AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 29, 1997
1933 ACT FILE NO. 33-572
1940 ACT FILE NO. 811-4409
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933 [X]
POST-EFFECTIVE AMENDMENT NO. 68 [X]
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 70 [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 [ ] on (date) pursuant to
pursuant to paragraph (b) paragraph (a)(1)
[X] on September 1, 1997 [ ] 75 days after filing
pursuant to paragraph (b) pursuant to paragraph (a)(2)
[ ] 60 days after filing [ ] on (date) pursuant to
pursuant 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
</TABLE>
<TABLE>
<CAPTION>
PART B
ITEM NO. ITEM CAPTION STATEMENT OF ADDITIONAL INFORMATION CAPTION
- ------ -------- ---------------------------------------------
<S> <C> <C>
10. ..................... Cover Page Cover Page
11. ..................... Table of Contents Table of Contents
12. ..................... General Information and History Other Information
13. ..................... Investment Objectives and Policies Additional Information about Investment
Policies; Investment Restrictions
14. ..................... Management of the Fund Trustees and Officers; Fees and Expenses
15. ..................... Control Persons and Principal Holders of Control Persons and Principal Holders of
Securities Securities
16. ..................... Investment Advisory and Other Investment Adviser and Administrator;
Services Distribution Plan - Class B Shares; Service
Plan - Class A Shares; Custodian;
Independent Certified Public Accountants
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 -- Class B Shares;
Service Plan -- Class A Shares
20. ..................... Tax Status Taxes; Tax Equivalent Yield Table
21. ..................... Underwriters Principal Underwriter
22. ..................... Calculation of Performance Data Investment Performance
23. ..................... Financial Statements Financial Statements
</TABLE>
<PAGE>
PART A
INFORMATION REQUIRED IN A PROSPECTUS
[GRAPHIC OMITTED]
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
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 ........................... 29
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 ................ 30
Management of the Funds and the Portfolios ............ 22 Eaton Vance Shareholder Services .................. 31
Distribution and Service Plans ........................ 24 Distributions and Taxes ........................... 32
Valuing Shares ........................................ 25 Performance Information ........................... 33
How to Buy Shares ..................................... 26 Appendix -- State Specific Information ............ 34
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
PROSPECTUS DATED SEPTEMBER 1, 1997
<PAGE>
SHAREHOLDER AND FUND EXPENSES
- --------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES
- --------------------------------------------------------------------------------
CLASS A CLASS B
SHARES SHARES
------- --------
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) 4.75% None
Sales Charges Imposed on Reinvested Distributions None None
Fees to Exchange Shares None None
Maximum Contingent Deferred Sales Charge None 5.00%
ANNUAL FUND AND ALLOCATED PORTFOLIO OPERATING EXPENSES (as a percentage of
average daily net assets)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
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%
==== ==== ==== ==== ==== ==== ==== ====
</TABLE>
<TABLE>
EXAMPLE
- ---------------------------------------------------------------------------------------------------------------------------
An investor would pay the following expenses and, in the case of Class A shares, maximum initial sales charge or, in the
case of Class B shares, contingent deferred sales charge on a $1,000 investment, assuming (a) 5% annual return and (b)
redemption at the end of each period:
<CAPTION>
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 $ 56 $ 66 $ 55 $ 66 $ 56 $ 66 $ 55 $ 66
3 Years $ 73 $ 90 $ 72 $ 89 $ 73 $ 90 $ 72 $ 90
5 Years $ 92 $106 $ 90 $105 $ 92 $106 $ 91 $106
10 Years $146 $187 $142 $186 $146 $188 $144 $187
</TABLE>
<TABLE>
<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 $ 56 $ 16 $ 55 $ 16 $ 56 $ 16 $ 55 $ 16
3 Years $ 73 $ 50 $ 72 $ 49 $ 73 $ 50 $ 72 $ 50
5 Years $ 92 $ 86 $ 90 $ 85 $ 92 $ 86 $ 91 $ 86
10 Years $146 $187 $142 $186 $146 $188 $144 $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 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%
==== ==== ==== ==== ==== ==== ==== ====
</TABLE>
<TABLE>
EXAMPLE
- ---------------------------------------------------------------------------------------------------------------------------
An investor would pay the following expenses and, in the case of Class A shares, maximum initial sales charge or, in the
case of Class B shares, contingent deferred sales charge on a $1,000 investment, assuming (a) 5% annual return and (b)
redemption at the end of each period:
<CAPTION>
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 $ 55 $ 65 $ 55 $ 66 $ 55 $ 66 $ 56 $ 66
3 Years $ 71 $ 88 $ 72 $ 90 $ 72 $ 89 $ 73 $ 90
5 Years $ 89 $103 $ 90 $106 $ 90 $105 $ 92 $107
10 Years $140 $181 $143 $187 $144 $186 $146 $189
</TABLE>
<TABLE>
An investor would pay the following expenses on the same investment, assuming (a) 5% annual return and (b) no
redemptions:
<CAPTION>
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 $ 55 $ 15 $ 55 $ 16 $ 55 $ 16 $ 56 $ 16
3 Years $ 71 $ 48 $ 72 $ 50 $ 72 $ 49 $ 73 $ 50
5 Years $ 89 $ 83 $ 90 $ 86 $ 90 $ 85 $ 92 $ 87
10 Years $140 $181 $143 $187 $143 $186 $146 $189
</TABLE>
<TABLE>
ANNUAL FUND AND ALLOCATED PORTFOLIO OPERATING EXPENSES (as a percentage of average daily net assets)
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
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%
==== ==== ==== ==== ==== ==== ==== ====
</TABLE>
<TABLE>
EXAMPLE
- ---------------------------------------------------------------------------------------------------------------------------
An investor would pay the following expenses and, in the case of Class A shares, maximum initial sales charge or, in the
case of Class B shares, contingent deferred sales charge on a $1,000 investment, assuming (a) 5% annual return and (b)
redemption at the end of each period:
<CAPTION>
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 $ 55 $ 66 $ 56 $ 66 $ 55 $ 66 $ 55 $ 66
3 Years $ 72 $ 89 $ 74 $ 90 $ 71 $ 88 $ 72 $ 89
5 Years $ 90 $105 $ 92 $107 $ 89 $103 $ 91 $105
10 Years $143 $186 $147 $190 $140 $182 $143 $186
</TABLE>
<TABLE>
An investor would pay the following expenses on the same investment, assuming (a) 5% annual return and (b) no
redemptions:
<CAPTION>
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 $ 55 $ 16 $ 56 $ 16 $ 55 $ 16 $ 55 $ 16
3 Years $ 72 $ 49 $ 74 $ 50 $ 71 $ 48 $ 72 $ 49
5 Years $ 90 $ 87 $ 92 $ 87 $ 89 $ 83 $ 90 $ 85
10 Years $143 $190 $147 $190 $140 $182 $143 $186
</TABLE>
NOTES:
The tables and Examples summarize the aggregate expenses of the Portfolio and
each class of shares of the Funds and are designed to help investors understand
the costs and expenses they will bear, directly or indirectly, by investing in a
Fund. Information for Class A shares is estimated based upon the most recent
fiscal year of its predecessor fund adjusted for the multiple- class structure.
Information for Class B shares is for the most recent fiscal year (except that
the Investment Adviser Fee for the Louisiana Fund has been estimated for the
current fiscal year).
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 ("CDSC") 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 CDSC if redeemed within
six years after purchase. The CDSC does not apply in certain circumstances. See
"How to Buy Shares" and "How to Redeem Shares".
The Examples should not be considered a representation of past or future
expenses and actual expenses may be greater or less than those shown. Federal
regulations require the Examples to assume a 5% annual return, but actual return
will vary. Long-term holders of Class B shares may pay more than the economic
equivalent of the maximum front-end sales charge permitted by a rule of the
National Association of Securities Dealers, Inc. For further information
regarding the expenses of the Funds and the Portfolios, see "The Funds"
Financial Highlights", "Management of the Funds and the Portfolios",
"Distribution and Service Plans" and "How to Redeem Shares".
Each Portfolio's monthly advisory fee has two components, a fee based on daily
net assets and a fee based on daily gross income, as set forth in the fee
schedule on page 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 annual financial statements and the independent auditors' report
are incorporated by reference into the Statement of Additional Information.
Further information regarding the performance of a Fund is contained in its
annual report to shareholders which may be obtained without charge by
contacting the Principal Underwriter. The financial information for each of
the periods presented in the Funds' Financial Highlights are for each Fund
prior to reclassification of its shares as Class B shares on September 1,
1997. Information for Class A shares is not presented because that class did
not exist prior to September 1, 1997. The financial highlights for Class A
shares will differ from the Financial Highlights for Class B shares due to the
different fees imposed on Class A shares.
<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(1)(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)(4) 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(1)(4) 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>
<TABLE>
THE FUNDS' FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------------------------------------
<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(1)(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(1)(4) 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>
<TABLE>
THE FUNDS' FINANCIAL HIGHLIGHTS (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------
<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(1)(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(1)(4) 1.61%+
Net investment
income 4.24%+
Net investment
income per share $ 0.341
(See footnotes on page 16.)
</TABLE>
<TABLE>
THE FUNDS' FINANCIAL HIGHLIGHTS (CONTINUED)
- ------------------------------------------------------------------------------
<CAPTION>
KENTUCKY FUND -- CLASS B
------------------------------------------------------------------------------------------------
<CAPTION>
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(1)(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(1)(4) 1.52%+
Net investment income 4.48%+
Net investment
income per share $ 0.357
(See footnotes on page 16.)
</TABLE>
<PAGE>
<TABLE>
THE FUNDS' FINANCIAL HIGHLIGHTS (CONTINUED)
- -------------------------------------------------------------------------------------------------------------
<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(1)(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(1)(4) 1.60%+ 1.53% 1.42% 1.44%+ 1.76%+
Expenses after
custodian fee reduction(1) 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>
<TABLE>
THE FUNDS' FINANCIAL HIGHLIGHTS (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------
<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(1)(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(1)(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>
<TABLE>
THE FUNDS' FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------------------------------------------
<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(1)(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(1)(4) 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>
<TABLE>
THE FUNDS' FINANCIAL HIGHLIGHTS (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------
<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(1)(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(1)(4) 1.57%+
Net
investment
income 4.32%+
Net investment
income per share $ 0.434
(See footnotes on page 16.)
</TABLE>
<PAGE>
<TABLE>
THE FUNDS' FINANCIAL HIGHLIGHTS (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------
<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(1)(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(1)(4) 1.63%+
Net investment
income 4.11%+
Net investment
income per share $ 0.338
(See footnotes on page 16.)
</TABLE>
<PAGE>
<TABLE>
THE FUNDS' FINANCIAL HIGHLIGHTS (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------
<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(1)(4) 1.60%+ 1.60% 1.49% 1.36%+ 1.07%+
Ratio of net expenses to
average daily net
assets, after custodian
fee reduction(1) 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(1)(4) 1.44%+
Net investment income 3.85%+
Net investment income per
share $ 0.421
(See footnotes on page 16.)
</TABLE>
<PAGE>
<TABLE>
THE FUNDS' FINANCIAL HIGHLIGHTS (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------
<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(1)(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(1) 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(1)(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>
<TABLE>
THE FUNDS' FINANCIAL HIGHLIGHTS (CONTINUED)
- -----------------------------------------------------------------------------------------------------------------------------------
<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 $10.000
-------- -------- -------- -------- -------- ------- -------
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(1)(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(1) 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(1)(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").
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 each Portfolio will normally be invested in
obligations rated at least investment grade at the time of investment (which are
those rated Baa or higher by Moody's Investors Service, Inc. ("Moody's") or BBB
or higher by either Standard & Poor's Ratings Group ("S&P") or Fitch Investors
Service, Inc. ("Fitch")) or, if unrated, determined by the Investment Adviser to
be of at least investment grade quality. The balance of each Portfolio's net
assets may be invested in municipal obligations rated below investment grade
(but not lower than B by Moody's, S&P or Fitch) and unrated municipal
obligations considered to be of comparable quality by the Investment Adviser.
Municipal obligations rated Baa or BBB may have speculative characteristics.
Also, changes in economic conditions or other circumstances are more likely to
lead to a weakened capacity to make principal and interest payments than in the
case of higher rated obligations. Securities rated below Baa or BBB are commonly
known as "junk bonds". A Portfolio may retain an obligation whose rating drops
below B after its acquisition if such retention is considered desirable by the
Investment Adviser. See "Additional Risk Considerations". For a description of
municipal obligation ratings, see the Statement of Additional Information.
MUNICIPAL OBLIGATIONS. Municipal obligations include bonds, notes and commercial
paper issued by a municipality for a wide variety of both public and private
purposes, the interest on which is, in the opinion of bond counsel, exempt from
regular federal income tax. Public purpose municipal bonds include general
obligation and revenue bonds. General obligation bonds are backed by the taxing
power of the issuing municipality. Revenue bonds are backed by the revenues of a
project or facility, or from the proceeds of a specific revenue source. Some
revenue bonds are payable solely or partly from funds which are subject to
annual appropriations by a State's legislature. Municipal notes include bond
anticipation, tax anticipation and revenue anticipation notes. Bond, tax and
revenue anticipation notes are short-term obligations that will be retired with
the proceeds of an anticipated bond issue, tax revenue or facility revenue,
respectively. Under normal market conditions, a Portfolio will invest at least
65% 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 rated investment grade or
below (Baa or BBB or lower), or are unrated. As indicated above, each Portfolio
may invest in municipal obligations rated below investment grade (but not lower
than B by Moody's, S&P or Fitch) and comparable unrated obligations. Municipal
obligations rated investment grade or below and comparable unrated municipal
obligations in which a Portfolio may invest will have speculative
characteristics in varying degrees. While such obligations may have some quality
and protective characteristics, these characteristics can be expected to be
offset or outweighed by uncertainties or major risk exposures to adverse
conditions. Lower rated and comparable unrated municipal obligations are subject
to the risk of an issuer's inability to meet principal and interest payments on
the obligations (credit risk) and may also be subject to greater price
volatility due to such factors as interest rate sensitivity, market perception
of the creditworthiness of the issuer and general market liquidity (market
risk). Lower rated or unrated municipal obligations are also more likely to
react to real or perceived developments affecting market and credit risk than
are more highly rated obligations, which react primarily to movements in the
general level of interest rates. The Investment Adviser seeks to minimize the
risks of investing in below investment grade securities through professional
investment analysis and attention to current developments in interest rates and
economic conditions. When a Portfolio invests in lower rated or unrated
municipal obligations, the achievement of the Portfolio's goals is more
dependent on the Investment Adviser's ability than would be the case if the
Portfolio were investing in municipal obligations in the higher rating
categories.
Municipal obligations held by a Portfolio which are rated below investment grade
but which, subsequent to the assignment of such rating, are backed by escrow
accounts containing U.S. Government obligations may be determined by the
Investment Adviser to be of investment grade quality for purposes of the
Portfolio's investment policies. A Portfolio may retain in its portfolio an
obligation whose rating drops below B after its acquisition, including defaulted
obligations, if such retention is considered desirable by the Investment
Adviser; provided, however, that holdings of obligations rated below Baa or BBB
will be less than 35% of net assets. In the event the rating of an obligation
held by a Portfolio is downgraded, causing the Portfolio to exceed this
limitation, the Investment Adviser will (in an orderly fashion within a
reasonable period of time) dispose of such obligations as it deems necessary in
order to comply with the Portfolio's credit quality limitations. In the case of
a defaulted obligation, a Portfolio may incur additional expense seeking
recovery of its investment.
The net asset value of shares will change in response to fluctuations in
prevailing interest rates and changes in the value of the securities held by its
corresponding Portfolio. When interest rates decline, the value of securities
held by a Portfolio can be expected to rise. Conversely, when interest rates
rise, the value of most portfolio security holdings can be expected to decline.
Changes in the credit quality of the issuers of municipal obligations held by a
Portfolio will affect the principal value of (and possibly the income earned on)
such obligations. In addition, the values of such securities are affected by
changes in general economic conditions and business conditions affecting the
specific industries of their issuers. Changes by recognized rating services in
their ratings of a security and in the ability of the issuer to make payments of
principal and interest may also affect the value of a Portfolio's investments.
The amount of information about the financial condition of an issuer of
municipal obligations may not be as extensive as that made available by
corporations whose securities are publicly traded. An investment in shares of a
Fund will not constitute a complete investment program.
At times, a substantial portion of the Portfolio's assets may be invested in
securities as to which the Portfolio, by itself or together with other accounts
managed by the Investment Adviser and its affiliates, holds a major portion or
all of such securities. Under adverse market or economic conditions or in the
event of adverse changes in the financial condition of the issuer, the Portfolio
could find it more difficult to sell such securities when the Investment Adviser
believes it advisable to do so or may be able to sell such securities only at
prices lower than if such securities were more widely held. Under such
circumstances, it may also be more difficult to determine the fair value of such
securities for purposes of computing the Portfolio's net asset value.
The secondary market for some municipal obligations issued within a State
(including issues which are privately placed with a Portfolio) is less liquid
than that for taxable debt obligations or other more widely traded municipal
obligations. No Portfolio will invest in illiquid securities if more than 15% of
its net assets would be invested in securities that are not readily marketable.
No established resale market exists for certain of the municipal obligations in
which a Portfolio may invest. The market for obligations rated below investment
grade is also likely to be less liquid than the market for higher rated
obligations. As a result, a Portfolio may be unable to dispose of these
municipal obligations at times when it would otherwise wish to do so at the
prices at which they are valued.
Certain securities held by the Portfolio may permit the issuer at its option to
"call", or redeem, its securities. If an issuer redeems securities held by the
Portfolio during a time of declining interest rates, the Portfolio may not be
able to reinvest the proceeds in securities providing the same investment return
as the securities redeemed.
Some of the securities in which a Portfolio invests may include so-called
"zero-coupon" bonds, whose values are subject to greater fluctuation in response
to changes in market interest rates than bonds which pay interest currently.
Zero-coupon bonds are issued at a significant discount from face value and pay
interest only at maturity rather than at intervals during the life of the
security. Each Portfolio is required to accrue income from zero- coupon bonds on
a current basis, even though it does not receive that income currently in cash
and each Fund is required to distribute its share of the Portfolio's income for
each taxable year. Thus, a Portfolio may have to sell other investments to
obtain cash needed to make income distributions.
Each Portfolio may invest in municipal leases, and participations in municipal
leases. The obligation of the issuer to meet its obligations under such leases
is often subject to the appropriation by the appropriate legislative body, on an
annual or other basis, of funds for the payment of the obligations. Investments
in municipal leases are thus subject to the risk that the legislative body will
not make the necessary appropriation and the issuer will not otherwise be
willing or able to meet its obligation.
EACH FUND AND PORTFOLIO HAVE ADOPTED CERTAIN FUNDAMENTAL INVESTMENT
RESTRICTIONS WHICH ARE ENUMERATED IN DETAIL IN THE STATEMENT OF ADDITIONAL
INFORMATION AND WHICH MAY NOT BE CHANGED UNLESS AUTHORIZED BY A SHAREHOLDER
VOTE AND AN INVESTOR VOTE, RESPECTIVELY. EXCEPT FOR SUCH ENUMERATED
RESTRICTIONS AND AS OTHERWISE INDICATED IN THIS PROSPECTUS, THE INVESTMENT
OBJECTIVE AND POLICIES OF EACH FUND AND PORTFOLIO ARE NOT FUNDAMENTAL POLICIES
AND ACCORDINGLY MAY BE CHANGED BY THE TRUSTEES OF THE TRUST AND THE PORTFOLIO
WITHOUT OBTAINING THE APPROVAL OF A FUND'S SHAREHOLDERS OR THE INVESTORS IN
THE CORRESPONDING PORTFOLIO, AS THE CASE MAY BE.
ORGANIZATION OF THE FUNDS AND THE PORTFOLIOS
- --------------------------------------------------------------------------------
EACH FUND IS A NON-DIVERSIFIED SERIES OF EATON VANCE MUNICIPALS TRUST, A
BUSINESS TRUST ESTABLISHED UNDER MASSACHUSETTS LAW PURSUANT TO A DECLARATION OF
TRUST DATED SEPTEMBER 30, 1985, AS AMENDED. The Trustees of the Trust are
responsible for the overall management and supervision of its affairs. The Trust
may issue an unlimited number of shares of beneficial interest (no par value per
share) in one or more series (such as the Funds). The Trustees of the Trust have
divided the shares of each Fund into multiple classes, including Class A and
Class B shares. Each class represents an interest in a Fund, but is subject to
different expenses, rights and privileges. See "Distribution and Service Plans"
and "How to Buy Shares". The Trustees have the authority under the Declaration
of Trust to create additional classes of shares with differing rights and
privileges. As a result of a reorganization with separate series of the Trust,
the Funds commenced offering Class A and Class B shares on 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 of a Fund will be voted together except that only
Shareholders of a particular class may vote on matters affecting only that
class. Shares have no preemptive or conversion rights and are freely
transferable. In the event of the liquidation of a Fund, shareholders of each
class are entitled to share pro rata in the net assets attributable to that
class available for distribution to shareholders.
The Trustees of the Trust have considered the advantages and disadvantages of
investing the assets of each Fund in its corresponding Portfolio, as well as the
advantages and disadvantages of the two-tier format. The Trustees believe that
the structure offers opportunities for growth in the assets of the Portfolios,
may afford the potential for economies of scale for each Fund (at least when the
assets of its corresponding Portfolio exceed $500 million) and may over time
result in lower expenses for a Fund.
EACH PORTFOLIO IS ORGANIZED AS A TRUST UNDER THE LAWS OF THE STATE OF NEW YORK
AND INTENDS TO BE TREATED AS A PARTNERSHIP FOR FEDERAL TAX PURPOSES. In addition
to selling an interest to its corresponding Fund, a Portfolio may sell interests
to other affiliated and non-affiliated mutual funds or institutional investors.
Such investors will invest in a Portfolio on the same terms and conditions and
will pay a proportionate share of the Portfolio's expenses. However, the other
investors investing in a Portfolio are not required to sell their shares at the
same public offering price as the corresponding Fund or class due to variations
in sales commissions and other operating expenses. Therefore, these differences
may result in differences in returns experienced by investors in the various
classes and funds that invest in its corresponding Portfolio. Information
regarding other pooled investment entities or funds which invest in a Portfolio
may be obtained by contacting the Principal Underwriter, 24 Federal Street,
Boston, MA 02110, (617) 482-8260.
Whenever a Fund as an investor in a Portfolio is requested to vote on matters
pertaining to the Portfolio (other than the termination of the Portfolio's
business, which may be determined by the Trustees of the Portfolio without
investor approval), the Fund will hold a meeting of Fund shareholders and will
vote its interest in the Portfolio for or against such matters proportionately
to the instructions to vote for or against such matters received from Fund
shareholders. A Fund shall vote shares for which it receives no voting
instructions in the same proportion as the shares for which it receives voting
instructions. Other investors in a Portfolio may alone or collectively acquire
sufficient voting interests in the Portfolio to control matters relating to the
operation of the Portfolio, which may require the corresponding Fund to withdraw
its investment in the Portfolio or take other appropriate action. Any such
withdrawal could result in a distribution "in kind" of portfolio securities (as
opposed to a cash distribution from the Portfolio). If securities are
distributed, a Fund could incur brokerage, tax or other charges in converting
the securities to cash. In addition, the distribution in kind may result in a
less diversified portfolio of investments or adversely affect the liquidity of a
Fund. Notwithstanding the above, there are other means for meeting shareholder
redemption requests, such as borrowing.
A Fund may withdraw (completely redeem) all its assets from its corresponding
Portfolio at any time if the Board of Trustees of the Trust determines that it
is in the best interest of that Fund to do so. In the event a Fund withdraws all
of its assets from its corresponding Portfolio, or the Board of Trustees of the
Trust determines that the investment objective of such Portfolio is no longer
consistent with the investment objective of the Fund, the Trustees would
consider what action might be taken, including investing the assets of such Fund
in another pooled investment entity or retaining an investment adviser to manage
the Fund's assets in accordance with its investment objective. A Fund's
investment performance may be affected by a withdrawal of all its assets (or the
assets of another investor in the Portfolio) from its corresponding Portfolio.
Although each Fund offers only its own shares of beneficial interest, it is
possible that a Fund or class might become liable for a misstatement or omission
in this Prospectus regarding another Fund or class because the Funds use this
combined Prospectus. The Trustees of the Trust have considered this factor in
approving the use of a combined Prospectus.
MANAGEMENT OF THE FUNDS AND THE PORTFOLIOS
- --------------------------------------------------------------------------------
EACH PORTFOLIO ENGAGES BOSTON MANAGEMENT AND RESEARCH ("BMR"), A WHOLLY-OWNED
SUBSIDIARY OF EATON VANCE MANAGEMENT ("EATON VANCE"), AS ITS INVESTMENT ADVISER.
EATON VANCE, ITS AFFILIATES AND ITS PREDECESSOR COMPANIES HAVE BEEN MANAGING
ASSETS OF INDIVIDUALS AND INSTITUTIONS SINCE 1924 AND MANAGING INVESTMENT
COMPANIES SINCE 1931.
Acting under the general supervision of the Board of Trustees of each Portfolio,
BMR manages each Portfolio's investments and affairs. BMR also furnishes for the
use of each Portfolio office space and all necessary office facilities,
equipment and personnel for servicing the investments of the Portfolios. Under
its investment advisory agreement with a Portfolio, BMR receives a monthly
advisory fee equal to the aggregate of
(a) a daily asset based fee computed by applying the annual asset rate
applicable to that portion of the total daily net assets in each Category as
indicated below, plus
(b) a daily income based fee computed by applying the daily income rate
applicable to that portion of the total daily gross income (which portion
shall bear the same relationship to the total daily gross income on such day
as that portion of the total daily net assets in the same Category bears to
the total daily net assets on such day) in each Category as indicated below:
<TABLE>
<CAPTION>
ANNUAL DAILY
CATEGORY DAILY NET ASSETS ASSET RATE INCOME RATE
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 up to $20 million 0.100% 1.00%
2 $20 million but less than $40 million 0.200% 2.00%
3 $40 million but less than $500 million 0.300% 3.00%
4 $500 million but less than $1 billion 0.275% 2.75%
5 $1 billion but less than $1.5 billion 0.250% 2.50%
6 $1.5 billion but less than $2 billion 0.225% 2.25%
7 $2 billion but less than $3 billion 0.200% 2.00%
8 $3 billion and over 0.175% 1.75%
</TABLE>
For the fiscal year ended August 31, 1996, each Portfolio paid advisory fees
equivalent to the percentage of average daily net assets stated below.
<TABLE>
<CAPTION>
NET ASSETS AS OF
PORTFOLIO AUGUST 31, 1996 ADVISORY FEE
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
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%
</TABLE>
(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
APPROXIMATELY $20 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 manages other Eaton Vance portfolios and has been a Vice
President of Eaton Vance and BMR since 1996. He served as an analyst/ trader at
Eaton Vance prior thereto.
