<PAGE>
As filed with the Securities and Exchange Commission on December 28, 1998
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. 77 [x]
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940 [x]
AMENDMENT NO. 79 [x]
EATON VANCE MUNICIPALS TRUST
----------------------------
(Exact Name of Registrant as Specified in Charter)
24 Federal Street, Boston, Massachusetts 02110
----------------------------------------------
(Address of Principal Executive Offices)
(617) 482-8260
--------------
(Registrant's Telephone Number)
ALAN R. DYNNER, 24 Federal Street, Boston, Massachusetts 02110
-------------------
(Name and Address of Agent for Service)
It is proposed that this filing will become effective pursuant to Rule 485
(check appropriate box):
[ ] immediately upon filing pursuant to paragraph (b)
[x] on January 1, 1999 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to 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.
LOGO
Mutual Funds
for
People
Who Pay
Taxes
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
MUTUAL FUNDS PROVIDING TAX-EXEMPT INCOME
PROSPECTUS DATED
JANUARY 1, 1999
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR DETERMINED WHETHER THIS PROSPECTUS IS TRUTHFUL OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Information in this prospectus
<S> <C> <C> <C>
Page Page
- ------------------------------------------------------------------------------------
Fund Summaries 2 Sales Charges 17
Investment Objectives, Policies and Risks 15 Redeeming Shares 19
Management and Organization 16 Shareholder Account Features 19
Valuing Shares 17 Tax Information 20
Purchasing Shares 17 Financial Highlights 25
- ------------------------------------------------------------------------------------
</TABLE>
THIS PROSPECTUS CONTAINS IMPORTANT INFORMATION ABOUT THE
FUNDS AND THE SERVICES AVAILABLE TO SHAREHOLDERS.
PLEASE SAVE IT FOR REFERENCE.
<PAGE>
FUND SUMMARIES
This section summarizes the investment objectives, and principal strategies and
risks of investing in an Eaton Vance Municipal Fund. You will find more specific
information about each Fund in the pages that follow.
INVESTMENT OBJECTIVES AND PRINCIPAL STRATEGIES
The purpose of each Fund is to provide current income exempt from regular
federal income tax and from particular state or local income or other taxes.
Each Fund primarily invests in investment grade municipal obligations. The
portfolio manager will purchase and sell securities to maintain a competitive
yield and to enhance return based upon the relative value of the securities in
the marketplace. The portfolio manager may also trade securities to minimize
taxable capital gains to shareholders.
Each Fund currently invests its assets in a separate registered investment
company with the same investment objective and policies as that Fund.
PRINCIPAL RISK FACTORS
The value of Fund shares may change when interest rates change. When interest
rates rise, the value of Fund shares typically will decline. The Fund's yield
will also fluctuate over time.
Each Fund is non-diversified, which means that it may invest a larger portion of
its assets in the obligations of a limited number of issuers than a diversified
fund. Because a significant portion of assets is invested in obligations of
issuers located in a single state, the Fund is sensitive to factors affecting
that state, such as changes in the economy, decreases in tax collection or the
tax base, legislation which limits taxes and changes in issuer credit ratings.
In addition, each Fund may invest up to 25% of its assets in obligations of
below investment grade quality (so-called "junk bonds"). Because lower quality
obligations are more sensitive to the financial soundness of their issuers than
higher quality obligations, Fund shares may fluctuate more in value than shares
of a fund investing solely in high quality obligations. The credit ratings
assigned a state's general obligations (if any) by Standard & Poor's Ratings
Group ("S&P"), Moody's Investors Service, Inc. ("Moody's") and Fitch/IBCA
("Fitch") are contained in the Fund-specific summaries that follow this page.
Each Fund may concentrate in certain types of municipal obligations (such as
housing bonds, hospital bonds or utility bonds), so Fund shares could be
affected by events that adversely affect a particular sector. No Fund is a
complete investment program and you may lose money by investing. An investment
in a Fund is not a deposit in a bank and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
2
<PAGE>
EATON VANCE ALABAMA MUNICIPALS FUND
The Alabama Fund seeks to provide current income exempt from regular federal
income taxes and Alabama state personal income taxes. Alabama general
obligations are currently rated AA, Aa and AA, by S&P, Moody's and Fitch,
respectively.
PERFORMANCE INFORMATION. The following bar chart and table provide information
about the Alabama Fund's performance, including a comparison of the Fund's
performance to the performance of a national index of municipal bonds. Although
past performance is no guarantee of future results, this performance information
demonstrates the risk that the value of your investment will change. The
following returns are for Class B shares for each calendar year through December
31, 1997 and do not a reflect sales charge. If the sales charge was reflected,
the returns would be lower.
13.8% -8.3% 17.7% 1.8% 8.0%
1993 1994 1195 1196 1197
The Fund's highest quarterly total return was 8.07% for the quarter ended March
31, 1995, and its lowest quarterly total return was ---7.33% for the quarter
ended March 31, 1994. The year-to-date total return through the end of the most
recent calendar quarter (December 31, 1997 to September 30, 1998) was 3.87%. For
the 30-days ended August 31, 1998, the yield and tax-equivalent yield (assuming
a combined state and federal tax rate of 34.45%) for Class A shares were 3.99%
and 6.06%, respectively, and for Class B shares were 3.39% and 5.17%,
respectively. For current yield information call 1-800-225-6265.
<TABLE>
<CAPTION>
One Five Life of
Average Annual Total Return as of December 31, 1997 Year Years Fund
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A Shares 3.6% 5.3% 6.1%
Class B Shares 3.2% 5.9% 6.7%
Lehman Brothers Municipal Bond Index 9.2% 7.4% 7.7%
</TABLE>
These returns reflect the maximum sales charge for Class A (4.75%) and any
applicable CDSC for Class B. The Class A performance shown above for the period
prior to December 7, 1993 is the performance of Class B shares, adjusted for the
sales charge that applies to Class A shares (but not adjusted for any other
differences in the expenses of the two classes). Class B shares commenced
operations on May 1, 1992. Life of Fund returns are calculated from May 31,
1992. The Lehman Brothers Municipal Bond Index is an unmanaged index of
municipal bonds. Investors cannot invest directly in an Index.
Alabama Fund Fees and Expenses. These tables describe the fees and expenses
that you may pay if you buy and hold shares.
<TABLE>
<CAPTION>
Shareholder Fees
(fees paid directly from your investment) Class A Class B
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (as a percentage of offering price) 4.75% None
Maximum Deferred Sales Charge (as a percentage of the
lower of net asset value at time of purchase or
time of redemption) None 5.00%
Sales Charge Imposed on Reinvested Distributions None None
Exchange Fee None None
</TABLE>
<TABLE>
<CAPTION>
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets) Class A Class B
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Management Fees 0.37% 0.37%
Distribution and Service (12b-1) Fees 0.00% 0.94%
Other Expenses* 0.41% 0.26%
----- -----
Total Annual Fund Operating Expenses 0.78% 1.57%
</TABLE>
*Other Expenses for Class A shares includes a service fee of 0.15%.
Long-term holders of Class B shares may pay more than the economic equivalent of
the front-end sales charge permitted by the National Association of Securities
Dealers, Inc.
EXAMPLE. This Example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The Example also assumes
that your investment has a 5% return each year and that the operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Class A shares $551 $712 $ 888 $ 1,395
Class B shares $660 $896 $ 1,055 $ 1,867
You would pay the following expenses if you did not redeem your shares:
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Class A shares $551 $712 $888 $ 1,395
Class B shares $160 $496 $855 $ 1,867
3
<PAGE>
EATON VANCE ARKANSAS MUNICIPALS FUND
The Arkansas Fund seeks to provide current income exempt from regular federal
income taxes and Arkansas state personal income taxes. Arkansas general
obligation bonds are rated Aa and AA by Moody's and S&P. Fitch does not
currently rate Arkansas general obligation bonds.
PERFORMANCE INFORMATION. The following bar chart and table provide information
about the Arkansas Fund's performance, including a comparison of the Fund's
performance to the performance of a national index of municipal bonds. Although
past performance is no guarantee of future results, this performance information
demonstrates the risk that the value of your investment will change. The
following returns are for Class B shares for each calendar year through December
31, 1997 and do not reflect a sales charge. If the sales charge was reflected,
the returns would be lower.
13.8% -8.3% 17.7% 1.8% 8.0%
1993 1994 1995 1996 1997
The Fund's highest quarterly total return was 8.10% for the quarter ended March
31, 1995, and its lowest quarterly total return was ---7.47% for the quarter
ended March 31, 1994. The year-to-date total return through the end of the most
recent calendar quarter (December 31, 1997 to September 30, 1998) was 4.34%. For
the 30-days ended August 31, 1998, the yield and tax-equivalent yield (assuming
a combined state and federal tax rate of 35.83%) for Class A shares were 4.39%
and 6.84%, respectively, and for Class B shares were 3.75% and 5.84%,
respectively. For current yield information call 1-800-225-6265.
<TABLE>
<CAPTION>
One Five Life of
Average Annual Total Return as of December 31, 1997 Year Years Fund
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A Shares 3.6% 5.7% 5.9%
Class B Shares 3.0% 5.8% 6.2%
Lehman Brothers Municipal Bond Index 9.2% 7.4% 7.7%
</TABLE>
These returns reflect the maximum sales charge for Class A (4.75%) and any
applicable CDSC for Class B. The Class A performance shown above for the period
prior to February 9, 1994 is the performance of Class B shares, adjusted for the
sales charge that applies to Class A shares (but not adjusted for any other
differences in the expenses of the two classes). Class B shares commenced
operations on October 2, 1992. Life of Fund returns are calculated from October
31, 1992. The Lehman Brothers Municipal Bond Index is an unmanaged index of
municipal bonds. Investors cannot invest directly in an Index.
ARKANSAS FUND FEES AND EXPENSES. These tables describe the fees and expenses
that you may pay if you buy and hold shares.
<TABLE>
Shareholder Fees
(fees paid directly from your investment) Class A Class B
- -----------------------------------------------------------------------------------------------
<S> <C>
Maximum Sales Charge (as a percentage of offering price) 4.75% None
Maximum Deferred Sales Charge (as a percentage of the lower
of net asset value at time of purchase or time of redemption) None 5.00%
Sales Charge Imposed on Reinvested Distributions None None
Exchange Fee None None
</TABLE>
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets) Class A Class B
- --------------------------------------------------------------------------------
Management Fees 0.31% 0.31%
Distribution and Service (12b-1) Fees 0.00% 0.94%
Other Expenses* 0.42% 0.28%
----- -----
Total Annual Fund Operating Expenses 0.73% 1.53%
* Other Expenses for Class A shares includes a service fee of 0.14%.
Long-term holders of Class B shares may pay more than the economic equivalent of
the front-end sales charge permitted by the National Association of Securities
Dealers, Inc.
EXAMPLE. This Example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The Example also assumes
that your investment has a 5% return each year and that the operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Class A shares $546 $697 $ 862 $ 1,338
Class B shares $656 $883 $1,034 $ 1,824
You would pay the following expenses if you did not redeem your shares:
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Class A shares $546 $697 $862 $ 1,338
Class B shares $156 $483 $834 $ 1,824
4
<PAGE>
Eaton Vance Georgia Municipals Fund
The Georgia Fund seeks to provide current income exempt from regular federal
income taxes and Georgia state personal income taxes. Georgia general obligation
bonds are rated AAA, Aaa and AAA by S&P, Moody's and Fitch, respectively.
PERFORMANCE INFORMATION. The following bar chart and table provide information
about the Georgia Fund's performance, including a comparison of the Fund's
performance to the performance of a national index of municipal bonds. Although
past performance is no guarantee of future results, this performance information
demonstrates the risk that the value of your investment will change. The
following returns are for Class B shares for each calendar year through December
31, 1997 and do not reflect a sales charge. If the sales charge was reflected,
the returns would be lower.
7.5% 12.1% -9.6% 16.4% 2.9% 8.2%
1992 1993 1994 1995 1996 1997
The Fund's highest quarterly total return was 7.57% for the quarter ended March
31, 1995, and its lowest quarterly total return was ---7.11% for the quarter
ended March 31, 1994. The year-to-date total return through the end of the most
recent calendar quarter (December 31, 1997 to September 30, 1998) was 4.44%. For
the 30-days ended August 31, 1998, the yield and tax-equivalent yield (assuming
a combined state and federal tax rate of 35.14%) for Class A shares were 4.32%
and 6.66%, respectively, and for Class B shares were 3.79% and 5.84%,
respectively. For current yield information call 1-800-225-6265.
<TABLE>
One Five Life of
Average Annual Total Return as of December 31, 1997 Year Years Fund
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A Shares 3.6% 4.7% 5.1%
Class B Shares 3.2% 5.3% 5.9%
Lehman Brothers Municipal Bond Index 9.2% 7.4% 7.6%
</TABLE>
These returns reflect the maximum sales charge for Class A (4.75%) and any
applicable CDSC for Class B. The Class A performance shown above for the period
prior to December 7, 1993 is the performance of Class B shares, adjusted for the
sales charge that applies to Class A shares (but not adjusted for any other
differences in the expenses of the two classes). Class B shares commenced
operations on December 23, 1991. Life of Fund returns are calculated from
December 31, 1991. The Lehman Brothers Municipal Bond Index is an unmanaged
index of municipal bonds. Investors cannot invest directly in an Index.
GEORGIA FUND FEES AND EXPENSES. These tables describe the fees and expenses that
you may pay if you buy and hold shares.
<TABLE>
<CAPTION>
Shareholder Fees
(fees paid directly from your investment) Class A Class B
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (as a percentage of offering price) 4.75% None
Maximum Deferred Sales Charge (as a percentage of the lower
of net asset value at time of purchase or time of redemption) None 5.00%
Sales Charge Imposed on Reinvested Distributions None None
Exchange Fee None None
</TABLE>
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets) Class A Class B
- --------------------------------------------------------------------------------
Management Fees 0.37% 0.37%
Distribution and Service (12b-1) Fees 0.00% 0.93%
Other Expenses* 0.47% 0.27%
----- -----
Total Annual Fund Operating Expenses 0.84% 1.57%
* Other Expenses for Class A shares includes a service fee of 0.20%.
Long-term holders of Class B shares may pay more than the economic equivalent of
the front-end sales charge permitted by the National Association of Securities
Dealers, Inc.
EXAMPLE. This Example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The Example also assumes
that your investment has a 5% return each year and that the operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Class A shares $557 $730 919 $1,463
Class B shares $660 $896 $1,055 $1,867
You would pay the following expenses if you did not redeem your shares:
1 Year 3 Years 5 Years 10 Years
- -------------------------------------------------------------------------------
Class A shares $557 $730 $919 $1,463
Class B shares $160 $496 $855 $1,867
5
<PAGE>
EATON VANCE KENTUCKY MUNICIPALS FUND
The Kentucky Fund seeks to provide current income exempt from regular federal
income taxes and Kentucky state personal income taxes in the form of an
investment exempt from the Kentucky intangibles tax. There are currently no
Kentucky general obligations outstanding.
PERFORMANCE INFORMATION. The following bar chart and table provide information
about the Kentucky Fund's performance, including a comparison of the Fund's
performance to the performance of a national index of municipal bonds. Although
past performance is no guarantee of future results, this performance information
demonstrates the risk that the value of your investment will change. The
following returns are for Class B shares for each calendar year through December
31, 1997 and do not reflect a sales charge. If the sales charge was reflected,
the returns would be lower.
7.3% 12.6% -9.3% 18.0% 2.4% 8.92%
1992 1993 1994 1995 1996 1997
The Fund's highest quarterly total return was 8.21% for the quarter ended March
31, 1995, and its lowest quarterly total return was ---7.52% for the quarter
ended March 31, 1994. The year-to-date total return through the end of the most
recent calendar quarter (December 31, 1997 to September 30, 1998) was 4.27%. For
the 30-days ended August 31, 1998, the yield and tax-equivalent yield (assuming
a combined state and federal tax rate of 35.14%) for Class A shares were 4.07%
and 6.28%, respectively, and for Class B shares were 3.55% and 5.47%,
respectively. For current yield information call 1-800-225-6265.
<TABLE>
<CAPTION>
One Five Life of
Average Annual Total Return as of December 31, 1997 Year Years Fund
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A Shares 4.4% 5.2% 5.5%
Class B Shares 3.9% 5.8% 6.3%
Lehman Brothers Municipal Bond Index 9.2% 7.4% 7.6%
</TABLE>
These returns reflect the maximum sales charge for Class A (4.75%) and any
applicable CDSC for Class B. The Class A performance shown above for the period
prior to December 7, 1993 is the performance of Class B shares, adjusted for the
sales charge that applies to Class A shares (but not adjusted for any other
differences in the expenses of the two classes). Class B shares commenced
operations on December 23, 1991. Life of Fund returns are calculated from
December 31, 1991. The Lehman Brothers Municipal Bond Index is an unmanaged
index of municipal bonds. Investors cannot invest directly in an Index.
KENTUCKY FUND FEES AND EXPENSES. These tables describe the fees and expenses
that you may pay if you buy and hold shares.
Shareholder Fees
(fees paid directly from your investment) Class A Class B
- --------------------------------------------------------------------------------
Maximum Sales Charge (as a percentage of offering price) 4.75% None
Maximum Deferred Sales Charge (as a percentage of the
lower of net asset value at time of purchase or time
of redemption) None 5.00%
Sales Charge Imposed on Reinvested Distributions None None
Exchange Fee None None
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets) Class A Class B
- --------------------------------------------------------------------------------
Management Fees 0.40% 0.40%
Distribution and Service (12b-1) Fees 0.00% 0.94%
Other Expenses* 0.43% 0.23%
----- -----
Total Annual Fund Operating Expenses 0.83% 1.57%
* Other Expenses for Class A shares includes a service fee of 0.20%.
Long-term holders of Class B shares may pay more than the economic equivalent of
the front-end sales charge permitted by the National Association of Securities
Dealers, Inc.
EXAMPLE. This Example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The Example also assumes
that your investment has a 5% return each year and that the operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Class A shares $556 $727 $ 914 $1,452
Class B shares $660 $896 $1,055 $1,867
You would pay the following expenses if you did not redeem your shares:
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Class A shares $556 $727 $914 $1,452
Class B shares $160 $496 $855 $1,867
6
<PAGE>
EATON VANCE LOUISIANA MUNICIPALS FUND
The Louisiana Fund seeks to provide current income exempt from regular federal
income taxes and Louisiana state individual and corporate income taxes.
Louisiana general obligation bonds are rated A- (with a stable outlook) and A3
by S&P and Moody's, respectively.
PERFORMANCE INFORMATION. The following bar chart and table provide information
about the Louisiana Fund's performance, including a comparison of the Fund's
performance to the performance of a national index of municipal bonds. Although
past performance is no guarantee of future results, this performance information
demonstrates the risk that the value of your investment will change. The
following returns are for Class B shares for each calendar year through December
31, 1997 and do not reflect a sales charge. If the sales charge was reflected,
the returns would be lower.
15.3% -10.3% 16.4% 3.1% 8.3%
1993 1994 1995 1996 1997
The Fund's highest quarterly total return was 8.07% for the quarter ended March
31, 1995, and its lowest quarterly total return was ---8.62% for the quarter
ended March 31, 1994. The year-to-date total return through the end of the most
recent calendar quarter (December 31, 1997 to September 30, 1998) was 4.87%. For
the 30-days ended August 31, 1998, the yield and tax-equivalent yield (assuming
a combined state and federal tax rate of 35.14%) for Class A shares were 4.64%
and 7.15%, respectively, and for Class B shares were 4.12% and 6.35%,
respectively. For current yield information call 1-800-225-6265.
<TABLE>
<CAPTION>
One Five Life of
Average Annual Total Return as of December 31, 1997 Year Years Fund
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A Shares 4.1% 6.1% 6.4%
Class B Shares 3.3% 5.8% 6.3%
Lehman Brothers Municipal Bond Index 9.2% 7.4% 7.7%
</TABLE>
These returns reflect the maximum sales charge for Class A (4.75%) and any
applicable CDSC for Class B. The Class A performance shown above for the period
prior to February 14, 1994 is the performance of Class B shares, adjusted for
the sales charge that applies to Class A shares (but not adjusted for any other
differences in the expenses of the two classes). Class B shares commenced
operations on October 2, 1992. Life of Fund returns are calculated from October
31, 1992. The Lehman Brothers Municipal Bond Index is an unmanaged index of
municipal bonds. Investors cannot invest directly in an Index.
Louisiana Fund Fees and Expenses. These tables describe the fees and expenses
that you may pay if you buy and hold shares.
Shareholder Fees
(fees paid directly from your investment) Class A Class B
- --------------------------------------------------------------------------------
Maximum Sales Charge (as a percentage of offering price) 4.75% None
Maximum Deferred Sales Charge (as a percentage of the
lower of net asset value at time of purchase or time
of redemption) None 5.00%
Sales Charge Imposed on Reinvested Distributions None None
Exchange Fee None None
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets) Class A Class B
- --------------------------------------------------------------------------------
Management Fees 0.22% 0.22%
Distribution and Service (12b-1) Fees 0.00% 0.93%
Other Expenses* 0.49% 0.34%
----- -----
Total Annual Fund Operating Expenses 0.71% 1.49%
* Other Expenses for Class A shares includes a service fee of 0.15%.
Long-term holders of Class B shares may pay more than the economic equivalent of
the front-end sales charge permitted by the National Association of Securities
Dealers, Inc.
EXAMPLE. This Example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The Example also assumes
that your investment has a 5% return each year and that the operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Class A shares $544 $691 $ 851 $1,316
Class B shares $652 $871 $1,013 $1,779
You would pay the following expenses if you did not redeem your shares:
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Class A shares $544 $691 $851 $1,316
Class B shares $152 $471 $813 $1,779
7
<PAGE>
EATON VANCE MARYLAND MUNICIPALS FUND
The Maryland Fund seeks to provide current income exempt from regular federal
income taxes and Maryland state and local income taxes. Maryland general
obligation bonds are rated AAA, Aaa and AAA by S&P, Moody's and Fitch,
respectively.
PERFORMANCE INFORMATION. The following bar chart and table provide information
about the Maryland Fund's performance, including a comparison of the Fund's
performance to the performance of a national index of municipal bonds. Although
past performance is no guarantee of future results, this performance information
demonstrates the risk that the value of your investment will change. The
following returns are for Class B shares for each calendar year through December
31, 1997 and do not reflect a sales charge. If the sales charge was reflected,
the returns would be lower.
13.2% -9.9% 18.9% 2.8% 8.6%
1993 1994 1995 1996 1997
The Fund's highest quarterly total return was 8.67% for the quarter ended March
31, 1995, and its lowest quarterly total return was ---8.20% for the quarter
ended March 31, 1994. The year-to-date total return through the end of the most
recent calendar quarter (December 31, 1997 to September 30, 1998) was 3.97%. For
the 30-days ended August 31, 1998, the yield and tax-equivalent yield (assuming
a combined state and federal tax rate of 36.38%) for Class A shares were 4.10%
and 6.44%, respectively, and for Class B shares were 3.58% and 5.63%,
respectively. For current yield information call 1-800-225-6265.
<TABLE>
<CAPTION>
One Five Life of
Average Annual Total Return as of December 31, 1997 Year Years Fund
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A Shares 4.3% 5.6% 6.1%
Class B Shares 3.6% 5.9% 6.6%
Lehman Brothers Municipal Bond Index 9.2% 7.4% 7.8%
</TABLE>
These returns reflect the maximum sales charge for Class A (4.75%) and any
applicable CDSC for Class B. The Class A performance shown above for the period
prior to December 10, 1993 is the performance of Class B shares, adjusted for
the sales charge that applies to Class A shares (but not adjusted for any other
differences in the expenses of the two classes). Class B shares commenced
operations on February 3, 1992. Life of Fund returns are calculated from
February 29, 1992. The Lehman Brothers Municipal Bond Index is an unmanaged
index of municipal bonds. Investors cannot invest directly in an Index.
Maryland Fund Fees and Expenses. These tables describe the fees and expenses
that you may pay if you buy and hold shares.
Shareholder Fees
(fees paid directly from your investment) Class A Class B
- --------------------------------------------------------------------------------
Maximum Sales Charge (as a percentage of offering price) 4.75% None
Maximum Deferred Sales Charge (as a percentage of the
lower of net asset value at time of purchase or time
of redemption) None 5.00%
Sales Charge Imposed on Reinvested Distributions None None
Exchange Fee None None
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets) Class A Class B
- --------------------------------------------------------------------------------
Management Fees 0.38% 0.38%
Distribution and Service (12b-1) Fees 0.00% 0.93%
Other Expenses* 0.44% 0.25%
----- -----
Total Annual Fund Operating Expenses 0.82% 1.56%
* Other Expenses for Class A shares includes a service fee of 0.19%.
