.493) $ (0.506) $ (0.592) $ (0.253)
-------- -------- -------- -------- -------- --------
NET ASSET VALUE, end of period $ 10.710 $ 10.460 $ 10.440 $ 10.210 $ 11.060 $ 10.340
======== ======== ======== ======== ======== ========
TOTAL RETURN(1) 4.70% 4.85% 7.38% (3.18)% 13.09% 5.71%
RATIOS/SUPPLEMENTAL DATA*:
Net assets, end of period (000 omitted) $100,383 $101,692 $108,642 $105,553 $ 84,621 $ 21,105
Ratio of net expenses to average daily net assets(2)(4) 1.62%+ 1.57% 1.51% 1.43%+ 1.37% 1.01%+
Ratio of net expenses to average daily net assets,
after custodian fee reduction(2) 1.60%+ 1.52% -- -- -- --
Ratio of net investment income to
average daily net assets 4.45%+ 4.44% 4.74% 4.35%+ 4.30% 4.49%+
PORTFOLIO TURNOVER(3) -- -- -- -- 15% 13%
*The operating expenses of the Funds and the Portfolios may reflect a reduction of the Investment Advisor fee, an allocation of
expenses to the Investment Adviser or Administrator, or both. Had such actions not been taken, the ratios and net investment
income (loss) per share would have been as follows:
RATIOS/SUPPLEMENTAL DATA:
Expenses(2) 1.49% 1.50%+
Net investment income 4.18% 4.00%+
Net investment income per share $ 0.462 $ 0.185
-------- --------
(See footnotes on page 16.)
</TABLE>
<PAGE>
THE FUNDS' FINANCIAL HIGHLIGHTS (CONTINUED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ARKANSAS FUND -- CLASS B
-----------------------------------------------------------------------
YEAR ENDED
SIX MONTHS ----------------------------------------------
ENDED AUGUST 31, SEPTEMBER 30,
FEBRUARY 28, 1997 --------------------------------- -------
(UNAUDITED) 1996 1995 1994** 1993++
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of period $ 10.190 $ 10.250 $ 10.140 $ 10.910 $ 10.000
-------- -------- -------- -------- --------
INCOME (LOSS) FROM OPERATIONS:
Net investment income $ 0.222 $ 0.450 $ 0.460 $ 0.431 $ 0.471
Net realized and unrealized gain
(loss) on investments 0.191 (0.038) 0.132 (0.703) 1.025
-------- -------- -------- -------- --------
Total income (loss) from operations $ 0.413 $ 0.412 $ 0.592 $ (0.272) $ 1.496
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
From net investment income
(0.222) $ (0.471) $ (0.460) $ (0.431) $ (0.471)
In excess of net investment income(5) (0.001) (0.001) (0.022) (0.067) (0.115)
-------- -------- -------- -------- --------
Total distributions (0.223) $ (0.472) $ (0.482) $ (0.498) $ (0.586)
-------- -------- -------- -------- --------
NET ASSET VALUE, end of period $ 10.380 $ 10.190 $ 10.250 $ 10.140 $ 10.910)
======== ======== ======== ======== ========
TOTAL RETURN(1) 4.15% 4.05% 6.15% (2.53)% 15.00%
RATIOS/SUPPLEMENTAL DATA*:
Net assets, end of period (000 omitted) $ 67,577 $ 72,868 $ 80,823 $ 82,436 $ 59,205
Ratio of net expenses to average daily
net assets(2)(4) 1.63%+ 1.56% 1.50% 1.17%+ 0.88%+
Ratio of net expenses to average daily net
assets, after custodian fee reduction(2) 1.63%+ 1.54% -- -- --
Ratio of net investment
income to average daily net assets 4.34%+ 4.34% 4.67% 4.47%+ 4.27%+
PORTFOLIO TURNOVER(3) -- -- -- 5% 13%
*The operating expenses of the Funds and the Portfolios may reflect a reduction of the Investment Advisor fee, an allocation of
expenses to the Investment Adviser or Administrator, or both. Had such actions not been taken, the ratios and net investment
income (loss) per share would have been as follows:
RATIOS/SUPPLEMENTAL DATA:
Expenses(2) 1.40% 1.42%+
Net investment income 4.24% 3.73%+
Net investment income per share $ 0.409 $ 0.411
-------- -------
(See footnotes on page 16.)
</TABLE>
<PAGE>
THE FUNDS' FINANCIAL HIGHLIGHTS (CONTINUED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GEORGIA FUND -- CLASS B
----------------------------------------------------------------------------
YEAR ENDED
SIX MONTHS -----------------------------------------------------------
ENDED AUGUST 31, SEPTEMBER 30,
FEBRUARY 28, 1997 --------------------------- ------------------------
(UNAUDITED) 1996 1995 1994** 1993 1992++
----------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of period $ 9.810 $ 9.790 $ 9.800 $ 10.750 $ 10.120 $ 10.000
-------- -------- -------- -------- -------- --------
INCOME (LOSS) FROM OPERATIONS:
Net investment income $ 0.225 $ 0.451 $ 0.450 $ 0.413 $ 0.459 $ 0.380
Net realized and unrealized
gain (loss) on investments 0.220 0.024 0.007 (0.841) 0.776 0.215
++++++++
-------- -------- -------- -------- -------- --------
Total income (loss) from operations $ 0.445 $ 0.475 $ 0.457 $ (0.428) $ 1.235 $ 0.595
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
From net investment income
(0.225) $ (0.455) $ (0.450) $ (0.413) $ (0.459) $ (0.380)
In excess of net investment income
(5) -- -- (0.017) (0.065) (0.129) (0.095)
From net realized gain on investments -- -- -- -- (0.017) --
In excess of net realized gain on
investments(5) -- -- -- (0.044) -- --
-------- -------- -------- -------- -------- --------
Total distributions
(0.225) $ (0.455) $ (0.467) $ (0.522) $ (0.605) $ (0.475)
-------- -------- -------- -------- -------- --------
NET ASSET VALUE, end of period $ 10.030 $ 9.810 $ 9.790 $ 9.800 $ 10.750 $ 10.120
======== ======== ======== ======== ======== ========
TOTAL RETURN(1) 4.75% 4.91% 4.90% (4.08)% 12.60% 5.85%
RATIOS/SUPPLEMENTAL DATA*:
Net assets, end of period
(000 omitted) $ 99,383 $106,992 $120,143 $134,481 $120,043 $ 42,156
Ratio of net expenses to
average daily net assets(2)(4) 1.59%+ 1.58% 1.49% 1.41%+ 1.52% 1.13%+
Ratio of net expenses to
average daily net assets,
after custodian fee reduction(2) 1.58%+ 1.52% -- -- -- --
Ratio of net investment
income to average daily
net assets 4.55%+ 4.55% 4.72% 4.39%+ 4.27% 4.72%+
PORTFOLIO TURNOVER(3) -- -- -- -- 20% 33%
*The operating expenses of the Funds and the Portfolios may reflect a reduction of the Investment Advisor fee, an allocation of
expenses to the Investment Adviser or Administrator, or both. Had such actions not been taken, the ratios and net investment
income (loss) per share would have been as follows:
RATIOS/SUPPLEMENTAL DATA:
Expenses(2) 1.61%+
Net investment income 4.24%+
Net investment income per share $ 0.341
(See footnotes on page 16.)
</TABLE>
<PAGE>
THE FUNDS' FINANCIAL HIGHLIGHTS (CONTINUED)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
KENTUCKY FUND -- CLASS B
----------------------------------------------------------------------------
YEAR ENDED
SIX MONTHS -----------------------------------------------------------
ENDED AUGUST 31, SEPTEMBER 30,
FEBRUARY 28, 1997 --------------------------- ------------------------
(UNAUDITED) 1996 1995 1994** 1993 1992++
----------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of period $ 9.970 $ 9.990 $ 9.850 $ 10.780 $ 10.090 $ 10.000
-------- -------- -------- -------- -------- --------
INCOME (LOSS) FROM OPERATIONS:
Net investment income $ 0.228 $ 0.450 $ 0.458 $ 0.415 $ 0.462 $ 0.363
Net realized and unrealized
gain (loss) on investments 0.255 (0.009)++ 0.163 (0.811) 0.820 0.192
-------- -------- -------- -------- -------- --------
Total income
(loss) from
operations $ 0.483 $ 0.441 $ 0.621 $ (0.396) $ 1.282 $ 0.555
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
From net investment income
(0.223) $ (0.450) $ (0.458) $ (0.415) $ (0.462) $ (0.363)
In excess of net investment income(5) -- (0.011) (0.023) (0.075) (0.125) (0.102)
From net realized gain
on investments -- -- -- -- (0.005) --
In excess of net investment income(5) -- -- -- (0.044) -- --
-------- -------- -------- -------- -------- --------
Total distributions
(0.223) $ (0.461) $ (0.481) $ (0.534) $ (0.592) $ (0.465)
-------- -------- -------- -------- -------- --------
NET ASSET VALUE, end of period $ 10.230 $ 9.970 $ 9.990 $ 9.850 $ 10.780 $ 10.090
======== ======== ======== ======== ======== ========
TOTAL RETURN(1) 4.96% 4.45% 6.61% (3.78)% 13.05% 5.45%
RATIOS/SUPPLEMENTAL DATA*:
Net assets, end of period (000 omitted) $126,250 $131,357 $143,106 $141,994 $120,093 $ 46,835
Ratio of net expenses to
average daily net assets(2)(4) 1.58%+ 1.57% 1.52% 1.44%+ 1.50% 1.44%+
Ratio of net expenses to average
daily net assets, after
custodian fee reduction(2) 1.56%+ 1.54% -- -- -- --
Ratio of net investment income to
average daily net assets 4.55%+ 4.45% 4.74% 4.39%+ 4.29% 4.56%+
PORTFOLIO TURNOVER(3) -- -- -- -- 21% 64%
*The operating expenses of the Funds and the Portfolios may reflect a reduction of the Investment Advisor fee, an allocation of
expenses to the Investment Adviser or Administrator, or both. Had such actions not been taken, the ratios and net investment
income (loss) per share would have been as follows:
RATIOS/SUPPLEMENTAL DATA:
Expenses(2) 1.52%+
Net investment income 4.48%+
Net investment income per share $ 0.357
--------
(See footnotes on page 16.)
</TABLE>
<PAGE>
THE FUNDS' FINANCIAL HIGHLIGHTS (CONTINUED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LOUISIANA FUND -- CLASS B
-----------------------------------------------------------------------
YEAR ENDED
SIX MONTHS ----------------------------------------------
ENDED AUGUST 31, SEPTEMBER 30,
FEBRUARY 28, 1997 --------------------------------- -------
(UNAUDITED) 1996 1995 1994** 1993++
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of period $ 9.960 $ 9.980 $ 10.010 $ 11.130 $ 10.000
-------- -------- -------- -------- --------
INCOME (LOSS) FROM OPERATIONS:
Net investment income (loss) $ 0.243 $ 0.486 $ 0.487 $ 0.447 $ 0.478
Net realized and
unrealized gain (loss) on investments 0.236 (0.016) (0.006)++ (0.937) 1.234
-------- -------- -------- -------- --------
Total income (loss) from operations $ 0.479 $ 0.470 $ 0.481 $ (0.490) $ 1.712
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
From net investment income
(0.239) $ (0.490) $ (0.487) $ (0.447) $ (0.478)
In excess of net
investment income(5) -- -- (0.024) (0.074) (0.104)
In excess of net realized gain on investments(5) -- -- -- (0.109) --
-------- -------- -------- -------- --------
Total distributions $ (0.239) $ (0.490) $ (0.511) $ (0.630) $ (0.582)
-------- -------- -------- -------- --------
NET ASSET VALUE, end of period $ 10.200 $ 9.960 $ 9.980 $ 10.010 $ 11.130
======== ======== ======== ======== ========
TOTAL RETURN(1) 4.92% 4.77% 5.08% (4.56)% 17.26%
RATIOS/SUPPLEMENTAL DATA*:
Net assets, end of period (000 omitted) $ 32,769 $ 32,994 $ 31,836 $ 29,020 $ 17,935
Ratio of net expenses to average daily
net assets(2)(4) 1.51%+ 1.41% 1.31% 1.08%+ 1.07%+
Ratio of net expenses to average daily net
assets, after custodian fee reduction(2) 1.49%+ 1.34% -- -- --
Ratio of net investment income to average
daily net assets 4.82%+ 4.82% 4.97% 4.62%+ 4.27%+
PORTFOLIO TURNOVER(3) -- -- -- 14% 86%
*The operating expenses of the Funds and the Portfolios may reflect a reduction of the Investment Advisor fee, an allocation of
expenses to the Investment Adviser or Administrator, or both. Had such actions not been taken, the ratios and net investment
income (loss) per share would have been as follows:
RATIOS/SUPPLEMENTAL DATA:
Expenses(2)(4) 1.60%+ 1.53% 1.42% 1.44%+ 1.76%+
Expenses after custodian fee reduction(2) 1.58%+ 1.45% -- -- --
Net investment income 4.73%+ 4.70% 4.86% 4.26%+ 3.58%+
Net investment income per share $ 0.239 $ 0.474 $ 0.470 $ 0.412 $ 0.401
(See footnotes on page 16.)
</TABLE>
<PAGE>
THE FUNDS' FINANCIAL HIGHLIGHTS (CONTINUED)
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
MARYLAND FUND -- CLASS B
----------------------------------------------------------------------------
YEAR ENDED
SIX MONTHS -----------------------------------------------------------
ENDED AUGUST 31, SEPTEMBER 30,
FEBRUARY 28, 1997 --------------------------- ------------------------
(UNAUDITED) 1996 1995 1994** 1993 1992++
----------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of period $ 10.300 $ 10.230 $ 10.070 $ 11.070 $ 10.290 $ 10.000
-------- -------- -------- -------- -------- --------
INCOME (LOSS) FROM OPERATIONS:
Net investment income $ 0.228 $ 0.464 $ 0.476 $ 0.428 $ 0.466 $ 0.303
Net realized and unrealized gain
(loss) on investments 0.231 0.086 0.169 (0.922) 0.890 0.375+++
-------- -------- -------- -------- -------- --------
Total income (loss) from operations $ 0.459 $ 0.550 $ 0.645 $ (0.494) $ 1.356 $ 0.678
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
From net investment income $ (0.229) $ (0.480) $ (0.476) $ (0.428) $ (0.466) $ (0.303)
In excess of net investment income(5) -- -- (0.009) (0.070) (0.110) (0.085)
In excess of net realized gain
on investments(5) -- -- -- (0.008) -- --
-------- -------- -------- -------- -------- --------
Total distributions (0.229) $ (0.480) $ (0.485) $ (0.506) $ (0.576) $ (0.388)
-------- -------- -------- -------- -------- --------
NET ASSET VALUE, end of period $ 10.530 $ 10.300 $ 10.230 $ 10.070 $ 11.070 $ 10.290
======== ======== ======== ======== ======== ========
TOTAL RETURN(1) 4.56% 5.44% 6.71% (4.56)% 13.61% 6.65%
RATIOS/SUPPLEMENTAL DATA*:
Net assets, end of period (000 omitted) $108,261 $109,243 $113,826 $116,721 $ 95,226 $ 29,180
Ratio of net expenses to average daily
net assets(2)(4) 1.58%+ 1.57% 1.50% 1.43%+ 1.43% 1.30%+
Ratio of net expenses to average daily
net assets, after custodian
fee reduction(2) 1.55%+ 1.55% -- -- -- --
Ratio of net investment income to
average daily net assets 4.39%+ 4.46% 4.82% 4.44%+ 4.28% 4.25%+
PORTFOLIO TURNOVER(3) -- -- -- -- 12% 3%
*The operating expenses of the Funds and the Portfolios may reflect a reduction of the Investment Advisor fee, an allocation of
expenses to the Investment Adviser or Administrator, or both. Had such actions not been taken, the ratios and net investment
income (loss) per share would have been as follows:
RATIOS/SUPPLEMENTAL DATA:
Expenses(2)(4) 1.48% 1.62%+
Net investment income 4.23% 3.93%+
Net investment income per share $ 0.461 $ 0.280
-------- --------
(See footnotes on page 16.)
</TABLE>
<PAGE>
THE FUNDS' FINANCIAL HIGHLIGHTS (CONTINUED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MISSOURI FUND -- CLASS B
----------------------------------------------------------------------------
YEAR ENDED
SIX MONTHS -----------------------------------------------------------
ENDED AUGUST 31, SEPTEMBER 30,
FEBRUARY 28, 1997 --------------------------- ------------------------
(UNAUDITED) 1996 1995 1994** 1993 1992++
----------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of period $ 10.510 $ 10.510 $ 10.240 $ 11.250 $ 10.400 $ 10.000
-------- -------- -------- -------- -------- --------
INCOME (LOSS) FROM OPERATIONS:
Net investment income $ 0.239 $ 0.476 $ 0.477 $ 0.423 $ 0.470 $ 0.200
Net realized and unrealized gain
(loss) on investments 0.295 0.003 0.289 (0.904) 1.005 0.455+++
-------- -------- -------- -------- -------- --------
Total income (loss) from operations $ 0.534 $ 0.479 $ 0.766 $ (0.481) $ 1.475 $ 0.655
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
From net investment income $ (0.234) $ (0.476) $ (0.477) $ (0.423) $ (0.470) $ (0.200)
In excess of net investment income(5) -- (0.003) (0.019) (0.084) (0.128) (0.055)
In excess of net realized gain on investments(5) -- -- -- (0.022) (0.027) --
-------- -------- -------- -------- -------- --------
Total distributions (0.234) $ (0.479) $ (0.496) $ (0.529) $ (0.625) $ (0.255)
-------- -------- -------- -------- -------- --------
NET ASSET VALUE, end of period $ 10.810 $ 10.510 $ 10.510 $ 10.240 $ 11.250 $ 10.400
======== ======== ======== ======== ======== ========
TOTAL RETURN(1) 5.18% 4.60% 7.82% (4.33)% 14.66% 6.33%
RATIOS/SUPPLEMENTAL DATA*:
Net assets, end of period (000 omitted) $ 79,212 $ 82,385 $ 89,811 $ 91,227 $ 76,653 $ 25,225
Ratio of net expenses to average daily
net assets(2)(4) 1.60%+ 1.56% 1.53% 1.49%+ 1.52% 1.32%+
Ratio of net expenses to average daily
net assets, after custodian fee reduction(2) 1.59%+ 1.54% -- -- -- --
Ratio of net investment income to
average daily net assets 4.48%+ 4.47% 4.72% 4.30%+ 4.23% 4.31%+
PORTFOLIO TURNOVER(3) -- -- -- -- 14% 21%
*The operating expenses of the Funds and the Portfolios may reflect a reduction of the Investment Advisor fee, an allocation of
expenses to the Investment Adviser or Administrator, or both. Had such actions not been taken, the ratios and net investment
income (loss) per share would have been as follows:
RATIOS/SUPPLEMENTAL DATA:
Expenses(2) 1.55% 1.49%+
Net investment income 4.20% 4.14%+
Net investment income per share $ 0.467 $ 0.192
-------- -------
(See footnotes on page 16.)
</TABLE>
<PAGE>
THE FUNDS' FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NORTH CAROLINA FUND -- CLASS B
----------------------------------------------------------------------------
YEAR ENDED
SIX MONTHS -----------------------------------------------------------
ENDED AUGUST 31, SEPTEMBER 30,
FEBRUARY 28, 1997 --------------------------- ------------------------
(UNAUDITED) 1996 1995 1994** 1993 1992++
----------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of period $ 9.970 $ 9.960 $ 9.970 $ 10.940 $ 10.300 $ 10.000
-------- -------- -------- -------- -------- --------
INCOME (LOSS) FROM OPERATIONS:
Net investment income $ 0.227 $ 0.452 $ 0.466 $ 0.423 $ 0.468 $ 0.456
Net realized and unrealized
gain (loss) on investments 0.191 0.026 0.011+++ (0.895) 0.794 0.423+++
-------- -------- -------- -------- -------- --------
Total income (loss) from operations $ 0.418 $ 0.478 $ 0.477 $ (0.472) $ 1.262 $ 0.879
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
From net investment income (0.228) $ (0.455) $ (0.466) $ (0.423) $ (0.468) $ (0.456)
In excess of net investment income(5) -- (0.013) (0.021) (0.075) (0.120) (0.123)
In excess of net realized gain on investments(5) -- -- -- -- (0.034) --
-------- -------- -------- -------- -------- --------
Total distributions
(0.228) $ (0.468) $ (0.487) $ (0.498) $ (0.622) $ (0.579)
-------- -------- -------- -------- -------- --------
NET ASSET VALUE, end of period $ 10.160 $ 9.970 $ 9.960 $ 9.970 $ 10.940 $ 10.300
======== ======== ======== ======== ======== ========
TOTAL RETURN(1) 4.29% 4.83% 5.03% (4.40)% 12.69% 8.75%
RATIOS/SUPPLEMENTAL DATA*:
Net assets, end of period (000 omitted) $163,219 $169,889 $188,450 $192,667 $173,828 $ 71,733
Ratio of net expenses to average
daily net assets(2)(4) 1.60%+ 1.59% 1.51% 1.42%+ 1.52% 1.35%+
Ratio of net expenses to
average daily net assets,
after custodian fee reduction(2) 1.57%+ 1.54% -- -- -- --
Ratio of net investment income to
average daily net assets 4.54%+ 4.47% 4.78% 4.43%+ 4.34% 4.54%+
PORTFOLIO TURNOVER(3) -- -- -- -- 16% 52%
*The operating expenses of the Funds and the Portfolios may reflect a reduction of the Investment Advisor fee, an allocation of
expenses to the Investment Adviser or Administrator, or both. Had such actions not been taken, the ratios and net investment
income (loss) per share would have been as follows:
RATIOS/SUPPLEMENTAL DATA:
Expenses(2) 1.57%+
Net investment income 4.32%+
Net investment income per share $ 0.434
(See footnotes on page 16.)
</TABLE>
<PAGE>
THE FUNDS' FINANCIAL HIGHLIGHTS (CONTINUED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
OREGON FUND -- CLASS B
----------------------------------------------------------------------------
YEAR ENDED
SIX MONTHS -----------------------------------------------------------
ENDED AUGUST 31, SEPTEMBER 30,
FEBRUARY 28, 1997 --------------------------- ------------------------
(UNAUDITED) 1996 1995 1994** 1993 1992++
----------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
beginning of period $ 10.240 $ 10.310 $ 10.090 $ 11.130 $ 10.270 $ 10.000
-------- -------- -------- -------- -------- --------
INCOME (LOSS) FROM OPERATIONS:
Net investment income $ 0.228 $ 0.450 $ 0.455 $ 0.415 $ 0.459 $ 0.351
Net realized and unrealized gain
(loss) on investments 0.136 (0.061) 0.241 (0.869) 0.983 0.368
-------- -------- -------- -------- -------- --------
Total income (loss) from operations $ 0.364 $ 0.389 $ 0.696 $ (0.454) $ 1.442 $ 0.719
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
From net investment income
(0.224) $ (0.457) $ (0.455) $ (0.415) $ (0.459) $ (0.351)
In excess of net investment income(5) -- (0.002) (0.021) (0.078) (0.117) (0.098)
From net realized gain on investments -- -- -- (0.093) (0.006) --
-------- -------- -------- -------- -------- --------
Total distributions
(0.224) $ (0.459) $ (0.476) $ (0.586) $ (0.582) $ (0.449)
-------- -------- -------- -------- -------- --------
NET ASSET VALUE, end of period $ 10.380 $ 10.240 $ 10.310 $ 10.090 $ 11.130 $ 10.270
======== ======== ======== ======== ======== ========
TOTAL RETURN(1) 3.65% 3.80% 7.22% (4.21)% 14.47% 7.10%
RATIOS/SUPPLEMENTAL DATA*:
Net assets, end of period (000 omitted) $121,180 $128,580 $145,056 $151,127 $128,229 $ 41,703
Ratio of net expenses to average daily
net assets(2)(4) 1.69%+ 1.56% 1.53% 1.43%+ 1.55% 1.47%+
Ratio of net expenses to
average daily net assets,
after custodian fee reduction(2) 1.67%+ 1.53% -- -- -- --
Ratio of net investment income to
average daily net assets 4.44%+ 4.33% 4.59% 4.28%+ 4.22% 4.27%+
PORTFOLIO TURNOVER(3) -- -- -- -- 23% 44%
*The operating expenses of the Funds and the Portfolios may reflect a reduction of the Investment Advisor fee, an allocation of
expenses to the Investment Adviser or Administrator, or both. Had such actions not been taken, the ratios and net investment
income (loss) per share would have been as follows:
RATIOS/SUPPLEMENTAL DATA:
Expenses(2) 1.63%+
Net investment income 4.11%+
Net investment income per share $ 0.338
-------
(See footnotes on page 16.)
</TABLE>
<PAGE>
THE FUNDS' FINANCIAL HIGHLIGHTS (CONTINUED)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SOUTH CAROLINA FUND -- CLASS B
-----------------------------------------------------------------------
YEAR ENDED
SIX MONTHS ----------------------------------------------
ENDED AUGUST 31, SEPTEMBER 30,
FEBRUARY 28, 1997 --------------------------------- -------
(UNAUDITED) 1996 1995 1994** 1993++
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of period $ 10.020 $ 10.000 $ 9.940 $ 10.890 $ 10.000
-------- -------- -------- -------- --------
INCOME (LOSS) FROM OPERATIONS:
Net investment income $ 0.232 $ 0.467 $ 0.460 $ 0.408 $ 0.461
Net realized and unrealized gain
(loss) on investments 0.250 0.021 0.071 (0.870) 0.986
-------- -------- -------- -------- --------
Total income (loss) from operations $ 0.482 $ 0.488 $ 0.531 $ (0.462) $ 1.447
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
From net investment income (0.232) $ (0.468) $ (0.460) $ (0.408) $ (0.461)
In excess of net investment income(5) -- -- (0.011) (0.080) (0.096)
-------- -------- -------- -------- --------
Total distributions $ (0.232) $ (0.468) $ (0.471) $ (0.488) $ (0.557)
-------- -------- -------- -------- --------
NET ASSET VALUE, end of period $ 10.270 $ 10.020 $ 10.000 $ 9.940 $ 10.890
======== ======== ======== ======== ========
TOTAL RETURN(1) 4.91% 4.92% 5.64% (4.33)% 14.50%
RATIOS/SUPPLEMENTAL DATA*:
Net assets, end of period (000 omitted) $ 55,978 $ 57,217 $ 59,955 $ 59,878 $ 43,169
Ratio of net expenses to
average daily net assets(2)(4) 1.60%+ 1.60% 1.49% 1.36%+ 1.07%+
Ratio of net expenses to average daily net
assets, after custodian fee reduction(2) 1.58%+ 1.58% -- -- --
Ratio of net investment income to average
daily net assets 4.56%+ 4.60% 4.77% 4.27%+ 4.22%+
PORTFOLIO TURNOVER(3) -- -- -- 3% 13%
*The operating expenses of the Funds and the Portfolios may reflect a reduction
of the Investment Advisor fee, an allocation of expenses to the Investment
Adviser or Administrator, or both. Had such actions not been taken, the ratios
and net investment income (loss) per share would have been as follows:
RATIOS/SUPPLEMENTAL DATA:
Expenses(2) 1.44%+
Net investment income 3.85%+
Net investment income per share $ 0.421
--------
(See footnotes on page 16.)
</TABLE>
<PAGE>
THE FUNDS' FINANCIAL HIGHLIGHTS (CONTINUED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TENNESSEE FUND -- CLASS B
----------------------------------------------------------------------------
YEAR ENDED
SIX MONTHS -----------------------------------------------------------
ENDED AUGUST 31, SEPTEMBER 30,
FEBRUARY 28, 1997 --------------------------- ------------------------
(UNAUDITED) 1996 1995 1994** 1993 1992++
----------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of period $ 10.150 $ 10.110 $ 10.020 $ 11.070 $ 10.010 $ 10.000
-------- -------- -------- -------- -------- --------
INCOME (LOSS) FROM OPERATIONS:
Net investment income $ 0.226 $ 0.457 $ 0.468 $ 0.426 $ 0.466 $ 0.040
Net realized and unrealized gain
(loss) on investments 0.244 0.059 0.115 (0.848) 1.158 0.027+++
-------- -------- -------- -------- -------- --------
Total income (loss) from operations $ 0.470 $ 0.516 $ 0.583 $ (0.422) $ 1.624 $ 0.067
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
From net investment income $ (0.226) $ (0.475) $ (0.468) $ (0.426) $ (0.466) $ (0.040)
In excess of net investment income(5) (0.004) (0.001) (0.025) (0.071) (0.098) (0.017)
From net realized gain on investments -- -- -- (0.094) -- --
In excess of net realized gain on investments(5) -- -- -- (0.037) -- --
-------- -------- -------- -------- -------- --------
Total distributions (0.230) $ (0.476) $ (0.493) $ (0.628) $ (0.564) $ (0.057)
-------- -------- -------- -------- -------- --------
NET ASSET VALUE, end of period $ 10.390 $ 10.150 $ 10.110 $ 10.020 $ 11.070 $ 10.010
======== ======== ======== ======== ======== ========
TOTAL RETURN(1) 4.74% 5.16% 6.12% (3.93)% 16.97% 0.01%
RATIOS/SUPPLEMENTAL DATA*:
Net assets, end of period (000 omitted) $ 53,432 $ 54,533 $ 57,484 $ 55,379 $ 39,648 $ 3,475
Ratio of net expenses to average daily
net assets(2)(4) 1.58%+ 1.53% 1.47% 1.37%+ 1.30% 1.00%+
Ratio of net expenses to
average daily net assets,
after custodian fee reduction(2) 1.56%+ 1.51% -- -- -- --
Ratio of net investment income to
average daily net assets 4.43%+ 4.45% 4.77% 4.44%+ 4.24% 2.91%+
PORTFOLIO TURNOVER(3) -- -- -- -- 28% 0%
*The operating expenses of the Funds and the Portfolios may reflect a reduction of the Investment Advisor fee, an allocation of
expenses to the Investment Adviser or Administrator, or both. Had such actions not been taken, the ratios and net investment
income (loss) per share would have been as follows:
RATIOS/SUPPLEMENTAL DATA:
Expenses(2)(4) 1.61% 2.10%+
Net investment income 3.93% 1.81%+
Net investment income per share $ 0.432 $ 0.025
-------- --------
(See footnotes on page 16.)
</TABLE>
<PAGE>
THE FUNDS' FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VIRGINIA FUND -- CLASS B
----------------------------------------------------------------------------
YEAR ENDED
SIX MONTHS -----------------------------------------------------------
ENDED AUGUST 31, SEPTEMBER 30,
FEBRUARY 28, 1997 --------------------------- ------------------------
(UNAUDITED) 1996 1995 1994** 1993 1992++ 1991
----------- -------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of period $ 10.260 $ 10.260 $ 10.120 $ 11.060 $ 10.460 $10.200 $10.00
-------- -------- -------- -------- -------- ------- -------
INCOME (LOSS) FROM OPERATIONS:
Net investment income $ 0.235 $ 0.471 $ 0.479 $ 0.438 $ 0.483 $ 0.526 $ 0.087
Net realized and unrealized gain
(loss) on investments 0.206 0.006 0.161 (0.864) 0.762 0.385 0.220+++
-------- -------- -------- -------- -------- ------- -------
Total income (loss) from operations $ 0.441 $ 0.477 $ 0.640 $ (0.426) $ 1.245 $ 0.911 $ 0.307
-------- -------- -------- -------- -------- ------- -------
LESS DISTRIBUTIONS:
From net investment income (0.231) $ (0.471) $ (0.479) $ (0.438) $ (0.483) $(0.526) $(0.087)
In excess of net investment income(5) -- (0.006) (0.021) (0.076) (0.130) (0.120) (0.020)
From net realized gain on investments -- -- -- -- (0.022) (0.005) --
In excess of net realized gain on investments(5) -- -- -- -- (0.010) -- --
-------- -------- -------- -------- -------- ------- -------
Total distributions $ (0.231) $ (0.477) $ (0.500) $ (0.514) $ (0.645) $(0.651) $(0.107)
-------- -------- -------- -------- -------- ------- -------
NET ASSET VALUE, end of period $ 10.470 $ 10.260 $ 10.260 $ 10.120 $ 11.060 $10.460 $10.200
======== ======== ======== ======== ======== ======= =======
TOTAL RETURN(1) 4.40% 4.67% 6.62% (3.95)% 12.33% 9.16% 2.82%
RATIOS/SUPPLEMENTAL DATA*:
Net assets, end of period (000 omitted) $169,665 $175,918 $189,535 $193,420 $175,426 $72,629 $11,081
Ratio of net expenses to average daily
net assets(2)(4) 1.61%+ 1.56% 1.50% 1.44%+ 1.52% 1.36% 1.27%+
Ratio of net expenses to average daily
net assets, after custodian fee reduction(2) 1.59%+ 1.53% -- -- -- -- --
Ratio of net investment income to
average daily net assets 4.54%+ 4.52% 4.81% 4.51%+ 4.42% 4.86% 4.47%+
PORTFOLIO TURNOVER(3) -- -- -- -- 27% 85% 10%
*The operating expenses of the Funds and the Portfolios may reflect a reduction of the Investment Advisor fee, an allocation of
expenses to the Investment Adviser or Administrator, or both. Had such actions not been taken, the ratios and net investment
income (loss) per share would have been as follows:
RATIOS/SUPPLEMENTAL DATA:
Expenses(2)(4) 1.59% 1.68%+
Net investment income 4.63% 4.06%+
Net investment income per share $ 0.501 $ 0.079
------- -------
** For the eleven months ended August 31, 1994.
+ Annualized.
++ For the period from the start of business July 26, 1991 to September 30, 1991 for the Virginia Fund, for the period from the
start of business December 23, 1991, December 23, 1991, February 3, 1992, May 1, 1992, October 23, 1991, December 24, 1991 and
August 25, 1992 to September 30, 1992 for the Georgia, Kentucky, Maryland, Missouri, North Carolina, Oregon, and Tennessee
Funds, respectively, and for the period from the start of business May 1, 1992 to September 30, 1993 for the Alabama Fund and
for the period from the start of business, October 2, 1992 to September 30, 1993 for the Arkansas, Louisiana and South
Carolina Funds, respectively.
+++ 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 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 February 28, 1997 and the year ended August 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 August 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 the 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 ALABAMA MUNICIPALS FUND (the "Alabama Fund") seeks to provide
current income exempt from regular federal income tax and Alabama State personal
income taxes. The Alabama Fund seeks to meet its objective by investing its
assets in the Alabama Municipals Portfolio (the "Alabama Portfolio").
EATON VANCE ARKANSAS MUNICIPALS FUND (the "Arkansas Fund") seeks to provide
current income exempt from regular federal income tax and Arkansas State
personal income taxes. The Arkansas Fund seeks to meet its objective by
investing its assets in the Arkansas Municipals Portfolio (the "Arkansas
Portfolio").
EATON VANCE GEORGIA MUNICIPALS FUND (the "Georgia Fund") seeks to provide
current income exempt from regular federal income tax and Georgia State personal
income taxes. The Georgia Fund seeks to meet its objective by investing its
assets in the Georgia Municipals Portfolio (the "Georgia Portfolio").
EATON VANCE KENTUCKY MUNICIPALS FUND (the "Kentucky Fund") seeks to provide
current income exempt from regular federal income tax and Kentucky state
personal income taxes in the form of an investment exempt from the Kentucky
intangibles tax. The Kentucky Fund seeks to meet its objective by investing its
assets in the Kentucky Municipals Portfolio (the "Kentucky Portfolio").
EATON VANCE LOUISIANA MUNICIPALS FUND (the "Louisiana Fund") seeks to provide
current income exempt from regular federal income tax and Louisiana State
individual and corporate income taxes. The Louisiana Fund seeks to meet its
objective by investing its assets in the Louisiana Municipals Portfolio (the
"Louisiana Portfolio").
EATON VANCE MARYLAND MUNICIPALS FUND (the "Maryland Fund") seeks to provide
current income exempt from regular federal income tax and Maryland State and
local income taxes. The Maryland Fund seeks to meet its objective by investing
its assets in the Maryland Municipals Porfolio (the "Maryland Portfolio").
EATON VANCE MISSOURI MUNICIPALS FUND (the "Missouri Fund") seeks to provide
current income exempt from regular federal income tax and Missouri State
personal income taxes. The Missouri Fund seeks to meet its objective by
investing its assets in the Missouri Municipals Portfolio (the "Missouri
Portfolio").
EATON VANCE NORTH CAROLINA MUNICIPALS FUND (the "North Carolina Fund") seeks to
provide current income exempt from regular federal income tax and North Carolina
State personal income taxes. The North Carolina Fund seeks to meet its objective
by investing its assets in the North Carolina Municipals Portfolio (the "North
Carolina Portfolio").
EATON VANCE OREGON MUNICIPALS FUND (the "Oregon Fund") seeks to provide current
income exempt from regular federal income tax and Oregon State personal income
taxes. The Oregon Fund seeks to meet its objective by investing its assets in
the Oregon Municipals Portfolio (the "Oregon Portfolio").