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
1994 and manages other Eaton Vance portfolios. Prior to joining Eaton Vance, she
was a Vice President and portfolio manager at Lazard Freres Asset Management.
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 a manager of other Eaton Vance portfolios since 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 manages other Eaton Vance portfolios and has
been a Vice President of Eaton Vance and BMR since 1993. She served as a high
yield municipal bond analyst at Eaton Vance prior thereto.
Thomas M. Metzold has acted as the portfolio manager of the Oregon Portfolio
since November 1, 1996. He manages other Eaton Vance portfolios and is a Vice
President of Eaton Vance and BMR.
Thomas J. Fetter has acted as the portfolio manager of the South Carolina
Portfolio since January 1, 1996. Mr. Fetter manages other Eaton Vance
portfolios and is a Vice President of Eaton Vance and BMR.
Robert B. MacIntosh has acted as the portfolio manager of the Louisiana and
North Carolina Portfolios since January 1, 1996. Mr. MacIntosh manages other
Eaton Vance portfolios and is a Vice President of Eaton Vance and BMR.
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 Service Plan (the "Class A Plan") for each Fund's Class
A shares that is designed to meet the service fee requirements of the sales
charge rule of the National Association of Securities Dealers, Inc. THE CLASS A
PLAN PROVIDES THAT CLASS A MAY MAKE SERVICE FEE PAYMENTS FOR PERSONAL SERVICES
AND/OR THE MAINTENANCE OF SHAREHOLDER ACCOUNTS TO THE PRINCIPAL UNDERWRITER,
FINANCIAL SERVICE FIRMS ("AUTHORIZED FIRMS") AND OTHER PERSONS IN AMOUNTS NOT
EXCEEDING .25% OF ITS AVERAGE DAILY NET ASSETS FOR ANY FISCAL YEAR. The Trustees
of the Trust have initially implemented the Class A Plan by authorizing Class A
to make quarterly service fee payments to the Principal Underwriter and
Authorized Firms in amounts not expected to exceed .20% of its average daily net
assets for any fiscal year which is based on the value of Class A shares sold by
such persons and remaining outstanding for at least twelve months. However, the
Class A Plan authorizes the Trustees of the Trust to increase payments without
action by Class A shareholders of any Fund, provided that the aggregate amount
of payments made in any fiscal year does not exceed .25% of average daily net
assets.
The Trust has also adopted a Distribution Plan ("Class B Plan") pursuant to Rule
12b-1 under the Investment Company Act of 1940 ("1940 Act") for each Fund's
Class B shares. The Plan is designed to permit an investor to purchase shares
through an Authorized Firm without incurring an initial sales charge and at the
same time permit the Principal Underwriter to compensate Authorized Firms in
connection therewith. UNDER SUCH PLAN, EACH CLASS B PAYS THE PRINCIPAL
UNDERWRITER A FEE, ACCRUED DAILY AND PAID MONTHLY, AT AN ANNUAL RATE NOT
EXCEEDING .75% OF ITS AVERAGE DAILY NET ASSETS TO FINANCE THE DISTRIBUTION OF
ITS SHARES. Such fees compensate the Principal Underwriter for sales commissions
paid by it to Authorized Firms on the sale of Class B shares and for interest
expenses. The Principal Underwriter uses its own funds to pay sales commissions
(except on exchange transactions and reinvestments) to Authorized Firms at the
time of sale equal to 4% of the purchase price of the Class B shares sold by
such Firms. CDSCs paid to the Principal Underwriter will be used to reduce
amounts owed to it. Because payments to the Principal Underwriter under the
Class B Plan are limited, uncovered distribution charges (sales commissions paid
by the Principal Underwriter plus interest, less the above fees and CDSCs
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 equivalent to .75% of 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.
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%).
The Principal Underwriter may, from time to time, at its own expense, provide
additional incentives to Authorized Firms which employ registered
representatives who sell Fund shares and/or shares of other funds distributed by
the Principal Underwriter. In some instances, such additional incentives may be
offered only to certain Authorized Firms whose representatives sell or are
expected to sell significant amounts of shares. In addition, the Principal
Underwriter may from time to time increase or decrease the sales commissions
payable to Authorized Firms.
The Trust may, in its absolute discretion, suspend, discontinue or limit the
offering of one or more of its classes of shares at any time. In determining
whether any such action should be taken, the Trust's management intends to
consider all relevant factors, including (without limitation) the size of a Fund
or class, the investment climate and market conditions, the volume of sales and
redemptions of shares, and in the case of Class B shares, the amount of
uncovered distribution charges of the Principal Underwriter. The Plans may
continue in effect and payments may be made under the Plans following any such
suspension, discontinuance or limitation of the offering of shares; however,
there is no contractual obligation to continue any Plans for any particular
period of time. Suspension of the offering of shares would not, of course,
affect a shareholder's ability to redeem shares.
VALUING SHARES
- --------------------------------------------------------------------------------
EACH FUND VALUES ITS SHARES ONCE EACH DAY THE NEW YORK STOCK EXCHANGE (THE
"EXCHANGE") IS OPEN FOR TRADING, as of the close of regular trading on the
Exchange (normally 4:00 p.m. New York time). Each Class's net asset value per
share is determined by the Trust's custodian, Investors Bank & Trust Company
("IBT"), (as agent for the Trust) in the manner authorized by the Trustees of
the Trust. The net asset value of each Class is computed by dividing the value
of that Class's pro rata share of each Fund's total assets, less its
liabilities, by the number of shares of that Class outstanding. Because each
Fund invests its assets in an interest in its corresponding Portfolio, each
Class's net asset value will reflect the value of each Fund's interest in the
Portfolio (which, in turn, reflects the underlying value of the Portfolio's
assets and liabilities).
Authorized Firms must communicate an investor's order to the Principal
Underwriter prior to the close of the Principal Underwriter's business day to
receive that day's net asset value per share, and, for Class A shares, the
public offering price based thereon. It is the Authorized Firms' responsibility
to transmit orders promptly to the Principal Underwriter.
Each Portfolio's net asset value is also determined as of the close of regular
trading on the Exchange by IBT (as custodian and agent for the Portfolio) based
on market or fair value in the manner authorized by the Trustees of the
Portfolio. Net asset value is computed by subtracting the liabilities of a
Portfolio from the value of its total assets. Municipal obligations will
normally be valued on the basis of valuations furnished by a pricing service.
SHAREHOLDERS MAY DETERMINE THE VALUE OF THEIR INVESTMENT BY MULTIPLYING THE
NUMBER OF SHARES OWNED BY THE CURRENT NET ASSET VALUE PER SHARE.
HOW TO BUY SHARES
- --------------------------------------------------------------------------------
SHARES OF A FUND MAY BE PURCHASED FOR CASH OR MAY BE ACQUIRED IN EXCHANGE FOR
ACCEPTABLE SECURITIES. Class A shares are purchased at the effective public
offering price, which price is based on the effective net asset value per share
plus the applicable sales charge. The sales charge is divided between the
Authorized Firm and the Principal Underwriter. Class B shares are purchased at
the net asset value per share next determined after an order is effective. An
Authorized Firm may charge its customers a fee in connection with transactions
executed by that Firm. The Trust may suspend the offering of shares at any time
and may refuse an order for the purchase of shares. Shares of each Fund are
offered for sale only in States where such shares may be legally sold.
An initial investment must be at least $1,000. Once an account has been
established the investor may send investments of $50 or more at any time
directly to the Trust's transfer agent (the "Transfer Agent") as follows: First
Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123. The
$1,000 minimum initial investment is waived for Bank Automated Investing
accounts, which may be established with an investment of $50 or more. See "Eaton
Vance Shareholder Services".
CLASS A SHARES. The sales charge may vary depending on the size of the purchase
and the number of Class A shares of Eaton Vance funds the investor may already
own, any arrangement to purchase additional shares during a 13- month period or
special purchase programs. Complete details of how investors may purchase shares
at reduced sales charges under a Statement of Intention or Right of Accumulation
are available from Authorized Firms or the Principal Underwriter.
The current sales charges and dealer commissions are:
<TABLE>
<CAPTION>
SALES CHARGE SALES CHARGE DEALER COMMISSION
AS PERCENTAGE OF AS PERCENTAGE OF AS PERCENTAGE OF
AMOUNT OF PURCHASE OFFERING PRICE AMOUNT INVESTED OFFERING PRICE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $25,000 4.75% 4.99% 4.50%
$25,000 but less than $100,000 4.50 4.71 4.25
$100,000 but less than $250,000 3.75 3.90 3.50
$250,000 but less than $500,000 3.00 3.09 2.75
$500,000 but less than $1,000,000 2.00 2.04 2.00
$1,000,000 or more 0.00* 0.00* 0.50
</TABLE>
*No sales charge is payable at the time of purchase on investments of $1 million
or more or where the amount invested represents redemption proceeds from a
mutual fund unaffiliated with Eaton Vance, if the redemption occurred no more
than 60 days' prior to the purchase of Fund shares and the redeemed shares were
potentially subject to a sales charge. A CDSC of 0.50% will be imposed on such
investments (as described below) in the event of certain redemptions within 12
months of purchase.
The Principal Underwriter may at times allow discounts up to the full sales
charge. During periods when the discount includes the full sales charge,
Authorized Firms may be deemed to be underwriters as that term is defined in the
Securities Act of 1933.
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:
<TABLE>
<S> <C>
IN THE CASE OF BOOK ENTRY: IN THE CASE OF PHYSICAL DELIVERY:
Deliver through Depository Trust Co. Investors Bank & Trust Company
Broker #2212 Attention: Eaton Vance [State name] Municipals Fund
Investors Bank & Trust Company (and Class)
For A/C Eaton Vance [State name] Municipals Fund Physical Securities Processing Settlement Area
(and Class) 200 Clarendon Street
Boston, MA 02116
</TABLE>
Investors who are contemplating an exchange of securities for shares, or their
representatives, must contact Eaton Vance to determine whether the securities
are acceptable before forwarding such securities. Eaton Vance reserves the right
to reject any securities. Exchanging securities for shares may create a taxable
gain or loss. Each investor should consult his or her tax adviser with respect
to the particular federal, State and local tax consequences of exchanging
securities.
IF YOU DON'T HAVE AN AUTHORIZED FIRM, EATON VANCE CAN RECOMMEND ONE.
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
A SHAREHOLDER MAY REDEEM SHARES IN ONE OF THREE WAYS -- BY MAIL, BY TELEPHONE OR
THROUGH AN AUTHORIZED FIRM. The redemption price will be based on the net asset
value per share next computed after a redemption request is received in the
proper form as described below.
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 CDSC and any federal income tax required to be withheld. While
normally payments will be made in cash for redeemed shares, the Trust, subject
to compliance with applicable regulations, has reserved the right to pay the
redemption price of shares of a Fund, either totally or partially, by a
distribution in kind of readily marketable securities withdrawn from its
corresponding Portfolio. The securities so distributed would be valued pursuant
to the Portfolio's valuation procedures. If a shareholder received a
distribution in kind, the shareholder could incur brokerage or other charges in
converting the securities to cash.
If shares were recently purchased, the proceeds of a redemption will not be sent
until the check (including a certified or cashier's check) received for the
shares purchased has cleared. Payment for shares tendered for redemption may be
delayed up to 15 days from the purchase date when the purchase check has not yet
cleared. Redemptions may result in a taxable gain or loss.
Due to the high cost of maintaining small accounts, the Trust reserves the right
to redeem accounts with balances of less than $750. Prior to such a redemption,
shareholders will be given 60 days' written notice to make an additional
purchase. However, no such redemption would be required if the cause of the low
account balance was a reduction in the net asset value of shares. No CDSC will
be imposed with respect to 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 imposed on Class A shares is waived for redemptions involving certain
liquidation, merger or acquisition transactions involving other investment
companies. If a shareholder reinvests redemption proceeds in accordance with the
conditions set forth under "Eaton Vance Shareholder Services -- Reinvestment
Privilege", the shareholder's account will be credited with the amount of any
CDSC paid on such redeemed shares.
CONTINGENT DEFERRED SALES CHARGE -- CLASS B. Class B shares redeemed within the
first six years of their purchase (except shares acquired through the
reinvestment of distributions) generally will be subject to a CDSC. This CDSC is
imposed on any redemption, the amount of which exceeds the aggregate value at
the time of redemption of (a) all shares in the account purchased more than six
years prior to the redemption, (b) all shares in the account acquired through
reinvestment of distributions, and (c) the increase, if any, in the value of all
other shares in the account (namely those purchased within the six years
preceding the redemption) over the purchase price of such shares. Redemptions
are processed in a manner to maximize the amount of redemption proceeds which
will not be subject to a CDSC. That is, each redemption will be assumed to have
been made first from the exempt amounts referred to in clauses (a), (b) and (c)
above, and second through liquidation of those shares in the account referred to
in clause (c) on a first-in-first-out basis. Any CDSC which is required to be
imposed on Class B share redemptions will be made in accordance with the
following schedule:
YEAR OF REDEMPTION
AFTER PURCHASE CDSC
- ------------------------------------------------------
First or Second 5%
Third 4%
Fourth 3%
Fifth 2%
Sixth 1%
Seventh and following 0%
In calculating the CDSC upon the redemption of Class B shares acquired in an
exchange of shares of a fund currently listed under "The Eaton Vance Exchange
Privilege", the CDSC schedule applicable to the shares at the time of purchase
will apply and the purchase of shares acquired in the exchange is deemed to have
occurred at the time of the original purchase of the exchanged shares.
No CDSC will be imposed on Class B shares which have been sold to Eaton Vance or
its affiliates, or to their respective employees or clients. The CDSC will also
be waived for shares redeemed (1) pursuant to a Withdrawal Plan (see "Eaton
Vance Shareholder Services"), (2) as part of a required distribution from a
tax-sheltered retirement plan or (3) following the death of all beneficial
owners of such shares, provided the redemption is requested within one year of
death (a death certificate and other applicable documents may be required). In
addition, shares acquired as a result of a merger or liquidation of another
Eaton Vance sponsored fund will have a CDSC imposed at the same rate as would
have been imposed in the prior fund.
REPORTS TO SHAREHOLDERS
- --------------------------------------------------------------------------------
EACH FUND WILL ISSUE TO ITS SHAREHOLDERS SEMI-ANNUAL AND ANNUAL REPORTS
CONTAINING FINANCIAL STATEMENTS. Financial statements included in annual reports
are audited by the Funds' independent certified public accountants. Shortly
after the end of each calendar year, each Fund will furnish its shareholders
with information necessary for preparing federal and State tax returns.
Consistent with applicable law, duplicate mailings of shareholder reports and
certain other Fund information to shareholders residing at the same address may
be eliminated.
THE LIFETIME INVESTING ACCOUNT/DISTRIBUTION OPTIONS
- --------------------------------------------------------------------------------
AFTER AN INVESTOR MAKES AN INITIAL PURCHASE OF SHARES, THE TRANSFER AGENT WILL
SET UP A LIFETIME INVESTING ACCOUNT FOR THE INVESTOR ON THE TRUST'S RECORDS.
This account is a complete record of all transactions which at all times shows
the balance of shares owned. The Trust will not issue share certificates except
upon request.
At least quarterly, shareholders will receive a statement showing complete
details of any transaction and the current share balance in the account. THE
LIFETIME INVESTING ACCOUNT ALSO PERMITS A SHAREHOLDER TO MAKE ADDITIONAL
INVESTMENTS IN SHARES BY SENDING A CHECK FOR $50 OR MORE to the Transfer Agent.
Any questions concerning a shareholder's account or services available may be
directed by telephone to EATON VANCE SHAREHOLDER SERVICES at 800-225-6265,
extension 2, or in writing to the Transfer Agent, First Data Investor Services
Group, P.O. Box 5123, Westborough, MA 01581-5123 (please provide the name of the
shareholder, the Fund and Class, and the account number).
THE FOLLOWING DISTRIBUTION OPTIONS WILL BE AVAILABLE TO ALL LIFETIME INVESTING
ACCOUNTS and may be changed as often as desired by written notice to the Trust's
dividend disbursing agent, First Data Investor Services Group, P.O. Box 5123,
Westborough, MA 01581-5123. The currently effective option will appear on each
account statement.
Share Option -- Dividends and capital gains will be reinvested in additional
shares.
Income Option -- Dividends will be paid in cash, and capital gains will be
reinvested in additional shares.
Cash Option -- Dividends and capital gains will be paid in cash.
The Share Option will be assigned if no other option is specified.
Distributions, including those reinvested, will be reduced by any withholding
required under the federal income tax laws.
If the Income Option or Cash Option has been selected, dividend and/or capital
gains distribution checks which are returned by the United States Postal Service
as not deliverable or which remain uncashed for six months or more will be
reinvested in the account in shares at the then current net asset value.
Furthermore, the distribution option on the account will be automatically
changed to the Share Option until such time as the shareholder selects a
different option.
DISTRIBUTION INVESTMENT OPTION. In addition to the distribution options set
forth above, dividends and/or capital gains may be invested in additional shares
of another Eaton Vance fund. Before selecting this option, a shareholder should
obtain a prospectus of the other Eaton Vance fund and consider its objectives
and policies carefully.
"STREET NAME" ACCOUNTS. If shares are held in a "street name" account with an
Authorized Firm, all recordkeeping, transaction processing and payments of
distributions relating to the beneficial owner's account will be performed by
the Authorized Firm, and not by the Trust and its Transfer Agent. Since the
Trust will have no record of the beneficial owner's transactions, a beneficial
owner should contact the Authorized Firm to purchase, redeem or exchange shares,
to make changes in or give instructions concerning the account, or to obtain
information about the account. The transfer of shares in a "street name" account
to an account with another Authorized Firm or to an account directly with the
Trust involves special procedures and will require the beneficial owner to
obtain historical purchase information about the shares in the account from the
Authorized Firm. Before establishing a "street name" account with an Authorized
Firm, or transferring the account to another Authorized Firm, an investor
wishing to reinvest distributions should determine whether the Authorized Firm
which will hold the shares allows reinvestment of distributions in "street name"
accounts.
THE EATON VANCE EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
Shares of each Fund currently may be exchanged for shares of the same class of
one or more other funds in the Eaton Vance Group of Funds. Class A shares may
also be exchanged for shares of Eaton Vance Cash Management Fund, Eaton Vance
Income Fund of Boston, Eaton Vance Municipal Bond Fund L.P., and Eaton Vance Tax
Free Reserves. Class B shares may also be exchanged for shares of Eaton Vance
Prime Rate Reserves, which are subject to an early withdrawal charge, shares of
Eaton Vance Money Market Fund, which are subject to a CDSC, and shares of a
money market fund sponsored by an Authorized Firm and approved by the Principal
Underwriter (an "Authorized Firm fund"). Any such exchange will be made on the
basis of the net asset value per share of each fund/class at the time of the
exchange (plus, in the case of an exchange made within six months of the date of
purchase of Class A shares subject to an initial sales charge, an amount equal
to the difference, if any, between the sales charge previously paid on the
shares being exchanged and the sales charge payable on the shares being
acquired). Exchange offers are available only in States where shares of the fund
being acquired may be legally sold. Exchanges are subject to any restrictions or
qualifications set forth in the current prospectus of any such fund.
Each exchange must involve shares which have a net asset value of at least
$1,000. The exchange privilege may be changed or discontinued without penalty.
Shareholders will be given sixty (60) days' notice prior to any termination or
material amendment of the exchange privilege. The Trust does not permit the
exchange privilege to be used for "Market Timing" and may terminate the exchange
privilege for any shareholder account engaged in Market Timing activity. Any
shareholder account for which more than two round-trip exchanges are made within
any twelve month period will be deemed to be engaged in Market Timing.
Furthermore, a group of unrelated accounts for which exchanges are entered
contemporaneously by a financial intermediary will be considered to be engaged
in Market Timing.
The Transfer Agent makes exchanges at the next determined net asset value after
receiving an exchange request in good order (see "How to Redeem Shares").
Consult the Transfer Agent for additional information concerning the exchange
privilege. Applications and prospectuses of other funds are available from
Authorized Firms or the Principal Underwriter. The prospectus for each fund
describes its investment objectives and policies, and shareholders should obtain
a prospectus and consider these objectives and policies carefully before
requesting an exchange.
No CDSC is imposed on exchanges. For purposes of calculating the CDSC upon
redemption of shares acquired in an exchange, the CDSC schedule applicable to
the shares at the time of purchase will apply and the purchase of shares
acquired in one or more exchanges is deemed to have occurred at the time of the
original purchase of the exchanged shares, except that time during which shares
are held in an Authorized Firm fund will not be credited toward completion of
the CDSC period. For the CDSC schedule applicable to Class B shares (except
Prime Rate Reserves and Class B shares of the Limited Maturity Funds), see "How
to Redeem Shares". The CDSC or early withdrawal charge schedule applicable to
Prime Rate Reserves and Class B shares of the Limited Maturity Funds is 3%,
2.5%, 2% or 1% in the event of a redemption occurring in the first, second,
third or fourth year, respectively, after the original share purchase.
Telephone exchanges are accepted by the Transfer Agent provided the investor has
not disclaimed in writing the use of the privilege. To effect such exchanges,
call the Transfer Agent at 800-262-1122, Monday through Friday, 9:00 a.m. to
4:00 p.m. (Eastern Standard Time). Shares acquired by telephone exchange must be
registered in the same name(s) and with the same address as the shares being
exchanged. Neither the Trust, the Principal Underwriter nor the Transfer Agent
will be responsible for the authenticity of exchange instructions received by
telephone, provided that reasonable procedures to confirm that instructions
communicated are genuine have been followed. Telephone instructions will be tape
recorded. In times of drastic economic or market changes, a telephone exchange
may be difficult to implement. An exchange may result in a taxable gain or loss.
EATON VANCE SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
THE TRUST OFFERS THE FOLLOWING SERVICES, WHICH ARE VOLUNTARY, INVOLVE NO EXTRA
CHARGE, AND MAY BE CHANGED OR DISCONTINUED WITHOUT PENALTY AT ANY TIME. Full
information on each of the services described below and an application, where
required, are available from Authorized Firms or the Principal Underwriter. The
cost of administering such services for the benefit of shareholders who
participate in them is borne by the applicable Fund or Class as an expense to
all shareholders.
INVEST-BY-MAIL -- FOR PERIODIC SHARE ACCUMULATION: Once the $1,000 minimum
investment has been made, checks of $50 or more payable to the order of the Fund
and Class being purchased may be mailed directly to the Transfer Agent, First
Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123 at any
time -- whether or not dividends are reinvested. The name of the shareholder,
the Fund and Class and the account number should accompany each investment.
BANK AUTOMATED INVESTING -- FOR REGULAR SHARE ACCUMULATION: Cash investments of
$50 or more may be made automatically each month or quarter from a shareholder's
bank account. The $1,000 minimum initial investment and small account redemption
policy are waived for these accounts.
WITHDRAWAL PLAN: A shareholder may draw on shareholdings systematically with
monthly or quarterly checks. For Class B shares, any such withdrawal may not
exceed in the aggregate 12% annually of the account balance at the time the plan
is established. Such amount will not be subject to the Class B 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 $25,000 or more of Class A shares made
over a 13-month period are eligible for reduced sales charges. See "How to Buy
Shares -- Statement of Intention and Escrow Agreement."
RIGHT OF ACCUMULATION: Purchases may qualify for reduced sales charges on Class
A shares when the current market value of holdings (shares at current offering
price), plus new purchases, reaches $25,000 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 BY ITS
CORRESPONDING PORTFOLIO, LESS THE FUND'S DIRECT AND ALLOCATED EXPENSES AND
CLASS-SPECIFIC EXPENSES, WILL BE DECLARED DAILY AS A DISTRIBUTION TO
SHAREHOLDERS OF RECORD AT THE TIME OF DECLARATION. Distributions on Class A
shares, whether taken in cash or reinvested in additional shares, will
ordinarily be paid on the last day of each month or the next business day
thereafter. Distributions on Class B shares will ordinarily be paid on the
fifteenth day of each month or the next business day thereafter. Each Fund
anticipates that for tax purposes the entire distribution, whether paid in cash
or reinvested in additional shares, will constitute tax-exempt income to
shareholders, except for the proportionate part of the distribution that may be
considered taxable income if the Fund has taxable income during the calendar
year. Shareholders reinvesting the monthly distribution should treat the amount
of the entire distribution as the tax cost basis of the additional shares
acquired by reason of such reinvestment. Daily distribution crediting will
commence on the business day after collected funds for the purchase of shares
are available at the Transfer Agent. Shareholders will receive timely federal
income tax information as to the tax-exempt or taxable status of all
distributions made by their Fund during the calendar year. A Fund's net realized
capital gains, if any, consist of the net realized capital gains allocated to
the Fund by its corresponding Portfolio for tax purposes, after taking into
account any available capital loss carryovers; a Fund's net realized capital
gains, if any, will be distributed at least once a year, usually in December.
Sales charges paid upon a purchase of Class A shares cannot be taken into
account for purposes of determining gain or loss on a redemption or exchange of
the shares before the 91st day after their purchase to the extent a sales charge
is reduced or eliminated in a subsequent acquisition of such shares of a Fund or
of another fund pursuant to a Fund's reinvestment or exchange privilege. Any
disregarded amounts will result in an adjustment to the shareholder's tax basis
in some or all of any other shares acquired.
Each Fund intends to qualify as a regulated investment company under the Code
and to satisfy all requirements necessary to avoid paying federal income taxes
on the part of its investment company taxable income (consisting generally of
taxable net investment income and net short-term capital gain) and net capital
gain that it distributes to shareholders. In satisfying these requirements, each
Fund will treat itself as owning its proportionate share of each of its
corresponding Portfolio's assets and as entitled to the income of the Portfolio
properly attributable to such share.
As a regulated investment company under the Code, each Fund does not pay federal
income or excise taxes to the extent that it distributes to shareholders
substantially all of its ordinary income and capital gain net income in
accordance with the timing requirements imposed by the Code. As partnerships
under the Code, the Portfolios do not pay federal income or excise taxes.
Distributions of interest on certain municipal obligations constitute a tax
preference item under the AMT provisions applicable to individuals and
corporations. Distributions of taxable income (including a portion of any
original issue discount with respect to certain stripped municipal obligations
and stripped coupons and accretion of certain market discount) and net
short-term capital gains will be taxable to shareholders as ordinary income.
Distributions of long-term capital gains are taxable to shareholders as such for
federal income tax purposes, regardless of the length of time shares have been
owned by the shareholder. If shares are purchased shortly before the record date
of such a distribution, the shareholder will pay the full price for the shares
and then receive some portion of the price back as a taxable distribution.
Distributions are taxed in the manner described above whether paid in cash or
reinvested in additional shares. Tax-exempt distributions received from a Fund
are includable in the tax base for determining the taxability of social security
and railroad retirement benefits.