Long-term holders of Class B shares may pay more than the economic equivalent of
the front-end sales charge permitted by the National Association of Securities
Dealers, Inc.
EXAMPLE. This Example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The Example also assumes
that your investment has a 5% return each year and that the operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Class A shares $555 $724 $ 908 $1,440
Class B shares $659 $893 $1,050 $1,856
You would pay the following expenses if you did not redeem your shares:
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Class A shares $555 $724 $908 $1,440
Class B shares $159 $493 $850 $1,856
8
<PAGE>
EATON VANCE MISSOURI MUNICIPALS FUND
The Missouri Fund seeks to provide current income exempt from regular federal
income taxes and Missouri state personal income taxes. Missouri general
obligation bonds are rated AAA, Aaa and AAA by S&P, Moody's and Fitch,
respectively.
PERFORMANCE INFORMATION. The following bar chart and table provide information
about the Missouri Fund's performance, including a comparison of the Fund's
performance to the performance of a national index of municipal bonds. Although
past performance is no guarantee of future results, this performance information
demonstrates the risk that the value of your investment will change from
year-to-year. The following returns are for Class B shares for each calendar
year through December 31, 1997 and do not reflect a sales charge. If the sales
charge was reflected, the returns would be lower.
13.6% -9.3% 19.4% 2.8% 9.1%
1993 1994 1995 1996 1997
The Fund's highest quarterly total return was 8.55% for the quarter ended March
31, 1995, and its lowest quarterly total return was ---7.72% for the quarter
ended March 31, 1994. The total return through the end of the most recent
calendar quarter (December 31, 1997 to September 30, 1998) was 4.91%. For the
30-days ended August 31, 1998, the yield and tax-equivalent yield (assuming a
combined state and federal tax rate of 35.14%) for Class A shares were 4.25% and
6.55%, respectively, and for Class B shares were 3.70% and 5.70%, respectively.
For current yield information call 1-800-225-6265.
<TABLE>
<CAPTION>
One Five Life of
Average Annual Total Return as of December 31, 1997 Year Years Fund
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A Shares 4.8% 5.9% 6.7%
Class B Shares 4.1% 6.3% 7.2%
Lehman Brothers Municipal Bond Index 9.2% 7.4% 7.7%
</TABLE>
These returns reflect the maximum sales charge for Class A (4.75%) and any
applicable CDSC for Class B. The Class A performance shown above for the period
prior to December 7, 1993 is the performance of Class B shares, adjusted for the
sales charge that applies to Class A shares (but not adjusted for any other
differences in the expenses of the two classes). Class B shares commenced
operations on May 1, 1992. Life of Fund returns are calculated from May 31,
1992. The Lehman Brothers Municipal Bond Index is an unmanaged index of
municipal bonds. Investors cannot invest directly in an Index.
Missouri Fund Fees and Expenses. These tables describe the fees and expenses
that you may pay if you buy and hold shares.
Shareholder Fees
(fees paid directly from your investment) Class A Class B
- -------------------------------------------------------------------------------
Maximum Sales Charge (as a percentage of offering price) 4.75% None
Maximum Deferred Sales Charge (as a percentage of the
lower of net asset value at time of purchase or time
of redemption) None 5.00%
Sales Charge Imposed on Reinvested Distributions None None
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets) Class A Class B
- --------------------------------------------------------------------------------
Management Fees 0.35% 0.35%
Distribution and Service (12b-1) Fees 0.00% 0.93%
Other Expenses* 0.44% 0.28%
----- ------
Total Annual Fund Operating Expenses 0.79% 1.56%
* Other Expenses for Class A shares includes a service fee of 0.16%.
Long-term holders of Class B shares may pay more than the economic equivalent of
the front-end sales charge permitted by the National Association of Securities
Dealers, Inc.
EXAMPLE. This Example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The Example also assumes
that your investment has a 5% return each year and that the operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Class A shares $552 $715 $ 893 $1,406
Class B shares $659 $893 $1,050 $1,856
You would pay the following expenses if you did not redeem your shares:
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Class A shares $552 $715 $893 $1,406
Class B shares $159 $493 $850 $1,856
9
<PAGE>
EATON VANCE NORTH CAROLINA MUNICIPALS FUND
The North Carolina Fund seeks to provide current income exempt from regular
federal income taxes and North Carolina state personal income taxes. North
Carolina general obligation bonds are rated Aaa, AAA and AAA by Moody's, S&P and
Fitch, respectively.
PERFORMANCE INFORMATION. The following bar chart and table provide information
about the North Carolina Fund's performance, including a comparison of the
Fund's performance to the performance of a national index of municipal bonds.
Although past performance is no guarantee of future results, this performance
information demonstrates the risk that the value of your investment will change.
The following returns are for Class B shares for each calendar year through
December 31, 1997 and do not reflect a sales charge. If the sales charge was
reflected, the returns would be lower.
2.6% 8.1% 11.5% -9.3% 16.7% 2.0% 8.5%
1991 1992 1993 1994 1995 1996 1997
The Fund's highest quarterly total return was 7.90% for the quarter ended March
31, 1995, and its lowest quarterly total return was ---7.11% for the quarter
ended March 31, 1994. The year-to-date total return through the end of the most
recent calendar quarter (December 31, 1997 to September 30, 1998) was 4.98%. For
the 30-days ended August 31, 1998, the yield and tax- equivalent yield (assuming
a combined state and federal tax rate of 36.35%) for Class A shares were 4.22%
and 6.63%, respectively, and for Class B shares were 3.61% and 5.67%,
respectively. For current yield information call 1-800-225-6265.
<TABLE>
<CAPTION>
One Five Life of
Average Annual Total Return as of December 31, 1997 Year Years Fund
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A Shares 4.2% 4.8% 5.6%
Class B Shares 3.5% 5.2% 6.2%
Lehman Brothers Municipal Bond Index 9.2% 7.4% 7.8%
</TABLE>
These returns reflect the maximum sales charge for Class A (4.75%) and any
applicable CDSC for Class B. The Class A performance shown above for the period
prior to December 7, 1993 is the performance of Class B shares, adjusted for the
sales charge that applies to Class A shares (but not adjusted for any other
differences in the expenses of the two classes). Class B shares commenced
operations on October 23, 1991. Life of Fund returns are calculated from October
31, 1991. The Lehman Brothers Municipal Bond Index is an unmanaged index of
municipal bonds. Investors cannot invest directly in an Index.
NORTH CAROLINA FUND FEES AND EXPENSES. These tables describe the fees and
expenses that you may pay if you buy and hold shares.
Shareholder Fees
(fees paid directly from your investment) Class A Class B
- --------------------------------------------------------------------------------
Maximum Sales Charge (as a percentage of offering price) 4.75% None
Maximum Deferred Sales Charge (as a percentage of the
lower of net asset value at time of purchase or time
of redemption) None 5.00%
Sales Charge Imposed on Reinvested Distributions None None
Exchange Fee None None
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets) Class A Class B
- --------------------------------------------------------------------------------
Management Fees 0.42% 0.42%
Distribution and Service (12b-1) Fees 0.00% 0.94%
Other Expenses* 0.41% 0.22%
----- -----
Total Annual Fund Operating Expenses 0.83% 1.58%
* Other Expenses for Class A shares includes a service fee of 0.19%.
Long-term holders of Class B shares may pay more than the economic equivalent of
the front-end sales charge permitted by the National Association of Securities
Dealers, Inc.
EXAMPLE. This Example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The Example also assumes
that your investment has a 5% return each year and that the operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Class A shares $556 $727 $914 $1,452
Class B shares $661 $899 $1,060 $1,878
You would pay the following expenses if you did not redeem your shares:
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Class A shares $556 $727 $914 $1,452
Class B shares $161 $499 $860 $1,878
10
<PAGE>
EATON VANCE OREGON MUNICIPALS FUND
The Oregon Fund seeks to provide current income exempt from regular federal
income taxes and Oregon state personal income taxes. Oregon general obligation
bonds are rated AA-, Aa and AA by S&P, Moody's and Fitch, respectively.
PERFORMANCE INFORMATION. The following bar chart and table provide information
about the Oregon Fund's performance, including a comparison of the Fund's
performance to the performance of a national index of municipal bonds. Although
past performance is no guarantee of future results, this performance information
demonstrates the risk that the value of your investment will change. The
following returns are for Class B shares for each calendar year through December
31, 1997 and do not reflect a sales charge. If the sales charge was reflected,
the returns would be lower.
9.4% 13.4% -9.5% 18.0% 1.7% 7.2%
1992 1992 1994 1995 1996 1997
The Fund's highest quarterly total return was 8.41% for the quarter ended March
31, 1995, and its lowest quarterly total return was ---7.40% for the quarter
ended March 31, 1994. The year-to-date total return through the end of the most
recent calendar quarter (December 31, 1997 to September 30, 1998) was 5.04%. For
the 30-days ended August 31, 1998, the yield and tax-equivalent yield (assuming
a combined state and federal tax rate of 37.21%) for Class A shares were 4.29%
and 6.67%, respectively, and for Class B shares were 3.64% and 5.80%,
respectively. For current yield information call 1-800-225-6265.
<TABLE>
<CAPTION>
One Five Life of
Average Annual Total Return as of December 31, 1997 Year Years Fund
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A Shares 2.9% 5.1% 5.8%
Class B Shares 2.2% 5.4% 6.3%
Lehman Brothers Municipal Bond Index 9.2% 7.4% 7.6%
</TABLE>
These returns reflect the maximum sales charge for Class A (4.75%) and any
applicable CDSC for Class B. The Class A performance shown above for the period
prior to December 28, 1993 is the performance of Class B shares, adjusted for
the sales charge that applies to Class A shares (but not adjusted for any other
differences in the expenses of the two classes). Class B shares commenced
operations on December 24, 1991. Life of Fund returns are calculated from
December 31, 1991. The Lehman Brothers Municipal Bond Index is an unmanaged
index of municipal bonds. Investors cannot invest directly in an Index.
OREGON FUND FEES AND EXPENSES. These tables describe the fees and expenses that
you may pay if you buy and hold shares.
Shareholder Fees
(fees paid directly from your investment) Class A Class B
- --------------------------------------------------------------------------------
Maximum Sales Charge (as a percentage of offering price) 4.75% None
Maximum Deferred Sales Charge (as a percentage of the
lower of net asset value at time of purchase or time
of redemption) None 5.00%
Sales Charge Imposed on Reinvested Distributions None None
Exchange Fee None None
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets) Class A Class B
- --------------------------------------------------------------------------------
Management Fees 0.39% 0.39%
Distribution and Service (12b-1) Fees 0.00% 0.93%
Other Expenses* 0.39% 0.24%
----- -----
Total Annaul Fund Operating Expenses 0.78% 1.56%
* Other Expenses for Class A shares includes a service fee of 0.15%.
Long-term holders of Class B shares may pay more than the economic equivalent of
the front-end sales charge permitted by the National Association of Securities
Dealers, Inc.
EXAMPLE. This Example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The Example also assumes
that your investment has a 5% return each year and that the operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Class A shares $551 $712 $ 888 $1,395
Class B shares $659 $893 $1,050 $1,856
You would pay the following expenses if you did not redeem your shares:
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Class A shares $551 $712 $888 $1,395
Class B shares $159 $493 $850 $1,856
11
<PAGE>
EATON VANCE SOUTH CAROLINA MUNICIPALS FUND
The South Carolina Fund seeks to provide current income exempt from regular
federal income taxes and South Carolina state personal income taxes. South
Carolina general obligation bonds are rated Aaa, AAA and AAA, by Moody's, S&P
and Fitch, respectively.
Performance Information. The following bar chart and table provide information
about the South Carolina Fund's performance, including a comparison of the
Fund's performance to the performance of a national index of municipal bonds.
Although past performance is no guarantee of future results, this performance
information demonstrates the risk that the value of your investment will change.
The following returns are for Class B shares for each calendar year through
December 31, 1997 and do not reflect a sales charge. If the sales charge was
reflected, the returns would be lower.
13.4% -9.7% 17.3% 2.5% 8.3%
1993 1994 1995 1996 1997
The Fund's highest quarterly total return was 7.89% for the quarter ended March
31, 1995, and its lowest quarterly total return was ---7.80% for the quarter
ended March 31, 1994. The year-to-date total return through the end of the most
recent calendar quarter (December 31, 1997 to September 30, 1998) was 5.10%. For
the 30-days ended August 31, 1998, the yield and tax-equivalent yield (assuming
a combined state and federal tax rate of 35.83%) for Class A shares were 4.25%
and 6.62%, respectively, and for Class B shares were 3.74% and 5.83%,
respectively. For current yield information call 1-800-225-6265.
<TABLE>
<CAPTION>
One Five Life of
Average Annual Total Return as of December 31, 1997 Year Years Fund
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A Shares 3.6% 5.4% 5.5%
Class B Shares 3.3% 5.6% 5.9%
Lehman Brothers Municipal Bond Index 9.2% 7.4% 7.7%
</TABLE>
These returns reflect the maximum sales charge for Class A (4.75%) and any
applicable CDSC for Class B. The Class A performance shown above for the period
prior to February 14, 1994 is the performance of Class B shares, adjusted for
the sales charge that applies to Class A shares (but not adjusted for any other
differences in the expenses of the two classes). Class B shares commenced
operations on October 2, 1992. Life of Fund returns are calculated from October
31, 1992. The Lehman Brothers Municipal Bond Index is an unmanaged index of
municipal bonds. Investors cannot invest directly in an Index.
SOUTH CAROLINA FUND FEES AND EXPENSES. These tables describe the fees and
expenses that you may pay if you buy and hold shares.
Shareholder Fees
(fees paid directly from your investment) Class A Class B
- -------------------------------------------------------------------------------
Maximum Sales Charge (as a percentage of offering price) 4.75% None
Maximum Deferred Sales Charge (as a percentage of the
lower of net asset value at time of purchase or time
of redemption) None 5.00%
Sales Charge Imposed on Reinvested Distributions None None
Exchange Fee None None
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets) Class A Class B
- --------------------------------------------------------------------------------
Management Fees 0.29% 0.29%
Distribution and Service (12b-1) Fees 0.00% 0.94%
Other Expenses* 0.48% 0.29%
----- -----
Total Annual Fund Operating Expenses 0.77% 1.52%
* Other Expenses for Class A shares includes a service fee of 0.19%.
Long-term holders of Class B shares may pay more than the economic equivalent of
the front-end sales charge permitted by the National Association of Securities
Dealers, Inc.
EXAMPLE. This Example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The Example also assumes
that your investment has a 5% return each year and that the operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Class A shares $550 $709 $ 883 $1,384
Class B shares $655 $880 $1,029 $1,813
You would pay the following expenses if you did not redeem your shares:
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Class A shares $550 $709 $883 $1,384
Class B shares $155 $480 $829 $1,813
12
<PAGE>
EATON VANCE TENNESSEE MUNICIPALS FUND
The Tennessee Fund seeks to provide current income exempt from regular federal
income taxes and Tennessee state personal income taxes. Tennessee's general
obligation bonds are rated AA+, Aaa and AAA, by S&P, Moody's and Fitch,
respectively.
Performance Information. The following bar chart and table provide information
about the Tennessee Fund's performance, including a comparison of the Fund's
performance to the performance of a national index of municipal bonds. Although
past performance is no guarantee of future results, this performance information
demonstrates the risk that the value of your investment will change. The
following returns are for Class B shares for each calendar year through December
31, 1997 and do not reflect a sales charge. If the sales charge was reflected,
the returns would be lower.
14.5% -9.6% 18.9% 2.6% 8.4%
1993 1994 1995 1996 1997
The Fund's highest quarterly total return was 8.58% for the quarter ended March
31, 1995, and its lowest quarterly total return was ---7.57% for the quarter
ended March 31, 1994. The year-to-date total return through the end of the most
recent calendar quarter (December 31, 1997 to September 30, 1998) was 4.42%. For
the 30-days ended August 31, 1998, the yield and tax-equivalent yield (assuming
a combined state and federal tax rate of 35.14%) for Class A shares were 4.33%
and 6.63%, respectively, and for Class B shares were 3.71% and 5.72%,
respectively. For current yield information call 1-800-225-6265.
<TABLE>
<CAPTION>
One Five Life of
Average Annual Total Return as of December 31, 1997 Year Years Fund
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A Shares 4.2% 5.8% 6.1%
Class B Shares 3.4% 6.2% 6.5%
Lehman Brothers Municipal Bond Index 9.2% 7.4% 7.4%
</TABLE>
These returns reflect the maximum sales charge for Class A (4.75%) and any
applicable CDSC for Class B. The Class A performance shown above for the period
prior to December 9, 1993 is the performance of Class B shares, adjusted for the
sales charge that applies to Class A shares (but not adjusted for any other
differences in the expenses of the two classes). Class B shares commenced
operations on August 25, 1992. Life of Fund returns are calculated from August
31, 1992. The Lehman Brothers Municipal Bond Index is an unmanaged index of
municipal bonds. Investors cannot invest directly in an Index.
TENNESSEE FUND FEES AND EXPENSES. These tables describe the fees and expenses
that you may pay if you buy and hold shares.
Shareholder Fees
(fees paid directly from your investment) Class A Class B
- --------------------------------------------------------------------------------
Maximum Sales Charge (as a percentage of offering price) 4.75% None
Maximum Deferred Sales Charge (as a percentageof the
lower of net asset value at time of purchase or
time of redemption) None 5.00%
Sales Charge Imposed on Reinvested Distributions None None
Exchange Fee None None
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets) Class A Class B
- --------------------------------------------------------------------------------
Management Fees 0.30% 0.30%
Distribution and Service (12b-1) Fees 0.00% 0.93%
Other Expenses* 0.37% 0.29%
----- -----
Total Annual Fund Operating Expenses 0.67% 1.52%
* Other Expenses for Class A shares includes a service fee of 0.08%.
Long-term holders of Class B shares may pay more than the economic equivalent of
the front-end sales charge permitted by the National Association of Securities
Dealers, Inc.
EXAMPLE. This Example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The Example also assumes
that your investment has a 5% return each year and that the operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Class A shares $540 $ 679 $ 830 $ 1,270
Class B shares $655 $ 880 $ 1,029 $ 1,813
You would pay the following expenses if you did not redeem your shares:
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Class A shares $540 $679 $830 $1,270
Class B shares $155 $480 $829 $1,813
13
<PAGE>
EATON VANCE VIRGINIA MUNICIPALS FUND
The Virginia Fund seeks to provide current income exempt from regular federal
income taxes and Virginia state personal income taxes. Virginia general
obligation bonds are rated Aaa, AAA and AAA by Moody's, S&P and Fitch,
respectively.
PERFORMANCE INFORMATION. The following bar chart and table provide information
about the Virginia Fund's performance, including a comparison of the Fund's
performance to the performance of a national index of municipal bonds. Although
past performance is no guarantee of future results, this performance information
demonstrates the risk that the value of your investment will change. The
following returns are for Class B shares for each calendar year through December
31, 1997 and do not reflect a sales charge. If the sales charge was reflected,
the returns would be lower.
6.8% 7.1% 11.6% -8.9% 18.0% 2.2% 8.1%
1991 1992 1993 1994 1995 1996 1997
The Fund's highest quarterly total return was 8.10% for the quarter ended March
31, 1995, and its lowest quarterly total return was ---6.51% for the quarter
ended March 31, 1994. The year-to-date total return through the end of the most
recent calendar quarter (December 31, 1997 to September 30, 1998) was 4.50%. For
the 30-days ended August 31, 1998, the yield and tax-equivalent yield (assuming
a combined state and federal tax rate of 34.97%) for Class A shares were 4.08%
and 6.27%, respectively, and for Class B shares were 3.54% and 5.44%,
respectively. For current yield information call 1-800-225-6265.
<TABLE>
<CAPTION>
One Five Life of
Average Annual Total Return as of December 31, 1997 Year Years Fund
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A Shares 3.9% 5.0% 6.1%
Class B Shares 3.1% 5.5% 6.7%
Lehman Brothers Municipal Bond Index 9.2% 7.4% 8.1%
</TABLE>
These returns reflect the maximum sales charge for Class A (4.75%) and any
applicable CDSC for Class B. The Class A performance shown above for the period
prior to December 17, 1993 is the performance of Class B shares, adjusted for
the sales charge that applies to Class A shares (but not adjusted for any other
differences in the expenses of the two classes). Class B shares commenced
operations on July 26, 1991. Life of Fund returns are calculated from July 31,
1991. The Lehman Brothers Municipal Bond Index is an unmanaged index of
municipal bonds. Investors cannot invest directly in an Index.
VIRGINIA FUND FEES AND EXPENSES. These tables describe the fees and expenses
that you may pay if you buy and hold shares.
Shareholder Fees
(fees paid directly from your investment) Class A Class B
- --------------------------------------------------------------------------------
Maximum Sales Charge (as a percentage of offering price) 4.75% None
Maximum Deferred Sales Charge (as a percentage of the
lower of net asset value at time of purchase or
time of redemption) None 5.00%
Sales Charge Imposed on Reinvested Distributions None None
Exchange Fee None None
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets) Class A Class B
- --------------------------------------------------------------------------------
Management Fees 0.41% 0.41%
Distribution and Service (12b-1) Fees 0.00% 0.94%
Other Expenses* 0.44% 0.24%
----- -----
Total Annual Fund Operating Expenses 0.85% 1.59%
* Other Expenses for Class A shares includes a service fee of 0.20%.
Long-term holders of Class B shares may pay more than the economic equivalent of
the front-end sales charge permitted by the National Association of Securities
Dealers, Inc.
EXAMPLE. This Example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The Example also assumes
that your investment has a 5% return each year and that the operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Class A shares $558 $733 $ 924 $1,474
Class B shares $662 $902 $1,066 $1,889
You would pay the following expenses if you did not redeem your shares:
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Class A shares $558 $733 $924 $1,474
Class B shares $162 $502 $866 $1,889
14
<PAGE>
INVESTMENT OBJECTIVES, POLICIES AND RISKS
The investment objective of each Fund is to provide current income exempt from
regular federal income tax and particular state or local income or other taxes.
Each Fund seeks to achieve its objective by investing 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. This is a fundamental policy of each Fund which only
may be changed with shareholder approval. Each Fund's investment objective and
other policies may be changed by the Trustees without shareholder approval. Each
Fund currently seeks to meet its investment objective by investing in a separate
open-end management company (a "Portfolio") that has the same objective and
policies as the Fund.
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 municipal obligations is (in the opinion of the issuer's counsel)
exempt from regular federal income tax. Interest income from certain types of
municipal obligations may be subject to the federal alternative minimum tax (the
"AMT") for individuals. Distributions to corporate investors may also be subject
to the AMT. The Funds may not be suitable for investors subject to the AMT.
At least 75% of net assets will normally be invested in municipal obligations
rated at least investment grade at the time of investment (which are those rated
Baa or higher by Moody's, or BBB or higher by either S&P or Fitch) or, if
unrated, are determined by the investment adviser to be of at least investment
grade quality. The balance of 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 in unrated municipal obligations considered to be of comparable
quality by the investment adviser. Municipal obligations rated Baa or BBB or
below have speculative characteristics. Also, changes in economic conditions or
other circumstances are more likely to reduce the capacity of issuers of
lower-rated obligations to make principal and interest payments.
Under normal conditions, each Portfolio invests at least 65% of its total assets
in obligations issued by its respective state or its political subdivisions,
agencies, authorities and instrumentalities. Municipal obligations of issuers in
a single state may be adversely affected by economic developments (including
insolvency of an issuer) and by legislation and other governmental activities in
that state. Each Portfolio may also invest in municipal obligations issued by
the governments of Puerto Rico, the U.S. Virgin Islands and Guam. Moody's
currently rates Puerto Rico general obligations Baa, while S&P rates them A.
Each Portfolio may invest 25% or more of its total assets in municipal
obligations of the same type (such as those involving leases, housing finance,
public housing, municipal utilities, hospital and health facilities or
industrial development). This may make a Portfolio more susceptible to adverse
economic, political or regulatory occurrences affecting a particular category of
issuer.