EATON VANCE SOUTH CAROLINA MUNICIPALS FUND (the "South Carolina Fund") seeks to
provide current income exempt from regular federal income tax and South Carolina
State personal income taxes. The South Carolina Fund seeks to meet its objective
by investing its assets in the South Carolina Municipals Portfolio (the "South
Carolina Portfolio").
EATON VANCE TENNESSEE MUNICIPALS FUND (the "Tennessee Fund") seeks to provide
current income exempt from regular federal income tax and Tennessee State
personal income taxes. The Tennessee Fund seeks to meet its objective by
investing its assets in the Tennessee Municipals Portfolio (the "Tennessee
Portfolio").
EATON VANCE VIRGINIA MUNICIPALS FUND (the "Virginia Fund") seeks to provide
current income exempt from regular federal income tax and Virginia state
personal income taxes. The Virginia Fund seeks to meet its objective by
investing its assets in the Virginia Municipals Portfolio (the "Virginia
Portfolio").
<PAGE>
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.
At least 75% of the net assets of the Alabama Portfolio, Arkansas Portfolio,
Georgia Portfolio, Louisiana Portfolio, Maryland Portfolio, Missouri Portfolio,
North Carolina Portfolio, South Carolina Portfolio, Tennessee Portfolio and
Virginia Portfolio and at least 70% of the net assets of the Kentucky Portfolio
and Oregon Portfolio will normally be invested in obligations rated at least
investment grade at the time of investment (which are those rated Baa or higher
by Moody's Investors Service, Inc. ("Moody's") or BBB or higher by either
Standard & Poor's Ratings Group ("S&P") or Fitch Investors Service, Inc.
("Fitch")) or, if unrated, determined by the Investment Adviser to be of at
least investment grade quality. The balance of each Portfolio's net assets may
be invested in municipal obligations rated below investment grade (but not lower
than B by Moody's, S&P or Fitch) and unrated municipal obligations considered to
be of comparable quality by the Investment Adviser. Municipal obligations rated
Baa or BBB may have speculative characteristics. Also, changes in economic
conditions or other circumstances are more likely to lead to a weakened capacity
to make principal and interest payments than in the case of higher rated
obligations. Securities rated below Baa or BBB are commonly known as "junk
bonds". A Portfolio may retain an obligation whose rating drops below B after
its acquisition if such retention is considered desirable by the Investment
Adviser. See "Additional Risk Considerations". For a description of municipal
obligation ratings, see the Statement of Additional Information.
MUNICIPAL OBLIGATIONS. Municipal obligations include bonds, notes and commercial
paper issued by a municipality for a wide variety of both public and private
purposes, the interest on which is, in the opinion of bond counsel, exempt from
regular federal income tax. Public purpose municipal bonds include general
obligation and revenue bonds. General obligation bonds are backed by the taxing
power of the issuing municipality. Revenue bonds are backed by the revenues of a
project or facility, or from the proceeds of a specific revenue source. Some
revenue bonds are payable solely or partly from funds which are subject to
annual appropriations by a State's legislature and the availability of monies
for such payments. Municipal notes include bond anticipation, tax anticipation
and revenue anticipation notes. Bond, tax and revenue anticipation notes are
short-term obligations that will be retired with the proceeds of an anticipated
bond issue, tax revenue or facility revenue, respectively. Under normal market
conditions, a Portfolio will invest at least 65% 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
August 31, 1996, the Portfolios had invested in such obligations as follows (as
a percentage of net assets): Alabama Portfolio (17.2%); Arkansas Portfolio
(20.9%); Georgia Portfolio (16.9%); Kentucky Portfolio (24.3%); Louisiana
Portfolio (36.8%); Maryland Portfolio (17.7%); Missouri Portfolio (18.8%); North
Carolina Portfolio (16.3%); Oregon Portfolio (21.5%); South Carolina Portfolio
(26.0%); Tennessee Portfolio (18.6%); and Virginia Portfolio (16.9%).
Distributions to corporate investors of certain interest income may also be
subject to the AMT. 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 in the lowest investment
grade category (Baa or BBB), lower categories or may be unrated. As indicated
above, each Portfolio may invest in municipal obligations rated below investment
grade (but not lower than B by Moody's, S&P or Fitch) and comparable unrated
obligations. The lowest investment grade, lower rated and comparable unrated
municipal obligations in which a Portfolio may invest will have speculative
characteristics in varying degrees. While such obligations may have some quality
and protective characteristics, these characteristics can be expected to be
offset or outweighed by uncertainties or major risk exposures to adverse
conditions. Lower rated and comparable unrated municipal obligations are subject
to the risk of an issuer's inability to meet principal and interest payments on
the obligations (credit risk) and may also be subject to greater price
volatility due to such factors as interest rate sensitivity, market perception
of the creditworthiness of the issuer and general market liquidity (market
risk). Lower rated or unrated municipal obligations are also more likely to
react to real or perceived developments affecting market and credit risk than
are more highly rated obligations, which react primarily to movements in the
general level of interest rates. The Investment Adviser seeks to minimize the
risks of investing in below investment grade securities through professional
investment analysis and attention to current developments in interest rates and
economic conditions. When a Portfolio invests in lower rated or unrated
municipal obligations, the achievement of the Portfolio's goals is more
dependent on the Investment Adviser's ability than would be the case if the
Portfolio were investing in municipal obligations in the higher rating
categories.
Each Portfolio may retain defaulted obligations in its portfolio when such
retention is considered desirable by the Investment Adviser. In the case of a
defaulted obligation, a Portfolio may incur additional expense seeking recovery
of its investment. Municipal obligations held by a Portfolio which are rated
below investment grade but which, subsequent to the assignment of such rating,
are backed by escrow accounts containing U.S. Government obligations may be
determined by the Investment Adviser to be of investment grade quality for
purposes of the Portfolio's investment policies. A Portfolio may retain in its
portfolio an obligation whose rating drops below B after its acquisition, if
such retention is considered desirable by the Investment Adviser; provided,
however, that holdings of obligations rated below Baa or BBB will be less than
35% of net assets. In the event the rating of an obligation held by a Portfolio
is downgraded, causing the Portfolio to exceed this limitation, the Investment
Adviser will (in an orderly fashion within a reasonable period of time) dispose
of such obligations as it deems necessary in order to comply with the
Portfolio's credit quality limitations.
The net asset value of shares 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
- --------------------------------------------------------------------------------
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 shares and Class B shares on September 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 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.
EACH PORTFOLIO IS ORGANIZED AS A TRUST UNDER THE LAWS OF THE STATE OF NEW YORK
AND INTENDS TO BE TREATED AS A PARTNERSHIP FOR FEDERAL TAX PURPOSES. The
Portfolios, as well as the Trust, intend to comply with all applicable federal
and state securities laws. Each Portfolio's Declaration of Trust provides that
its corresponding Fund and other entities permitted to invest in that Portfolio
(e.g., other U.S. and foreign investment companies, and common and commingled
trust funds) will each be liable for all obligations of the Portfolio. However,
the risk of a Fund incurring financial loss on account of such liability is
limited to circumstances in which both inadequate insurance exists and the
Portfolio itself is unable to meet its obligations. Accordingly, the Trustees of
the Trust believe that neither the Funds nor their shareholders will be
adversely affected by reason of the Funds investing in the Portfolios.
The Trustees of the Trust have considered the advantages and disadvantages of
investing the assets of each Fund in its corresponding Portfolio, as well as the
advantages and disadvantages of the two-tier format. The Trustees believe that
the structure offers opportunities for substantial growth in the assets of the
Portfolios, affords the potential for economies of scale for each Fund, (at
least when the assets of its corresponding Portfolio exceed $500 million) and
may over time result in lower expenses for a Fund.
In addition to selling an interest to its corresponding Fund, a Portfolio may
sell interests to other affiliated and non-affiliated mutual funds or
institutional investors. Such investors will invest in a Portfolio on the same
terms and conditions and will pay a proportionate share of the Portfolio's
expenses. However, the other investors investing in a Portfolio are not required
to sell their shares at the same public offering price as the corresponding Fund
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
- --------------------------------------------------------------------------------
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
- -----------------------------------------------------------------------------
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 August 31, 1996, each Portfolio paid advisory fees
equivalent to the percentage of average daily net assets stated below.
NET ASSETS AS OF
PORTFOLIO AUGUST 31, 1996 ADVISORY FEE
- ---------------------------------------------------------------------------
Alabama ......................... $108,543,550 0.40%
Arkansas ........................ 74,103,217 0.36%
Georgia ......................... 108,974,295 0.40%
Kentucky ........................ 133,017,453 0.41%
Louisiana ....................... 35,048,671 0.12%(1)
Maryland ........................ 110,588,345 0.40%
Missouri ........................ 85,162,363 0.37%
North Carolina .................. 187,044,385 0.43%
Oregon .......................... 129,758,655 0.41%
South Carolina .................. 58,318,147 0.33%
Tennessee ....................... 56,065,353 0.31%
Virginia ........................ 177,644,321 0.43%
(1) Absent a fee reduction, the Louisiana Portfolio would have paid BMR advisory
fees equivalent to 0.23% of average daily net assets.
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 Alabama Portfolio since
June 1, 1997. Mr. Ahern has been a Vice President of Eaton Vance and BMR since
1996 and an employee of Eaton Vance since 1989.
Nicole Anderes has acted as the portfolio manager of the Kentucky Portfolio
since November 1, 1996. She joined BMR and Eaton Vance as a Vice President in
January, 1994. Prior to joining Eaton Vance, she was a Vice President and
portfolio manager at Lazard Freres Asset Management (1992-1994) and a Vice
President and Manager at Municipal Research at Roosevelt & Cross (1987-1992).
Timothy T. Browse has acted as the portfolio manager of the Arkansas and
Maryland Portfolios since they commenced operations and the Virginia Portfolio
since November 1, 1996. He has been a Vice President of Eaton Vance and of BMR
since 1993 and an employee of Eaton Vance since 1992. Prior to joining Eaton
Vance, he was a municipal bond trader at Fidelity Management & Research Company
(1987-1992).
Cynthia J. Clemson has acted as the portfolio manager of the Missouri and
Tennessee Portfolios since they commenced operations and the Georgia Portfolio
since January 1, 1996. Ms. Clemson has been a Vice President of Eaton Vance and
BMR since 1993 and an employee of Eaton Vance since 1985.
Thomas M. Metzold has acted as the portfolio manager of the Oregon Portfolio
since November 1, 1996. He has been a Vice President of Eaton Vance since 1991
and of BMR since 1992, and an employee of Eaton Vance since 1987.
Thomas J. Fetter has acted as the portfolio manager of the South Carolina
Portfolio since January 1, 1996. Mr. Fetter has been a Vice President of Eaton
Vance since 1987 and of BMR since 1992.
Robert B. MacIntosh has acted as the portfolio manager of the Louisiana and
North Carolina Portfolios since January 1, 1996. Mr. MacIntosh has been a Vice
President of Eaton Vance since 1991 and of BMR since 1992.
Municipal obligations are normally traded on a net basis (without commission)
through broker-dealers and banks acting for their own account. Such firms
attempt to profit from such transactions by buying at the bid price and selling
at the higher asked price of the market, and the difference is customarily
referred to as the spread. In selecting firms which will execute portfolio
transactions, BMR judges their professional ability and quality of service and
uses its best efforts to obtain execution at prices which are advantageous to
the Portfolios and at reasonably competitive spreads. Subject to the foregoing,
BMR may consider sales of shares of the Funds or of other investment companies
sponsored by BMR or Eaton Vance as a factor in the selection of firms to execute
portfolio transactions. 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
- -------------------------------------------------------------------------------
The Trust has adopted a Distribution Plan ("Class B Plan") pursuant to Rule
12b-1 under the Investment Company Act of 1940 ("1940 Act") for its Class B
shares. UNDER THE CLASS B PLAN, EACH CLASS B MAY PAY 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 CLASS B SHARES. Such
fees compensate the Principal Underwriter for sales commissions paid by it to
financial services firms ("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 contingent deferred sales charges received by
it) may exist indefinitely. During the fiscal year ended August 31, 1996, each
Class B (which was then a seperate series fund) paid or accrued sales
commissions under the Class B Plan equivalent to .75% of such Fund's average
daily net assets. As at August 31, 1996, the outstanding uncovered distribution
charges of the Principal Underwriter on such day calculated under the Class B
Plan amounted to approximately $3,631,000 (equivalent to 3.6% of net assets on
such day) in the case of Alabama Class B, $2,777,000 (equivalent to 3.8% of net
assets on such day) in the case of Arkansas Class B, $3,759,000 (equivalent to
3.5% of net assets on such day) in the case of Georgia Class B, $4,511,000
(equivalent to 3.4% of net assets on such day) in the case of Kentucky Class B,
$1,362,000 (equivalent to 4.1% of net assets on such day) in the case of
Louisiana Class B, $3,946,000 (equivalent to 3.6% of net assets on such day) in
the case of Maryland Class B, $2,856,000 (equivalent to 3.5% of net assets on
such day) in the case of Missouri Class B, $5,905,000 (equivalent to 3.5% of net
assets on such day) in the case of North Carolina Class B, $4,465,000
(equivalent to 3.5% of net assets on such day) in the case of Oregon Class B,
$2,245,000 (equivalent to 3.9% of net assets on such day) in the case of South
Carolina Class B, $2,037,000 (equivalent to 3.7% of net assets on such day) in
the case of Tennessee Class B and $5,877,000 (equivalent to 3.3% of net assets
on such day) in the case of Virginia Class B. For more information, see the
Statement of Additional Information.
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
August 31, 1996, each Class B paid or accrued service fees as follows (as an
annualized percentage of average daily net assets): Alabama Class B (0.18%);
Arkansas Class B (0.17%); Georgia Class B (0.17%); Kentucky Class B (0.18%);
Louisiana Class B (0.17%); Maryland Class B (0.16%); Missouri Class B (0.17%);
North Carolina Class B (0.18%); Oregon Class B (0.17%); South Carolina Class B
(0.16%); Tennessee Class B (0.16%); and Virginia Class B (0.17%).
Class A shares of each Fund pay service fees pursuant to a Service Plan (the
Class A "Plan") 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 each Class A 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 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 to the Principal Underwriter, Authorized Firms and other
persons from time to time without further action by Class A shareholders of any
Fund, provided that the aggregate amount of payments made to such persons under
the Plan in any fiscal year does not exceed .25% of average daily net assets.
The Class A Plan is described further in the Statement of Additional
Information.
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 Funds' 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 shares; however, there
is no contractual obligation to continue the 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 CLASS VALUES ITS SHARES ONCE ON EACH DAY THE NEW YORK STOCK EXCHANGE (THE
"EXCHANGE") IS OPEN FOR TRADING, as of the close of regular trading on the
Exchange (normally 4:00 p.m. New York time). Each Class's net asset value per
share is determined by its custodian, Investors Bank & Trust Company ("IBT"),
(as agent for the Trust) in the manner authorized by the Trustees of the Trust.
Net asset value is computed by dividing the value of a Class's total assets,
less its liabilities, by the number of shares outstanding. Because each Fund
invests its assets in an interest in its corresponding Portfolio, each Class's
net asset value will reflect the value of its interest in the Portfolio (which,
in turn, reflects the underlying value of the Portfolio's assets and
liabilities).
Authorized Firms must communicate an investor's order to the Principal
Underwriter prior to the close of the Principal Underwriter's business day to
receive that day's net asset value per share, and, 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.
For further information regarding the valuation of the Portfolios' assets, see
"Determination of Net Asset Value" in the Statement of Additional Information.
SHAREHOLDERS MAY DETERMINE THE VALUE OF THEIR INVESTMENT BY MULTIPLYING THE
NUMBER OF 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
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 shares 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>
Less than $50,000 3.75% 3.90% 4.00%
$50,000 but less than $100,000 2.75 2.83 3.00
$100,000 but less than $250,000 2.25 2.30 2.50
$250,000 but less than $500,000 1.75 1.78 2.00
$500,000 but less than $1,000,000 1.25 1.27 1.50
$1,000,000 or more 0.00* 0.00* 0.50
*No sales charge is payable at the time of purchase on investments of $1 million or more or where the amount invested represents
redemption proceeds from a mutual fund unaffiliated with Eaton Vance, if the redemption occurred no more than 60 days' prior to
the purchase of Fund shares and the redeemed shares were subject to a sales charge. A contingent deferred sales charge ("CDSC")
of 0.50% will be imposed on such investments (as described below) in the event of certain redemptions within 12 months of purchase.
</TABLE>
The Principal Underwriter may at times allow discounts up to the full sales
charge. During periods when the discount includes the full sales charge,
Authorized Firms may be deemed to be underwriters as that term is defined in the
Securities Act of 1933. The Principal Underwriter may, from time to time, at its
own expense, provide additional incentives to Authorized Firms which employ
registered representatives who sell Fund shares and/or shares of other funds
distributed by the Principal Underwriter. In some instances, such additional
incentives may be offered only to certain Authorized Firms whose representatives
sell or are expected to sell significant amounts of shares.
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 02111
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 FUND SHARES IN ONE OF THREE WAYS -- BY MAIL, BY
TELEPHONE OR THROUGH AN AUTHORIZED FIRM. The redemption price will be based on
the net asset value per share next computed after a redemption request is
received in the proper form as described below.
REDEMPTION BY MAIL: Shares may be redeemed by delivering to the Transfer Agent,
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123,
during its business hours a written request for redemption in good order, plus
any share certificates with executed stock powers. Good order means that all
relevant documents must be endorsed by the record owner(s) exactly as the shares
are registered and the signature(s) must be guaranteed by a member of either the
Securities Transfer Association's STAMP program or the New York Stock Exchange's
Medallion Signature Program, or certain banks, savings and loan institutions,
credit unions, securities dealers, securities exchanges, clearing agencies and
registered securities associations as required by a 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
applicable contingent deferred sales charges (described below) and 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 by that Fund from its corresponding Portfolio.
The securities so distributed would be valued pursuant to the Portfolio's
valuation procedures. If a shareholder received a distribution in kind, the
shareholder could incur brokerage or other charges in converting the securities
to cash.
If shares were recently purchased, the proceeds of 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. No contingent
deferred sales charge will be imposed with respect to such involuntary
redemptions.
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. As described under "Distribution
and Service Plans", the CDSC will be paid to the Principal Underwriter or a
Class. 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.
THE FOLLOWING EXAMPLE ILLUSTRATES THE OPERATION OF THE CLASS B CDSC. ASSUME
THAT AN INVESTOR PURCHASES $10,000 OF SHARES AND THAT 16 MONTHS LATER THE
VALUE OF THE ACCOUNT HAS GROWN THROUGH INVESTMENT PERFORMANCE AND REINVESTMENT
OF DIVIDENDS TO $12,000. THE INVESTOR THEN MAY REDEEM UP TO $2,000 OF SHARES
WITHOUT INCURRING A CDSC. IF THE INVESTOR SHOULD REDEEM $3,000 OF SHARES, A
CDSC WOULD BE IMPOSED ON $1,000 OF THE REDEMPTION. THE RATE WOULD BE 5%
BECAUSE IT WAS IN THE SECOND YEAR AFTER THE PURCHASE WAS MADE AND THE CDSC
WOULD BE $50.
REPORTS TO SHAREHOLDERS
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EACH FUND WILL ISSUE TO ITS SHAREHOLDERS SEMI-ANNUAL AND ANNUAL REPORTS
CONTAINING FINANCIAL STATEMENTS. Financial statements included in annual reports
are audited by the Funds' independent certified public accountants. Shortly
after the end of each calendar year, each Fund will furnish its shareholders
with information necessary for preparing federal and State tax returns.
Consistent with applicable law, duplicate mailings of shareholder reports and
certain other Fund information to shareholders residing at the same address may
be eliminated.
THE LIFETIME INVESTING ACCOUNT/DISTRIBUTION OPTIONS
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AFTER AN INVESTOR MAKES AN INITIAL PURCHASE OF 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 Fund Shares").
Consult the Transfer Agent for additional information concerning the exchange
privilege. Applications and prospectuses of other funds are available from
Authorized Firms or the Principal Underwriter. The prospectus for each fund
describes its investment objectives and policies, and shareholders should obtain
a prospectus and consider these objectives and policies carefully before
requesting an exchange.
No CDSC is imposed on exchanges. For purposes of calculating the CDSC upon
redemption of shares acquired in an exchange, the CDSC schedule applicable to
the shares at the time of purchase will apply and the purchase of shares
acquired in one or more exchanges is deemed to have occurred at the time of the
original purchase of the exchanged shares, except that time during which shares
are held in an Authorized Firm fund will not be credited toward completion of
the CDSC period. For the CDSC schedule applicable to the Eaton Vance Class B
Funds (except Strategic Income Fund, Prime Rate Reserves and Limited Maturity
Fund), see "How to Redeem Fund Shares". The CDSC or early withdrawal charge
schedule applicable to Eaton Vance Prime Rate Reserves and Class B shares of
Strategic Income Fund and 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
Fund 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 be relieved of federal taxes on
income and gains it distributes to shareholders. In satisfying these
requirements, each Fund will treat itself as owning its proportionate share of
each of its corresponding Portfolio's assets and as entitled to the income of
the Portfolio properly attributable to such share.
As a regulated investment company under the Code, each Fund does not pay federal
income or excise taxes to the extent that it distributes to shareholders its net
investment income and net realized capital gains in accordance with the timing
requirements imposed by the Code. As partnerships under the Code, the Portfolios
do not pay federal income or excise taxes.
Distributions of interest on certain municipal obligations constitute a tax
preference item under the 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.
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. 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
- --------------------------------------------------------------------------------
FROM TIME TO TIME, EACH CLASS MAY ADVERTISE ITS YIELD AND/OR AVERAGE ANNUAL
TOTAL RETURN. Current yield is calculated by dividing the net investment income
per share earned during a recent 30-day period by the maximum offering price per
share 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 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 Portfolio's total
return (or that of its predecessor) adjusted to reflect any applicable Class
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 and Class may also publish total return figures 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 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.
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.
ALABAMA. Since the early 1980's, modernization of existing facilities and an
increase in direct foreign investments in the State have made the State's
manufacturing sector more competitive in domestic and international markets.
Although it remains the largest employment sector, the State economy has become
less dependent on manufacturing (pulp and paper, mining and chemicals). Strong
growth in the service and wholesale/retail trade sectors combined with recent
weakness in the manufacturing sector has enabled the economy to become more
diverse. However, its reliance on the manufacturing sector remains significantly
greater than the national average. In the past several years, the loss of
manufacturing jobs has been primarily as a result of weakness in the durable
goods sector. Overall, non-agricultural employment has steadily grown during the
past five years. The seasonally adjusted unemployment rate for August, 1996, was
4.5%, compared to the national rate of 5.1%.
Alabama general obligations are currently rated AA, Aa and AA, by S&P, Moody's
and Fitch, respectively.
ALABAMA TAXES. In the opinion of Bradley, Arant, Rose & White, special Alabama
tax counsel to the Alabama Fund, under existing Alabama law, as long as the
Alabama Fund qualifies as a separate "regulated investment company" under the
Code, and provided the Alabama Fund is invested in the Alabama Portfolio, and
provided that the Alabama Portfolio is invested in obligations the interest on
which would be exempt from Alabama personal income taxes if held directly by an
individual shareholder (such as obligations of Alabama or its political
subdivisions, of the United States or of certain territories or possessions of
the United States), and further provided that the Alabama Portfolio is
characterized as a partnership for Federal income tax purposes, dividends
received by shareholders from the Alabama Fund that represent interest received
by the Alabama Portfolio on such obligations will be exempt from Alabama
personal income taxes. To the extent that distributions by the Alabama Fund are
derived from long-term or short-term capital gains on such obligations, or from
dividends or capital gains on other types of obligations, such distributions
will not be exempt from Alabama personal income tax. Capital gains or losses
realized from a redemption, sale or exchange of shares of the Alabama Fund by an
Alabama resident will be taken into account for Alabama personal income tax
purposes.
ARKANSAS. Arkansas has a relatively diverse economy. The economy consists
primarily of manufacturing (25%) involving more sophisticated processes and
products such as electrical machinery, transportation equipment, fabricated
metals and electronics. The health services, wholesale/retail trade and service
sectors have also grown in recent years. The diversification of economic
interests has lessened the State's cyclical sensitivity to the impact of any
single sector. Agriculture, however, continues to be an important component of
the State's economy. In addition, the State has significant natural gas and oil
producing interests, as well as mining activities. The seasonally adjusted
unemployment rate for August, 1996, was 5.2%, compared to a national rate of
5.1%. State law prohibits deficit spending. In 1995, the General Fund had an
ending balance of $1.2 billion, with revenues over expenditures of $195 million.
Arkansas general obligation bonds are rated Aa and AA by Moody's and S&P. Fitch
does not currently rate Arkansas general obligations.
ARKANSAS TAXES. In the opinion of special Arkansas tax counsel, under Arkansas
law, as long as the Arkansas Fund qualifies as a separate "regulated investment
company" under the Code, and provided the Arkansas Fund is invested in
obligations the interest on which would be exempt from Arkansas personal income
taxes if held directly by an individual shareholder (such as obligations of
Arkansas or its political subdivisions, of the United States or of certain
territories or possessions of the United States), dividends received from the
Arkansas Fund that represent interest received by the Arkansas Fund on such
obligations will be exempt from Arkansas personal income taxes. To the extent
that distributions by the Arkansas Fund are derived from long-term or short-term
capital gains on such obligations, or from dividends or capital gains on other
types of obligations, such distributions will not be exempt from Arkansas
personal income tax. The opinion addresses the tax consequences when the
Arkansas Fund invests directly in these obligations. The application of these
consequences to the Arkansas Fund when investing in interests of another
registered investment company was the subject of a favorable opinion from
Revenue Counsel for the Arkansas Department of Finance and Administration
obtained when the Portfolio commenced operations.
Capital gains or losses realized from a redemption, sale or exchange of shares
of the Arkansas Fund by an Arkansas resident will be taken into account for
Arkansas personal income tax purposes.
GEORGIA. Georgia has a generally sound, well-diversified economy, which has
performed relatively well during recent years. The unemployment rate of the
civilian labor force in the State as of August 1996 was 4.4% compared to 5.1%
for the nation. Actual revenues of the State for fiscal year 1995 increased
10.5% over revenue collections for the previous fiscal year. Total projected
revenues for fiscal year 1996 are approximately $10.7 million, a 7.2% increase
over the total projected revenues for fiscal year 1995. The State's economy
received a boost from economic activity associated with the 1996 Summer
Olympics. The fiscal 1996 budget includes approximately $76,663,963 to help
Georgians recover from the 1994 summer flooding and tropical storm disasters
which is not likely to affect the market value of Georgia obligations or the
ability of the State or its instrumentalities to pay interest and repay
principal on Georgia obligations in a timely manner.
Georgia general obligations are rated "AA+," "Aaa" and "AAA" by S&P, Moody's and
Fitch, respectively. Fitch views the rating as stable and S&P has a positive
outlook.
GEORGIA TAXES. In the opinion of Powell, Goldstein, Frazer & Murphy, special tax
counsel to the Georgia Fund, under existing law, shareholders who are otherwise
subject to the Georgia personal or corporate income tax will not be subject to
Georgia income tax on distributions with respect to shares of the Georgia Fund
to the extent such distributions represent "exempt-interest dividends" for
Federal income tax purposes that are attributable to interest on obligations
issued by or on behalf of the State of Georgia or its political subdivisions,
and by the governments of Puerto Rico, the U.S. Virgin Islands and Guam to the
extent that such obligations are exempt from State income tax pursuant to
Federal law. Distributions, if any, derived from capital gain or other sources
generally will be taxable to shareholders of the Georgia Fund for Georgia income
tax purposes. Shareholders who are subject to the Georgia corporate net worth
tax, a franchise tax that is based on net worth, will be subject to such tax
with respect to ownership of shares of the Georgia Fund and distributions with
respect thereto.
The Georgia Legislature repealed the Georgia Intangible Personal Property Tax on
March 21, 1996, effective retroactive to January 1, 1996, subject to approval by
Georgia's voters. On November 5, 1996, Georgia's voters ratified the legislation
repealing the Georgia Intangible personal Property Tax. Thus, shares of the
Georgia Fund are no longer subject to Georgia Intangible Personal Property
Taxation effective for taxable years beginning on or after January 1, 1996.
KENTUCKY. Calendar year 1995 marked the third consecutive year that Kentucky has
outpaced the nation in terms of per capita income growth and lower unemployment
rates. Kentucky's per capita income growth rate for 1995 was 5.2% versus the
U.S. growth rate of 5.0%. As of August, 1996, Kentucky's unemployment rate was
4.5% compared to the national average of 5.1%. During 1995, the manufacturing
sector gained 8,600 jobs or 2.8%. The trade and service sectors recorded
employment gains of 16,300 and 13,600, respectively. The State relies on
manufacturing and mining for a greater portion of its employment than does the
rest of the nation. General Electric, Fruit of the Loom and Ford Motor are the
three largest manufacturing employers. The automobile industry has become an
important component of the economy. Toyota and General Motors have assembly
facilities in the State.
The Commonwealth of Kentucky's financial condition has steadily improved during
the last four years. State General Fund Revenue grew by 3.5% in fiscal year 1996
to a total of $5.34 billion. To avoid the need for state budget cuts in the
event revenues do not meet expectations, a Budget Reserve Trust Fund was
established with a $90 million deposit in fiscal year 1994 and has been
increased by additional deposits of $10 million in fiscal year 1995 and $100
million in fiscal year 1996 to a current balance of $200 million.
Because the Kentucky Constitution requires a vote of a majority of the
electorate to approve the issuance of State general obligation indebtedness,
none of the outstanding indebtedness of the Commonwealth of Kentucky is general
obligation indebtedness but instead is either debt payable only from revenues
produced by the particular project or lease revenue indebtedness subject to
legislative appropriation for the payment of debt service during each fiscal
biennium of the Commonwealth.
As of the date of this Prospectus the State's appropriation-backed debt is rated
A+, A and A+, by S&P, Moody's and Fitch, respectively.
KENTUCKY TAXES. In the opinion of Wyatt, Tarrant & Combs, special Kentucky tax
counsel to the Kentucky Fund, shareholders of the Kentucky Fund who otherwise
are subject to individual or corporate income taxes of the Commonwealth of
Kentucky will not be subject to such taxes on distributions with respect to
their shares in the Kentucky Fund to the extent that such distributions are
attributable to interest on obligations of the Commonwealth of Kentucky or its
political subdivisions, obligations of the United States, or obligations of the
government of Puerto Rico, the U.S. Virgin Islands or Guam. To the extent that
distributions from the Kentucky Fund are included in a corporate shareholder's
surplus, they will be subject to the Kentucky license (franchise) tax that is
based on net worth. To the extent that the Portfolio's holdings consist of
obligations of the Commonwealth of Kentucky or its political subdivisions and
the balance are obligations of the United States, shares in the Kentucky Fund
will be exempt from the Kentucky Intangibles Tax. Shareholders will be required
to include the entire amount of capital gain dividends in income to the same
extent for state income tax purposes as for federal income tax purposes.
Many local governments in Kentucky, including Louisville, Jefferson County,
Lexington-Fayette Urban County, Bowling Green and Covington, impose taxes on the
net profits of businesses operating (in any form, including sole
proprietorships) within the local jurisdiction. Such taxes should not be imposed
on income derived from an investment in the Kentucky Fund. However, because of
differences in the provisions of the local ordinances, it is not possible to
address their specific impact.
LOUISIANA. The State has experienced operating budget deficits in three of the
last seven fiscal years. Since 1988, the gap between General Fund expenditures
and recurring revenues has widened for a variety of reasons: new expenditures
have been phased in; new tax exemptions have been implemented; the federal
government has issued costly mandates, most significantly in the Medicaid
program; and revenues once available to the General Fund have in recent years
been dedicated for specific purposes. Furthermore, the State's tax base (which
is comprised in part of mineral revenues and volume-based taxes, such as those
on tobacco, beer, and liquor) is inherently inelastic, i.e., its nominal growth
rate does not match or exceed the growth rate of the economy.
During 1994, $30.6 million of the surplus funds were utilized to cover known
shortfalls in current year program operations. The State ended the fiscal period
1993-94 with an operating surplus of $129 million. This amount together with the
prior year fund balance of $101 million and reserve changes leaves an
unreserved-undesignated General Fund fund balance of $212.9 million. The new
administration needs to address several budgetary issues in order to resolve its
fiscal challenges. It is uncertain how these issues will be resolved or how it
will impact the creditworthiness of the State and its outstanding and related
debt. For fiscal 1996, the State expects to finish with a balanced budget
despite these budgetary issues including concerns relating to its Medicaid
program.
As of the date of this Prospectus, general obligations of Louisiana are rated A-
(with a negative outlook) and Baa1 by S&P and Moody's, respectively.
LOUISIANA TAXES. In the opinion of Jones, Walker, Waechter, Poitevent, Carrere &
Denegre, L.L.P., special Louisiana tax counsel to the Louisiana Fund, under
existing Louisiana law as long as: (i) the Louisiana Fund qualifies as a
separate "regulated investment company" under the Code; (ii) the Louisiana
Portfolio will be treated as a partnership for federal and state tax purposes;
and (iii) the Louisiana Fund receives income from obligations, the interest on
which would be exempt from Louisiana individual and corporate income taxes if
held directly by an individual shareholder (such as obligations of Louisiana or
its political subdivisions, of the United States or of certain territories or
possessions of the United States), the dividends received from the Louisiana
Fund that represent interest received by the Louisiana Fund on such obligations
will be exempt from Louisiana individual and corporate income taxes. To the
extent that distributions by the Louisiana Fund are derived from long-term or
short-term capital gains on such obligations, or from dividends or capital gains
on other types of obligations, such distributions will not be exempt from
Louisiana individual and corporate income taxes.
Capital gains or losses realized from a redemption, sale or exchange of shares
of the Louisiana Fund by a Louisiana resident will be taken into account for
Louisiana individual and corporate income tax purposes. Distributions from and
investments in the Louisiana Fund by corporate shareholders who are otherwise
subject to the Louisiana corporate franchise tax will be included in the capital
of such corporations for Louisiana franchise tax purposes.
MARYLAND. Maryland has a diverse economy with government, services and mining,
and manufacturing and trade each accounting for approximately 20%, 31% and 32%
of employment, respectively. In recent years financial operations of the State
have concluded in ending surpluses, although in the early 1990s various cost
containment and tax revenue measures were required. State revenues are largely
dependent on income and sales and use taxes and, relatedly, on general levels of
employment, personal income growth and consumer spending. The national slowdown,
beginning in 1990, impacted the State with total employment declining slightly
in the early 1990s but recovering commencing in 1992. Unemployment in Maryland
for August 1996 was 4.7% versus the national rate of 5.1%.
Generally, Maryland has been among the most heavily indebted of the states. In
recent years increases in State general obligation debt have been controlled.
Since 1991, State tax-supported debt service and debt outstanding have been less
than 3.07% of personal income and 6.74% of State revenues, respectively.
Including local government debt, debt service as a percentage of total revenues
has risen from 8.88% in 1991 to 9.67% in 1994. It should be noted that the
creditworthiness of obligations issued by local Maryland issuers and State
revenue obligations may vary considerably from the creditworthiness of general
obligations bonds issued by the State, and that there is no obligation on the
part of the State to make payment on such local obligations in the event of
default.
The State of Maryland's general obligation bonds are rated AAA, Aaa and AAA, by
S&P, Moody's and Fitch, respectively. Both S&P and Fitch have a stable outlook
for the State.
MARYLAND TAXES. In the opinion of Piper & Marbury, L.L.P., special Maryland tax
counsel to the Maryland Fund, so long as the Maryland Fund qualifies to be taxed
as a regulated investment company in the manner set forth in Section 852(b) of
the Code holders of the Maryland Fund who are individuals, estates or trusts and
who are otherwise subject to Maryland State and local individual income taxes
will not be subject to such taxes on Maryland 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, which are attributable
to interest on tax-exempt obligations of the State of Maryland or its political
subdivisions or authorities, or obligations issued by the government of Puerto
Rico, U.S. Virgin Islands or Guam or their authorities ("Maryland tax-exempt
obligations"), (b) such dividends are attributable to interest on obligations of
the U.S. Government or obligations issued or guaranteed by the U.S. Government
and its agencies, instrumentalities and authorities ("U.S. obligations") or (c)
such dividends are attributable to gain realized by the Maryland Fund as a
result of the sale or exchange by the Maryland Portfolio of a bond issued by the
State of Maryland or a political subdivision thereof.
To the extent that distributions of the Maryland Fund are attributable to
sources other than those described in the preceding paragraph such as short or
long-term capital gain or interest on tax-exempt obligations of states other
than Maryland and their political subdivisions and authorities, such
distributions will not be exempt from Maryland State and local individual income
taxes.
Maryland presently includes in Maryland taxable income a portion of certain
items of tax preferences as defined in the Code. Interest paid on certain
private activity bonds constitutes such a tax preference. Accordingly, up to 50%
of any distributions of the Maryland Fund attributable to such private activity
bonds (other than private activity bonds issued by the State of Maryland, its
political subdivision, or authorities) may not be exempt from Maryland State and
local individual income taxes. The Maryland Portfolio has no present intention
of investing in such securities.