The Code provides that interest on indebtedness incurred or continued by a
shareholder to purchase or carry shares is not deductible to the extent it is
deemed related to a Fund's distributions of tax-exempt interest dividends to the
shareholder. Further, entities or persons who are "substantial users" (or
persons related to "substantial users") of facilities financed by industrial
development or private activity bonds should consult their tax advisers before
purchasing shares. "Substantial user" is defined in applicable Treasury
regulations to include a "non-exempt person" who regularly uses in trade or
business a part of a facility financed from the proceeds of industrial
development bonds and would likely be interpreted to include private activity
bonds issued to finance similar facilities.
SEE THE APPENDIX TO THIS PROSPECTUS FOR INFORMATION CONCERNING STATE TAXES.
Shareholders should consult with their tax advisers concerning the applicability
of State, local and other taxes to an investment.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
FROM TIME TO TIME, YIELD AND/OR AVERAGE ANNUAL TOTAL RETURN MAY BE ADVERTISED.
Current yield is calculated separately for each Class by dividing the net
investment income per share earned during a recent 30-day period by the maximum
offering price per share or net asset value on the last day of the period and
annualizing the resulting figure. A taxable-equivalent yield is computed by
using the tax-exempt yield figure and dividing by 1 minus the tax rate. Average
annual total return is determined separately for each Class by computing the
average annual percentage change in value of $1,000 invested at the maximum
public offering price (including maximum sales charge for Class A; net asset
value for Class B) for specified periods, assuming reinvestment of all
distributions. Total return may be quoted for the period prior to commencement
of operations which would reflect the Class's total return (or that of its
predecessor) adjusted to reflect any applicable sales charge. The average annual
total return calculation assumes a complete redemption of the investment and the
deduction of any applicable CDSC at the end of the period. Each Fund may publish
annual and cumulative total return figures from time to time.
Each Fund may also publish total return figures for each Class which do not take
into account any sales charge. Any performance figure which does not take into
account a sales charge would be reduced to the extent such charge is imposed
upon a redemption. Each Fund's performance may be compared in publications to
the performance of various indices and investments for which reliable data is
available, and to averages, performance rankings or other information prepared
by recognized mutual fund statistical services.
Investors should note that 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 May 1997, was
4.1%, compared to the national rate of 4.7%.
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 May, 1997, was 4.5%, compared to a national rate of 4.7%.
State law prohibits deficit spending. In 1995, the General Fund had an ending
balance of $1.5 billion, with revenues over expenditures of $195 million which
is equal to 24% of expenditures.
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 May 1997 was 4.1% compared to 4.7% for
the nation. Actual revenues of the State for fiscal year 1995 increased 10.5%
over revenue collections for the previous fiscal year and fiscal 1995 closed
with combined reserves of nearly 8% of expenditures. Based on preliminary data,
similar surpluses were generated in fiscals 1996 and 1997. 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 May 1997, Kentucky's unemployment rate was 5.0%
compared to the national average of 4.7%. 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. Kentucky
expects to maintain the budget reserve at $200 million through fiscal 1998.
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.
Growth in general fund revenues, significant cuts to the State's Medicaid
program and one-time gaming license receipts together led to growth in the
general fund balance from $83 million in fiscal 1992 to nearly $600 million in
fiscal 1994. However, fiscal challenges remain, including $1.8 billion in
unfunded risk management claims and the suspension of sales and income tax
exemptions. In addition, the State must operate with an economy that has been
growing more slowly than the U.S. as a whole. As of May, 1997 Louisiana's
unemployment rate was 5.7% compared to the national average of 4.7%.
As of the date of this Prospectus, general obligations of Louisiana are rated A-
(with a stable 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 May 1997 was 4.6% versus the national rate of 4.7%.
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. Debt
service as a percentage of total revenues remained steady at about 6.3% since
1992. 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 May 1997 was 3.8% as
compared to the May 1996 level of 4.2%. 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. As of May, 1997 North
Carolina's unemployment rate was 3.4% compared to the national average of 4.7%.
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 May
1997 was 4.6%, compared to a national rate of 4.7%.
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 May
1997, unemployment in South Carolina was 4.4% compared with the national rate of
4.7%.
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 May 1997 unemployment rate was 4.5%.
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. General fund reserves
were $198 million at the end of fiscal 1996, down from $346 million three years
earlier. The 1997 budget will be balanced, but an $85 million interim budget gap
has to be closed.
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 1996-98 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. May 1997 unemployment was 4.2% versus a national
rate of 4.7%. 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
================
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
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
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 ..................................................... 19
Service Plan -- Class A Shares ............................................ 21
Distribution Plan -- Class B Shares ....................................... 21
Portfolio Security Transactions ........................................... 23
Other Information ......................................................... 25
Independent Certified Public Accountants .................................. 26
Financial Statements ...................................................... 26
Appendix A: Class A Shares ................................................ a-1
Appendix B: Class B Shares ................................................ b-1
Appendix C: State Specific Information .................................... c-1
Appendix D: Tax Equivalent Yield Tables ................................... d-1
Appendix E: Ratings ....................................................... e-1
Although each Fund offers only its shares of beneficial interest, it is
possible that a Fund (or Class) might become liable for a misstatement or
omission in this Statement of Additional Information regarding another Fund (or
Class) because the Funds use this combined Statement of Additional Information.
The Trustees of the Trust have considered this factor in approving the use of a
combined Statement of Additional Information.
THIS COMBINED STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY THE FUNDS' PROSPECTUS DATED 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).
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This SAI provides information about the Funds and the Portfolios.
Capitalized terms used in this SAI and not otherwise defined have the meanings
given them in the Prospectus. The Funds are subject to the same investment
policies as those of the Portfolio. Each Fund currently seeks to achieve its
objective by investing in its corresponding Portfolio.
ADDITIONAL INFORMATION ABOUT INVESTMENT POLICIES
MUNICIPAL OBLIGATIONS
Municipal obligations are issued to obtain funds for various public and
private purposes. Such obligations include bonds as well as tax-exempt
commercial paper, project notes and municipal notes such as tax, revenue and
bond anticipation notes of short maturity, generally less than three years. In
general, there are three categories of municipal obligations the interest on
which is exempt from federal income tax and is not a tax preference item for
purposes of the AMT: (i) certain "public purpose" obligations (whenever issued),
which include obligations issued directly by state and local governments or
their agencies to fulfill essential governmental functions; (ii) certain
obligations issued before August 8, 1986 for the benefit of non-governmental
persons or entities; and (iii) certain "private activity bonds" issued after
August 7, 1986 which include "qualified Section 501(c)(3) bonds" or refundings
of certain obligations included in the second category. In assessing the federal
income tax treatment of interest on any municipal obligation, the Portfolio will
generally rely on an opinion of the issuer's counsel (when available) and will
not undertake any independent verification of the basis for the opinion. The two
principal classifications of municipal bonds are "general obligation" and
"revenue" bonds.
Interest on certain "private activity bonds" issued after August 7, 1986 is
exempt from regular federal income tax, but such interest (including a
distribution by a Fund derived from such interest) is treated as a tax
preference item which could subject the recipient to or increase the recipient's
liability for the AMT. For corporate shareholders, a Fund's distributions
derived from interest on all municipal obligations (whenever issued) is included
in "adjusted current earnings" for purposes of the AMT as applied to
corporations (to the extent not already included in alternative minimum taxable
income as income attributable to private activity bonds).
Any recognized gain or income attributable to market discount on long-term
tax-exempt municipal obligations (i.e., obligations with a term of more than one
year) purchased after April 30, 1993 other than, in general, at their original
issue, is taxable as ordinary income. A long-term debt obligation is generally
treated as acquired at a market discount if purchased after its original issue
at a price less than (i) the stated principal amount payable at maturity, in the
case of an obligation that does not have original issue discount or (ii) in the
case of an obligation that does have original issue discount, the sum of the
issue price and any original issue discount that accrued before the obligation
was purchased, subject to a de minimis exclusion.
Issuers of general obligation bonds include states, counties, cities, towns
and regional districts. The proceeds of these obligations are used to fund a
wide range of public projects including the construction or improvement of
schools, highways and roads, water and sewer systems and a variety of other
public purposes. The basic security of general obligation bonds is the issuer's
pledge of its faith, credit, and taxing power for the payment of principal and
interest. The taxes that can be levied for the payment of debt service may be
limited or unlimited as to rate and amount.
The principal security for a revenue bond is generally the net revenues
derived from a particular facility or group of facilities or, in some cases,
from the proceeds of a special excise or other specific revenue source. Revenue
bonds have been issued to fund a wide variety of capital projects including:
electric, gas, water, sewer and solid waste disposal systems; highways, bridges
and tunnels; port, airport and parking facilities; transportation systems;
housing facilities, colleges and universities and hospitals. Although the
principal security behind these bonds varies widely, many provide additional
security in the form of a debt service reserve fund whose monies may be used to
make principal and interest payments on the issuer's obligations. Housing
finance authorities have a wide range of security including partially or fully
insured, rent subsidized and/or collateralized mortgages, and/or the net
revenues from housing or other public projects. In addition to a debt service
reserve fund, some authorities provide further security in the form of a state's
ability (without legal obligation) to make up deficiencies in the debt service
reserve fund. Lease rental revenue bonds issued by a state or local authority
for capital projects are normally secured by annual lease rental payments from
the state or locality to the authority sufficient to cover debt service on the
authority's obligations. Such payments are usually subject to annual
appropriations by the state or locality.
Industrial development and pollution control bonds, although nominally
issued by municipal authorities, are in most cases revenue bonds and are
generally not secured by the taxing power of the municipality, but are usually
secured by the revenues derived by the authority from payments of the industrial
user or users.
Each Portfolio may on occasion acquire revenue bonds which carry warrants or
similar rights covering equity securities. Such warrants or rights may be held
indefinitely, but if exercised, the Portfolio anticipates that it would, under
normal circumstances, dispose of any equity securities so acquired within a
reasonable period of time.
While most municipal bonds pay a fixed rate of interest semi-annually in
cash, there are exceptions. Some bonds pay no periodic cash interest, but rather
make a single payment at maturity representing both principal and interest.
Bonds may be issued or subsequently offered with interest coupons materially
greater or less than those then prevailing, with price adjustments reflecting
such deviation.
The obligations of any person or entity to pay the principal of and interest
on a municipal obligation are subject to the provisions of bankruptcy,
insolvency and other laws affecting the rights and remedies of creditors, such
as the Federal Bankruptcy Act, and laws, if any, which may be enacted by
Congress or state legislatures extending the time for payment of principal or
interest, or both, or imposing other constraints upon enforcement of such
obligations. There is also the possibility that as a result of litigation or
other conditions the power or ability of any person or entity to pay when due
principal of and interest on a municipal obligation may be materially affected.
There have been recent instances of defaults and bankruptcies involving
municipal obligations which were not foreseen by the financial and investment
communities. Each Portfolio will take whatever action it considers appropriate
in the event of anticipated financial difficulties, default or bankruptcy of
either the issuer of any municipal obligation or of the underlying source of
funds for debt service. Such action may include retaining the services of
various persons or firms (including affiliates of the Investment Adviser) to
evaluate or protect any real estate, facilities or other assets securing any
such obligation or acquired by a Portfolio as a result of any such event, and a
Portfolio may also manage (or engage other persons to manage) or otherwise deal
with any real estate, facilities or other assets so acquired. The Portfolio
anticipates that real estate consulting and management services may be required
with respect to properties securing various municipal obligations in its
portfolio or subsequently acquired by the Portfolio. The Portfolio will incur
additional expenditures in taking protective action with respect to portfolio
obligations in default and assets securing such obligations.
The yields on municipal obligations will be dependent on a variety of
factors, including purposes of issue and source of funds for repayment, general
money market conditions, general conditions of the municipal bond market, size
of a particular offering, maturity of the obligation and rating of the issue.
The ratings of Moody's, S&P and Fitch represent their opinions as to the quality
of the municipal obligations which they undertake to rate. It should be
emphasized, however, that ratings are based on judgment and are not absolute
standards of quality. Consequently, municipal obligations with the same
maturity, coupon and rating may have different yields while obligations of the
same maturity and coupon with different ratings may have the same yield. In
addition, the market price of such obligations will normally fluctuate with
changes in interest rates, and therefore the net asset value of a Portfolio will
be affected by such changes.
RISKS OF CONCENTRATION
Municipal Obligations of a Particular State. For a discussion of the risks
associated with a Portfolio's policy of concentrating its investments in
particular State issuers of municipal obligations, see "Risks of Concentration"
in Appendix C.
Obligations of Particular Types of Issuers. Each Portfolio may invest 25% or
more of its total assets in municipal obligations of the same type. There could
be economic, business or political developments which might affect all municipal
obligations of the same type. In particular, investments in industrial revenue
bonds might involve (without limitation) the following risks.
Hospital bond ratings are often based on feasibility studies which contain
projections of expenses, revenues and occupancy levels. Among the influences
affecting a hospital's gross receipts and net income available to service its
debt are demand for hospital services, the ability of the hospital to provide
the services required, management capabilities, economic developments in the
service area, efforts by insurers and government agencies to limit rates and
expenses, confidence in the hospital, service area economic developments,
competition, availability and expense of malpractice insurance, Medicaid and
Medicare funding and possible federal legislation limiting the rates of increase
of hospital charges.
Electric utilities face problems in financing large construction programs in
an inflationary period, cost increases and delay occasioned by safety and
environmental considerations (particularly with respect to nuclear facilities),
difficulty in obtaining fuel at reasonable prices, and in achieving timely and
adequate rate relief from regulatory commissions, effects of energy conservation
and limitations on the capacity of the capital market to absorb utility debt.
Life care facilities are an alternative form of long-term housing for the
elderly which offer residents the independence of a condominium life style and,
if needed, the comprehensive care of nursing home services. Bonds to finance
these facilities have been issued by various state and local authorities. Since
the bonds are normally secured only by the revenues of each facility and not by
state or local government tax payments, they are subject to a wide variety of
risks. Primarily, the projects must maintain adequate occupancy levels to be
able to provide revenues sufficient to meet debt service payments. Moreover,
since a portion of housing, medical care and other services may be financed by
an initial deposit, it is important that the facility maintain adequate
financial reserves to secure estimated actuarial liabilities. The ability of
management to accurately forecast inflationary cost pressures is an important
factor in this process. The facilities may also be affected adversely by
regulatory cost restrictions applied to health care delivery in general,
particularly state regulations or changes in Medicare and Medicaid payments or
qualifications, or restrictions imposed by medical insurance companies. They may
also face competition from alternative health care or conventional housing
facilities in the private or public sector.
Obligations of Puerto Rico, the U.S. Virgin Islands and Guam. Subject to each
Fund's investment policies as set forth in the Prospectus, each Portfolio may
invest in the obligations of Puerto Rico, the U.S. Virgin Islands and Guam.
Accordingly, the Portfolio may be adversely affected by local political and
economic conditions and developments within Puerto Rico, the U.S. Virgin Islands
and Guam affecting the issuers of such obligations.
Puerto Rico has a diversified economy dominated by the manufacturing and
service sectors. Manufacturing is the largest sector in terms of gross domestic
product and is more diversified than during earlier phases of Puerto Rico's
industrial development. The three largest sectors of the economy (as a
percentage of employment) are services (47%), government (22%) and manufacturing
(16.4%). These three sectors represent 37.5%, 11% and 41.8%, respectively, of
the gross domestic product. The service sector is the fastest growing, followed
by manufacturing which has begun to show signs of expansion. The North American
Free Trade Agreement ("NAFTA"), which became effective January 1, 1994, could
lead to the loss of Puerto Rico's lower salaried or labor intensive jobs to
Mexico.
The Commonwealth of Puerto Rico exercises virtually the same control over
its internal affairs as do the fifty states; however, it differs from the states
in its relationship with the federal government. Most federal taxes, except
those such as social security taxes that are imposed by mutual consent, are not
levied in Puerto Rico. However, in conjunction with the 1993 U.S. budget plan,
Section 936 of the Code was amended and provided for two alternative limitations
to the Section 936 credit. The first option limited the credit against such
income to 40% of the credit allowable under then current law, with a five year
phase-in period starting at 60% of the allowable credit. The second option was a
wage and depreciation based credit. Additional amendments to Section 936 in 1996
imposed caps on these credits, beginning in 1998 for the first option and
beginning in 2002 for the second option. More importantly, the 1996 amendments
eliminated both options for taxable years beginning in 2006. The eventual
elimination of tax benefits to those U.S. companies with operations in Puerto
Rico may lead to slower growth in the future. There can be no assurance that
this will not lead to a weakened economy, a lower rating on Puerto Rico's debt
or lower prices for Puerto Rican bonds that may be held by the Portfolio in the
long-term. Short-term affects are minimal.
Puerto Rico's financial reporting was first conformed to generally accepted
accounting principles in fiscal 1990. Nonrecurring revenues have been used
frequently to balance recent years' budgets. In November, 1993 Puerto Ricans
voted on whether they wished to retain their Commonwealth status, become a state
or establish an independent nation. Puerto Ricans voted to retain Commonwealth
status, leaving intact the current relationship with the federal government.
There can be no assurance that the statehood issue will not be brought to a vote
in the future. A successful statehood vote in Puerto Rico would then require the
U.S. Congress to ratify the election.
The United States Virgin Islands (USVI) are located approximately 1,100
miles east-southeast of Miami and are made up of St. Croix, St. Thomas and St.
John. The economy is heavily reliant on the tourism industry, with roughly 43%
of non-agricultural employment in tourist-related trade and services. In 1996,
unemployment stood at 13.8%. The tourism industry is economically sensitive
and would likely be adversely affected by a recession in either the United
States or Europe.
An important component of the USVI revenue base is the federal excise tax on
rum exports. Tax revenues rebated by the federal government to the USVI provide
the primary security of many outstanding USVI bonds. Since more than 90% of the
rum distilled in the USVI is distilled at one plant, any interruption in its
operations (as occurred after Hurricane Hugo in 1989) would adversely affect
these revenues. Consequently, there can be no assurance that rum exports to the
United States and the rebate of tax revenues to the USVI will continue at their
present levels. The preferential tariff treatment the USVI rum industry
currently enjoys could be reduced under NAFTA. Increased competition from
Mexican rum producers could reduce USVI rum imported to the U.S., decreasing
excise tax revenues generated. The USVI is periodically hit by hurricanes.
Several hurricanes have caused extensive damage, which has had a negative impact
on revenue collections. There is currently no rated, unenhanced Virgin Islands
debt outstanding (although there is unrated debt outstanding).
Guam, an unincorporated U.S. territory, is located 1,500 miles southeast of
Tokyo. The U.S. military is a key component of Guam's economy. The federal
government directly comprises more than 10% of the employment base, with a
substantial component of the service sector to support these personnel. The
Naval Air Station, one of several U.S. military facilities on the island, has
been slated for closure by the Defense Base Closure and Realignment Committee;
however, the administration plans to use these facilities to expand the island's
commercial airport. Guam is also heavily reliant on tourists, particularly the
Japanese. For 1995, the government realized a General Fund operating surplus.
The administration has taken steps to improve its financial position; however,
there are no guarantees that an improvement will be realized. Guam's general
obligation debt is rated BBB by S&P with a negative outlook.
MUNICIPAL LEASES
Each Portfolio may invest in municipal leases and participations therein,
which arrangements frequently involve special risks. Municipal leases are
obligations in the form of a lease or installment purchase arrangement which is
issued by state or local governments to acquire equipment and facilities.
Interest income from such obligations is generally exempt from local and state
taxes in the state of issuance. "Participations" in such leases are undivided
interests in a portion of the total obligation. Participations entitle their
holders to receive a pro rata share of all payments under the lease. A trustee
is usually responsible for administering the terms of the participation and
enforcing the participants' rights in the underlying lease. Leases and
installment purchase or conditional sale contracts (which normally provide for
title to the leased assets to pass eventually to the governmental issuer) have
evolved as a means for governmental issuers to acquire property and equipment
without meeting the constitutional and statutory requirements for the issuance
of debt. State debt-issuance limitations are deemed to be inapplicable to these
arrangements because of the inclusion in many leases or contracts of
"non-appropriation" clauses that provide that the governmental issuer has no
obligation to make future payments under the lease or contract unless money is
appropriated for such purpose by the appropriate legislative body on a yearly or
other periodic basis. Such arrangements are, therefore, subject to the risk that
the governmental issuer will not appropriate funds for lease payments.
Certain municipal lease obligations owned by each Portfolio may be deemed
illiquid for the purpose of the Portfolio's 15% limitation on investments in
illiquid securities, unless determined by the Investment Adviser, pursuant to
guidelines adopted by the Trustees of a Portfolio, to be liquid securities for
the purpose of such limitation. In determining the liquidity of municipal lease
obligations, the Investment Adviser will consider a variety of factors
including: (1) the willingness of dealers to bid for the security; (2) the
number of dealers willing to purchase or sell the obligation and the number of
other potential buyers; (3) the frequency of trades and quotes for the
obligation; and (4) the nature of the marketplace trades. In addition, the
Investment Adviser will consider factors unique to particular lease obligations
affecting the marketability thereof. These include the general creditworthiness
of the municipality, the importance of the property covered by the lease to the
municipality, and the likelihood that the marketability of the obligation will
be maintained throughout the time the obligation is held by a Portfolio. In the
event a Portfolio acquires an unrated municipal lease obligation, the Investment
Adviser will be responsible for determining the credit quality of such
obligation on an on-going basis, including an assessment of the likelihood that
the lease may or may not be cancelled.
ZERO COUPON BONDS
Zero coupon bonds are debt obligations which do not require the periodic
payment of interest and are issued at a significant discount from face value.
The discount approximates the total amount of interest the bonds will accrue and
compound over the period until maturity at a rate of interest reflecting the
market rate of the security at the time of issuance. Zero coupon bonds benefit
the issuer by mitigating its need for cash to meet debt service, but also
require a higher rate of return to attract investors who are willing to defer
receipt of such cash.
INSURANCE
Insured municipal obligations held by a Portfolio (if any) will be insured
as to their scheduled payment of principal and interest under either (i) an
insurance policy obtained by the issuer or underwriter of the obligation at the
time of its original issuance or (ii) an insurance policy obtained by a
Portfolio or a third party subsequent to the obligation's original issuance
(which may not be reflected in the obligation's market value). In either event,
such insurance may provide that in the event of non-payment of interest or
principal when due with respect to an insured obligation, the insurer is not
required to make such payment until a specified time has lapsed (which may be 30
days or more after notice).
CREDIT QUALITY
Each Portfolio is dependent on the Investment Adviser's judgment, analysis
and experience in evaluating the quality of municipal obligations. In evaluating
the credit quality of a particular issue, whether rated or unrated, the
Investment Adviser will normally take into consideration, among other things,
the financial resources of the issuer (or, as appropriate, of the underlying
source of funds for debt service), its sensitivity to economic conditions and
trends, any operating history of and the community support for the facility
financed by the issue, the ability of the issuer's management and regulatory
matters. The Investment Adviser will attempt to reduce the risks of investing in
the lowest investment grade, below investment grade and comparable unrated
obligations through active portfolio management, credit analysis and attention
to current developments and trends in the economy and the financial markets.
See "Portfolio of Investments" in the "Financial Statements" incorporated by
reference into this SAI with respect to any defaulted obligations held by a
Portfolio.
SHORT-TERM TRADING
Each Portfolio may sell (and later purchase) securities in anticipation of a
market decline (a rise in interest rates) or purchase (and later sell)
securities in anticipation of a market rise (a decline in interest rates). In
addition, a security may be sold and another purchased at approximately the same
time to take advantage of what a Portfolio believes to be a temporary disparity
in the normal yield relationship between the two securities. Yield disparities
may occur for reasons not directly related to the investment quality of
particular issues or the general movement of interest rates, such as changes in
the overall demand for or supply of various types of municipal obligations or
changes in the investment objectives of investors. Such trading may be expected
to increase the portfolio turnover rate, which may increase capital gains and
the expenses incurred in connection with such trading. A Portfolio cannot
accurately predict its portfolio turnover rate, but it is anticipated that the
annual portfolio turnover rate will generally not exceed 100% (excluding
turnover of securities having a maturity of one year or less). A 100% annual
turnover rate would occur, for example, if all the securities held by a
Portfolio were replaced once in a period of one year. A high turnover rate (100%
or more) necessarily involves greater expenses to the Portfolio. Each Portfolio
engages in portfolio trading (including short-term trading) if it believes that
a transaction including all costs will help in achieving its investment
objective. For the portfolio turnover rate of each Portfolio in prior fiscal
years, see "Supplementary Data" in the "Financial Statements".
WHEN-ISSUED SECURITIES
New issues of municipal obligations are sometimes offered on a "when-
issued" basis, that is, delivery and payment for the securities normally take
place within a specified number of days after the date of a Portfolio's
commitment and are subject to certain conditions such as the issuance of
satisfactory legal opinions. Each Portfolio may also purchase securities on a
when-issued basis pursuant to refunding contracts in connection with the
refinancing of an issuer's outstanding indebtedness. Refunding contracts
generally require the issuer to sell and a Portfolio to buy such securities on a
settlement date that could be several months or several years in the future.
Each Portfolio will make commitments to purchase when-issued securities only
with the intention of actually acquiring the securities, but may sell such
securities before the settlement date if it is deemed advisable as a matter of
investment strategy. The payment obligation and the interest rate that will be
received on the securities are fixed at the time a Portfolio enters into the
purchase commitment. When a Portfolio commits to purchase a security on a
when-issued basis it records the transaction and reflects the value of the
security in determining its net asset value. Securities purchased on a
when-issued basis and the securities held by a Portfolio are subject to changes
in value based upon the perception of the creditworthiness of the issuer and
changes in the level of interest rates (i.e., appreciation when interest rates
decline and depreciation when interest rates rise). Therefore, to the extent
that a Portfolio remains substantially fully invested at the same time that it
has purchased securities on a when-issued basis, there will be greater
fluctuations in the Portfolio's net asset value than if it solely set aside cash
to pay for when-issued securities.
VARIABLE RATE OBLIGATIONS
Each Portfolio may purchase variable rate obligations. Variable rate
instruments provide for adjustments in the interest rate at specified intervals
(weekly, monthly, semi-annually, etc.). The revised rates are usually set at the
issuer's discretion, in which case the investor normally enjoys the right to
"put" the security back to the issuer or his agent. Rate revisions may
alternatively be determined by formula or in some other contractual fashion.
Variable rate obligations normally provide that the holder can demand payment of
the obligation on short notice at par with accrued interest and are frequently
secured by letters of credit or other credit support arrangements provided by
banks. To the extent that such letters of credit or other arrangements
constitute an unconditional guarantee of the issuer's obligations, a bank may be
treated as the issuer of a security for the purpose of complying with the
diversification requirements set forth in Section 5(b) of the 1940 Act and Rule
5b-2 thereunder. Each Portfolio would anticipate using these obligations as cash
equivalents pending longer term investment of its funds.