The net asset value will change in response to changes in prevailing interest
rates and changes in the value of securities held. The value of securities held
will be affected by the credit quality of the issuer of the obligation, and
general economic and business conditions that affect the specific economic
sector of the issuer. Changes by rating agencies in the rating assigned to an
obligation may also affect the value of an obligation. Lower rated obligations
may be subject to greater price volatility than higher rated obligations. The
amount of information available about the financial condition of issuers of
municipal obligations generally is not as extensive as that available for
publicly-traded corporations.
Each Portfolio may purchase derivative instruments, which derive their value
from another instrument, security or index. For example, a 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").
Although they are volatile and may expose a Portfolio to leverage risk, inverse
floaters typically offer the potential for yields exceeding the yields available
on fixed rate bonds with comparable credit quality and maturity. Each Portfolio
may also purchase and sell various kinds of financial futures contracts and
options thereon to hedge against changes in interest rates or as a substitute
for the purchase of portfolio securities. The use of derivative instruments for
both hedging and investment purposes involves a risk of loss or depreciation due
to a variety of factors including counterparty risk, unexpected market, interest
rate or securities price movements, and tax and regulatory constraints.
Each Portfolio may invest in zero coupon bonds, which do not pay income
currently. The values of these bonds are subject to greater fluctuation in
response to changes in market interest rates than bonds which pay interest
currently. In addition, each Portfolio may also temporarily borrow up to 5% of
the value of its total assets to satisfy redemption requests or settle
securities transactions.
15
<PAGE>
The investment adviser's process for selecting securities for purchase and sale
is research intensive and emphasizes the creditworthiness of the issuer or other
person obligated to repay the obligation. The investment adviser seeks to invest
in obligations that it believes will retain their value in varying interest rate
climates.
Like most mutual funds, the Funds and Portfolios rely on computers in conducting
daily business and processing information. There is a concern that on January 1,
2000 some computer programs will be unable to recognize the new year and as a
consequence computer malfunctions will occur. Eaton Vance is taking steps that
it believes are reasonably designed to address this potential problem and to
obtain satisfactory assurance from other service providers to the Funds and
Portfolios that they are also taking steps to address the issue. There can,
however, be no assurance that these steps will be sufficient to avoid any
adverse impact on the Funds and Portfolios or shareholders. The Year 2000
concern may also adversely impact issuers of obligations held by a Portfolio.
MANAGEMENT AND ORGANIZATION
MANAGEMENT. Each Portfolio's investment adviser is Boston Management and
Research ("BMR"), a subsidiary of Eaton Vance Management, 24 Federal Street,
Boston, Massachusetts 02110. Eaton Vance has been managing assets since 1924 and
managing mutual funds since 1931. Eaton Vance and its subsidiaries currently
manage over $30 billion on behalf of mutual funds, institutional clients and
individuals.
The investment adviser manages the investments of each Portfolio and provides
related office facilities and personnel. Under its investment advisory agreement
with each Portfolio, BMR receives a monthly advisory fee equal to the aggregate
of a daily asset based fee and a daily income based fee. The fees are applied on
the basis of the following categories.
<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, 1998, each Portfolio paid advisory fees
equivalent to the percentage of average daily net assets stated below.
Net Assets on
Portfolio August 31, 1998 Advisory Fee
- --------------------------------------------------------------------------------
Alabama $ 94,776,703 0.37%
Arkansas $ 56,255,044 0.31%
Georgia $ 87,251,274 0.37%
Kentucky $112,635,280 0.40%
Louisiana $ 36,509,773 0.22%
Maryland $105,152,253 0.38%
Missouri $ 74,397,997 0.35%
North Carolina $152,930,124 0.42%
Oregon $103,755,097 0.39%
South Carolina $ 50,117,073 0.29%
Tennessee $ 53,708,707 0.30%
Virginia $151,257,470 0.41%
William H. Ahern is the portfolio manager of the Alabama Portfolio (since June
1, 1997) and the Kentucky Portfolio (since November 1, 1998). Timothy T. Browse
is the portfolio manager of the Arkansas Portfolio and the Maryland Portfolio
(since they commenced operations) and the Virginia Portfolio (since November 1,
1996). Cynthia J. Clemson is the portfolio manager of the Missouri Portfolio and
the Tennessee Portfolio (since they commenced operations) and the Georgia
Portfolio (since January 1, 1996). Robert B. MacIntosh is the portfolio manager
of the Louisiana Portfolio and the North Carolina Portfolio (since January 1,
1996). Thomas M. Metzold is the portfolio manager of the Oregon Portfolio (since
November 1,
16
<PAGE>
1996). Thomas J. Fetter is the portfolio manager of the South Carolina Portfolio
(since January 1, 1996). Each portfolio manager also manages other Eaton Vance
portfolios, has been an employee of Eaton Vance for at least 5 years, and is a
Vice President of Eaton Vance and BMR.
The investment adviser and each Fund and Portfolio have adopted Codes of Ethics
governing personal securities transactions. Under the Codes, Eaton Vance
employees may purchase and sell securities (including securities held by a
Portfolio) subject to certain pre-clearance and reporting requirements and other
procedures.
Eaton Vance serves as administrator of each Fund, providing the Fund with
administrative services and related office facilities. Eaton Vance does not
currently receive a fee for serving as administrator.
ORGANIZATION. Each Fund is a series of Eaton Vance Municipals Trust, a
Massachusetts business trust. The Funds do not hold annual shareholder meetings,
but may hold special meetings for matters that require shareholder approval
(like electing or removing trustees, approving management contracts or changing
investment policies that may only be changed with shareholder approval). Because
a Fund invests in a Portfolio, it may be asked to vote on certain Portfolio
matters (like changes in certain Portfolio investment restrictions). When
necessary, a Fund will hold a meeting of its shareholders to consider the
Portfolio matter and then vote its interest in the Portfolio in proportion to
the votes cast by its shareholders. A Fund can withdraw from a Portfolio at any
time.
Because the Funds use this combined prospectus, a Fund could be held liable for
a misstatement or omission made about another Fund. The Trust's Trustees
considered this in approving the use of a combined prospectus.
VALUING SHARES
Each Fund values its shares once each day only when the New York Stock Exchange
is open for trading (typically Monday through Friday), as of the close of
regular trading on the Exchange (normally 4:00 p.m. eastern time). The price of
Fund shares is their net asset value, which is derived from Portfolio holdings.
Municipal obligations will normally be valued on the basis of valuations
furnished by a pricing service. Your investment dealer must communicate your
order to the principal underwriter by a specific time each day to receive that
day's public offering price per share. It is the investment dealer's
responsibility to transmit orders promptly. Each Fund may accept purchase and
redemption orders as of the time of their receipt by certain investment dealers
(or their designated intermediaries).
PURCHASING SHARES
You may purchase Fund shares through your investment dealer or by mailing the
account application form included in this prospectus to the transfer agent (see
back cover for address). Your initial investment must be at least $1,000. The
price of Class A shares is the net asset value plus a sales charge. The price of
Class B shares is the net asset value; however, you may be subject to a sales
charge (called a "contingent deferred sales charge" or "CDSC") if you redeem
Class B shares within six years of purchase. The sales charges are described
below. Your investment dealer can help you decide which class of shares suits
your investment needs.
You may purchase Fund shares for cash or in exchange for securities. Please call
1-800-225-6265 for information about exchanging securities for Fund shares. If
you purchase shares through an investment dealer (which includes brokers,
dealers and other financial institutions), that dealer may charge you a fee for
executing the purchase for you. A Fund may suspend the sale of its shares at any
time and any purchase order may be refused.
After your initial investment, additional investments of $50 or more may be made
at any time by sending a check payable to the order of the Fund or the transfer
agent directly to the transfer agent (see back cover for address). Please
include your name and account number and the name of the Fund and Class with
each investment.
You may also make automatic investments of $50 or more each month or each
quarter from your bank account. You can establish bank automated investing on
the account application or by calling 1-800-262-1122. The minimum initial
investment amount and Fund policy of redeeming accounts with low account
balances are waived for bank automated investing accounts.
SALES CHARGES
FRONT-END SALES CHARGE. Class A shares are offered at net asset value per share
plus a sales charge that is determined by the amount of your investment. The
current sales charge schedule is:
17
<PAGE>
<TABLE>
<CAPTION>
Sales Charge Sales Charge Dealer Commission
as Percentage of as Percentage of Net as a Percentage of
Amount of Purchase Offering Price Amount Invested Offering Price
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Less than $25,000 4.75% 4.99% 4.50%
$50,000 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* 1.00%
</TABLE>
* No sales charge is payable at the time of purchase on investments of $1
million or more. A CDSC of 1.00% will be imposed on such investments (as
described below) in the event of redemptions within 24 months of purchase.
CONTINGENT DEFERRED SALES CHARGE. Each Class of shares is subject to a CDSC on
certain redemptions. If Class A shares are purchased at net asset value because
the purchase amount is $1 million or more, they are subject to a 1.00% CDSC if
redeemed within 24 months of purchase. Class B shares are subject to the
following CDSC schedule:
Year of Redemption After Purchase CDSC
- --------------------------------------------
First or Second 5%
Third 4%
Fourth 3%
Fifth 2%
Sixth 1%
Seventh or following 0%
The CDSC is based on the lower of the net asset value at the time of purchase or
the time of redemption. Shares acquired through the reinvestment of
distributions are exempt. Redemptions are made first from shares that are not
subject to a CDSC.
REDUCING OR ELIMINATING SALES CHARGES. Front-end sales charges may be reduced
under the right of accumulation or under a statement of intention. Under the
right of accumulation, sales charges are reduced if the current market value of
your current holdings (shares at current offering price), plus your new
purchases, reach $25,000 or more. Class A shares of other Eaton Vance funds
owned by you can be included in your current holdings. Under a statement of
intention, purchases of $25,000 or more made over a 13-month period are eligible
for reduced sales charges. The principal underwriter may hold 5% of the dollar
amount to be purchased in escrow in the form of shares registered in your name
until the statement is satisfied or the thirteen-month period expires. See the
account application for details.
Class A shares are offered at net asset value through certain wrap fee programs
and other programs sponsored by investment dealers that charge fees for their
services. Ask your investment dealer for details. Certain persons associated
with Eaton Vance, other advisers to Eaton Vance funds, the transfer agent, the
custodian and investment dealers may purchase shares at net asset value.
The Class B CDSC is waived for redemptions pursuant to a Withdrawal Plan (see
"Shareholder Account Features"). The Class B CDSC is also waived following the
death of all beneficial owners of shares, but only if the redemption is
requested within one year after death (a death certificate and other applicable
documents may be required).
If you redeem shares, you may reinvest at net asset value any portion or all of
the redemption proceeds in the same class of shares of the Fund (or, for Class A
shares, in Class A shares of any other Eaton Vance fund), provided that the
reinvestment occurs within 60 days of the redemption, and the privilege has not
been used more than once in the prior 12 months. Your account will be credited
with any CDSC paid in connection with the redemption. Reinvestment requests must
be in writing. If you reinvest, you will be sold shares at the next determined
net asset value following receipt of your request.
DISTRIBUTION AND SERVICE FEES. Class B shares have adopted a plan under Rule
12b-1 that allows the Fund to pay distribution fees for the sale and
distribution of shares (so-called "12b-1 fees"). Class B shares pay distribution
fees of .75% of average daily net assets annually. Because these fees are paid
from Fund assets on an ongoing basis, they will increase your cost over time and
may cost you more than paying other types of sales charges. Both classes pay
service fees for personal and/ or account services not exceeding .20% of average
daily net assets annually. Class A and Class B shares only pay service fees on
shares that have been outstanding for twelve months.
18
<PAGE>
REDEEMING SHARES
You can redeem shares in any of the following ways:
By Mail Send your request to the transfer agent
along with any certificates and stock powers.
The request must be signed exactly as your
account is registered and signature
guaranteed. You can obtain a signature
guarantee at certain banks, savings and loan
institutions, credit unions, securities
dealers, securities exchanges, clearing agencies
and registered securities associations. You may
be asked to provide additional documents if
your shares are registered in the name of a
corporation, partnership or fiduciary.
By Telephone You can redeem up to $50,000 by calling the
transfer agent at 1-800-262-1122 on Monday
through Friday, 9:00 a.m. to 4:00 p.m.
(eastern time). Proceeds of a telephone
redemption can be mailed only to the account
address. Shares held by corporations, trusts
or certain other entities, or subject to
fiduciary arrangements, cannot be redeemed by
telephone.
Through an Investment Dealer Your investment dealer is responsible for
transmitting the order promptly. A dealer may
charge a fee for this service.
If you redeem shares, your redemption price will be based on the net asset value
per share next computed after the redemption request is received. Your
redemption proceeds will be paid in cash within seven days, reduced by the
amount of any applicable CDSC and any federal income tax required to be
withheld. Payments will be sent by mail unless you complete the Bank Wire
Redemptions section of the account application.
If you recently purchased shares, the proceeds of a redemption will not be sent
until the check (including a certified or cashier's check) has cleared. If the
purchase check has not cleared, redemption proceeds may be delayed up to 15 days
from the purchase date. If your account value falls below $750 other than due to
market decline, you may be asked to either add to your account or redeem it
within 60 days. If you take no action, your account will be redeemed and the
proceeds sent to you.
While redemption proceeds are normally paid in cash, redemptions may be paid by
distributing marketable securities. If you receive securities, you could incur
brokerage or other charges in converting the securities to cash.
SHAREHOLDER ACCOUNT FEATURES
Once you purchase shares, the transfer agent establishes a Lifetime Investing
Account for you. Share certificates are issued only on request.
DISTRIBUTIONS. You may have your Fund distributions paid in one of the following
ways:
.Full Reinvest Option Dividends and capital gains are reinvested in
additional shares. This option will be assigned if
you do not specify an option.
.Partial Reinvest Option Dividends are paid in cash and capital gains are
reinvested in additional shares.
.Cash Option Dividends and capital gains are paid in cash.
.Exchange Option Dividends and/or capital gains are reinvested in
additional shares of another Eaton Vance fund
chosen by you. Before selecting this option, you
must obtain a prospectus of the other fund and
consider its objectives and policies carefully.
INFORMATION FROM THE FUND. From time to time, you may be mailed the following:
.Annual and Semi-Annual Reports, containing performance information and
financial statements.
.Periodic account statements, showing recent activity and total share balance.
.Form 1099 and tax information needed to prepare your income tax returns.
.Proxy materials, in the event a shareholder vote is required.
.Special notices about significant events affecting your Fund.
19
<PAGE>
WITHDRAWAL PLAN. You may redeem shares on a monthly or quarterly basis by
establishing a systematic withdrawal plan. For Class B shares, your withdrawals
will not be subject to a CDSC if they do not in the aggregate exceed 12%
annually of the account balance at the time the plan is established. A minimum
account size of $5,000 is required to establish a systematic withdrawal plan.
Because purchases of Class A shares are subject to a sales charge, you should
not make withdrawals from your account while you are making purchases.
EXCHANGE PRIVILEGE. You may exchange your Fund shares for shares of the same
class of another Eaton Vance fund. Exchanges are generally made at net asset
value. If you have held Class A shares for less than six months, an additional
sales charge may apply if you exchange. If your shares are subject to a CDSC,
the CDSC will continue to apply to your new shares at the same CDSC rate. For
purposes of the CDSC, your shares will continue to age from the date of your
original purchase.
Before exchanging, you should read the prospectus of the new fund carefully. If
you wish to exchange shares, you may write to the transfer agent (address on
back cover) or call 1-800-262-1122. Periodic automatic exchanges are also
available. The exchange privilege may be changed or discontinued at any time.
You will receive 60 days' notice of any material change to the privilege. This
privilege may not be used for "market timing". If an account (or group of
accounts) makes more than two round-trip exchanges within twelve months, it will
be deemed to be market timing. The exchange privilege may be terminated for
market timing accounts.
TELEPHONE TRANSACTIONS. You can redeem or exchange shares by telephone as
described in this prospectus. The transfer agent and the principal underwriter
have procedures in place to authenticate telephone instructions (such as
verifying personal account information). As long as the transfer agent and
principal underwriter follow these procedures, they will not be responsible for
unauthorized telephone transactions and you bear the risk of possible loss
resulting from telephone transactions. You may decline the telephone redemption
option on the account application. Telephone instructions are tape recorded.
"STREET NAME" ACCOUNTS. If your shares are held in a "street name" account at an
investment dealer, that dealer (and not the Fund or its transfer agent) will
perform all recordkeeping, transaction processing and distribution payments.
Because the Fund will have no record of your transactions, you should contact
your investment dealer to purchase, redeem or exchange shares, to make changes
in your account, or to obtain account information. The transfer of shares in a
"street name" account to an account with another investment dealer or to an
account directly with the Fund involves special procedures and you will be
required to obtain historical information about your shares prior to the
transfer. Before establishing a "street name" account with an investment dealer,
you should determine whether that dealer allows reinvestment of distributions in
"street name" accounts.
ACCOUNT QUESTIONS. If you have any questions about your account or the services
available, please call Eaton Vance Shareholder Services at 1-800-225-6265, or
write to the transfer agent (see back cover for address).
TAX INFORMATION
Each Fund declares dividends daily. Each Fund ordinarily pays distributions each
month for Class A shares on the last day and for Class B shares on the fifteenth
day. If the payment date is not a business day, the payment will be made on the
business day thereafter. Your account will be credited with dividends beginning
on the business day after the day when the funds used to purchase your Fund
shares are collected by the transfer agent. For tax purposes the entire
distribution, whether paid in cash or reinvested in additional shares,
ordinarily will constitute tax-exempt income to you.
Distributions of any taxable income and net short-term capital gains will be
taxable as ordinary income. Distributions of any long-term capital gains are
taxable as such. Distributions of interest on certain municipal obligations are
a tax preference item under the AMT provisions applicable to individuals and
corporations.
Shareholders, particularly corporations and those subject to state alternative
minimum tax, should consult with their advisers concerning the applicability of
state, local and other taxes to an investment. Additional information about
state taxes is provided below.
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
20
<PAGE>
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 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 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 the U.S., 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.
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 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
21
<PAGE>
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 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 the
foregoing (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.
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 the foregoing (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 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 income 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
from 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.
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
22
<PAGE>
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 TAXES. In the opinion of Oregon tax counsel, 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 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 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
23
<PAGE>
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 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.
24
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights are intended to help you understand a Fund's financial
performance for the past five years. Certain information in the tables reflects
the financial results for a single Fund share. The total returns in the tables
represent the rate an investor would have earned (or lost) on an investment in
the Fund (assuming reinvestment of all distributions and not taking into account
a sales charge). This information has been audited by Deloitte & Touche LLP,
independent accountants. The report of Deloitte & Touche LLP and each Fund's
financial statements are incorporated herein by reference and included in the
annual report, which is available on request. Each Fund began offering two
classes of shares on September 1, 1997. Prior to that date, the Fund offered
only Class B shares.
<TABLE>
<CAPTION>
ALABAMA FUND
--------------------------------------------------------------------
YEAR ENDED AUGUST 31,
--------------------------------------------------------------------
1998 1997 1996 1995 1994*
--------------------------------------------------------------------
CLASS A CLASS B CLASS B CLASS B CLASS B CLASS B
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value -
Beginning of year $ 9.860 $10.850 $10.460 $ 10.440 $ 10.210 $ 11.060
------- ------- ------- -------- -------- --------
Income (loss) from
operations
Net investment
income $ 0.493 $ 0.455 $ 0.469 $ 0.470 $ 0.479 $ 0.425
Net realized and
unrealized gain
(loss) 0.181 0.200 0.386 0.030 0.244 (0.769)
------- ------- ------- -------- -------- --------
Total income (loss)
from operations $ 0.674 $ 0.655 $ 0.855 $ 0.500 $ 0.723 $ (0.344)
------- ------- ------- -------- -------- --------
Less distributions
From net investment
income $(0.494) $(0.464) $(0.465) $ (0.480) $ (0.479) $ (0.425)
In excess of net
investment income(4) -- (0.001) -- -- (0.014) (0.081)
------- ------- ------- -------- -------- --------
Total distributions $(0.494) $(0.465) $(0.465) $ (0.480) $ (0.493) $ (0.506)
------- ------- ------- -------- -------- --------
Net asset value -
End of year $10.040 $11.040 $10.850 $ 10.460 $ 10.440 $ 10.210
------- ------- ------- -------- -------- --------
Total return(1) 6.98% 6.17% 8.33% 4.85% 7.38% (3.18)%
Ratios/Supplemental
Data
Net assets, end of
year (000's omitted) $ 5,140 $89,321 $96,154 $101,692 $108,642 $105,553
Ratios (as a
percentage of
average daily net
assets):
Expenses (2)(3) 0.78% 1.57% 1.60% 1.57% 1.51% 1.43%+
Expenses after
custodian fee
reduction (2) 0.76% 1.55% 1.59% 1.52% -- --
Net investment
income 4.93% 4.15% 4.39% 4.44% 4.74% 4.35%/+/
Portfolio turnover
of the Portfolio 23% 23% 23% 52% 51% 26%
</TABLE>
(See footnotes on last page.)
25
<PAGE>
<TABLE>
<CAPTION>
ARKANSAS FUND
-----------------------------------------------------------------
YEAR ENDED AUGUST 31,
-----------------------------------------------------------------
1998/++/ 1997 1996 1995 1994*
-----------------------------------------------------------------
CLASS A CLASS B CLASS B CLASS B CLASS B CLASS B
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value -
Beginning of year $ 9.810 $10.510 $10.190 $10.250 $10.140 $10.910
------- ------- ------- ------- ------- -------
Income (loss) from
operations
Net investment
income $ 0.492 $ 0.442 $ 0.445 $ 0.450 $ 0.460 $ 0.431
Net realized and
unrealized gain
(loss) 0.272 0.298 0.324 (0.038) 0.132 (0.703)
------- ------- ------- ------- ------- -------
Total income (loss)
from operations $ 0.764 $ 0.740 $ 0.769 $ 0.412 $ 0.592 $(0.272)
------- ------- ------- ------- ------- -------
Less distributions
From net investment
income $(0.492) $(0.442) $(0.445) $(0.471) $(0.460) $(0.431)
In excess of net
investment income (0.012) (0.008) (0.004) (0.001) (0.022) (0.067)
------- ------- ------- ------- ------- -------
Total distributions $(0.504) $(0.450) $(0.449) $(0.472) $(0.482) $(0.498)
------- ------- ------- ------- ------- -------
Net asset value -
End of year $10.070 $10.800 $10.510 $10.190 $10.250 $10.140
------- ------- ------- ------- ------- -------
Total return (1) 7.95% 7.19% 7.70% 4.05% 6.15% (2.53%)
Ratios/Supplemental
Data+
Net assets, end of
year (000's omitted) $ 1,286 $54,655 $61,322 $72,868 $80,823 $82,436
Ratios (as a
percentage of
average daily net
assets):
Net expenses
(2)(3) 0.73% 1.53% 1.60% 1.56% 1.50% 1.17%+
Net expenses after
custodian fee
reduction (2) 0.72% 1.52% 1.59% 1.54% -- --
Net investment
income 4.93% 4.14% 4.31% 4.34% 4.67% 4.47%+
Portfolio turnover
of the Portfolio 13% 13% 17% 11% 23% 16%
</TABLE>
Financial Highlights (continued)
+ The operating expenses of the Fund reflect a reduction of the investment
adviser fee, an allocation of expenses to the adviser or administrator, or
both. Had such action not been taken, the ratios and investment income per
share would have been as follows:
Ratios (as a percentage of average daily net assets):
Expenses /(2)(3)/ 1.40%+
Expenses after custodian fee reduction /(2)/ --
Net investment income 4.24%+
Net investment income per share $0.409
(See footnotes on last page.)