Shareholders of the Maryland Fund that are corporations otherwise subject to
Maryland corporate income tax will not be subject to such tax on Maryland Fund
dividends to the extent that (a) such dividends qualify as exempt-interest
dividends under Section 852(b)(5) of the Code which are attributable to Maryland
tax-exempt obligations, (b) such dividends are attributable to interest on U.S.
obligations or (c) such dividends are attributable to gain realized by the
Maryland Fund as a result of the sale or exchange by the Maryland Portfolio of a
bond issue by the State of Maryland or a political subdivision thereof.
To the extent that distributions of the Maryland Fund are attributable to
sources other than those described in the preceding paragraph such as short or
long-term capital gain or interest on tax-exempt obligations of states other
than Maryland and their political subdivisions and authorities, such
distributions will not be exempt from Maryland corporate income tax.
Shareholders of the Maryland Fund that are financial institutions otherwise
subject to Maryland financial institution franchise taxes will probably be
subject to such taxes on all distributions received from the Maryland Fund
(including exempt-interest dividends).
Interest on indebtedness incurred or continued (directly or indirectly) by a
shareholder of the Maryland Fund to purchase or carry shares of the Maryland
Fund will not be deductible for Maryland State and local individual income tax
purposes or corporate income tax purposes to the extent such interest is
allocable to exempt-interest dividends.
Shares of the Maryland Fund will not be subject to the Maryland personal
property tax.
MISSOURI. The State has a well balanced economy that approximates the national
economy. As a result, the State unemployment rate has typically remained close
to the national average. The civilian unemployment rate for August 1996 was 3.9%
as compared to the August 1995 level of 5.0%. In the early 1990s, the State had
operating deficits resulting from lower collections than budgeted due to the
recession. The State's financial operations have been pressured by the cost
associated with the settlement of the desegregation lawsuit involving the Kansas
City and St. Louis school districts. For fiscal 1995, the cost of the settlement
was $315 million, approximately 7% of the General Fund budget. A recent Supreme
Court decision favorable to the State may decrease the level of State funding
required in the future, but the impact of this decision is uncertain. Economic
reversals in either of the Kansas City or St. Louis metropolitan areas, whose
Missouri portions together contain more than half of the State's population,
would have a major impact on the State's overall economic condition.
An amendment to the State Constitution limits the amount of state taxes which
may be imposed by the General Assembly, as well as the amount of local taxes,
licenses and fees which can be imposed by local governments in any fiscal year.
The details of the amendment are complex and clarification by subsequent
legislation or judicial decision may be necessary.
As of the date of this Prospectus, Missouri's general obligation of debt is
rated AAA, Aaa and AAA, by S&P, Moody's and Fitch, respectively.
MISSOURI TAXES. In the opinion of Bryan Cave, LLP, special Missouri tax counsel
to the Missouri Fund, so long as the Missouri Fund qualifies for Federal income
taxation as a regulated investment company and the Missouri Portfolio is treated
as a partnership for Federal tax purposes, dividends distributed to individual
shareholders of the Missouri Fund will be exempt from the Missouri personal
income tax imposed by Chapter 143 of the Missouri Revised Statutes to the extent
that such dividends qualify as exempt interest dividends of a regulated
investment company under Section 852(b)(5) of the Code and are derived form
interest on obligations of the United States, its authorities, commissions,
instrumentalities, possessions or territories to the extent exempt from Missouri
income taxes under the laws of the United States (including Puerto Rico, Guam
and the U.S. Virgin Islands), or of the State of Missouri or its political
subdivisions. Capital gain dividends, as defined in Section 852(b)(3) of the
Code, distributable by the Missouri Fund to individual resident shareholders of
the Missouri Fund, to the extent includable in Federal adjusted gross income,
will be subject to Missouri income taxation. Shares in the Missouri Fund are not
subject to Missouri personal property taxes.
The Missouri Fund will notify its shareholders within 60 days after the close of
the year as to the amount of interest dividend from Missouri obligations which
is exempt from Missouri personal income taxation.
NORTH CAROLINA. The current economic profile of the State consists of a
combination of industry, agriculture and tourism. Tobacco production, which had
been the leading source of agricultural income in the State, declined in 1995.
Tobacco farming in the State has been and is expected to continue to be affected
by major federal legislation and regulatory measures regarding tobacco
production and marketing and by international competition.
The North Carolina constitution requires that the total expenditures of the
State for the fiscal period covered by each budget not exceed the total of
receipts during the fiscal period and the surplus remaining in the State
Treasury at the beginning of the period. As a result of new taxes, fees and
spending reductions, the State has had a budget surplus since 1994. As of
November, 1996, the amount of uncommitted funds of the State was $586 million.
Fiscal year 1995 ended with a $114 million surplus and a general fund of $1.0
billion. For 1996, revenues were $125 million ahead of budget.
General obligations of the State of North Carolina are rated Aaa, AA and AAA by
Moody's, S&P and Fitch, respectively. Fitch and S&P view the State's credit
trend as "Stable".
NORTH CAROLINA TAXES. In the opinion of Hunton & Williams, special North
Carolina tax counsel to the North Carolina Fund, distributions from the North
Carolina Fund will not be subject to North Carolina individual, trust, or estate
income taxation to the extent that such distributions are either (i) excluded
from federal gross income and represent interest the North Carolina Fund, either
directly or through the North Carolina Portfolio, receives on obligations of
North Carolina or its political subdivisions, nonprofit educational institutions
organized or chartered under the laws of North Carolina, or Puerto Rico, U.S.
Virgin Islands, or Guam or (ii) represent interest the North Carolina Fund,
either directly or through the North Carolina Portfolio, receives on direct
obligations of the United States. These North Carolina income tax exemptions
will be available only if the North Carolina Fund complies with the requirement
of the Code that at least 50% of the value of its assets at the close of each
quarter of its taxable years is invested, either directly or through the North
Carolina Portfolio, in state, municipal, or other obligations described in
(S)103(a) of the Code. The North Carolina Fund intends to comply with that
requirement.
Any capital gains distributed by the North Carolina Fund (except for capital
gain attributable to the sale by the North Carolina Fund or the North Carolina
Portfolio of an obligation the profit from which is exempt by North Carolina
statute) or gains realized by the shareholder from a redemption or sale of
shares of the North Carolina Fund will be subject to North Carolina individual,
trust, or estate income taxation.
Interest on indebtedness incurred (directly or indirectly) by a shareholder of
the North Carolina Fund to purchase or carry shares of the North Carolina Fund
generally will not be deductible for North Carolina income tax purposes.
The opinion of Hunton & Williams is based on a ruling of the North Carolina
Department of Revenue obtained by Hunton & Williams on behalf of the North
Carolina Fund. That ruling is subject to change.
OREGON. According to the September 1996 Oregon Economic and Revenue Forecast
prepared by the State Department of Administrative Services, Oregon's recent
strong growth is expected to slow over the next year, primarily due to a
softening of the State's housing markets, reductions in timber output and
employment, and weaker national demand for Oregon's manufactured products. A
risk to continued economic expansion is further weakness in the semiconductor
industry resulting from excess capacity in the industry. A strong international
export sector, further nonresidential construction activity and a steady stream
of immigration are expected to lead Oregon to outperform the national economy
for the next 5 years. This combination of forces is likely to generate growth,
although increases in personal income and employment are expected to be less
than they were in 1994. Oregon's seasonally adjusted unemployment rate for
August 1996 was 5.4%, compared to a national rate of 5.1%.
Oregon's general obligation debt is rated AA-, Aa and AA, by S&P, Moody's and
Fitch, respectively.
OREGON TAXES. In the opinion of Stoel Rives LLP, special Oregon tax counsel to
the Oregon Fund, so long as the Oregon Fund qualifies to be taxed as a separate
"regulated investment company" under the Code and the Oregon Portfolio is
treated as a partnership (but not a "publicly traded partnership") under the
Code, and so long as the Oregon Fund is deemed under the regulated investment
company provisions of the Code to own its proportionate share of the assets of
the Oregon Portfolio and to be entitled to the income of the Oregon Portfolio
attributable to that share, under existing Oregon law holders of the Oregon Fund
who are individuals, estates or trusts will not be subject to Oregon personal
income tax on Oregon Fund dividends to the extent that such dividends (i)
qualify as "exempt-interest dividends" of a regulated investment company under
the Code and (ii) are attributable to interest on tax-exempt obligations of the
State of Oregon or its political subdivisions or authorities, or obligations
issued by the Governments of Puerto Rico, U.S. Virgin Islands or Guam or their
authorities ("Oregon tax-exempt obligations").
To the extent that distributions of the Oregon Fund are attributable to certain
sources other than interest on Oregon tax-exempt obligations, including all
short-term and long-term capital gain and interest on tax-exempt obligations of
states other than Oregon and their political subdivisions and authorities, such
distributions will not be exempt from Oregon personal income tax for
individuals, estates or trusts otherwise subject to Oregon personal income tax.
Capital gains or losses realized from a redemption, sale or exchange of shares
of the Oregon Fund will be taken into account for Oregon personal income tax
purposes.
No portion of distributions from the Oregon Fund will be exempt from the Oregon
corporation excise tax, which generally applies to financial corporations
"located within" Oregon and other business corporations "doing or authorized to
do business within" Oregon. Oregon imposes a corporate income tax on
corporations not subject to the Oregon corporation excise tax. Corporations
subject to the Oregon corporation income tax should consult their tax advisors
regarding distributions from the Oregon Fund. Shares of the Oregon Fund will not
be subject to Oregon property tax.
SOUTH CAROLINA. After several years of budget short falls in the early 1990's,
South Carolina has nearly eliminated an accumulated unreserved fund balance
deficit. Fiscal year 1995 ended with a $222 million surplus and early estimates
of 1996 revenues indicate they are ahead of budget. South Carolina has
successfully passed balanced budgets without raising taxes.
Although dominated by the textile industry, South Carolina's economic base has
diversified in recent years as the trade and service sectors developed. With
increased added development in the durable goods manufacturing industries, South
Carolina's economy now resembles more closely that of the United States. For
August, 1996, unemployment in South Carolina was 5.9% compared with the national
rate of 5.1%.
South Carolina general obligations are rated Aaa, AA+ (positive), AAA (stable),
by Moody's, S&P and Fitch, respectively. South Carolina was upgraded by S&P from
AA+ to AAA in July, 1996.
SOUTH CAROLINA TAXES. In the opinion of Nelson, Mullins, Riley & Scarborough,
L.L.P., special South Carolina tax counsel to the South Carolina Fund, under
existing South Carolina law as long as the South Carolina Fund qualifies as a
separate "regulated investment company" under the Code, shareholders of the
South Carolina Fund will not be required to include in their South Carolina
gross income distributions from the South Carolina Fund to the extent such
distributions qualify as "exempt-interest dividends" as defined in the Code,
which are directly attributable to interest received by the South Carolina Fund
on tax-exempt obligations issued by the State of South Carolina or its political
subdivisions or the United States. In the event the South Carolina Fund fails to
qualify as a separate "regulated investment company," the foregoing exemption
may be unavailable or substantially limited. The opinion addresses the tax
consequences when the South Carolina Fund invests directly in these obligations.
The application of these consequences to the South Carolina Fund when investing
in interests of another registered investment company was ruled upon favorably
by the South Carolina Tax Commission.
Capital gains distributed by the South Carolina Fund, or gains realized by a
shareholder from a redemption or sale of shares of the South Carolina Fund, will
be subject to South Carolina income taxes.
As intangible personal property, the shares of the South Carolina Fund are
exempt from any and all ad valorem taxation in South Carolina.
TENNESSEE. Historically, the Tennessee economy has been characterized by a
greater concentration in manufacturing employment than the U.S. as a whole. The
economy is, however, undergoing a structural change through the increase in
service sector and trade sector employment. The service and trade sectors each
account for approximately 25% of employment, while manufacturing accounts for
about 23% of employment. The August, 1996 unemployment rate was 4.4%.
Tennessee's financial operations are considerably different than most other
states because there is no state payroll income tax. This factor, together with
the State's reliance on the sales tax for a large percentage of General Fund
receipts, exposes total State tax collections to considerably more volatility
than would otherwise be the case and, in the event of an economic downswing,
could effect the State's ability to pay principal and interest in a timely
manner. Under the State constitution, no debt may be authorized for the current
operation of any State service or program unless repaid within the fiscal year
of issuance. For the fiscal year 1993, a 0.5% increase in the sales tax rate was
enacted and dedicated towards the implementation of certain educational reforms
enacted by the legislature. The State's General Fund balance was reduced by $66
million and $62 million in 1994 and 1995, respectively. Further fiscal weakness
is expected in 1996 and it is uncertain at this time as to the effect this will
have on the credit worthiness of the State.
Tennessee's general obligation debt is rated AA+, Aaa and AAA, by S&P, Moody's
and Fitch, respectively. S&P has a positive outlook for the State.
TENNESSEE TAXES. In the opinion of Hunton & Williams, special Tennessee tax
counsel to the Tennessee Fund, individual shareholders of the Tennessee Fund
will not be subject to Tennessee individual income tax on distributions received
from the Tennessee Fund to the extent such distributions are attributable to
interest the Tennessee Fund, either directly or through the Tennessee Portfolio,
receives on (i) bonds or securities of the U.S. Government or any agency or
instrumentality thereof, (ii) bonds of the State of Tennessee or any county,
municipality or political subdivision thereof, including any agency, board,
authority or commission, or (iii) bonds of Puerto Rico, U.S. Virgin Islands or
Guam.
The opinion of Hunton & Williams is based on a ruling of the Tennessee
Department of Revenue obtained by Hunton & Williams on behalf of the Tennessee
Fund. That ruling is subject to change. The Tennessee Fund will report annually
to its shareholders the percentage and source, on a state-by-state basis, of
interest income received by the Tennessee Fund on municipal bonds during the
preceding year.
On March 16, 1994, the Tennessee Fund received a letter ruling from the
Department of Revenue of the State of Tennessee to the effect that distributions
of capital gains from the Tennessee Fund attributable to tax-exempt securities
are exempt from Tennessee income tax. Tennessee Fund management believes that
Eaton Vance is the only mutual fund sponsor that has obtained such a ruling. The
ruling is subject to change under certain conditions.
VIRGINIA. The Constitution of Virginia requires a balanced budget and limits the
ability of the Commonwealth to create debt. General obligation debt may be
incurred to meet certain short-term needs, to finance capital projects and,
under less stringent restrictions, to finance revenue-producing capital
projects. Also, "special fund" revenue bonds, to which the constitutional debt
restrictions do not apply and which are not supported by the full faith and
credit of the Commonwealth, may be issued to finance qualifying Commonwealth
revenue projects.
General obligations of cities, towns and counties are payable from the general
revenues of the entity, including ad valorem tax revenues on property within the
jurisdiction. Revenue obligations issued by other entities are customarily
payable only from revenues from the particular project or projects involved. The
Commonwealth has maintained a high level of fiscal stability for many years due
in large part to conservative financial operations and diverse sources of
revenue. The budget for the 1994-96 biennium submitted by the Governor does not
contemplate any significant new taxes or increases in the scope or amount of
existing taxes.
The economy of Virginia is based primarily on manufacturing, the government
sector, agriculture, mining and tourism, and unemployment rates are typically
below the national average. August 1996 unemployment was 4.0% versus a national
rate of 5.1%. The Commonwealth has a long history of fiscal stability, due in
large part to a conservative financial philosophy, broad-based employment
opportunities and diverse sources of revenue. In the past decade, however, the
Commonwealth has experienced cycles of financial stringency. No significant new
taxes or increases were enacted by the General Assembly at the 1995 session.
As a result of litigation involving proceedings before the United States Supreme
Court, the Commonwealth may be obligated to refund tax payments made by federal
pensioners of up to $707.5 million. Legislation has been enacted to effect a
settlement of the litigation, but a significant number of federal pensioners
opted out of the settlement, necessitating its reauthorization in 1995, and
there can be no assurance that it will result in release of the pensioners'
claims and dismissal of their lawsuits.
General obligations of Virginia are rated Aaa, AAA, and AAA by Moody's, S&P and
Fitch, respectively.
VIRGINIA TAXES. In the opinion of Hunton & Williams, special Virginia tax
counsel to the Virginia Fund, under existing Virginia law, distributions from
the Virginia Fund will not be subject to Virginia individual, trust, estate, or
corporate income taxation to the extent that such distributions are either (i)
excluded from federal gross income and attributable to interest the Virginia
Fund, either directly or through the Virginia Portfolio, receives on obligations
of Virginia, its political subdivisions, or its instrumentalities, or Puerto
Rico, U.S. Virgin Islands, or Guam or (ii) attributable to interest the Virginia
Fund, either directly or through the Virginia Portfolio, receives on direct
obligations of the United States. These Virginia income tax exemptions will be
available only if the Virginia Fund complies with the requirement of the Code
that at least 50% of the value of its assets at the close of each quarter of its
taxable year is invested, either directly or through the Virginia Portfolio, in
state, municipal, or other obligations described in (S)103(a) of the Code. The
Virginia Fund intends to comply with that requirement.
Other distributions from the Virginia Fund, including capital gains, generally
will not be exempt from Virginia income taxation.
Interest on indebtedness incurred (directly or indirectly) by shareholders to
purchase or carry shares of the Virginia Fund generally will not be deductible
for Virginia income tax purposes.
Neither the Trust nor the Virginia Fund will be subject to any Virginia
intangible property tax on any obligations in the Virginia Portfolio. In
addition, shares of the Virginia Fund held for investment purposes will not be
subject to any Virginia intangible personal property tax.
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
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Mutual Funds
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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
PROSPECTUS
SEPTEMBER 1, 1997
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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
M-TFC12/1P
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PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
September 1, 1997
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<S> <C>
EATON VANCE ALABAMA MUNICIPALS FUND EATON VANCE MISSOURI MUNICIPALS FUND
EATON VANCE ARKANSAS MUNICIPALS FUND EATON VANCE NORTH CAROLINA MUNICIPALS FUND
EATON VANCE GEORGIA MUNICIPALS FUND EATON VANCE OREGON MUNICIPALS FUND
EATON VANCE KENTUCKY MUNICIPALS FUND EATON VANCE SOUTH CAROLINA MUNICIPALS FUND
EATON VANCE LOUISIANA MUNICIPALS FUND EATON VANCE TENNESSEE MUNICIPALS FUND
EATON VANCE MARYLAND MUNICIPALS FUND EATON VANCE VIRGINIA MUNICIPALS FUND
</TABLE>
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 ......................................... 16
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 ................................. 27
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 might become liable for a misstatement or omission in
this Statement of Additional Information regarding another Fund because the
Funds use this combined Statement of Additional Information. The Trustees of
the Trust have considered this factor in approving the use of a combined
Statement of Additional Information.
THIS COMBINED STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND
IS AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY THE FUNDS' PROSPECTUS DATED SEPTEMBER 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. However, in
particular cases, when it is economically advantageous for the Portfolio to do
so, a long futures position may be terminated (or an option may expire)
without the corresponding purchase of securities. 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, the lending of portfolio
securities or futures contracts and options (other than options that the
Portfolio has purchased) expose the Portfolio to an obligation to another
party. 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 each 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 by a Portfolio with respect to the
Portfolio without approval by 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 since August 11, 1992, and of Eaton Vance and EV.
Officer of various investment companies managed by Eaton Vance or BMR. Mr.
MacIntosh was elected Vice President of the Trust on March 22, 1993.
JAMES L. O'CONNOR (52), Treasurer
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
THOMAS OTIS (65), Secretary
Vice President and Secretary of BMR, Eaton Vance, EVC and EV. Officer of
various investment companies managed by Eaton Vance or BMR.
JANET E. SANDERS (61), Assistant Secretary
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
A. JOHN MURPHY (34), Assistant Secretary
Assistant Vice President of BMR, Eaton Vance and EV since March 1, 1994;
employee of Eaton Vance since March 1993. State Regulations Supervisor, The
Boston Company (1991-1993). Officer of various investment companies managed
by Eaton Vance or BMR. Mr. Murphy was elected Assistant Secretary 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 Alabama Portfolio. Mr. Ahern has served as Vice
President of the Portfolio since June 23, 1997. Nicole Anderes (35) is a Vice
President of the Kentucky Portfolio. Ms. Anderes has served as a Vice President
of the Kentucky Portfolio since November 18, 1996. 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 Arkansas, Maryland and Virginia Portfolios. Mr.
Browse has served as a Vice President of the Arkansas and Maryland Portfolios
since June 19, 1995 and of the Virginia Portfolio since November 18, 1996.
Cynthia J. Clemson (34), Vice President of Eaton Vance and BMR, is a Vice
President of the Georgia, Missouri and Tennessee Portfolios. Ms. Clemson has
served as a Vice President of the Georgia Portfolio since December 18, 1995 and
of the Missouri and Tennessee Portfolio since June 19, 1995. Thomas M. Metzold
(38), Vice President of Eaton Vance and BMR, is a Vice President of the Oregon
Portfolio. Mr. Metzold has served as a Vice President of the Oregon Portfolio
since November 18, 1996. Ms. Anderes and Ms. Clemson, and Messrs. Ahern, 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 August 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) $ 13,745 $ 12,612 $ 12,519 $ 12,719 $ 13,636
Alabama Portfolio 1,542 1,687 1,645 1,729 1,683
Arkansas Portfolio 1,129 1,308 1,268 1,348 1,274
Georgia Portfolio 1,542 1,687 1,645 1,729 1,683
Kentucky Portfolio 1,542 1,687 1,645 1,729 1,683
Louisiana Portfolio 343 316 314 318 314
Maryland Portfolio 1,542 1,687 1,645 1,729 1,683
Missouri Portfolio 1,129 1,308 1,268 1,348 1,274
North Carolina Portfolio 2,091 2,192 2,147 2,238 2,228
Oregon Portfolio 1,542 1,687 1,645 1,729 1,683
South Carolina Portfolio 1,129 1,308 1,268 1,348 1,274
Tennessee Portfolio 1,129 1,308 1,268 1,348 1,274
Virginia Portfolio 2,091 2,192 2,147 2,238 2,228
------- ------- ------- ------- -------
Trust and Fund Complex $142,500(5) $153,750(6) $142,500 $147,500 $147,500
</TABLE>
- ----------
(1) The Eaton Vance fund complex consists of 213 registered investment
companies or series thereof.
(2) The Trust consisted of 60 Funds as of August 31, 1996.
(3) Mr. Dwight received deferred compensation from each Portfolio as follows:
Alabama - $1,542; Arkansas - $1,129; Georgia - $1,542; Kentucky - $1,542;
Louisiana - $343; Maryland - $1,542; Missouri - $1,129; North Carolina -
$2,091; Oregon - $1,542; South Carolina - $1,129; Tennessee - $1,129;
Virginia - $2,091.
(4) Mr. Hayes received deferred compensation from each Portfolio as follows:
Alabama - $1,687; Arkansas - $1,308; Georgia - $1,687; Kentucky - $1,687;
Louisiana - $316; Maryland - $1,687; Missouri - $1,308; North Carolina -
$2,192; Oregon - $1,687; South Carolina - $1,308; Tennessee - $1,308;
Virginia - $2,192.
(5) Includes $42,500 of deferred compensation.
(6) Includes $37,500 of deferred compensation.
<PAGE>
INVESTMENT ADVISER AND ADMINISTRATOR
Each Portfolio engages BMR as investment adviser pursuant to Investment
Advisory Agreements each dated October 13, 1992. BMR or Eaton Vance acts as
investment adviser to investment companies and various individual and
institutional clients with combined assets under management of over $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
Fund's 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. The Investment Advisory Agreement requires BMR to pay the
salaries and fees of all officers and Trustees of the Portfolio who are
members of the BMR organization and all personnel of BMR performing services
relating to research and investment activities. The Portfolio is responsible
for all expenses not expressly stated to be payable by BMR under the
Investment Advisory Agreement, including, without implied limitation, (i)
expenses of maintaining the Portfolio and continuing its existence, (ii)
registration of the Portfolio under the 1940 Act, (iii) commissions, fees and
other expenses connected with the acquisition, holding and disposition of
securities and other investments, (iv) auditing, accounting and legal
expenses, (v) taxes and interest, (vi) governmental fees, (vii) expenses of
issue, sale and redemption of interests in the Portfolio, (viii) expenses of
registering and qualifying the Portfolio and interests in the Portfolio under
federal and state securities laws and of preparing and printing registration
statements or other offering statements or memoranda for such purposes and for
distributing the same to investors, and fees and expenses of registering and
maintaining registrations of the Portfolio and of the Portfolio's placement
agent as broker-dealer or agent under state securities laws, (ix) expenses of
reports and notices to investors and of meetings of investors and proxy
solicitations therefor, (x) expenses of reports to governmental officers and
commissions, (xi) insurance expenses, (xii) association membership dues,
(xiii) fees, expenses and disbursements of custodians and subcustodians for
all services to the Portfolio (including without limitation safekeeping of
funds, securities and other investments, keeping of books, accounts and
records, and determination of net asset values, book capital account balances
and tax capital account balances), (xiv) fees, expenses and disbursements of
transfer agents, dividend disbursing agents, investor servicing agents and
registrars for all services to the Portfolio, (xv) expenses for servicing the
accounts of investors, (xvi) any direct charges to investors approved by the
Trustees of the Portfolio, (xvii) compensation and expenses of Trustees of the
Portfolio who are not members of BMR's organization, and (xviii) such non-
recurring items as may arise, including expenses incurred in connection with
litigation, proceedings and claims and any legal obligation of the Portfolio
to indemnify its Trustees, officers and investors with respect thereto, to the
extent not covered by insurance.
The following table sets forth the net assets of each Portfolio and the
advisory fees earned during the fiscal years ended August 31, 1996, 1995 and
1994.
<TABLE>
<CAPTION>
ADVISORY FEE FOR FISCAL YEARS ENDED
NET ASSETS -----------------------------------
PORTFOLIO AT 8/31/96 AUGUST 31, 1996 AUGUST 31, 1995 AUGUST 31, 1994*
- --------- ---------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
Alabama $108,543,550 $455,711 $466,320 $373,047
Arkansas(1) 74,103,217 280,071 296,231 84,274
Georgia 108,974,295 473,056 521,159 496,637
Kentucky 133,017,453 577,479 595,483 510,287
Louisiana(2) 35,048,671 81,858 73,471 34,790
Maryland 110,588,345 454,842 459,907 390,773
Missouri 85,162,363 339,243 353,176 296,556
North Carolina 187,044,385 832,564 851,448 744,143
Oregon 129,758,655 574,189 609,837 534,681
South Carolina 58,318,147 201,026 198,498 106,785
Tennessee 56,065,353 181,502 177,788 125,060
Virginia 177,644,321 811,731 834,074 744,841
</TABLE>
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* For the eleven months ended August 31, 1994
(1) To enhance the net income of the Arkansas Portfolio, BMR made a reduction
of its advisory fee for the eleven months ended August 31, 1994 in the
amount of $88,417.
(2) To enhance the net income of the Louisiana Portfolio, BMR made a reduction
of its advisory fee for the periods ended August 31, 1996, 1995 and 1994
in the amount of $40,000, $36,188 and $31,760, respectively.
The 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. The Agreement
may be terminated at any time without penalty on sixty (60) days' written
notice by the Board of Trustees of either party, or by vote of the majority of
the outstanding voting securities of the Portfolio, and the Agreement will
terminate automatically in the event of its assignment. The Agreement provides
that BMR may render services to others. The Agreement also provides that BMR
shall not be liable for any loss incurred in connection with the performance
of its duties, or action taken or omitted under that Agreement, in the absence
of willful misfeasance, bad faith, gross negligence in the performance of its
duties or by reason of its reckless disregard of its obligations and duties
thereunder, or for any losses sustained in the acquisition, holding or
disposition of any security or other investment.
As indicated in the Prospectus, Eaton Vance serves as Administrator of the
Fund, but currently receives no compensation for providing administrative
services to the Fund. Under its Administrative Services Agreement with the
Fund, Eaton Vance has been engaged to administer the Fund's affairs, subject
to the supervision of the Trustees of the Trust, and shall furnish for the use
of the Fund office space and all necessary office facilities, equipment and
personnel for administering the affairs of the Fund.
The Fund pays all of its own expenses including, without limitation, (i)
expenses of maintaining the Fund and continuing its existence, (ii) its pro
rata share of 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 June 30, 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.
In addition, Eaton Vance owns all the stock of Northeast Properties, Inc.,
which is engaged in real estate investment. EVC owns all the stock of Fulcrum
Management, Inc., and MinVen Inc., which are engaged in precious metal mining
venture investment and management. EVC also owns 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 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 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 also computed by IBT (as agent and
custodian for the Portfolio) by subtracting the liabilities of the Portfolio
from the value of its total assets. Inasmuch as the market for municipal
obligations is a dealer market with no central trading location or continuous
quotation system, it is not feasible to obtain last transation prices for most
municipal obligations held by the Portfolio, and such obligations, including
those purchaed on a when-issued basis, will normally be valued on the basis of
valuations furnished by a pricing service. The pricing service uses
information with respect to transactions in bonds, quotations from bond
dealers, market transactions in comparable securities, various relationships
between securities, and yield to maturity in determining value. Taxable
obligations for which price quotations are readily available normally will be
valued at the mean between the latest available bid and asked prices. Open
futures positions on debt securities are valued at the most recent settlement
prices, unless such price does not reflect the fair value of the contract, in
which case the positions will be valued by or at the direction of the Trustees
of the Portfolio. Other assets are valued at fair value using methods
determined in good faith by or at the direction of the Trustees of the
Portfolio. The Fund and the Portfolio will be closed for business and will not
price their respective shares or interests on the following business holidays:
New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day.
Each investor in the Portfolio, including the Fund, may add to or reduce
its investment in the Portfolio on each day the Exchange is open for trading
("Portfolio Business Day") as of the close of regular trading on the Exchange
(the "Portfolio Valuation Time"). The value of each investor's interest in the
Portfolio will be determined by multiplying the net asset value of the
Portfolio by the percentage, determined on the prior Portfolio Business Day,
which represented that investor's share of the aggregate interests in the
Portfolio on such prior day. Any additions or withdrawals for the current
Portfolio Business Day will then be recorded. Each investor's percentage of
the aggregate interest in the Portfolio will then be recomputed as a
percentage equal to a fraction (i) the numerator of which is the value of such
investor's investment in the Portfolio as of the Portfolio Valuation Time on
the prior Portfolio Business Day plus or minus, as the case may be, the amount
of any additions to or withdrawals from the investor's investment in the
Portfolio on the current Portfolio Business Day and (ii) the denominator of
which is the aggregate net asset value of the Portfolio as of the Portfolio
Valuation Time on the prior Portfolio Business Day plus or minus, as the case
may be, the amount of the net additions to or withdrawals from the aggregate
investment in the Portfolio on the current Portfolio Business Day by all
investors in the Portfolio. The percentage so determined will then be applied
to determine the value of the investor's interest in the Portfolio for the
current Portfolio Business Day.
INVESTMENT PERFORMANCE
Average annual total return is determined by multiplying a hypothetical
initial purchase order of $1,000 by the average annual compound rate of return
(including capital appreciation/depreciation, and distributions paid and
reinvested) for the stated period and annualizing the result. The calculation
assumes that all distributions are reinvested at net asset value on the
reinvestment dates during the period, and either (i) the deduction of the
maximum sales charge from the initial $1,000 purchase order or (ii) a complete
redemption of the investment and, if applicable, the deduction of the CDSC at
the end of the period. For further information concerning the total return of
a Fund, see Appendix A and B.
Yield is computed pursuant to a standardized formula by dividing the net
investment income per share earned during a recent thirty-day period by the
maximum offering price (including; if applicable, the maximum sales charge)
per share on the last day of the period and annualizing the resulting figure.
Net investment income per share is calculated from the yields to maturity of
all debt obligations held by the Portfolio based on prescribed methods,
reduced by accrued Fund expenses for the period with the resulting number
being divided by the average daily number of Fund shares outstanding and
entitled to receive distributions during the period. This yield figure does
not reflect the deduction of any 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 sales charge (if
applicable) 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 Fund, see Appendix A and B.
The Principal Underwriter may publish to Authorized Firms the Fund's
distribution rate and/or its effective distribution rate. The Fund's
distribution rate is computed by dividing the most recent monthly distribution
per share annualized, by the current net asset value per share or, where
applicable, the maximum public offering price per share (which includes the
maximum initial sales charge). The Fund's effective distribution rate is
computed by dividing the distribution rate by the ratio (the days in a year
divided by the accrual days of the monthly period) used to annualize the most
recent monthly distribution and reinvesting the resulting amount for a full
year on the basis of such ratio. The effective distribution rate will be
higher than the distribution rate because of the compounding effect of the
assumed reinvestment. Investor's should note that the Fund's yield is
calculated using a standardized formula, the income component of which is
computed from the yields to maturity of all debt obligations held by the
Portfolio based on prescribed methods (with all purchases and sales of
securities during such period included in the income calculation on a
settlement date basis), whereas the distribution rate is based on the Fund's
last monthly distribution which tends to be relatively stable and may be more
or less than the amount of net investment income and short-term capital gain
actually earned by the Fund during the month.
The Fund's total return may be compared to relevant indices, such as the
Consumer Price Index, the Bond Buyer 25 Revenue Bond Index and the Lehman
Brothers Municipal Bond Index, which may be used in advertisements and in
information furnished to present or prospective shareholders. The Fund's
performance may differ from that of other investors in the Portfolio,
including other investment companies.
The Fund may provide investors with information on municipal bond
investing, which may include comparative performance information, evaluations
of Fund performance, charts and/or illustrations prepared by independent
sources (such as Lipper Analytical Services Inc., CDA/Wiesenberger,
Morningstar, Inc., The Bond Buyer, the Federal Reserve Board or The Wall
Street Journal). The Fund may also refer in investor publications to Tax
Freedom Day, as computed by the Tax Foundation, Washington, DC 20005, to help
illustrate the value of tax free investing, as well as other tax-related
information. Information, charts and illustrations showing the effects of
inflation and taxes (including their effects on the dollar and the return on
various investments) and compounding earnings may also be included in
advertisements and materials furnished to present and prospective investors.
Information about portfolio allocation and holdings of the Portfolio at a
particular date (including ratings assigned by independent ratings services
such as Moody's, S&P and Fitch) may be included in advertisements and other
material furnished to present and prospective shareholders. Such information
may be stated as a percentage of the Portfolio's bond holdings on such date.
Comparative information about the yield or distribution rate of the Fund
and about average rates of return on certificates of deposit, bank money
market deposit accounts, money market mutual funds and other short-term
investments may also be included in advertisements, supplemental sales
literature or communications of the Fund. Such information may also compare
the tax equivalent yield (or value) of the Fund to the after-tax yield (or
value) of such other investment vehicles. Such information may be in the form
of hypothetical illustrations. A bank certificate of deposit, unlike the
Fund's shares, pays a fixed rate of interest and entitles the depositor to
receive the face amount of the certificate of deposit at maturity. A bank
money market deposit account is a form of savings account which pays a
variable rate of interest. Unlike the Fund's shares, bank certificates of
deposit and bank money market deposit accounts are insured by the Federal
Deposit Insurance Corporation. A money market mutual fund is designed to
maintain a constant value of $1.00 per share and, thus, a money market fund's
shares are subject to less price fluctuation than the Fund's shares.
The average rates of return of money market mutual funds, certificates of
deposit and bank money market deposit accounts referred to in advertisements,
supplemental sales literature or communications of the Fund will be based on
rates published by the Federal Reserve Bank, Donoghues Money Fund Averages,
RateGram or The Wall Street Journal.
Information used in advertisements and materials furnished to present and
prospective investors may include statements or illustrations relating to the
appropriateness of certain types of securities and/or mutual funds to meet
specific financial goals. Such information may address:
- cost associated with aging parents;
- funding a college education (including its actual and estimated
cost);
- health care expenses (including actual and projected expenses);
- long-term disabilities (including the availability of, and coverage
provided by, disability insurance); and
- retirement (including the availability of social security benefits,
the tax treatment of such benefits and statistics and other
information relating to maintaining a particular standard of living
and outliving existing assets).
Such information may also address different methods for saving money and
the results of such methods, as well as the benefits of investing in municipal
bond funds. Such information may describe the following advantages of
investing in a municipal bond mutual fund versus individual municipal bonds:
regular monthly income; free reinvestment of distributions; potential for
increased income; bond diversification; liquidity; low-cost easy access; and
active management and in depth credit analysis by investment professionals. In
addition, by investing in a municipal bond fund instead of individual bonds,
an investor can avoid dealing with the complexities of the municipal bond
market, while benefitting from the market access and lower transactions costs
enjoyed by municipal bond funds.
The Fund may provide information about Eaton Vance, its affiliates and
other investment advisers to the funds in the Eaton Vance Family of Funds in
sales material or advertisements provided to investors or prospective
investors. Such material or advertisements may also provide information on the
use of investment professionals by such investors.
TAXES
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 its
net investment income (including tax-exempt income) and net realized capital
gains (after reduction by any available capital loss carryforwards) in
accordance with the timing requirements imposed by the Code, so as to avoid
any federal income or excise tax on the Fund. Each Fund so qualified for its
fiscal year ended August 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 satisfy them. 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 will be deemed (i) to own its proportionate share of each of the assets
of the corresponding Portfolio and (ii) to be entitled to the gross income of
that Portfolio attributable to such share.