REDEMPTION, DEMAND AND PUT FEATURES
Most municipal bonds have a fixed final maturity date. However, it is
commonplace for the issuer to reserve the right to call the bond earlier. Also,
some bonds may have "put" or "demand" features that allow early redemption by
the bondholder. Longer term fixed-rate bonds may give the holder a right to
request redemption at certain times (often annually after the lapse of an
intermediate term). These bonds are more defensive than conventional long term
bonds (protecting to some degree against a rise in interest rates) while
providing greater opportunity than comparable intermediate term bonds, because
the Portfolio may retain the bond if interest rates decline. By acquiring these
kinds of obligations a Portfolio obtains the contractual right to require the
issuer of the security or some other person (other than a broker or dealer) to
purchase the security at an agreed upon price, which right is contained in the
obligation itself rather than in a separate agreement with the seller or some
other person. Because this right is assignable with the security, which is
readily marketable and valued in the customary manner, the Portfolio will not
assign any separate value to such right.
LIQUIDITY AND PROTECTIVE PUT OPTIONS
Each Portfolio may also enter into a separate agreement with the seller of
the security or some other person granting the Portfolio the right to put the
security to the seller thereof or the other person at an agreed upon price. Each
Portfolio intends to limit this type of transaction to institutions (such as
banks or securities dealers) which the Investment Adviser believes present
minimal credit risks and would engage in this type of transaction to facilitate
portfolio liquidity or (if the seller so agrees) to hedge against rising
interest rates. There is no assurance that this kind of put option will be
available to a Portfolio or that selling institutions will be willing to permit
a Portfolio to exercise a put to hedge against rising interest rates. A separate
put option may not be marketable or otherwise assignable, and sale of the
security to a third party or lapse of time with the put unexercised may
terminate the right to exercise the put. A Portfolio does not expect to assign
any value to any separate put option which may be acquired to facilitate
portfolio liquidity, inasmuch as the value (if any) of the put will be reflected
in the value assigned to the associated security; any put acquired for hedging
purposes would be valued in good faith under methods or procedures established
by the Trustees of the Portfolio after consideration of all relevant factors,
including its expiration date, the price volatility of the associated security,
the difference between the market price of the associated security and the
exercise price of the put, the creditworthiness of the issuer of the put and the
market prices of comparable put options. Interest income generated by certain
bonds having put or demand features may not qualify as tax-exempt interest.
SECURITIES LENDING
Each Portfolio may seek to increase its income by lending portfolio
securities to broker-dealers or other institutional borrowers. A Portfolio would
have the right to call a loan and obtain the securities loaned at any time on up
to five business days' notice. During the existence of a loan, the Portfolio
will continue to receive the equivalent of the interest paid by the issuer on
the securities loaned and will also receive a fee, or all or a portion of the
interest on investment of the collateral, if any. However, the Portfolio may pay
lending fees to such borrowers. A Portfolio would not have the right to vote any
securities having voting rights during the existence of the loan, but would call
the loan in anticipation of an important vote to be taken among holders of the
securities or the giving or withholding of their consent on a material matter
affecting the investment. As with other extensions of credit there are risks of
delay in recovery or even loss of rights in the securities loaned if the
borrower of the securities fails financially. However, the loans will be made
only to organizations deemed by the Portfolio's management to be of good
standing and when, in the judgment of the Portfolio's management, the
consideration which can be earned from securities loans of this type, net of
administrative expenses and any finders' fees, justifies the attendant risk.
Distributions by a Fund of any income realized by a Portfolio from securities
loans will be taxable. If the management of the Portfolio decides to make
securities loans, it is intended that the value of the securities loaned would
not exceed 30% of a Portfolio's total assets. Each Portfolio has no present
intention of engaging in securities lending.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
A change in the level of interest rates may affect the value of the
securities held by a Portfolio (or of securities that a Portfolio expects to
purchase). To hedge against changes in rates, a Portfolio may enter into (i)
futures contracts for the purchase or sale of debt securities and (ii) futures
contracts on securities indices. All futures contracts entered into by a
Portfolio are traded on exchanges or boards of trade that are licensed and
regulated by the Commodity Futures Trading Commission ("CFTC") and must be
executed through a futures commission merchant or brokerage firm which is a
member of the relevant exchange. The Portfolio may purchase and write call and
put options on futures contracts which are traded on a United States or foreign
exchange or board of trade. The Portfolio will be required, in connection with
transactions in futures contracts and the writing of options on futures, to make
margin deposits, which will be held by the Portfolio's custodian for the benefit
of the futures commission merchant through whom the Portfolio engages in such
futures and options transactions.
Some futures contracts and options thereon may become illiquid under adverse
market conditions. In addition, during periods of market volatility, a commodity
exchange may suspend or limit transactions in an exchange-traded instrument,
which may make the instrument temporarily illiquid and difficult to price.
Commodity exchanges may also establish daily limits on the amount that the price
of a futures contract or futures option can vary from the previous day's
settlement price. Once the daily limit is reached, no trades may be made that
day at a price beyond the limit. This may prevent the Portfolio from closing out
positions and limiting its losses.
Each Portfolio will engage in futures and related options transactions only
for bona fide hedging purposes as defined in or permitted by CFTC regulations.
The Portfolio will determine that the price fluctuations in the futures
contracts and options on futures are substantially related to price fluctuations
in securities held by the Portfolio or which it expects to purchase. The
Portfolio's futures transactions will be entered into for traditional hedging
purposes -- that is, futures contracts will be sold to protect against a decline
in the price of securities that the Portfolio owns, or futures contracts will be
purchased to protect the Portfolio against an increase in the price of
securities it intends to purchase. Each Portfolio will engage in transactions in
futures and related options contracts only to the extent such transactions are
consistent with the requirements of the Code for maintaining qualification of a
Fund as a regulated investment company for federal income tax purposes (see
"Taxes").
ASSET COVERAGE REQUIREMENTS
Transactions involving when-issued securities 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
1940 Act;
(2) Purchase securities on margin (but the Fund may obtain such short-term
credits as may be necessary for the clearance of purchases and sales of
securities). The deposit or payment by the Fund of initial or maintenance margin
in connection with futures contracts or related options transactions is not
considered the purchase of a security on margin;
(3) Underwrite or participate in the marketing of securities of others,
except insofar as it may technically be deemed to be an underwriter in selling a
portfolio security under circumstances which may require the registration of the
same under the Securities Act of 1933;
(4) Purchase or sell real estate (including limited partnership interests in
real estate but excluding readily marketable interests in real estate investment
trusts or readily marketable securities of companies which invest or deal in
real estate or securities which are secured by real estate);
(5) Purchase or sell physical commodities or contracts for the purchase or
sale of physical commodities; or
(6) Make loans to any person except by (a) the acquisition of debt
instruments and making portfolio investments, (b) entering into repurchase
agreements and (c) lending portfolio securities.
Notwithstanding the investment policies and restrictions of the Fund, the
Fund may invest all of its investable assets in an open-end management
investment company with substantially the same investment objective, policies
and restrictions as the Fund.
Each Portfolio has adopted substantially the same fundamental investment
restrictions as the foregoing investment restrictions adopted by each Fund; such
restrictions cannot be changed without the approval of a "majority of the
outstanding voting securities" of a Portfolio.
The Funds and the Portfolios have adopted the following investment policies
which may be changed by the Trust with respect to a Fund without approval by
that Fund's shareholders or with respect to the Portfolio without approval of a
Fund or its other investors. As a matter of nonfundamental policy, the Fund and
the Portfolio will not: (a) engage in options, futures or forward transactions
if more than 5% of its net assets, as measured by the aggregate of the premiums
paid by the Fund or the Portfolio, would be so invested; (b) make short sales of
securities or maintain a short position, unless at all times when a short
position is open it owns an equal amount of such securities or securities
convertible into or exchangeable, without payment of any further consideration,
for securities of the same issue as, and equal in amount to, the securities sold
short and unless not more than 25% of the Fund's net assets (taken at current
value) is held as collateral for such sales at any one time. (The Fund and the
Portfolio will make such sales only for the purpose of deferring realization of
gain or loss for federal income tax purposes); (c) invest more than 15% of its
net assets in investments which are not readily marketable, including restricted
securities and repurchase agreements maturing in more than seven days.
Restricted securities for the purposes of this limitation do not include
securities eligible for resale pursuant to Rule 144A under the Securities Act of
1933 and commercial paper issued pursuant to Section 4(2) of said Act that the
Board of Trustees of the Trust or the Portfolio, or its delegate, determines to
be liquid; or (d) purchase or retain in its portfolio any securities issued by
an issuer any of whose officers, directors, trustees or security holders is an
officer or Trustee of the Trust or the Portfolio or is a member, officer,
director or trustee of any investment adviser of the Trust or the Portfolio, if
after the purchase of the securities of such issuer by the Fund or the Portfolio
one or more of such persons owns beneficially more than 1/2 of 1% of the shares
or securities or both (all taken at market value) of such issuer and such
persons owning more than 1/2 of 1% of such shares or securities together own
beneficially more than 5% of such shares or securities or both (all taken at
market value).
For purposes of a Portfolio's investment restrictions, the determination of
the "issuer" of a municipal obligation which is not a general obligation bond
will be made by the Portfolio's Investment Adviser on the basis of the
characteristics of the obligation and other relevant factors, the most
significant of which is the source of funds committed to meeting interest and
principal payments of such obligations.
Whenever an investment policy or investment restriction set forth in the
Prospectus or this SAI states a maximum percentage of assets that may be
invested in any security or other asset, or describes a policy regarding quality
standards, such percentage limitation or standard shall be determined
immediately after and as a result of the Fund's or the Portfolio's acquisition
of such security or asset. Accordingly, any later increase or decrease resulting
from a change in values, assets or other circumstances, or any subsequent rating
change below investment grade made by a rating service, will not compel the Fund
or the Portfolio, as the case may be, to dispose of such security or other
asset. Where applicable and notwithstanding the foregoing, under normal market
conditions the Fund and the Portfolio must take actions necessary to comply with
the policy of investing at least 65% of total assets in a particular State.
Moreover, the Fund and Portfolio must always be in compliance with the borrowing
policies set forth above.
TRUSTEES AND OFFICERS
The Trustees and officers of the Trust and the Portfolios are listed below.
Except as indicated, each individual has held the office shown or other offices
in the same company for the last five years. Unless otherwise noted, the
business address of each Trustee and officer is 24 Federal Street, Boston,
Massachusetts 02110, which is also the address of the Investment Adviser, BMR, a
wholly-owned subsidiary of Eaton Vance Management ("Eaton Vance"); of Eaton
Vance's parent, Eaton Vance Corp. ("EVC"); and of BMR's and Eaton Vance's
trustee, Eaton Vance, Inc. ("EV"). Eaton Vance and EV are both wholly-owned
subsidiaries of EVC. Those Trustees who are "interested persons" of the Trust or
the Portfolio, as defined in the 1940 Act by virtue of their affiliation with
BMR, Eaton Vance, EVC or EV, are indicated by an asterisk(*).
TRUSTEES OF THE TRUST AND THE PORTFOLIOS
DONALD R. DWIGHT (66), Trustee
President of Dwight Partners, Inc. (a corporate relations and communications
company); Chairman of the Board of Newspapers of New England, Inc. Director
or Trustee of various investment companies managed by Eaton Vance or BMR.
Address: Clover Mill Lane, Lyme, New Hampshire 03768
JAMES B. HAWKES (55), Vice President and Trustee*
President and Chief Executive Officer of BMR, Eaton Vance, EVC and EV, and a
Director of EVC and EV. Director, Trustee and officer of various investment
companies managed by Eaton Vance or BMR.
SAMUEL L. HAYES, III (62), Trustee
Jacob H. Schiff Professor of Investment Banking, Harvard University Graduate
School of Business Administration. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: Harvard University Graduate School of Business Administration,
Soldiers Field Road, Boston, Massachusetts 02163
NORTON H. REAMER (61), Trustee
President and Director, United Asset Management Corporation (a holding company
owning institutional investment management firms); Chairman, President and
Director, UAM Funds (mutual funds). Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: One International Place, Boston, Massachusetts 02110
JOHN L. THORNDIKE (70), Trustee
Formerly Director of Fiduciary Company Incorporated. Director or Trustee of
various investment companies managed by Eaton Vance or BMR.
Address: 175 Federal Street, Boston, Massachusetts 02110
JACK L. TREYNOR (67), Trustee
Investment Adviser and Consultant. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: 504 Via Almar, Palos Verdes Estates, California 90274
OFFICERS OF THE TRUST AND THE PORTFOLIOS
THOMAS J. FETTER (53), President
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR. Mr. Fetter was elected President of
the Trust and the Portfolio on December 13, 1993.
ROBERT B. MACINTOSH (40), Vice President
Vice President of BMR 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.
ALAN R. DYNNER (56), Secretary
Vice President and Chief Legal Officer of BMR, Eaton Vance, EVC and EV since
November 1, 1996. Previously, Mr. Dynner was a Partner of the law firm of
Kirkpartrick & Lockhart LLP, New York and Washington, D.C., and was Executive
Vice President of Neuberger & Berman Management, Inc., a mutual fund
management company. Officer of various investment companies managed by Eaton
Vance or BMR. Mr. Dynner was elected Secretary on June 23, 1997.
JANET E. SANDERS (61), Assistant Secretary
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
A. JOHN MURPHY (34), Assistant Secretary
Assistant Vice President of BMR, Eaton Vance and EV since March 1, 1994;
employee of Eaton Vance since March 1993. State Regulations Supervisor, The
Boston Company (1991-1993). Officer of various investment companies managed by
Eaton Vance or BMR. Mr. Murphy was elected Assistant Secretary on March 27,
1995.
ERIC G. WOODBURY (40), Assistant Secretary
Vice President of BMR, Eaton Vance and EV since February 1993; formerly,
associate attorney at Dechert, Price & Rhoads. Officer of various investment
companies managed by Eaton Vance or BMR. Mr. Woodbury 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 Alabama 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. 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, 1995. 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,
Ms. Clemson, and Messrs. Ahern, Browse and Metzold 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 228 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.
INVESTMENT ADVISER AND ADMINISTRATOR
Each Portfolio engages BMR as investment adviser pursuant to an Investment
Advisory Agreement, which is substantially the same for each Portfolio. BMR or
Eaton Vance acts as investment adviser to investment companies and various
individual and institutional clients with combined assets under management of
approximately $20 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
approximately $21 billion in assets. Eaton Vance mutual funds are distributed by
the Principal Underwriter both within the United States and offshore.
The Principal Underwriter believes that an investment professional can
provide valuable services to you to help you reach your investment goals.
Meeting investment goals requires time, objectivity and investment savvy. Before
making an investment recommendation, a representative can help you carefully
consider your short- and long-term financial goals, your tolerance for
investment risk, your investment time frame, and other investments you may
already own. Your professional investment representatives are knowledgeable
about financial markets, as well as the wide range of investment opportunities
available. A representative can help you decide when to buy, sell or persevere
with your investments. A professional investment representative can provide you
with tailored financial advice.
Eaton Vance offers single-state tax-free portfolios in more states than any
other sponsor of mutual funds. There are 32 long-term state portfolios, 5
national portfolios and 9 limited maturity portfolios, which serve as investment
vehicles for over 100 mutual funds with varying pricing options. A staff of 29
(including 7 portfolio managers and 9 credit specialists) is responsible for the
day-to-day management of over 3,500 issues in 46 mutual fund portfolios. Assets
managed by the municipal investment group are currently over $7.6 billion. The
investment philosophy of the municipal investment group is to: seek value by
avoiding unnecessary credit risk; build portfolios one security at a time; and
take a long-term approach to managing market risk. Over the long-term, the group
seeks to maximize tax-free income by keeping portfolios fully invested (rather
than trying to "time the market" for short-term results) and reduce potential
capital losses due to poor credit quality. Diligent and continuing research and
analysis are a critical component of the municipal investment group's investment
philosophy and long-term strategy.
The following persons manage one or more of the Eaton Vance municipal
portfolios. For the identity of a Portfolio's portfolio manager, see the
Prospectus.
William H. Ahern, Jr. is a Vice President of Eaton Vance and BMR. Mr.
Ahern graduated from Boston College in 1981 with a B.A. in Economics, and
received his M.B.A. degree in Finance from Babson College in 1987. Mr. Ahern
is a member of the Boston Security Analysts Society.
Nicole Anderes is a Vice President of Eaton Vance and BMR. Ms. Anderes
graduated from Brown University with a B.A. in Women's Studies/Economics. She
has been an active member of MAGNY/National Federation of Municipal Analysts,
the Public Securities Association and the Municipal Forum, and served as the
General Secretary of MAGNY from 1992 to 1993.
Timothy T. Browse is a Vice President of Eaton Vance and BMR. Mr. Browse
graduated from St. Lawrence University in 1981 and received his M.B.A. degree
from Boston University in 1990.
Cynthia J. Clemson is a Vice President of Eaton Vance and BMR. Ms. Clemson
graduated from Mount Holyoke College with a B.A. in 1985 and received her
M.B.A., cum laude, from Boston University in 1990. She is a member of the
Boston Municipal Analysts Forum, the Boston Securities Analyst Society and the
Financial Analysts Federation.
Thomas J. Fetter is a Vice President of Eaton Vance and BMR, and Director
of Municipal Investments. Mr. Fetter graduated with a degree in Business
Administration from Kent State University. He is a Chartered Financial Analyst
and member of the Boston Security Analysts Society. He is also a member of the
Boston Municipal Analysts Forum.
Robert B. MacIntosh is a Vice President of Eaton Vance and BMR, and the
portfolio manager of single-state, tax-exempt funds in six states: Hawaii,
Louisiana, Massachusetts, Minnesota, New Jersey and North Carolina. He also
serves as economic spokesman for the Eaton Vance organization.
Thomas M. Metzold is a Vice President of Eaton Vance and BMR. He is a
Chartered Financial Analyst and a member of the Boston Security Analysts
Society, the Association for Investment Management & Research, the Boston
Municipal Analysts Forum, and the National Federation of Municipal Analysts.
BMR manages the investments and affairs of each Portfolio subject to the
supervision of the Portfolio's Board of Trustees. BMR furnishes to the
Portfolios investment research, advice and supervision, furnishes an investment
program and determines what securities will be purchased, held or sold by the
Portfolio and what portion, if any, of the Portfolio's assets will be held
uninvested. Each Investment Advisory Agreement requires BMR to pay the salaries
and fees of all officers and Trustees of the Portfolio who are members of the
BMR organization and all personnel of BMR performing services relating to
research and investment activities. A Portfolio is responsible for all expenses
not expressly stated to be payable by BMR under its Investment Advisory
Agreement, including, without implied limitation, (i) expenses of maintaining
the Portfolio and continuing its existence, (ii) registration of the Portfolio
under the 1940 Act, (iii) commissions, fees and other expenses connected with
the acquisition, holding and disposition of securities and other investments,
(iv) auditing, accounting and legal expenses, (v) taxes and interest, (vi)
governmental fees, (vii) expenses of issue, sale and redemption of interests in
the Portfolio, (viii) expenses of registering and qualifying the Portfolio and
interests in the Portfolio under federal and state securities laws and of
preparing and printing registration statements or other offering statements or
memoranda for such purposes and for distributing the same to investors, and fees
and expenses of registering and maintaining registrations of the Portfolio and
of the Portfolio's placement agent as broker-dealer or agent under state
securities laws, (ix) expenses of reports and notices to investors and of
meetings of investors and proxy solicitations therefor, (x) expenses of reports
to governmental officers and commissions, (xi) insurance expenses, (xii)
association membership dues, (xiii) fees, expenses and disbursements of
custodians and subcustodians for all services to the Portfolio (including
without limitation safekeeping of funds, securities and other investments,
keeping of books, accounts and records, and determination of net asset values,
book capital account balances and tax capital account balances), (xiv) fees,
expenses and disbursements of transfer agents, dividend disbursing agents,
investor servicing agents and registrars for all services to the Portfolio, (xv)
expenses for servicing the accounts of investors, (xvi) any direct charges to
investors approved by the Trustees of the Portfolio, (xvii) compensation and
expenses of Trustees of the Portfolio who are not members of BMR's organization,
and (xviii) such non-recurring items as may arise, including expenses incurred
in connection with litigation, proceedings and claims and any legal obligation
of the Portfolio to indemnify its Trustees, officers and investors with respect
thereto, to the extent not covered by insurance.
For a description of the compensation that each Portfolio pays BMR, see the
Prospectus. The following table sets forth the net assets of each Portfolio and
the advisory fees earned during the fiscal years ended 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 81,468 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.
Each Investment Advisory Agreement with BMR continues in effect from year to
year so long as such continuance is approved at least annually (i) by the vote
of a majority of the noninterested Trustees of the Portfolio cast in person at a
meeting specifically called for the purpose of voting on such approval and (ii)
by the Board of Trustees of the Portfolio or by vote of a majority of the
outstanding voting securities of the Portfolio. Each Agreement may be terminated
at any time without penalty on sixty (60) days' written notice by the Board of
Trustees of either party, or by vote of the majority of the outstanding voting
securities of the Portfolio, and the Agreement will terminate automatically in
the event of its assignment. Each Agreement provides that BMR may render
services to others. Each Agreement also provides that BMR shall not be liable
for any loss incurred in connection with the performance of its duties, or
action taken or omitted under that Agreement, in the absence of willful
misfeasance, bad faith, gross negligence in the performance of its duties or by
reason of its reckless disregard of its obligations and duties thereunder, or
for any losses sustained in the acquisition, holding or disposition of any
security or other investment.
As indicated in the Prospectus, Eaton Vance serves as Administrator of each
Fund, but currently receives no compensation for providing administrative
services to the Fund. Under its Administrative Services Agreement with the
Trust, Eaton Vance has been engaged to administer the Funds' affairs, subject to
the supervision of the Trustees of the Trust, and shall furnish for the use of
the Funds office space and all necessary office facilities, equipment and
personnel for administering the affairs of the Funds.
Each Fund pays all of its own expenses including, without limitation, (i)
expenses of maintaining the Fund and continuing its existence, (ii) its pro rata
share of the Trust's registration under the 1940 Act, (iii) commissions, fees
and other expenses connected with the purchase or sale of securities and other
investments, (iv) auditing, accounting and legal expenses, (v) taxes and
interest, (vi) governmental fees, (vii) expenses of issue, sale, repurchase and
redemption of shares, (viii) expenses of registering and qualifying the Fund and
its shares under federal and state securities laws and of preparing and printing
prospectuses for such purposes and for distributing the same to shareholders and
investors, and fees and expenses of registering and maintaining registrations of
the Fund and of the Fund's principal underwriter, if any, as broker-dealer or
agent under state securities laws, (ix) expenses of reports and notices to
shareholders and of meetings of shareholders and proxy solicitations therefor,
(x) expenses of reports to governmental officers and commissions, (xi) insurance
expenses, (xii) association membership dues, (xiii) fees, expenses and
disbursements of custodians and subcustodians for all services to the Fund
(including without limitation safekeeping of funds, securities and other
investments, keeping of books and accounts and determination of net asset
values), (xiv) fees, expenses and disbursements of transfer agents, dividend
disbursing agents, shareholder servicing agents and registrars for all services
to the Fund, (xv) expenses for servicing shareholder accounts, (xvi) any direct
charges to shareholders approved by the Trustees of the Trust, (xvii)
compensation and expenses of Trustees of the Trust who are not members of the
Eaton Vance organization, and (xviii) such non-recurring items as may arise,
including expenses incurred in connection with litigation, proceedings and
claims and any legal obligation of the Trust to indemnify its Trustees and
officers with respect thereto, to the extent not covered by insurance.
BMR is a wholly-owned subsidiary of Eaton Vance. Eaton Vance and EV are
both wholly-owned subsidiaries of EVC. BMR and Eaton Vance are both
Massachusetts business trusts, and EV is the trustee of BMR and Eaton Vance.
The Directors of EV are Landon T. Clay, M. Dozier Gardner, James B. Hawkes and
Benjamin A. Rowland, Jr. The Directors of EVC consist of the same persons and
John G. L. Cabot and Ralph Z. Sorenson. Mr. Clay is chairman, Mr. Gardner is
vice chairman and Mr. Hawkes is president and chief executive officer of EVC,
BMR, Eaton Vance and EV. All of the issued and outstanding shares of Eaton
Vance and EV are owned by EVC. All of the issued and outstanding shares of BMR
are owned by Eaton Vance. All shares of the outstanding Voting Common Stock of
EVC are deposited in a Voting Trust which expires on December 31, 1997, the
Voting Trustees of which are Messrs. Clay, Gardner, Hawkes and Rowland and
Thomas E. Faust, Jr. The Voting Trustees have unrestricted voting rights for
the election of Directors of EVC. All of the outstanding voting trust receipts
issued under said Voting Trust are owned by certain of the officers of BMR and
Eaton Vance who are also officers or officers and Directors of EVC and EV. As
of July 31, 1997, Messrs. Clay, Gardner and Hawkes each owned 24% of such
voting trust receipts, and Messrs. Rowland and Faust owned 15% and 13%,
respectively, of such voting trust receipts. Messrs. Hawkes and Dynner are
officers or Trustees of the Trust and the Portfolios and are members of the
EVC, BMR, Eaton Vance and EV organizations. Messrs. Ahern, Browse, Fetter,
MacIntosh, Metzold, Murphy, O'Connor and Woodbury and Ms. Anderes, Ms. Clemson
and Ms. Sanders, are officers of the Trust and/or the Portfolios and are also
members of the BMR, Eaton Vance and EV organizations.
Eaton Vance owns all the stock of Northeast Properties, Inc., which is
engaged in real estate investment. EVC owns all the stock of Fulcrum Management,
Inc., and MinVen Inc., which are engaged in precious metal mining venture
investment and management. EVC also owns 22% of the Class A shares of Lloyd
George Management (B.V.I.) Limited, a registered investment adviser. EVC, BMR,
Eaton Vance and EV may also enter into other businesses.
EVC and its affiliates and their officers and employees from time to time
have transactions with various banks, including the custodian of the Fund and
the Portfolio, IBT. It is Eaton Vance's opinion that the terms and conditions of
such transactions were not and will not be influenced by existing or potential
custodial or other relationships between the Fund or the Portfolio and such
banks.
CUSTODIAN
IBT acts as custodian for the Trust and the Portfolios. IBT has the custody
of all cash and securities representing a Fund's interest in a Portfolio, has
custody of each Portfolio's assets, maintains the general ledger of each
Portfolio and each Fund and computes the daily net asset value of interests in
each Portfolio and the net asset value of shares of the Fund. In such capacity
it attends to details in connection with the sale, exchange, substitution,
transfer or other dealings with the Portfolios' investments, receives and
disburses all funds and performs various other ministerial duties upon receipt
of proper instructions from the Trust and the Portfolios. IBT charges fees which
are competitive within the industry. A portion of the fee relates to custody,
bookkeeping and valuation services and is based upon a percentage of Fund and
Portfolio net assets and a portion of the fee relates to activity charges,
primarily the number of portfolio transactions. These fees are then reduced by a
credit for cash balances of the particular investment company at the custodian
equal to 75% of the 91-day, U.S. Treasury Bill auction rate applied to the
particular investment company's average daily collected balances for the week.