26
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
GEORGIA FUND
----------------------------------------------------------------------
YEAR ENDED AUGUST 31,
----------------------------------------------------------------------
1998 1997 1996 1995 1994*
----------------------------------------------------------------------
CLASS A CLASS B CLASS B CLASS B CLASS B CLASS B
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value - Beginning
of year $9.500 $10.140 $9.810 $9.790 $9.800 $10.750
------- ------- ------- -------- -------- --------
Income (loss) from
operations
Net investment income $0.476 $0.434 $0.449 $0.451 $0.450 $0.413
Net realized and unrealized
gain (loss) 0.245 0.261 0.336 0.024 0.007+++ (0.841)
-------- -------- ------- -------- -------- ---------
Total income (loss) from
operations $0.721 $0.695 $0.785 $0.475 $0.457 $(0.428)
-------- -------- ------- -------- -------- ---------
Less distributions
From net investment income $(0.484) $(0.437) $(0.455) $(0.455) $(0.450) $(0.413)
In excess of net investment
income (0.007) (0.018) -- -- (0.017) (0.065)
In excess of net realized
gain -- -- -- -- -- (0.044)
------- ------- ------- -------- -------- ---------
Total distributions $(0.491) $(0.455) $(0.455) $(0.455) $(0.467) $(0.522)
------- ------- ------- -------- -------- ---------
Net asset value - End of
year $9.730 $10.380 $10.140 $9.810 $9.790 $9.800
------- ------- ------- -------- -------- ---------
Total return (1) 7.75% 7.00% 8.16% 4.91% 4.90% (4.08)%
Ratios/Supplemental Data
Net assets, end of year
(000's omitted) $2,043 $84,830 $93,128 $106,992 $120,143 $134,481
Ratios (as a percentage of
average daily net assets):
Expenses (2)(3) 0.83% 1.56% 1.59% 1.58% 1.49% 1.41%+
Expenses after custodian
fee reduction (2) 0.82% 1.55% 1.57% 1.52% -- --
Net investment income 4.92% 4.22% 4.48% 4.55% 4.72% 4.39%+
Portfolio turnover of the
Portfolio 19% 19% 13% 21% 48% 45%
</TABLE>
(See footnotes on last page.)
27
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
KENTUCKY FUND
-------------------------------------------------------------------------
YEAR ENDED AUGUST 31,
-------------------------------------------------------------------------
1998/++/ 1997 1996 1995 1994*
-------------------------------------------------------------------------
CLASS A CLASS B CLASS B CLASS B CLASS B CLASS B
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value - Beginning
of year $ 9.680 $ 10.410 $ 9.970 $ 9.990 $ 9.850 $ 10.780
-------- --------- -------- -------- -------- ---------
Income (loss) from
operations
Net investment income $ 0.497 $ 0.456 $ 0.456 $ 0.450 $ 0.458 $ 0.415
Net realized and unrealized
gain (loss) 0.235 0.254 0.435 (0.009)+++ 0.163 (0.811)
-------- --------- -------- -------- -------- ---------
Total income (loss) from
operations $ 0.732 $ 0.710 $ 0.891 $ 0.441 $ 0.621 $ (0.396)
-------- --------- -------- -------- -------- ---------
Less distributions
From net investment income $(0.497) $ (0.456) $ (0.451) $ (0.450) $ (0.458) $ (0.415)
In excess of net investment
income (4) (0.005) (0.004) -- (0.011) (0.023) (0.075)
In excess of net realized
gain -- -- -- -- -- (0.044)
-------- --------- -------- -------- -------- ---------
Total distributions $(0.502) $ (0.460) $ (0.451) $ (0.461) $ (0.481) $ (0.534)
-------- --------- -------- -------- -------- ---------
Net asset value - End of
year $ 9.910 $ 10.660 $ 10.410 $ 9.970 $ 9.990 $ 9.850
-------- --------- -------- -------- -------- ---------
Total return(1) 7.72% 6.97% 9.12% 4.45% 6.61% (3.78)%
Ratios/Supplemental Data
Net assets, end of year
(000's omitted) $ 1,303 $111,015 $121,376 $131,357 $143,106 $141,994
Ratios (as a percentage of
average daily net assets):
Expenses(2)(3) 0.83% 1.57% 1.60% 1.57% 1.52% 1.44%+
Expenses after custodian
fee reduction /(2)/ 0.82% 1.56% 1.57% 1.54% -- --
Net investment income 5.05% 4.32% 4.50% 4.45% 4.74% 4.39%+
Portfolio turnover of the
Portfolio 15% 15% 28% 28% 30% 21%
</TABLE>
(See footnotes on last page.)
28
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
LOUISIANA FUND
--------------------------------------------------------------------
YEAR ENDED AUGUST 31,
--------------------------------------------------------------------
1998 1997 1996 1995 1994*
--------------------------------------------------------------------
CLASS A CLASS B CLASS B CLASS B CLASS B CLASS B
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value - Beginning
of year $ 9.750 $10.310 $ 9.960 $ 9.980 $10.010 $11.130
-------- -------- ------- ------- ------- --------
Income (loss) from
operations
Net investment income $ 0.480 $ 0.436 $ 0.482 $ 0.486 $ 0.487 $ 0.447
Net realized and unrealized
gain (loss) 0.294 0.306 0.350 (0.016) (0.006)+++ (0.937)
-------- -------- ------- ------- ------- --------
Total income (loss) from
operations $ 0.774 $ 0.742 $ 0.832 $ 0.470 $ 0.481 $(0.490)
-------- -------- ------- ------- ------- --------
Less distributions
From net investment income $(0.515) $(0.446) $(0.482) $(0.490) $(0.487) $(0.447)
In excess of net investment
income(4) (0.019) (0.036) -- -- (0.024) (0.074)
In excess of net realized
gain -- -- -- -- -- (0.109)
-------- -------- ------- ------- ------- --------
Total distributions $(0.534) $(0.482) $(0.482) $(0.490) $(0.511) $(0.630)
-------- -------- ------- ------- ------- --------
Net asset value - End of
year $ 9.990 $10.570 $10.310 $ 9.960 $ 9.980 $10.010
-------- -------- ------- ------- ------- --------
Total return(1) 8.13% 7.37% 8.52% 4.77% 5.08% (4.56)%
Ratios/Supplemental Data
Net assets, end of year
(000's omitted) $ 4,886 $31,536 $31,996 $32,994 $31,836 $29,020
Ratios (as a percentage of
average daily net assets):
Expenses(2)(3) 0.71% 1.49% 1.54% 1.41% 1.31% 1.08%+
Expenses after custodian
fee reduction(2) 0.66% 1.44% 1.52% 1.34% -- --
Net investment income 4.79% 4.18% 4.74% 4.82% 4.97% 4.62%+
Portfolio turnover of the
Portfolio 43% 43% 27% 99% 46% 21%
</TABLE>
+ The operating expenses of the Fund reflect a reduction of the investment
adviser fee, an allocation of expenses to the adviser or administrator, or
both. Had such action not been taken, the ratios and investment income per
share would have been as follows:
Ratios (as a percentage of average daily net
assets):
Expenses(2)(3) 1.53% 1.42% 1.44%+
Expenses after custodian fee reduction(2) 1.45% -- --
Net investment income 4.70% 4.86% 4.26%+
Net investment income per share $0.474 $0.470 $0.412
(See footnotes on last page.)
29
<PAGE>
<TABLE>
<CAPTION>
MARYLAND FUND
----------------------------------------------------------------------
YEAR ENDED AUGUST 31,
----------------------------------------------------------------------
1998/++/ 1997 1996 1995 1994*
----------------------------------------------------------------------
CLASS A CLASS B CLASS B CLASS B CLASS B CLASS B
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value -
Beginning of year $9.810 $10.710 $10.300 $10.230 $10.070 $11.070
------- -------- -------- -------- -------- --------
Income (loss) from
operations
Net investment
income $0.476 $0.441 $0.453 $0.464 $0.476 $0.428
Net realized and
unrealized gain
(loss) 0.262 0.291 0.419 0.086 0.169 (0.922)
------- -------- -------- -------- -------- --------
Total income (loss)
from operations $0.738 $0.732 $0.872 $0.550 $0.645 $(0.494)
------- -------- -------- -------- -------- --------
Less distributions
From net investment
income $(0.476) $(0.447) $(0.462) $(0.480) $(0.476) $(0.428)
In excess of net
investment income (0.022) (0.015) -- -- (0.009) (0.070)
In excess of net
realized gain -- -- -- -- -- (0.008)
------- -------- -------- -------- -------- --------
Total distributions $(0.498) $(0.462) $(0.462) $(0.480) $(0.485) $(0.506)
------- -------- -------- -------- -------- --------
Net asset value -
End of year $10.050 $10.980 $10.710 $10.300 $10.230 $10.070
Total return(1) 7.68% 6.98% 8.64% 5.44% 6.71% (4.56)%
Ratios/Supplemental
Data
Net assets, end of
year (000's omitted) $1,625 $103,307 $105,671 $109,243 $113,826 $116,721
Ratios (as a
percentage of
average daily net
assets):
Expenses(2)(3) 0.82% 1.56% 1.57% 1.57% 1.50% 1.43%+
Expenses after
custodian fee
reduction(2) 0.78% 1.52% 1.54% 1.55% -- --
Net investment
income 4.76% 4.05% 4.30% 4.46% 4.82% 4.44%+
Portfolio turnover
of the Portfolio 30% 30% 30% 33% 30% 41%
</TABLE>
Financial Highlights (continued)
(See footnotes on last page.)
30
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
MISSOURI FUND
-----------------------------------------------------------------
YEAR ENDED AUGUST 31,
-----------------------------------------------------------------
1998 1997 1996 1995 1994*
-----------------------------------------------------------------
CLASS A CLASS B CLASS B CLASS B CLASS B CLASS B
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value - Beginning
of year $ 9.930 $11.010 $10.510 $10.510 $10.240 $11.250
------- ------- ------- ------- ------- -------
Income (loss) from
operations
Net investment income $ 0.503 $ 0.477 $ 0.478 $ 0.476 $ 0.477 $ 0.423
Net realized and unrealized
gain (loss) 0.334 0.364 0.493 0.003 0.289 (0.904)
-------- -------- ------- ------- ------- --------
Total income (loss) from
operations $ 0.837 $ 0.841 $ 0.971 $ 0.479 $ 0.766 $(0.481)
-------- -------- ------- ------- ------- --------
Less distributions
From net investment income $(0.497) $(0.471) $(0.471) $(0.476) $(0.477) $(0.423)
In excess of net investment
income(4) -- -- -- (0.003) (0.019) (0.084)
In excess of net realized
gain -- -- -- -- -- (0.022)
------- ------- ------- ------- ------- -------
Total distributions $(0.479) $(0.471) $(0.471) $(0.479) $(0.496) $(0.529)
------- ------- ------- ------- ------- -------
Net asset value - End of
year $10.270 $11.380 $11.010 $10.510 $10.510 $10.240
------- ------- ------- ------- ------- -------
Total return(1) 8.61% 7.81% 9.42% 4.60% 7.82% (4.33)%
Ratios/Supplemental Data
Net assets, end of year
(000's omitted) $ 2,665 $71,586 $77,479 $82,385 $89,811 $91,227
Ratios (as a percentage of
average daily net assets):
Expenses(2)(3) 0.79% 1.56% 1.57% 1.56% 1.53% 1.49%+
Expenses after custodian
fee reduction(2) 0.77% 1.54% 1.56% 1.54% -- --
Net investment income 5.00% 4.25% 4.44% 4.47% 4.72% 4.30%+
Portfolio turnover of the
Portfolio 11% 11% 5% 36% 24% 28%
</TABLE>
(See footnotes on last page.)
31
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
NORTH CAROLINA FUND
------------------------------------------------------------------------
YEAR ENDED AUGUST 31,
------------------------------------------------------------------------
1998/++/ 1997 1996 1995 1994*
------------------------------------------------------------------------
CLASS A CLASS B CLASS B CLASS B CLASS B CLASS B
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value - Beginning
of year $ 9.610 $ 10.340 $ 9.970 $ 9.960 $ 9.970 $ 10.940
------- -------- -------- -------- -------- --------
Income (loss) from
operations
Net investment income $ 0.490 $ 0.447 $ 0.452 $ 0.452 $ 0.466 $ 0.423
Net realized and unrealized
gain (loss) 0.282 0.303 0.378 0.026 0.011+++ (0.895)
------- -------- -------- -------- -------- --------
Total income (loss) from
operations $ 0.772 $ 0.750 $ 0.830 $ 0.478 $ 0.477 $ (0.472)
------- -------- -------- -------- -------- --------
Less distributions
From net investment income $(0.490) $ (0.447) $ (0.455) $ (0.455) $ (0.466) $ (0.423)
In excess of net investment
income (0.012) (0.013) (0.005) (0.013) (0.021) (0.075)
------- -------- -------- -------- -------- --------
Total distributions $(0.502) $ (0.460) $ (0.460) $ (0.468) $ (0.487) $ (0.498)
------- -------- -------- -------- -------- --------
Net asset value - End of
year $ 9.880 $ 10.630 $ 10.340 $ 9.970 $ 9.960 $ 9.970
------- -------- -------- -------- -------- --------
Total return(1) 8.22% 7.42% 8.50% 4.83% 5.03% (4.40)%
Ratios/Supplemental
Data/+/
Net assets, end of year
(000's omitted) $12,967 $139,325 $151,564 $169,889 $188,450 $192,667
Ratios (as a percentage of
average daily net assets):
Net expenses (2)(3) 0.83% 1.58% 1.60% 1.59% 1.51% 1.42%+
Net expenses after
custodian fee reduction(2) 0.80% 1.55% 1.58% 1.54% -- --
Net investment income 5.03% 4.26% 4.48% 4.47% 4.78% 4.43%+
Portfolio turnover of the
Portfolio 26% 26% 42% 54% 33% 37%
</TABLE>
32
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
OREGON FUND
----------------------------------------------------------------------
YEAR ENDED AUGUST 31,
----------------------------------------------------------------------
1998 1997 1996 1995 1994*
----------------------------------------------------------------------
CLASS A CLASS B CLASS B CLASS B CLASS B CLASS B
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value - Beginning
of year $9.600 $10.510 $10.240 $10.310 $10.090 $11.130
------- -------- -------- -------- -------- --------
Income (loss) from
operations
Net investment income $0.483 $0.450 $0.456 $0.450 $0.455 $0.415
Net realized and unrealized
gain (loss) 0.275 0.292 0.266 (0.061) 0.241 (0.869)
------- -------- -------- -------- -------- --------
Total income (loss) from
operations $0.758 $0.742 $0.722 $0.389 $0.696 $(0.454)
------- -------- -------- -------- -------- --------
Less distributions
From net investment income $(0.483) $(0.451) $(0.452) $(0.457) $(0.455) $(0.415)
In excess of net investment
income(4) (0.005) (0.001) -- (0.002) (0.021) (0.078)
From net realized gain -- -- -- -- -- (0.093)
------- -------- -------- -------- -------- --------
Total distributions $(0.488) $(0.452) $(0.452) $(0.459) $(0.476) $(0.586)
------- -------- -------- -------- -------- --------
Net asset value - End of
year $9.870 $10.800 $10.510 $10.240 $10.310 $10.090
------- -------- -------- -------- -------- --------
Total return(1) 8.08% 7.22% 7.20% 3.80% 7.22% (4.21)%
Ratios/Supplemental Data
Net assets, end of year
(000's omitted) $914 $102,571 $112,586 $128,580 $145,056 $151,127
Ratios (as a percentage of
average daily net assets):
Expenses(2)(3) 0.78% 1.56% 1.63% 1.56% 1.53% 1.43%+
Expenses after custodian
fee reduction(2) 0.78% 1.56% 1.63% 1.53% -- --
Net investment income 4.95% 4.22% 4.41% 4.33% 4.59% 4.28%+
Portfolio turnover of the
Portfolio 9% 9% 22% 28% 22% 15%
</TABLE>
(See footnotes on last page.)
33
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
SOUTH CAROLINA FUND
-----------------------------------------------------------------
YEAR ENDED AUGUST 31,
-----------------------------------------------------------------
1998 1997 1996 1995 1994*
-----------------------------------------------------------------
CLASS A CLASS B CLASS B CLASS B CLASS B CLASS B
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value - Beginning
of year $9.760 $10.380 $10.020 $10.000 $9.940 $10.890
------- ------- ------- ------- ------- -------
Income (loss) from
operations
Net investment income $0.495 $0.455 $0.463 $0.467 $0.460 $0.408
Net realized and unrealized
gain (loss) 0.328 0.352 0.364 0.021 0.071 (0.870)
------- ------- ------- ------- ------- -------
Total income (loss) from
operations $0.823 $0.807 $0.827 $0.488 $0.531 $(0.462)
------- ------- ------- ------- ------- -------
Less distributions
From net investment income $(0.493) $(0.467) $(0.467) $(0.468) $(0.460) $(0.408)
In excess of net investment
income(4) -- -- -- -- (0.011) (0.080)
------- ------- ------- ------- ------- -------
Total distributions $(0.493) $(0.467) $(0.467) $(0.468) $(0.471) $(0.488)
------- ------- ------- ------- ------- -------
Net asset value - End of
year $10.090 $10.720 $10.380 $10.020 $10.000 $9.940
------- ------- ------- ------- ------- -------
Total return(1) 8.62% 7.96% 8.41% 4.92% 5.64% (4.33)%
Ratios/Supplemental Data
Net assets, end of year
(000's omitted) $1,316 $48,562 $52,686 $57,217 $59,955 $59,878
Ratios (as a percentage of
average daily net assets):
Expenses(2)(3) 0.77% 1.52% 1.63% 1.60% 1.49% 1.36%+
Expenses after custodian
fee reduction(2) 0.76% 1.51% 1.62% 1.58% -- --
Net investment income 5.03% 4.30% 4.50% 4.60% 4.77% 4.27%+
Portfolio turnover of the
Portfolio 21% 21% 8% 36% 75% 23%
</TABLE>
(See footnotes on last page.)
34
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
TENNESSEE FUND
-----------------------------------------------------------------
YEAR ENDED AUGUST 31,
-----------------------------------------------------------------
1998# 1997 1996 1995 1994*
-----------------------------------------------------------------
CLASS A CLASS B CLASS B CLASS B CLASS B CLASS B
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value - Beginning
of year $9.740 $10.580 $10.150 $10.110 $10.020 $11.070
------- ------- ------- ------- ------- -------
Income (loss) from
operations
Net investment income $0.491 $0.444 $0.453 $0.457 $0.468 $0.426
Net realized and unrealized
gain (loss) 0.257 0.266 0.436 0.059 0.115 (0.848)
------- ------- ------- ------- ------- -------
Total income (loss) from
operations $0.748 $0.710 $0.889 $0.516 $0.583 $(0.422)
------- ------- ------- ------- ------- -------
Less distributions
From net investment income $(0.491) $(0.444) $(0.453) $(0.475) $(0.468) $(0.426)
In excess of net investment
income (0.017) (0.006) (0.006) (0.001) (0.025) (0.071)
From net realized gain -- -- -- -- -- (0.094)
In excess of net realized
gain -- -- -- -- -- (0.037)
------- ------- ------- ------- ------- -------
Total distributions $(0.508) $(0.450) $(0.459) $(0.476) $(0.493) $(0.628)
------- ------- ------- ------- ------- -------
Net asset value - End of
year $9.980 $10.840 $10.580 $10.150 $10.110 $10.020
------- ------- ------- ------- ------- -------
Total return(1) 7.85% 6.86% 8.95% 5.16% 6.12% (3.93)%
Ratios/Supplemental Data
Net assets, end of year
(000's omitted) $3,413 $50,090 $51,712 $54,533 $57,484 $55,379
Ratios (as a percentage of
average daily net assets):
Expenses(2)(3) 0.67% 1.52% 1.54% 1.53% 1.47% 1.37%+
Expenses after custodian
fee reduction(2) 0.65% 1.50% 1.53% 1.51% -- --
Net investment income 4.94% 4.14% 4.39% 4.45% 4.77% 4.44%+
Portfolio turnover of the
Portfolio 21% 21% 3% 39% 20% 10%
</TABLE>
(See footnotes on last page.)
35
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
VIRGINIA FUND
----------------------------------------------------------------------
YEAR ENDED AUGUST 31,
----------------------------------------------------------------------
199# 1997 1996 1995 1994*
----------------------------------------------------------------------
CLASS A CLASS B CLASS B CLASS B CLASS B CLASS B
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value - Beginning
of year $9.620 $10.630 $10.260 $10.260 $10.120 $11.060
------- -------- -------- -------- -------- --------
Income (loss) from
operations
Net investment income $0.483 $0.454 $0.467 $0.471 $0.479 $0.438
Net realized and unrealized
gain (loss) 0.277 0.312 0.369 0.006 0.161 (0.864)
------- -------- -------- -------- -------- --------
Total income (loss) from
operations $0.760 $0.766 $0.836 $0.477 $0.640 $(0.426)
------- -------- -------- -------- -------- --------
Less distributions
From net investment income $(0.483) $(0.454) $(0.466) $(0.471) $(0.479) $(0.438)
In excess of net investment
income (0.027) (0.012) -- (0.006) (0.021) (0.076)
------- -------- -------- -------- -------- --------
Total distributions $(0.510) $(0.466) $(0.466) $(0.477) $(0.500) $(0.514)
------- -------- -------- -------- -------- --------
Net asset value - End of
year $9.870 $10.93 $10.630 $10.260 $10.260 $10.120
------- -------- -------- -------- -------- --------
Total return (1) 8.08% 7.37% 8.31% 4.67% 6.62% (3.95)%
Ratios/Supplemental Data
Net assets, end of year
(000's omitted) $2,117 $148,902 $159,603 $175,918 $189,535 $193,420
Ratios (as a percentage of
average daily net assets):
Expenses(2)(3) 0.85% 1.59% 1.60% 1.56% 1.50% 1.44%+
Expenses after custodian
fee reduction(2) 0.83% 1.57% 1.57% 1.53% -- --
Net investment income 4.92% 4.21% 4.47% 4.52% 4.81% 4.51%+
Portfolio turnover of the
Portfolio 8% 8% 25% 30% 38% 48%
</TABLE>
* For the eleven months ended August 31, 1994.
+ Annualized.
++ Net investment income per share was computed using average shares
outstanding.
+++ The per share amount is not in accord with the net realized and unrealized
gain (loss) for the period because of the timing of sales of the Fund shares
and the amount of per share realized and unrealized gains and losses at such
time.
(1) Total return is calculated assuming a purchase at the net asset value on
the first day and a sale at the net asset value on the last day of each period
reported. Distributions, if any, are assumed to be reinvested at the net asset
value on the payable date. Total return is not computed on an annualized
basis.
(2) Includes the Fund's share of its corresponding Portfolio's allocated
expenses.
(3) The expense ratios for the year ended August 31, 1996 and periods
thereafter have been adjusted to reflect a change in reporting requirements.
The new reporting guidelines require the Fund, as well as its corresponding
Portfolio, to increase its expense ratio by the effect of any expense offset
arrangements with its service providers. The expense ratios for each of the
prior periods have not been adjusted to reflect this change.
(4) The Funds have followed the Statement of Position (SOP) 93-2:
Determination, Disclosure and Financial Statement Presentation of Income,
Capital Gain, and Return of Capital Distribution by Investment Companies. The
SOP requires that differences in the recognition or classification of income
between the financial statements and tax earnings and profits that result in
temporary over-distributions for financial statement purposes, are classified
as distributions in excess of net investment income or accumulated net
realized gains.
36
<PAGE>
LOGO
Mutual Funds
for
People
Who Pay
Taxes
MORE INFORMATION
- --------------------------------------------------------------------------------
ABOUT THE FUNDS: More information is available in the statement of additional
information. The statement of additional information is incorporated by
reference into this prospectus. Additional information about each Portfolio's
investments is available in the annual and semi-annual reports to shareholders.
In the annual report, you will find a discussion of the market conditions and
investment strategies that significantly affected each Fund's performance during
the past year. You may obtain free copies of the statement of additional
information and the shareholder reports by contacting:
Eaton Vance Distributors, Inc.
24 Federal Street
Boston, MA 02110
1-800-225-6265
website: www.eatonvance.com
You will find and may copy information about each Fund at the Securities
and Exchange Commission's public reference room in Washington, DC (call
1-800-SEC-0330 for information); on the SEC's Internet site
(http://www.sec.gov); or upon payment of copying fees by writing to the
SEC's public reference room in Washington, DC 20549-6009.
About Shareholder Accounts: You can obtain more information from Eaton Vance
Share- holder Services (1-800-225-6265). If you own shares and would like to add
to, redeem or change your account, please write or call the transfer agent:
- --------------------------------------------------------------------------------
First Data Investor Services Group
P.O. Box 5123
Westborough, MA 01581-5123
1-800-262-1122
SEC File No. 811-4409 12MUNI1/1P
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
January 1, 1999
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
24 Federal Street
Boston, Massachusetts 02110
(800) 225-6265
This Statement of Additional Information ("SAI") provides general
information about the Funds listed above and their corresponding Portfolios.