In order to avoid federal excise tax, 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 the excess of its realized capital gains over its
realized capital losses, generally computed on the basis of the one-year
period ending on October 31 of such year, after reduction by any available
capital loss carryforwards, and 100% of any income from the prior year (as
previously computed) that was not paid out during such year and on which the
Fund paid no federal income tax. Under current law, provided that a Fund
qualifies as a RIC for federal income tax purposes and a Portfolio is treated
as a partnership for Massachusetts and federal tax purposes, neither the Fund
nor the Portfolio is liable for any income, corporate excise or franchise tax
in the Commonwealth of Massachusetts.
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 portfolio securities that it might
otherwise have continued to hold in order to generate cash that the Fund may
withdraw from the Portfolio for subsequent distribution to Fund shareholders.
Investments in lower-rated or unrated securities may present special tax
issues for a Portfolio and hence for the relevant Fund to the extent actual or
anticipated defaults may be more likely with respect to such securities. Tax
rules are not entirely clear about issues such as when a Portfolio may cease
to accrue interest, original issue discount, or market discount; when and to
what extent deductions may be taken for bad debts or worthless securities; how
payments received on obligations in default should be allocated between
principal and income; and whether exchanges of debt obligations in a workout
context are taxable.
Distributions by 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 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 qualification
as a RIC for federal income tax purposes.
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
and certain certifications required by the Internal Revenue Service (the
"IRS") as well as shareholders with respect to whom the Fund has received
notification from the IRS or a broker, may be subject to "backup" withholding
of federal income tax from the Fund's taxable dividends and distributions and
the proceeds of redemptions (including repurchases and exchanges), at a rate
of 31%. An individual's taxpayer identification number is generally his or her
social security number.
Non-resident alien individuals, foreign corporations and certain other
foreign entities generally will be subject to a U.S. withholding tax at a rate
of 30% on 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 treaty. 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 result if
the shareholder is engaged in a trade or business in the United States, is
present in the United States for a sufficient period of time during a taxable
year to be treated as a U.S. resident, or fails to provide any required
certifications regarding status as a non-resident alien investor. Foreign
shareholders should consult their tax advisers regarding the U.S. and foreign
tax consequences of an investment in a Fund.
The foregoing discussion does not address the special tax rules applicable
to certain classes of investors, such as tax-exempt entities, insurance
companies and financial institutions. Shareholders should consult their own
tax advisers with respect to special tax rules that may apply in their
particular situations, as well as the state, local or foreign tax consequences
of investing in 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 Class A share 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 the Fund. The Plan has been approved by the Board of Trustees of
the Trust, including the Plan Trustees.
Under the Plan, the President or a Vice President of the Trust shall
provide to the Trustees for their review, and the Trustees shall review at
least quarterly, a written report of the amount expended under the Plan and
the purposes for which such expenditures were made. The Plan may not be
amended to increase materially the payments described herein without approval
of the shareholders of 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 the Fund and its Class A shareholders.
DISTRIBUTION PLAN -- 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 to the Fund.
The Plan provides that the Fund will pay sales commissions and
distribution fees to the Principal Underwriter only after and as a result of
the sale of shares of the Fund. On each sale of Fund shares (excluding
reinvestment of distributions) the Fund will pay the Principal Underwriter
amounts representing (i) sales commissions equal to 5% of the amount received
by the Fund for each share sold and (ii) distribution fees calculated by
applying the rate of 1% over the prime rate then reported in The Wall Street
Journal to the outstanding balance of uncovered distribution charges (as
described below) of the Principal Underwriter.
The amount payable by the Fund to the Principal Underwriter pursuant to
the Plan as sales commissions and distribution fees with respect to each day
will be accrued on such day as a liability of the Fund and will accordingly
reduce the Fund's net assets upon such accrual, all in accordance with
generally accepted accounting principles. The amount payable on each day by
the Fund is limited to 1/365 of .75% of the Fund's net assets on such day.
The level of the Fund's net assets changes each day and depends upon the
amount of sales and redemptions of Fund shares, the changes in the value of
the investments held by the Portfolio, the expenses of the Fund and the
Portfolio accrued and allocated to the Fund on such day, income on portfolio
investments of the Portfolio accrued and allocated to the Fund on such day,
and any dividends and distributions declared on Fund shares. The Fund does not
accrue possible future payments as a liability of the Fund or reduce the
Fund's current net assets in respect of unknown amounts which may become
payable under the Plan in the future because the standards for accrual of such
a liability under accounting principles have not been satisfied.
The Plan provides that the Fund will receive all CDSCs and will make no
payments to the Principal Underwriter in respect of any day on which there are
no outstanding uncovered distribution charges of the Principal Underwriter.
CDSCs and accrued amounts will be paid by the Fund to the Principal
Underwriter whenever there exist uncovered distribution charges.
In calculating daily the amount of uncovered distribution charges,
distribution charges will include the aggregate amount of sales commissions
and distribution fees theretofore paid plus the aggregate amount of sales
commissions and distribution fees which the Principal Underwriter is entitled
to be paid under the Plan since its inception. Payments theretofore paid or
payable under the Plan by the Fund to the Principal Underwriter and CDSCs
theretofore paid or payable to the Principal Underwriter will be subtracted
from such distribution charges; if the result of such subtraction is positive,
a distribution fee (computed at 1% over the prime rate then reported in The
Wall Street Journal) will be computed on such amount and added thereto, with
the resulting sum constituting the amount of outstanding uncovered
distribution charges with respect to such day. The amount of outstanding
uncovered distribution charges of the Principal Underwriter calculated on any
day does not constitute a liability recorded on the financial statements of
the Fund.
The amount of uncovered distribution charges of the Principal Underwriter
at any particular time depends upon various changing factors, including the
level and timing of sales of Fund shares, the nature of such sales (i.e.,
whether they result from exchange transactions, reinvestments or from cash
sales through Authorized Firms), the level and timing of redemptions of Fund
shares upon which a CDSC will be imposed, the level and timing of redemptions
of Fund shares upon which no CDSC will be imposed (including redemptions of
Fund shares pursuant to the exchange privilege which result in a reduction of
uncovered distribution charges), changes in the level of the net assets of the
Fund, and changes in the interest rate used in the calculation of the
distribution fee under the Plan. Periods with a high level of sales of Fund
shares accompanied by a low level of early redemptions of Fund shares
resulting in the imposition of CDSCs will tend to increase the time during
which there will exist uncovered distribution charges of the Principal
Underwriter.
Currently, payments of sales commissions and distribution fees and of
service fees may equal 1% of the Fund's average daily net assets per annum.
For actual payments made by the Fund and the outstanding uncovered
distribution charges of the Principal Underwriter, see Appendix B. The Fund
believes that the combined rate of all these payments may be higher than the
rate of payments made under distribution plans adopted by other investment
companies pursuant to Rule 12b-1. Although the Principal Underwriter will use
its own funds (which may be borrowed from banks) to pay sales commissions at
the time of sale, it is anticipated that the Eaton Vance organization will
profit by reason of the operation of the Plan through an increase in the
Fund's assets (thereby increasing the advisory fee payable to BMR by the
Portfolio) resulting from sale of Fund shares and through the amounts paid to
the Principal Underwriter, including CDSCs, pursuant to the Plan. The Eaton
Vance organization may be considered to have realized a profit under the Plan
if at any point in time the aggregate amounts theretofore received by the
Principal Underwriter pursuant to the Plan and from CDSCs have exceeded the
total expenses theretofore incurred by such organization in distributing
shares of the Fund. Total expenses for this purpose will include an allocable
portion of the overhead costs of such organization and its branch offices,
which costs will include without limitation leasing expense, depreciation of
building and equipment, utilities, communication and postage expense,
compensation and benefits of personnel, travel and promotional expense,
stationery and supplies, literature and sales aids, interest expense, data
processing fees, consulting and temporary help costs, insurance, taxes other
than income taxes, legal and auditing expense and other miscellaneous overhead
items. Overhead is calculated and allocated for such purpose by the Eaton
Vance organization in a manner deemed equitable to the Fund.
The Plan continues in effect 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 Fund. 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 Fund 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 the Fund's assets, and will result in
increased investment flexibility and advantages which have benefitted and will
continue to benefit the Fund and its shareholders. Payments for sales
commissions and distribution fees made to the Principal Underwriter under the
Plan will compensate the Principal Underwriter for its services and expenses
in distributing shares of the Fund. Service fee payments made to the Principal
Underwriter and Authorized Firms under the Plan provide incentives to provide
continuing personal services to investors and the maintenance of shareholder
accounts. By providing incentives to the Principal Underwriter and Authorized
Firms, the Plan is expected to result in the maintenance of, and possible
future growth in, the assets of the Fund. Based on the foregoing and other
relevant factors, the Trustees of the Trust have determined that in their
judgment there is a reasonable likelihood that the Plan will benefit the Fund
and its shareholders.
PORTFOLIO SECURITY TRANSACTIONS
Decisions concerning the execution of portfolio security transactions,
including the selection of the market and the executing firm, are made by BMR.
BMR is also responsible for the execution of transactions for all other
accounts managed by it.
BMR places the portfolio security transactions of 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 August 31,
1996, 1995 and 1994 brokerage commission paid by each Portfolio:
<TABLE>
<CAPTION>
PORTFOLIO 8/31/96 8/31/95 8/31/94*
- --------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Alabama ................................................ $ -0- $ -0- $ -0-
Arkansas ............................................... 20,283 -0- -0-
Georgia ................................................ 17,018 -0- -0-
Kentucky ............................................... 43,344 -0- -0-
Louisiana .............................................. 7,029 -0- -0-
Maryland ............................................... 15,543 -0- -0-
Missouri ............................................... 15,858 -0- -0-
North Carolina ......................................... 26,538 -0- -0-
Oregon ................................................. 39,752 -0- -0-
South Carolina ......................................... 18,253 -0- -0-
Tennessee .............................................. 9,892 -0- -0-
Virginia ............................................... 50,618 -0- -0-
</TABLE>
*Eleven months ended August 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 August 31, 1996 were as follows: Alabama -- $0;
Arkansas -- $144,975,283; Georgia -- $146,330,600; Kentucky -- $237,637,801;
Louisiana -- $59,248,516; Maryland -- $136,017,108; Missouri -- $211,176,593;
North Carolina -- $211,176,598; Oregon -- $204,677,669; South Carolina --
$136,816,360; Tennessee -- $85,993,505; and Virginia -- $247,838,146.
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 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. 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 holding
office have been elected by investors. In such an event the Trustees of the
Portfolio then in office will call an investors' meeting for the election of
Trustees. Except for the foregoing circumstances and unless removed by action
of the investors in accordance with the Portfolio's Declaration of Trust, the
Trustees shall continue to hold office and may appoint successor Trustees.
The Declaration of Trust of the Portfolio provides that no person shall
serve as a Trustee if investors holding two-thirds of the outstanding interest
have removed him from that office either by a written declaration filed with
the Portfolio's custodian or by votes cast at a meeting called for that
purpose. The Declaration of Trust further provides that under certain
circumstances the investors may call a meeting to remove a Trustee and that
the Portfolio is required to provide assistance in communicating with
investors about such a meeting.
The Portfolio's Declaration of Trust provides that the Portfolio will
terminate 120 days after the complete withdrawal of the Fund or any other
investor in the Portfolio, unless either the remaining investors, by unanimous
vote at a meeting of such investors, or a majority of the Trustees of the
Portfolio, by written instrument consented to by all investors, agree to
continue the business of the Portfolio. This provision is consistent with
treatment of the Portfolio as a partnership for federal income tax purposes.
The right to redeem shares of the Fund can be suspended and the payment of
the redemption price deferred when the Exchange is closed (other than for
customary weekend and holiday closings), during periods when trading on the
Exchange is restricted as determined by the Commission, or during any
emergency as determined by the Commission which makes it impracticable for the
Portfolio to dispose of its securities or value its assets, or during any
other period permitted by order of the Commission for the protection of
investors.
Each Fund (Class A) changed its name from EV Classic [state name] Tax Free
Fund to EV Classic [state name] Municipals Fund on January 1, 1996. The Alabama,
Arkansas, Georgia, Kentucky, Louisiana, Maryland, Missouri, North Carolina,
Oregon, South Carolina, Tennessee and Virginia Funds changed their names to EV
Traditional [state name] Municipals Fund on February 1, 1996. Each Fund was
reorganized as Class A shares of an Eaton Vance [state name] Municipals Fund on
September 1, 1997, so information herein prior to such date is for the Fund when
it was a separate series of the Trust and before it became a multiple-class
fund.
Each Fund (Class B) 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 January 1, 1996. Each Fund was renamed
Class B shares of an Eaton Vance [state name] Municipals Fund on September 1,
1997, so information herein prior to such date is for the Fund when it was a
separate series of the Trust and before it became a multiple-class fund.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Deloitte & Touche LLP, 125 Summer Street, Boston, Massachusetts, are the
independent certified public accountants of the Fund and the Portfolio,
providing audit services, tax return preparation, and assistance and
consultation with respect to the preparation of filings with the Commission.
FINANCIAL STATEMENTS
The 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 Fund's 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 August 31,
1996, as previously filed electronically with the Commission:
EV Marathon Alabama Municipals Fund Alabama Portfolio
EV Marathon Arkansas Municipals Fund Arkansas Portfolio
EV Marathon Georgia Municipals Fund Georgia Portfolio
EV Marathon Kentucky Municipals Fund Kentucky Portfolio
EV Marathon Louisiana Municipals Fund Louisiana Portfolio
EV Marathon Maryland Municipals Fund Maryland Portfolio
EV Marathon Missouri Municipals Fund Missouri Portfolio
EV Marathon North Carolina Municipals Fund North Carolina Portfolio
EV Marathon Oregon Municipals Fund Oregon Portfolio
EV Marathon South Carolina Municipals Fund South Carolina Portfolio
EV Marathon Tennessee Municipals Fund Tennessee Portfolio
EV Marathon Virginia Municipals Fund Virginia Portfolio
(Accession No. 0000950135-96-005156)
Registrant incorporates by reference the unaudited financial information
for the Funds and the Portfolios listed below for the six months ended
February 28, 1997, as previously filed electronically with the Commission:
EV Marathon Alabama Municipals Fund Alabama Portfolio
EV Marathon Arkansas Municipals Fund Arkansas Portfolio
EV Marathon Georgia Municipals Fund Georgia Portfolio
EV Marathon Kentucky Municipals Fund Kentucky Portfolio
EV Marathon Louisiana Municipals Fund Louisiana Portfolio
EV Marathon Maryland Municipals Fund Maryland Portfolio
EV Marathon Missouri Municipals Fund Missouri Portfolio
EV Marathon North Carolina Municipals Fund North Carolina Portfolio
EV Marathon Oregon Municipals Fund Oregon Portfolio
EV Marathon South Carolina Municipals Fund South Carolina Portfolio
EV Marathon Tennessee Municipals Fund Tennessee Portfolio
EV Marathon Virginia Municipals Fund Virginia Portfolio
(Accession No. 0000950109-97-003888)
<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 Class A shares for the periods shown in
each table. The total for the period prior to a Fund's commencement of
operations 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 3.75%. 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.
VALUE OF A $1,000 INVESTMENT -- ALABAMA
<TABLE>
<CAPTION>
TOTAL RETURN TOTAL RETURN
EXCLUDING MAXIMUM INCLUDING MAXIMUM
VALUE OF SALES CHARGE SALES CHARGE
INVESTMENT INVESTMENT AMOUNT OF INVESTMENT ---------------------------- --------------------------
PERIOD** DATE INVESTMENT ON 2/28/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------------------------- ------------- ------------- ------------ ------------- ------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of Fund 5/1/92 $962.00 $1,317.72 36.98% 6.73% 31.77% 5.88%
1 Year Ended
2/28/97 2/28/96 $962.45 $1,014.99 5.46% 5.46% 1.50% 1.50%
</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.
- ------------
*Commencement of Fund operations May 1, 1992.
VALUE OF A $1,000 INVESTMENT -- ARKANSAS
<TABLE>
<CAPTION>
TOTAL RETURN TOTAL RETURN
EXCLUDING MAXIMUM INCLUDING MAXIMUM
VALUE OF SALES CHARGE SALES CHARGE
INVESTMENT INVESTMENT AMOUNT OF INVESTMENT ---------------------------- ---------------------------
PERIOD** DATE INVESTMENT ON 2/28/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------------------------- ------------- ------------ ------------ ------------- ------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of Fund 10/2/92 $962.31 $1,264.18 31.37% 6.38% 26.42% 5.46%
1 Year Ended
2/28/97 2/28/96 $962.63 $1,005.95 4.50% 4.50% 0.60% 0.60%
</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.
- ------------
*Commencement of Fund operations October 2, 1992.
VALUE OF A $1,000 INVESTMENT -- GEORGIA
<TABLE>
<CAPTION>
TOTAL RETURN TOTAL RETURN
EXCLUDING MAXIMUM INCLUDING MAXIMUM
VALUE OF SALES CHARGE SALES CHARGE
INVESTMENT INVESTMENT AMOUNT OF INVESTMENT ---------------------------- --------------------------
PERIOD** DATE INVESTMENT ON 2/28/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------------------------- ------------- ------------ ------------ ------------- ------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of Fund 12/23/91 $962.14 $1,266.88 31.68% 5.45% 26.69% 4.66%
5 Years Ended
2/28/97 2/28/92 $962.59 $1,279.25 32.90% 5.85% 27.92% 5.05%
1 Year Ended
2/28/97 2/28/96 $962.25 $1,013.13 5.29% 5.29% 1.31% 1.31%
</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.
- ------------
*Commencement of Fund operations December 23, 1991.
VALUE OF A $1,000 INVESTMENT -- KENTUCKY
<TABLE>
<CAPTION>
TOTAL RETURN TOTAL RETURN
EXCLUDING MAXIMUM INCLUDING MAXIMUM
VALUE OF SALES CHARGE SALES CHARGE
INVESTMENT INVESTMENT AMOUNT OF INVESTMENT ---------------------------- --------------------------
PERIOD** DATE INVESTMENT ON 2/28/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------------------------- ------------ ------------ ------------ ------------- ------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of Fund 12/23/91 $962.78 $1,289.66 33.95% 5.79% 28.97% 5.02%
5 Years Ended
2/28/97 2/28/92 $962.31 $1,299.52 35.05% 6.19% 29.95% 5.38%
1 Year Ended
2/28/97 2/28/96 $962.63 $1,014.13 5.35% 5.35% 1.41% 1.41%
</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.
- ------------
*Commencement of Fund operations December 23, 1991.
VALUE OF A $1,000 INVESTMENT -- LOUISIANA
<TABLE>
<CAPTION>
TOTAL RETURN TOTAL RETURN
EXCLUDING MAXIMUM INCLUDING MAXIMUM
VALUE OF SALES CHARGE SALES CHARGE
INVESTMENT INVESTMENT AMOUNT OF INVESTMENT ---------------------------- ---------------------------
PERIOD** DATE INVESTMENT ON 2/28/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------------------------- ---------- ------------ ------------ ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of Fund 10/2/92 $962.73 $1,293.77 34.38% 6.93% 29.38% 6.01%
1 Year Ended
2/28/97 2/28/96 $962.82 $1,024.56 6.41% 6.41% 2.46% 2.46%
</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.
- ------------
*Commencement of Fund operations October 2, 1992.
VALUE OF A $1,000 INVESTMENT -- MARYLAND
<TABLE>
<CAPTION>
TOTAL RETURN TOTAL RETURN
EXCLUDING MAXIMUM INCLUDING MAXIMUM
VALUE OF SALES CHARGE SALES CHARGE
INVESTMENT INVESTMENT AMOUNT OF INVESTMENT ---------------------------- ---------------------------
PERIOD** DATE INVESTMENT ON 2/28/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- --------------------------- ------------ ------------ ------------ ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of Fund 2/3/92 $962.44 $1,323.78 37.54% 6.49% 32.38% 5.69%
5 Years Ended
2/28/97 2/28/92 $962.50 $1,325.19 37.68% 6.60% 32.52% 5.79%
1 Year Ended
2/28/97 2/28/96 $962.23 $1,009.46 4.90% 4.90% 0.95% 0.95%
</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.
- ------------
*Commencement of Fund operations February 3, 1992.
VALUE OF A $1,000 INVESTMENT -- MISSOURI
<TABLE>
<CAPTION>
TOTAL RETURN TOTAL RETURN
EXCLUDING MAXIMUM INCLUDING MAXIMUM
VALUE OF SALES CHARGE SALES CHARGE
INVESTMENT INVESTMENT AMOUNT OF INVESTMENT ---------------------------- ---------------------------
PERIOD** DATE INVESTMENT ON 2/28/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------------------- ------------ ------------ ------------ ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of Fund 5/1/92 $962.46 $1,339.88 39.21% 7.09% 33.99% 6.24%
1 Year Ended
2/28/97 2/28/96 $962.49 $1,012.38 5.18% 5.18% 1.24% 1.24%
</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.
- ------------
*Commencement of Fund operations May 1, 1992.
VALUE OF A $1,000 INVESTMENT -- NORTH CAROLINA
<TABLE>
<CAPTION>
TOTAL RETURN TOTAL RETURN
EXCLUDING MAXIMUM INCLUDING MAXIMUM
VALUE OF SALES CHARGE SALES CHARGE
INVESTMENT INVESTMENT AMOUNT OF INVESTMENT --------------------------- ---------------------------
PERIOD DATE INVESTMENT ON 2/28/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------------------- ------------ ------------ ------------ ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of Fund 10/23/91 $962.83 $1,309.09 35.96% 5.90% 30.91% 5.15%
5 Years Ended
2/28/97 2/28/92 $962.63 $1,277.25 32.67% 5.82% 27.72% 5.02%
1 Year Ended
2/28/97 2/28/96 $962.63 $1,006.83 4.59% 4.59% 0.68% 0.68%
</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.
- ------------
*Commencement of Fund operations October 23, 1991.
VALUE OF A $1,000 INVESTMENT -- OREGON
<TABLE>
<CAPTION>
TOTAL RETURN TOTAL RETURN
EXCLUDING MAXIMUM INCLUDING MAXIMUM
VALUE OF SALES CHARGE SALES CHARGE
INVESTMENT INVESTMENT AMOUNT OF INVESTMENT --------------------------- --------------------------
PERIOD DATE INVESTMENT ON 2/28/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------------------- ------------ ------------ ------------ -------------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of Fund 12/24/91 $962.30 $1,320.69 37.24% 6.29% 32.07% 5.51%
5 Years Ended
2/28/97 2/28/92 $962.47 $1,313.83 36.51% 6.42% 31.38% 5.61%
0.30%
1 Year Ended
2/28/97 2/28/96 $962.07 $ 997.04 3.63% 3.63% - -0.30%
</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.
- ------------
*Commencement of Fund operations December 24, 1991.
VALUE OF A $1,000 INVESTMENT -- SOUTH CAROLINA
<TABLE>
<CAPTION>
TOTAL RETURN TOTAL RETURN
EXCLUDING MAXIMUM INCLUDING MAXIMUM
VALUE OF SALES CHARGE SALES CHARGE
INVESTMENT INVESTMENT AMOUNT OF INVESTMENT ---------------------------- ---------------------------
PERIOD DATE INVESTMENT ON 2/28/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------------------- ------------ ------------ ------------ ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of Fund 10/2/92 $962.61 $1,246.70 29.51% 6.04% 24.67% 5.13%
1 Year Ended
2/28/97 2/28/96 $962.16 $1,014.02 5.39% 5.39% 1.40% 1.40%
</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.
- ------------
*Commencement of Fund operations October 2, 1992.
VALUE OF A $1,000 INVESTMENT -- TENNESSEE
<TABLE>
<CAPTION>
TOTAL RETURN TOTAL RETURN
EXCLUDING MAXIMUM INCLUDING MAXIMUM
VALUE OF SALES CHARGE SALES CHARGE
INVESTMENT INVESTMENT AMOUNT OF INVESTMENT ---------------------------- ---------------------------
PERIOD DATE INVESTMENT ON 2/28/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------------------- ------------ ------------ ------------ ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of Fund 8/25/92 $962.74 $1,276.96 32.63% 6.46% 27.70% 5.57%
1 Year Ended
2/28/97 2/28/96 $962.86 $1,013.64 5.27% 5.27% 1.36% 1.36%
</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.
- ------------
*Commencement of Fund operations August 25, 1992.
VALUE OF A $1,000 INVESTMENT -- VIRGINIA
<TABLE>
<CAPTION>
TOTAL RETURN TOTAL RETURN
EXCLUDING MAXIMUM INCLUDING MAXIMUM
VALUE OF SALES CHARGE SALES CHARGE
INVESTMENT INVESTMENT AMOUNT OF INVESTMENT ---------------------------- ---------------------------
PERIOD DATE INVESTMENT ON 2/28/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------------------- ------------ ------------ ------------ ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of Fund 7/26/91 $962.73 $1,363.12 41.60% 6.41% 36.31% 5.69%
5 Years Ended
2/28/97 2/28/92 $962.28 $1,280.74 33.09% 5.88% 28.07% 5.07%
1 Year Ended
2/28/97 2/28/96 $962.78 $1,005.58 4.44% 4.44% 0.56% 0.56%
</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.
- ----------
*Commencement of Fund operations July 26, 1991.
The following shows the yield of Class A shares for the thirty-day period
ended February 28, 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. Appendix D contains state-
specific applicable tax rates and income brackets.
TAXABLE SECURITY ASSUMED
CLASS A 30-DAY YIELD EQUIVALENT YIELD TAX RATE
- ------- ------------ ---------------- --------
Alabama .......................... 4.55% 6.94% 31%
Arkansas ......................... 4.40% 6.86% 31%
Georgia .......................... 4.79% 7.39% 31%
Kentucky ......................... 4.83% 7.45% 31%
Louisiana ........................ 5.56% 8.57% 31%
Maryland ......................... 4.90% 7.72% 31%
Missouri ......................... 4.71% 6.96% 31%
North Carolina ................... 4.79% 7.53% 31%
Oregon ........................... 4.88% 7.77% 31%
South Carolina ................... 4.92% 7.67% 31%
Tennessee ........................ 5.01% 7.72% 31%
Virginia ......................... 4.94% 7.60% 31%
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As at June 2, 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 A.
As of June 2, 1997, Merrill Lynch, Pierce, Fenner & Smith, Inc., Jacksonville,
FL was the record owner of the following amounts of the Class A 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:
Alabama -- 80.0%; Arkansas -- 25.8%; Georgia -- 36.7%; Kentucky -- 39.5%;
Louisiana -- 25.0%; Missouri -- 24.4%; Oregon -- 8.3%; South Carolina -- 45.0%;
Tennessee -- 37.0%; and Virginia -- 13.3%. In addition, as of such date, the
following shareholders owned beneficially and of record the percentage indicated
of outstanding Class A shares of the Funds as follows: Arkansas: Donaldson
Lufkin Jenrette Securities Corporation, Inc., Jersey City, NJ (28.2%), James &
Peggy Walker, JtTen, Fayetteville, AR (7.1%), and CNOM & Co., St. Louis, MO
(5.2%); Georgia: Sub A/C 033 00785, New York, NY (13.9%), and Edward D. Jones &
Co. F/A/O Scottie E Dickenson & Robert L. Dickenson EDJ# 342-06244-17, Maryland
Heights, MO (8.2%); Kentucky: Mary R. Stephenson, Battletown, KY (10.8%), NFSC
FEBO #CJR-101982 Kathleen C. Parsons, Bowling Green, KY (8.6%), and Betty L.
Fow, Crestwood, KY (5.1%); Louisiana: Rozell Hahn MD, Benton, LA (9.0%),
PaineWebber FBO Brigette Belair & Charles Belair, Ten in Common, Belle Chasse,
LA (7.0%), PaineWebber FBO William E. Wynne, New Orleans, LA (6.4%), Juanita C.
Sendker, c/o Pivach & Pivach, Belle Chasse, LA (6.0%), and Sidney S. Moreland
IV, Baton Rouge, LA (5.9%); Maryland: Calvert R. Bregel, Glen Arm, MD (16.2%),
and Cecile B. Taubman, Baltimore, MD (9.6%); North Carolina: Irwin Belk,
Charlotte, NC (73.3%); Oregon: Dain Bosworth Inc. FBO Caroline R. Blind, Eugene,
OR (9.9%), John H. Dunlevy, Bend, OR (8.1%), Fern B. Wilson TTEE Fern B. Wildson
Trust U/A dtd 10/22/92, Salem, OR (6.7%), and Joycelyn Lauree Dolan, Beaverton,
OR (5.2%); South Carolina: Barbara B. McDaniel, Awendaw, SC (9.8%), and
PaineWebber FBO Douglas P. Magann & Sarah R. Magann JTWROS, Georgetown, SC
(9.5%); Tennessee: PaineWebber FBO Elizabeth W. Dupree, Knoxville, TN (14.9%),
William C. Kennedy, Knoxville, TN (6.1%), and Patricia R. Kennedy, Knoxville, TN
(6.1%); and Virginia: Olive Young Brown TTEE FBO Olive Young Brown Rev Trust U/A
dtd 4/1/94, Arlington, VA (11.1%), Jennifer E. Matherly & Philip A. Matherly
JTTEN, Mineral, VA (9.3%), US Clearing Corp FBO 139-22898-13, New York, NY
(9.1%), PaneWebber FBO Olive M. Wolters, Studley, VA (8.7%), and PaineWebber FBO
Robert L. Huff, Sam Huff Sporting Life Stable, Middleburg, VA (6.5%). To the
knowledge of the Trust, no other person owned of record or beneficially 5% or
more of any Fund's outstanding Class A shares as of such date.
<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 August 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>
Alabama .......................... $156,301 $ 805,078 $363,000 $188,442 $187,873
Arkansas ......................... 109,223 585,185 312,000 130,268 129,088
Georgia .......................... 103,513 869,639 475,000 196,317 195,874
Kentucky ......................... 189,712 1,040,081 532,000 244,894 244,436
Louisiana ........................ 134,790 247,330 88,000 56,538 56,444
Maryland ......................... 260,829 852,487 445,000 185,757 185,020
Missouri ......................... 137,794 657,054 304,000 150,023 149,425
North Carolina ................... 219,900 1,373,171 742,000 328,294 326,372
Oregon ........................... 170,426 1,047,054 645,000 236,226 234,833
South Carolina ................... 149,516 452,132 226,000 99,151 92,578
Tennessee ........................ 121,384 425,503 214,000 92,921 92,578
Virginia ......................... 269,358 1,402,507 604,000 317,860 316,579
</TABLE>
PRINCIPAL UNDERWRITER
For the fiscal year ended August 31, 1996, each Fund paid the Principal
Underwriter for repurchase transactions handled by it $2.50 for each such
transaction which aggregated as follows: Alabama -- $1,152.50; Arkansas --
$1,005; Georgia -- $1,995; Kentucky -- $1,657.50; Louisiana -- $305; Maryland
- -- $350; Missouri -- $892.50; North Carolina -- $2,162.50; Oregon --
$2,107.50; South Carolina -- $692.50; Tennessee -- $602.50; and Virginia --
$2,402.50.
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.
VALUE OF A $1,000 INVESTMENT -- ALABAMA
<TABLE>
<CAPTION>
VALUE BEFORE TOTAL RETURN BEFORE TOTAL RETURN AFTER
DE- VALUE AFTER DE- DEDUCTING DEDUCTING
DUCTING THE DUCTING THE THE MAXIMUM CDSC THE MAXIMUM CDSC
INVESTMENT INVESTMENT AMOUNT OF MAXIMUM CDSC MAXIMUM CDSC -------------------------- --------------------------
PERIOD DATE INVESTMENT ON 2/28/97 ON 2/28/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------------- ------------ ----------- --------------- --------------- ------------ ------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of
Fund 5/1/92 $1,000 $1,364.27 $1,344.27 36.43% 6.64% 34.43% 6.32%
1 Year
Ended
2/28/97 2/28/96 $1,000 $1,048.84 $ 998.84 4.88% 4.88% -0.12% -0.12%
</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.
- ------------
*Investment operations began on May 1, 1992.
VALUE OF A $1,000 INVESTMENT -- ARKANSAS
<TABLE>
<CAPTION>
TOTAL RETURN BEFORE TOTAL RETURN AFTER
VALUE BEFORE VALUE AFTER DEDUCTING DEDUCTING
DEDUCTING THE DEDUCTING THE THE MAXIMUM CDSC THE MAXIMUM CDSC
INVESTMENT INVESTMENT AMOUNT OF MAXIMUM CDSC MAXIMUM CDSC -------------------------- --------------------------
PERIOD DATE INVESTMENT ON 2/28/97 ON 2/28/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------------- ----------- ----------- --------------- ---------------- ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of
Fund 10/2/92 $1,000 $1,289.54 $1,269.54 28.95% 5.94% 26.95% 5.56%
1 Year
Ended
2/28/97 2/28/96 $1,000 $1,034.91 $ 985.43 3.49% 3.49% -1.46% -1.46%
</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.
- ------------
*Investment operations began on October 2, 1992.
VALUE OF A $1,000 INVESTMENT -- GEORGIA
<TABLE>
<CAPTION>
VALUE BEFORE TOTAL RETURN BEFORE TOTAL RETURN AFTER
DE- VALUE AFTER DE- DEDUCTING DEDUCTING
DUCTING THE DUCTING THE THE MAXIMUM CDSC THE MAXIMUM CDSC
INVESTMENT INVESTMENT AMOUNT OF MAXIMUM CDSC MAXIMUM CDSC -------------------------- --------------------------
PERIOD DATE INVESTMENT ON 2/28/97 ON 2/28/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- --------------- ----------- ----------- --------------- ----------------- ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of
Fund 12/23/91 $1,000 $1,317.94 $1,307.94 31.79% 5.46% 30.79% 5.31%
5 Years
Ended
2/28/97 2/28/92 $1,000 $1,330.15 $1,310.15 33.02% 5.87% 31.02% 5.55%
1 Year
Ended
2/28/97 2/28/96 $1,000 $1,046.40 $ 996.45 4.64% 4.64% -0.36% -0.36%
</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.
- ------------
*Investment operations began on December 23, 1991.
VALUE OF A $1,000 INVESTMENT -- KENTUCKY
<TABLE>
<CAPTION>
TOTAL RETURN BEFORE TOTAL RETURN AFTER
VALUE BEFORE VALUE AFTER DEDUCTING DEDUCTING
DEDUCTING THE DEDUCTING THE THE MAXIMUM CDSC THE MAXIMUM CDSC
INVESTMENT INVESTMENT AMOUNT OF MAXIMUM CDSC MAXIMUM CDSC -------------------------- --------------------------
PERIOD DATE INVESTMENT ON 2/28/97 ON 2/28/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------------- ----------- ----------- --------------- ---------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of
Fund 12/23/91 $1,000 $1,340.68 $1,330.68 34.07% 5.81% 33.07% 5.66%
5 Years
Ended
2/28/97 2/28/92 $1,000 $1,351.67 $1,331.67 35.17% 6.21% 33.17% 5.90%
1 Year
Ended
2/28/97 2/28/96 $1,000 $1,046.40 $ 996.40 4.64% 4.64% -0.36% -0.36%
</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.
- ------------
*Investment operations began on December 23, 1991.
VALUE OF A $1,000 INVESTMENT -- LOUISIANA
<TABLE>
<CAPTION>
VALUE BEFORE TOTAL RETURN BEFORE TOTAL RETURN AFTER
DE- VALUE AFTER DE- DEDUCTING DEDUCTING
DUCTING THE DUCTING THE THE MAXIMUM CDSC THE MAXIMUM CDSC
INVESTMENT INVESTMENT AMOUNT OF MAXIMUM CDSC MAXIMUM CDSC -------------------------- --------------------------
PERIOD DATE INVESTMENT ON 2/28/97 ON 2/28/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------------- ------------ ----------- --------------- --------------- ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of
Fund 10/2/92 $1,000 $1,292.56 $1,272.56 29.26% 5.99% 27.26% 5.62%
1 Year
Ended
2/28/97 2/28/96 $1,000 $1,056.02 $1,006.02 5.60% 5.60% 0.60% 0.60%
</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.
- ------------
*Investment operations began on October 2, 1992.
VALUE OF A $1,000 INVESTMENT -- MARYLAND
<TABLE>
<CAPTION>
VALUE BEFORE TOTAL RETURN BEFORE TOTAL RETURN AFTER
DE- VALUE AFTER DE- DEDUCTING DEDUCTING
DUCTING THE DUCTING THE THE MAXIMUM CDSC THE MAXIMUM CDSC
INVESTMENT INVESTMENT AMOUNT OF MAXIMUM CDSC MAXIMUM CDSC -------------------------- --------------------------
PERIOD DATE INVESTMENT ON 2/28/97 ON 2/28/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- --------------- ----------- ----------- --------------- ----------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of
Fund 2/3/92 $1,000 $1,360.47 $1,350.47 36.05% 6.26% 35.05% 6.11%
5 Years
Ended
2/28/97 2/28/92 $1,000 $1,361.92 $1,341.92 36.19% 6.37% 34.19% 6.06%
1 Year
Ended
2/28/97 2/28/96 $1,000 $1,043.50 $ 993.64 4.35% 4.35% -0.64% -0.64%
</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.