Landon T. Clay, a Director of EVC and an officer, Trustee or Director of other
entities in the Eaton Vance organization, owns approximately 13% of the voting
stock of Investors Financial Services Corp., the holding company parent of IBT.
Management believes that such ownership does not create an affiliated person
relationship between the Trust or a Portfolio and IBT under the 1940 Act.
IBT also provides services in connection with the preparation of shareholder
reports and the electronic filing of such reports with the Commission, for which
it receives a separate fee.
SERVICES FOR ACCUMULATION -- CLASS A SHARES
The following services are voluntary, involve no extra charge, other than
the sales charge included in the offering price, and may be changed or
discontinued without penalty at any time.
Intended Quantity Investment -- Statement of Intention. If it is anticipated
that $25,000 or more of Class A shares and shares of other funds exchangeable
for Class A shares and of the other continuously offered open-end funds listed
under "The Eaton Vance Exchange Privilege" in the Prospectus will be purchased
within a 13-month period, a Statement of Intention should be signed so that
shares may be obtained at the same reduced sales charge as though the total
quantity were invested in one lump sum. Shares held under Right of Accumulation
(see below) as of the date of the Statement will be included toward the
completion of the Statement. The Statement authorizes the Transfer Agent to hold
in escrow sufficient shares (5% of the dollar amount specified in the Statement)
which can be redeemed to make up any difference in sales charge on the amount
intended to be invested and the amount actually invested. Execution of a
Statement does not obligate the shareholder to purchase or the Fund to sell the
full amount indicated in the Statement, and should the amount actually purchased
during the 13-month period be more or less than that indicated on the Statement,
price adjustments will be made. For sales charges and other information on
quantity purchases, see "How to Buy Shares" in the Prospectus. Any investor
considering signing a Statement of Intention should read it carefully.
Right of Accumulation -- Cumulative Quantity Discount. The applicable sales
charge level for the purchase of Class A Fund shares is calculated by taking the
dollar amount of the current purchase and adding it to the value (calculated at
the maximum current offering price) of the Class A shares the shareholder owns
in his or her account(s) in the Fund, and shares of other Funds exchangeable for
Class A shares and listed under "The Eaton Vance Exchange Privilege" in the
Prospectus. 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 each Portfolio is computed by IBT (as agent and
custodian for the Portfolio) by subtracting the liabilities of the Portfolio
from the value of its total assets. Inasmuch as the market for municipal
obligations is a dealer market with no central trading location or continuous
quotation system, it is not feasible to obtain last transation prices for most
municipal obligations held by the Portfolio, and such obligations, including
those purchased on a when-issued basis, will normally be valued on the basis of
valuations furnished by a pricing service. The pricing service uses information
with respect to transactions in bonds, quotations from bond dealers, market
transactions in comparable securities, various relationships between securities,
and yield to maturity in determining value. Taxable obligations for which price
quotations are readily available normally will be valued at the mean between the
latest available bid and asked prices. Open futures positions on debt securities
are valued at the most recent settlement prices, unless such price does not
reflect the fair value of the contract, in which case the positions will be
valued by or at the direction of the Trustees of the Portfolio. Other assets are
valued at fair value using methods determined in good faith by or at the
direction of the Trustees of the Portfolio. The Fund and the Portfolio will be
closed for business and will not price their respective shares or interests on
the following business holidays: New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Each investor in a Portfolio, including a Fund, may add to or reduce its
investment in the Portfolio on each day the Exchange is open for trading
("Portfolio Business Day") as of the close of regular trading on the Exchange
(the "Portfolio Valuation Time"). The value of each investor's interest in the
Portfolio will be determined by multiplying the net asset value of the Portfolio
by the percentage, determined on the prior Portfolio Business Day, which
represented that investor's share of the aggregate interests in the Portfolio on
such prior day. Any additions or withdrawals for the current Portfolio Business
Day will then be recorded. Each investor's percentage of the aggregate interest
in the Portfolio will then be recomputed as a percentage equal to a fraction (i)
the numerator of which is the value of such investor's investment in the
Portfolio as of the Portfolio Valuation Time on the prior Portfolio Business Day
plus or minus, as the case may be, the amount of any additions to or withdrawals
from the investor's investment in the Portfolio on the current Portfolio
Business Day and (ii) the denominator of which is the aggregate net asset value
of the Portfolio as of the Portfolio Valuation Time on the prior Portfolio
Business Day plus or minus, as the case may be, the amount of the net additions
to or withdrawals from the aggregate investment in the Portfolio on the current
Portfolio Business Day by all investors in the Portfolio. The percentage so
determined will then be applied to determine the value of the investor's
interest in the Portfolio for the current Portfolio Business Day.
INVESTMENT PERFORMANCE
Average annual total return is determined separately for each Class of a
Fund by multiplying a hypothetical initial purchase order of $1,000 by the
average annual compound rate of return (including capital appreciation/
depreciation, and distributions paid and reinvested) for the stated period and
annualizing the result. The calculation assumes (i) that all distributions are
reinvested at net asset value on the reinvestment dates during the period, (ii)
the deduction of the maximum sales charge from the initial $1,000 purchase order
for Class A shares, (iii) a complete redemption of the investment and, (iv) the
deduction of any CDSC at the end of the period. For further information
concerning the total return of the Classes of a Fund, see Appendix A and
Appendix B.
Yield is computed separately for each Class of a Fund pursuant to a
standardized formula by dividing the net investment income per share earned
during a recent thirty-day period by the maximum offering price (including the
maximum initial sales charge for Class A shares) per share on the last day of
the period and annualizing the resulting figure. Net investment income per share
is calculated from the yields to maturity of all debt obligations held by the
Portfolio based on prescribed methods, reduced by accrued Fund and Class
expenses for the period with the resulting number being divided by the average
daily number of Class shares outstanding and entitled to receive distributions
during the period. This yield figure does not reflect the deduction of any CDSCs
which (if applicable) are imposed upon certain redemptions at the rates set
forth under "How to Redeem Shares" in the Prospectus. Yield calculations assume
the current maximum initial sales charge for Class A shares set forth under "How
to Buy Shares" in the Prospectus. (Actual yield may be affected by variations in
sales charges on investments). A taxable-equivalent yield is computed by using
the tax-exempt yield and dividing by 1 minus a stated rate. For the yield and
taxable-equivalent yield of the Classes of a Fund, see Appendix A and Appendix
B.
A Fund's total return may be compared to relevant indices, such as the
Consumer Price Index, the Bond Buyer 25 Revenue Bond Index and the Lehman
Brothers Municipal Bond Index, which may be used in advertisements and in
information furnished to present or prospective shareholders. A Fund's
performance may differ from that of other investors in its corresponding
Portfolio, including other investment companies.
The Trust (or Principal Underwriter) may provide investors with information
on municipal bond investing, which may include comparative performance
information, evaluations of Fund performance, charts and/or illustrations
prepared by independent sources (such as Lipper Analytical Services Inc.,
CDA/Wiesenberger, Morningstar, Inc., The Bond Buyer, the Federal Reserve Board
or The Wall Street Journal). The Trust may also refer in investor publications
to Tax Freedom Day, as computed by the Tax Foundation, Washington, DC 20005, to
help illustrate the value of tax free investing, as well as other tax-related
information. Information, charts and illustrations showing the effects of
inflation and taxes (including their effects on the dollar and the return on
various investments) and compounding earnings may also be included in
advertisements and materials furnished to present and prospective investors.
Information about portfolio allocation and holdings of a Portfolio at a
particular date (including ratings assigned by independent ratings services such
as Moody's, S&P and Fitch) may be included in advertisements and other material
furnished to present and prospective shareholders. Such information may be
stated as a percentage of the Portfolio's bond holdings on such date.
Comparative information about the yield or distribution rate of a Fund and
about average rates of return on certificates of deposit, bank money market
deposit accounts, money market mutual funds and other short-term investments may
also be included in advertisements, supplemental sales literature or
communications of the Fund. Such information may also compare the tax equivalent
yield (or value) of the Fund to the after-tax yield (or value) of such other
investment vehicles. Such information may be in the form of hypothetical
illustrations. A bank certificate of deposit, unlike the Fund's shares, pays a
fixed rate of interest and entitles the depositor to receive the face amount of
the certificate of deposit at maturity. A bank money market deposit account is a
form of savings account which pays a variable rate of interest. Unlike the
Fund's shares, bank certificates of deposit and bank money market deposit
accounts are insured by the Federal Deposit Insurance Corporation. A money
market mutual fund is designed to maintain a constant value of $1.00 per share
and, thus, a money market fund's shares are subject to less price fluctuation
than the Fund's shares.
The average rates of return of money market mutual funds, certificates of
deposit and bank money market deposit accounts referred to in advertisements,
supplemental sales literature or communications of the Fund will be based on
rates published by the Federal Reserve Bank, Donoghues Money Fund Averages,
RateGram or The Wall Street Journal.
Information used in advertisements and materials furnished to present and
prospective investors may include statements or illustrations relating to the
appropriateness of certain types of securities and/or mutual funds to meet
specific financial goals. Such information may address:
- cost associated with aging parents;
- funding a college education (including its actual and estimated
cost);
- health care expenses (including actual and projected expenses); -
long-term disabilities (including the availability of, and coverage
provided by, disability insurance); and
- retirement (including the availability of social security benefits,
the tax treatment of such benefits and statistics and other
information relating to maintaining a particular standard of living
and outliving existing assets).
Such information may also address different methods for saving money and the
results of such methods, as well as the benefits of investing in municipal bond
funds. Such information may describe the following advantages of investing in a
municipal bond mutual fund versus individual municipal bonds: regular monthly
income; free reinvestment of distributions; potential for increased income; bond
diversification; liquidity; low-cost easy access; and active management and in
depth credit analysis by investment professionals. In addition, by investing in
a municipal bond fund instead of individual bonds, an investor can avoid dealing
with the complexities of the municipal bond market, while benefitting from the
market access and lower transactions costs enjoyed by municipal bond funds.
The Trust (or Principal Underwriter) may provide information about Eaton
Vance, its affiliates and other investment advisers to the funds in the Eaton
Vance Family of Funds in sales material or advertisements provided to investors
or prospective investors. Such material or advertisements may also provide
information on the use of investment professionals by such investors.
TAXES
Each series of the Trust is treated as a separate entity for federal income
tax purposes. Each Fund has elected to be treated and intends to qualify each
year, as a regulated investment company ("RIC") under the Code. Accordingly,
each Fund intends to satisfy certain requirements relating to sources of its
income and diversification of its assets and to distribute substantially all of
its ordinary income (including tax-exempt income) and net income (after
reduction by any available capital loss carryforwards) in accordance with the
timing requirements imposed by the Code, so as to maintain its RIC status and to
avoid paying any federal income or excise tax. Each Fund so qualified for its
fiscal year ended 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 also satisfy these
requirements. Each Portfolio will allocate at least annually among its
investors, including a Fund, each investor's distributive share of the
Portfolio's net taxable (if any) and tax-exempt investment income, net realized
capital gains, and any other items of income, gain, loss, deduction or credit.
For purposes of applying the requirements of the Code regarding qualification as
a RIC, each Fund (i) will be deemed to own its proportionate share of each of
the assets of the corresponding Portfolio and (ii) will be entitled to the gross
income of that Portfolio attributable to such share.
In order to avoid incurring a federal excise tax obligation, the Code
requires that each Fund distribute (or be deemed to have distributed) by
December 31 of each calendar year at least 98% of its ordinary income (not
including tax-exempt income) for such year, at least 98% of its capital gain net
income (which is the excess of its realized capital gains over its realized
capital losses), generally computed on the basis of the one-year period ending
on October 31 of such year, after reduction by (i) any available capital loss
carryforwards and (ii) 100% of any income from the prior year (as previously
computed) that was not paid out during such year and on which the Fund paid no
federal income tax. Under current law, provided that a Fund qualifies as a RIC
and a Portfolio is treated as a partnership for Massachusetts and federal tax
purposes, neither the Fund nor the Portfolio should be liable for any income,
corporate excise or franchise tax in the Commonwealth of Massachusetts.
A Portfolio's investment in zero coupon and certain other securities will
cause it to realize income prior to the receipt of cash payments with respect to
these securities. Such income will be allocated daily to interests in the
Portfolio and, in order to enable the relevant Fund to distribute its
proportionate share of this income and avoid a tax payable by the Fund, the
Portfolio may be required to liquidate securities that it might otherwise have
continued to hold in order to generate cash that the Fund may withdraw from the
Portfolio to make distributions to Fund shareholders.
Investments in lower-rated or unrated securities may present special tax
issues for a Portfolio (and, hence, for the relevant Fund) to the extent that
the issuers of these securities default on their obligations pertaining thereto.
The Code is not entirely clear regarding the federal income tax consequences of
the Fund's taking certain positions in connection with ownership of such
distressed securities. For example, the Code is unclear regarding: (i) when a
Portfolio may cease to accrue interest, original issue discount, or market
discount; (ii) when and to what extent deductions may be taken for bad debts or
worthless securities; (iii) how payments received on obligations in default
should be allocated between principal and income; and (iv) whether exchanges of
debt obligations in a workout context are taxable.
Distributions by a Fund of net tax-exempt interest income that are properly
designated as "exempt-interest dividends" may be treated by shareholders as
interest excludable from gross income under Section 103(a) of the Code. In order
for a Fund to be entitled to pay the tax-exempt interest income allocated to it
by its corresponding Portfolio as exempt-interest dividends to its shareholders,
the Fund must and intends to satisfy certain requirements, including the
requirement that, at the close of each quarter of its taxable year, at least 50%
of the value of its total assets consists of obligations the interest on which
is exempt from regular federal income tax under Code Section 103(a). For
purposes of applying this 50% requirement, the Fund will be deemed to own its
proportionate share of each of the assets of the Portfolio, and the Portfolio
currently intends to invest its assets in a manner such that the Fund can meet
this 50% requirement. Interest on certain municipal obligations is treated as a
tax preference item for purposes of the AMT. Shareholders of each Fund are
required to report tax-exempt interest on their federal income tax returns.
From time to time proposals have been introduced before Congress for the
purpose of restricting or eliminating the federal income tax exemption for
interest on certain types of municipal obligations, and it can be expected that
similar proposals may be introduced in the future. Under federal tax legislation
enacted in 1986, the federal income tax exemption for interest on certain
municipal obligations was eliminated or restricted. As a result of such
legislation, the availability of municipal obligations for investment by a
Portfolio and the value of the securities held by it may be affected.
In the course of managing its investments, a Portfolio may realize some
short-term and long-term capital gains (and/or losses) as a result of market
transactions, including sales of portfolio securities and rights to when- issued
securities and options and futures transactions. A Portfolio may also realize
taxable income from certain short-term taxable obligations, securities loans, a
portion of discount with respect to certain stripped municipal obligations or
their stripped coupons, and certain realized gains or income attributable to
accrued market discount. Any distributions by a Fund of its share of such
capital gains (after reduction by any capital loss carryforwards) or taxable
income would be taxable to shareholders of the Fund. However, it is expected
that such amounts, if any, would normally be insubstantial in relation to the
tax exempt interest earned by the corresponding Portfolio and allocated to the
Fund. Certain distributions of a Fund, if declared in October, November or
December and paid the following January, may be taxed to shareholders as if
received on December 31 of the year in which they are declared.
A Portfolio's transactions in options and futures contracts will be subject
to special tax rules that may affect the amount, timing and character of Fund
distributions to shareholders. For example, certain positions held by a
Portfolio on the last business day of each taxable year will be "marked to
market" (i.e., treated as if closed out on such day), and any resulting gain or
loss will generally be treated as 60% long-term and 40% short-term capital gain
or loss. Certain positions held by a Portfolio that substantially diminish the
Portfolio's risk of loss with respect to other positions in its portfolio may
constitute "straddles," which are subject to tax rules that may cause deferral
of Portfolio losses, adjustments in the holding periods of Portfolio securities,
and conversion of short-term capital losses into long-term capital losses. A
Portfolio may have to limit its activities in options and futures contracts in
order to enable the relevant Fund to maintain its RIC status.
Any loss realized upon the sale or exchange of shares of a Fund with a tax
holding period of 6 months or less will be disallowed to the extent the
shareholder has received tax-exempt interest with respect to such shares and, to
the extent the loss exceeds the disallowed amount, will be treated as a
long-term capital loss to the extent of any distribution treated as net
long-term capital gains with respect to such shares. In addition, a loss
realized on a redemption or other disposition of Fund shares may be disallowed
to the extent the shareholder acquired other Fund shares (whether through the
reinvestment of distributions or otherwise) within the period beginning 30 days
before the redemption of the loss shares and ending 30 days after such date.
Amounts paid by a Fund to individuals and certain other shareholders who
have not provided the Fund with their correct taxpayer identification number
("TIN") and certain certifications required by the Internal Revenue Service (the
"IRS") as well as shareholders with respect to whom the Fund has received
certain information from the IRS or a broker, may be subject to "backup"
withholding of federal income tax arising from the Fund's taxable dividends and
other distributions as well as the proceeds of redemption transactions
(including repurchases and exchanges), at a rate of 31%. An individual's TIN is
generally his or her social security number.
Non-resident alien individuals, foreign corporations and certain other
foreign entities generally will be subject to a U.S. withholding tax at a rate
of 30% on a Fund's distributions from its ordinary income and the excess of its
net short-term capital gain over its net long-term capital loss, unless the tax
is reduced or eliminated by an applicable tax convention. Distributions from the
excess of a Fund's net long-term capital gain over its net short-term capital
loss received by such shareholders and any gain from the sale or other
disposition of shares of the Fund generally will not be subject to U.S. federal
income taxation, provided that non-resident alien status has been certified by
the shareholder. Different U.S. tax consequences may arise if: (i) the
shareholder is engaged in a trade or business in the United States; (ii) the
shareholder is present in the United States for a sufficient period of time
during a taxable year to be treated as a U.S. resident, (generally 180 days or
more); or (iii) the shareholder fails to provide any required certifications
regarding its status as a non-resident alien investor. Foreign shareholders
should consult their tax advisers regarding the U.S. and foreign tax
consequences of an investment in a Fund.
The foregoing discussion does not address the special tax rules applicable
to certain classes of investors, such as tax-exempt entities, insurance
companies and financial institutions. Shareholders should consult their own tax
advisers with respect to special tax rules that may apply in their particular
situations, as well as the state, local, and, where applicable, foreign tax
consequences of investing in a Fund.
PRINCIPAL UNDERWRITER
CLASS A SHARES. Class A shares of each 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
pursuant to a written Statement of Intention; or (2) purchases of Class A shares
pursuant to the Right of Accumulation and declared as such at the time of
purchase.
Subject to the applicable provisions of the 1940 Act, the Trust may issue
Class A shares at net asset value in the event that an investment company
(whether a regulated or private investment company or a personal holding
company) is merged or consolidated with or acquired by the Class. Normally no
sales charges will be paid in connection with an exchange of Class A shares for
the assets of such investment company. Class A shares may be sold at net asset
value to any officer, director, trustee, general partner or employee of the
Trust, a Portfolio or any investment company for which Eaton Vance or BMR acts
as investment adviser, any investment advisory, agency, custodial or trust
account managed or administered by Eaton Vance or by any parent, subsidiary or
other affiliate of Eaton Vance, or any officer, director or employee of any
parent, subsidiary or other affiliate of Eaton Vance. The terms "officer,"
"director," "trustee," "general partner" or "employee" as used in this paragraph
include any such person's spouse and minor children, and also retired officers,
directors, trustees, general partners and employees and their spouses and minor
children. Class A shares may also be sold at net asset value to registered
representatives and employees of Authorized Firms and to the spouses and
children under the age of 21 and beneficial accounts of such persons.
The Principal Underwriter acts as principal in selling Class A shares under
a Distribution Agreement with the Trust. The expenses of printing copies of
prospectuses used to offer shares to Authorized Firms or investors and other
selling literature and of advertising are borne by the Principal Underwriter.
The fees and expenses of qualifying and registering and maintaining
qualifications and registrations of the Fund and its Class A shares under
federal and state securities laws are borne by the Class. The Distribution
Agreement is renewable annually by the Board of Trustees of the Trust (including
a majority of the noninterested Trustees) may be terminated on six months'
notice by either party and is automatically terminated upon assignment. The
Principal Underwriter distributes Class A shares on a "best efforts" basis under
which it is required to take and pay for only such shares as may be sold. The
Principal Underwriter allows Authorized Firms discounts from the applicable
public offering price which are alike for all Authorized Firms. The Principal
Underwriter may allow, upon notice to all Authorized Firms with whom it has
agreements, discounts up to the full sales charge during the periods specified
in the notice. During periods when the discount includes the full sales charge,
such Authorized Firms may be deemed to be underwriters as that term is defined
in the Securities Act of 1933.
The Trust has authorized the Principal Underwriter to act as its agent in
repurchasing shares at the rate of $2.50 for each repurchase transaction handled
by the Principal Underwriter. The Principal Underwriter estimates that the
expenses incurred by it in acting as repurchase agent for the Trust will exceed
the amounts paid therefor.
CLASS B SHARES. Under a Distribution Agreement the Principal Underwriter
acts as principal in selling Class B shares. The expenses of printing copies of
prospectuses used to offer shares to Authorized Firms or investors and other
selling literature and of advertising is borne by the Principal Underwriter. The
fees and expenses of qualifying and registering and maintaining qualifications
and registrations of the Fund and its Class B shares under federal and state
securities laws are borne by the Class. In addition, each Class B makes payments
to the Principal Underwriter pursuant to a Distribution Plan as described in the
Prospectus; the provisions of the plan relating to such payments are included in
the Distribution Agreement. The Distribution Agreement is renewable annually by
the Trust's Board of Trustees (including a majority of the noninterested
Trustees who have no direct or indirect financial interest in the operation of
the Distribution Plan or the Distribution Agreement), may be terminated on sixty
days' notice either by such Trustees or by vote of a majority of the outstanding
Class B shares or on six months' notice by the Principal Underwriter and is
automatically terminated upon assignment. The Principal Underwriter distributes
Class B shares on a "best efforts" basis under which it is required to take and
pay for only such shares as may be sold. The Trust has authorized the Principal
Underwriter to act as its agent in repurchasing shares at the rate of $2.50 for
each repurchase transaction handled by the Principal Underwriter. The Principal
Underwriter estimates that the expenses incurred by it in acting as repurchase
agent for the Trust will exceed the amounts paid therefor. For the amount paid
by the Trust to the Principal Underwriter for acting as repurchase agent, see
Appendix B.
SERVICE PLAN -- CLASS A SHARES
The Trust on behalf of each of its Class A shares has adopted a Service Plan
(the "Plan") designed to meet the service fee requirements of the sales charge
rule of the National Association of Securities Dealers, Inc. (the "NASD").
(Management believes service fee payments are not distribution expenses governed
by Rule 12b-1 under the 1940 Act, but has chosen to have the Plan approved as if
that Rule were applicable.) The following supplements the discussion of the Plan
contained in the Prospectus.
The Plan continues in effect from year to year, for so long as such
continuance is approved by a vote of both a majority of (i) the noninterested
Trustees who have no direct or indirect financial interest in the operation of
the Plan or any agreements related to it (the "Plan Trustees") and (ii) all of
the Trustees then in office, cast in person at a meeting (or meetings) called
for the purpose of voting on this Plan. The Plan may be terminated any time by
vote of the Plan Trustees or by a vote of a majority of the outstanding Class A
shares of a Fund. The Plan has been approved by the Board of Trustees of the
Trust, including the Plan Trustees.
Under the Plan, an officer of the Trust shall provide to the Trustees for
their review, and the Trustees shall review at least quarterly, a written report
of the amount expended under the Plan and the purposes for which such
expenditures were made. The Plan may not be amended to increase materially the
payments described herein without approval of the affected shareholders of Class
A shares, and all material amendments of the Plan must also be approved by the
Trustees of the Trust in the manner described above. So long as the Plan is in
effect, the selection and nomination of Trustees who are not interested persons
of the Trust shall be committed to the discretion of the Trustees who are not
such interested persons. The Trustees have determined that in their judgment
there is a reasonable likelihood that the Plan will benefit each Fund and its
Class A shareholders.
DISTRIBUTION PLAN -- CLASS B SHARES
The Trust has adopted a Distribution Plan (the "Plan") on behalf of its
Class B shares. The Plan is designed to meet the requirements of Rule 12b-1
under the 1940 Act and the sales charge rule of the NASD. The purpose of the
Plan is to compensate the Principal Underwriter for its distribution services
and facilities provided with respect to Class B shares.
The Plan provides that each Fund will pay sales commissions and distribution
fees to the Principal Underwriter only after and as a result of the sale of
Class B shares of the Fund. On each sale of Fund shares (excluding reinvestment
of distributions) the Fund will pay the Principal Underwriter amounts
representing (i) sales commissions equal to 5% of the amount received by the
Fund for each share sold and (ii) distribution fees calculated by applying the
rate of 1% over the prime rate then reported in The Wall Street Journal to the
outstanding balance of uncovered distribution charges (as described below) of
the Principal Underwriter.
The amount payable to the Principal Underwriter pursuant to the Plan as
sales commissions and distribution fees with respect to each day will be accrued
on such day as a liability of the respective Class and will accordingly reduce
the Class's net assets upon such accrual, all in accordance with generally
accepted accounting principles. The amount payable on each day is limited to
1/365 of .75% of a Class's net assets on such day. The level of a Class's net
assets changes each day and depends upon the amount of sales and redemptions of
shares, the changes in the value of the investments held by the Portfolio, the
expenses of the Class, Fund and the Portfolio accrued and allocated to the Fund
and Class on such day, income on portfolio investments of the Portfolio accrued
and allocated to the Fund on such day, and any dividends and distributions
declared on Fund shares. The Trust does not accrue possible future payments as a
liability of a Class or reduce a Class's current net assets in respect of
unknown amounts which may become payable under the Plan in the future because
the standards for accrual of such a liability under accounting principles have
not been satisfied.
The Plan provides that the Class will receive all CDSCs and will make no
payments to the Principal Underwriter in respect of any day on which there are
no outstanding uncovered distribution charges of the Principal Underwriter.
CDSCs and accrued amounts will be paid by the Trust to the Principal Underwriter
whenever there exist uncovered distribution charges.
In calculating daily the amount of uncovered distribution charges,
distribution charges will include the aggregate amount of sales commissions and
distribution fees theretofore paid plus the aggregate amount of sales
commissions and distribution fees which the Principal Underwriter is entitled to
be paid under the Plan since its inception. Payments theretofore paid or payable
under the Plan by the Trust to the Principal Underwriter and CDSCs theretofore
paid or payable to the Principal Underwriter will be subtracted from such
distribution charges; if the result of such subtraction is positive, a
distribution fee (computed at 1% over the prime rate then reported in The Wall
Street Journal) will be computed on such amount and added thereto, with the
resulting sum constituting the amount of outstanding uncovered distribution
charges with respect to such day. The amount of outstanding uncovered
distribution charges of the Principal Underwriter calculated on any day does not
constitute a liability recorded on the financial statements of the Fund.