Each Fund is a series of Eaton Vance Municipals Trust. Capitalized terms used
in this SAI and not otherwise defined have the meanings given to them in the
prospectus. This SAI contains additional information about:
Page
Strategies and Risks .................................................. 1
Investment Restrictions ............................................... 6
Management and Organization ........................................... 7
Investment Advisory and Administrative Services ....................... 11
Other Service Providers ............................................... 14
Purchasing and Redeeming Shares ....................................... 14
Sales Charges ......................................................... 16
Performance ........................................................... 19
Taxes ................................................................. 20
Portfolio Security Transactions ....................................... 22
Financial Statements .................................................. 25
Appendices:
A: Class A Fees, Performance and Ownership ............................ a-1
B: Class B Fees, Performance and Ownership ............................ b-1
C: State Specific Information ......................................... c-1
D: Yield Tables ....................................................... d-1
E: Description of Municipal Obligation 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 SAI regarding another Fund (or Class) because the Funds use
this combined SAI. The Trustees of the Trust have considered this factor in
approving the use of a combined SAI.
THIS IS NOT A PROSPECTUS AND IS AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE
INVESTORS ONLY IF PRECEDED OR ACCOMPANIED BY THE FUNDS' PROSPECTUS DATED JANUARY
1, 1999, AS SUPPLEMENTED FROM TIME TO TIME, WHICH IS INCORPORATED HEREIN BY
REFERENCE. THIS SAI SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS, WHICH MAY
BE OBTAINED BY CALLING 1-800-225-6265.
<PAGE>
STRATEGIES AND RISKS
MUNICIPAL OBLIGATIONS. Municipal obligations are issued to obtain funds for
various public and private purposes. Municipal 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. 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.
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. 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). In
assessing the federal income tax treatment of interest on any municipal
obligation, the Portfolios 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. 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.
Revenue bonds are generally secured by 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.
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.
STATE-SPECIFIC CONCENTRATION. For a discussion of the risks associated with
investing in municipal obligations of a particular state's issuers, see "Risks
of Concentration" in Appendix C. Each Portfolio may also invest a total of up
to 35% of its net assets 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.
Information about some of these conditions and developments is included in
Appendix C.
ISSUER CONCENTRATION. 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 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.
Industrial development bonds are normally secured only by the revenues
from the project and not by state or local government tax payments, they are
subject to a wide variety of risks, many of which relate to the nature of the
specific project. Generally, IDBs are sensitive to the risk of a slowdown in
the economy.
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. 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.
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. 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.
CREDIT QUALITY. While municipal obligations rated investment grade or below
and comparable unrated municipal 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.
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. See "Portfolio of Investments" in
the "Financial Statements" incorporated by reference into this SAI with
respect to any defaulted obligations held by a Portfolio.
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. 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.
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 may also purchase instruments that
give the Portfolio the option to purchase a municipal obligation when and if
issued.
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.
REDEMPTION, DEMAND AND PUT FEATURES AND PUT OPTIONS. Issuers of municipal
obligations reserve the right to call (redeem) the bond. 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. 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.
LIQUIDITY AND PROTECTIVE PUT OPTIONS. Each Portfolio may 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 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
be taxable.
ILLIQUID OBLIGATIONS. 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.
SECURITIES LENDING. Each Portfolio may seek to increase its income by lending
portfolio securities to broker-dealers or other institutional borrowers.
Distributions by a Fund of any income realized by a Portfolio from securities
loans will be taxable. If the management of a 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. Securities lending involves
risks of delay in recovery or even loss of rights on the securities loaned if
the borrower fails financially. 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 or as a substitute for the purchase of securities, 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 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 for
bona fide hedging purposes or non-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 used for hedging purposes are
substantially related to price fluctuations in securities held by the
Portfolio or which it expects 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 Securities and Exchange Commission ("SEC")
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.
PORTFOLIO TURNOVER. 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 could 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.
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
outstanding shares are present or represented at the meeting or (b) more than
50% of the outstanding shares of a Fund. Accordingly, each Fund may not:
(1) Borrow money or issue senior securities except as permitted by the
Investment Company Act of 1940 (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 each 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 Trustees 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. Each Fund and each 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; or
(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. If the Fund or Portfolio invests in Rule 144A securities, the
level of portfolio illiquidity may be increased to the extent that
eligible buyers become uninterested in purchasing such securities.
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 and not investing more than 15% of net assets in
illiquid securities. Moreover, the Fund and Portfolio must always be in
compliance with the borrowing policies set forth above.
MANAGEMENT AND ORGANIZATION
FUND MANAGEMENT. The Trustees of the Trust are responsible for the overall
management and supervision of the Trust's affairs. 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. Those
Trustees who are "interested persons" of the Trust or a Portfolio, as defined
in the 1940 Act, are indicated by an asterisk(*).
JESSICA M. BIBLIOWICZ (38), Trustee
President and Chief Operating Officer of John A. Levin & Co. (a registered
investment advisor) (since July, 1997) and a Director of Baker, Fentress &
Company which owns John A. Levin & Co. (since July, 1997). Formerly Executive
Vice President of Smith Barney Mutual Funds (from July, 1994 to June, 1997).
Elected Trustee October 30, 1998. Trustee of various investment companies
managed by Eaton Vance or BMR since October 30, 1998.
Address: One Rockefeller Plaza, New York, New York 10020
DONALD R. DWIGHT (67), Trustee
President of Dwight Partners, Inc. (a corporate relations and communications
company). Trustee of various investment companies managed by Eaton Vance or
BMR.
Address: Clover Mill Lane, Lyme, New Hampshire 03768
JAMES B. HAWKES (57), Vice President and Trustee*
Chairman, President and Chief Executive Officer of BMR, Eaton Vance and their
corporate parent and trustee (EVC and EV); Director of EVC and EV. Trustee
and officer of various investment companies managed by Eaton Vance or BMR.
SAMUEL L. HAYES, III (63), Trustee
Jacob H. Schiff Professor of Investment Banking Emeritus, Harvard University
Graduate School of Business Administration. Trustee of the Kobrick - Cendant
Investment Trust (mutual funds). Trustee of various investment companies
managed by Eaton Vance or BMR.
Address: 345 Nahatan Road, Westwood, Massachusetts 02090
NORTON H. REAMER (63), Trustee
Chairman of the Board and Chief Executive Officer, United Asset Management
Corporation (a holding company owning institutional investment management
firms); Chairman, President and Director, UAM Funds (mutual funds). Trustee
of various investment companies managed by Eaton Vance or BMR.
Address: One International Place, Boston, Massachusetts 02110
LYNN A. STOUT (41), Trustee
Professor of Law, Georgetown University Law Center. Elected Trustee October
30, 1998. Trustee of various investment companies managed by Eaton Vance or
BMR since October 30, 1998.
Address: 600 New Jersey Avenue, NW, Washington, DC 20001
JOHN L. THORNDIKE (72), Trustee
Formerly Director of Fiduciary Company Incorporated. Trustee of various
investment companies managed by Eaton Vance or BMR.
Address: 175 Federal Street, Boston, Massachusetts 02110
JACK L. TREYNOR (68), Trustee
Investment Adviser and Consultant. Trustee of various investment companies
managed by Eaton Vance or BMR.
Address: 504 Via Almar, Palos Verdes Estates, California 90274
THOMAS J. FETTER (55), President
Vice President of BMR and Eaton Vance. Officer of various investment
companies managed by Eaton Vance or BMR.
ROBERT B. MACINTOSH (41), Vice President
Vice President of BMR and Eaton Vance. Officer of various investment companies
managed by Eaton Vance or BMR.
JAMES L. O'CONNOR (53), Treasurer
Vice President of BMR and Eaton Vance. Officer of various investment companies
managed by Eaton Vance or BMR.
ALAN R. DYNNER (58), Secretary
Vice President and Chief Legal Officer of BMR, Eaton Vance and EVC since
November 1, 1996. Previously, he was a Partner of the law firm of
Kirkpatrick & Lockhart LLP, New York and Washington, D.C., and was Executive
Vice President of Neuberger & Berman Management, Inc., a mutual fund
management company. Officer of various investment companies managed by Eaton
Vance or BMR.
JANET E. SANDERS (63), Assistant Secretary
Vice President of BMR and Eaton Vance. Officer of various investment companies
managed by Eaton Vance or BMR.
A. JOHN MURPHY (35), Assistant Secretary
Vice President of BMR and Eaton Vance. Officer of various investment companies
managed by Eaton Vance or BMR.
ERIC G. WOODBURY (41), Assistant Secretary
Vice President of BMR and Eaton Vance. Officer of various investment companies
managed by Eaton Vance or BMR.
In addition, William H. Ahern, Jr. (39), Vice President of Eaton Vance and
BMR, is a Vice President of the Colorado and Connecticut Portfolios. Timothy
T. Browse (39), Vice President of Eaton Vance and BMR, is a Vice President of
the Michigan and Pennsylvania Portfolios. Cynthia J. Clemson (35), Vice
President of Eaton Vance and BMR, is a Vice President of the Arizona
Portfolio. Thomas M. Metzold (40), Vice President of Eaton Vance and BMR, is a
Vice President of the Texas Portfolio. 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 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 the noninterested Trustees of the Trust and of
the Portfolios 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, 1998,
the noninterested Trustees of the Trust and the Portfolio received the
following compensation in their capacities as Trustees from the Trust, the
Portfolio and the Eaton Vance fund complex(1):
<TABLE>
<CAPTION>
JESSICA M. DONALD R. SAMUEL L. NORTON H. LYNN A. JOHN L. JACK L.
SOURCE OF COMPENSATION BIBLIOWICZ(9) DWIGHT(3) HAYES, III(4) REAMER STOUT(9) THORNDIKE(5) TREYNOR
- ---------------------- ------------- --------- ------------- ------ -------- ------------ -------
<S> <C> <C> <C> <C> <C> <C>
Trust(2) $ -- $ 14,811 $ 14,340 $ 13,789 -- $ 14,296 $ 15,808
Alabama Portfolio -- 1,332 1,593 1,453 -- 1,472 1,536
Arkansas Portfolio -- 1,227 1,497 1,363 -- 1,372 1,432
Georgia Portfolio -- 1,227 1,497 1,363 -- 1,372 1,432
Kentucky Portfolio -- 1,674 1,929 1,779 -- 1,803 1,909
Louisiana Portfolio -- 372 360 346 -- 359 397
Maryland Portfolio -- 1,674 1,929 1,779 -- 1,803 1,909
Missouri Portfolio -- 1,227 1,497 1,363 -- 1,372 1,432
North Carolina Portfolio -- 2,268 2,505 2,333 -- 2,377 2,544
Oregon Portfolio -- 1,674 1,929 1,779 -- 1,803 1,909
South Carolina Portfolio -- 1,227 1,497 1,363 -- 1,372 1,432
Tennessee Portfolio -- 1,227 1,497 1,363 -- 1,372 1,432
Virginia Portfolio -- 2,268 2,505 2,333 -- 2,377 2,544
Trust and Fund Complex -- $156,250(6) $166,250(7) $156,250 -- $156,250(8) $165,000
</TABLE>
- ----------
(1) As of January 1, 1999, the Eaton Vance fund complex consists of 143
registered investment companies or series thereof.
(2) The Trust consisted of 29 Funds as of August 31, 1998.
(3) Mr. Dwight received deferred compensation from each Portfolio as follows:
Alabama -- $661; Arkansas -- $616; Georgia -- $616; Kentucky -- $840;
Louisiana -- $187; Maryland -- $840; Missouri -- $616; North Carolina --
$1,140; Oregon -- $840; South Carolina -- $616; Tennessee -- $616; and
Virginia -- $1,140.
(4) Mr. Hayes received deferred compensation from each Portfolio as follows:
Alabama -- $544; Arkansas -- $511; Georgia -- $511; Kentucky -- $659;
Louisiana -- $123; Maryland -- $659; Missouri -- $511; North Carolina --
$857; Oregon -- $659; South Carolina -- $511; Tennessee -- $511; and
Virginia $857.
(5) Mr. Thorndike received deferred compensation from each Portfolio as
follows: Alabama -- $1,469; Arkansas -- $1,369; Georgia -- $1,369;
Kentucky -- $1,799; Louisiana -- $358; Maryland -- $1,799; Missouri --
$1,369; North Carolina -- $2,372; Oregon -- $1,799; South Carolina --
$1,369; Tennessee -- $1,369; and Virginia -- $2,372.
(6) Includes $56,250 of deferred compensation.
(7) Includes $41,563 of deferred compensation.
(8) Includes $115,790 of deferred compensation.
(9) Ms. Bibliowicz and Ms. Stout were elected as Trustees on October 30, 1998
and will receive compensation approximating the other Trustees after
November 1, 1998.
ORGANIZATION. Each Fund is a series of the Trust, which is organized under
Massachusetts law as a businesss trust and is operated as an open-end
management investment company. Each Fund changed its name from Eaton Vance
[state name] Tax Free Fund to EV Marathon [state name] Tax Free Fund on
February 1, 1994 and to EV Marathon [state name] Municipals Fund on December
1, 1994. Each Fund was reorganized into multiple classes and changed its name
to Eaton Vance [state name] Municipals Fund on September 1, 1997. The
operations of the 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.
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. Each class represents an interest in a Fund, but is subject to
different expenses, rights and privileges. The Trustees have the authority
under the Declaration of Trust to create additional classes of shares with
differing rights and privileges. When issued and outstanding, shares are fully
paid and nonassessable by the Trust. 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
and may over time result in lower expenses for a Fund.
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 remote.
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
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 of the
Portfolio holding office have been elected by investors. In such an event the
Trustees of the Portfolio then in office will call an investors' meeting for
the election of Trustees. Except for the foregoing circumstances and unless
removed by action of the investors in accordance with the Portfolio's
Declaration of Trust, the Trustees shall continue to hold office and may
appoint successor Trustees.
The Declaration of Trust of 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 the Fund
incurring financial loss on account of such liability is limited to
circumstances in which both inadequate insurance exists and the Portfolio
itself is unable to meet its obligations. Accordingly, the Trustees of the
Trust believe that neither the Fund nor its shareholders will be adversely
affected by reason of the Fund investing in the Portfolio.
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 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.
INVESTMENT ADVISORY AND ADMINISTRATIVE SERVICES
INVESTMENT ADVISORY SERVICES. 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.
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 three fiscal years ended
August 31, 1998.
<TABLE>
<CAPTION>
ADVISORY FEE FOR FISCAL YEARS ENDED
NET ASSETS -------------------------------------------------------------
PORTFOLIO AT 8/31/98 AUGUST 31, 1998 AUGUST 31, 1997 AUGUST 31, 1996
- --------- ---------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Alabama $ 94,776,703 $366,055 $412,072 $455,711
Arkansas 56,255,044 185,589 231,998 280,071
Georgia 87,251,274 333,875 393,961 473,056
Kentucky 112,635,280 470,058 519,193 577,479
Louisiana(1) 36,509,773 78,185 80,898 81,468
Maryland 105,152,253 401,391 423,543 454,842
Missouri 74,397,997 272,984 297,922 339,243
North Carolina 152,930,124 655,565 764,004 832,564
Oregon 103,755,097 419,629 488,080 574,189
South Carolina 50,117,073 154,671 177,252 201,026
Tennessee 53,708,707 161,125 167,958 181,502
Virginia 151,257,470 647,387 726,536 811,731
</TABLE>
- ----------
(1) To enhance the net income of the Louisiana Portfolio, BMR made a reduction
of its advisory fee for the period ended August 31, 1996 in the amount of
$40,000.
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.
ADMINISTRATIVE SERVICES. 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.
INFORMATION ABOUT BMR AND EATON VANCE. BMR and Eaton Vance are business
trusts organized under Massachusetts law. Eaton Vance, Inc. ("EV") serves as
trustee of BMR and Eaton Vance. BMR, Eaton Vance and EV are wholly-owned
subsidiaries of Eaton Vance Corporation ("EVC"), a Maryland corporation and
publicly-held holding company. EVC through its subsidiaries and affiliates
engages primarily in investment management, administration and marketing
activities. The Directors of EVC are James B. Hawkes, Benjamin A. Rowland, Jr.,
John G.L. Cabot, John M. Nelson, Vincent M. O'Reilly and Ralph Z. Sorenson. All
of the issued and outstanding shares of Eaton Vance 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, the
Voting Trustees of which are Messrs. Hawkes and Rowland, Alan R. Dynner, Thomas
E. Faust, Jr., Thomas J. Fetter, Duncan W. Richardson, William M. Steul, and
Wharton P. Whitaker. 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
indicated under "Management and Organization", all of the officers of the Trust
(as well as Mr. Hawkes who is also a Trustee) hold positions in the Eaton Vance
organization.
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 a family of mutual funds,
and individual and various institutional accounts, including corporations,
hospitals, retirement plans, universities, foundations and trusts. Eaton Vance
mutual funds feature international equities, domestic equities, tax-free
municipal bonds, and U.S. government and corporate bonds. Lloyd George
Management has advised Eaton Vance's international equity funds since 1992.
Founded in 1991, Lloyd George is headquartered in Hong Kong with offices in
London and Mumbai, India. It has established itself as a leader in investment
management in Asian equities and other global markets. Lloyd George features
an experienced team of investment professionals that began working together in
the mid-1980s. Lloyd George analysts cover East Asia, the India subcontinent,
Russia and Eastern Europe, Latin America, Australia and New Zealand from
offices in Hong Kong, London and Mumbai. Together Eaton Vance and Lloyd George
manage over $30 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, 4
national portfolios and 9 limited maturity portfolios, which serve as
investment vehicles for over 44 mutual funds with varying pricing options. A
staff of 26 (including 5 portfolio managers and 11 credit specialists) is
responsible for the day-to-day management of over 3,500 issues in 45 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 Chartered Financial Analyst and a member of the Boston Security Analysts
Society.
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. Mr. Browse is a Chartered Financial Analyst.
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 Security 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, North Carolina and Rhode
Island. He also serves as economic spokesman for the Eaton Vance organization.
Mr. MacIntosh is a Chartered Financial Analyst.
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.
EXPENSES. Each Fund and Portfolio is responsible for all expenses not
expressly stated to be payable by another party (such as the investment
adviser under the Investment Advisory Agreement, Eaton Vance under the
Administrative Services Agreement or the principal underwriter under the
Distribution Agreement). In the case of expenses incurred by the Trust, each
Fund is responsible for its pro rata share of those expenses. The only
expenses of a Fund allocated to a particular class are those incurred under
the Distribution or Service Plan applicable to that class and those resulting
from the fee paid to the principal underwriter for repurchase transactions.
OTHER SERVICE PROVIDERS
PRINCIPAL UNDERWRITER. Eaton Vance Distributors, Inc. ("EVD"), 24 Federal
Street, Boston, MA 02110, is the Funds' principal underwriter. 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 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 a Fund and its shares
under federal and state securities laws are borne by that Fund. The
Distribution Agreement as it applies to Class A shares 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 Distribution
Agreement as it applies to Class B shares 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 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 investment dealers discounts from the applicable public offering price
which are alike for all investment dealers. See "Sales Charges." EVD is a
wholly-owned subsidiary of EVC. M. Hawkes is a Vice President and Director and
Messrs. Dynner and O'Connor are Vice Presidents of EVD.
CUSTODIAN. Investors Bank & Trust Company ("IBT"), 200 Clarendon Street,
Boston, MA 02116, serves as custodian to the Funds and 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
also provides services in connection with the preparation of shareholder
reports and the electronic filing of such reports with the SEC. EVC and its
affiliates and their officers and employees from time to time have
transactions with various banks, including 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.
INDEPENDENT ACCOUNTANTS. Deloitte & Touche LLP, 125 Summer Street, Boston,
Massachusetts, are the independent 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 SEC.
TRANSFER AGENT. First Data Investor Services Group, P.O. Box 5123,
Westborough, MA 01581-5123, serves as transfer and dividend disbursing agent
for the Funds.
PURCHASING AND REDEEMING SHARES
CALCULATION 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 Funds and the Portfolios will be closed for
business and will not price their respective shares or interests on the
following business holidays: New Year's Day, Martin Luther King, Jr. 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 New York Stock Exchange (the
"Exchange") is open for trading ("Portfolio Business Day") as of the close of
regular trading on the Exchange (the "Portfolio Valuation Time"). The value of
each investor's interest in the Portfolio will be determined by multiplying
the net asset value of the Portfolio by the percentage, determined on the
prior Portfolio Business Day, which represented that investor's share of the
aggregate interests in the Portfolio on such prior day. Any additions or
withdrawals for the current Portfolio Business Day will then be recorded. Each
investor's percentage of the aggregate interest in the Portfolio will then be
recomputed as a percentage equal to a fraction (i) the numerator of which is
the value of such investor's investment in the Portfolio as of the Portfolio
Valuation Time on the prior Portfolio Business Day plus or minus, as the case
may be, the amount of any additions to or withdrawals from the investor's
investment in the Portfolio on the current Portfolio Business Day and (ii) the
denominator of which is the aggregate net asset value of the Portfolio as of
the Portfolio Valuation Time on the prior Portfolio Business Day plus or
minus, as the case may be, the amount of the net additions to or withdrawals
from the aggregate investment in the Portfolio on the current Portfolio
Business Day by all investors in the Portfolio. The percentage so determined
will then be applied to determine the value of the investor's interest in the
Portfolio for the current Portfolio Business Day.
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 investment dealers, together with a
completed and signed Letter of Transmittal in approved form (available from
investment dealers). 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.
ADDITIONAL INFORMATION ABOUT PURCHASES. Fund shares are continuously offered
through investment dealers which have entered agreements with the principal
underwriter. The public offering price is the net asset value next computed
after receipt of the order, plus, in the case of Class A shares, a variable
percentage (sales charge) depending upon the amount of purchase as indicated
by the sales charge table set forth in the prospectus. The sales charge is
divided between the principal underwriter and the investment dealer. The
sales charge 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. See
"Sales Charges".
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
Class B Distribution Plan may continue in effect and payments may be made
under the Plan following any such suspension, discontinuance or limitation of
the offering of shares; however, there is no contractual obligation to
continue any Plan for any particular period of time. Suspension of the
offering of shares would not, of course, affect a shareholder's ability to
redeem shares.
ADDITIONAL INFORMATION ABOUT REDEMPTIONS. The right to redeem shares of a
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 SEC, or during any emergency as determined by the SEC which
makes it impracticable for a Portfolio to dispose of its securities or value
its assets, or during any other period permitted by order of the SEC for the
protection of investors.
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.
SYSTEMATIC WITHDRAWAL PLAN. The transfer agent will send to the shareholder
regular monthly or quarterly payments of any permitted amount designated by the
shareholder based upon the value of the shares held. The checks will be drawn
from share redemptions and hence, 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.
SALES CHARGES
DEALER COMMISSION. The principal underwriter may, from time to time, at its
own expense, provide additional incentives to investment dealers 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 investment dealers 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 investment dealers. The principal underwriter
may allow, upon notice to all investment dealers 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
investment dealers may be deemed to be underwriters as that term is defined in
the Securities Act of 1933.
SALES CHARGE WAIVERS. 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 investment dealers and
bank employees who refer customers to registered representatives of invetment
dealers; to officers and employees of IBT and the transfer agent; and to such
persons' spouses, parents, siblings and children 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". 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 investment advisory, agency, custodial or trust account managed
or administered by Eaton Vance or by any parent, subsidiary or other affiliate
of Eaton Vance. Class A shares are offered at net asset value to the foregoing
persons and in the foregoing situations because either (i) there is no sales
effort involved in the sale of shares or (ii) the investor is paying a fee
(other than the sales charge) to the investment dealer involved in the sale.
The CDSC applicable to Class B shares will be waived in connection with
minimum required distributions from tax-sheltered retirement plans by applying
the rate required to be withdrawn under the applicable rules and regulations
of the Internal Revenue Service to the balance of Class B shares in your
account.
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 of another
Eaton Vance fund will be purchased within a 13-month period, a Statement of
Intention should be signed so that shares may be obtained at the same reduced
sales charge as though the total quantity were invested in one lump sum.
Shares held under Right of Accumulation (see below) as of the date of the
Statement will be included toward the completion of the Statement. The
Statement authorizes the transfer agent to hold in escrow sufficient shares
(5% of the dollar amount specified in the Statement) which can be redeemed to
make up any difference in sales charge on the amount intended to be invested
and the amount actually invested. Execution of a Statement does not obligate
the shareholder to purchase or the Fund to sell the full amount indicated in
the Statement, and should the amount actually purchased during the 13-month
period be more or less than that indicated on the Statement, price adjustments
will be made. Any investor considering signing a Statement of Intention should
read it carefully.