- ----------
*Investment operations began on February 3, 1992.
VALUE OF A $1,000 INVESTMENT -- MISSOURI
<TABLE>
<CAPTION>
TOTAL RETURN BEFORE TOTAL RETURN AFTER
VALUE BEFORE VALUE AFTER DEDUCTING DEDUCTING
DEDUCTING THE DEDUCTING THE THE MAXIMUM CDSC THE MAXIMUM CDSC
INVESTMENT INVESTMENT AMOUNT OF MAXIMUM CDSC MAXIMUM CDSC -------------------------- --------------------------
PERIOD DATE INVESTMENT ON 2/28/97 ON 2/28/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- --------------- ----------- ----------- --------------- ------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of
Fund 5/1/92 $1,000 $1,383.62 $1,363.62 38.36% 6.95% 36.36% 6.63%
1 Year
Ended
2/28/97 2/28/96 $1,000 $1,046.96 $ 996.96 4.70% 4.70% -0.30% -0.30%
</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.
- ----------
*Investment operations began on May 1, 1992.
VALUE OF A $1,000 INVESTMENT -- NORTH CAROLINA
<TABLE>
<CAPTION>
VALUE BEFORE TOTAL RETURN BEFORE TOTAL RETURN AFTER
DE- VALUE AFTER DE- DEDUCTING DEDUCTING
DUCTING THE DUCTING THE THE MAXIMUM CDSC THE MAXIMUM CDSC
INVESTMENT INVESTMENT AMOUNT OF MAXIMUM CDSC MAXIMUM CDSC ------------------------- --------------------------
PERIOD DATE INVESTMENT ON 2/28/97 ON 2/28/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- --------------- ----------- ----------- --------------- ----------------- ---------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of
Fund 10/23/91 $1,000 $1,345.32 $1,335.32 34.53% 5.69% 33.53% 5.54%
5 Years
Ended
2/28/97 2/28/92 $1,000 $1,312.83 $1,292.83 31.28% 5.59% 29.28% 5.27%
1 Year
Ended
2/28/97 2/28/96 $1,000 $1,038.15 $ 988.59 3.82% 3.82% -1.14% -1.14%
</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.
- ------------
*Investment operations began on October 23, 1991.
VALUE OF A $1,000 INVESTMENT -- OREGON
<TABLE>
<CAPTION>
VALUE BEFORE TOTAL RETURN BEFORE TOTAL RETURN AFTER
DE- VALUE AFTER DE- DEDUCTING DEDUCTING
DUCTING THE DUCTING THE THE MAXIMUM CDSC THE MAXIMUM CDSC
INVESTMENT INVESTMENT AMOUNT OF MAXIMUM CDSC MAXIMUM CDSC -------------------------- --------------------------
PERIOD DATE INVESTMENT ON 2/28/97 ON 2/28/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ------------ ------------ ----------- -------------- ----------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of
the Fund 12/24/91 $1,000 $1,354.61 $1,344.61 35.46% 6.02% 34.46% 5.87%
5 Years
Ended
2/28/97 2/28/92 $1,000 $1,347.39 $1,327.39 34.74% 6.14% 32.74% 5.83%
1 Year
Ended
2/28/97 2/28/96 $1,000 $1,029.45 $ 980.21 2.94% 2.94% -1.98% -1.98%
</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.
- ----------
*Investment operations began on Decemer 24, 1991.
VALUE OF A $1,000 INVESTMENT -- SOUTH CAROLINA
<TABLE>
<CAPTION>
VALUE BEFORE TOTAL RETURN BEFORE TOTAL RETURN AFTER
DE- VALUE AFTER DE- DEDUCTING DEDUCTING
DUCTING THE DUCTING THE THE MAXIMUM CDSC THE MAXIMUM CDSC
INVESTMENT INVESTMENT AMOUNT OF MAXIMUM CDSC MAXIMUM CDSC -------------------------- --------------------------
PERIOD DATE INVESTMENT ON 2/28/97 ON 2/28/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ----------- ------------ ------------ -------------- ----------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of
Fund 10/02/92 $1,000 $1,273.77 $1,253.77 27.38% 5.64% 25.38% 5.26%
1 Year
Ended
2/28/97 2/28/96 $1,000 $1,047.57 $ 997.57 4.76% 4.76% -0.24% -0.24%
</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.
- ----------
*Investment operations began on October 2, 1992.
VALUE OF A $1,000 INVESTMENT -- TENNESSEE
<TABLE>
<CAPTION>
VALUE BEFORE TOTAL RETURN BEFORE TOTAL RETURN AFTER
DE- VALUE AFTER DE- DEDUCTING DEDUCTING
DUCTING THE DUCTING THE THE MAXIMUM CDSC THE MAXIMUM CDSC
INVESTMENT INVESTMENT AMOUNT OF MAXIMUM CDSC MAXIMUM CDSC ---------------------------- ---------------------------
PERIOD DATE INVESTMENT ON 2/28/97 ON 2/28/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ------------ ------------ ---------- -------------- --------------- ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of
Fund 8/25/92 $1,000 $1,314.67 $1,294.67 31.47% 6.25% 29.47% 5.89%
1 Year
Ended
2/28/97 2/28/96 $1,000 $1,046.11 $ 996.16 4.61% 4.61% -0.38% -0.38%
</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.
- ------------
*Investment operations began on August 25, 1992.
VALUE OF A $1,000 INVESTMENT -- VIRGINIA
<TABLE>
<CAPTION>
VALUE BEFORE TOTAL RETURN BEFORE TOTAL RETURN AFTER
DE- VALUE AFTER DE- DEDUCTING DEDUCTING
DUCTING THE DUCTING THE THE MAXIMUM CDSC THE MAXIMUM CDSC
INVESTMENT INVESTMENT AMOUNT OF MAXIMUM CDSC MAXIMUM CDSC -------------------------- --------------------------
PERIOD DATE INVESTMENT ON 2/28/97 ON 2/28/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ------------ ------------ ------------ --------------- ----------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of
Fund 7/26/91 $1,000 $1,410.96 $1,400.96 41.10% 6.34% 40.10% 6.21%
5 Years
Ended
2/28/97 2/28/92 $1,000 $1,326.21 $1,306.21 36.62% 5.81% 30.62% 5.49%
1 Year
Ended
2/28/97 2/28/96 $1,000 $1,038.75 $ 989.13 3.88% 3.88% -1.09% -1.09%
</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.
- ------------
*Investment operations began on July 26, 1991.
The following shows the yield of Class B shares for the thirty-day period
ended February 28, 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. 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>
Alabama ................................ 4.08% 6.22% 31%
Arkansas ............................... 4.19% 6.53% 31%
Georgia ................................ 4.35% 6.71% 31%
Kentucky ............................... 4.20% 6.48% 31%
Louisiana .............................. 4.87% 7.51% 31%
Maryland ............................... 4.16% 6.55% 31%
Missouri ............................... 4.29% 6.34% 31%
North Carolina ......................... 4.25% 6.68% 31%
Oregon ................................. 4.27% 6.80% 31%
South Carolina ......................... 4.28% 6.67% 31%
Tennessee .............................. 4.25% 6.55% 31%
Virginia ............................... 4.32% 6.64% 31%
</TABLE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As at June 2, 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.
As of June 2, 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: Alabama -- 35.3%; Arkansas -- 12.1%; Georgia -- 20.6%; Kentucky
- -- 14.9%; Louisiana -- 40.3%; Maryland -- 15.6%; Missouri -- 7.3%; North
Carolina -- 11.8%; Oregon -- 10.2%; South Carolina -- 16.5%; Tennessee --
10.5%; and Virginia -- 16.1%. 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 Portfolios 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 Portfolio has independently verified this information.
ALABAMA
Alabama's business cycle is closely related to the national economy, due
to its manufacturing based economy. The State's economy has changed little in
the past few years. Growth in machinery, aerospace and electronic
manufacturing have become increasingly important to the State. The present
movement toward diversification of the State's manufacturing base and a
similar trend toward enlargement and diversification of the service industries
are expected to lead to increased stability. With its strong natural gas and
oil deposits, Alabama is well positioned in energy markets. An important
factor affecting the economy is the State owned Port of Mobile which primarily
handles coal exports and serves as a major Gulf Coast port. The Port of Mobile
is one of the nation's busiest ports in tons of cargo handled.
Although manufacturing remains the largest employment sector, the State
economy has become less dependent on manufacturing. Strong growth in the
service and wholesale/retail trade sectors combined with a weakening
manufacturing sector has enabled the economy to become more diverse. However,
its reliance on the manufacturing sector remains significantly greater than
the national average. In the past several years, the loss of manufacturing
jobs has been primarily as a result of weakness in the durable good sector.
Overall, non-agricultural employment has steadily grown during the past five
years.
ARKANSAS
The Constitution of the State does not limit the amount of general
obligation bonds which may be issued by the State; however, no such bonds may
be issued unless approved by the voters of the State at a general election or
a special election held for that purpose. There is no constitutional
limitation on the aggregate principal amount of revenue bonds that may be
issued by the State and its agencies. All revenue bonds and notes are secured
only by specific revenue streams and neither the general revenues of the State
nor its full faith and credit are pledged to repayment.
Pursuant to the Revenue Stabilization Law, the General Assembly must enact
legislation to provide for an allotment process of funding appropriations in
order to comply with State law prohibiting deficit spending whereby spending
is limited to actual revenues received by the State. The Governor may restrict
spending to a level below the level of appropriations. Pursuant to the
Stabilization Act, the General Assembly establishes five levels of priority
for general revenue spending, levels "A," "B," "B-1," "C" and "C-1".
Successive levels of appropriations are funded only in the event sufficient
revenues have been generated to fully fund any prior level. Accordingly,
appropriations made to programs and agencies are only maximum authorizations
to spend. Actual expenditures are limited to the lesser of (i) moneys flowing
into a program or agency's fund maintained by the Treasurer or (ii) the
maximum appropriation by the General Assembly. Since State revenues are not
collected throughout the year in a pattern consistent with program and agency
expenditures, a budget revolving fund, which receives interest earnings from
State fund investments, has been established and is utilized to assure proper
cash flow during any period. One-half of all moneys deposited into the budget
revolving fund ultimately are utilized to supplement the State's capital
construction program and the balance is distributed to programs and agencies
funded from general revenues.
The State operates under a biennial budgeting system with July 1, 1995
beginning the current biennium. The State ended fiscal 1994 in balance as
required by the Revenue Stabilization Act. Gross available general revenue
growth for fiscal 1996 was 3.9%.
GEORGIA
The Georgia Constitution provides that the State may incur public debt of
two types for public purposes: (1) general obligation debt and (2) guaranteed
revenue debt. General obligation debt may be incurred to acquire, construct,
develop, extend, enlarge or improve land, waters, property, highways,
buildings, structures, equipment or facilities of the State, its agencies,
departments, institutions and certain State authorities, to provide
educational facilities for county and independent school systems, to provide
public library facilities for county and independent school systems, counties,
municipalities, and boards of trustees of public libraries or boards of
trustees of public library systems, to make loans to counties, municipal
corporations, political subdivisions, local authorities and other local
government entities for water or sewerage facilities or systems, and to make
loans to local government entities for regional or multijurisdictional solid
waste recycling or solid waste facilities or systems. No general obligation
debt may be incurred, however, when the highest aggregate annual debt service
requirements for the then current year or any subsequent year for outstanding
general obligation debt and guaranteed revenue debt, including any proposed
debt, and the highest aggregate annual payments for the then current year or
any subsequent fiscal year of the State under certain State contracts, exceed
ten percent of the total revenue receipts, less refunds, of the State Treasury
in the fiscal year immediately preceding the year in which the debt is to be
incurred. In addition, no general obligation debt may be incurred with a term
in excess of twenty-five years.
Guaranteed revenue debt may be incurred by guaranteeing the payment of
certain revenue obligations issued by an instrumentality of the State. No
guaranteed revenue debt may be incurred to finance water or sewage treatment
facilities or systems when the highest aggregate annual debt service
requirements for the then current year or any subsequent fiscal year of the
State for outstanding or proposed guaranteed revenue debt for water or
sewerage facilities or systems exceed one percent of the total revenue
receipts, less refunds, of the State Treasury in the fiscal year immediately
preceding the year in which any debt is to be incurred. In addition, the
aggregate amounts of guaranteed revenue debt incurred to make loans for
educational purposes may not exceed $18 million, and the aggregate guaranteed
revenue debt incurred to purchase, or to lend or deposit against the security
of, loans for educational purposes that may be outstanding may not exceed $72
million.
As of May 31, 1996, the State's outstanding general obligation debt was
$4,670,545,000. The State had outstanding at July 31, 1996, $185,135,000 of
guaranteed revenue debt.
In addition to the State's general obligation debt and guaranteed revenue
debt, the State had outstanding at May 30, 1996, $395,000 in revenue bonds and
notes issued by various State agencies, authorities and institutions of higher
education.
In the 1996 Legislative Session, the General Assembly authorized the
issuance of $65,340,000 in aggregate principal amount of general obligation
bonds for fiscal year 1997, the proceeds of which are to be used for various
planned capital projects of the State, its departments and agencies.
The Georgia Constitution also permits the State to incur public debt to
supply a temporary deficit in the State Treasury in any fiscal year created by
a delay in collecting the taxes of that year. Such debt must not exceed, in
the aggregate, 5% of the total revenue receipts, less refunds, of the State
Treasury in the fiscal year immediately preceding the year in which such debt
is incurred. The debt incurred must be repaid on or before the last day of
the fiscal year in which it is to be incurred out of the taxes levied for that
fiscal year. No such debt may be incurred in any fiscal year if there is then
outstanding unpaid debt from any previous fiscal year which was incurred to
supply a temporary deficit in the State Treasury. No such debt has been
incurred under this provision since its inception.
Virtually all of the issues of long-term debt obligations issued by or on
behalf of the State of Georgia and counties, municipalities and other
political subdivisions and public authorities thereof are required by law to
be validated and confirmed in a judicial proceeding prior to issuance. The
legal effect of a validation in Georgia is to render incontestable the
validity of the pertinent bond issue and the security therefor.
Tax collections of the State for fiscal year 1995 were 9.0% over tax
collections for fiscal year 1994. Corporate and individual income tax
receipts and general sales tax receipts of the State for fiscal year 1995
comprised an estimated 43.7% and 35.0%, respectively, of the total State tax
revenues. Revenues from sales and income taxes increased 8.0% and 9.0%,
respectively, during fiscal year 1995.
Three suits (two for refund and one for declaratory and injunctive relief)
have been filed with the State of Georgia by foreign producers of alcoholic
beverages. The first suit seeks $96 million in refunds of alcohol import taxes
imposed under Georgia's post-Bacchus (468 U.S. 263-1984) statute, O.C.G.A.
(S) 3-4-60, et seq., as amended in 1985. These claims constitute 99% of all
such taxes paid during the three years preceding these claims. In addition,
the claimants have filed a second suit for refund of an additional $23 million
for apparently later time periods. These two cases encompass all known or
anticipated claims for refund of such type within the apparently applicable
statute of limitations for the years in question (1989 - January 1995). The
two refund cases are still pending in the trial court. The declaration/
injunctive relief case was dismissed by the Federal District Court and was
affirmed by the Eleventh Circuit Court of Appeals. The claimants have filed a
petition for rehearing which is pending.
A suit has also been filed based on a local school board's claim that the
State finance the major portion of the costs of its desegregation program.
The Savannah Board originally requested restitution in the amount of $30
million, but the Federal District Court set forth a formula which would
require a State payment in the amount of approximately $8,900,000 computed
through June 30, 1994. The plaintiffs, dissatisfied with the apportionment of
desegregation costs between State and county, and an adverse ruling on the
State funding formula for transportation costs, have appealed to the Eleventh
Circuit Court of Appeals. The State has filed a responsive cross-appeal on
the ground that there is no basis for any liability. Subsequently, the
parties agreed to a settlement, which has been approved by the Court. The
settlement calls for the State to pay the amount awarded to the plaintiffs and
to offer an option regarding future funding methodology for pupil
transportation. Because interest was accruing in the settlement, in March
1995, the State paid to the plaintiffs $8,925,000 in partial satisfaction of
the settlement agreement. The final settlement figure has yet to be
calculated, due to costs which accrued during the pendency of the settlement
proposal. Those cost calculations will be finalized in the next several months
but are not expected to exceed a total of $10,000,000, including the money
already paid.
A similar complaint has been filed by DeKalb County and seeking
approximately $67,500,000 in restitution. The Federal District Court ruled
that the State's funding formula for pupil transportation (which the District
Court in the Savannah case upheld) was contrary to State law. This ruling
would require a State payment of a State law funding entitlement in the amount
of approximately $34,000,000 computed through June 30, 1994. Motions to
reconsider and amend the Court's judgment were filed by both parties. The
State's motion was granted, in part, which reduced the required State payment
to approximately $28,000,000. Notices of appeal to the Eleventh Circuit Court
of Appeals have been filed. There are approximately five other school
districts which might file similar claims.
Another suit has been filed in federal district and State superior courts
challenging the constitutionality of Georgia's transfer fee (often referred to
as "impact fee") by asserting that the fee violates the commerce clause, due
process, equal protection and privilege and immunities provisions of the
constitution. The plaintiff seeks to prohibit the State from further
collections and to require the State to return to her and those similarly
situated all fees previously collected. A similar lawsuit previously filed in
another State superior court has been voluntarily dismissed and will likely be
joined with this action. From May of 1992 to June 1995, the State has
collected $24,168,203. All amounts collected after June 7, 1995 are being
paid into an escrow account. The State continues to collect approximately
$500,000 to $600,000 per month.
On September 1, 1994, a civil action was filed in the Fulton County
Superior Court on behalf of all certain employees of the State of Georgia who
were subjected to a freeze in pay between 1992 and 1995. Should the
plaintiffs prevail in every aspect of their claims, the liability of the State
in this matter could be as much as $295,000,000, based on best estimates
currently available.
KENTUCKY
Because the Kentucky Constitution requires the vote of a majority of the
state's electorate to approve the issuance of state general obligation
indebtedness and until recently regained the vote of two-thirds of a
municipality's electorate to approve the issuance of general obligation
indebtedness by any city, county, or other municipality within the state, most
Kentucky state and local government indebtedness is issued not as general
obligation indebtedness but as either debt payable only from revenues produced
by the particular project or as indebtedness subject to biennial, in the case
of the state, or annual, in the case of a local government, legislative
appropriation for the payment of debt service. Such appropriation-backed
indebtedness is customarily issued in the form of lease revenue bonds by a
public authority or public holding company which uses the proceeds of the
bonds to finance the particular public project and leases the project to the
state or local government pursuant to a lease renewable each fiscal biennium
(in the case of the state) or each fiscal year (in the case of a local
government). Failure of the lessee government to renew the lease would
terminate the lessee's obligation to make further rental payments and would
leave the bondholders with recourse only against the property which was
subject to the lease and any other security pledged for the payment of the
bonds. An amendment to the state constitution approved by the electorate at
the November 1994 general election authorized the Kentucky General Assembly to
enact legislation permitting local governments to issue general obligation
indebtedness without voter approval but subject to prescribed limitations on
the maximum amount of indebtedness that may be incurred based on the assessed
value of the taxable property within the municipality and such additional
limitations and conditions as may be prescribed by statute. Although the
Kentucky General Assembly enacted enabling legislation in 1996, the validity
of the constitutional amendment is currently the subject of a test case.
Therefore, appropriation-backed indebtedness continues to be the prevailing
form of financing for local governments in Kentucky.
The Commonwealth of Kentucky recently retired the last of its outstanding
general obligation debt. In September 1994 S&P upgraded the rating of the
State's appropriation-back debt from A to A+. Moody's and Fitch rate the
State's appropriation-back debt as A and A+, respectively.
Kentucky is an "average" state in terms of size and in terms of its
proportion of the national economy. Kentucky has 1.5% of total U.S.
population, 1.2% of total U.S. personal income, and 1.3% of total U.S.
nonagricultural employment. The Kentucky economy has shown almost
uninterrupted growth for the past decade. During 1995, the unemployment rate
in Kentucky averaged 5.4% compared to the national average of 5.6%; Kentucky
nonagricultural employment grew by 2.8% compared to the national average of
2.3%; manufacturing employment in Kentucky increased by 2.8% compared to 0.5%
nationally; and personal income in Kentucky grew 5.8% compared to 6.0%
nationally.
The Commonwealth of Kentucky's financial condition has steadily improved
during the last four years. State General Fund Revenue grew by 3.5% in fiscal
year 1996 to a total of $5.34 billion. To avoid the need for state budget cuts
in the event revenues do not meet expectations, a Budget Reserve Trust Fund
was established with a $90 million deposit in fiscal year 1994 and has been
increased by additional deposits of $10 million in fiscal year 1995 and $100
million in fiscal year 1996 to a current balance of $200 million.
LOUISIANA
The State of Louisiana General Fund should have a $76.8 million balance
after Fiscal Year 1995-96. However, Fiscal Year 1996-97 budget projections
indicate that the State will have to rely on reduction in expenditures by
approximately $72.5 million to produce a balanced budget. One of the most
severe budget issues is the Medicaid program. For Fiscal Year 1995-96,
Louisiana was eligible to receive $690 million in Medicaid disproportionate
share payments for hospitals. In the past, Louisiana used a portion of the
amounts paid to the State public hospitals to fund the State's portion of the
Medicaid program. The 1993 amendments to the federal disproportionate share
law severely restrict the State's ability to continue to help finance health
care in this manner. On April 26, 1996, Congress adopted a budget bill that
included a two-year funding based specifically for the State Medicaid Program.
This budget bill allows the State to move forward with the Medicaid Managed
Care initiatives without being faced with severe funding cuts. It is expected,
however, that additional program reductions will be required in order to bear
a $2.6 billion Federal fund cap and the minimum required State match of $600
million for Fiscal Year 1996-97 as allowed by Congress. The State's executive
and legislative leadership is currently revising its overall spending
projections for years through Fiscal Year 1999-2000, including projections for
Medicaid requirements. This Medicaid problem will also slow the growth in the
services sector of the Louisiana economy.
The Louisiana Economic Development and Gaming Corporation (the "Gaming
Corporation") was created by the Louisiana legislature in 1992 for the purpose
of contracting with a casino operator to provide for or furnish an official
gaming establishment and to conduct casino gaming operations at the official
gaming establishment, the Rivergate Convention Center in New Orleans (the
"casino") as well as a temporary casino until the casino is opened. Voters at
the general election held in November, 1996, approved land-based gambling in
the City of New Orleans. Once the casino is in operation, the operator must
pay a minimum of 18 1/2% of gross revenues, or $100 million annually,
whichever is higher, to the Gaming Corporation. The Gaming Corporation must
transfer daily to the State Treasury for deposit in the Casino Gaming Proceeds
Fund net revenues which are surplus to its needs. Such revenues will be first
credited to the Bond Security and Redemption Fund before being credited to the
Casino Gaming Proceeds Fund. Moneys in the Casino Gaming Proceeds Fund may be
allotted or expended only pursuant to legislative appropriation. The operating
contract was awarded to Harrah's Jazz Company, which is a partnership
comprised of three principals: Harrah's New Orleans; New Orleans/Louisiana
Development Corporation (Jazzville); and Grand Palais Corporation.
Construction of the permanent casino began at the site of the old Rivergate in
the spring of 1995. In November, 1995, after unsuccessfully operating a
temporary casino at the New Orleans Municipal Auditorium, Harrah's New Orleans
filed voluntary bankruptcy under Chapter 11. Harrah's New Orleans is in the
process of restructuring Harrah's Jazz Company financing and renegotiating
other contractual terms. The temporary casino will not re-open. It appears at
this time that a scaled-down version of the casino will be opened in the
latter part of 1997, but the Governor of the State has publicly stated that he
will not comprise any payments that are due the State under the enabling
legislation and the original contract. At this time, the situation has not
been resolved. The State has not included any revenue from land based casino
gaming in the official revenue forecast for Fiscal Year 1996-97.
MARYLAND
Generally Maryland has been among the most heavily indebted of the states,
although its position is more moderate with the inclusion of local debt,
reflecting in part the State assumption several years ago of a substantial
portion of local school construction costs. The State became concerned over
its debt levels and, following recommendations of a debt affordability
committee, has practiced restraint in borrowing. Resources have also expanded
and debt ratios have fallen. Capital borrowing plans are reasonable and
designed not to increase debt levels. Recently, major infrastructure projects
undertaken, including a light rail line, a stadium, and airport and convention
center improvements, have been financed primarily by revenue-backed or other
non-general obligation financings.
The public indebtedness of Maryland and its instrumentalities is divided
into three basic types. The State, as well as the various counties and
municipalities of the State, issues general obligation bonds payable from ad
valorem taxes for capital improvements. The Department of Transportation of
Maryland issues limited, special obligation bonds for transportation purposes
payable primarily from specific, fixed-rate excise taxes and other revenues
related mainly to highway use. Certain authorities, as well as several local
governments, issue obligations payable solely from identified taxes or revenue
streams, including loan obligations from nonprofits, companies or other
private entities, and for which the State or local government has no liability
and has given no moral obligation assurance. The State, its agencies and
departments and the various localities also enter into municipal leases or
installment purchase obligations. Such a lease is not a general obligation of
the municipality for which the municipality's taxing power is pledged but is
ordinarily backed by the municipality's covenant to budget for, appropriate
and make the payments due under the lease. Such municipal leases generally
contain "non-appropriation" clauses which provide that the municipality has no
obligation to make lease payments in future years unless money is appropriated
for such purpose on a yearly basis.
During fiscal year 1991 through 1993, the State experienced budgetary
problems caused by a national recession. To address revenue shortfalls and
expanded expenditure requirements the State increased tax and other revenues,
curtailed various programs and transferred funds from various reserve
accounts. The State ended its fiscal year 1994 with a General Fund surplus on
a budgetary basis of approximately $60.0 million, and ended its fiscal year
1995 with a General Fund surplus on a budgetary basis of approximately $26.5
million (excluding $106 million to be applied to the fiscal year 1996 budget)
and $286.1 million in the Revenue Stabilization Account of the State Reserve
Fund. When the fiscal year 1996 budget was enacted, it was anticipated that
the year-end General Fund surplus on a budgetary basis would be approximately
$7.8 million and that there would be $370.9 million in the State's Revenue
Stabilization Account. The State currently projects the year-end General Fund
surplus on a budgetary basis to be approximately $34.3 million and the balance
in the Revenue Stabilization Account to be approximately $51.8 million. Fiscal
year 1995 revenues for the General Fund were $7.09 billion; fiscal 1996
revenues for the General Fund are anticipated to be $7.43 billion.
MISSOURI
While Missouri has a diverse economy with a distribution of earnings and
employment among manufacturing, trade and service sectors closely
approximating the average national distribution, the national economic
recession of the early 1980's had a disproportionately adverse impact on the
economy of Missouri. However, since the 1980 to 1983 recession periods,
Missouri unemployment levels generally approximated or slightly exceeded the
national average. The St. Louis and Kansas City metropolitan areas are
important contributors to the Missouri economy. Economic reversals in either
of these two areas would have a major impact on the overall economic condition
of the State of Missouri. Additionally, the State of Missouri has a
significant agricultural sector which is experiencing farm-related problems
comparable to those which are occurring in other states. To the extent that
these problems were to intensify, there could possibly be an adverse impact on
the overall economic condition of the State.
Defense related business plays an important role in Missouri's economy. In
addition to the large number of civilians employed at the various military
installations and training bases in the State, aircraft and related businesses
in Missouri are the recipients of substantial annual dollar volumes of defense
contract awards. McDonnell Douglas Corporation, the State's largest employer,
received the second largest dollar amount of defense contracts in the United
States in 1995. There can be no assurances there will not be further changes
in the levels of military appropriations, and, to the extent that further
changes in military appropriations are enacted by the United States Congress,
Missouri could be disproportionately affected.
Desegregation lawsuits in St. Louis and Kansas City continue to require
significant levels of state funding and are sources of uncertainty: litigation
continues on many issues, court orders are unpredictable, and school district
spending patterns have proven difficult to predict. A recent Supreme Court
decision favorable to the State may decrease the level of State funding
required in the future, but the impact of this decision is uncertain. The
State paid $282 million for desegregation costs in fiscal 1994 and the budget
for fiscal 1995 provided $315 million. This expense accounts for close to 17%
of total state General Revenue Fund spending.
Article X, Sections 16-24 of the Constitution of Missouri (the "Hancock
Amendment") imposes limitations on the amount of State taxes which may be
imposed by the General Assembly of Missouri (the "General Assembly") as well
as on the amount of local taxes, licenses and fees (including taxes, licenses
and fees used to meet debt service commitments on debt obligations) which may
be imposed by local governmental units (such as cities, counties, school
districts, fire protection districts and other similar bodies) in the State of
Missouri in any fiscal year.
The limit on taxes is tied to total State revenues determined in
accordance with the formula set forth in the amendment, which adjusts the
limit based on increases in the average personal income of Missouri for
certain designated periods. The details of the amendment are complex and
clarification from subsequent legislation and further judicial decisions may
be necessary. Generally, if the total State revenues exceed the State revenue
limit imposed by Section 18 of Article X by more than 1%, the State is
required to refund the excess. The State revenue limitation imposed by the
Hancock Amendment does not apply to taxes imposed for the payment of principal
and interest on bonds, approved by the voters and authorized by the Missouri
Constitution. The revenue limit can also be exceeded by a constitutional
amendment authorizing new or increased taxes or revenues adopted by the voters
of the State of Missouri. The Hancock Amendment also limits new taxes,
licenses and fees and increases in taxes, licenses and fees by local
governmental units in Missouri. It prohibits counties and other political
subdivisions (essentially all local governmental units) from levying new
taxes, licenses and fees or increasing the current levy of an existing tax,
license or fee "without the approval of the required majority of the qualified
voters of that county or other political subdivision voting thereon."
When a local governmental unit's tax base with respect to certain fees or
taxes is broadened, the Hancock Amendment requires the tax levy or fees to be
reduced "to yield the same estimated gross revenue as on the prior base." It
also effectively limits any percentage increase in property tax revenues to
the percentage increase in the general price level (plus the value of new
construction and improvements), even if the assessed valuation of property in
the local governmental unit, excluding the value of new construction and
improvements, increases at a rate exceeding the increase in the general price
level.
NORTH CAROLINA
The current economic profile of the State consists of a combination of
industry, agriculture and tourism. Tobacco production, which had been the
leading source of agricultural income in the State, declined in 1995. Tobacco
farming in the State has been and is expected to continue to be affected by
major Federal legislation and regulatory measures regarding tobacco production
and marketing and by international competition.
The State's seasonally adjusted unemployment rate in August, 1996 was
estimated to be 4.1% of the labor force, as compared with and unemployment of
5.1% nationwide. The labor force has undergone significant change during
recent years as the State has moved from an agricultural to a service and
goods producing economy. Those persons displaced by farm mechanization and
farm consolidations have, in large measure, sought and found employment in
other pursuits.
During fiscal 1991 and 1992, the State was forced to employ various non-
recurring items and budget reductions in order to balance the State's budget.
Among other things, the State deferred Basic Education Program improvements.
In addition, the State also implemented approximately $640 million in tax
increases, including raising the State sales tax from 3% to 4%. This 4% tax is
the State's portion of the total 6% sales tax with the rest dedicated to local
governments. A 4% corporate income tax surcharge was also implemented and is
scheduled to terminate on January 1, 1995. The State's fiscal position has
improved considerably since 1992, with the general fund balance increasing
from a deficit position to a surplus equal to 11% of 1994 expenditures.
The State is a defendent in pending court actions involving the taxing of
benefits paid to federal retirees and related matters. Although specific
claims for damages have not been precisely calculated, the amount could exceed
$400 million over a period of years. The State is also a defendent in several
other litigations which, in the opinion of the Department of the Treasurer,
could have a material adverse affect on the State's ability to meet its
obligations. In the Leandro action, the plaintiffs claim that the State has
failed to provide adequate or substantially equal educational opportunities to
children. In the Francisco action, the plaintiffs claim that the State has
failed to fund programs to educate non-English speaking students. In a series
of cases involving State retirement benefits, disabled retirees are
challenging on various grounds changes in the formula for paying retirement
benefits. Damages could exceed $100 million. In the Fulton case, the
imposition of the State's intangible personal property tax on shares of stock
has been challenged.
OREGON
As of September 1, 1996, $3.64 billion in general obligation bonds issued
by the State of Oregon and its agencies and instrumentalities were
outstanding, including $125.1 million in general obligation bonds supported by
the budget for the State's general fund and $3.52 billion of self-supporting
general obligation bonds. The State's self-supporting general obligation bonds
include $2.78 billion of State veteran's bonds, which, in the event of poor
economic conditions resulting in an increased number of mortgage defaults,
could cease to be self-supporting. All of the existing and outstanding general
obligation bonds of the State have been issued under specific State
constitutional provisions that authorize the issuance of such bonds and
provide authority for ad valorem taxation to pay the principal of and interest
on such bonds. With the exception of the veteran's bonds, for which no more
than two mills on each dollar valuation may be levied to pay principal and
interest, the authority of the State to tax property for the payment of its
general obligation bonds is unlimited. Since at least 1950, the State has not
imposed ad valorem tax for the payment of any of its obligations because other
revenues, including those generated by the self-supporting bonds, have been
sufficient.
In addition to general obligation bonds, various state statutes authorize
the issuance of State revenue bonds and certificates of participation. These
limited obligations of the State or its agencies or instrumentalities may be
payable from a specific project or source, including lease rentals. The State
is not authorized to impose ad valorem taxes on property for the payment of
principal and interest on these bonds, so they are more sensitive to changes
in the economy. There can be no assurance that future economic problems will
not adversely affect the market value of Oregon obligations held by the
Portfolio or the ability of the respective obligors (both private and
governmental) to make required payments on such obligations.
Oregon does not have a sales tax. As a result, State tax revenues are
particularly sensitive to economic recessions. The principal source of State
tax revenues are personal income and corporate income taxes. For the 1995-97
biennium, approximately 96.6% of the State's legislatively budgeted revenues
are projected to come from combined income taxes, insurance taxes, gift and
inheritance taxes, and cigarette and tobacco taxes.
Over the past several years, a number of species of Oregon wildlife have
been added to the Endangered Species list, including the northern spotted owl
and certain populations of salmon. The spotted owl listing has already had a
substantial economic impact on the State's economy, primarily through a
reduction in timber harvests from federal lands. The salmon listings also have
had a substantial economic impact, primarily through increased electricity
rates and related impacts on rate-sensitive industries such as the aluminum
industry. Efforts to protect the spotted owl and salmon and steelhead
populations may eventually affect a wide variety of agricultural, industrial,
recreational and land use activities, with corresponding impacts on long-term
economic growth. The magnitude and extent of any future environmental action
is difficult to predict.
Ballot Measure 5. Article XI, section 11b of the Oregon Constitution,
adopted by Oregon's voters in November 1990 ("Ballot Measure 5"), imposes an
aggregate limit on the rate of property taxes, including ad valorem taxes,
that may be levied against any real or personal property. The limit is subject
to certain exceptions and is being phased in over a five-year period.
Beginning with the tax year that starts on July 1, 1996, the final year of the
phase-in period, not more than $15 per $1,000 of real market value can be
levied against any piece of property. Of this amount, $5 may be used for
public education, and the remaining $10 may be used for general governmental
purposes.
The limitations of Ballot Measure 5 do not apply to taxes imposed to pay
the principal of and interest on bonded indebtedness authorized by a specific
provision of the State Constitution or which has received voter approval.
Therefore, since the State has traditionally issued only general obligation
indebtedness that is authorized by specific provisions of the State
Constitution and units of local government have generally adopted policies of
seeking specific approval for all general obligation indebtedness, the ability
of the State and units of local government to levy taxes to service their
general obligation indebtedness has generally avoided the limit. In addition,
because the State currently receives its revenues from sources other than
property taxes, Ballot Measure 5 has not directly affected State revenues.
Ballot Measure 5 has controlled the growth of local property tax revenues
since its adoption. Although the growth in local property valuations during
the period 1991 to 1995 has somewhat mitigated the potential impacts of Ballot
Measure 5, revenues of local government units in Oregon have generally been
adversely affected by the adoption of Ballot Measure 5. This appears to be
particularly true with respect to school districts operating revenues.
Ballot Measure 5 required the State to replace a substantial portion of
the lost revenues of local school districts through the end of fiscal year
1995-1996. Although this obligation has now expired, the extent of revenue
loss perceived to have been incurred by local school districts indicates that
the State may continue to provide significant revenue relief to these
governmental units. In addition, the provisions of the initiative known as
Ballot Measure 47, as defined and discussed below, is expected to also result
in the State making further financial assistance available to certain units of
local government as a result of further restrictions and limitations placed
upon the ability of units of local government to generate revenues through
Oregon's system of ad valorem property taxation.
Ballot Measure 47. At the November 5, 1996 general election, the voters
of the State of Oregon approved a constitutional amendment creating new
sections 11g, 11h, 11i and 11j within Article XI of the Oregon Constitution.
The initiative proposing these amendments was commonly referred to as "Ballot
Measure 47" or "Cut and Cap."