The amount of uncovered distribution charges of the Principal Underwriter at
any particular time depends upon various changing factors, including the level
and timing of sales of shares, the nature of such sales (i.e., whether they
result from exchange transactions, reinvestments or from cash sales through
Authorized Firms), the level and timing of redemptions of shares upon which a
CDSC will be imposed, the level and timing of redemptions of shares upon which
no CDSC will be imposed (including redemptions of shares pursuant to the
exchange privilege which result in a reduction of uncovered distribution
charges), changes in the level of the net assets of the Class, and changes in
the interest rate used in the calculation of the distribution fee under the
Plan. Periods with a high level of sales of Class shares accompanied by a low
level of early redemptions of Class shares resulting in the imposition of CDSCs
will tend to increase the time during which there will exist uncovered
distribution charges of the Principal Underwriter.
Currently, payments of sales commissions and distribution fees and of
service fees may equal 1% of a Class's average daily net assets per annum. For
actual payments made and the outstanding uncovered distribution charges of the
Principal Underwriter, see Appendix B. The Trust believes that the combined rate
of all these payments may be higher than the rate of payments made under
distribution plans adopted by other investment companies pursuant to Rule 12b-1.
Although the Principal Underwriter will use its own funds (which may be borrowed
from banks) to pay sales commissions at the time of sale, it is anticipated that
the Eaton Vance organization will profit by reason of the operation of the Plan
through an increase in the Fund's assets (thereby increasing the advisory fee
payable to BMR by the Portfolio) resulting from sale of shares and through the
amounts paid to the Principal Underwriter, including CDSCs, pursuant to the
Plan. The Eaton Vance organization may be considered to have realized a profit
under the Plan if at any point in time the aggregate amounts theretofore
received by the Principal Underwriter pursuant to the Plan and from CDSCs have
exceeded the total expenses theretofore incurred by such organization in
distributing Class B shares of the Fund. Total expenses for this purpose will
include an allocable portion of the overhead costs of such organization and its
branch offices, which costs will include without limitation leasing expense,
depreciation of building and equipment, utilities, communication and postage
expense, compensation and benefits of personnel, travel and promotional expense,
stationery and supplies, literature and sales aids, interest expense, data
processing fees, consulting and temporary help costs, insurance, taxes other
than income taxes, legal and auditing expense and other miscellaneous overhead
items. Overhead is calculated and allocated for such purpose by the Eaton Vance
organization in a manner deemed equitable to the Trust.
The Plan continues in effect from year to year so long as such continuance
is approved at least annually by the vote of both a majority of (i) the
noninterested Trustees of the Trust who have no direct or indirect financial
interest in the operation of the Plan or any agreements related to the Plan (the
"Rule 12b-1 Trustees") and (ii) all of the Trustees then in office, and the
Distribution Agreement contains a similar provision. The Plan and Distribution
Agreement may be terminated at any time by vote of a majority of the Rule 12b-1
Trustees or by a vote of a majority of the outstanding voting securities of the
applicable Class. The Plan requires quarterly Trustee review of a written report
of the amount expended under the Plan and the purposes for which such
expenditures were made. The Plan may not be amended to increase materially the
payments described therein without approval of the shareholders of the affected
Class and the Trustees. So long as the Plan is in effect, the selection and
nomination of the noninterested Trustees shall be committed to the discretion of
such Trustees.
The Trustees of the Trust believe that the Plan will be a significant factor
in the expected growth of each Fund's assets, and will result in increased
investment flexibility and advantages which have benefitted and will continue to
benefit the Fund and its Class B shareholders. Payments for sales commissions
and distribution fees made to the Principal Underwriter under the Plan will
compensate the Principal Underwriter for its services and expenses in
distributing Class B shares of the Fund. Service fee payments made to the
Principal Underwriter and Authorized Firms under the Plan provide incentives to
provide continuing personal services to investors and the maintenance of
shareholder accounts. By providing incentives to the Principal Underwriter and
Authorized Firms, the Plan is expected to result in the maintenance of, and
possible future growth in, the assets of the Fund. Based on the foregoing and
other relevant factors, the Trustees of the Trust have determined that in their
judgment there is a reasonable likelihood that the Plan will benefit the Fund
and its Class B shareholders.
PORTFOLIO SECURITY TRANSACTIONS
Decisions concerning the execution of portfolio security transactions,
including the selection of the market and the executing firm, are made by BMR.
BMR is also responsible for the execution of transactions for all other accounts
managed by it.
BMR places the portfolio security transactions of each Portfolio and of all
other accounts managed by it for execution with many firms. BMR uses its best
efforts to obtain execution of portfolio security transactions at prices which
are advantageous to each Portfolio and at reasonably competitive spreads or
(when a disclosed commission is being charged) at reasonably competitive
commission rates. In seeking such execution, BMR will use its best judgment in
evaluating the terms of a transaction, and will give consideration to various
relevant factors, including without limitation the size and type of the
transaction, the nature and character of the market for the security, the
confidentiality, speed and certainty of effective execution required for the
transaction, the general execution and operational capabilities of the executing
firm, the reputation, reliability, experience and financial condition of the
firm, the value and quality of the services rendered by the firm in this and
other transactions, and the reasonableness of the spread or commission, if any.
Municipal obligations, including State obligations, purchased and sold by the
Portfolios are generally traded in the over-the-counter market on a net basis
(i.e., without commission) through broker-dealers and banks acting for their own
account rather than as brokers, or otherwise involve transactions directly with
the issuer of such obligations. Such firms attempt to profit from such
transactions by buying at the bid price and selling at the higher asked price of
the market for such obligations, and the difference between the bid and asked
price is customarily referred to as the spread. The Portfolios may also purchase
municipal obligations from underwriters, the cost of which may include
undisclosed fees and concessions to the underwriters. While it is anticipated
that each Portfolio will not pay significant brokerage commissions in connection
with such portfolio security transactions, on occasion it may be necessary or
appropriate to purchase or sell a security through a broker on an agency basis,
in which case the Portfolio will incur a brokerage commission. Although spreads
or commissions on portfolio security transactions will, in the judgment of BMR,
be reasonable in relation to the value of the services provided, spreads or
commissions exceeding those which another firm might charge may be paid to firms
who were selected to execute transactions on behalf of the Portfolios and BMR's
other clients for providing brokerage and research services to BMR.
The following table shows brokerage commission paid by each Portfolio for
each of the fiscal years ended August 31, 1996, 1995 and 1994:
<TABLE>
<CAPTION>
PORTFOLIO 8/31/96 8/31/95 8/31/94*
- --------- ------- ------- --------
<S> <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: 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 (such as reclassifying series of Classes of shares or restructuring the
Trust) as do not have a materially adverse effect on the financial interests of
shareholders or if they deem it necessary to conform it to applicable federal or
state laws or regulations. The Trust or any series or class thereof may be
terminated by: (1) the affirmative vote of the holders of not less than
two-thirds of the shares outstanding and entitled to vote at any meeting of
shareholders of the Trust or the appropriate series or class thereof, or by an
instrument or instruments in writing without a meeting, consented to by the
holders of two-thirds of the shares of the Trust or a series or class thereof,
provided, however, that, if such termination is recommended by the Trustees, the
vote of a majority of the outstanding voting securities of the Trust or a series
or class thereof entitled to vote thereon shall be sufficient authorization; or
(2) by means of an instrument in writing signed by a majority of the Trustees,
to be followed by a written notice to shareholders stating that a majority of
the Trustees has determined that the continuation of the Trust or a series or a
class thereof is not in the best interest of the Trust, such series or class or
of their respective shareholders.
The Declaration of Trust further provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law; but nothing in the
Declaration of Trust protects a Trustee against any liability to which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
office.
Under Massachusetts law, if certain conditions prevail, shareholders of a
Massachusetts business trust (such as the Trust) could be deemed to have
personal liability for the obligations of the Trust. Numerous investment
companies registered under the 1940 Act have been formed as Massachusetts
business trusts, and management is not aware of an instance where such liability
has been imposed. The Trust's Declaration of Trust contains an express
disclaimer of liability on the part of the Fund shareholders and the Trust's
By-laws provide that the Trust shall assume the defense on behalf of any Fund
shareholders. The Declaration of Trust also contains provisions limiting the
liability of a series or class to that series or class. Moreover, the Trust's
By-laws also provide for indemnification out of the property of the Fund of any
shareholder held personally liable solely by reason of being or having been a
shareholder for all loss or expense arising from such liability. The assets of
the Fund are readily marketable and will ordinarily substantially exceed its
liabilities. In light of the nature of the Fund's business and the nature of its
assets, management believes that the possibility of the Fund's liability
exceeding its assets, and therefore the shareholder's risk of personal
liability, is extremely remote.
In accordance with the Declaration of Trust of each 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 each 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.
Each Portfolio's Declaration of Trust provides that a Fund and other
entities permitted to invest in the Portfolio (e.g., other U.S. and foreign
investment companies, and common and commingled trust funds) will each be liable
for all obligations of the Portfolio. However, the risk of 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
Fund nor its shareholders will be adversely affected by reason of the Fund
investing in the Portfolio.
Each Portfolio's Declaration of Trust provides that the Portfolio will
terminate 120 days after the complete withdrawal of the Fund or any other
investor in the Portfolio, unless either the remaining investors, by unanimous
vote at a meeting of such investors, or a majority of the Trustees of the
Portfolio, by written instrument consented to by all investors, agree to
continue the business of the Portfolio. This provision is consistent with
treatment of the Portfolio as a partnership for federal income tax purposes.
The right to redeem shares of the Fund can be suspended and the payment of
the redemption price deferred when the Exchange is closed (other than for
customary weekend and holiday closings), during periods when trading on the
Exchange is restricted as determined by the Commission, or during any emergency
as determined by the Commission which makes it impracticable for the Portfolio
to dispose of its securities or value its assets, or during any other period
permitted by order of the Commission for the protection of investors.
Each Fund changed its name from Eaton Vance [state name] Tax Free Fund to EV
Marathon [state name] Tax Free Fund on February 1, 1994 and to EV Marathon
[state name] Municipals Fund on January 1, 1996. Each Fund was reorganized into
multiple classes of an Eaton Vance [state name] Municipals Fund on September 1,
1997. The operations of Class B reflect the operations of a Fund prior to
September 1, 1997. Class A is a successor to the operations of a separate series
of the Trust.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Deloitte & Touche LLP, 125 Summer Street, Boston, Massachusetts, are the
independent certified public accountants of the Funds and the Portfolios,
providing audit services, tax return preparation, and assistance and
consultation with respect to the preparation of filings with the Commission.
FINANCIAL STATEMENTS
The audited financial statements of and independent auditors' reports for
the Funds and the Portfolios, appear in the Funds' most recent annual report to
shareholders, and the unaudited financial statements of the Funds and the
Portfolios appear in the Funds' most recent semiannual report to shareholders
both of which are incorporated by reference into this SAI. A copy of the Funds'
semiannual and annual report accompanies this SAI.
Registrant incorporates by reference the audited financial information for
the Funds and the Portfolios listed below for the fiscal year ended August 31,
1996, as previously filed electronically with the Commission:
<TABLE>
<S> <C>
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)
</TABLE>
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:
<TABLE>
<S> <C>
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)
</TABLE>
<PAGE>
APPENDIX A: CLASS A SHARES
PERFORMANCE INFORMATION
The tables below indicate the cumulative and average total return on a
hypothetical investment of $1,000 in a predecessor fund reorganized August 1,
1997 into Class A shares for the periods shown in each table. The total return
for part of the period reflects the Portfolio's total return (or that of its
predecessor) adjusted to reflect any applicable Class A sales charge. Total
return for this time period has not been adjusted to reflect Class A service
fees and certain other expenses. The Value of Initial Investment reflects the
deduction of the maximum sales charge of 4.75%. Past performance is not
indicative of future results. Investment return and principal value will
fluctuate; shares, when redeemed, may be worth more or less than their original
cost. Information presented with two asterisks (**) includes the effect of
subsidizing expenses. Returns would have been lower without subsidies.
VALUE OF A $1,000 INVESTMENT -- ALABAMA
<TABLE>
<CAPTION>
TOTAL RETURN TOTAL RETURN
EXCLUDING MAXIMUM INCLUDING MAXIMUM
VALUE OF VALUE OF SALES CHARGE SALES CHARGE
INVESTMENT INVESTMENT INITIAL INVESTMENT ---------------------------- ---------------------------
PERIOD* DATE INVESTMENT ON 2/28/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------------------- ---------- ---------- ---------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of Fund** 5/1/92 $952.93 $1,305.31 36.98% 6.73% 30.53% 5.67%
1 Year Ended
2/28/97** 2/28/96 $952.10 $1,004.10 5.46% 5.46% 0.41% 0.41%
- ------------
*Predecessor Fund commenced operations December 7, 1993.
</TABLE>
VALUE OF A $1,000 INVESTMENT -- ARKANSAS
<TABLE>
<CAPTION>
TOTAL RETURN TOTAL RETURN
EXCLUDING MAXIMUM INCLUDING MAXIMUM
VALUE OF VALUE OF SALES CHARGE SALES CHARGE
INVESTMENT INVESTMENT INITIAL INVESTMENT ---------------------------- ---------------------------
PERIOD* DATE INVESTMENT ON 2/28/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------------------- ---------- ---------- ---------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of Fund** 10/2/92 $952.35 $1,251.05 31.37% 6.38% 25.10% 5.21%
1 Year Ended
2/28/97** 2/28/96 $952.33 $ 995.17 4.50% 4.50% (0.48)% (0.48)%
- ------------
*Predecessor Fund commenced operations February 9, 1994.
</TABLE>
VALUE OF A $1,000 INVESTMENT -- GEORGIA
<TABLE>
<CAPTION>
TOTAL RETURN TOTAL RETURN
EXCLUDING MAXIMUM INCLUDING MAXIMUM
VALUE OF VALUE OF SALES CHARGE SALES CHARGE
INVESTMENT INVESTMENT INITIAL INVESTMENT ---------------------------- ---------------------------
PERIOD* DATE INVESTMENT ON 2/28/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------------------- ---------- ---------- ---------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of Fund** 12/23/91 $952.37 $1,254.09 31.68% 5.45% 25.41% 4.46%
5 Years Ended**
2/28/97 2/28/92 $952.64 $1,266.07 32.90% 5.85% 26.61% 4.83%
1 Year Ended
2/28/97** 2/28/96 $952.52 $1,002.89 5.29% 5.29% 0.29% 0.29%
- ------------
*Predecessor Fund commenced operations December 7, 1993.
</TABLE>
VALUE OF A $1,000 INVESTMENT -- KENTUCKY
<TABLE>
<CAPTION>
TOTAL RETURN TOTAL RETURN
EXCLUDING MAXIMUM INCLUDING MAXIMUM
VALUE OF VALUE OF SALES CHARGE SALES CHARGE
INVESTMENT INVESTMENT INITIAL INVESTMENT ---------------------------- ---------------------------
PERIOD* DATE INVESTMENT ON 2/28/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------------------- ---------- ---------- ---------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of Fund** 12/23/91 $952.93 $1,276.41 33.95% 5.79% 27.64% 4.81%
5 Years Ended
2/28/97** 2/28/92 $952.31 $1,286.11 35.05% 6.19% 28.61% 5.16%
1 Year Ended
2/28/97** 2/28/96 $952.05 $1,002.97 5.35% 5.35% 0.30% 0.30%
- ------------
*Predecessor Fund commenced operations December 7, 1993.
</TABLE>
VALUE OF A $1,000 INVESTMENT -- LOUISIANA
<TABLE>
<CAPTION>
TOTAL RETURN TOTAL RETURN
EXCLUDING MAXIMUM INCLUDING MAXIMUM
VALUE OF VALUE OF SALES CHARGE SALES CHARGE
INVESTMENT INVESTMENT INITIAL INVESTMENT ---------------------------- ---------------------------
PERIOD* DATE INVESTMENT ON 2/28/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------------------- ---------- ---------- ---------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of Fund** 10/2/92 $952.67 $1,280.28 34.38% 6.93% 28.03% 5.76%
1 Year Ended
2/28/97** 2/28/96 $952.29 $1,013.36 6.41% 6.41% 1.34% 1.34%
- ------------
*Predecessor Fund commenced operations February 14, 1993.
</TABLE>
VALUE OF A $1,000 INVESTMENT -- MARYLAND
<TABLE>
<CAPTION>
EXCLUDING MAXIMUM INCLUDING MAXIMUM
VALUE OF VALUE OF SALES CHARGE SALES CHARGE
INVESTMENT INVESTMENT INITIAL 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 $952.33 $1,309.84 37.54% 6.49% 30.98% 5.47%
5 Years Ended
2/28/97** 2/28/92 $952.37 $1,311.14 37.68% 6.60% 31.11% 5.57%
1 Year Ended
2/28/97** 2/28/96 $952.75 $ 999.53 4.90% 4.90% (0.05)% (0.05)%
- ------------
*Predecessor Fund commenced operations December 10, 1993.
</TABLE>
VALUE OF A $1,000 INVESTMENT -- MISSOURI
<TABLE>
<CAPTION>
TOTAL RETURN TOTAL RETURN
EXCLUDING MAXIMUM INCLUDING MAXIMUM
VALUE OF VALUE OF SALES CHARGE SALES CHARGE
INVESTMENT INVESTMENT INITIAL INVESTMENT ---------------------------- ---------------------------
PERIOD* DATE INVESTMENT ON 2/28/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------------------- ---------- ---------- ---------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of Fund** 5/1/92 $952.24 $1,325.60 39.21% 7.09% 32.56% 6.01%
1 Year Ended
2/28/97** 2/28/96 $952.15 $1,001.49 5.18% 5.18% 0.15% 0.15%
- ------------
*Predecessor Fund commenced operations December 7, 1993.
</TABLE>
VALUE OF A $1,000 INVESTMENT -- NORTH CAROLINA
<TABLE>
<CAPTION>
TOTAL RETURN TOTAL RETURN
EXCLUDING MAXIMUM INCLUDING MAXIMUM
VALUE OF VALUE OF SALES CHARGE SALES CHARGE
INVESTMENT INVESTMENT INITIAL INVESTMENT ---------------------------- ---------------------------
PERIOD* DATE INVESTMENT ON 2/28/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------------------- ---------- ---------- ---------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of Fund** 10/23/91 $952.90 $1,295.65 35.96% 5.90% 29.56% 4.59%
5 Years Ended
2/28/97** 2/28/92 $952.75 $1,264.01 32.67% 5.82% 26.40% 4.80%
1 Year Ended
2/28/97** 2/28/96 $952.05 $ 995.77 4.59% 4.59% (0.42)% (0.42)%
- ------------
*Predecessor Fund commenced operations December 7, 1993.
</TABLE>
VALUE OF A $1,000 INVESTMENT -- OREGON
<TABLE>
<CAPTION>
TOTAL RETURN TOTAL RETURN
EXCLUDING MAXIMUM INCLUDING MAXIMUM
VALUE OF VALUE OF SALES CHARGE SALES CHARGE
INVESTMENT INVESTMENT INITIAL INVESTMENT ---------------------------- ---------------------------
PERIOD* DATE INVESTMENT ON 2/28/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------------------- ---------- ---------- ---------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of Fund** 12/24/91 $952.20 $1,306.83 37.24% 6.29% 30.68% 5.29%
5 Years Ended
2/28/97** 2/28/92 $952.33 $1,300.06 36.51% 6.42% 30.01% 5.39%
1 Year Ended
2/28/97** 2/28/96 $952.37 $ 987.17 3.63% 3.63% (1.28)% (1.28)%
- ------------
*Predecessor Fund commenced operations December 28, 1993.
</TABLE>
VALUE OF A $1,000 INVESTMENT -- SOUTH CAROLINA
<TABLE>
<CAPTION>
TOTAL RETURN TOTAL RETURN
EXCLUDING MAXIMUM INCLUDING MAXIMUM
VALUE OF VALUE OF SALES CHARGE SALES CHARGE
INVESTMENT INVESTMENT INITIAL INVESTMENT ---------------------------- ---------------------------
PERIOD* DATE INVESTMENT ON 2/28/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------------------- ---------- ---------- ---------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of Fund** 10/2/92 $952.70 $1,233.81 29.51% 6.04% 23.38% 4.88%
1 Year Ended
2/28/97** 2/28/96 $952.66 $1,004.01 5.39% 5.39% 0.40% 0.40%
- ------------
*Predecesor Fund commenced operations February 14, 1994.
</TABLE>
VALUE OF A $1,000 INVESTMENT -- TENNESSEE
<TABLE>
<CAPTION>
TOTAL RETURN TOTAL RETURN
EXCLUDING MAXIMUM INCLUDING MAXIMUM
VALUE OF VALUE OF SALES CHARGE SALES CHARGE
INVESTMENT INVESTMENT INITIAL INVESTMENT ---------------------------- ---------------------------
PERIOD* DATE INVESTMENT ON 2/28/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------------------- ---------- ---------- ---------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of Fund** 8/25/92 $952.61 $1,263.49 32.63% 6.46% 26.35% 5.32%
1 Year Ended
2/28/97** 2/28/96 $952.33 $1,002.53 5.27% 5.27% 0.25% 0.25%
- ------------
*Predecessor Fund commenced operations December 9, 1993.
</TABLE>
VALUE OF A $1,000 INVESTMENT -- VIRGINIA
<TABLE>
<CAPTION>
TOTAL RETURN TOTAL RETURN
EXCLUDING MAXIMUM INCLUDING MAXIMUM
VALUE OF VALUE OF SALES CHARGE SALES CHARGE
INVESTMENT INVESTMENT INITIAL INVESTMENT ---------------------------- ---------------------------
PERIOD* DATE INVESTMENT ON 2/28/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------------------- ---------- ---------- ---------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of Fund** 7/26/91 $952.67 $1,348.94 41.60% 6.41% 34.89% 5.49%
5 Years Ended
2/28/97** 2/28/92 $952.48 $1,267.71 33.09% 5.88% 26.67% 4.86%
1 Year Ended
2/28/97** 2/28/96 $952.23 $ 994.58 4.44% 4.44% (0.54)% (0.54)%
- ----------
*Predecessor Fund commenced operations December 17, 1993.
</TABLE>
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. If a Portfolio's or Fund's expenses
had not been subsidized, yield would be lower. Appendix D contains
state-specific applicable tax rates and income brackets.
TAXABLE SECURITY ASSUMED
CLASS A 30-DAY YIELD EQUIVALENT YIELD TAX RATE
- ------- ------------ ---------------- --------
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%
<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) distribution payments to the Principal Underwriter
allocated to Class B shares 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.
<PAGE>
VALUE OF A $1,000 INVESTMENT -- ALABAMA
<TABLE>
<CAPTION>
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN BEFORE TOTAL RETURN AFTER
BEFORE 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 $1,364.27 $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%
- ------------
*Investment operations began on May 1, 1992.
</TABLE>
VALUE OF A $1,000 INVESTMENT -- ARKANSAS
<TABLE>
<CAPTION>
VALUE OF
INVESTMENT VALUE OF TOTAL RETURN BEFORE TOTAL RETURN AFTER
BEFORE INVESTMENT 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%
- ------------
*Investment operations began on October 2, 1992.
</TABLE>
VALUE OF A $1,000 INVESTMENT -- GEORGIA
<TABLE>
<CAPTION>
VALUE OF
INVESTMENT VALUE OF TOTAL RETURN BEFORE TOTAL RETURN AFTER
BEFORE INVESTMENT 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 $1,317.94 $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%
- ------------
*Investment operations began on December 23, 1991.
</TABLE>
<PAGE>
VALUE OF A $1,000 INVESTMENT -- KENTUCKY
<TABLE>
<CAPTION>
VALUE OF
INVESTMENT VALUE OF TOTAL RETURN BEFORE TOTAL RETURN AFTER
BEFORE INVESTMENT 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%
- ------------
*Investment operations began on December 23, 1991.
</TABLE>
VALUE OF A $1,000 INVESTMENT -- LOUISIANA
<TABLE>
<CAPTION>
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN BEFORE TOTAL RETURN AFTER
BEFORE 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 $1,292.56 $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%
- ------------
*Investment operations began on October 2, 1992.
</TABLE>
VALUE OF A $1,000 INVESTMENT -- MARYLAND
<TABLE>
<CAPTION>
VALUE OF
INVESTMENT VALUE OF TOTAL RETURN BEFORE TOTAL RETURN AFTER
BEFORE INVESTMENT 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** 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%
- ----------
*Investment operations began on February 3, 1992.
</TABLE>
<PAGE>
VALUE OF A $1,000 INVESTMENT -- MISSOURI
<TABLE>
<CAPTION>
VALUE OF
INVESTMENT VALUE OF TOTAL RETURN BEFORE TOTAL RETURN AFTER
BEFORE INVESTMENT 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%
- ----------
*Investment operations began on May 1, 1992.
</TABLE>
VALUE OF A $1,000 INVESTMENT -- NORTH CAROLINA
<TABLE>
<CAPTION>
VALUE OF
INVESTMENT VALUE OF TOTAL RETURN BEFORE TOTAL RETURN AFTER
BEFORE INVESTMENT 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** 10/23/91 $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%
- ------------
*Investment operations began on October 23, 1991.
</TABLE>
VALUE OF A $1,000 INVESTMENT -- OREGON
<TABLE>
<CAPTION>
VALUE OF
INVESTMENT VALUE OF TOTAL RETURN BEFORE TOTAL RETURN AFTER
BEFORE INVESTMENT 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
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%
- ----------
*Investment operations began on December 24, 1991.
</TABLE>
<PAGE>
VALUE OF A $1,000 INVESTMENT -- SOUTH CAROLINA
<TABLE>
<CAPTION>
VALUE OF
INVESTMENT VALUE OF TOTAL RETURN BEFORE TOTAL RETURN AFTER
BEFORE INVESTMENT 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** 10/02/92 $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%
- ----------
*Investment operations began on October 2, 1992.
</TABLE>
VALUE OF A $1,000 INVESTMENT -- TENNESSEE
<TABLE>
<CAPTION>
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN BEFORE TOTAL RETURN AFTER
BEFORE 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** 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%
- ------------
*Investment operations began on August 25, 1992.
</TABLE>
VALUE OF A $1,000 INVESTMENT -- VIRGINIA
<TABLE>
<CAPTION>
VALUE OF
INVESTMENT VALUE OF TOTAL RETURN BEFORE TOTAL RETURN AFTER
BEFORE INVESTMENT 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** 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%
- ------------
*Investment operations began on July 26, 1991.
</TABLE>
<PAGE>
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. If a Portfolio's or Fund's expenses
had not been subsidized, yield would be lower. Appendix D contains state
specific applicable tax rates and income brackets.