RIGHT OF ACCUMULATION. The applicable sales charge level for the purchase of
Class A 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. The sales charge on the shares being purchased will then be at the
rate applicable to the aggregate. 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 investment dealer must provide
the principal underwriter (in the case of a purchase made through an
investment dealer) 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.
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 "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 Class A Plan provides that each Class A may make service fee
payments for personal services and/or the maintenance of shareholder accounts
to the principal underwriter, investment dealers 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 investment dealers 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. For the service fees paid by
Class A shares, see Appendix A.
The Trust has also adopted a compensation-type Distribution Plan ("Class B
Plan") pursuant to Rule 12b-1 under the 1940 Act for each Fund's Class B
shares. The Plan is designed to permit an investor to purchase shares through
an investment dealer without incurring an initial sales charge and at the same
time permit the principal underwriter to compensate investment dealers in
connection therewith.
The Class B 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) each Fund will pay the principal underwriter
amounts representing (i) sales commissions equal to 5% of the amount received
by the Fund for each Class B 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. To pay these amounts, 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 investment dealers 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 investment dealers at the time of sale equal to 4% of the
purchase price of the Class B shares sold by such dealers. CDSCs paid to the
principal underwriter will be used to reduce amounts owed to it. The Class B
Plan provides that the Fund 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. 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. For the sales commissions and CDSCs
paid on (and uncovered distribution charges of) Class B shares, see Appendix
B.
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 investment dealers), 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.
The Class B Plan also authorizes each Class B to make payments of service
fees to the principal underwriter, investment dealers 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 investment dealers 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 service fees paid by Class B shares, see Appendix B.
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. 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 Service and Distribution Plans continue 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 "Plan Trustees") and (ii) all of the Trustees then in
office. Each Plan may be terminated at any time by vote of a majority of the
Plan Trustees or by a vote of a majority of the outstanding voting securities
of the applicable Class. Each 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 Plans 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 a Plan is in effect, the
selection and nomination of the noninterested Trustees shall be committed to
the discretion of such Trustees. The Class A and Class B Plans were approved
by the Trustees, including the Plan Trustees, on June 23, 1997.
The Trustees of the Trust believe that each 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 shareholders. Payments for sales
commissions and distribution fees made to the principal underwriter under the
Class B 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 investment dealers provide incentives to
provide continuing personal services to investors and the maintenance of
shareholder accounts. By providing incentives to the principal underwriter
and investment dealers, each 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 each Plan will benefit
the Fund and its shareholders.
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 "Sales Charges" in the prospectus.
Yield calculations assume the current maximum initial sales charge for Class A
shares set forth under "Sales Charges" 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.
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. 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. 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 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 mutual fund shares, pays a fixed rate of
interest and entitles the depositor to receive the face amount of the
certificate of deposit at maturity. A bank money market deposit account is a
form of savings account which pays a variable rate of interest. Unlike the
Fund's shares, bank certificates of deposit and bank money market deposit
accounts are insured by the Federal Deposit Insurance Corporation. A money
market mutual fund is designed to maintain a constant value of $1.00 per share
and, thus, a money market fund's shares are subject to less price fluctuation
than the Fund's shares.
The average rates of return of money market mutual funds, certificates of
deposit and bank money market deposit accounts referred to in advertisements,
supplemental sales literature or communications of the Fund will be based on
rates published by the Federal Reserve Bank, Donoghues Money Fund Averages,
RateGram or The Wall Street Journal.
Information used in advertisements and materials furnished to present and
prospective investors may include statements or illustrations relating to the
appropriateness of certain types of securities and/or mutual funds to meet
specific financial goals. Such information may address:
- cost associated with aging parents;
- funding a college education (including its actual and estimated
cost);
- health care expenses (including actual and projected expenses);
- long-term disabilities (including the availability of, and coverage
provided by, disability insurance); and
- retirement (including the availability of social security benefits,
the tax treatment of such benefits and statistics and other
information relating to maintaining a particular standard of living
and outliving existing assets).
Such information may also address different methods for saving money and
the results of such methods, as well as the benefits of investing in municipal
bond funds. Such information may describe the following advantages of
investing in a municipal bond mutual fund versus individual municipal bonds:
regular monthly income; free reinvestment of distributions; potential for
increased income; bond diversification; liquidity; low-cost easy access; and
active management and in depth credit analysis by investment professionals. In
addition, by investing in a municipal bond fund instead of individual bonds,
an investor can avoid dealing with the complexities of the municipal bond
market, while benefitting from the market access and lower transactions costs
enjoyed by municipal bond funds.
The Trust (or principal underwriter) may provide information about Eaton
Vance, its affiliates and other investment advisers to the funds in the Eaton
Vance Family of Funds in sales material or advertisements provided to
investors or prospective investors. Such material or advertisements may also
provide information on the use of investment professionals by such investors.
TAXES
Each series of the Trust is treated as a separate entity for federal
income tax purposes. Each Fund has elected to be treated and intends to
qualify each year, as a regulated investment company ("RIC") under the Code.
Accordingly, each Fund intends to satisfy certain requirements relating to
sources of its income and diversification of its assets and to distribute
substantially all of its ordinary income (including tax-exempt income) and net
income (after reduction by any available capital loss carryforwards) in
accordance with the timing requirements imposed by the Code, so as to maintain
its RIC status and to avoid paying any federal income or excise tax. Each Fund
so qualified for its fiscal year ended July 31, 1998. Because each Fund
invests its assets in a Portfolio, the Portfolio normally must satisfy the
applicable source of income and diversification requirements in order for the
Fund to also satisfy these requirements. Each Portfolio will allocate at least
annually among its investors, including a Fund, each investor's distributive
share of the Portfolio's net taxable (if any) and tax-exempt investment
income, net realized capital gains, and any other items of income, gain, loss,
deduction or credit. For purposes of applying the requirements of the Code
regarding qualification as a RIC, each Fund (i) will be deemed to own its
proportionate share of each of the assets of the corresponding Portfolio and
(ii) will be entitled to the gross income of that Portfolio attributable to
such share.
In order to avoid incurring a federal excise tax obligation, the Code
requires that each Fund distribute (or be deemed to have distributed) by
December 31 of each calendar year at least 98% of its ordinary income (not
including tax-exempt income) for such year, at least 98% of its capital gain
net income (which is the excess of its realized capital gains over its
realized capital losses), generally computed on the basis of the one-year
period ending on October 31 of such year, after reduction by (i) any available
capital loss carryforwards and (ii) 100% of any income from the prior year (as
previously computed) that was not paid out during such year and on which the
Fund paid no federal income tax. Under current law, provided that a Fund
qualifies as a RIC and a Portfolio is treated as a partnership for
Massachusetts and federal tax purposes, neither the Fund nor the Portfolio
should be liable for any income, corporate excise or franchise tax in the
Commonwealth of Massachusetts.
A Portfolio's investment in zero coupon and certain other securities will
cause it to realize income prior to the receipt of cash payments with respect
to these securities. Such income will be allocated daily to interests in the
Portfolio and, in order to enable the relevant Fund to distribute its
proportionate share of this income and avoid a tax payable by the Fund, the
Portfolio may be required to liquidate securities that it might otherwise have
continued to hold in order to generate cash that the Fund may withdraw from
the Portfolio to make distributions to Fund shareholders.
Investments in lower-rated or unrated securities may present special tax
issues for a Portfolio (and, hence, for the relevant Fund) to the extent that
the issuers of these securities default on their obligations pertaining
thereto. The Code is not entirely clear regarding the federal income tax
consequences of a Portfolio'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.
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.
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.
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. See Appendix C for state tax
information for some states.
PORTFOLIO TRADING
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 full range and quality of the executing
firm's services, the value of the brokerage and research services provided,
the responsiveness of the firm to BMR, 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, and dealers in fixed-price
offerings, the cost of which may include undisclosed fees and concessions to
the underwriters. 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
during the three fiscal years ended August 31, 1998:
PORTFOLIO 8/31/98 8/31/97 8/31/96
- --------- ------- ------- -------
Alabama ........................ $11,545 $12,410 $ -0-
Arkansas ....................... 4,436 -0- 20,283
Georgia ........................ 4,847 5,977 17,018
Kentucky ....................... 6,133 5,493 43,344
Louisiana ...................... 1,047 -0- 7,029
Maryland ....................... 7,559 12,851 15,543
Missouri ....................... 4,071 4,904 15,858
North Carolina ................. 5,730 -0- 26,538
Oregon ......................... 2,425 9,834 39,752
South Carolina ................. 2,707 -0- 18,253
Tennessee ...................... 2,768 3,209 9,892
Virginia ....................... 11,884 19,352 50,618
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, 1998 were as follows: Alabama --
$229,113,562; Arkansas -- $86,959,340; Georgia -- $99,435,303; Kentucky --
$129,981,507; Louisiana -- $21,850,649; Maryland -- $150,792,443; Missouri --
$83,512,654; North Carolina -- $118,326,555; Oregon -- $45,467,726; South
Carolina -- $52,676,970; Tennessee -- $57,563,019; and Virginia --
$232,993,674.
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, analytical, 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, political, business and market information, industry and company
reviews, evaluations of securities and portfolio strategies and transactions,
proxy voting data and analysis services, technical analysis of various aspects
of the securities markets, 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 portfolio security transactions 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.
The Portfolios and BMR may also receive Research Services from
underwriters and dealers in fixed-price offerings, which Research Services are
reviewed and evaluated by BMR in connection with its investment
responsibilities. The investment companies sponsored by BMR or Eaton Vance may
allocate trades in such offerings to acquire information relating to the
performance, fees and expenses of such companies and other mutual funds, which
information is used by the Trustees of such companies to fulfill their
responsibility to oversee the quality of the services provided by various
entities, including BMR, to such companies. Such companies may also pay cash
for such information.
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.
FINANCIAL STATEMENTS
The audited financial statements of and the independent auditors' reports
for the Funds and the Portfolios, appear in the Funds' most recent annual
report to shareholders and are incorporated by reference into this SAI. A copy
of the Funds' annual report accompanies this SAI. Consistent with applicable
law, duplicate mailings of shareholder reports and certain other Fund
information to shareholders residing at the same address may be eliminated.
Registrant incorporates by reference the audited financial information for
the Funds and the Portfolios listed below for the fiscal year ended August 31,
1998, as previously filed electronically with the Commission:
<TABLE>
<S> <C>
Eaton Vance Alabama Municipals Fund Alabama Municipals Portfolio
Eaton Vance Arkansas Municipals Fund Arkansas Municipals Portfolio
Eaton Vance Georgia Municipals Fund Georgia Municipals Portfolio
Eaton Vance Kentucky Municipals Fund Kentucky Municipals Portfolio
Eaton Vance Louisiana Municipals Fund Louisiana Municipals Portfolio
Eaton Vance Missouri Municipals Fund Missouri Municipals Portfolio
Eaton Vance Maryland Municipals Fund Maryland Municipals Portfolio
Eaton Vance North Carolina Municipals Fund North Carolina Municipals Portfolio
Eaton Vance Oregon Municipals Fund Oregon Municipals Portfolio
Eaton Vance South Carolina Municipals Fund South Carolina Municipals Portfolio
Eaton Vance Tennessee Municipals Fund Tennessee Municipals Portfolio
Eaton Vance Virginia Municipals Fund Virginia Municipals Portfolio
(Accession No. 0001021408-98-000837)
</TABLE>
<PAGE>
APPENDIX A
CLASS A FEES, PERFORMANCE AND OWNERSHIP
SERVICE FEES
For the fiscal year ended August 31, 1998, the following table shows (1)
amount of service fees on Class A shares paid under the Plan, and (2) amount
of service fees on Class A shares paid to investment dealers. The service fees
paid by the Funds that were not paid to investment dealers were retained by
the principal underwriter.
SERVICE FEES TO
CLASS A SERVICE FEES INVESTMENT DEALERS
- ------- ------------ ------------------
Alabama ................................ $ 9,216 $ 8,929
Arkansas ............................... 1,868 1,759
Georgia ................................ 3,061 3,037
Kentucky ............................... 1,789 1,692
Louisiana .............................. 4,013 4,002
Maryland ............................... 1,852 1,828
Missouri ............................... 3,594 3,528
North Carolina ......................... 25,147 24,931
Oregon ................................. 1,250 1,193
South Carolina ......................... 1,948 1,928
Tennessee .............................. 2,878 2,878
Virginia ............................... 2,049 2,049
PRINCIPAL UNDERWRITER
The total sales charges paid in connection with sales of Class A shares
during the fiscal year ended August 31, 1998 follow:
<TABLE>
<CAPTION>
TOTAL SALES SALES CHARGES TO SALES CHARGES TO
CLASS A CHARGES INVESTMENT DEALERS PRINCIPAL UNDERWRITER
- ------- ----------- ------------------ ---------------------
<S> <C> <C> <C>
Alabama ........................ $19,119 $18,164 $ 955
Arkansas ....................... 8,335 7,872 463
Georgia ........................ 16,076 14,992 1,084
Kentucky ....................... 20,464 19,187 1,277
Louisiana ...................... 32,922 31,481 1,441
Maryland ....................... 18,769 17,782 987
Missouri ....................... 29,275 27,534 1,741
North Carolina ................. 42,692 41,156 1,536
Oregon ......................... 10,757 10,174 583
South Carolina ................. 10,050 9,472 578
Tennessee ...................... 22,694 21,333 1,361
Virginia ....................... 16,406 15,447 960
</TABLE>
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. For the fiscal year ended August 31,
1998, Class A paid the principal underwriter for repurchase transactions
handled by it $2.50 for each such transaction which aggregated as follows:
Alabama -- $80.00; Arkansas -- $22.50; Georgia -- $42.50; Kentucky -- $72.50;
Louisiana -- $25.00; Maryland -- $22.50; Missouri -- $30.00; North Carolina --
$47.50; Oregon -- $15.00; South Carolina -- $10.00; Tennessee -- $17.50; and
Virginia -- $17.50.
PERFORMANCE INFORMATION
The tables below indicate the cumulative and average annual total return
on a hypothetical investment in shares of $1,000. Total return for the period
prior to September 1, 1997 reflects the total return of a predecessor to Class
A. Total return prior to the Predecessor Fund's commencement of operations
reflects the total return of Class B, adjusted to reflect the Class A sales
charge. The Class B total return has not been adjusted to reflect certain
other expenses (such as distribution and/or service fees). If such adjustments
were made, the Class A total return would be different. The "Value of Initial
Investment" reflects the deduction of the maximum sales charge of 4.75%. Past
performance is no guarantee of future results. Investment return and principal
value will fluctuate; shares, when redeemed, may be worth more or less than
their original cost. Information presented with two asterisks (**) includes
the effect of subsidizing expenses. Returns would have been lower without
subsidies.
<TABLE>
VALUE OF A $1,000 INVESTMENT -- ALABAMA
<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 8/31/98 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------------------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of Fund** 5/1/92 $952.93 $1,447.04 51.85% 6.81% 44.70% 6.00%
5 Years Ended
8/31/98** 8/31/93 $952.42 $1,222.76 28.38% 5.12% 22.28% 4.10%
1 Year Ended
8/31/98 8/31/97 $952.65 $1,019.12 6.98% 6.98% 1.91% 1.91%
- ------------
*Predecessor Fund commenced operations December 7, 1993.
</TABLE>
<TABLE>
VALUE OF A $1,000 INVESTMENT -- ARKANSAS
<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 8/31/98 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------------------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of Fund** 10/2/92 $952.35 $1,400.50 47.06% 6.74% 40.05% 5.86%
5 Years Ended
8/31/98 8/31/93 $952.50 $1,232.50 29.38% 5.29% 5.29% 4.27%
1 Year Ended
8/31/98 8/31/97 $952.42 $1,028.16 7.95% 7.95% 2.82% 2.82%
- ------------
*Predecessor Fund commenced operations February 9, 1994.
</TABLE>
<TABLE>
VALUE OF A $1,000 INVESTMENT -- GEORGIA
<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 8/31/98 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------------------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of Fund** 12/23/91 $952.37 $1,398.95 46.89% 5.92% 39.90% 5.15%
5 Years Ended
8/31/98 8/31/93 $952.36 $1,187.58 24.70% 4.51% 18.76% 3.50%
1 Year Ended
8/31/98 8/31/97 $952.86 $1,026.72 7.75% 7.75% 2.67% 2.67%
- ------------
*Predecessor Fund commenced operations December 7, 1993.
</TABLE>
<TABLE>
VALUE OF A $1,000 INVESTMENT -- KENTUCKY
<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 8/31/98 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------------------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of Fund** 12/23/91 $952.93 $1,435.56 50.65% 6.32% 43.56% 5.55%
5 Years Ended
8/31/98 8/31/93 $952.44 $1,217.85 27.86% 5.04% 21.78% 4.02%
1 Year Ended
8/31/98 8/31/97 $952.75 $1,026.37 7.72% 7.72% 2.64% 2.64%
- ------------
*Predecessor Fund commenced operations December 7, 1993.
</TABLE>
<TABLE>
VALUE OF A $1,000 INVESTMENT -- LOUISIANA
<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 8/31/98 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------------------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of Fund** 10/2/92 $952.67 $1,439.66 51.12% 7.24% 43.97% 6.36%
5 Years Ended
8/31/98 8/31/93 $952.23 $1,244.83 30.73% 5.51% 24.48% 4.48%
1 Year Ended
8/31/98 8/31/97 $952.15 $1,029.56 8.13% 8.13% 2.96% 2.96%
- ------------
*Predecessor Fund commenced operations February 14, 1994.
</TABLE>
<TABLE>
VALUE OF A $1,000 INVESTMENT -- MARYLAND
<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 8/31/98 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------------------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of Fund** 2/3/92 $952.33 $1,473.00 54.66% 6.85% 47.30% 6.06%
5 Years Ended
8/31/98** 8/31/93 $952.73 $1,234.69 29.60% 5.32% 23.47% 4.31%
1 Year Ended
8/31/98 8/31/97 $952.42 $1,025.54 7.68% 7.68% 2.55% 2.55%
- ------------
*Predecessor Fund commenced operations December 10, 1993.
</TABLE>
<TABLE>
VALUE OF A $1,000 INVESTMENT -- MISSOURI
<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 8/31/98 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------------------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of Fund** 5/1/92 $952.24 $1,505.75 58.12% 7.49% 50.58% 6.67%
5 Years Ended
8/31/98** 8/31/93 $952.44 $1,251.73 31.42% 5.62% 25.17% 4.59%
1 Year Ended
8/31/98 8/31/97 $952.06 $1,034.01 8.61% 8.61% 3.40% 3.40%
- ------------
*Predecessor Fund commenced operations December 7, 1993.
</TABLE>
<TABLE>
VALUE OF A $1,000 INVESTMENT -- NORTH CAROLINA
<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 8/31/98 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------------------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of Fund** 10/23/91 $952.90 $1,464.33 53.66% 6.46% 46.43% 5.72%
5 Years Ended
8/31/98 8/31/93 $952.27 $1,206.83 26.74% 4.85% 20.68% 3.83%
1 Year Ended
8/31/98 8/31/97 $952.43 $1,030.68 8.22% 8.22% 3.07% 3.07%
- ------------
*Predecessor Fund commenced operations December 7, 1993.
</TABLE>
<TABLE>
VALUE OF A $1,000 INVESTMENT -- OREGON
<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 8/31/98 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------------------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of Fund** 12/24/91 $952.20 $1,466.24 53.98% 6.66% 46.62% 5.89%
5 Years Ended
8/31/98 8/31/93 $952.08 $1,205.14 26.58% 4.83% 20.51% 3.80%
1 Year Ended
8/31/98 8/31/97 $952.38 $1,029.30 8.08% 8.08% 2.93% 2.93%
- ------------
*Predecessor Fund commenced operations December 28, 1993.
</TABLE>
<TABLE>
VALUE OF A $1,000 INVESTMENT -- SOUTH CAROLINA
<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 8/31/98 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------------------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of Fund** 10/2/92 $952.70 $1,387.78 45.68% 6.57% 38.78% 5.70%
5 Years Ended
8/31/98 8/31/93 $952.43 $1,228.09 28.94% 5.22% 22.81% 4.19%
1 Year Ended
8/31/98 8/31/97 $952.20 $1,034.31 8.62% 8.62% 3.43% 3.43%
- ------------
*Predecesor Fund commenced operations February 14, 1994.
</TABLE>
<TABLE>
VALUE OF A $1,000 INVESTMENT -- TENNESSEE
<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 8/31/98 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------------------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of Fund** 8/25/92 $952.61 $1,424.25 49.50% 6.91% 42.42% 6.05%
5 Years Ended
8/31/98** 8/31/93 $952.70 $1,231.61 29.27% 5.27% 23.16% 4.25%
1 Year Ended
8/31/98 8/31/97 $952.10 $1,026.87 7.85% 7.85% 2.69% 2.69%
- ------------
*Predecessor Fund commenced operations December 9, 1993.
</TABLE>
<TABLE>
VALUE OF A $1,000 INVESTMENT -- VIRGINIA
<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 8/31/98 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------------------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of Fund** 7/26/91 $952.67 $1,521.54 59.71% 6.82% 52.15% 6.09%
5 Years Ended
8/31/98 8/31/93 $952.38 $1,220.54 28.16% 5.09% 22.05% 4.07%
1 Year Ended
8/31/98 8/31/97 $952.48 $1,029.48 8.08% 8.08% 2.95% 2.95%
- ------------
*Predecessor Fund commenced operations December 9, 1993.
</TABLE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As at November 30 1998, the Trustees and Officers of the Trust, as a
group, owned in the aggregate less than 1% of the outstanding shares of each
Class A and of each Fund. In addition, as of the same date, the following
record owners held the amounts of Class A shares indicated below, which were
held on behalf of their customers who are the beneficial owners of such
shares, and as to which they have voting power under certain limited
circumstances:
<TABLE>
<S> <C> <C> <C>
ALABAMA - Merrill Lynch, Pierce, Fenner & Smith, Inc. Jacksonville, FL 61.9%
ARKANSAS - Merrill Lynch, Pierce, Fenner & Smith, Inc. Jacksonville, FL 29.1%
Donaldson Lufkin Jenerette Jersey City, NJ 5.8%
GEORGIA - Merrill Lynch, Pierce, Fenner & Smith, Inc. Jacksonville, FL 32.4%
BT Alex Brown Incorporated Baltimore, MD 13.2%
KENTUCKY - Merrill Lynch, Pierce, Fenner & Smith, Inc. Jacksonville, FL 27.1%
Donaldson Lufkin Jenerette Jersey City, NJ 8.3%
Donaldson Lufkin Jenerette Jersey City, NJ 7.6%
LOUISIANA - Donaldson Lufkin Jenrette Jersey City, NJ 30.0%
Donaldson Lufkin Jenrette Jersey City, NJ 15.8%
Merrill Lynch, Pierce, Fenner & Smith, Inc. Jacksonville, FL 13.3%
MARYLAND - Merrill Lynch, Pierce, Fenner & Smith, Inc. Jacksonville, FL 8.1%
MISSOURI - Merrill Lynch, Pierce, Fenner & Smith, Inc. Jacksonville, FL 19.5%
NORTH CAROLINA - FUBS & Co. Charlotte, NC 49.1%
US Clearing Corp. New York, NY 7.1%
OREGON - Merrill Lynch, Pierce, Fenner & Smith, Inc. Jacksonville, FL 6.8%
Donaldson Lufkin Jenerette Jersey City, NJ 6.1%
SOUTH CAROLINA - Merrill Lynch, Pierce, Fenner & Smith, Inc. Jacksonville, FL 45.3%
TENNESSEE - Prudential Securities Inc. Lewisburg, TN 27.9%
Painewebber FBO Elixabeth W. Dupree Knoxville, TN 10.2%
Bear Stearns Securities Corp. Brooklyn, NY 5.7%
Merrill Lynch, Pierce, Fenner & Smith, Inc. Jacksonville, FL 5.6%
VIRGINIA - NFSC FEBO Sherry L. Volk Williamsburg, VA 14.0%
US Clearing Corp. New York, NY 9.4%
Wilmington Trust Co. TTEEFBO Wesley C. Dudley Wilmington, DE 6.4%
Cowen & Co. New York, NY 5.2%
</TABLE>
In addition, as of the same date, the following shareholders owned of
record, the percentage of each Fund's Class A shares indicated after their
name:
<TABLE>
<S> <C> <C> <C>
ARKANSAS - John C. Baber & Barbara Woods Baber JTTEN Little Rock, AR 6.3%
James L. Walker & Peggy L. Walker JT Peggy L. Walker JTTEN Poyetteville, AR 5,5%
Jolee Brown Churan Gentry, AR 5.3%
GEORGIA - Jack D. Pollexfen & Lee Pollexfen; REV LIV Trust Sausalito, CA 9.3%
Edward D. Jones & Company Maryland Heights, MD 7.3%
KENTUCKY - Joseph M. Peterson & Nola Jean Peterson Louisville, KY 16.3%
LOUISIANA - R. Ray Rhymes, Jr. Monroe, LA 5.0%
MARYLAND - Cecile B. Taubman Baltimore, MD 7.4%
Calvert R. Bregel Glen Arm, MD 5.6%
Jean Allen Dornin Lexington Park, MD 5.2%
Neal Goldberg Bethesda, MD 5.1%
MISSOURI - John F. Cooney & Joan M. Cooney Raytown, MO 5.2%
Dale A. Knight & Vern H. Schneider St. Louis, MO 5.1%
OREGON - Dain Rauscher Incorporated Eugene, OR 9.2%
Ragen MacKenzie Inc. FBO Larry R. Fredrickson &
Sandra Landis Fredrickson TTEES Larry Richard Fedrickson
REV Family Trust 9/18/96 Banks, OR 9.4%
Jaynese Hiigel TTEE Eugene, OR 7.7%
John H. Dunlevy Bend, OR 6.5%
Ronald K. Nakata & Wands A. Nakata Portland, OR 5.2%
SOUTH CAROLINA - Barbara B. McDaniel Mount Pleasant, SC 8.1%
Cathryn M. Lander Garden City, SC 7.5%
VIRGINIA - NFSC FBO Sherry L. Volk Williamsburg, VA 14.0%
Wilmington Trust Co. TTEE FBO Wesley C. Dudley Wilmington, DE 6.4%
Olive Young Brown TTEE FBO Olive Young Brown REV TRUST Arlington, VA 6.4%
Jennifer E. Matherly & Philip A. Matherly New York, NY 5.0%
</TABLE>
To the knowledge of the Trust, no other person owned of record or
beneficially 5% or more of any Fund's outstanding Class A shares as of such
date.