Ballot Measure 47 will generally reduce the revenues of local governements
available from ad valorem property taxes starting on July 1, 1997. For fiscal
year 1997-98, the amount of tax which may be collected from each property
subject to taxation is limited to the lesser of the amount due for fiscal year
1995-96 reduced by ten percent (10%) or the amount due for fiscal year
1994-95. Future increases in annual ad valorem property taxes which can be
collected from each property subject to taxation are limited to three percent
(3%) unless certain exceptions apply. Ballot Measure 47 also contains
provisions limiting local governments' ability to shift activities previously
funded in whole or in part from ad valorem property tax revenues to a user fee
or other form of non-ad valorem property tax basis. One of the exceptions is
for taxes levied to pay bonded indebtedness which has been approved by the
voters in accordance with certain specific and new guidelines contained in
Ballot Measure 47.
By its terms, Ballot Measure 47 does not affect the revenues of
governmental units which do not rely upon the collection of ad valorem
property taxes, such as the State, or governmental operations which are
supported solely from user fees and charges, such as many municipal utilities.
However, its revenue reducing provisions are expected to create new financial
burdens on the State revenue resources as well as on the revenue resources of
units of government which levy and collect ad valorem property taxes. Such
burdens are expected to arise, at least in part, from the potential need for
the State to assist units of local government adversely affected by the
implementation of Ballot Measure 47. Although the actual impact of Ballot
Measure 47 on a particular unit of local governement cannot presently be
determined because the methodology for applying its provisions to individual
properties has not yet been established, it is anticipated that the general
fund operations of many local government units will be materially adversely
affected by its revenue reduction and revenue growth limiting provisions.
Ballot Measure 11. In November 1994, voters approved three measures
affecting the State's penal system. The most significant in terms of financial
impact for the State is Ballot Measure 11, which established mandatory minimum
prison sentences for certain felons. It is anticipated that this initiative
will require construction of a substantial number of additional prison beds.
Currently, the State expects to fund construction from sources other than the
State general fund.
Several litigation matters are pending involving the State. These matters
include (i) an action filed by several out-of-state insurers challenging
Oregon's gross premium tax on out-of-state insurers and seeking refunds of
taxes previously paid, which could result in the State being liable for
approximately $50 million in refunds and (ii) several cases in which federal
retirees have challenged the validity of a State Public Employees Retirement
System benefit increase to offset the taxation of such benefits or have sought
refunds of State taxes paid on federal retirement benefits. In addition, the
Oregon Supreme Court has ruled against the State in an action brought to
require the State to return $81 million that was transferred in 1983 from the
State's Industrial Accident Fund ("SAIF") to the State's general fund. The
amount required to be returned to SAIF, including interest, has been estimated
to be approximately $280 million. The claims have been settled for a State
obligation to pay $225 million, $65 million of that amount has been paid. $80
million is payable at the end of the 1997 legislative session, and an
additional $80 million is payable at the end of the 1999 legislative session.
SOUTH CAROLINA
The South Carolina Constitution requires the General Assembly to provide a
balanced budget and requires that if there is a deficit, such deficit shall be
provided for in the succeeding fiscal year. The State Constitution also
provides that (i) the State Budget and Control Board may, if a deficit appears
likely, effect such reductions in appropriations as may be necessary to
prevent a deficit, (ii) annual increases in State appropriations may not
exceed the average growth rate of the economy of the State, (iii) that the
annual increase in the number of State employees may not exceed the average
growth of the population of the State, and (iv) a General Reserve Fund be
maintained in an amount equal to 3% of General Fund revenue for the latest
fiscal year. The State also maintains a Capital Reserve Fund equal to 2% of
the General Reserve Fund.
Despite several spending reductions in fiscal 1992, the State recorded a
budgetary basis operating deficit of $54 million due to lower than anticipated
sales and corporate-income tax revenues. The State ended fiscal 1992 with only
$7.6 million in its budgetary general fund. In June 1993, the presidential
base-closing commission voted to close the Charleston Naval Base. South
Carolina has estimated lost revenues of $100 million over the three-year
period from July 1, 1993 to June 30, 1996 due to the closing. There can be no
guarantee that the actual cost will not be more or less than the State's
estimate. Budgetary General Fund revenues and expenditures for fiscal 1993
were $3.673 billion and $3.521 billion, respectively. There was a $151 million
surplus of which $33.7 million was deposited into the General Reserve Fund
("Rainy Day Fund") bringing its total to $100 million. Fiscal 1994 had
budgeted revenues and expenditures of $3.828 billion and $3.795 billion,
respectively. No new taxes were implemented. Fiscal 1994 ended with a General
Fund surplus of $248 million. The General Reserve Fund is now at its fully
funded level of $110.2 million. Fiscal 1995 has budgeted $3.93 billion for
expenditures with no new taxes expected.
TENNESSEE
Tennessee's State Constitution requires that (1) the total expenditures of
the State for any fiscal year shall not exceed the State's revenues and
reserves, including the proceeds of debt obligations issued to finance capital
expenditures and (2) in no year shall the rate of growth of appropriations
from State tax revenues exceed the estimated rate of growth of the State's
economy. In the past, the Governor and the General Assembly have had to
restrict expenditures to comply with the State Constitution.
The Tennessee economy generally tends to rise and fall in a roughly
parallel manner with the U.S. economy. Like the U.S. economy, the Tennessee
economy entered recession in the last half of 1990 which continued throughout
1991 and into 1992 as the Tennessee indexes of coincident and leading economic
indicators trended downward throughout the period. However, the Tennessee
economy gained strength during the latter part of 1992 and this renewed
vitality steadily continued through 1993, 1994 and into 1995. The latter half
of 1995 and the first part of 1996 has seen the State's economy become
slightly inconsistent in its performance, with most 1996 economic data
revealing some downward movement in the leading economic index. However, many
experts believe that the State will achieve modest economic gains in 1996.
State revenue collections for 1996 are falling below projections, possibly
requiring the State to reduce expenditures for the fiscal year in order to
avoid depletion of the rainy-day fund. The State's rainy-day fund remained
constant from December 1994 to December 1995 at $101 million and remains so as
of July 1, 1996.
VIRGINIA
The Commonwealth of Virginia has had a tradition of low debt, and a large
proportion of its general obligation bonds has been supported by particular
revenue-producing projects. However, a trend towards more use of non-general
obligation debt, which is not subject to constitutional limits on borrowing,
is now changing the Commonwealth's debt profile. In recent years, the
Commonwealth has expanded its limited obligation borrowings through various
financing vehicles such as the Virginia Public Building Authority and the
Virginia College Building Authority, and has embarked upon a substantial
transportation bonding program to which certain increases in retail sales and
motor vehicle-related taxes enacted in 1986 are dedicated. The general fund is
the Commonwealth's major operating fund and accounts for about half of
Commonwealth expenditures. It covers all functions except highways and Federal
grant disbursements, for which there are special revenue funds.
While the Commonwealth has had a long history of sound financial
operations, variations of a cyclical nature have occurred during the past
several years. During fiscal year 1992, financial operations were somewhat
more favorable than expected. Revenues of $5.6 billion exceeded expenditures
by approximately $150 million with $44 million in increased revenues and the
balance in decreased expenditures ordered by the Governor in December of 1991.
The closing balance at June 30, 1992 was $195.1 million, of which $142.3
million will be reappropriated, leaving $52.8 million as an unreserved,
undesignated balance, the first such balance in four years. The fiscal 1993
ending balance for the General Fund was $331.8 million of which $59.7 is
unreserved, undesignated. Revenues for the 1993 fiscal year were 8.9% higher
than fiscal year 1992, a $103 million increase. At the close of the biennium
ending June 30, 1994, the Fund balance amounted to $518.7 million of which $81
million was reserved, including $79.9 million for the Revenue Stabilization
Fund. Preliminary results for fiscal 1995 indicate a general fund surplus of
$65 million.
Virginia's economy is generally affected by economic trends throughout the
country and in the Mid-Atlantic region, and it is particularly influenced by
Federal civilian and military installations and the growth of suburban
communities around Washington, D.C. Also significant to the economy of
Virginia are manufacturing (such as electronic equipment, shipbuilding and
chemical products), minerals (chiefly coal), service sector occupations
(including banking and insurance), agriculture and tourism. Unemployment rates
are typically below the national average, but because of a large military and
civilian government employment component, and the related civilian employment,
a substantial decrease in defense or other governmental spending could have a
material adverse effect on both the unemployment rate and the economy of the
Commonwealth in general.
<PAGE>
APPENDIX D: TAX EQUIVALENT YIELD TABLES
The tables below gives the approximate yield a taxable security must earn
at various income brackets to produce after-tax yields equivalent to those of
tax exempt bonds yielding from 4% to 7% under the regular federal income tax
and applicable state and local taxes given 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.
ALABAMA
<TABLE>
<CAPTION>
COMBINED
FEDERAL A FEDERAL AND ALABAMA STATE
AND TAX EXEMPT YIELD OF:
SINGLE RETURN JOINT RETURN AL STATE 4% 4.5% 5% 5.5% 6% 6.5% 7%
- ----------------------- --------------------- 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 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
</TABLE>
*Net amount subject to federal and Alabama personal income tax after
deductions and exemptions.
+The first tax bracket is calculated using the highest Alabama tax rate
within the bracket. Taxpayers with taxable income within this bracket may
have a lower combined bracket and taxable equivalent yield than indicated
above. The combined tax brackets assume that Alabama 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 set forth above are 15%,
28%, 31%, 36% and 39.6%, over the same ranges of income. The assumed Alabama
State income tax rate is 5%.
ARKANSAS
<TABLE>
<CAPTION>
COMBINED
FEDERAL A FEDERAL AND ARKANSAS STATE
AND TAX EXEMPT YIELD OF:
SINGLE RETURN JOINT RETURN AR STATE 4% 4.5% 5% 5.5% 6% 6.5% 7%
- ----------------------- --------------------- 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 20.95% 5.06% 5.69% 6.33% 6.96% 7.59% 8.22% 8.86%
$ 24,651 - $ 59,750 $ 41,201 - $ 99,600 33.04 5.97 6.72 7.47 8.21 8.96 9.71 10.45
$ 59,751 - $124,650 $ 99,601 - $151,750 35.83 6.23 7.01 7.79 8.57 9.35 10.13 10.91
$124,651 - $271,050 $151,751 - $271,050 40.48 6.72 7.56 8.40 9.24 10.08 10.92 11.76
Over $271,050 Over $271,050 43.83 7.12 8.01 8.90 9.79 10.68 11.57 12.46
</TABLE>
*Net amount subject to federal and Arkansas personal income tax after
deductions and exemptions.
+The first tax bracket is calculated using the highest Arkansas tax rate
within the bracket. Taxpayers with taxable income within this bracket may
have a lower combined bracket and taxable equivalent yield than indicated
above. The combined tax brackets assume that Arkansas 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 set forth above are 15%,
28%, 31%, 36% and 39.6% over the same ranges of income. The assumed Arkansas
State income tax rate is 7%.
GEORGIA
<TABLE>
<CAPTION>
COMBINED
FEDERAL A FEDERAL AND GEORGIA STATE
AND TAX EXEMPT YIELD OF:
SINGLE RETURN JOINT RETURN GA STATE 4% 4.5% 5% 5.5% 6% 6.5% 7%
- ----------------------- --------------------- 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 20.10% 5.01% 5.63% 6.26% 6.88% 7.51% 8.14% 8.76%
$ 24,651 - $ 59,750 $ 41,201 - $ 99,600 32.32 5.91 6.65 7.39 8.13 8.87 9.60 10.34
$ 59,751 - $124,650 $ 99,601 - $151,750 35.14 6.17 6.94 7.71 8.48 9.25 10.02 10.79
$124,651 - $271,050 $151,751 - $271,050 39.84 6.65 7.48 8.31 9.14 9.97 10.80 11.64
Over $271,050 Over $271,050 43.22 7.05 7.93 8.81 9.69 10.57 11.45 12.33
</TABLE>
*Net amount subject to federal and Georgia personal income tax after
deductions and exemptions.
+The first tax bracket is calculated using the highest Georgia tax rate within
the bracket. Taxpayers with taxable income within this bracket may have a
lower combined bracket and taxable equivalent yield than indicated above. The
combined tax brackets assume that Georgia 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 set forth above are 15%, 28%, 31%, 36% and
39.6%, over the same ranges of income.
KENTUCKY
<TABLE>
<CAPTION>
COMBINED A FEDERAL AND KENTUCKY STATE
FEDERAL TAX EXEMPT YIELD OF:
AND 4% 4.5% 5% 5.5% 6% 6.5% 7%
SINGLE RETURN JOINT RETURN KY 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 20.10% 5.01% 5.63% 6.26% 6.88% 7.51% 8.14% 8.76%
$ 24,651-$ 59,750 $ 41,201-$ 99,600 32.32% 5.91 6.65 7.39 8.13 8.87 9.60 10.34
$ 59,751-$124,650 $ 99,601-$151,750 35.14% 6.17 6.94 7.71 8.48 9.25 10.02 10.79
$124,651-$271,050 $151,751-$271,050 39.84% 6.65 7.48 8.31 9.14 9.97 10.80 11.64
Over $271,050 Over $271,050 43.22% 7.05 7.93 8.81 9.69 10.57 11.45 12.33
<CAPTION>
SINGLE RETURN JOINT RETURN 4% 4.5% 5% 5.5% 6% 6.5% 7%
- ------------------------- ------------------- -----------------------------------------------------------------------
(TAXABLE INCOME*) IS EQUIVALENT TO A FULLY TAXABLE YIELD OF:
- ---------------------------------------------- ---------- -----------------------------------------------------------------------
Up to $ 24,650 Up to $ 41,200 5.36% 5.99% 6.61% 7.23% 7.86% 8.48% 9.11%
$ 24,651-$ 59,750 $ 41,201-$ 99,600 6.33 7.07 7.80 8.54 9.28 10.01 10.75
$ 59,751-$124,650 $ 99,601-$151,750 6.61 7.37 8.14 8.91 9.68 10.45 11.22
$124,651-$271,050 $151,751-$271,050 7.12 7.95 8.78 9.61 10.44 11.27 12.10
Over $271,050 Over $271,050 7.55 8.42 9.30 10.18 11.06 11.94 12.82
</TABLE>
*Net amount subject to federal and Kentucky personal income tax after
deductions and exemptions.
+The first tax bracket is calculated using the highest Kentucky tax rate
within the bracket. Taxpayers with taxable income within this bracket may
have a lower combined bracket and taxable equivalent yield than indicated
above. The combined tax brackets assume that Kentucky 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 set forth above are 15%,
28%, 31%, 36% and 39.6%, over the same ranges of income. The Kentucky State
income tax rate is 6%.
**The Kentucky intangibles tax on stocks, bonds, notes and other evidences of
debt is 25 cents on every $100 of the value thereof. An example of the
effect of the Kentucky intangibles tax on the combined tax brackets of
taxpayers is as follows: A $10,000 investment subject to the tax would
require payment of $25 annually in intangibles taxes. If the investment
yielded 5.5% annually or $550, the intangibles tax as a percentage of income
would be $25/$550 or 4.55%. If a taxpayer owning such an investment were in
the 6% state income tax bracket, he or she would be paying combined state
taxes as a percentage of income of 6% plus 4.55% or 10.55%. Assuming the
deductibility of these taxes as itemized deductions and that such taxpayer
were in the 36% federal income tax bracket, the taxpayer would then be in a
42.75% (36% + (1 - .36) X 10.55%) combined tax bracket with respect to such
investment. This is higher than the 39.84% combined tax bracket without
taking into account the intangibles tax.
LOUISIANA
<TABLE>
<CAPTION>
COMBINED A FEDERAL AND LOUISIANA STATE
FEDERAL TAX EXEMPT YIELD OF:
AND 4% 4.5% 5% 5.5% 6% 6.5% 7%
SINGLE RETURN JOINT RETURN LA 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 20.10% 5.01% 5.63% 6.26% 6.88% 7.51% 8.14% 8.76%
$ 24,651 - $ 59,750 $ 41,201 - $ 99,600 32.32 5.91 6.65 7.39 8.13 8.87 9.60 10.34
$ 59,751 - $124,650 $ 99,601 - $151,750 35.14 6.17 6.94 7.71 8.48 9.25 10.02 10.79
$124,651 - $271,050 $151,751 - $271,050 39.84 6.65 7.48 8.31 9.14 9.97 10.80 11.64
Over $271,050 Over $271,050 43.22 7.05 7.93 8.81 9.69 10.57 11.45 12.33
</TABLE>
*Net amount subject to federal and Louisiana personal income tax after
deductions and exemptions.
+Tax brackets are calculated using the highest Louisiana tax rate within the
brackets. Taxpayers with taxable income within these brackets may have a
lower combined bracket and taxable equivalent yield than indicated above. The
combined tax brackets assume that Louisiana 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%.
MARYLAND
<TABLE>
<CAPTION>
COMBINED
FEDERAL A FEDERAL AND MARYLAND STATE
AND TAX EXEMPT YIELD OF:
SINGLE RETURN JOINT RETURN MD STATE 4% 4.5% 5% 5.5% 6% 6.5% 7%
- ----------------------- --------------------- 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 21.80% 5.12% 5.75% 6.39% 7.03% 7.67% 8.31% 8.95%
$ 24,651-$ 59,750 $ 41,201-$ 99,600 33.76% 6.04 6.79 7.55 8.30 9.06 9.81 10.57
$ 59,751-$124,650 $ 99,601-$151,750 36.52% 6.30 7.09 7.88 8.66 9.45 10.24 11.03
$124,651-$271,050 $151,751-$271,050 41.12% 6.79 7.64 8.49 9.34 10.19 11.04 11.89
Over $271,050 Over $271,050 44.43% 7.20 8.10 9.00 9.90 10.80 11.70 12.60
</TABLE>
*Net amount subject to federal and Maryland personal income tax after
deductions and exemptions.
+Tax brackets are calculated using the highest Maryland State and local tax
rate within the brackets. Taxpayers with taxable income within these brackets
may have a lower combined bracket and taxable equivalent yield than indicated
above. The illustration assumes the taxpayer is subject to a local income tax
which is 60% of the State rate. The combined tax brackets assume that
Maryland State and local income 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.
MISSOURI
<TABLE>
<CAPTION>
COMBINED
FEDERAL A FEDERAL AND MISSOURI STATE
AND TAX EXEMPT YIELD OF:
SINGLE RETURN JOINT RETURN MO STATE 4% 4.5% 5% 5.5% 6% 6.5% 7%
- ----------------------- --------------------- 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 20.10% 5.01% 5.63% 6.26% 6.88% 7.51% 8.14% 8.76%
$ 24,651 - $ 59,750 $ 41,201 - $ 99,600 32.32 5.91 6.65 7.39 8.13 8.87 9.60 10.34
$ 59,751 - $124,650 $ 99,601 - $151,750 35.14 6.17 6.94 7.71 8.48 9.25 10.02 10.79
$124,651 - $271,050 $151,751 - $271,050 39.84 6.65 7.48 8.31 9.14 9.97 10.80 11.64
Over $271,050 Over $271,050 43.22 7.05 7.93 8.81 9.69 10.57 11.45 12.33
</TABLE>
*Net amount subject to federal and Missouri personal income tax after
deductions and exemptions.
+The first tax bracket is calculated using the highest Missouri tax rate
within the bracket. Taxpayers with taxable income within this bracket may
have a lower combined bracket and taxable equivalent yield than indicated
above. The combined tax brackets assume that Missouri 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 set forth above are 15%,
28%, 31%, 36% and 39.6% over the same ranges of income. The assumed Missouri
State income tax rate is 6%.
NORTH CAROLINA
<TABLE>
<CAPTION>
COMBINED
FEDERAL A FEDERAL AND NORTH CAROLINA STATE
AND TAX EXEMPT YIELD OF:
SINGLE RETURN JOINT RETURN NC STATE 4% 4.5% 5% 5.5% 6% 6.5% 7%
- ----------------------- --------------------- 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 20.95% 5.06% 5.69% 6.33% 6.96% 7.59% 8.22% 8.86%
$ 24,651 - $ 59,750 $ 41,201 - $ 99,600 33.04 5.97 6.72 7.47 8.21 8.96 9.71 10.45
$ 59,751 - $124,650 $ 99,601 - $151,750 36.35 6.28 7.07 7.86 8.64 9.43 10.21 11.00
$124,651 - $271,050 $151,751 - $271,050 40.96 6.78 7.62 8.47 9.32 10.16 11.01 11.86
Over $271,050 Over $271,050 44.28 7.18 8.08 8.97 9.87 10.77 11.67 12.56
</TABLE>
*Net amount subject to federal and North Carolina personal income tax after
deductions and exemptions.
+Tax brackets are calculated using the highest North Carolina tax rate within
each bracket. Taxpayers with taxable income within these brackets may have a
lower combined bracket and taxable equivalent yield than indicated above. The
combined tax brackets assume that North Carolina 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 each of these combined brackets are 15%,
28%, 31%, 36% and 39.6%.
OREGON
<TABLE>
<CAPTION>
COMBINED
FEDERAL A FEDERAL AND OREGON STATE
AND TAX EXEMPT YIELD OF:
SINGLE RETURN JOINT RETURN OR STATE 4% 4.5% 5% 5.5% 6% 6.5% 7%
- ----------------------- --------------------- 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 22.65% 5.17% 5.82% 6.46% 7.11% 7.76% 8.40% 9.05%
$ 24,651-$ 59,750 $ 41,201-$ 99,600 34.48% 6.11 6.87 7.63 8.39 9.16 9.92 10.68
$ 59,751-$124,650 $ 99,601-$151,750 37.21% 6.37 7.17 7.96 8.76 9.56 10.35 11.15
$124,651-$271,050 $151,751-$271,050 41.76% 6.87 7.73 8.59 9.44 10.30 11.16 12.02
Over $271,050 Over $271,050 45.04% 7.28 8.19 9.10 10.01 10.92 11.83 12.74
</TABLE>
*Net amount subject to federal and Oregon personal income tax after deductions
and exemptions.
+The first tax bracket is calculated using the highest Oregon tax rate within
the bracket. Taxpayers with taxable income within this bracket may have a
lower combined bracket and taxable equivalent yield than indicated above. The
combined tax rates assume that Oregon 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 set forth above are 15%, 28%, 31%, 36% and
39.6%, over the same ranges of income. The assumed Oregon State income tax
rate is 9%.
SOUTH CAROLINA
<TABLE>
<CAPTION>
COMBINED
FEDERAL A FEDERAL AND SOUTH CAROLINA STATE
AND TAX EXEMPT YIELD OF:
SINGLE RETURN JOINT RETURN SC STATE 4% 4.5% 5% 5.5% 6% 6.5% 7%
- ----------------------- --------------------- 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 20.95% 5.06% 5.69% 6.33% 6.96% 7.59% 8.22% 8.86%
$ 24,651-$ 59,750 $ 41,201-$ 99,600 33.04% 5.97 6.72 7.47 8.21 8.96 9.71 10.45
$ 59,751-$124,650 $ 99,601-$151,750 35.83% 6.23 7.01 7.79 8.57 9.35 10.13 10.91
$124,651-$271,050 $151,751-$271,050 40.48% 6.72 7.56 8.40 9.24 10.08 10.92 11.76
Over $271,050 Over $271,050 43.83% 7.12 8.01 8.90 9.79 10.68 11.57 12.46
</TABLE>
*Net amount subject to federal and South Carolina personal income tax after
deductions and exemptions.
+The first tax bracket is calculated using the highest South Carolina tax rate
within the bracket. Taxpayers with taxable income within this bracket may
have a lower combined tax bracket and taxable equivalent yield than indicated
above. The combined tax brackets assume that South Carolina 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 set forth above
are 15%, 28%, 31%, 36% and 39.6%, over the same ranges of income. The assumed
South Carolina State income tax rate is 7%.
TENNESSEE
<TABLE>
<CAPTION>
COMBINED
FEDERAL A FEDERAL AND TENNESSEE STATE
AND TAX EXEMPT YIELD OF:
SINGLE RETURN JOINT RETURN TN STATE 4% 4.5% 5% 5.5% 6% 6.5% 7%
- ----------------------- --------------------- 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 20.10% 5.01% 5.63% 6.26% 6.88% 7.51% 8.14% 8.76%
$ 24,651-$ 59,750 $ 41,201-$ 99,600 32.32% 5.91 6.65 7.39 8.13 8.87 9.60 10.34
$ 59,751-$124,650 $ 99,601-$151,750 35.14% 6.17 6.94 7.71 8.48 9.25 10.02 10.79
$124,651-$271,050 $151,751-$271,050 39.84% 6.65 7.48 8.31 9.14 9.97 10.80 11.64
Over $271,050 Over $271,050 43.22% 7.05 7.93 8.81 9.69 10.57 11.45 12.33
</TABLE>
*Net amount subject to federal and Tennessee personal income tax after
deductions and exemptions.
+The combined tax brackets assume that Tennessee 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 set forth above are 15%, 28%, 31%, 36%
and 39.6% over the same ranges of income. The assumed Tennessee State income
tax rate is 6%.
VIRGINIA
<TABLE>
<CAPTION>
COMBINED
FEDERAL A FEDERAL AND VIRGINIA STATE
AND TAX EXEMPT YIELD OF:
SINGLE RETURN JOINT RETURN VA STATE 4% 4.5% 5% 5.5% 6% 6.5% 7%
- ----------------------- --------------------- 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 19.89% 4.99% 5.62% 6.24% 6.87% 7.49% 8.11% 8.74%
$ 24,651-$ 59,750 $ 41,201-$ 99,600 32.14% 5.89 6.63 7.37 8.10 8.84 9.58 10.32
$ 59,751-$124,650 $ 99,601-$151,750 34.97% 6.15 6.92 7.69 8.46 9.23 10.00 10.76
$124,651-$271,050 $151,751-$271,050 39.68% 6.63 7.46 8.29 9.12 9.95 10.78 11.60
Over $271,050 Over $271,050 43.07% 7.03 7.90 8.78 9.66 10.54 11.42 12.30
</TABLE>
*Net amount subject to federal and Virginia personal income tax after
deductions and exemptions.
+The first tax bracket is calculated using the highest Virginia tax rate with
the 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 Virginia 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 each of these combined brackets are 15%,
28%, 31%, 36% and 39.6%. The assumed Virginia State income tax rate is 5.75%.
<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 the
Portfolio's fiscal year end.
<PAGE>
Should no rating be assigned, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities or companies that
are not rated as a matter of policy.
3. There is a lack of essential data pertaining to the issue or issuer.
4. The issue was privately placed, in which case the rating is not
published in Moody's publications.
Suspension or withdrawal may occur if new and material circumstances arise,
the effects of which preclude satisfactory analysis; if there is no longer
available reasonable up-to-date data to permit a judgment to be formed; if a
bond is called for redemption; or for other reasons.
NOTE: Moody's applies numerical modifiers, 1, 2, and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the
modifier 3 indicates that the issue ranks in the lower end of its generic
rating category.
MUNICIPAL SHORT-TERM OBLIGATIONS
RATINGS: Moody's ratings for state and municipal short-term obligations will
be designated Moody's Investment Grade or (MIG). Such rating recognizes the
differences between short term credit risk and long term risk. Factors
effecting the liquidity of the borrower and short term cyclical elements are
critical in short term ratings, while other factors of major importance in
bond risk, long term secular trends for example, may be less important over
the short run.
A short term rating may also be assigned on an issue having a demand feature,
variable rate demand obligation (VRDO). Such ratings will be designated as
VMIG1, SG or if the demand feature is not rated, NR. A short term rating on
issues with demand features are differentiated by the use of the VMIG1 symbol
to reflect such characteristics as payment upon periodic demand rather than
fixed maturity dates and payment relying on external liquidity. Additionally,
investors should be alert to the fact that the source of payment may be
limited to the external liquidity with no or limited legal recourse to the
issuer in the event the demand is not met.
STANDARD & POOR'S RATINGS GROUP
INVESTMENT GRADE
AAA: Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.
A: Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB: Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
SPECULATIVE GRADE
Debt rated BB, B, CCC, CC, and C is regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and repay
principal. BB indicates the least degree of speculation and C the highest.
While such debt will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or major exposures to adverse
conditions.
BB: Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure
to adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB- rating.
B: Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness
to pay interest and repay principal. The B rating category is also used for
debt subordinated to senior debt that is assigned an actual or implied BB or
BB- rating.
CCC: Debt rated CCC has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to
meet timely payment of interest and repayment of principal. In the event of
adverse business, financial, or economic conditions, it is not likely to have
the capacity to pay interest and repay principal. The CCC rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied B or B- rating.
CC: The rating CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC debt rating.
C: The rating C is typically applied to debt subordinated to senior debt which
is assigned an actual or implied CCC- debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed, but debt service
payments are continued.
C1: The Rating C1 is reserved for income bonds on which no interest is being
paid.
D: Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if
the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period. The D rating also will be used
upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
PLUS (+) OR MINUS (-): The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
P: The letter "p" indicates that the rating is provisional. A provisional
rating assumes the successful completion of the project being financed by the
debt being rated and indicates that payment of debt service requirements is
largely or entirely dependent upon the successful and timely completion of the
project. This rating, however, while addressing credit quality subsequent to
completion of the project, makes no comment on the likelihood of, or the risk
of default upon failure of such completion. The investor should exercise his
own judgment with respect to such likelihood and risk.
L: The letter "L" indicates that the rating pertains to the principal amount
of those bonds to the extent that the underlying deposit collateral is insured
by the Federal Deposit Insurance Corp. and interest is adequately
collateralized. In the case of certificates of deposit, the letter "L"
indicates that the deposit, combined with other deposits being held in the
same right and capacity, will be honored for principal and accrued pre-default
interest up to the federal insurance limits within 30 days after closing of
the insured institution or, in the event that the deposit is assumed by a
successor insured institution, upon maturity.
NR: NR indicates no rating has been requested, that there is insufficient
information on which to base a rating, or that S&P does not rate a particular
type of obligation as a matter of policy.
MUNICIPAL NOTES
S&P note ratings reflect the liquidity concerns and market access risks unique
to notes. Notes due in 3 years or less will likely receive a note rating.
Notes maturing beyond 3 years will most likely receive a long-term debt
rating. The following criteria will be used in making that assessment:
-- Amortization schedule (the larger the final maturity relative to other
maturities the more likely it will be treated as a note).
-- Sources of payment (the more dependent the issue is on the market for
its refinancing, the more likely it will be treated as a note).
Note rating symbols are as follows:
SP-1: Strong capacity to pay principal and interest. Those issues
determined to possess very strong characteristics will be given a plus(+)
designation.
SP-2: Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse financial and economic changes over the term of
the notes.
SP-3: Speculative capacity to pay principal and interest.
FITCH INVESTORS SERVICE, INC.
INVESTMENT GRADE BOND RATINGS
AAA: Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events.
AA: Bonds considered to be investment grade and of very high credit quality.
The obligor's ability to pay interest and repay principal is very strong,
although not quite as strong as bonds rated "AAA". Because bonds rated in the
"AAA" and "AA" categories are not significantly vulnerable to foreseeable
future developments, short-term debt of these issuers is generally rated
"F-1+".
A: Bonds considered to be investment grade and of high credit quality. The
obligors ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions
and circumstances than bonds with higher ratings.
BBB: Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these bonds,
and therefore, impair timely payment. The likelihood that the ratings of these
bonds will fall below investment grade is higher than for bonds with higher
ratings.
HIGH YIELD BOND RATINGS
BB: Bonds are considered speculative. The obligor's ability to pay interest
and repay principal may be affected over time by adverse economic changes.
However, business and financial alternatives can be identified that could
assist the obligor in satisfying its debt service requirements.
B: Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued
timely payment of principal and interest reflects the obligor's limited margin
of safety and the need for reasonable business and economic activity
throughout the life of the issue.
CCC: Bonds have certain identifiable characteristics which, if not remedied,
may lead to default. The ability to meet obligations requires an advantageous
business and economic environment.
CC: Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C: Bonds are in imminent default in payment of interest or principal.
DDD, DD, AND D: Bonds are in default on interest and/or principal payments.
Such bonds are extremely speculative and should be valued on the basis of
their ultimate recovery value in liquidation or reorganization of the obligor.
"DDD" represents the highest potential for recovery on these bonds, and "D"
represents the lowest potential for recovery.
PLUS (+) OR MINUS (-): The ratings from AA to C may be modified by the
addition of a plus or minus sign to indicate the relative position of a credit
within the rating category.
NR: Indicates that Fitch does not rate the specific issue.
CONDITIONAL: A conditional rating is premised on the successful completion of
a project or the occurrence of a specific event.
INVESTMENT GRADE SHORT-TERM RATINGS
Fitch's short-term ratings apply to debt obligations that are payable on
demand or have original maturities of generally up to three years, including
commercial paper, certificates of deposit, medium-term notes, and municipal
and investment notes.
F-1+: Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1: Very Stong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated
"F-1+".
F-2: Good Credit Quality. Issues carrying this rating have a satisfactory
degree of assurance for timely payment, but the margin of safety is not as
great as the "F-1+" and "F-1" categories.
F-3: Fair Credit Quality. Issues carrying this rating have characteristics
suggesting that the degree of assurance for timely payment is adequate,
however, near-term adverse change could cause these securities to be rated
below investment grade.
* * * * * * * *
NOTES: Bonds which are unrated expose the investor to risks with respect to
capacity to pay interest or repay principal which are similar to the risks of
lower-rated speculative bonds. The Portfolio is dependent on the Investment
Adviser's judgment, analysis and experience in the evaluation of such bonds.
Investors should note that the assignment of a rating to a bond by a
rating service may not reflect the effect of recent developments on the
issuer's ability to make interest and principal payments.
<PAGE>
- --------------------------------------------------------------------------------
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
STATEMENT OF ADDITIONAL INFORMATION
SEPTEMBER 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
M-TFC12/1SAI
<PAGE>
PART C
OTHER INFORMATION
ITEM 24: FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS
INCLUDED IN PART A FOR THE FUNDS LISTED BELOW ARE "FINANCIAL
HIGHLIGHTS" FOR THE PERIOD FROM THE START OF BUSINESS TO THE
FISCAL YEAR ENDED AUGUST 31, 1996 AND FOR THE SIX MONTHS
ENDED FEBRUARY 28, 1997 (UNAUDITED):
EV Marathon Alabama Municipals Fund (start of business May 1, 1992)
EV Marathon Arkansas Municipals Fund (start of business May 1, 1992)
EV Marathon Georgia Municipals Fund (start of business December 23,
1991)
EV Marathon Kentucky Municipals Fund (start of business December 23,
1991)
EV Marathon Louisiana Municipals Fund (start of business October 2,
1992)
EV Marathon Maryland Municipals Fund (start of business February 3,
1992)
EV Marathon Missouri Municipals Fund (start of business May 1, 1992)
EV Marathon North Carolina Municipals Fund (start of business
October 23, 1992)
EV Marathon Oregon Municipals Fund (start of business December 24,
1992)
EV Marathon South Carolina Municipals Fund (start of business
October 2, 1992)
EV Marathon Tennessee Municipals Fund (start of business August 25,
1992)
EV Marathon Virginia Municipals Fund (start of business July 26,
1991)
INCORPORATED BY REFERENCE INTO PART B ARE THE FINANCIAL
STATEMENTS CONTAINED IN THE SEMI-ANNUAL REPORT FOR THE FUNDS,
DATED FEBRUARY 28, 1997 (WHICH WAS PREVIOUSLY FILED
ELECTRONICALLY PURSUANT TO SECTION 30(b)(2) OF THE INVESTMENT
COMPANY ACT OF 1940):
<TABLE>
<S> <C>
EV Marathon Alabama Municipals Fund EV Marathon North Carolina Municipals Fund
EV Marathon Arkansas Municipals Fund EV Marathon Oregon Municipals Fund
EV Marathon Georgia Municipals Fund EV Marathon South Carolina Municipals Fund
EV Marathon Kentucky Municipals Fund EV Marathon Tennessee Municipals Fund
EV Marathon Louisiana Municipals Fund EV Marathon Virginia Municipals Fund
EV Marathon Maryland Municipals Fund (Accession No. 0000950109-97-003888)
EV Marathon Missouri 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 AUGUST 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 Alabama Municipals Fund EV Marathon North Carolina Municipals Fund
EV Marathon Arkansas Municipals Fund EV Marathon Oregon Municipals Fund
EV Marathon Georgia Municipals Fund EV Marathon South Carolina Municipals Fund
EV Marathon Kentucky Municipals Fund EV Marathon Tennessee Municipals Fund
EV Marathon Louisiana Municipals Fund EV Marathon Virginia Municipals Fund
EV Marathon Maryland Municipals Fund (Accession No. 0000950135-96-005156)
EV Marathon Missouri 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 ALABAMA MUNICIPALS PORTFOLIO,
ARKANSAS MUNICIPALS PORTFOLIO, GEORGIA MUNICIPALS PORTFOLIO,
KENTUCKY MUNICIPALS PORTFOLIO, LOUISIANA MUNICIPALS
PORTFOLIO, MARYLAND MUNICIPALS PORTFOLIO, MISSOURI MUNICIPALS
PORTFOLIO, NORTH CAROLINA MUNICIPALS PORTFOLIO, OREGON
MUNICIPALS PORTFOLIO, SOUTH CAROLINA MUNICIPALS PORTFOLIO,
TENNESSEE MUNICIPALS PORTFOLIO, VIRGINIA MUNICIPALS
PORTFOLIO, WHICH ARE CONTAINED IN THE ANNUAL REPORT DATED
AUGUST 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 ALABAMA MUNICIPALS PORTFOLIO,
ARKANSAS MUNICIPALS PORTFOLIO, GEORGIA MUNICIPALS PORTFOLIO,
KENTUCKY MUNICIPALS PORTFOLIO, LOUISIANA MUNICIPALS
PORTFOLIO, MARYLAND MUNICIPALS PORTFOLIO, MISSOURI MUNICIPALS
PORTFOLIO, NORTH CAROLINA MUNICIPALS PORTFOLIO, OREGON
MUNICIPALS PORTFOLIO, SOUTH CAROLINA MUNICIPALS PORTFOLIO,
TENNESSEE MUNICIPALS PORTFOLIO, VIRGINIA MUNICIPALS
PORTFOLIO, WHICH ARE CONTAINED IN THE SEMI-ANNUAL REPORT
DATED FEBRUARY 28, 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) Form of Amendment and Restatement of Establishment and
Designation of Series to be filed by amendment.