TAXABLE SECURITY ASSUMED
CLASS B 30-DAY YIELD EQUIVALENT YIELD TAX RATE
- ------- ------------ ---------------- --------
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%
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As at July 31, 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 of
each Fund. As of July 31, 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 -- 35.0%; Arkansas -- 11.9%; Georgia -- 20.8%; Kentucky
- -- 14.9%; Louisiana -- 40.6%; Maryland -- 15.0%; Missouri -- 7.2%; North
Carolina -- 12.1%; Oregon -- 9.9%; South Carolina -- 16.2%; Tennessee -- 10.3%;
and Virginia -- 15.6%. To the knowledge of the Trust, no other person owned of
record or beneficially 5% or more of any Fund's outstanding Class B shares as of
such date.
<PAGE>
APPENDIX C: STATE SPECIFIC INFORMATION
RISKS OF CONCENTRATION
The following information as to certain State specific considerations is
given to investors in view of a Portfolio's policy of concentrating its
investments in particular State issuers. Such information supplements the
information in the Prospectus. It is derived from sources that are generally
available to investors and is believed to be accurate. Such information
constitutes only a brief summary, does not purport to be a complete description
and is based on information from official statements relating to securities
offerings of issuers of each particular State. Neither the Trust nor the
Portfolios have independently verified this information.
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, 1997
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 1996 were 3.8% over tax
collections for fiscal year 1995. Corporate and individual income tax receipts
and general sales tax receipts of the State for fiscal year 1996 comprised an
estimated 50.1% and 40.3%, respectively, of the total State tax revenues.
Revenues from sales and income taxes increased 8.3% and 8.0%, 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. In April, 1997, the unemployment rate in Kentucky was 5.1% compared
to the national rate of 4.9%; Kentucky nonagricultural employment grew by 2.6%
between April 1996 and April 1997; manufacturing employment in Kentucky
increased by 1.1%.
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. The
State ended fiscal year 1996 with a $124 million surplus and a $461.2 million in
the Revenue Stabilization Account. Fiscal year 1997 is estimated to end with a
$35.9 million surplus and a $489.3 million balance in the Revenue Stabilization
Account. Fiscal year 1996 revenues for the General Fund were $7.47 billion;
fiscal 1997 revenues for the General Fund are anticipated to be $7.46 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 April, 1997 was 3.2% of
the labor force, as compared with and unemployment of 4.9% 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 6.3% of 1996 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 $500 million. In the Fulton case, the imposition of the State's
intangible personal property tax on shares of stock was challenged and was found
to be in violation of the United States Constitution Commerce Clause. The
estimated cost of refunds is approximately $150 million.
OREGON
As of March 1, 1997, $3.27 billion in general obligation bonds issued by the
State of Oregon and its agencies and instrumentalities were outstanding,
including $117.3 million in general obligation bonds supported by the budget for
the State's general fund and $3.15 billion of self-supporting general obligation
bonds. The State's self-supporting general obligation bonds include $2.42
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 $116 million surplus of which $67
million was deposited into the General Reserve Fund ("Rainy Day Fund"). 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 $128 million, 1995 ended with a $222 million surplus and
1996 with a $27 million surplus. Despite recent deposits into the General
Reserve Fund, South Carolina still maintains a deficit in its unrestricted
general fund, in the amount of $261 million at the end of 1996. 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.
State revenue collections for 1996 fell below projections by $22.4 million.
A corresponding reduction in expenditures enabled the rainy day fund to maintain
its balance of $101 million.
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. Fiscal 1995 general fund
revenues exceeded projections by $56 million, or 0.8% and 1996 ended just below
budget. The Revenue Stabilization Fund is estimated to have a balance of $200
million by June 30, 1998.
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 give the approximate yield a taxable security must earn
at various income brackets to produce after-tax yields equivalent to those of
tax exempt bonds yielding from 4% to 7% under the regular federal income tax
and applicable state and local taxes at tax rates applicable for 1997.
Note: The federal income tax portion of the indicated combined income tax
brackets in the tables does not take into account the effect of a reduction in
the deductibility of itemized deductions (including applicable state and local
taxes) for taxpayers with adjusted gross income in excess of $121,200. The tax
brackets also do not show the effects of phaseout of personal exemptions for
single filers with adjusted gross income in excess of $121,200 and joint
filers with adjusted gross income in excess of $181,800. The effective tax
brackets and equivalent taxable yields of such taxpayers will be higher than
those indicated in the tables.
Yields shown are for illustration purposes only and are not meant to represent
a Fund's actual yield. No assurance can be given that any specific tax exempt
yield will be achieved. While it is expected that each Portfolio will invest
principally in obligations, the interest from which is exempt from the regular
federal income tax and applicable state and local taxes described in the
Prospectus, other income received by a Portfolio and allocated to a Fund may
be taxable. The tables do not take into account state or local taxes, if any,
payable on Fund distributions except for those described in the footnote to
the tables. Also, the interest earned on certain "private activity bonds"
issued after August 7, 1986, while exempt from the regular federal income tax,
is treated as a tax preference item which could subject the recipient to the
federal alternative minimum tax. The illustrations assume that the federal
alternative minimum tax is not applicable and do not take into account any tax
credits that may be available.
The information set forth herein is as of the date of this SAI. Subsequent tax
law changes could result in prospective or retroactive changes in the tax
brackets, tax rates, and tax equivalent yields set forth above. Investors
should consult their tax adviser for additional information.
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%.
<PAGE>
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.
<PAGE>
KENTUCKY
<TABLE>
<CAPTION>
COMBINED
FEDERAL A FEDERAL AND KENTUCKY STATE
AND TAX EXEMPT YIELD OF:
SINGLE RETURN JOINT RETURN KY 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>
<TABLE>
<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:
- ---------------------------------------------- ---------- -----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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%.
<PAGE>
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%.
<PAGE>
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%.
<PAGE>
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%.
<PAGE>
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%.
<PAGE>
VIRGINIA
<TABLE>
<CAPTION>
COMBINED
SINGLE RETURN JOINT RETURN FEDERAL A FEDERAL AND VIRGINIA STATE
AND TAX EXEMPT YIELD OF:
- ----------------------- --------------------- 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.
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.
- ------------
+The ratings indicated herein are believed to be the most recent ratings
available at the date of this SAI for the securities listed. Ratings are
generally given to securities at the time of issuance. While the rating
agencies may from time to time revise such ratings, they undertake no
obligation to do so, and the ratings indicated do not necessarily represent
ratings which would be given to these securities on the date of a Portfolio's
fiscal year end.
NOTE: Moody's applies numerical modifiers, 1, 2, and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
MUNICIPAL SHORT-TERM OBLIGATIONS
RATINGS: Moody's ratings for state and municipal short-term obligations will be
designated Moody's Investment Grade or (MIG). Such rating recognizes the
differences between short term credit risk and long term risk. Factors effecting
the liquidity of the borrower and short term cyclical elements are critical in
short term ratings, while other factors of major importance in bond risk, long
term secular trends for example, may be less important over the short run.
A short term rating may also be assigned on an issue having a demand feature,
variable rate demand obligation (VRDO). Such ratings will be designated as
VMIG1, SG or if the demand feature is not rated, NR. A short term rating on
issues with demand features are differentiated by the use of the VMIG1 symbol to
reflect such characteristics as payment upon periodic demand rather than fixed
maturity dates and payment relying on external liquidity. Additionally,
investors should be alert to the fact that the source of payment may be limited
to the external liquidity with no or limited legal recourse to the issuer in the
event the demand is not met.
STANDARD & POOR'S RATINGS GROUP
INVESTMENT GRADE
AAA: Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the highest rated issues only in small degree.
A: Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB: Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibit adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay interest and repay principal for debt in this
category than in higher rated categories.
SPECULATIVE GRADE
Debt rated BB, B, CCC, CC, and C is regarded as having predominantly speculative
characteristics with respect to capacity to pay interest and repay principal. BB
indicates the least degree of speculation and C the highest. While such debt
will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major exposures to adverse conditions.
BB: Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB- rating.
B: Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB or BB-
rating.
CCC: Debt rated CCC has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The CCC rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
B or B- rating.
CC: The rating CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC debt rating.
C: The rating C is typically applied to debt subordinated to senior debt which
is assigned an actual or implied CCC- debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed, but debt service
payments are continued.
C1: The Rating C1 is reserved for income bonds on which no interest is being
paid.
D: Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The D rating also will be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.
PLUS (+) OR MINUS (-): The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
P: The letter "p" indicates that the rating is provisional. A provisional rating
assumes the successful completion of the project being financed by the debt
being rated and indicates that payment of debt service requirements is largely
or entirely dependent upon the successful and timely completion of the project.
This rating, however, while addressing credit quality subsequent to completion
of the project, makes no comment on the likelihood of, or the risk of default
upon failure of such completion. The investor should exercise his own judgment
with respect to such likelihood and risk.
L: The letter "L" indicates that the rating pertains to the principal amount of
those bonds to the extent that the underlying deposit collateral is insured by
the Federal Deposit Insurance Corp. and interest is adequately collateralized.
In the case of certificates of deposit, the letter "L" indicates that the
deposit, combined with other deposits being held in the same right and capacity,
will be honored for principal and accrued pre-default interest up to the federal
insurance limits within 30 days after closing of the insured institution or, in
the event that the deposit is assumed by a successor insured institution, upon
maturity.
NR: NR indicates no rating has been requested, that there is insufficient
information on which to base a rating, or that S&P does not rate a particular
type of obligation as a matter of policy.
MUNICIPAL NOTES
S&P note ratings reflect the liquidity concerns and market access risks unique
to notes. Notes due in 3 years or less will likely receive a note rating. Notes
maturing beyond 3 years will most likely receive a long-term debt rating. The
following criteria will be used in making that assessment:
-- Amortization schedule (the larger the final maturity relative to other
maturities the more likely it will be treated as a note).
-- Sources of payment (the more dependent the issue is on the market for its
refinancing, the more likely it will be treated as a note).
Note rating symbols are as follows:
SP-1: Strong capacity to pay principal and interest. Those issues determined
to possess very strong characteristics will be given a plus(+) designation.
SP-2: Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse financial and economic changes over the term of the
notes.
SP-3: Speculative capacity to pay principal and interest.
FITCH INVESTORS SERVICE, INC.
INVESTMENT GRADE BOND RATINGS
AAA: Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA: Bonds considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated "AAA". Because bonds rated in the "AAA" and
"AA" categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated "F-1+".
A: Bonds considered to be investment grade and of high credit quality. The
obligors ability to pay interest and repay principal is considered to be strong,
but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB: Bonds considered to be investment grade and of satisfactory credit quality.
The obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however, are
more likely to have adverse impact on these bonds, and therefore, impair timely
payment. The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.
HIGH YIELD BOND RATINGS
BB: Bonds are considered speculative. The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified that could assist the
obligor in satisfying its debt service requirements.
B: Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue.
CCC: Bonds have certain identifiable characteristics which, if not remedied,
may lead to default. The ability to meet obligations requires an advantageous
business and economic environment.
CC: Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C: Bonds are in imminent default in payment of interest or principal.
DDD, DD, AND D: Bonds are in default on interest and/or principal payments. Such
bonds are extremely speculative and should be valued on the basis of their
ultimate recovery value in liquidation or reorganization of the obligor. "DDD"
represents the highest potential for recovery on these bonds, and "D" represents
the lowest potential for recovery.
PLUS (+) OR MINUS (-): The ratings from AA to C may be modified by the addition
of a plus or minus sign to indicate the relative position of a credit within the
rating category.
NR: Indicates that Fitch does not rate the specific issue.
CONDITIONAL: A conditional rating is premised on the successful completion of
a project or the occurrence of a specific event.
INVESTMENT GRADE SHORT-TERM RATINGS
Fitch's short-term ratings apply to debt obligations that are payable on demand
or have original maturities of generally up to three years, including commercial
paper, certificates of deposit, medium-term notes, and municipal and investment
notes.
F-1+: Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1: Very Stong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated
"F-1+".
F-2: Good Credit Quality. Issues carrying this rating have a satisfactory
degree of assurance for timely payment, but the margin of safety is not as
great as the "F-1+" and "F-1" categories.
F-3: Fair Credit Quality. Issues carrying this rating have characteristics
suggesting that the degree of assurance for timely payment is adequate, however,
near-term adverse change could cause these securities to be rated below
investment grade.
* * * * * * * *
NOTES: Bonds which are unrated expose the investor to risks with respect to
capacity to pay interest or repay principal which are similar to the risks of
lower-rated speculative bonds. Each Portfolio is dependent on the Investment
Adviser's judgment, analysis and experience in the evaluation of such bonds.
Investors should note that the assignment of a rating to a bond by a rating
service may not reflect the effect of recent developments on the issuer's
ability to make interest and principal payments.
<PAGE>
[Logo]
EATON VANCE
================
Mutual Funds
- --------------------------------------------------------------------------------
EATON VANCE 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 AND VIRGINIA MUNICIPALS PORTFOLIO, WHICH ARE CONTAINED IN THE
SEMI-ANNUAL REPORT DATED FEBRUARY 28, 1997 OF THE CORRESPONDING FUNDS:
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)
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 AND VIRGINIA MUNICIPALS PORTFOLIO, WHICH ARE CONTAINED IN THE
ANNUAL REPORT DATED AUGUST 31, 1996 OF THE CORRESPONDING FUNDS:
Portfolio of Investments
Statement of Assets and Liabilities
Statement of Operations
Statements of Changes in Net Assets
Supplementary Data
Notes to Financial Statements
Independent Auditors' Report
(b) EXHIBITS:
(1)(a)(1) Amended and Restated Declaration of Trust of Eaton Vance
Municipals Trust dated January 11, 1993, filed as Exhibit (1)(a)
to Post-Effective Amendment No. 55 and incorporated herein by
reference.
(b) Amendment dated June 23, 1997 to the Declaration of Trust filed
as Exhibit (1)(b) to Post-Effective Amendment No. 67 and
incorporated herein by reference.
(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) 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.
(4) Distribution Agreement between Eaton Vance Municipals Trust on
behalf of Massachusetts Municipal Bond Portfolio and Eaton Vance
Distributors, Inc. effective November 1, 1996 filed as Exhibit
(6)(a)(4) to Post-Effective Amendment No. 61 and incorporated
herein by reference.
(5) Distribution Agreement between Eaton Vance Municipals Trust and
Eaton Vance Distributors, Inc. effective June 23, 1997 with
attached Schedule A effective June 23, 1997 filed as Exhibit
(6)(a)(5) to Post-Effective Amendment No. 67 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.
(7) The Securities and Exchange Commission has granted the
Registrant an exemptive order that permits the Registrant to
enter into deferred compensation arrangements with its
independent Trustees. See in the Matter of Capital Exchange
Fund, Inc., Release No. IC-20671 (November 1, 1994).
(8)(a) Custodian Agreement with Investors Bank & Trust Company dated
October 15, 1992 filed as Exhibit (8) to Post-Effective
Amendment No. 55 and incorporated herein by reference.
(b) Amendment to Custodian Agreement with Investors Bank & Trust
Company dated October 23, 1995 filed as Exhibit (8)(b) to
Post-Effective Amendment No. 57 and incorporated herein by
reference.
(9)(a)(1) Amended Administrative Services Agreement between Eaton Vance
Municipals Trust (on behalf of each of its series) and Eaton
Vance Management with attached schedules (including Amended
Schedule A dated September 29, 1995) filed as Exhibit (9)(a) to
Post-Effective Amendment No. 55 and incorporated herein by
reference.
(2) Amendment to Schedule A dated June 23, 1997 to the Amended
Administrative Services Agreement dated June 19, 1995 filed as
Exhibit (9)(a)(2) to Post-Effective Amendment No. 67 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 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, filed herewith.
(12) Not applicable
(13) Not applicable
(14) Not applicable
(15)(a) Amended Distribution Plan pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended, for Eaton Vance
Municipals Trust (on behalf of its Classic Series) dated January
27, 1995 with attached schedules (including Amended Schedule A
dated February 1, 1996) filed as Exhibit (15)(a) to
Post-Effective Amendment No. 55 and incorporated herein by
reference.
(b) Amendment to Amended Distribution Plan for Eaton Vance
Municipals Trust (on behalf of its Classic Series) adopted June
24, 1996 filed as Exhibit (15)(b) to Post- Effective Amendment
No. 61 and incorporated herein by reference.
(c) Amended Distribution Plan pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended, for Eaton Vance
Municipals Trust (on behalf of its Marathon series) dated June
19, 1995 with attached schedules (including Amended Schedule A
dated September 29, 1995) filed as Exhibit (15)(b) to
Post-Effective Amendment No. 55 and incorporated herein by
reference.
(d) Amendment to Amended Distribution Plan for Eaton Vance
Municipals Trust (on behalf of its Marathon Series) adopted June
24, 1996 filed as Exhibit (15)(d) to Post- Effective Amendment
No. 61 and incorporated herein by reference.
(e) Amended Service Plan pursuant to Rule 12b-1 under the Investment
Company Act of 1940, as amended, for Eaton Vance Municipals
Trust (on behalf of its Traditional series) dated June 19, 1995
with attached schedules (including Amended Schedule A dated
February 1, 1996) filed as Exhibit (15)(c) to Post-Effective
Amendment No. 55 and incorporated herein by reference.
(f) Amendment to Amended Service Plan for Eaton Vance Municipals
Trust (on behalf of its Traditional Series) adopted June 24,
1996 filed as Exhibit (15)(f) to Post- Effective Amendment No.
61 and incorporated herein by reference.
(g) Eaton Vance Municipals Trust Class A Service Plan adopted June
23, 1997 with attached Schedule A effective June 23, 1997 filed
as Exhibit (15)(g) to Post- Effective Amendment No. 67 and
incorporated herein by reference.
(h) Eaton Vance Municipals Trust Class B Distribution Plan adopted
June 23, 1997 with attached Schedule A effective June 23, 1997
filed as Exhibit (15)(h) to Post- Effective Amendment No. 67 and
incorporated herein by reference.
(i) Eaton Vance Municipals Trust Class C Distribution Plan adopted
June 23, 1997 with attached Schedule A effective June 23, 1997
filed as Exhibit (15)(i) to Post- Effective Amendment No. 67 and
incorporated herein by reference.
(16) Schedule for Computation of Performance Quotations filed
herewith.
(17)(a) Power of Attorney for Eaton Vance Municipals Trust dated April
22, 1997 filed as Exhibit (17)(a) to Post-Effective Amendment
No. 65 and incorporated herein by reference.
(b) Power of Attorney for Alabama Municipals Portfolio, Arizona
Municipals Portfolio, Arkansas Municipals Portfolio, California
Municipals Portfolio, Colorado Municipals Portfolio, Connecticut
Municipals Portfolio, Florida Municipals Portfolio, Georgia
Municipals Portfolio, Kentucky Municipals Portfolio, Louisiana
Municipals Portfolio, Maryland Municipals Portfolio,
Massachusetts Municipals Portfolio, Michigan Municipals
Portfolio, Minnesota Municipals Portfolio, Mississippi
Municipals Portfolio, Missouri Municipals Portfolio, National
Municipals Portfolio, New Jersey Municipals Portrfolio, New York
Municipals Portfolio, North Carolina Municipals Portfolio, Ohio
Municipals Portfolio, Oregon Municipals Portfolio, Pennsylvania
Municipals Portfolio, Rhode Island Municipals Portfolio, South
Carolina Municipals Portfolio, Tennessee Municipals Portfolio,
Texas Municipals Portfolio, Virginia Municipals Portfolio and
West Virginia Municipals Portfolio dated April 22, 1997 filed as
Exhibit (17)(b) to Post-Effective Amendment No. 65 and
incorporated herein by reference.
(18) Multiple Class Plan for Eaton Vance Funds dated June 23, 1997
filed as Exhibit (18) to Post-Effective Amendment No. 67 and
incorporated herein by reference.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not applicable
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
(1) (2)
TITLE OF CLASS NUMBER OF RECORD HOLDERS
hares of beneficial interest as of July 31, 1997
EV Classic National Municipals Fund 1,146
Eaton Vance Alabama Municipals Fund 1,753
Eaton Vance Arizona Municipals Fund 2,386
Eaton Vance Arkansas Municipals Fund 1,690
EV Marathon California Municipals Fund 6,232
Eaton Vance Colorado Municipals Fund 980
Eaton Vance Connecticut Municipals Fund 3,858
EV Marathon Florida Municipals Fund 10,541
Eaton Vance Georgia Municipals Fund 2,193
Eaton Vance Kentucky Municipals Fund 3,002
Eaton Vance Louisiana Municipals Fund 541
Eaton Vance Maryland Municipals Fund 2,682
EV Marathon Massachusetts Municipals Fund 5,882
Eaton Vance Michigan Municipals Fund 3,537
Eaton Vance Minnesota Municipals Fund 2,050
EV Marathon Mississippi Municipals Fund 541
Eaton Vance Missouri Municipals Fund 2,292
EV Marathon National Municipals Fund 38,191
Eaton Vance New Jersey Municipals Fund 9,011
EV Marathon New York Municipals Fund 12,682
Eaton Vance North Carolina Municipals Fund 3,820
EV Marathon Ohio Municipals Fund 6,334
Eaton Vance Oregon Municipals Fund 2,991
Eaton Vance Pennsylvania Municipals Fund 11,052
EV Marathon Rhode Island Municipals Fund 760
Eaton Vance South Carolina Municipals Fund 1,205
Eaton Vance Tennessee Municipals Fund 1,324
Eaton Vance Texas Municipals Fund 357
Eaton Vance Virginia Municipals Fund 4,146
EV Marathon West Virginia Municipals Fund 1,032
EV Traditional Alabama Municipals Fund 61
EV Traditional Arizona Municipals Fund 48
EV Traditional Arkansas Municipals Fund 36
EV Traditional California Municipals Fund 63
EV Traditional Colorado Municipals Fund 73
EV Traditional Connecticut Municipals Fund 68
EV Traditional Florida Municipals Fund 121
EV Traditional Georgia Municipals Fund 46
EV Traditional Kentucky Municipals Fund 35
EV Traditional Louisiana Municipals Fund 32
EV Traditional Maryland Municipals Fund 52
EV Traditional Massachusetts Municipals Fund 92
EV Traditional Michigan Municipals Fund 33
EV Traditional Minnesota Municipals Fund 79
EV Traditional Mississippi Municipals Fund 29
EV Traditional Missouri Municipals Fund 83
EV Traditional National Municipals Fund 759
EV Traditional New Jersey Municipals Fund 128
EV Traditional New York Municipals Fund 194
EV Traditional North Carolina Municipals Fund 94
EV Traditional Ohio Municipals Fund 45
EV Traditional Oregon Municipals Fund 40
EV Traditional Pennsylvania Municipals Fund 123
EV Traditional Rhode Island Municipals Fund 39
EV Traditional South Carolina Municipals Fund 23
EV Traditional Tennessee Municipals Fund 36
EV Traditional Texas Municipals Fund 7
EV Traditional Virginia Municipals Fund 43
EV Traditional West Virginia Municipals Fund 44
Massachusetts Municipal Bond Portfolio 32
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 Secretary
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 None
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, 200 Clarendon Street, 16th Floor Mail Code
ADM27, Boston, MA 02116 and its transfer agent, First Data Investor Services
Group, 4400 Computer Drive, Westborough, MA 01581-5123, with the exception of
certain corporate documents and portfolio trading documents which are in the
possession and custody, Eaton Vance Management, 24 Federal Street, Boston, MA
02110. Registrant is informed that all applicable accounts, books and documents
required to be maintained by registered investment advisers are in the custody
and possession of Eaton Vance Management and Boston Management and Research.
ITEM 31. MANAGEMENT SERVICES
Not applicable
ITEM 32. UNDERTAKINGS
The Registrant undertakes to furnish to each person to whom a prospectus is
delivered a copy of the latest annual report to shareholders, upon request and
without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Amendment to the Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this Amendment to its Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized in the City of Boston, and the
Commonwealth of Massachusetts, on the 18th day of August, 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) August 18, 1997
- --------------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and Accounting
/s/JAMES L. O'CONNOR Officer August 18, 1997
- --------------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee August 18, 1997
- --------------------------------------
DONALD R. DWIGHT
/s/JAMES B. HAWKES Trustee August 18, 1997
- --------------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee August 18, 1997
- --------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee August 18, 1997
- --------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee August 18, 1997
- --------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee August 18, 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 18th day of
August, 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) August 18, 1997
- --------------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and
/s/JAMES L. O'CONNOR Accounting Officer August 18, 1997
- --------------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee August 18, 1997
- --------------------------------------
DONALD R. DWIGHT
/s/JAMES B. HAWKES Trustee August 18, 1997
- --------------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee August 18, 1997
- --------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee August 18, 1997
- --------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee August 18, 1997
- --------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee August 18, 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 18th day of
August, 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) August 18, 1997
- --------------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and
/s/JAMES L. O'CONNOR Accounting Officer August 18, 1997
- --------------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee August 18, 1997
- --------------------------------------
DONALD R. DWIGHT
/s/JAMES B. HAWKES Trustee August 18, 1997
- --------------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee August 18, 1997
- --------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee August 18, 1997
- --------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee August 18, 1997
- --------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee August 18, 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 18th day of
August, 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) August 18, 1997
- --------------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and
/s/JAMES L. O'CONNOR Accounting Officer August 18, 1997
- --------------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee August 18, 1997
- --------------------------------------
DONALD R. DWIGHT
/s/JAMES B. HAWKES Trustee August 18, 1997
- --------------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee August 18, 1997
- --------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee August 18, 1997
- --------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee August 18, 1997
- --------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee August 18, 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 18th day of
August, 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) August 18, 1997
- --------------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and
/s/JAMES L. O'CONNOR Accounting Officer August 18, 1997
- --------------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee August 18, 1997
- --------------------------------------
DONALD R. DWIGHT
/s/JAMES B. HAWKES Trustee August 18, 1997
- --------------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee August 18, 1997
- --------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee August 18, 1997
- --------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee August 18, 1997
- --------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee August 18, 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 18th day of
August, 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) August 18, 1997
- --------------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and
/s/JAMES L. O'CONNOR Accounting Officer August 18, 1997
- --------------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee August 18, 1997
- --------------------------------------
DONALD R. DWIGHT
/s/JAMES B. HAWKES Trustee August 18, 1997
- --------------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee August 18, 1997
- --------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee August 18, 1997
- --------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee August 18, 1997
- --------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee August 18, 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 18th day of
August, 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) August 18, 1997
- --------------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and
/s/JAMES L. O'CONNOR Accounting Officer August 18, 1997
- --------------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee August 18, 1997
- --------------------------------------
DONALD R. DWIGHT
/s/JAMES B. HAWKES Trustee August 18, 1997
- --------------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee August 18, 1997
- --------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee August 18, 1997
- --------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee August 18, 1997
- --------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee August 18, 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 18th day of
August, 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) August 18, 1997
- --------------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and
/s/JAMES L. O'CONNOR Accounting Officer August 18, 1997
- --------------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee August 18, 1997
- --------------------------------------
DONALD R. DWIGHT
/s/JAMES B. HAWKES Trustee August 18, 1997
- --------------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee August 18, 1997
- --------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee August 18, 1997
- --------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee August 18, 1997
- --------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee August 18, 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 18th day of
August, 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) August 18, 1997
- --------------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and
/s/JAMES L. O'CONNOR Accounting Officer August 18, 1997
- --------------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee August 18, 1997
- --------------------------------------
DONALD R. DWIGHT
/s/JAMES B. HAWKES Trustee August 18, 1997
- --------------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee August 18, 1997
- --------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee August 18, 1997
- --------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee August 18, 1997
- --------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee August 18, 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 18th day of
August, 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) August 18, 1997
- --------------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and
/s/JAMES L. O'CONNOR Accounting Officer August 18, 1997
- --------------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee August 18, 1997
- --------------------------------------
DONALD R. DWIGHT
/s/JAMES B. HAWKES Trustee August 18, 1997
- --------------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee August 18, 1997
- --------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee August 18, 1997
- --------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee August 18, 1997
- --------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee August 18, 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 18th day of
August, 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) August 18, 1997
- --------------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and
/s/JAMES L. O'CONNOR Accounting Officer August 18, 1997
- --------------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee August 18, 1997
- --------------------------------------
DONALD R. DWIGHT
/s/JAMES B. HAWKES Trustee August 18, 1997
- --------------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee August 18, 1997
- --------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee August 18, 1997
- --------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee August 18, 1997
- --------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee August 18, 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 18th day of
August, 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) August 18, 1997
- --------------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and
/s/JAMES L. O'CONNOR Accounting Officer August 18, 1997
- --------------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee August 18, 1997
- --------------------------------------
DONALD R. DWIGHT
/s/JAMES B. HAWKES Trustee August 18, 1997
- --------------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee August 18, 1997
- --------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee August 18, 1997
- --------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee August 18, 1997
- --------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee August 18, 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 18th day of
August, 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) August 18, 1997
- --------------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and
/s/JAMES L. O'CONNOR Accounting Officer August 18, 1997
- --------------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee August 18, 1997
- --------------------------------------
DONALD R. DWIGHT
/s/JAMES B. HAWKES Trustee August 18, 1997
- --------------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee August 18, 1997
- --------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee August 18, 1997
- --------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee August 18, 1997
- --------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee August 18, 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 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.