<PAGE>
APPENDIX B
CLASS B FEES, PERFORMANCE AND OWNERSHIP
DISTRIBUTION AND SERVICE FEES
The following table shows, for the fiscal year ended August 31, 1998, (1)
sales commissions paid by the principal underwriter to investment dealers on
sales of Class B shares, (2) distribution payments to the principal
underwriter under the Distribution Plan, (3) CDSC payments to the principal
underwriter, (4) service fees on Class B shares, and (5) the amount of service
fees on Class B shares paid to investment dealers. The service fees paid by
the Funds that were not paid to investment dealers were retained by the
principal underwriter.
<TABLE>
<CAPTION>
DISTRIBUTION CDSC SERVICE
PAYMENTS TO PAYMENTS TO FEES TO
SALES THE PRINCIPAL THE PRINCIPAL SERVICE INVESTMENT
CLASS B COMMISSIONS UNDERWRITER UNDERWRITER FEES DEALERS
- ------- ----------- ------------- ------------ ------- ----------
<S> <C> <C> <C> <C> <C>
Alabama ....................... $168,436 $ 691,815 $200,000 $177,654 $176,614
Arkansas ...................... 86,457 434,913 166,000 111,199 109,908
Georgia ....................... 146,348 665,255 201,000 170,191 168,847
Kentucky ...................... 190,832 872,503 267,000 224,998 223,402
Louisiana ..................... 76,130 239,653 65,000 58,473 58,200
Maryland ...................... 239,119 779,861 208,000 192,623 190,780
Missouri ...................... 119,943 563,472 156,000 143,015 141,641
North Carolina ................ 185,943 1,084,915 294,000 279,539 277,671
Oregon ........................ 114,434 804,263 253,000 204,767 203,113
South Carolina ................ 72,627 384,035 134,000 97,960 96,551
Tennessee ..................... 131,723 386,116 117,000 95,253 94,324
Virginia ...................... 237,135 1,156,266 321,000 295,321 292,991
</TABLE>
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. For the fiscal year ended August 31,
1998, Class B paid the principal underwriter for repurchase transactions
handled by it $2.50 for each such transaction which aggregated as follows:
Alabama -- $1,412.50; Arkansas -- $832.50; Georgia -- $1,647.50; Kentucky --
$1,610.00; Louisiana -- $375.00; Maryland -- $1,255.00; Missouri -- $970.00;
North Carolina -- $2,002.50; Oregon -- $1,707.50; South Carolina -- $710.00;
Tennessee -- $665.00; and Virginia -- $2,120.00.
PERFORMANCE INFORMATION
The tables below indicate the cumulative and average annual total return
on a hypothetical investment of $1,000 in Class B shares for the periods shown
in each table. Past performance is not indicative of future results.
Investment return and principal value will fluctuate; shares, when redeemed,
may be worth more or less than their original cost. Information presented with
two asterisks (**) includes the effect of subsidizing expenses. Return would
have been lower without subsidies.
<TABLE>
VALUE OF A $1,000 INVESTMENT -- ALABAMA
<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 8/31/98 ON 8/31/98 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------- ---------- ---------- ------------- ------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of
Fund** 5/1/92 $1,000 $1,498.61 $1,498.61 49.86% 6.59% 49.86% 6.59%
5 Years
Ended
8/31/98** 8/31/93 $1,000 $1,267.08 $1,247.08 26.71% 4.85% 24.71% 4.52%
1 Year
Ended
8/31/98 8/31/97 $1,000 $1,061.71 $1,011.71 6.17% 6.17% 1.17% 1.17%
- ------------
*Investment operations began on May 1, 1992.
</TABLE>
<TABLE>
VALUE OF A $1,000 INVESTMENT -- ARKANSAS
<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 8/31/98 ON 8/31/98 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------- ---------- ---------- ------------- ------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of
Fund** 10/2/92 $1,000 $1,429.43 $1,419.43 42.94% 6.23% 41.94% 6.11%
5 Years
Ended
8/31/98** 8/31/93 $1,000 $1,257.61 $1,237.67 25.76% 4.69% 23.77% 4.36%
1 Year
Ended
8/31/98 8/31/97 $1,000 $1,071.94 $1,021.94 7.19% 7.19% 2.19% 2.19%
- ------------
*Investment operations began on October 2, 1992.
</TABLE>
<TABLE>
VALUE OF A $1,000 INVESTMENT -- GEORGIA
<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 8/31/98 ON 8/31/98 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------- ---------- ---------- ------------- --------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of
Fund** 12/23/91 $1,000 $1,456.00 $1,456.00 45.60% 5.78% 45.60% 5.78%
5 Years
Ended
8/31/98 8/31/93 $1,000 $1,236.05 $1,216.59 23.60% 4.33% 21.66% 4.00%
1 Year
Ended
8/31/98 8/31/97 $1,000 $1,070.00 $1,020.00 7.00% 7.00% 2.00% 2.00%
- ------------
*Investment operations began on December 23, 1991.
</TABLE>
<TABLE>
VALUE OF A $1,000 INVESTMENT -- KENTUCKY
<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 8/31/98 ON 8/31/98 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------- ---------- ---------- ------------- ------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of
Fund** 12/23/91 $1,000 $1,490.96 $1,490.96 49.10% 6.15% 49.10% 6.15%
5 Years
Ended
8/31/98 8/31/93 $1,000 $1,265.56 $1,245.63 26.56% 4.82% 24.56% 4.49%
1 Year
Ended
8/31/98 8/31/97 $1,000 $1,069.69 $1,019.69 6.97% 6.97% 1.97% 1.97%
- ------------
*Investment operations began on December 23, 1991.
</TABLE>
<TABLE>
VALUE OF A $1,000 INVESTMENT -- LOUISIANA
<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 8/31/98 ON 8/31/98 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------- ---------- ---------- ------------- ------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of
Fund** 10/2/92 $1,000 $1,435.47 $1,425.47 43.55% 6.31% 42.55% 6.18%
5 Years
Ended
8/31/98** 8/31/93 $1,000 $1,241.66 $1,222.48 24.17% 4.42% 22.25% 4.10%
1 Year
Ended
8/31/98 8/31/97 $1,000 $1,073.70 $1,023.70 7.37% 7.37% 2.37% 2.37%
- ------------
*Investment operations began on October 2, 1992.
</TABLE>
<TABLE>
VALUE OF A $1,000 INVESTMENT -- MARYLAND
<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 8/31/98 ON 8/31/98 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------- ---------- ---------- ------------- -------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of
Fund** 2/3/92 $1,000 $1,512.18 $1,512.18 51.22% 6.49% 51.22% 6.49%
5 Years
Ended
8/31/98** 8/31/93 $1,000 $1,267.11 $1,247.11 26.71% 4.85% 24.71% 4.52%
1 Year
Ended
8/31/98 8/31/97 $1,000 $1,069.77 $1,019.77 6.98% 6.98% 1.98% 1.98%
- ----------
*Investment operations began on February 3, 1992.
</TABLE>
<TABLE>
VALUE OF A $1,000 INVESTMENT -- MISSOURI
<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 8/31/98 ON 8/32/98 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------- ---------- ---------- ------------- ------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of
Fund** 5/1/92 $1,000 $1,551.66 $1,551.66 55.17% 7.18% 55.17% 7.18%
5 Years
Ended
8/31/98** 8/31/93 $1,000 $1,289.57 $1,269.57 28.96% 5.22% 26.96% 4.89%
1 Year
Ended
8/31/98 8/31/97 $1,000 $1,078.06 $1,028.06 7.81% 7.81% 2.81% 2.81%
- ----------
*Investment operations began on May 1, 1992.
</TABLE>
<TABLE>
VALUE OF A $1,000 INVESTMENT -- NORTH CAROLINA
<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 8/31/98 ON 8/31/98 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------- ---------- ---------- ------------- ------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of
Fund** 10/23/91 $1,000 $1,503.46 $1,503.46 50.35% 6.12% 50.35% 6.12%
5 Years
Ended
8/31/98 8/31/93 $1,000 $1,239.93 $1,220.37 23.99% 4.39% 22.04% 4.06%
1 Year
Ended
8/31/98 8/31/97 $1,000 $1,074.25 $1,024.25 7.42% 7.42% 2.42% 2.42%
- ------------
*Investment operations began on October 23, 1991.
</TABLE>
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT -- OREGON
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 8/31/98 ON 8/31/98 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------- ---------- ---------- ------------- ------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of
the Fund** 12/24/91 $1,000 $1,502.20 $1,502.20 50.22% 6.27% 50.22% 6.27%
5 Years
Ended
8/31/98 8/31/93 $1,000 $1,234.88 $1,215.40 23.49% 4.31% 21.54% 3.98%
1 Year
Ended
8/31/98 8/31/97 $1,000 $1,072.25 $1,022.25 7.22% 7.22% 2.22% 2.22%
- ----------
*Investment operations began on December 24, 1991.
</TABLE>
<TABLE>
VALUE OF A $1,000 INVESTMENT -- SOUTH CAROLINA
<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 8/31/98 ON 8/31/98 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------- ---------- ---------- ------------- --------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of
Fund** 10/02/92 $1,000 $1,420.90 $1,410.90 42.09% 6.12% 41.09% 6.00%
5 Years
Ended
8/31/98 8/31/93 $1,000 $1,257.77 $1,237.90 25.78% 4.69% 23.79% 4.36%
1 Year
Ended
8/31/98 8/31/97 $1,000 $1,079.55 $1,029.55 7.96% 7.96% 2.96% 2.96%
- ----------
*Investment operations began on October 2, 1992.
</TABLE>
<TABLE>
VALUE OF A $1,000 INVESTMENT -- TENNESSEE
<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 8/31/98 ON 8/31/98 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------- ---------- ---------- ------------- ------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of
Fund** 8/25/92 $1,000 $1,461.36 $1,461.36 46.14% 6.50% 46.14% 6.50%
5 Years
Ended
8/31/98** 8/31/93 $1,000 $1,263.54 $1,243.80 26.35% 4.79% 24.38% 4.46%
1 Year
Ended
8/31/98 8/31/97 $1,000 $1,068.59 $1,018.59 6.86% 6.86% 1.86% 1.86%
- ------------
*Investment operations began on August 25, 1992.
</TABLE>
<TABLE>
VALUE OF A $1,000 INVESTMENT -- VIRGINIA
<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 8/31/98 ON 8/31/98 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------- ---------- ---------- ------------- ------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of
Fund** 7/26/91 $1,000 $1,571.64 $1,571.64 57.16% 6.58% 57.16% 6.58%
5 Years
Ended
8/31/98 8/31/93 $1,000 $1,261.09 $1,241.18 26.11% 4.75% 24.12% 4.42%
1 Year
Ended
8/31/98 8/31/97 $1,000 $1,073.66 $1,023.66 7.37% 7.37% 2.37% 2.37%
- ------------
*Investment operations began on July 26, 1991.
</TABLE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As at November 30, 1998, the Trustees and officers of the Trust, as a
group, owned in the aggregate less than 1% of the outstanding shares of each
Class B and of each Fund. As of November 30, 1998, 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 -- 33.9%; Arkansas -- 11.7%;
Georgia -- 19.3%; Kentucky -- 15.6%; Louisiana -- 42.5%; Maryland -- 14.1%;
Missouri -- 7.8%; North Carolina -- 11.4%; Oregon -- 9.0%; South Carolina --
14.8%; Tennessee -- 8.7%; and Virginia -- 14.8%. 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.
The bond ratings provided in the prospectus are current as of the date of
the 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
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.
The U.S. Supreme Court has granted certiorari to review an Alabama Supreme
Court decision summarily affirming a lower state court's ruling that a
telephone company, its affiliated corporations, and a transportation company
were barred by the doctrine of res judicata from relitigating the
constitutionality of the Alabama foreign corporation franchise tax because of
the preclusive effect of the holding in White v. Reynolds Metals Co., 558 So
2d 373 (Ala. 1989), cert. denied, 496 U.S. 912 (1990). In Reynolds Metals the
Alabama Supreme Court held that Alabama's franchise tax scheme did not violate
either the Equal Protection Clause or the Commerce Clause of the U.S.
Constitution. South Central Bell Telephone Co. et al., U.S. Supreme Court,
Dkt. 97-2045, petition for certiorari granted September 29, 1998. The Court
will review the petitioners' contentions that the state franchise tax
impermissibility discriminates against interstate commerce by taxing Alabama
corporations only on the par value of their stock while taxing out-of-state
corporations on the value of essentially all their capital employed in
Alabama. The Court declined to review the question of the relief to which
petitioners may be entitled if the franchise tax is found to be
unconstitutional.
In recent years corporate franchise tax collections have constituted as
much as 15% of the state's General Fund revenues; in 1995-96, Alabama
collected $116,740,877 in corporate franchise taxes, a large proportion of
which represented taxes paid by foreign corporations; in 1994-95 franchise tax
collections were $134,574,958. Total General Fund receipts for these two years
were $896,910,316 (1995-96) and $874,315,598 (1994-95), respectively (Source:
A Legislator's Guide to Alabama's Taxes, January, 1997). Corporate franchise
taxes are distributed as follows: 77% to the State General Fund; 16.35% to the
Public Welfare Trust Fund; and 6.65% to the counties in which the corporations
operate. A Supreme Court decision holding a substantial component of this tax
to be unconstitutional could have a severe impact on the budgets and financial
condition of the state and certain of its counties.
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 three levels of priority
for general revenue spending, levels "A," "B" and "C". 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, the Budget
Stabilization Trust Fund, which receives one-half of interest earnings from
State fund investments, has been established and is utilized to assure proper
cash flow during any period. Other said interest earnings are utilized to
supplement the State's capital construction program. However, such interest
earnings are first pledged to the payment of certain bonds issued by or on
behalf of certain state agencies.
The State operates under a biennial budgeting system with July 1, 1997
beginning the current biennium. The State ended fiscal 1997 in balance as
required by the Revenue Stabilization Act. Gross available general revenue
growth for fiscal 1997 was 5.5%.
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 October 31, 1998, the State's outstanding general obligation debt
was $5,012,670,000. The State had outstanding at October 31, 1998,
$171,805,000 of guaranteed revenue debt. In addition to the State's general
obligation debt and guaranteed revenue debt, the State had outstanding at June
30, 1997, $130,000 in revenue bonds and notes issued by various State
agencies, authorities and institutions of higher education. In the 1998
Legislative Session, the General Assembly authorized and the Governor approved
the issuance of $765,608,000 in aggregate principal amount of general
obligation bonds ($283,218,000 for amended fiscal year 1998 and $482,390,000
for fiscal year 1999) fiscal year 1998, 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 1998 were 5.6% over tax
collections for fiscal year 1997. Corporate and individual income tax receipts
and general sales tax receipts of the State for fiscal year 1997 comprised an
estimated 52.1% and 40.2%, respectively, of the total State tax revenues.
Revenues from sales and income taxes increased 2.8% and 6.0%, respectively,
during fiscal year 1998.
Two suits 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 plus interest, 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, plus interest, 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). These cases are still pending
in the trial court. The trial court has granted the State's motion for summary
judgement, and twelve of the twenty-three claimants have appealed to the
Georgia Supreme Court. The total principal amount of the claims for refund by
twelve Plaintiffs who did appeal now appears to be approximately $42 million.
The total principal dollar amount of the claims for refund by the eleven
Plaintiffs who did not appeal, which claims appear to be conclusively resolved
in favor of the State by virtue of the trial court's judgment now appears to
be approximately $54 million.
In cases related to ones filed recently in Fulton Superior Court, each
County and certain of its officials has sued the State of Georgia, the
Department of Revenue, Zell Miller (in his official capacity as Governor), T.
Jerry Jackson (in his personal capacity and in his official capacity as
Revenue Commissioner), Claude L. Vickers in his personal capacity and in his
official capacity as State Auditor), and the Department of Audits
(collectively "the State") in connection with the State's collection and
distribution of local option sales taxes to the counties. In Cobb, the County
sought an accounting, a writ of mandamus, injunctive relief and additional
relief based upon theories of unjust enrichment and bailment. Cobb's claims
related to the State's administration of state and local option sales taxes
from April 1, 1995 to the present. Cobb sought $19 million in relief. In
DeKalb, the County asserts similar grounds for relief with the addition of a
claim for declaratory relief. Dekalb's claims relate to the State's
administration of state and local option sales taxes from July 1, 1997 to the
present. DeKalb seeks unspecified monetary relief but estimates a shortfall in
distributions from the State of $15 million. The State filed motions to
dismiss in both cases and additionally, in Cobb, filed a counterclaim against
the County for $10.4 million. The trial court has granted the State's motions
to dismiss in both actions. DeKalb County has appealed this ruling, claiming
that certain of its claims were meritorious and seeking to litigate those
claims. The State believes that the period for Cobb County to appeal has
lapsed, although a motion by Cobb County remains pending in the trial court.
The State intends to contest all claims against it vigorously. The State
believes that the substance of Plaintiff's claims in both cases in
unsubstantiated. This appeal has been fully briefed and argued, and decision
is awaited from the Supreme Court of Georgia.
On August 26, 1996, a civil action was filed in the Fulton County Superior
Court seeking a court order declaring that two games sponsored by the Georgia
Lottery Corporation, "Quick Cash" and "Cash Three," are unconstitutional and
enjoining the lottery from further offering of these games. Plaintiffs also
seek the return of all monies played on these games during a specified period,
approximately $1,703,462,781. On an interlocutory appeal, the Georgia Court of
Appeals ruled that the Lottery Corporation does not have sovereign immunity
but ruled for the Corporation on the merits. The Plaintiffs petitioned for a
writ of certiorari to the Supreme Court of Georgia, and the Supreme Court
denied the petition. The remittitur of Court of Appeals has been returned to
the trial court.
Another case has arisen in the context of a declaratory judgment action
brought by the State of Georgia and counterclaims filed by the defendants. A
young professional woman and mother was killed in an automobile accident when
her car collided with another vehicle. The other vehicle was a state-owned
vehicle driven by an employee of a for-profit corporation, which had
contracted with Fulton County, Georgia, to provide a transportation service.
Fulton County had a contract with the Atlanta Regional Commission concerning
the transportation service program, and the Atlanta Regional Commission, in
turn, had a contract with the Georgia Department of Human Resources. In June
1996, the Georgia Department of Human Resources and the Georgia Department of
Administrative Services brought declaratory judgment actions against the
decedent's estate and others to assert the absence of any duty to insure the
second driver. In August 1996, the estate and other parties filed tort
counter-claims for wrongful death. The State's self-insurance program and the
State's vehicle insurer have settled with the decedent's estate in a total
amount of $675,000; the State's share was $175,000. The State has reached a
settlement of all remaining claims for a total of less than $200,000.
A civil action was filed in October, 1997, on behalf of W.J. Luke and all
other contributors to the Georgia Underground Storage Tank Trust Fund,
established under the Georgia Underground Storage Tank Act, O.C.G.A.
(S)12-13-1, et seq., for refund of all monies collected under that Act,
interest, and attorney's fees. From the time of its inception in 1988 to the
present, the Fund has collected approximately $82 million. The State believes
that it has substantial defenses to assert and intends to defend the case
vigorously. The State was granted a motion to dismiss the action on the
grounds that no justifiable controversy exists, and the Plaintiff has filed an
appeal with the Georgia Supreme Court. The State filed a motion to transfer
the case to the Georgia Court of Appeals, which was denied. The Supreme Court
has heard oral arguments and a decision by the Court is pending.
Like other large organizations, the State and its agencies are subject to
the costs and risks associated with what has come to be known as "Year 2000"
compliance, which arises because many computer programs accept only two-digit
entries in date codes fields used for, among other things, calculation and
report generation features. Wherever the State and its agencies use
information systems, the resulting inability of such computer programs to
distinguish between the years 1900 and 2000 presents a number of risks. Such
risks include, for example, disruption of the collection of revenues,
disruption of the distribution of State funds with respect to transfer
payments, taxes, State payroll, and transfers to local government, and
disruption of other information processing with respect to preparation of tax
assessment notices and calculation of prisoner release dates, as well as the
inefficiencies and delays caused by system-generated errors and potential
litigation as a result of any of such disruptions or delays. In addition, the
State's receipt of revenues from its various revenue sources, both in the
public and private sectors, could be adversely affected by Year 2000
compliance problems experienced by such revenue sources.
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 required 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 has been 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. The Kentucky
General Assembly enacted such enabling legislation in 1996 and the Kentucky
courts issued a final judgment in July 1998 upholding the validity of the
constitutional amendment. Local governments in Kentucky have begun to issue
general obligation indebtedness under the authority of the constitutional
amendment and the enabling legislation.
LOUISIANA
The State of Louisiana general fund ended fiscal year 1996-97 with an
undesignated fund balance of approximately $135 million. The latest published
information indicated that the estimated amount necessary to continue all
existing programs through fiscal year 1997-98 was approximately $5.6 billion
while the estimate of revenues available for expenditures was approximately
$5.7 billion. The latest fiscal year 1998-99 budget projections indicate that
the state will have to rely on reduction in expenditures by approximately $616
million to produce a balanced budget. There are several items that may impact
the sale's budget in future years. On June 19, 1997, the State Bond Commission
authorized the defeasance of certain General Obligations Bond payments due in
Fiscal Years 1997-98, 1998-99, 1999-2000, and 2000-01, using the general fund
undesignated fund balance from the fiscal year 1995-96. The defeasance
resulted in a reduction of the State's debt service payment obligations for
fiscal years 1998-2001 by more than $393 million. In 1998, the Louisiana
Legislature continuned the existing temporary suspension of most exemptions
from the Louisiana sales/use tax through June 30, 2000. Louisiana also
participated in the settlement of lawsuits by various states against the
tobacco industry. Louisiana is expected to receive $4.4 billion in the next
twenty-five years for the public cost of treating smoking-related illnesses.
These funds will be unrestricted money that will be deposited into the general
fund. The State's Attorney General anticipates that the money will be
earmarked for medical research, education, and other areas to fight tobacco-
related illnesses. The State's first payment of $54.1 million is due soon.