(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.
(b) Selling Group Agreement between Eaton Vance Distributors,
Inc. and Authorized Dealers filed as Exhibit (6)(b) to
Post-Effective Amendment No. 61 to the Registration Statement
of Eaton Vance Growth Trust (File Nos. 2-22019, 811-1241) and
incorporated herein by reference.
(c) Schedule of Dealer Discounts and Sales Charges filed as
Exhibit (6)(c) to Post- Effective Amendment No. 61 to the
Registration Statement of Eaton Vance Growth Trust (File Nos.
2-22019, 811-1241) and incorporated herein by reference.
(7) The Securities and Exchange Commission has granted the
Registrant an exemptive order that permits the Registrant to
enter into deferred compensation arrangements with its
independent Trustees. See in the Matter of Capital Exchange
Fund, Inc., Release No. IC-20671 (November 1, 1994).
(8)(a) Custodian Agreement with Investors Bank & Trust Company dated
October 15, 1992 filed as Exhibit (8) to Post-Effective
Amendment No. 55 and incorporated herein by reference.
(b) Amendment to Custodian Agreement with Investors Bank & Trust
Company dated October 23, 1995 filed as Exhibit (8)(b) to
Post-Effective Amendment No. 57 and incorporated herein by
reference.
(9)(a) Amended Administrative Services Agreement between Eaton Vance
Municipals Trust (on behalf of each of its series) and Eaton
Vance Management with attached schedules (including Amended
Schedule A dated September 29, 1995) filed as Exhibit (9)(a)
to Post-Effective Amendment No. 55 and incorporated herein by
reference.
(b) Transfer Agency Agreement dated June 7, 1989 filed as Exhibit
9(d) to Post- Effective Amendment No. 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 Alabama
Municipals Fund, EV Marathon Arkansas Municipals Fund, EV
Marathon Georgia Municipals Fund, EV Marathon Kentucky
Municipals Fund, EV Marathon Louisiana Municipals Fund, EV
Marathon Maryland Municipals Fund, EV Marathon Missouri
Municipals Fund, EV Marathon North Carolina Municipals Fund,
EV Marathon Oregon Municipals Fund, EV Marathon South
Carolina Municipals Fund, EV Marathon Tennessee Municipals
Fund, EV Marathon Virginia 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) Amendment to the Amended Distribution Plan for Eaton Vance
Municipals Trust (on behalf of its Marathon Series) to be
filed by amendment.
(f) 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.
(g) 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.
(h) Amendment to the Amended Service Plan for Eaton Vance
Municipals Trust (on behalf of its Traditional Series) to be
filed by amendment.
(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) Form of Multiple Class Plan to be filed by amendment.
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 2, 1997
EV Classic National Municipals Fund 1,117
EV Marathon Alabama Municipals Fund 1,781
EV Marathon Arizona Municipals Fund 2,476
EV Marathon Arkansas Municipals Fund 1,763
EV Marathon California Municipals Fund 6,400
EV Marathon Colorado Municipals Fund 1,015
EV Marathon Connecticut Municipals Fund 3,980
EV Marathon Florida Municipals Fund 10,913
EV Marathon Georgia Municipals Fund 2,259
EV Marathon Kentucky Municipals Fund 3,052
EV Marathon Louisiana Municipals Fund 552
EV Marathon Maryland Municipals Fund 2,733
EV Marathon Massachusetts Municipals Fund 6,009
EV Marathon Michigan Municipals Fund 3,657
EV Marathon Minnesota Municipals Fund 2,099
EV Marathon Mississippi Municipals Fund 562
EV Marathon Missouri Municipals Fund 2,339
EV Marathon National Municipals Fund 39,772
EV Marathon New Jersey Municipals Fund 9,221
EV Marathon New York Municipals Fund 13,029
EV Marathon North Carolina Municipals Fund 3,931
EV Marathon Ohio Municipals Fund 6,492
EV Marathon Oregon Municipals Fund 3,070
EV Marathon Pennsylvania Municipals Fund 11,362
EV Marathon Rhode Island Municipals Fund 763
EV Marathon South Carolina Municipals Fund 1,220
EV Marathon Tennessee Municipals Fund 1,358
EV Marathon Texas Municipals Fund 368
EV Marathon Virginia Municipals Fund 4,235
EV Marathon West Virginia Municipals Fund 1,064
EV Traditional Alabama Municipals Fund 55
EV Traditional Arizona Municipals Fund 49
EV Traditional Arkansas Municipals Fund 33
EV Traditional California Municipals Fund 61
EV Traditional Colorado Municipals Fund 75
EV Traditional Connecticut Municipals Fund 66
EV Traditional Florida Municipals Fund 115
EV Traditional Georgia Municipals Fund 46
EV Traditional Kentucky Municipals Fund 30
EV Traditional Louisiana Municipals Fund 31
EV Traditional Maryland Municipals Fund 51
EV Traditional Massachusetts Municipals Fund 90
EV Traditional Michigan Municipals Fund 34
EV Traditional Minnesota Municipals Fund 78
EV Traditional Mississippi Municipals Fund 28
EV Traditional Missouri Municipals Fund 81
EV Traditional National Municipals Fund 753
EV Traditional New Jersey Municipals Fund 126
EV Traditional New York Municipals Fund 192
EV Traditional North Carolina Municipals Fund 93
EV Traditional Ohio Municipals Fund 43
EV Traditional Oregon Municipals Fund 41
EV Traditional Pennsylvania Municipals Fund 116
EV Traditional Rhode Island Municipals Fund 36
EV Traditional South Carolina Municipals Fund 25
EV Traditional Tennessee Municipals Fund 35
EV Traditional Texas Municipals Fund 7
EV Traditional Virginia Municipals Fund 41
EV Traditional West Virginia Municipals Fund 44
Massachusetts Municipal Bond Portfolio 1,833
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
- ----------
*Address is 24 Federal Street, Boston, MA 02110
</TABLE>
(c) Not applicable
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All applicable accounts, books and documents required to be maintained by
the Registrant by Section 31(a) of the 1940 Act and the Rules promulgated
thereunder are in the possession and custody of the Registrant's custodian,
Investors Bank & Trust Company, 600 Clarendon Street, 16th Floor Mail Code
ADM27, Boston, MA 02111 and its transfer agent, First Data Investor Services
Group, 4400 Computer Drive, Westborough, MA 01581-5123, with the exception of
certain corporate documents and portfolio trading documents which are in the
possession and custody, Eaton Vance Management, 24 Federal Street, Boston, MA
02110. Registrant is informed that all applicable accounts, books and
documents required to be maintained by registered investment advisers are in
the custody and possession of Eaton Vance Management and Boston Management and
Research.
ITEM 31. MANAGEMENT SERVICES
Not applicable
ITEM 32. UNDERTAKINGS
The Registrant undertakes to furnish to each person to whom a prospectus
is delivered a copy of the latest annual report to shareholders, upon request
and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, and the
Investment Company Act of 1940, the Registrant has duly caused this Amendment
to its Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized in the City of Boston, and the Commonwealth of
Massachusetts, on the 1st 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.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
President (Chief
/s/THOMAS J. FETTER Executive Officer) July 1, 1997
- --------------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and Accounting
/s/JAMES L. O'CONNOR Officer July 1, 1997
- --------------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee July 1, 1997
- --------------------------------------
DONALD R. DWIGHT
/s/JAMES B. HAWKES Trustee July 1, 1997
- --------------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee July 1, 1997
- --------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee July 1, 1997
- --------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee July 1, 1997
- --------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee July 1, 1997
- --------------------------------------
JACK L. TREYNOR
*By: /s/ ALAN R. DYNNER
- --------------------------------------
ALAN R. DYNNER
As attorney-in-fact
</TABLE>
<PAGE>
SIGNATURES
Alabama 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
1st day of July, 1997.
ALABAMA MUNICIPALS PORTFOLIO
By /s/ THOMAS J. FETTER
--------------------------------------
THOMAS J. FETTER, President
This Amendment to the Registration Statement on Form N-1A of Eaton Vance
Municipals Trust (File No. 33-572) has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
President (Chief
/s/THOMAS J. FETTER Executive Officer) July 1, 1997
- --------------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and Accounting
/s/JAMES L. O'CONNOR Officer July 1, 1997
- --------------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee July 1, 1997
- --------------------------------------
DONALD R. DWIGHT
/s/JAMES B. HAWKES Trustee July 1, 1997
- --------------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee July 1, 1997
- --------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee July 1, 1997
- --------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee July 1, 1997
- --------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee July 1, 1997
- --------------------------------------
JACK L. TREYNOR
*By: /s/ ALAN R. DYNNER
- --------------------------------------
ALAN R. DYNNER
As attorney-in-fact
</TABLE>
<PAGE>
SIGNATURES
Arkansas 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
1st day of July, 1997.
ARKANSAS MUNICIPALS PORTFOLIO
By /s/ THOMAS J. FETTER
--------------------------------------
THOMAS J. FETTER, President
This Amendment to the Registration Statement on Form N-1A of Eaton Vance
Municipals Trust (File No. 33-572) has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
President (Chief
/s/THOMAS J. FETTER Executive Officer) July 1, 1997
- --------------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and Accounting
/s/JAMES L. O'CONNOR Officer July 1, 1997
- --------------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee July 1, 1997
- --------------------------------------
DONALD R. DWIGHT
/s/JAMES B. HAWKES Trustee July 1, 1997
- --------------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee July 1, 1997
- --------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee July 1, 1997
- --------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee July 1, 1997
- --------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee July 1, 1997
- --------------------------------------
JACK L. TREYNOR
*By: /s/ ALAN R. DYNNER
- --------------------------------------
ALAN R. DYNNER
As attorney-in-fact
</TABLE>
<PAGE>
SIGNATURES
Georgia 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
1st day of July, 1997.
GEORGIA MUNICIPALS PORTFOLIO
By /s/ THOMAS J. FETTER
--------------------------------------
THOMAS J. FETTER, President
This Amendment to the Registration Statement on Form N-1A of Eaton Vance
Municipals Trust (File No. 33-572) has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
President (Chief
/s/THOMAS J. FETTER Executive Officer) July 1, 1997
- --------------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and Accounting
/s/JAMES L. O'CONNOR Officer July 1, 1997
- --------------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee July 1, 1997
- --------------------------------------
DONALD R. DWIGHT
/s/JAMES B. HAWKES Trustee July 1, 1997
- --------------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee July 1, 1997
- --------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee July 1, 1997
- --------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee July 1, 1997
- --------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee July 1, 1997
- --------------------------------------
JACK L. TREYNOR
*By: /s/ ALAN R. DYNNER
- --------------------------------------
ALAN R. DYNNER
As attorney-in-fact
</TABLE>
<PAGE>
SIGNATURES
Kentucky 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
1st day of July, 1997.
KENTUCKY MUNICIPALS PORTFOLIO
By /s/ THOMAS J. FETTER
--------------------------------------
THOMAS J. FETTER, President
This Amendment to the Registration Statement on Form N-1A of Eaton Vance
Municipals Trust (File No. 33-572) has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
President (Chief
/s/THOMAS J. FETTER Executive Officer) July 1, 1997
- --------------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and Accounting
/s/JAMES L. O'CONNOR Officer July 1, 1997
- --------------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee July 1, 1997
- --------------------------------------
DONALD R. DWIGHT
/s/JAMES B. HAWKES Trustee July 1, 1997
- --------------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee July 1, 1997
- --------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee July 1, 1997
- --------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee July 1, 1997
- --------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee July 1, 1997
- --------------------------------------
JACK L. TREYNOR
*By: /s/ ALAN R. DYNNER
- ---------------------------------------
ALAN R. DYNNER
As attorney-in-fact
</TABLE>
<PAGE>
SIGNATURES
Louisiana 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
1st day of July, 1997.
LOUISIANA MUNICIPALS PORTFOLIO
By /s/ THOMAS J. FETTER
--------------------------------------
THOMAS J. FETTER, President
This Amendment to the Registration Statement on Form N-1A of Eaton Vance
Municipals Trust (File No. 33-572) has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
President (Chief
/s/THOMAS J. FETTER Executive Officer) July 1, 1997
- --------------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and Accounting
/s/JAMES L. O'CONNOR Officer July 1, 1997
- --------------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee July 1, 1997
- --------------------------------------
DONALD R. DWIGHT
/s/JAMES B. HAWKES Trustee July 1, 1997
- --------------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee July 1, 1997
- --------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee July 1, 1997
- --------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee July 1, 1997
- --------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee July 1, 1997
- --------------------------------------
JACK L. TREYNOR
*By: /s/ ALAN R. DYNNER
- --------------------------------------
ALAN R. DYNNER
As attorney-in-fact
</TABLE>
<PAGE>
SIGNATURES
Maryland 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
1st day of July, 1997.
MARYLAND MUNICIPALS PORTFOLIO
By /s/ THOMAS J. FETTER
--------------------------------------
THOMAS J. FETTER, President
This Amendment to the Registration Statement on Form N-1A of Eaton Vance
Municipals Trust (File No. 33-572) has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
President (Chief
/s/THOMAS J. FETTER Executive Officer) July 1, 1997
- --------------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and Accounting
/s/JAMES L. O'CONNOR Officer July 1, 1997
- --------------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee July 1, 1997
- --------------------------------------
DONALD R. DWIGHT
/s/JAMES B. HAWKES Trustee July 1, 1997
- --------------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee July 1, 1997
- --------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee July 1, 1997
- --------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee July 1, 1997
- --------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee July 1, 1997
- --------------------------------------
JACK L. TREYNOR
*By: /s/ ALAN R. DYNNER
- ---------------------------------------
ALAN R. DYNNER
As attorney-in-fact
</TABLE>
<PAGE>
SIGNATURES
Missouri 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
1st day of July, 1997.
MISSOURI MUNICIPALS PORTFOLIO
By /s/ THOMAS J. FETTER
--------------------------------------
THOMAS J. FETTER, President
This Amendment to the Registration Statement on Form N-1A of Eaton Vance
Municipals Trust (File No. 33-572) has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
President (Chief
/s/THOMAS J. FETTER Executive Officer) July 1, 1997
- --------------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and Accounting
/s/JAMES L. O'CONNOR Officer July 1, 1997
- --------------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee July 1, 1997
- --------------------------------------
DONALD R. DWIGHT
/s/JAMES B. HAWKES Trustee July 1, 1997
- --------------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee July 1, 1997
- --------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee July 1, 1997
- --------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee July 1, 1997
- --------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee July 1, 1997
- --------------------------------------
JACK L. TREYNOR
*By: /s/ ALAN R. DYNNER
- --------------------------------------
ALAN R. DYNNER
As attorney-in-fact
</TABLE>
<PAGE>
SIGNATURES
North Carolina 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
1st day of July, 1997.
NORTH CAROLINA MUNICIPALS PORTFOLIO
By /s/ THOMAS J. FETTER
--------------------------------------
THOMAS J. FETTER, President
This Amendment to the Registration Statement on Form N-1A of Eaton Vance
Municipals Trust (File No. 33-572) has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
President (Chief
/s/THOMAS J. FETTER Executive Officer) July 1, 1997
- --------------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and Accounting
/s/JAMES L. O'CONNOR Officer July 1, 1997
- --------------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee July 1, 1997
- --------------------------------------
DONALD R. DWIGHT
/s/JAMES B. HAWKES Trustee July 1, 1997
- --------------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee July 1, 1997
- --------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee July 1, 1997
- --------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee July 1, 1997
- --------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee July 1, 1997
- --------------------------------------
JACK L. TREYNOR
*By: /s/ ALAN R. DYNNER
- --------------------------------------
ALAN R. DYNNER
As attorney-in-fact
</TABLE>
<PAGE>
SIGNATURES
Oregon 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
1st day of July, 1997.
OREGON MUNICIPALS PORTFOLIO
By /s/ THOMAS J. FETTER
--------------------------------------
THOMAS J. FETTER, President
This Amendment to the Registration Statement on Form N-1A of Eaton Vance
Municipals Trust (File No. 33-572) has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
President (Chief
/s/THOMAS J. FETTER Executive Officer) July 1, 1997
- --------------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and Accounting
/s/JAMES L. O'CONNOR Officer July 1, 1997
- --------------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee July 1, 1997
- --------------------------------------
DONALD R. DWIGHT
/s/JAMES B. HAWKES Trustee July 1, 1997
- --------------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee July 1, 1997
- --------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee July 1, 1997
- --------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee July 1, 1997
- --------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee July 1, 1997
- --------------------------------------
JACK L. TREYNOR
*By: /s/ ALAN R. DYNNER
- ---------------------------------------
ALAN R. DYNNER
As attorney-in-fact
</TABLE>
<PAGE>
SIGNATURES
South Carolina 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
1st day of July, 1997.
SOUTH CAROLINA MUNICIPALS PORTFOLIO
By /s/ THOMAS J. FETTER
--------------------------------------
THOMAS J. FETTER, President
This Amendment to the Registration Statement on Form N-1A of Eaton Vance
Municipals Trust (File No. 33-572) has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
President (Chief
/s/THOMAS J. FETTER Executive Officer) July 1, 1997
- --------------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and Accounting
/s/JAMES L. O'CONNOR Officer July 1, 1997
- --------------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee July 1, 1997
- --------------------------------------
DONALD R. DWIGHT
/s/JAMES B. HAWKES Trustee July 1, 1997
- --------------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee July 1, 1997
- --------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee July 1, 1997
- --------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee July 1, 1997
- --------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee July 1, 1997
- --------------------------------------
JACK L. TREYNOR
*By: /s/ ALAN R. DYNNER
- --------------------------------------
ALAN R. DYNNER
As attorney-in-fact
</TABLE>
<PAGE>
SIGNATURES
Tennessee 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
1st day of July, 1997.
TENNESSEE MUNICIPALS PORTFOLIO
By /s/ THOMAS J. FETTER
--------------------------------------
THOMAS J. FETTER, President
This Amendment to the Registration Statement on Form N-1A of Eaton Vance
Municipals Trust (File No. 33-572) has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
President (Chief
/s/THOMAS J. FETTER Executive Officer) July 1, 1997
- --------------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and Accounting
/s/JAMES L. O'CONNOR Officer July 1, 1997
- --------------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee July 1, 1997
- --------------------------------------
DONALD R. DWIGHT
/s/JAMES B. HAWKES Trustee July 1, 1997
- --------------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee July 1, 1997
- --------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee July 1, 1997
- --------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee July 1, 1997
- --------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee July 1, 1997
- --------------------------------------
JACK L. TREYNOR
*By: /s/ ALAN R. DYNNER
- --------------------------------------
ALAN R. DYNNER
As attorney-in-fact
</TABLE>
<PAGE>
SIGNATURES
Virginia 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
1st day of July, 1997.
VIRGINIA MUNICIPALS PORTFOLIO
By /s/ THOMAS J. FETTER
--------------------------------------
THOMAS J. FETTER, President
This Amendment to the Registration Statement on Form N-1A of Eaton Vance
Municipals Trust (File No. 33-572) has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
President (Chief
/s/THOMAS J. FETTER Executive Officer) July 1, 1997
- --------------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and Accounting
/s/JAMES L. O'CONNOR Officer July 1, 1997
- --------------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee July 1, 1997
- --------------------------------------
DONALD R. DWIGHT
/s/JAMES B. HAWKES Trustee July 1, 1997
- --------------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee July 1, 1997
- --------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee July 1, 1997
- --------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee July 1, 1997
- --------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee July 1, 1997
- --------------------------------------
JACK L. TREYNOR
*By: /s/ ALAN R. DYNNER
- --------------------------------------
ALAN R. DYNNER
As attorney-in-fact
</TABLE>
<PAGE>
EXHIBIT INDEX
The following exhibits are filed as part of this amendment to the
Registration Statement pursuant to General Instructions E of Form N-1A.
<TABLE>
<CAPTION>
PAGE IN
SEQUENTIAL
NUMBERING
EXHIBIT NO. DESCRIPTION SYSTEM
- ----------- ----------- -----------
<C> <S> <C>
(11) Consent of Independent Auditors for EV Marathon Alabama Municipals
Fund, EV Marathon Arkansas Municipals Fund, EV Marathon Georgia
Municipals Fund, EV Marathon Kentucky Municipals Fund, EV Marathon
Louisiana Municipals Fund, EV Marathon Maryland Municipals Fund, EV
Marathon Missouri Municipals Fund, EV Marathon North Carolina
Municipals Fund, EV Marathon Oregon Municipals Fund, EV Marathon South
Carolina Municipals Fund, EV Marathon Tennessee Municipals Fund and EV
Marathon Virginia Municipals Fund.
(16) Schedule for Computation of Performance Quotations.
</TABLE>
<PAGE>
EXHIBIT (11)
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 66 to the
Registration Statement of Eaton Vance Municipals Trust (1933 Act File No.
33-572) on behalf of 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 and Eaton Vance
Virginia Municipals Fund of our report dated October 1, 1996, relating to EV
Marathon Alabama Municipals Fund, EV Marathon Arkansas Municipals Fund, EV
Marathon Georgia Municipals Fund, EV Marathon Kentucky Municipals Fund, EV
Marathon Louisiana Municipals Fund, EV Marathon Maryland Municipals Fund, EV
Marathon Missouri Municipals Fund, EV Marathon North Carolina Municipals Fund,
EV Marathon Oregon Municipals Fund, EV Marathon South Carolina Municipals Fund,
EV Marathon Tennessee Municipals Fund and EV Marathon Virginia Municipals Fund,
and of our report dated October 1, 1996, relating to Alabama Municipals
Portfolio, Arkansas Municipals Portfolio, Georgia Municipals Portfolio, Kentucky
Municipals Portfolio, Louisiana Municipals Portfolio, Maryland Municipals
Portfolio, Missouri Municipals Portfolio, North Carolina Municipals Portfolio,
Oregon Municipals Portfolio, South Carolina Municipals Portfolio, Tennessee
Municipals Portfolio and Virginia Municipals Portfolio, which reports are
included in the Annual Report to Shareholders for the year ended August 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 1, 1997
Boston, Massachusetts
<PAGE>
Exhibit 16
EV MARATHON ALABAMA TAX FREE FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 2/28/97
Interest Income Earned: $467,677
Plus Dividend Income Earned:
--------
Equal Gross Income: $467,677
Minus Expenses: $127,227
--------
Equal Net Investment Income: $340,450
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 9,432,928
--------
Equal Net Investment Income Earned Per Share: $0.0361
Net Asset Value Per Share 2/28/97 $10.71
30 Day Yield*: 4.08%
Divided by One minus the Tax Rate of 31%: 0.69
--------
Equal Tax Equivalent Yield **: 5.91%
Divided by one minus a tax rate of 34.45%: 0.6555
--------
Equal Tax Equivalent Yield***: 6.22%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0361/$10.71)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and Alabama tax rate of 34.45%
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EV MARATHON ALABAMA 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 February 28, 1997 and for the 1 year period ended
February 28, 1997.
<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 02/28/97 ON 02/28/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ------ ---- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 05/01/92 $1,364.27 $1,344.27 36.43% 6.64% 34.43% 6.32%
1 YEAR ENDED
02/28/97 02/28/96 $1,048.84 $998.84 4.88% 4.88% -0.12% -0.12%
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.
</TABLE>
<PAGE>
Exhibit 16
EV MARATHON ARKANSAS TAX FREE FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 2/28/97
Interest Income Earned: $321,833
Plus Dividend Income Earned:
--------
Equal Gross Income: $321,833
Minus Expenses: $86,059
--------
Equal Net Investment Income: $235,773
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 6,562,507
--------
Equal Net Investment Income Earned Per Share: $0.0359
Net Asset Value Per Share 2/28/97 $10.38
30 Day Yield*: 4.19%
Divided by One minus the Tax Rate of 31%: 0.69
--------
Equal Tax Equivalent Yield **: 6.07%
Divided by one minus a tax rate of 35.83%: 0.6417
------
Equal Tax Equivalent Yield***: 6.53%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0359/$10.38)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and Arkansas tax rate of 35.83%
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EV MARATHON ARKANSAS 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 October 2, 1992 through February 28, 1997 and for the 1 year period ended
February 28, 1997.
<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 02/28/97 ON 02/28/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ------ ---- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 10/02/92 $1,289.54 $1,269.54 28.95% 5.94% 26.95% 5.56%
1 YEAR ENDED
02/28/97 02/28/96 $1,034.91 $985.43 3.49% 3.49% -1.46% -1.46%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC *
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the 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.
</TABLE>
<PAGE>
Exhibit 16
EV MARATHON GEORGIA TAX FREE FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 2/28/97
Interest Income Earned: $485,617
Plus Dividend Income Earned:
--------
Equal Gross Income: $485,617
Minus Expenses: $125,442
--------
Equal Net Investment Income: $360,175
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 9,984,919
--------
Equal Net Investment Income Earned Per Share: $0.0361
Net Asset Value Per Share 2/28/97 $10.04
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 35.14%: 0.6486
--------
Equal Tax Equivalent Yield***: 6.71%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0361/$10.04)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and Georgia tax rate of 35.14%
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EV MARATHON GEORGIA MUNICIPALS FUND
The table below indicates the total return (capital changes plus reinvestment of all distributions) on a hypothetical investment of
$1,000 in the Fund covering the period from December 23, 1991 through February 28, 1997 and for the 1 and 5 year periods ended
February 28, 1997.
<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 02/28/97 ON 02/28/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ------ ---- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 12/23/91 $1,317.94 $1,307.94 31.79% 5.46% 30.79% 5.31%
5 YEARS ENDED
02/28/97 02/28/92 $1,330.15 $1,310.15 33.02% 5.87% 31.02% 5.55%
1 YEAR ENDED
02/28/97 02/28/96 $1,046.40 $996.45 4.64% 4.64% -0.36% -0.36%
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.
</TABLE>
<PAGE>
Exhibit 16
EV MARATHON KENTUCKY TAX FREE FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 2/28/97
Interest Income Earned: $607,377
Plus Dividend Income Earned:
--------
Equal Gross Income: $607,377
Minus Expenses: $165,877
--------
Equal Net Investment Income: $441,500
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 12,452,936
--------
Equal Net Investment Income Earned Per Share: $0.0355
Net Asset Value Per Share 2/28/97 $10.23
30 Day Yield*: 4.20%
Divided by One minus the Tax Rate of 31%: 0.69
--------
Equal Tax Equivalent Yield **: 6.09%
Divided by one minus a tax rate of 35.14%: 0.6486
--------
Equal Tax Equivalent Yield***: 6.48%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0355/$10.23)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and Kentucky tax rate of 35.14%
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EV MARATHON KENTUCKY MUNICIPALS FUND
The table below indicates the total return (capital changes plus reinvestment of all distributions) on a hypothetical investment of
$1,000 in the Fund covering the period from December 23, 1991 through February 28, 1997 and for the 1 and 5 year periods ended
February 28, 1997.
<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 02/28/97 ON 02/28/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ------ ---- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 12/23/91 $1,340.68 $1,330.68 34.07% 5.81% 33.07% 5.66%
5 YEARS ENDED
02/28/97 02/28/92 $1,351.67 $1,331.67 35.17% 6.21% 33.17% 5.90%
1 YEAR ENDED
02/28/97 02/28/96 $1,046.40 $996.40 4.64% 4.64% -0.36% -0.36%
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.
</TABLE>
<PAGE>
Exhibit 16
EV MARATHON LOUISIANA TAX FREE FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 2/28/97:
Interest Income Earned: $172,766
Plus Dividend Income Earned:
--------
Equal Gross Income: $172,766
Minus Expenses: $40,810
--------
Equal Net Investment Income: $131,956
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 3,220,309
--------
Equal Net Investment Income Earned Per Share: $0.0410
Net Asset Value Per Share 2/28/97: $10.20
30 Day Yield*: 4.87%
Divided by One minus the Tax Rate of 31%: 0.69
--------
Equal Tax Equivalent Yield **: 7.06%
Divided by one minus a tax rate of 35.14%: 0.6486
--------
Equal Tax Equivalent Yield***: 7.51%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.041 /$0.2)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and Louisiana tax rate of 35.14%
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EV MARATHON LOUISIANA 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 October 2, 1992 through February 28, 1997 and for the 1 year period ended
February 28, 1997.
<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 02/28/97 ON 02/28/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ------ ---- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 10/02/92 $1,292.56 $1,272.56 29.26% 5.99% 27.26% 5.62%
1 YEAR ENDED
02/28/97 02/28/96 $1,056.02 $1,006.02 5.60% 5.60% 0.60% 0.60%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC *
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC **
P = an initial investment of $1,000
* The average annual total return not including the CDSC is calculated based 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.
</TABLE>
<PAGE>
Exhibit 16
EV MARATHON MARYLAND TAX FREE FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 2/28/97
Interest Income Earned: $515,649
Plus Dividend Income Earned:
--------
Equal Gross Income: $515,649
Minus Expenses: $140,050
--------
Equal Net Investment Income: $375,599
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 10,364,005
--------
Equal Net Investment Income Earned Per Share: $0.0362
Net Asset Value Per Share 2/28/97 $10.53
30 Day Yield*: 4.16%
Divided by One minus the Tax Rate of 31%: 0.69
--------
Equal Tax Equivalent Yield **: 6.03%
Divided by one minus a tax rate of 36.52%: 0.6348
--------
Equal Tax Equivalent Yield***: 6.55%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0362/$10.53)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and Maryland tax rate of 36.52%
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EV MARATHON MARYLAND 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 February 3, 1992 through February 28, 1997 and for the 1 and 5 year periods ended
February 28, 1997.
<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 02/28/97 ON 02/28/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ------ ---- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 02/03/92 $1,360.47 $1,350.47 36.05% 6.26% 35.05% 6.11%
5 YEARS ENDED
02/28/97 02/28/92 $1,361.92 $1,341.92 36.19% 6.37% 34.19% 6.06%
1 YEAR ENDED
02/28/97 02/28/96 $1,043.50 $993.64 4.35% 4.35% -0.64% -0.64%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC *
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC **
P = an initial investment of $1,000
* The average annual total return not including the CDSC is calculated based 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.
</TABLE>
<PAGE>
Exhibit 16
EV MARATHON MISSOURI TAX FREE FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 2/28/97:
Interest Income Earned: $384,699
Plus Dividend Income Earned:
--------
Equal Gross Income: $384,699
Minus Expenses: $102,519
--------
Equal Net Investment Income: $282,180
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 7,367,205
--------
Equal Net Investment Income Earned Per Share: $0.0383
Net Asset Value Per Share 2/28/97: $10.81
30 Day Yield*: 4.29%
Divided by One minus the Tax Rate of 31%: 0.69
--------
Equal Tax Equivalent Yield **: 6.22%
Divided by one minus a tax rate of 35.14%: 0.6768
--------
Equal Tax Equivalent Yield***: 6.34%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0383/$10.81)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and Missouri tax rate of 35.14%
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EV MARATHON MISSOURI 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 February 28, 1997 and for the 1 year period ended
February 28, 1997.
<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 02/28/97 ON 02/28/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ------ ---- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 05/01/92 $1,383.62 $1,363.62 38.36% 6.95% 36.36% 6.63%
1 YEAR ENDED
02/28/97 02/28/96 $1,046.96 $996.96 4.70% 4.70% -0.30% -0.30%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC *
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the 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.
</TABLE>
<PAGE>
Exhibit 16
EV MARATHON NORTH CAROLINA TAX FREE FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 2/28/97
Interest Income Earned: $777,913
Plus Dividend Income Earned:
--------
Equal Gross Income: $777,913
Minus Expenses: $201,993
--------
Equal Net Investment Income: $575,920
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 16,140,117
--------
Equal Net Investment Income Earned Per Share: $0.0357
Net Asset Value Per Share 2/28/97 $10.16
30 Day Yield*: 4.25%
Divided by One minus the Tax Rate of 31%: 0.69
--------
Equal Tax Equivalent Yield **: 6.16%
Divided by one minus a tax rate of 36.35%: 0.6365
--------
Equal Tax Equivalent Yield***: 6.68%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0357/$10.16)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and North Carolina tax rate of 36.35%
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EV MARATHON NORTH CAROLINA 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 October 23, 1991 through February 28, 1997 and for the 1 and 5 year periods ended
February 28, 1997.
<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 02/28/97 ON 02/28/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ------ ---- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 10/23/91 $1,345.32 $1,335.32 34.53% 5.69% 33.53% 5.54%
5 YEARS ENDED
02/28/97 02/28/92 $1,312.83 $1,292.83 31.28% 5.59% 29.28% 5.27%
1 YEAR ENDED
02/28/97 02/28/96 $1,038.15 $988.59 3.82% 3.82% -1.14% -1.14%
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.
</TABLE>
<PAGE>
Exhibit 16
EV MARATHON OREGON TAX FREE FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 2/28/97:
Interest Income Earned: $596,458
Plus Dividend Income Earned:
--------
Equal Gross Income: $596,458
Minus Expenses: $166,983
--------
Equal Net Investment Income: $429,475
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 11,743,098
--------
Equal Net Investment Income Earned Per Share: $0.0366
Net Asset Value Per Share 2/28/97: $10.38
30 Day Yield*: 4.27%
Divided by One minus the Tax Rate of 31%: 0.69
--------
Equal Tax Equivalent Yield **: 6.19%
Divided by one minus a tax rate of 37.21%: 0.6279
--------
Equal Tax Equivalent Yield***: 6.80%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0366/$10.38)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and Oregon tax rate of 37.21%
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EV MARATHON OREGON MUNICIPALS FUND
The table below indicates the total return (capital changes plus reinvestment of all distributions) on a hypothetical investment of
$1,000 in the Fund covering the period from December 24, 1991 through February 28, 1997 and for the 1 and 5 year periods ended
February 28, 1997.
<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 02/28/97 ON 02/28/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ------ ---- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 12/24/91 $1,354.61 $1,344.61 35.46% 6.02% 34.46% 5.87%
5 YEARS ENDED
02/28/97 02/28/92 $1,347.39 $1,327.39 34.74% 6.14% 32.74% 5.83%
1 YEAR ENDED
02/28/97 02/28/96 $1,029.45 $980.21 2.94% 2.94% -1.98% -1.98%
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.
</TABLE>
<PAGE>
Exhibit 16
EV MARATHON SOUTH CAROLINA TAX FREE FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 2/28/97
Interest Income Earned: $275,080
Plus Dividend Income Earned:
--------
Equal Gross Income: $275,080
Minus Expenses: $76,929
--------
Equal Net Investment Income: $198,151
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 5,462,216
--------
Equal Net Investment Income Earned Per Share: $0.0363
Net Asset Value Per Share 2/28/97 $10.27
30 Day Yield*: 4.28%
Divided by One minus the Tax Rate of 31%: 0.69
--------
Equal Tax Equivalent Yield **: 6.20%
Divided by one minus a tax rate of 35.83%: 0.6417
--------
Equal Tax Equivalent Yield***: 6.67%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0363/$10.27)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and South Carolina tax rate of 35.83%
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EV MARATHON SOUTH CAROLINA 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 October 2, 1992 through February 28, 1997 and for the 1 year period ended
February 28, 1997.
<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 02/28/97 ON 02/28/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ------ ---- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 10/02/92 $1,273.77 $1,253.77 27.38% 5.64% 25.38% 5.26%
1 YEAR ENDED
02/28/97 02/28/96 $1,047.57 $997.57 4.76% 4.76% -0.24% -0.24%
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.
</TABLE>
<PAGE>
Exhibit 16
EV MARATHON TENNESSEE TAX FREE FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 2/28/97:
Interest Income Earned: $257,795
Plus Dividend Income Earned:
--------
Equal Gross Income: $257,795
Minus Expenses: $68,967
--------
Equal Net Investment Income: $188,828
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 5,169,581
--------
Equal Net Investment Income Earned Per Share: $0.0365
Net Asset Value Per Share 2/28/97: $10.39
30 Day Yield*: 4.25%
Divided by One minus the Tax Rate of 31%: 0.69
--------
Equal Tax Equivalent Yield **: 6.16%
Divided by one minus a tax rate of 35.14%: 0.6486
--------
Equal Tax Equivalent Yield***: 6.55%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0365/$10.39)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and Tennessee tax rate of 35.14%
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EV MARATHON TENNESSEE 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 February 28, 1997 and for the 1 year period ended
February 28, 1997.