(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. 68 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 caption "Independent
Certified Public Accountants" in the Statement of Additional Information of the
Registration Statement.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
August 25, 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>
EXHIBIT 16
<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 $952.93 $1,305.31 36.98% 6.73% 30.53% 5.67%
1 YEAR ENDED
02/28/97 02/29/96 $952.10 $1,004.10 5.46% 5.46% 0.41% 0.41%
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 4.75%.
** The average annual total return including the sales charge is calculated based on an initial investment of $1,000 less the
maximum initial sales charge of 4.75%.
*** The cumulative total return including the sales charge is calculated based on an initial investment of $1,000 less
maximum initial sales charge of 4.75%.
</TABLE>
<PAGE>
Exhibit 16
EV TRADITIONAL 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 $952.35 $1,251.05 31.37% 6.38% 25.10% 5.21%
1 YEAR ENDED
02/28/97 02/29/96 $952.33 $995.17 4.50% 4.50% -0.48% -0.48%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000 **
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period
P = an initial investment of $1,000 ***
* Initial investment less the current maximum sales charge of 4.75%.
** The average annual total return including the sales charge is calculated based on an initial investment of $1,000 less the
maximum initial sales charge of 4.75%.
*** The cumulative total return including the sales charge is calculated based on an initial investment of $1,000 less
maximum initial sales charge of 4.75%.
</TABLE>
<PAGE>
Exhibit 16
EV TRADITIONAL 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 $952.37 $1,254.09 31.68% 5.45% 25.41% 4.46%
5 YEARS ENDED
02/28/97 02/29/92 $952.64 $1,266.07 32.90% 5.85% 26.61% 4.83%
1 YEAR ENDED
02/28/97 02/29/96 $952.52 $1,002.89 5.29% 5.29% 0.29% 0.29%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000 **
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period
P = an initial investment of $1,000 ***
* Initial investment less the current maximum sales charge of 4.75%.
** The average annual total return including the sales charge is calculated based on an initial investment of $1,000 less the
maximum initial sales charge of 4.75%.
*** The cumulative total return including the sales charge is calculated based on an initial investment of $1,000 less
maximum initial sales charge of 4.75%.
</TABLE>
<PAGE>
Exhibit 16
EV TRADITIONAL 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 $952.93 $1,276.41 33.95% 5.79% 27.64% 4.81%
5 YEARS ENDED
02/28/97 02/29/92 $952.31 $1,286.11 35.05% 6.19% 28.61% 5.16%
1 YEAR ENDED
02/28/97 02/29/96 $952.05 $1,002.97 5.35% 5.35% 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 4.75%.
** The average annual total return including the sales charge is calculated based on an initial investment of $1,000 less the
maximum initial sales charge of 4.75%.
*** The cumulative total return including the sales charge is calculated based on an initial investment of $1,000 less
maximum initial sales charge of 4.75%.
</TABLE>
<PAGE>
Exhibit 16
EV TRADITIONAL 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 $952.67 $1,280.28 34.38% 6.93% 28.03% 5.76%
1 YEAR ENDED
02/28/97 02/29/96 $952.29 $1,013.36 6.41% 6.41% 1.34% 1.34%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000 **
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period
P = an initial investment of $1,000 ***
* Initial investment less the current maximum sales charge of 4.75%.
** The average annual total return including the sales charge is calculated based on an initial investment of $1,000 less the
maximum initial sales charge of 4.75%.
*** The cumulative total return including the sales charge is calculated based on an initial investment of $1,000 less
maximum initial sales charge of 4.75%.
</TABLE>
<PAGE>
Exhibit 16
EV TRADITIONAL 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 $952.33 $1,309.84 37.54% 6.49% 30.98% 5.47%
5 YEARS ENDED
02/28/97 02/29/92 $952.37 $1,311.14 37.68% 6.60% 31.11% 5.57%
1 YEAR ENDED
02/28/97 02/29/96 $952.75 $999.53 4.90% 4.90% -0.05% -0.05%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000 **
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period
P = an initial investment of $1,000 ***
* Initial investment less the current maximum sales charge of 4.75%.
** The average annual total return including the sales charge is calculated based on an initial investment of $1,000 less the
maximum initial sales charge of 4.75%.
*** The cumulative total return including the sales charge is calculated based on an initial investment of $1,000 less
maximum initial sales charge of 4.75%.
</TABLE>
<PAGE>
Exhibit 16
EV TRADITIONAL 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 $952.24 $1,325.60 39.21% 7.09% 32.56% 6.01%
1 YEAR ENDED
02/28/97 02/29/96 $952.15 $1,001.49 5.18% 5.18% 0.15% 0.15%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000 **
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period
P = an initial investment of $1,000 ***
* Initial investment less the current maximum sales charge of 4.75%.
** The average annual total return including the sales charge is calculated based on an initial investment of $1,000 less the
maximum initial sales charge of 4.75%.
*** The cumulative total return including the sales charge is calculated based on an initial investment of $1,000 less
maximum initial sales charge of 4.75%.
</TABLE>
<PAGE>
Exhibit 16
EV TRADITIONAL 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 $952.90 $1,295.65 35.96% 5.90% 29.56% 4.95%
5 YEARS ENDED
02/28/97 02/29/92 $952.75 $1,264.01 32.67% 5.82% 26.40% 4.80%
1 YEAR ENDED
02/28/97 02/29/96 $952.05 $995.77 4.59% 4.59% -0.42% -0.42%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000 **
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period
P = an initial investment of $1,000 ***
* Initial investment less the current maximum sales charge of 4.75%.
** The average annual total return including the sales charge is calculated based on an initial investment of $1,000 less the
maximum initial sales charge of 4.75%.
*** The cumulative total return including the sales charge is calculated based on an initial investment of $1,000 less
maximum initial sales charge of 4.75%.
</TABLE>
<PAGE>
Exhibit 16
EV TRADITIONAL 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 $952.20 $1,306.83 37.24% 6.29% 30.68% 5.29%
5 YEARS ENDED
02/28/97 02/29/92 $952.33 $1,300.06 36.51% 6.42% 30.01% 5.39%
1 YEAR ENDED
02/28/97 02/29/96 $952.57 $987.17 3.63% 3.63% -1.28% -1.28%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000 **
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period
P = an initial investment of $1,000 ***
* Initial investment less the current maximum sales charge of 4.75%.
** The average annual total return including the sales charge is calculated based on an initial investment of $1,000 less the
maximum initial sales charge of 4.75%.
*** The cumulative total return including the sales charge is calculated based on an initial investment of $1,000 less
maximum initial sales charge of 4.75%.
</TABLE>
<PAGE>
Exhibit 16
EV TRADITIONAL 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 $952.70 $1,233.81 29.51% 6.04% 23.38% 4.88%
1 YEAR ENDED
02/28/97 02/29/96 $952.66 $1,004.01 5.39% 5.39% 0.40% 0.40%
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 4.75%.
** The average annual total return including the sales charge is calculated based on an initial investment of $1,000 less the
maximum initial sales charge of 4.75%.
*** The cumulative total return including the sales charge is calculated based on an initial investment of $1,000 less
maximum initial sales charge of 4.75%.
</TABLE>
<PAGE>
Exhibit 16
EV TRADITIONAL 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 $952.61 $1,263.49 32.63% 6.46% 26.35% 5.32%
1 YEAR ENDED
02/28/97 02/29/96 $952.33 $1,002.53 5.27% 5.27% 0.25% 0.25%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000 **
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period
P = an initial investment of $1,000 ***
* Initial investment less the current maximum sales charge of 4.75%.
** The average annual total return including the sales charge is calculated based on an initial investment of $1,000 less the
maximum initial sales charge of 4.75%.
*** The cumulative total return including the sales charge is calculated based on an initial investment of $1,000 less
maximum initial sales charge of 4.75%.
</TABLE>
<PAGE>
Exhibit 16
EV TRADITIONAL 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 $952.67 $1,348.94 41.60% 6.41% 34.89% 5.49%
5 YEARS ENDED
02/28/97 02/29/92 $952.48 $1,267.71 33.09% 5.88% 26.77% 4.86%
1 YEAR ENDED
02/28/97 02/29/96 $952.23 $994.58 4.44% 4.44% -0.54% -0.54%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000 **
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period
P = an initial investment of $1,000 ***
* Initial investment less the current maximum sales charge of 4.75%.
** The average annual total return including the sales charge is calculated based on an initial investment of $1,000 less the
maximum initial sales charge of 4.75%.
*** The cumulative total return including the sales charge is calculated based on an initial investment of $1,000 less
maximum initial sales charge of 4.75%.
</TABLE>
<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
<ACCUM-APPREC-OR-DEPREC> 2563
<NET-ASSETS> 67577
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 1907
<EXPENSES-NET> 388
<NET-INVESTMENT-INCOME> 1519
<REALIZED-GAINS-CURRENT> (191)
<APPREC-INCREASE-CURRENT> 1524
<NET-CHANGE-FROM-OPS> 2852
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1525)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 72
<NUMBER-OF-SHARES-REDEEMED> 783
<SHARES-REINVESTED> 70
<NET-CHANGE-IN-ASSETS> (5291)
<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> 388
<AVERAGE-NET-ASSETS> 70584
<PER-SHARE-NAV-BEGIN> 10.19
<PER-SHARE-NII> .222
<PER-SHARE-GAIN-APPREC> .191
<PER-SHARE-DIVIDEND> (.222)
<PER-SHARE-DISTRIBUTIONS> (.001)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.38
<EXPENSE-RATIO> 1.63
<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> 12-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> AUG-31-1996
<INVESTMENTS-AT-COST> 72042
<INVESTMENTS-AT-VALUE> 73080
<RECEIVABLES> 59
<ASSETS-OTHER> 2
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 73141
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 273
<TOTAL-LIABILITIES> 273
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 74506
<SHARES-COMMON-STOCK> 7151
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (6)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (2671)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1039
<NET-ASSETS> 72868
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 4220
<EXPENSES-NET> 836
<NET-INVESTMENT-INCOME> 3384
<REALIZED-GAINS-CURRENT> 287
<APPREC-INCREASE-CURRENT> (461)
<NET-CHANGE-FROM-OPS> 3210
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (3545)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (6)
<NUMBER-OF-SHARES-SOLD> 274
<NUMBER-OF-SHARES-REDEEMED> 1169
<SHARES-REINVESTED> 159
<NET-CHANGE-IN-ASSETS> (1614)
<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> 836
<AVERAGE-NET-ASSETS> 77928
<PER-SHARE-NAV-BEGIN> 10.25
<PER-SHARE-NII> .450
<PER-SHARE-GAIN-APPREC> (.038)
<PER-SHARE-DIVIDEND> (.471)
<PER-SHARE-DISTRIBUTIONS> (.001)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.19
<EXPENSE-RATIO> 1.54
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 13
<NAME> EV MARATHON GEORGIA MUNICIPALS FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> FEB-28-1997
<INVESTMENTS-AT-COST> 94143
<INVESTMENTS-AT-VALUE> 99770
<RECEIVABLES> 29
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 99799
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 416
<TOTAL-LIABILITIES> 416
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 101814
<SHARES-COMMON-STOCK> 9907
<SHARES-COMMON-PRIOR> 11705
<ACCUMULATED-NII-CURRENT> 90
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (8148)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5627
<NET-ASSETS> 99383
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 2905
<EXPENSES-NET> 559
<NET-INVESTMENT-INCOME> 2346
<REALIZED-GAINS-CURRENT> (25)
<APPREC-INCREASE-CURRENT> 2419
<NET-CHANGE-FROM-OPS> 4740
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2354)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 216
<NUMBER-OF-SHARES-REDEEMED> 1316
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<NET-CHANGE-IN-ASSETS> (7609)
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<GROSS-EXPENSE> 559
<AVERAGE-NET-ASSETS> 103994
<PER-SHARE-NAV-BEGIN> 9.81
<PER-SHARE-NII> .225
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<PER-SHARE-DIVIDEND> (.225)
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<EXPENSE-RATIO> 1.58
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 13
<NAME> EV MARATHON GEORGIA MUNICIPALS FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> AUG-31-1996
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<PAID-IN-CAPITAL-COMMON> 111810
<SHARES-COMMON-STOCK> 10905
<SHARES-COMMON-PRIOR> 0
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<ACCUMULATED-NET-GAINS> (8123)
<OVERDISTRIBUTION-GAINS> 0
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<NET-ASSETS> 106993
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<NET-INVESTMENT-INCOME> 5271
<REALIZED-GAINS-CURRENT> 7604
<APPREC-INCREASE-CURRENT> (243)
<NET-CHANGE-FROM-OPS> 5788
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<NUMBER-OF-SHARES-SOLD> 374
<NUMBER-OF-SHARES-REDEEMED> 1990
<SHARES-REINVESTED> 244
<NET-CHANGE-IN-ASSETS> (14339)
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<AVERAGE-NET-ASSETS> 115806
<PER-SHARE-NAV-BEGIN> 9.79
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<EXPENSE-RATIO> 1.52
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 14
<NAME> EV MARATHON KENTUCKY MUNICIPALS FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> FEB-28-1997
<INVESTMENTS-AT-COST> 119479
<INVESTMENTS-AT-VALUE> 126601
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<PAID-IN-CAPITAL-COMMON> 124763
<SHARES-COMMON-STOCK> 12344
<SHARES-COMMON-PRIOR> 13598
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<OVERDISTRIBUTION-GAINS> 0
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<NET-ASSETS> 126250
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<NET-INVESTMENT-INCOME> 2921
<REALIZED-GAINS-CURRENT> (522)
<APPREC-INCREASE-CURRENT> 3762
<NET-CHANGE-FROM-OPS> 6161
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<NUMBER-OF-SHARES-SOLD> 212
<NUMBER-OF-SHARES-REDEEMED> 1193
<SHARES-REINVESTED> 150
<NET-CHANGE-IN-ASSETS> (5107)
<ACCUMULATED-NII-PRIOR> 0
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<AVERAGE-NET-ASSETS> 129470
<PER-SHARE-NAV-BEGIN> 9.97
<PER-SHARE-NII> .228
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<PER-SHARE-DIVIDEND> (.223)
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<PER-SHARE-NAV-END> 10.23
<EXPENSE-RATIO> 1.56
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 14
<NAME> EV MARATHON KENTUCKY MUNICIPALS FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> AUG-31-1996
<INVESTMENTS-AT-COST> 128416
<INVESTMENTS-AT-VALUE> 131776
<RECEIVABLES> 72
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<TOTAL-ASSETS> 131848
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<SENIOR-LONG-TERM-DEBT> 0
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<TOTAL-LIABILITIES> 491
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 133182
<SHARES-COMMON-STOCK> 13176
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (198)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (4987)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3360
<NET-ASSETS> 131357
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 7637
<EXPENSES-NET> 1476
<NET-INVESTMENT-INCOME> 6161
<REALIZED-GAINS-CURRENT> (1157)
<APPREC-INCREASE-CURRENT> 1295
<NET-CHANGE-FROM-OPS> 6299
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (6161)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (155)
<NUMBER-OF-SHARES-SOLD> 561
<NUMBER-OF-SHARES-REDEEMED> 2048
<SHARES-REINVESTED> 332
<NET-CHANGE-IN-ASSETS> (11749)
<ACCUMULATED-NII-PRIOR> 0
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<GROSS-EXPENSE> 1478
<AVERAGE-NET-ASSETS> 138512
<PER-SHARE-NAV-BEGIN> 9.99
<PER-SHARE-NII> .450
<PER-SHARE-GAIN-APPREC> (.009)
<PER-SHARE-DIVIDEND> (.450)
<PER-SHARE-DISTRIBUTIONS> (.011)
<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> 24
<NAME> EV MARATHON LOUISIANA MUNICIPALS FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> FEB-28-1997
<INVESTMENTS-AT-COST> 31481
<INVESTMENTS-AT-VALUE> 32847
<RECEIVABLES> 24
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<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 32871
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
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<TOTAL-LIABILITIES> 102
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 33622
<SHARES-COMMON-STOCK> 3214
<SHARES-COMMON-PRIOR> 3294
<ACCUMULATED-NII-CURRENT> 41
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (2259)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1366
<NET-ASSETS> 32769
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 976
<EXPENSES-NET> 188
<NET-INVESTMENT-INCOME> 787
<REALIZED-GAINS-CURRENT> (122)
<APPREC-INCREASE-CURRENT> 866
<NET-CHANGE-FROM-OPS> 1530
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (776)
<DISTRIBUTIONS-OF-GAINS> 0
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<NUMBER-OF-SHARES-SOLD> 82
<NUMBER-OF-SHARES-REDEEMED> 215
<SHARES-REINVESTED> 35
<NET-CHANGE-IN-ASSETS> (224)
<ACCUMULATED-NII-PRIOR> 0
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<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
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<GROSS-EXPENSE> 188
<AVERAGE-NET-ASSETS> 32951
<PER-SHARE-NAV-BEGIN> 9.96
<PER-SHARE-NII> .243
<PER-SHARE-GAIN-APPREC> .236
<PER-SHARE-DIVIDEND> (.239)
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<PER-SHARE-NAV-END> 10.20
<EXPENSE-RATIO> 1.49
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 24
<NAME> EV MARATHON LOUISIANA MUNICIPALS FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> AUG-31-1996
<INVESTMENTS-AT-COST> 32588
<INVESTMENTS-AT-VALUE> 33088
<RECEIVABLES> 8
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<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 33098
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
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<TOTAL-LIABILITIES> 105
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 34601
<SHARES-COMMON-STOCK> 3311
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 29
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (2137)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 500
<NET-ASSETS> 32993
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 1951
<EXPENSES-NET> 363
<NET-INVESTMENT-INCOME> 1588
<REALIZED-GAINS-CURRENT> (338)
<APPREC-INCREASE-CURRENT> 266
<NET-CHANGE-FROM-OPS> 1516
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1600)
<DISTRIBUTIONS-OF-GAINS> 0
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<NUMBER-OF-SHARES-SOLD> 395
<NUMBER-OF-SHARES-REDEEMED> 350
<SHARES-REINVESTED> 77
<NET-CHANGE-IN-ASSETS> 1158
<ACCUMULATED-NII-PRIOR> 0
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<OVERDISTRIB-NII-PRIOR> 0
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<GROSS-EXPENSE> 365
<AVERAGE-NET-ASSETS> 32950
<PER-SHARE-NAV-BEGIN> 9.98
<PER-SHARE-NII> .486
<PER-SHARE-GAIN-APPREC> (.016)
<PER-SHARE-DIVIDEND> (.490)
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<EXPENSE-RATIO> 1.34
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 16
<NAME> EV MARATHON MARYLAND MUNICIPALS FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> FEB-28-1997
<INVESTMENTS-AT-COST> 105124
<INVESTMENTS-AT-VALUE> 108664
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<TOTAL-ASSETS> 108723
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<TOTAL-LIABILITIES> 461
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 106958
<SHARES-COMMON-STOCK> 10285
<SHARES-COMMON-PRIOR> 10902
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<ACCUMULATED-NET-GAINS> (2384)
<OVERDISTRIBUTION-GAINS> 0
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<NET-ASSETS> 108261
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<EXPENSES-NET> 589
<NET-INVESTMENT-INCOME> 2387
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<APPREC-INCREASE-CURRENT> 2179
<NET-CHANGE-FROM-OPS> 4800
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<DISTRIBUTIONS-OF-INCOME> (2399)
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<NUMBER-OF-SHARES-SOLD> 278
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<SHARES-REINVESTED> 122
<NET-CHANGE-IN-ASSETS> (982)
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<PER-SHARE-NAV-BEGIN> 10.30
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 16
<NAME> EV MARATHON MARYLAND MUNICIPALS FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> AUG-31-1996
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<PAID-IN-CAPITAL-COMMON> 110341
<SHARES-COMMON-STOCK> 10608
<SHARES-COMMON-PRIOR> 0
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<ACCUMULATED-NET-GAINS> (2618)
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<NET-ASSETS> 109244
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<APPREC-INCREASE-CURRENT> (575)
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 20
<NAME> EV MARATHON MISSOURI MUNICIPALS FUND
<MULTIPLIER> 1000
<S> <C>
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 20
<NAME> EV MARATHON MISSOURI MUNICIPALS FUND
<MULTIPLIER> 1000
<S> <C>
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</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
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<SHARES-COMMON-STOCK> 16059
<SHARES-COMMON-PRIOR> 18096
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<ACCUMULATED-NET-GAINS> (12093)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 10252
<NET-ASSETS> 163219
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<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
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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
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<GROSS-EXPENSE> 884
<AVERAGE-NET-ASSETS> 167651
<PER-SHARE-NAV-BEGIN> 9.97
<PER-SHARE-NII> .227
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<PER-SHARE-DIVIDEND> (.228)
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<PER-SHARE-NAV-END> 10.16
<EXPENSE-RATIO> 1.57
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<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
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<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
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<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
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<NUMBER-OF-SHARES-SOLD> 703
<NUMBER-OF-SHARES-REDEEMED> 2988
<SHARES-REINVESTED> 413
<NET-CHANGE-IN-ASSETS> (18561)
<ACCUMULATED-NII-PRIOR> 0
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<OVERDIST-NET-GAINS-PRIOR> 0
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<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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<TOTAL-ASSETS> 121915
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<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
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<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
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<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
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
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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
<DISTRIBUTIONS-OF-INCOME> (1292)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 144
<NUMBER-OF-SHARES-REDEEMED> 458
<SHARES-REINVESTED> 56
<NET-CHANGE-IN-ASSETS> (1239)
<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> 311
<AVERAGE-NET-ASSETS> 56919
<PER-SHARE-NAV-BEGIN> 10.02
<PER-SHARE-NII> .232
<PER-SHARE-GAIN-APPREC> .250
<PER-SHARE-DIVIDEND> (.232)
<PER-SHARE-DISTRIBUTIONS> 0
<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
<RECEIVABLES> 31
<ASSETS-OTHER> 3
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 57464
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 247
<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)
<DISTRIBUTIONS-OF-GAINS> 0
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<NUMBER-OF-SHARES-SOLD> 462
<NUMBER-OF-SHARES-REDEEMED> 870
<SHARES-REINVESTED> 120
<NET-CHANGE-IN-ASSETS> (2738)
<ACCUMULATED-NII-PRIOR> 0
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<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
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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
<INVESTMENTS-AT-VALUE> 53561
<RECEIVABLES> 151
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 53712
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
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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)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (2132)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2287
<NET-ASSETS> 53432
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
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<EXPENSES-NET> 301
<NET-INVESTMENT-INCOME> 1191
<REALIZED-GAINS-CURRENT> (173)
<APPREC-INCREASE-CURRENT> 1431
<NET-CHANGE-FROM-OPS> 2448
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<DISTRIBUTIONS-OF-INCOME> (1210)
<DISTRIBUTIONS-OF-GAINS> 0
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<NUMBER-OF-SHARES-SOLD> 130
<NUMBER-OF-SHARES-REDEEMED> 416
<SHARES-REINVESTED> 60
<NET-CHANGE-IN-ASSETS> (1101)
<ACCUMULATED-NII-PRIOR> 0
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<OVERDISTRIB-NII-PRIOR> 0
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<GROSS-EXPENSE> 301
<AVERAGE-NET-ASSETS> 54255
<PER-SHARE-NAV-BEGIN> 10.15
<PER-SHARE-NII> .226
<PER-SHARE-GAIN-APPREC> .244
<PER-SHARE-DIVIDEND> (.226)
<PER-SHARE-DISTRIBUTIONS> (.004)
<RETURNS-OF-CAPITAL> 0
<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
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> AUG-31-1996
<INVESTMENTS-AT-COST> 53878
<INVESTMENTS-AT-VALUE> 54734
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<TOTAL-ASSETS> 54737
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<TOTAL-LIABILITIES> 204
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 55642
<SHARES-COMMON-STOCK> 5371
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (6)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1959)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 856
<NET-ASSETS> 54533
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 3136
<EXPENSES-NET> 612
<NET-INVESTMENT-INCOME> 2524
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<APPREC-INCREASE-CURRENT> 342
<NET-CHANGE-FROM-OPS> 2919
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2618)
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<SHARES-REINVESTED> 130
<NET-CHANGE-IN-ASSETS> (2951)
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<AVERAGE-NET-ASSETS> 56672
<PER-SHARE-NAV-BEGIN> 10.22
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<EXPENSE-RATIO> 1.51
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 11
<NAME> EV MARATHON VIRGINIA MUNICIPALS FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> FEB-28-1997
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<SHARES-REINVESTED> 186
<NET-CHANGE-IN-ASSETS> (6254)
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<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 11
<NAME> EV MARATHON VIRGINIA MUNICIPALS FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> AUG-31-1996
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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.
<TABLE> <S> <C>
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
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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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