<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 02/28/97 ON 02/28/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ------ ---- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 08/25/92 $1,314.67 $1,294.67 31.47% 6.25% 29.47% 5.89%
1 YEAR ENDED
02/28/97 02/28/96 $1,046.11 $996.16 4.61% 4.61% -0.38% -0.38%
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.
</TABLE>
<PAGE>
Exhibit 16
EV MARATHON VIRGINIA TAX FREE FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 2/28/97
Interest Income Earned: $831,372
Plus Dividend Income Earned:
--------
Equal Gross Income: $831,372
Minus Expenses: $221,662
--------
Equal Net Investment Income: $609,709
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 16,308,622
--------
Equal Net Investment Income Earned Per Share: $0.0374
Net Asset Value Per Share 2/28/97 $10.47
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 34.97%: 0.6503
--------
Equal Tax Equivalent Yield***: 6.64%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0374/$10.47)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and Virginia tax rate of 34.97%
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EV MARATHON VIRGINIA 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 26, 1991 through February 28, 1997 and for the 1 and 5 year periods ended
February 28, 1997.
<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 02/28/97 ON 02/28/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ------ ---- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 07/26/91 $1,410.96 $1,400.96 41.10% 6.34% 40.10% 6.21%
5 YEARS ENDED
02/28/97 02/28/92 $1,326.21 $1,306.21 32.62% 5.81% 30.62% 5.49%
1 YEAR ENDED
02/28/97 02/28/96 $1,038.75 $989.13 3.88% 3.88% -1.09% -1.09%
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.
</TABLE>
<PAGE>
Exhibit 16
EV TRADITIONAL ALABAMA TAX FREE FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 2/28/97
Interest Income Earned: $26,796
Plus Dividend Income Earned:
--------
Equal Gross Income: $26,796
Minus Expenses: $4,180
--------
Equal Net Investment Income: $22,617
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 594,302
--------
Equal Net Investment Income Earned Per Share: $0.0381
Net Asset Value Per Share 2/28/97 $10.14
30 Day Yield*: 4.55%
Divided by One minus the Tax Rate of 31%: 0.69
--------
Equal Tax Equivalent Yield **: 6.59%
Divided by one minus a tax rate of 34.45%: 0.6555
--------
Equal Tax Equivalent Yield***: 6.94%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0381/$10.14)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and Alabama tax rate of 34.45%
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EV TRADITIONAL ALABAMA 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 February 28, 1997 and for the 1 year period ended
February 28, 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 02/28/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ------ ---- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 05/01/92 $962.00 $1,317.72 36.98% 6.73% 31.77% 5.88%
1 YEAR ENDED
02/28/97 02/28/96 $962.45 $1,014.99 5.46% 5.46% 1.50% 1.50%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000 **
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period
P = an initial investment of $1,000 ***
* Initial investment less the current maximum sales charge of 3.75%.
** The average annual total return including the sales charge is calculated based on an initial investment of $1,000 less the
maximum initial sales charge of 3.75%.
*** The cumulative total return including the sales charge is calculated based on an initial investment of $1,000 less
maximum initial sales charge of 3.75%.
</TABLE>
<PAGE>
Exhibit 16
EV TRADITIONAL ARKANSAS TAX FREE FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 2/28/97
Interest Income Earned: $4,587
Plus Dividend Income Earned:
--------
Equal Gross Income: $4,587
Minus Expenses: $864
--------
Equal Net Investment Income: $3,723
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 101,361
--------
Equal Net Investment Income Earned Per Share: $0.0367
Net Asset Value Per Share 2/28/97 $10.09
30 Day Yield*: 4.40%
Divided by One minus the Tax Rate of 31%: 0.69
--------
Equal Tax Equivalent Yield **: 6.38%
Divided by one minus a tax rate of 35.83%: 0.6417
--------
Equal Tax Equivalent Yield***: 6.86%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0367/$10.09)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and Arkansas tax rate of 35.83%
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EV TRADITIONAL ARKANSAS 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 October 2, 1992 through February 28, 1997 and for the 1 year period ended
February 28, 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 02/28/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ------ ---- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 10/02/92 $962.31 $1,264.18 31.37% 6.38% 26.42% 5.46%
1 YEAR ENDED
02/28/97 02/28/96 $962.63 $1,005.95 4.50% 4.50% 0.60% 0.60%
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 3.75%.
** The average annual total return including the sales charge is calculated based on an initial investment of $1,000 less the
maximum initial sales charge of 3.75%.
*** The cumulative total return including the sales charge is calculated based on an initial investment of $1,000 less
maximum initial sales charge of 3.75%.
</TABLE>
<PAGE>
Exhibit 16
EV TRADITIONAL GEORGIA TAX FREE FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 2/28/97
Interest Income Earned: $8,057
Plus Dividend Income Earned:
--------
Equal Gross Income: $8,057
Minus Expenses: $1,209
--------
Equal Net Investment Income: $6,847
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 177,000
--------
Equal Net Investment Income Earned Per Share: $0.0387
Net Asset Value Per Share 2/28/97 $9.79
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 35.14%: 0.6486
--------
Equal Tax Equivalent Yield***: 7.39%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0387/$9.79)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and Georgia tax rate of 35.14%
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EV TRADITIONAL GEORGIA MUNICIPALS FUND
The table below indicates the total return (capital changes plus reinvestment of all distributions) on a hypothetical investment of
$1,000 in the Fund covering the period from December 23, 1991 through February 28, 1997 and for the 1 and 5 year periods ended
February 28, 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 02/28/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ------ ---- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 12/23/91 $962.14 $1,266.88 31.68% 5.45% 26.69% 4.66%
5 YEARS ENDED
02/28/97 02/28/92 $962.59 $1,279.25 32.90% 5.85% 27.92% 5.05%
1 YEAR ENDED
02/28/97 02/28/96 $962.25 $1,013.13 5.29% 5.29% 1.31% 1.31%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000 **
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period
P = an initial investment of $1,000 ***
* Initial investment less the current maximum sales charge of 3.75%.
** The average annual total return including the sales charge is calculated based on an initial investment of $1,000 less the
maximum initial sales charge of 3.75%.
*** The cumulative total return including the sales charge is calculated based on an initial investment of $1,000 less
maximum initial sales charge of 3.75%.
</TABLE>
<PAGE>
Exhibit 16
EV TRADITIONAL KENTUCKY TAX FREE FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 2/28/97
Interest Income Earned: $5,015
Plus Dividend Income Earned:
--------
Equal Gross Income: $5,015
Minus Expenses: $619
--------
Equal Net Investment Income: $4,396
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 111,594
--------
Equal Net Investment Income Earned Per Share: $0.0394
Net Asset Value Per Share 2/28/97 $9.89
30 Day Yield*: 4.83%
Divided by One minus the Tax Rate of 31%: 0.69
--------
Equal Tax Equivalent Yield **: 7.00%
Divided by one minus a tax rate of 35.14%: 0.6486
--------
Equal Tax Equivalent Yield***: 7.45%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0394/$9.89)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and Kentucky tax rate of 35.14%
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EV TRADITIONAL KENTUCKY MUNICIPALS FUND
The table below indicates the total return (capital changes plus reinvestment of all distributions) on a hypothetical investment of
$1,000 in the Fund covering the period from December 23, 1991 through February 28, 1997 and for the 1 and 5 year periods ended
February 28, 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 02/28/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ------ ---- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 12/23/91 $962.78 $1,289.66 33.95% 5.79% 28.97% 5.02%
5 YEARS ENDED
02/28/97 02/28/92 $962.31 $1,299.52 35.05% 6.19% 29.95% 5.38%
1 YEAR ENDED
02/28/97 02/28/96 $962.63 $1,014.13 5.35% 5.35% 1.41% 1.41%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000 **
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period
P = an initial investment of $1,000 ***
* Initial investment less the current maximum sales charge of 3.75%.
** The average annual total return including the sales charge is calculated based on an initial investment of $1,000 less the
maximum initial sales charge of 3.75%.
*** The cumulative total return including the sales charge is calculated based on an initial investment of $1,000 less
maximum initial sales charge of 3.75%.
</TABLE>
<PAGE>
Exhibit 16
EV TRADITIONAL LOUISIANA TAX FREE FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 2/28/97:
Interest Income Earned: $10,656
Plus Dividend Income Earned:
--------
Equal Gross Income: $10,656
Minus Expenses: $947
--------
Equal Net Investment Income: $9,709
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 211,339
--------
Equal Net Investment Income Earned Per Share: $0.0459
Net Asset Value Per Share 2/28/97: $10.02
30 Day Yield*: 5.56%
Divided by One minus the Tax Rate of 31%: 0.69
--------
Equal Tax Equivalent Yield **: 8.06%
Divided by one minus a tax rate of 35.14%: 0.6486
--------
Equal Tax Equivalent Yield***: 8.57%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0459/$10.02)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and Louisiana tax rate of 35.14%
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EV TRADITIONAL LOUISIANA 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 October 2, 1992 through February 28, 1997 and for the 1 year period ended
February 28, 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 02/28/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ------ ---- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 10/02/92 $962.73 $1,293.77 34.38% 6.93% 29.38% 6.01%
1 YEAR ENDED
02/28/97 02/28/96 $962.82 $1,024.56 6.41% 6.41% 2.46% 2.46%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000 **
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period
P = an initial investment of $1,000 ***
* Initial investment less the current maximum sales charge of 3.75%.
** The average annual total return including the sales charge is calculated based on an initial investment of $1,000 less the
maximum initial sales charge of 3.75%.
*** The cumulative total return including the sales charge is calculated based on an initial investment of $1,000 less
maximum initial sales charge of 3.75%.
</TABLE>
<PAGE>
Exhibit 16
EV TRADITIONAL MARYLAND TAX FREE FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 2/28/97
Interest Income Earned: $5,295
Plus Dividend Income Earned:
--------
Equal Gross Income: $5,295
Minus Expenses: $548
--------
Equal Net Investment Income: $4,747
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 117,266
--------
Equal Net Investment Income Earned Per Share: $0.0405
Net Asset Value Per Share 2/28/97 $10.01
30 Day Yield*: 4.90%
Divided by One minus the Tax Rate of 31%: 0.69
--------
Equal Tax Equivalent Yield **: 7.10%
Divided by one minus a tax rate of 36.52%: 0.6348
--------
Equal Tax Equivalent Yield***: 7.72%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0405/$10.01)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and Maryland tax rate of 36.52%
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EV TRADITIONAL MARYLAND 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 February 3, 1992 through February 28, 1997 and for the 1 and 5 year periods ended
February 28, 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 02/28/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ------ ---- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 02/03/92 $962.44 $1,323.78 37.54% 6.49% 32.38% 5.69%
5 YEARS ENDED
02/28/97 02/28/92 $962.50 $1,325.19 37.68% 6.60% 32.52% 5.79%
1 YEAR ENDED
02/28/97 02/28/96 $962.23 $1,009.46 4.90% 4.90% 0.95% 0.95%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000 **
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period
P = an initial investment of $1,000 ***
* Initial investment less the current maximum sales charge of 3.75%.
** The average annual total return including the sales charge is calculated based on an initial investment of $1,000 less the
maximum initial sales charge of 3.75%.
*** The cumulative total return including the sales charge is calculated based on an initial investment of $1,000 less
maximum initial sales charge of 3.75%.
</TABLE>
<PAGE>
Exhibit 16
EV TRADITIONAL MISSOURI TAX FREE FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 2/28/97:
Interest Income Earned: $10,245
Plus Dividend Income Earned:
--------
Equal Gross Income: $10,245
Minus Expenses: $1,665
--------
Equal Net Investment Income: $8,580
Divided By Average daily number of shares
outstanding that were entitled
to receive dividends: 218,308
--------
Equal Net Investment Income Earned Per Share: $0.0393
Net Asset Value Per Share 2/28/97: $10.12
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 35.14%: 0.6768
--------
Equal Tax Equivalent Yield***: 6.96%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0393/$10.12)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and Missouri tax rate of 35.14%
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EV TRADITIONAL MISSOURI 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 February 28, 1997 and for the 1 year period ended
February 28, 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 02/28/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ------ ---- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 05/01/92 $962.46 $1,339.88 39.21% 7.09% 33.99% 6.24%
1 YEAR ENDED
02/28/97 02/28/96 $962.49 $1,012.38 5.18% 5.18% 1.24% 1.24%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000 **
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period
P = an initial investment of $1,000 ***
* Initial investment less the current maximum sales charge of 3.75%.
** The average annual total return including the sales charge is calculated based on an initial investment of $1,000 less the
maximum initial sales charge of 3.75%.
*** The cumulative total return including the sales charge is calculated based on an initial investment of $1,000 less
maximum initial sales charge of 3.75%.
</TABLE>
<PAGE>
Exhibit 16
EV TRADITIONAL NORTH CAROLINA TAX FREE FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 2/28/97
Interest Income Earned: $79,357
Plus Dividend Income Earned:
--------
Equal Gross Income: $79,357
Minus Expenses: $10,614
--------
Equal Net Investment Income: $68,743
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 1,771,653
--------
Equal Net Investment Income Earned Per Share: $0.0388
Net Asset Value Per Share 2/28/97 $9.82
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 36.35%: 0.6365
--------
Equal Tax Equivalent Yield***: 7.53%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0388/$9.82)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and North Carolina tax rate of 36.35%
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EV TRADITIONAL NORTH CAROLINA 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 October 23, 1991 through February 28, 1997 and for the 1 and 5 year periods ended
February 28, 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 02/28/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ------ ---- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 10/23/91 $962.83 $1,309.09 35.96% 5.90% 30.91% 5.15%
5 YEARS ENDED
02/28/97 02/28/92 $962.63 $1,277.25 32.67% 5.82% 27.72% 5.02%
1 YEAR ENDED
02/28/97 02/28/96 $962.63 $1,006.83 4.59% 4.59% 0.68% 0.68%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000 **
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period
P = an initial investment of $1,000 ***
* Initial investment less the current maximum sales charge of 3.75%.
** The average annual total return including the sales charge is calculated based on an initial investment of $1,000 less the
maximum initial sales charge of 3.75%.
*** The cumulative total return including the sales charge is calculated based on an initial investment of $1,000 less
maximum initial sales charge of 3.75%.
</TABLE>
<PAGE>
Exhibit 16
EV TRADITIONAL OREGON TAX FREE FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 2/28/97:
Interest Income Earned: $3,704
Plus Dividend Income Earned:
--------
Equal Gross Income: $3,704
Minus Expenses: $491
--------
Equal Net Investment Income: $3,213
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 80,871
--------
Equal Net Investment Income Earned Per Share: $0.0397
Net Asset Value Per Share 2/28/97: $9.86
30 Day Yield*: 4.88%
Divided by One minus the Tax Rate of 31%: 0.69
--------
Equal Tax Equivalent Yield **: 7.07%
Divided by one minus a tax rate of 37.21%: 0.6279
--------
Equal Tax Equivalent Yield***: 7.77%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0397/$9.86)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and Oregon tax rate of 37.21%
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EV TRADITIONAL OREGON MUNICIPALS FUND
The table below indicates the total return (capital changes plus reinvestment of all distributions) on a hypothetical investment of
$1,000 in the Fund covering the period from December 24, 1991 through February 28, 1997 and for the 1 and 5 year periods ended
February 28, 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 02/28/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ------ ---- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 12/24/91 $962.30 $1,320.69 37.24% 6.29% 32.07% 5.51%
5 YEARS ENDED
02/28/97 02/28/92 $962.47 $1,313.83 36.51% 6.42% 31.38% 5.61%
1 YEAR ENDED
02/28/97 02/28/96 $962.07 $997.04 3.63% 3.63% -0.30% -0.30%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000 **
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period
P = an initial investment of $1,000 ***
* Initial investment less the current maximum sales charge of 3.75%.
** The average annual total return including the sales charge is calculated based on an initial investment of $1,000 less the
maximum initial sales charge of 3.75%.
*** The cumulative total return including the sales charge is calculated based on an initial investment of $1,000 less
maximum initial sales charge of 3.75%.
</TABLE>
<PAGE>
Exhibit 16
EV TRADITIONAL SOUTH CAROLINA TAX FREE FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 2/28/97
Interest Income Earned: $5,814
Plus Dividend Income Earned:
--------
Equal Gross Income: $5,814
Minus Expenses: $781
--------
Equal Net Investment Income: $5,034
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 123,479
--------
Equal Net Investment Income Earned Per Share: $0.0408
Net Asset Value Per Share 2/28/97 $10.05
30 Day Yield*: 4.92%
Divided by One minus the Tax Rate of 31%: 0.69
--------
Equal Tax Equivalent Yield **: 7.13%
Divided by one minus a tax rate of 35.83%: 0.6417
--------
Equal Tax Equivalent Yield***: 7.67%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0408/$10.05)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and South Carolina tax rate of 35.83%
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EV TRADITIONAL SOUTH CAROLINA 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 October 2, 1992 through February 28, 1997 and for the 1 year period ended
February 28, 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 02/28/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ------ ---- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 10/02/92 $962.61 $1,246.70 29.51% 6.04% 24.67% 5.13%
1 YEAR ENDED
02/28/97 02/28/96 $962.16 $1,014.02 5.39% 5.39% 1.40% 1.40%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000 **
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period
P = an initial investment of $1,000 ***
* Initial investment less the current maximum sales charge of 3.75%.
** The average annual total return including the sales charge is calculated based on an initial investment of $1,000 less the
maximum initial sales charge of 3.75%.
*** The cumulative total return including the sales charge is calculated based on an initial investment of $1,000 less
maximum initial sales charge of 3.75%.
</TABLE>
<PAGE>
Exhibit 16
EV TRADITIONAL TENNESSEE TAX FREE FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 2/28/97:
Interest Income Earned: $9,049
Plus Dividend Income Earned:
--------
Equal Gross Income: $9,049
Minus Expenses: $907
--------
Equal Net Investment Income: $8,142
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 198,099
--------
Equal Net Investment Income Earned Per Share: $0.0411
Net Asset Value Per Share 2/28/97: $9.94
30 Day Yield*: 5.01%
Divided by One minus the Tax Rate of 31%: 0.69
--------
Equal Tax Equivalent Yield **: 7.26%
Divided by one minus a tax rate of 35.14%: 0.6486
--------
Equal Tax Equivalent Yield***: 7.72%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0411/$9.94)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and Tennessee tax rate of 35.14%
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EV TRADITIONAL TENNESSEE 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 February 28, 1997 and for the 1 year period ended
February 28, 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 02/28/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ------ ---- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 08/25/92 $962.74 $1,276.96 32.63% 6.46% 27.70% 5.57%
1 YEAR ENDED
02/28/97 02/28/96 $962.86 $1,013.64 5.27% 5.27% 1.36% 1.36%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000 **
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period
P = an initial investment of $1,000 ***
* Initial investment less the current maximum sales charge of 3.75%.
** The average annual total return including the sales charge is calculated based on an initial investment of $1,000 less the
maximum initial sales charge of 3.75%.
*** The cumulative total return including the sales charge is calculated based on an initial investment of $1,000 less
maximum initial sales charge of 3.75%.
</TABLE>
<PAGE>
Exhibit 16
EV TRADITIONAL VIRGINIA TAX FREE FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 2/28/97
Interest Income Earned: $5,921
Plus Dividend Income Earned:
--------
Equal Gross Income: $5,921
Minus Expenses: $739
--------
Equal Net Investment Income: $5,182
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 129,362
--------
Equal Net Investment Income Earned Per Share: $0.0401
Net Asset Value Per Share 2/28/97 $9.84
30 Day Yield*: 4.94%
Divided by One minus the Tax Rate of 31%: 0.69
--------
Equal Tax Equivalent Yield **: 7.16%
Divided by one minus a tax rate of 34.97%: 0.6503
--------
Equal Tax Equivalent Yield***: 7.60%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0401/$9.84)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and Virginia tax rate of 34.97%
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EV TRADITIONAL VIRGINIA 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 26, 1991 through February 28, 1997 and for the 1 and 5 year periods ended
February 28, 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 02/28/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ------ ---- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 07/26/91 $962.73 $1,363.12 41.60% 6.41% 36.31% 5.69%
5 YEARS ENDED
02/28/97 02/28/92 $962.28 $1,280.74 33.09% 5.88% 28.07% 5.07%
1 YEAR ENDED
02/28/97 02/28/96 $962.78 $1,005.58 4.44% 4.44% 0.56% 0.56%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000 **
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period
P = an initial investment of $1,000 ***
* Initial investment less the current maximum sales charge of 3.75%.
** The average annual total return including the sales charge is calculated based on an initial investment of $1,000 less the
maximum initial sales charge of 3.75%.
*** The cumulative total return including the sales charge is calculated based on an initial investment of $1,000 less
maximum initial sales charge of 3.75%.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 18
<NAME> EV MARATHON ALABAMA MUNICIPALS FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> FEB-28-1997
<INVESTMENTS-AT-COST> 95446
<INVESTMENTS-AT-VALUE> 100670
<RECEIVABLES> 16
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 100686
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 303
<TOTAL-LIABILITIES> 303
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 98366
<SHARES-COMMON-STOCK> 9375
<SHARES-COMMON-PRIOR> 10227
<ACCUMULATED-NII-CURRENT> 83
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (3290)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5224
<NET-ASSETS> 100383
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 2790
<EXPENSES-NET> 552
<NET-INVESTMENT-INCOME> 2238
<REALIZED-GAINS-CURRENT> (211)
<APPREC-INCREASE-CURRENT> 2548
<NET-CHANGE-FROM-OPS> 4575
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2200)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 169
<NUMBER-OF-SHARES-REDEEMED> 621
<SHARES-REINVESTED> 106
<NET-CHANGE-IN-ASSETS> (1309)
<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> 552
<AVERAGE-NET-ASSETS> 101446
<PER-SHARE-NAV-BEGIN> 10.46
<PER-SHARE-NII> .234
<PER-SHARE-GAIN-APPREC> .246
<PER-SHARE-DIVIDEND> (.230)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.71
<EXPENSE-RATIO> 1.60
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 18
<NAME> EV MARATHON ALABAMA MUNICIPALS FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> AUG-31-1996
<INVESTMENTS-AT-COST> 99618
<INVESTMENTS-AT-VALUE> 102293
<RECEIVABLES> 40
<ASSETS-OTHER> 2
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 102335
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 643
<TOTAL-LIABILITIES> 643
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 102048
<SHARES-COMMON-STOCK> 9722
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 47
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (3078)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2675
<NET-ASSETS> 101692
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 5913
<EXPENSES-NET> 1147
<NET-INVESTMENT-INCOME> 4766
<REALIZED-GAINS-CURRENT> 1384
<APPREC-INCREASE-CURRENT> (998)
<NET-CHANGE-FROM-OPS> 5152
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (4874)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 392
<NUMBER-OF-SHARES-REDEEMED> 1322
<SHARES-REINVESTED> 242
<NET-CHANGE-IN-ASSETS> (6950)
<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> 1154
<AVERAGE-NET-ASSETS> 107224
<PER-SHARE-NAV-BEGIN> 10.44
<PER-SHARE-NII> .470
<PER-SHARE-GAIN-APPREC> .030
<PER-SHARE-DIVIDEND> (.480)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.46
<EXPENSE-RATIO> 1.52
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 23
<NAME> EV MARATHON ARKANSAS MUNICIPALS FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> FEB-28-1997
<INVESTMENTS-AT-COST> 65212
<INVESTMENTS-AT-VALUE> 67774
<RECEIVABLES> 12
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 67786
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 209
<TOTAL-LIABILITIES> 209
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 67887
<SHARES-COMMON-STOCK> 6510
<SHARES-COMMON-PRIOR> 7509
<ACCUMULATED-NII-CURRENT> (12)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (2861)
<OVERDISTRIBUTION-GAINS> 0
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 23
<NAME> EV MARATHON ARKANSAS MUNICIPALS FUND
<MULTIPLIER> 1000
<S> <C>
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<PERIOD-END> AUG-31-1996
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
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<NAME> EV MARATHON GEORGIA MUNICIPALS FUND
<MULTIPLIER> 1000
<S> <C>
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<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> FEB-28-1997
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<NET-CHANGE-IN-ASSETS> (7609)
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 13
<NAME> EV MARATHON GEORGIA MUNICIPALS FUND
<MULTIPLIER> 1000
<S> <C>
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<PERIOD-END> AUG-31-1996
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 14
<NAME> EV MARATHON KENTUCKY MUNICIPALS FUND
<MULTIPLIER> 1000
<S> <C>
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<PERIOD-END> FEB-28-1997
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<NET-CHANGE-IN-ASSETS> (5107)
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 14
<NAME> EV MARATHON KENTUCKY MUNICIPALS FUND
<MULTIPLIER> 1000
<S> <C>
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<PERIOD-END> AUG-31-1996
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 24
<NAME> EV MARATHON LOUISIANA MUNICIPALS FUND
<MULTIPLIER> 1000
<S> <C>
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<FISCAL-YEAR-END> AUG-31-1997
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 24
<NAME> EV MARATHON LOUISIANA MUNICIPALS FUND
<MULTIPLIER> 1000
<S> <C>
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
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<NAME> EV MARATHON MARYLAND MUNICIPALS FUND
<MULTIPLIER> 1000
<S> <C>
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 16
<NAME> EV MARATHON MARYLAND MUNICIPALS FUND
<MULTIPLIER> 1000
<S> <C>
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<GROSS-EXPENSE> 1206
<AVERAGE-NET-ASSETS> 113545
<PER-SHARE-NAV-BEGIN> 10.23
<PER-SHARE-NII> .464
<PER-SHARE-GAIN-APPREC> .086
<PER-SHARE-DIVIDEND> (.480)
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<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.30
<EXPENSE-RATIO> 1.55
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 20
<NAME> EV MARATHON MISSOURI MUNICIPALS FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> FEB-28-1997
<INVESTMENTS-AT-COST> 74822
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<TOTAL-LIABILITIES> 163
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 76979
<SHARES-COMMON-STOCK> 7331
<SHARES-COMMON-PRIOR> 8241
<ACCUMULATED-NII-CURRENT> (7)
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<ACCUMULATED-NET-GAINS> (2324)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4550
<NET-ASSETS> 79212
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 2254
<EXPENSES-NET> 444
<NET-INVESTMENT-INCOME> 1810
<REALIZED-GAINS-CURRENT> (61)
<APPREC-INCREASE-CURRENT> 2302
<NET-CHANGE-FROM-OPS> 4051
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1775)
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<NUMBER-OF-SHARES-SOLD> 104
<NUMBER-OF-SHARES-REDEEMED> 696
<SHARES-REINVESTED> 84
<NET-CHANGE-IN-ASSETS> (3174)
<ACCUMULATED-NII-PRIOR> 0
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<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
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<GROSS-EXPENSE> 444
<AVERAGE-NET-ASSETS> 81454
<PER-SHARE-NAV-BEGIN> 10.51
<PER-SHARE-NII> .239
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<PER-SHARE-DIVIDEND> (.234)
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<PER-SHARE-NAV-END> 10.81
<EXPENSE-RATIO> 1.59
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 20
<NAME> EV MARATHON MISSOURI MUNICIPALS FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> AUG-31-1996
<INVESTMENTS-AT-COST> 80524
<INVESTMENTS-AT-VALUE> 82771
<RECEIVABLES> 7
<ASSETS-OTHER> 2
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 82780
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 395
<TOTAL-LIABILITIES> 395
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 82429
<SHARES-COMMON-STOCK> 7839
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (28)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (2263)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2247
<NET-ASSETS> 82385
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 4848
<EXPENSES-NET> 937
<NET-INVESTMENT-INCOME> 3911
<REALIZED-GAINS-CURRENT> 1115
<APPREC-INCREASE-CURRENT> (1051)
<NET-CHANGE-FROM-OPS> 3975
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (3911)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (28)
<NUMBER-OF-SHARES-SOLD> 356
<NUMBER-OF-SHARES-REDEEMED> 1245
<SHARES-REINVESTED> 186
<NET-CHANGE-IN-ASSETS> (7426)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
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<GROSS-EXPENSE> 937
<AVERAGE-NET-ASSETS> 87506
<PER-SHARE-NAV-BEGIN> 10.51
<PER-SHARE-NII> .476
<PER-SHARE-GAIN-APPREC> .003
<PER-SHARE-DIVIDEND> (.476)
<PER-SHARE-DISTRIBUTIONS> (.003)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.51
<EXPENSE-RATIO> 1.54
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 12
<NAME> EV MARATHON NORTH CAROLINA MUNICIPALS FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> FEB-28-1997
<INVESTMENTS-AT-COST> 153413
<INVESTMENTS-AT-VALUE> 163665
<RECEIVABLES> 7
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 163672
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 452
<TOTAL-LIABILITIES> 452
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 165296
<SHARES-COMMON-STOCK> 16059
<SHARES-COMMON-PRIOR> 18096
<ACCUMULATED-NII-CURRENT> (235)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (12093)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 10252
<NET-ASSETS> 163219
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 4661
<EXPENSES-NET> 884
<NET-INVESTMENT-INCOME> 3776
<REALIZED-GAINS-CURRENT> 1015
<APPREC-INCREASE-CURRENT> 2285
<NET-CHANGE-FROM-OPS> 7076
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (3775)
<DISTRIBUTIONS-OF-GAINS> 0
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<NUMBER-OF-SHARES-SOLD> 247
<NUMBER-OF-SHARES-REDEEMED> 1418
<SHARES-REINVESTED> 185
<NET-CHANGE-IN-ASSETS> (6669)
<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> 884
<AVERAGE-NET-ASSETS> 167651
<PER-SHARE-NAV-BEGIN> 9.97
<PER-SHARE-NII> .227
<PER-SHARE-GAIN-APPREC> .191
<PER-SHARE-DIVIDEND> (.228)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.16
<EXPENSE-RATIO> 1.57
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 12
<NAME> EV MARATHON NORTH CAROLINA MUNICIPALS FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> AUG-31-1996
<INVESTMENTS-AT-COST> 162518
<INVESTMENTS-AT-VALUE> 170484
<RECEIVABLES> 39
<ASSETS-OTHER> 1
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 170524
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 636
<TOTAL-LIABILITIES> 636
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 175266
<SHARES-COMMON-STOCK> 17045
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (236)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (13108)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 7966
<NET-ASSETS> 169888
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 10111
<EXPENSES-NET> 1932
<NET-INVESTMENT-INCOME> 8179
<REALIZED-GAINS-CURRENT> (47)
<APPREC-INCREASE-CURRENT> 745
<NET-CHANGE-FROM-OPS> 8877
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (8216)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (233)
<NUMBER-OF-SHARES-SOLD> 703
<NUMBER-OF-SHARES-REDEEMED> 2988
<SHARES-REINVESTED> 413
<NET-CHANGE-IN-ASSETS> (18561)
<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> 1945
<AVERAGE-NET-ASSETS> 182865
<PER-SHARE-NAV-BEGIN> 9.96
<PER-SHARE-NII> .452
<PER-SHARE-GAIN-APPREC> .026
<PER-SHARE-DIVIDEND> (.455)
<PER-SHARE-DISTRIBUTIONS> (.013)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.97
<EXPENSE-RATIO> 1.54
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 15
<NAME> EV MARATHON OREGON MUNICIPALS FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> FEB-28-1997
<INVESTMENTS-AT-COST> 116320
<INVESTMENTS-AT-VALUE> 121892
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<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 121915
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 735
<TOTAL-LIABILITIES> 735
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 121634
<SHARES-COMMON-STOCK> 11678
<SHARES-COMMON-PRIOR> 13370
<ACCUMULATED-NII-CURRENT> 14
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (6039)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5572
<NET-ASSETS> 121180
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 3439
<EXPENSES-NET> 675
<NET-INVESTMENT-INCOME> 2764
<REALIZED-GAINS-CURRENT> (816)
<APPREC-INCREASE-CURRENT> 2429
<NET-CHANGE-FROM-OPS> 4377
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2715)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 314
<NUMBER-OF-SHARES-REDEEMED> 1338
<SHARES-REINVESTED> 150
<NET-CHANGE-IN-ASSETS> (7400)
<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> 675
<AVERAGE-NET-ASSETS> 125562
<PER-SHARE-NAV-BEGIN> 10.24
<PER-SHARE-NII> .228
<PER-SHARE-GAIN-APPREC> .136
<PER-SHARE-DIVIDEND> (.224)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.38
<EXPENSE-RATIO> 1.67
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 15
<NAME> EV MARATHON OREGON MUNICIPALS FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> AUG-31-1996
<INVESTMENTS-AT-COST> 125870
<INVESTMENTS-AT-VALUE> 129014
<RECEIVABLES> 13
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 129027
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 447
<TOTAL-LIABILITIES> 447
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 130696
<SHARES-COMMON-STOCK> 12551
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (35)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (5224)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3143
<NET-ASSETS> 128580
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 7515
<EXPENSES-NET> 1477
<NET-INVESTMENT-INCOME> 6038
<REALIZED-GAINS-CURRENT> (927)
<APPREC-INCREASE-CURRENT> 449
<NET-CHANGE-FROM-OPS> 5560
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (6124)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (35)
<NUMBER-OF-SHARES-SOLD> 490
<NUMBER-OF-SHARES-REDEEMED> 2346
<SHARES-REINVESTED> 332
<NET-CHANGE-IN-ASSETS> (16476)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
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<GROSS-EXPENSE> 1477
<AVERAGE-NET-ASSETS> 139428
<PER-SHARE-NAV-BEGIN> 10.31
<PER-SHARE-NII> .450
<PER-SHARE-GAIN-APPREC> (.061)
<PER-SHARE-DIVIDEND> (.457)
<PER-SHARE-DISTRIBUTIONS> (.002)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.24
<EXPENSE-RATIO> 1.53
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 25
<NAME> EV MARATHON SOUTH CAROLINA MUNICIPALS FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> FEB-28-1997
<INVESTMENTS-AT-COST> 52634
<INVESTMENTS-AT-VALUE> 56079
<RECEIVABLES> 0
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<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 56080
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<TOTAL-LIABILITIES> 102
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 56726
<SHARES-COMMON-STOCK> 5450
<SHARES-COMMON-PRIOR> 5975
<ACCUMULATED-NII-CURRENT> 135
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (4327)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3445
<NET-ASSETS> 55978
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 1598
<EXPENSES-NET> 311
<NET-INVESTMENT-INCOME> 1286
<REALIZED-GAINS-CURRENT> (191)
<APPREC-INCREASE-CURRENT> 1586
<NET-CHANGE-FROM-OPS> 2682
<EQUALIZATION> 0
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<SHARES-REINVESTED> 56
<NET-CHANGE-IN-ASSETS> (1239)
<ACCUMULATED-NII-PRIOR> 0
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<GROSS-EXPENSE> 311
<AVERAGE-NET-ASSETS> 56919
<PER-SHARE-NAV-BEGIN> 10.02
<PER-SHARE-NII> .232
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<PER-SHARE-DIVIDEND> (.232)
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<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.27
<EXPENSE-RATIO> 1.58
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 25
<NAME> EV MARATHON SOUTH CAROLINA MUNICIPALS FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> AUG-31-1996
<INVESTMENTS-AT-COST> 55571
<INVESTMENTS-AT-VALUE> 57430
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<TOTAL-ASSETS> 57464
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<SENIOR-LONG-TERM-DEBT> 0
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<TOTAL-LIABILITIES> 247
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 59355
<SHARES-COMMON-STOCK> 5708
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 140
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (4136)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1858
<NET-ASSETS> 57217
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 3414
<EXPENSES-NET> 647
<NET-INVESTMENT-INCOME> 2767
<REALIZED-GAINS-CURRENT> 660
<APPREC-INCREASE-CURRENT> (485)
<NET-CHANGE-FROM-OPS> 2942
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2772)
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<NUMBER-OF-SHARES-SOLD> 462
<NUMBER-OF-SHARES-REDEEMED> 870
<SHARES-REINVESTED> 120
<NET-CHANGE-IN-ASSETS> (2738)
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<GROSS-EXPENSE> 647
<AVERAGE-NET-ASSETS> 60220
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> .467
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<PER-SHARE-DIVIDEND> (.468)
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<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.02
<EXPENSE-RATIO> 1.58
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 22
<NAME> EV MARATHON TENNESSEE MUNICIPALS FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> FEB-28-1997
<INVESTMENTS-AT-COST> 51274
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<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 53712
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<TOTAL-LIABILITIES> 281
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 53303
<SHARES-COMMON-STOCK> 5144
<SHARES-COMMON-PRIOR> 5497
<ACCUMULATED-NII-CURRENT> (26)
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<NET-ASSETS> 53432
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<NET-INVESTMENT-INCOME> 1191
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<APPREC-INCREASE-CURRENT> 1431
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<DISTRIBUTIONS-OF-INCOME> (1210)
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<SHARES-REINVESTED> 60
<NET-CHANGE-IN-ASSETS> (1101)
<ACCUMULATED-NII-PRIOR> 0
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<AVERAGE-NET-ASSETS> 54255
<PER-SHARE-NAV-BEGIN> 10.15
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<PER-SHARE-NAV-END> 10.39
<EXPENSE-RATIO> 1.56
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 22
<NAME> EV MARATHON TENNESSEE MUNICIPALS FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
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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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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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