After that, there will be twenty-four annual payments ranging from $144.6
million to $189.3 million. On October 31, 1998, Harrah's New Orleans Casino
emerged from bankruptcy after three years of legal, political and financial
obstacles. The project is backed by Harrah's Enertainment, Inc. Pursuant to
the casino operator's contract with the state, the casino is obligated to pay
to the State a $100 million annual state casino tax. This payment is
guaranteed by Harrah's Entertainment, Inc. The state has addressed certain
issues related to the Medicaid program. There were budget surpluses in the
State Medicaid Program in 1995-96 and 1996-97 fiscal years and no deficits are
foreseen in the near future. The appropriaton for the state fiscal year
1997-98 was $3.281 billion, the total state contribution for fiscal year
1997-98 is $982.2 million. This amount represents a complete State
contribution as required by the federal matching levels. There is no
assurance, however, that there will not be delays in appropriations or state
budget deficits which may occur in the future that may create a risk that
payments for services to a Medicaid patient will be held or delayed. Other
items that may impact the state's budget projections include the Louisiana
"Self-Insurance Fund," which consists of all premiums paid by state agencies
under the state's risk management program, the investment earnings thereon and
commissions retained. As of June 30, 1997, the self-insurance fund's
discounted valuation reported in accordance with Governmental Accounting
Standards Board No. 10 totaled $0 because, due to the indadequate funding
levels, discounted valuations were not possible. As of June 30, 1997, there
was a cash balance in the self-insurance fund of $123,675,053. Another debt
the state faces is the state employees retirement system "unfunded accrued
liability," which is the estimated amount by which the retirement systems are
under funded. In 1987, a law was passed which requires the state to make
whatever payments are necessary over a forty-year period to eliminate the
unfunded accrued liability. The legislative actuary originally projected that
the unfunded accrued liability would grow to $9 billion by the year 2019.
However, the unfunded accrued liability has actually decreased; as of fiscal
year 1996-97 it was $6.414 billion, $940 million less than projected.
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, two stadiums, 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.
The State ended fiscal year 1997 with a General Fund surplus on a
budgetary basis of $207.2 million, in addition to which there was $490.1
million in the Revenue Stabilization Account of the State Reserve Fund. In
April 1997 the General Assembly approved a $15.4 billion 1998 fiscal year
budget. When this budget was enacted, the State estimated the General Fund
surplus on a budgetary basis would be $28.2 million, in addition to which the
State projected that there would be a balance of $532 million in the Revenue
Stabilization Account of the State Reserve Fund. The General Fund surplus on a
budgetary basis at June 30, 1998 was $420 million. In addition, the balance in
the Revenue Stabilization Account of the State Reserve Fund was $617.9 million
at June 30, 1998. Based on the Budget approved for fiscal year 1999, it is
currently estimated that the General Fund surplus on a budgetary basis at June
30, 1999, will be approximately $117 million. In addition, the balance in the
Revenue Stabilization Account for the State Reserve Fund is estimated to be
$635 million at June 30, 1999 (after $185.2 million is transferred to the
General Fund).
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 and
in 1996 St. Louis based McDonnel Douglas Corporation ("MDC"), the largest
employer in the State, was reported to have received the second largest dollar
volume of defense contracts in the United States. Recent changes in the levels
of military appropriations and cancellations of weapons programs have resulted
in a 30% decrease in MDC's Missouri workforce over the last four years. In the
event of further reductions in the level of military appropriations are
enacted by the United States Congress, Missouri and particularly the St. Louis
area, could be disproportionately affected. On August 1, 1997, MDC became a
wholly-owned subsidiary of The Boeing Company. It is impossible to determine
what effect, if any, the acquisition of MDC by The Boeing Company will have on
the operations conducted by MDC. On December 1, 1998 the Boeing Company
announced it would reduce its overall workforce 20% by the end of 2000. While
it is expected that most of the reduction will occur in the commercial
aircraft division which is located outside of Missouri, any shift or loss of
production operations now conducted in Missouri would have a negative impact
on the economy of the State and particularly on the economy of the St. Louis
metropolitan area.
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 and the
State is attempting to negotiate a settlement of the litigation in order to
reduce its annual desegregation cost payments which, in recent year, have
accounting for as much 15% of total General 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.
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. On July 24, 1997, the North Carolina Supreme Court issued a decision
in the case, in which the Court held that the North Carolina Constitution
guarantees every child in the state an opportunity to receive a sound basic
education in North Carolina public schools, and defined the basic parameters
of a "sound basic education". The Court also held, however, that the
Constitution does not require substantially equal funding and educational
advantages in all school districts. The Court remanded the case to the
Superior Court to determine whether the plaintiffs could make a clear showing
that the State Board of Education has established and is administering a
system that denies the children in the State a sound basic education. 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. On
July 21, 1997, the North Carolina General
Assembly ratified legislation providing a refund to all taxpayers who paid
intangibles tax on shares of stock from 1990 through 1994, who protested
payment in a timely manner under applicable state law, and whose refund claim
was pending on the date the United States Supreme Court struck down the tax.
The estimated cost of refunds is approximately $155 million.
OREGON
As of September 1, 1997, $3.26 billion in general obligation bonds issued
by the State of Oregon and its agencies and instrumentalities were
outstanding, including $122.3 million in general obligation bonds supported by
the budget for the State's general fund and $3.14 billion of self-supporting
general obligation bonds. The State's self-supporting general obligation bonds
include $2.39 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 1997-99
biennium, approximately 97.0% 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.
Units of local government (including cities, counties, school districts
and various types of special purpose districts), each of them a municipal
corporation separate from the State, rely on various combinations of property
tax revenues, local income taxes, user fees and charges and State assistance.
As of June 30, 1996, units of local government in Oregon had $3.01 billion in
general obligation bonds outstanding.
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.
Oregon voters have approved several property tax limitation measures
during the 1990s. Ballot Measure 5, adopted by Oregon's voters in November
1990, imposed an aggregate limit on the rate of property taxes, including ad
valorem taxes, that may be levied against any real or personal property.
Measure 5 provided that not more than $15 per $1,000 of real market value
could be levied against any piece of property, of which $5 could be used for
public education and the remaining $10 could be used for general governmental
purposes. Ballot Measure 47, adopted by Oregon's voters in November 1996, was
designed to limit the amount of property taxes actually collected.
Units of local government that levy and collect property taxes are most
directly affected by the property tax limitation measures. The Oregon
Legislative Revenue Office has estimated that the total reduction in property
tax revenues collected by local governments under Measure 50 will be
approximately $389 million for tax year 1997-98 and approximately $454 million
for tax year 1998-99. Both Measure 5 and Measure 50 require the State to
temporarily replace a substantial portion of the lost revenues of local school
districts. Because the State does not levy or collect property taxes, the main
impact of the property tax limitation measures will likely be to increase
pressure on the Legislative Assembly to continue to use State funds to replace
revenues lost by local governments.
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."
Before Measure 47 was fully implemented, the 1997 Legislative Assembly
referred to Oregon voters, and the voters approved at the May 20, 1997 special
election, a constitutional amendment that replaced the property tax
limitations imposed by the former Measure 47. Measure 50 repealed both Measure
47 and Measure 5 and replaced them with a new ad valorem property tax
limitation measure, which required a 17 percent reduction in 1997-98 operating
tax levies (which vary by government entity) and which limited the assessed
value for the tax year 1997-98 to its 1995-96 "real market value," less ten
percent. Thereafter, Measure 50 limits the valuation growth of property
assessments on each unit of property to three percent per year for future tax
years. Measure 50 preserves the general limitations on property tax rates
imposed by Measure 5. Measure 50 also requires that any new property taxes be
approved by a majority of the voters in an election where at least 50 percent
of the eligible voters participate, except in the instance of a general
election in even numbered years. In addition, Measure 50 requires voter
approval of the use if fees, taxes, assessments or other charges as
alternative revenue sources to make up for revenue reductions caused by the
amended property tax limits.
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 and $145 million of that amount has been paid.
An additional $80 million is payable at the end of the 1999 legislative
session.
According to the September 1997 Oregon Economic and Revenue Forecast
prepared by the State Department of Administrative Services, Oregon's economy
is expected to continue expanding faster than the overall U.S. economy, due to
a strong international export sector, an expanding high technology sector and
a steady stream of immigration. Oregon's manufacturing and construction
sectors, which have been growing at an extremely rapid pace, are expected to
cool off. The larger service-producing sector, which has softened over the
past two quarters, is expected to grow slightly. The overall growth rate is
trending down. Increases in personal income are expected to be slightly higher
in 1997 than they were in 1996, and are projected to be lower in 1998 and
1999. Following a 4.0 percent increase in 1996, employment is projected to
rise more slowly in 1997 and 1998. Oregon's unemployment rate for August 1997
was 5.5% compared to a national rate of 4.9%.
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. For the past serveral years, the
Tennessee unemployment rate has generally stabilized in the range of 5.0
percent. Tennessee's overall average unemployment rate for 1997 was 5.4%; the
rate for March 1998 is 4.7%.
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. 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. The budget for the 1996-98 biennium
submitted by the Governor did not contemplate any significant new taxes or
increases in the scope or amount of existing tax.
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.
PUERTO RICO, THE U.S. VIRGIN ISLANDS AND GUAM
PUERTO RICO. Puerto Rico has a diversified economy dominated by the
manufacturing and service sectors. The North American Free Trade Agreement
("NAFTA"), which became effective January 1, 1994, has led to loss of lower
wage jobs such as textiles, but economic growth in other areas, particularly
the high technology area has compensated for that loss.
The Commonwealth of Puerto Rico 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.
Puerto Ricans have periodically considered conversion to statehood and
such a vote is likely again in the future.
THE U.S. VIRGIN ISLANDS. The United States Virgin Islands (USVI) is heavily
reliant on the tourism industry, with roughly 43% of non-agricultural
employment in tourist-related trade and services. The tourism industry is
economically sensitive and would likely be adversely affected by a recession
in either the United States or Europe.
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. 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. Guam's general obligation debt is rated BBB by S&P
with a negative outlook.
<PAGE>
APPENDIX D: TAX EQUIVALENT YIELD TABLES
The tables below give the approximate yield a taxable security must earn
at various income brackets to produce after-tax yields equivalent to those of
tax exempt bonds yielding from 4% to 7% (6% for Pennsylvania) under the
regular federal income tax and applicable state and local tax rates applicable
for 1998.
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 $124,500. The tax
brackets also do not show the effects of phaseout of personal exemptions for
single filers with adjusted gross income in excess of $124,500 and joint
filers with adjusted gross income in excess of $186,800. 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
AMT. The illustrations assume that the AMT is not applicable and do not take
into account any tax credits that may be available.
The information set forth herein is as of the date of this SAI. Subsequent tax
law changes could result in prospective or retroactive changes in the tax
brackets, tax rates, and tax equivalent yields set forth above. Investors
should consult their tax adviser for additional information.
<TABLE>
ALABAMA
<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 $ 25,350 Up to $ 42,350 19.25% 4.95% 5.57% 6.19% 6.81% 7.43% 8.05% 8.67%
$ 25,351 - $ 61,400 $ 42,351 - $102,300 31.60 5.85 6.58 7.31 8.04 8.77 9.50 10.23
$ 61,401 - $128,100 $102,301 - $155,950 34.45 6.10 6.86 7.63 8.39 9.15 9.92 10.68
$128,101 - $278,450 $155,951 - $278,450 39.20 6.58 7.40 8.22 9.05 9.87 10.69 11.51
Over $278,450 Over $278,450 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%.
<TABLE>
ARKANSAS
<CAPTION>
COMBINED
FEDERAL A FEDERAL AND ARKANSAS STATE
SINGLE RETURN JOINT RETURN AND TAX EXEMPT YIELD OF:
- ----------------------- --------------------- 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 $ 25,350 Up to $ 42,350 20.95% 5.06% 5.69% 6.33% 6.96% 7.59% 8.22% 8.86%
$ 25,351 - $ 61,400 $ 42,351 - $102,300 33.04 5.97 6.72 7.47 8.21 8.96 9.71 10.45
$ 61,401 - $128,100 $102,301 - $155,950 35.83 6.23 7.01 7.79 8.57 9.35 10.13 10.91
$128,101 - $278,450 $155,951 - $278,450 40.48 6.72 7.56 8.40 9.24 10.08 10.92 11.76
Over $278,450 Over $278,450 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%.
<TABLE>
GEORGIA
<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 $ 25,350 Up to $ 42,350 20.10% 5.01% 5.63% 6.26% 6.88% 7.51% 8.14% 8.76%
$ 25,351 - $ 61,400 $ 42,351 - $102,300 32.32 5.91 6.65 7.39 8.13 8.87 9.60 10.34
$ 61,401 - $128,100 $102,301 - $155,950 35.14 6.17 6.94 7.71 8.48 9.25 10.02 10.79
$128,101 - $278,450 $155,951 - $278,450 39.84 6.65 7.48 8.31 9.14 9.97 10.80 11.64
Over $278,450 Over $278,450 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.
<TABLE>
KENTUCKY
<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 $ 25,350 Up to $ 42,350 20.10% 5.01% 5.63% 6.26% 6.88% 7.51% 8.14% 8.76%
$ 25,351-$ 61,400 $ 42,351-$102,300 32.32% 5.91 6.65 7.39 8.13 8.87 9.60 10.34
$ 61,401-$128,100 $102,301-$155,950 35.14% 6.17 6.94 7.71 8.48 9.25 10.02 10.79
$128,101-$278,450 $155,951-$278,450 39.84% 6.65 7.48 8.31 9.14 9.97 10.80 11.64
Over $278,450 Over $278,450 43.22% 7.05 7.93 8.81 9.69 10.57 11.45 12.33
<CAPTION>
SINGLE RETURN JOINT RETURN 4% 4.5% 5% 5.5% 6% 6.5% 7%
- ------------------------- ------------------- -----------------------------------------------------------------------
(TAXABLE INCOME*) IS EQUIVALENT TO A FULLY TAXABLE YIELD OF:
- ---------------------------------------------- ---------- -----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Up to $ 25,350 Up to $ 42,350 5.36% 5.99% 6.61% 7.23% 7.86% 8.48% 9.11%
$ 25,351-$ 61,400 $ 42,351-$102,300 6.33 7.07 7.80 8.54 9.28 10.01 10.75
$ 61,401-$128,100 $102,301-$155,950 6.61 7.37 8.14 8.91 9.68 10.45 11.22
$128,101-$278,450 $155,951-$278,450 7.12 7.95 8.78 9.61 10.44 11.27 12.10
Over $278,450 Over $278,450 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.
<TABLE>
LOUISIANA
<CAPTION>
COMBINED
FEDERAL A FEDERAL AND LOUISIANA STATE
SINGLE RETURN JOINT RETURN AND TAX EXEMPT YIELD OF:
- ----------------------- --------------------- LA 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 $ 25,350 Up to $ 42,350 18.40% 4.90% 5.51% 6.13% 6.74% 7.35% 7.97% 8.58%
$ 25,351 - $ 61,400 $ 42,351 - $102,300 32.32 5.91 6.65 7.39 8.13 8.87 9.60 10.34
$ 61,401 - $128,100 $102,301 - $155,950 35.14 6.17 6.94 7.71 8.48 9.25 10.02 10.79
$128,101 - $278,450 $155,951 - $278,450 39.84 6.65 7.48 8.31 9.14 9.97 10.80 11.64
Over $278,450 Over $278,450 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%.
<TABLE>
<CAPTION>
MARYLAND
COMBINED
SINGLE RETURN JOINT RETURN FEDERAL A FEDERAL AND MARYLAND STATE
AND TAX EXEMPT YIELD OF:
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 $ 25,350 Up to $ 42,350 21.63% 5.10% 5.74% 6.38% 7.02% 7.66% 8.29% 8.93%
$ 25,351-$ 61,400 $ 42,351-$102,300 33.62% 6.03 6.78 7.53 8.29 9.04 9.79 10.54
$ 61,401-$128,100 $102,301-$155,950 36.38% 6.29 7.07 7.86 8.65 9.43 10.22 11.00
$128,101-$278,450 $155,951-$278,450 40.99% 6.78 7.63 8.47 9.32 10.17 11.02 11.86
Over $278,450 Over $278,450 44.31% 7.18 8.08 8.98 9.88 10.77 11.67 12.57
</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.
<TABLE>
MISSOURI
<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 $ 25,350 Up to $ 42,350 20.10% 5.01% 5.63% 6.26% 6.88% 7.51% 8.14% 8.76%
$ 25,351 - $ 61,400 $ 42,351 - $102,300 32.32 5.91 6.65 7.39 8.13 8.87 9.60 10.34
$ 61,401 - $128,100 $102,301 - $155,950 35.14 6.17 6.94 7.71 8.48 9.25 10.02 10.79
$128,101 - $278,450 $155,951 - $278,450 39.84 6.65 7.48 8.31 9.14 9.97 10.80 11.64
Over $278,450 Over $278,450 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%.
<TABLE>
<CAPTION>
NORTH CAROLINA
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 $ 25,350 Up to $ 42,350 20.95% 5.06% 5.69% 6.33% 6.96% 7.59% 8.22% 8.86%
$ 25,351 - $ 61,400 $ 42,351 - $102,300 33.04 5.97 6.72 7.47 8.21 8.96 9.71 10.45
$ 61,401 - $128,100 $102,301 - $155,950 36.35 6.28 7.07 7.86 8.64 9.43 10.21 11.00
$128,101 - $278,450 $155,951 - $278,450 40.96 6.78 7.62 8.47 9.32 10.16 11.01 11.86
Over $278,450 Over $278,450 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%.
<TABLE>
OREGON
<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 $ 25,350 Up to $ 42,350 22.65% 5.17% 5.82% 6.46% 7.11% 7.76% 8.40% 9.05%
$ 25,351-$ 61,400 $ 42,351-$102,300 34.48% 6.11 6.87 7.63 8.39 9.16 9.92 10.68
$ 61,401-$128,100 $102,301-$155,950 37.21% 6.37 7.17 7.96 8.76 9.56 10.35 11.15
$128,101-$278,450 $155,951-$278,450 41.76% 6.87 7.73 8.59 9.44 10.30 11.16 12.02
Over $278,450 Over $278,450 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%.
<TABLE>
SOUTH CAROLINA
<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 $ 25,350 Up to $ 42,350 20.95% 5.06% 5.69% 6.33% 6.96% 7.59% 8.22% 8.86%
$ 25,351-$ 61,400 $ 42,351-$102,300 33.04% 5.97 6.72 7.47 8.21 8.96 9.71 10.45
$ 61,401-$128,100 $102,301-$155,950 35.83% 6.23 7.01 7.79 8.57 9.35 10.13 10.91
$128,101-$278,450 $155,951-$278,450 40.48% 6.72 7.56 8.40 9.24 10.08 10.92 11.76
Over $278,450 Over $278,450 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%.
<TABLE>
TENNESSEE
<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 $ 25,350 Up to $ 42,350 20.10% 5.01% 5.63% 6.26% 6.88% 7.51% 8.14% 8.76%
$ 25,351-$ 61,400 $ 42,351-$102,300 32.32% 5.91 6.65 7.39 8.13 8.87 9.60 10.34
$ 61,401-$128,100 $102,301-$155,950 35.14% 6.17 6.94 7.71 8.48 9.25 10.02 10.79
$128,101-$278,450 $155,951-$278,450 39.84% 6.65 7.48 8.31 9.14 9.97 10.80 11.64
Over $278,450 Over $278,450 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%.
<TABLE>
VIRGINIA
<CAPTION>
COMBINED
FEDERAL A FEDERAL AND VIRGINIA STATE
AND TAX EXEMPT YIELD OF:
SINGLE RETURN JOINT RETURN VA STATE 4% 4.5% 5% 5.5% 6% 6.5% 7%
- ----------------------- --------------------- TAX -----------------------------------------------------------------------
(TAXABLE INCOME*) BRACKET+ IS EQUIVALENT TO A FULLY TAXABLE YIELD OF:
- ---------------------------------------------- ---------- -----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Up to $ 25,350 Up to $ 42,350 19.89% 4.99% 5.62% 6.24% 6.87% 7.49% 8.11% 8.74%
$ 25,351-$ 61,400 $ 42,351-$102,300 32.14% 5.89 6.63 7.37 8.10 8.84 9.58 10.32
$ 61,401-$128,100 $102,301-$155,950 34.97% 6.15 6.92 7.69 8.46 9.23 10.00 10.76
$128,101-$278,450 $155,951-$278,450 39.68% 6.63 7.46 8.29 9.12 9.95 10.78 11.60
Over $278,450 Over $278,450 43.07% 7.03 7.90 8.78 9.66 10.54 11.42 12.30
</TABLE>
*Net amount subject to federal and Virginia personal income tax after
deductions and exemptions.
+The first tax bracket is calculated using the highest Virginia tax rate with
the bracket. Taxpayers with taxable income within such brackets may have
lower combined tax brackets and taxable equivalent yields than indicated
above. The combined tax brackets assume that Virginia taxes are itemized
deductions for federal income tax purposes. Investors who do not itemize
deductions on their federal income tax return will have a higher combined
bracket and higher taxable equivalent yield than those indicated above. The
applicable federal tax rates within each of these combined brackets are 15%,
28%, 31%, 36% and 39.6%. The assumed Virginia State income tax rate is 5.75%.
<PAGE>
APPENDIX E: RATINGS
DESCRIPTION OF SECURITIES RATINGS+
MOODY'S INVESTORS SERVICE, INC.
MUNICIPAL BONDS
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long term risk appear somewhat larger than the Aaa
securities.
A: Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper-medium-grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may
be present which suggest a susceptibility to impairment sometime in the
future.
Baa: Bonds which are rated Baa are considered as medium-grade obligations
(i.e., they are neither highly protected nor poorly secured). Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during other good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
or interest.
Ca: Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
ABSENCE OF RATING: Where no rating has been assigned or where a rating has
been suspended or withdrawn, it may be for reasons unrelated to the quality of
the issue.
- ------------
+The ratings indicated herein are believed to be the most recent ratings
available at the date of this SAI for the securities listed. Ratings are
generally given to securities at the time of issuance. While the rating
agencies may from time to time revise such ratings, they undertake no
obligation to do so, and the ratings indicated do not necessarily represent
ratings which would be given to these securities on the date of a Portfolio's
fiscal year end.
Should no rating be assigned, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities or companies that
are not rated as a matter of policy.
3. There is a lack of essential data pertaining to the issue or issuer.
4. The issue was privately placed, in which case the rating is not
published in Moody's publications.
Suspension or withdrawal may occur if new and material circumstances arise,
the effects of which preclude satisfactory analysis; if there is no longer
available reasonable up-to-date data to permit a judgment to be formed; if a
bond is called for redemption; or for other reasons.
NOTE: Moody's applies numerical modifiers, 1, 2, and 3 in each generic rating
classification from Aa through B. 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 IBCA
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>
PART C - OTHER INFORMATION
ITEM 23. EXHIBITS
(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.
(2) 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.
(3) 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.
(b)(1) By-Laws as amended October 21, 1987 filed as Exhibit (2)(a) to
Post-Effective Amendment No. 55 and incorporated herein by
reference.
(2) 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.
(c) Reference is made to Item 23(a) and 23(b) above.
(d) Not applicable
(e)(1) 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)(7) to Post-Effective Amendment No. 67 and incorporated
herein by reference.
(2) Selling Group Agreement between Eaton Vance Distributors, Inc.
and Authorized Dealers filed as Exhibit (6)(b) to the
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.
(f) 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).
(g)(1) 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.
(2) 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.
(h)(1)(a) Amended Administrative Services Agreement between Eaton Vance
Municipals Trust (on behalf of each of its series) and Eaton
Vance Management with attached schedules (including Amended
Schedule A dated September 29, 1995) filed as Exhibit (9)(a) to
Post-Effective Amendment No. 55 and incorporated herein by
reference.
(b) Amendment to Schedule A dated June 23, 1997 to the Amended
Administrative Services
C-1
<PAGE>
Agreement dated June 19, 1995 filed as Exhibit (9)(a)(2) to
Post-Effective Amendment No. 67 and incorporated herein by
reference.
(2) Transfer Agency Agreement dated January 1, 1998 filed as Exhibit
(k)(b) to the Registration Statement on Form N-2 of Eaton Vance
Advisers Senior Floating-Rate Fund (File Nos. 333-46853,
811-08671) (Accession No. 0000950156-98-000172) and incorporated
herein by reference.
(i) Opinion of Internal Counsel filed as Exhibit (i) to
Post-Effective Amendment No. 73 and incorporated herein by
reference.
(j) 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.
(k) Not applicable
(l) Not applicable
(m)(1) 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.
(2) Eaton Vance Municipals Trust Class B Distribution Plan adopted
June 23, 1997 with attached Schedule A effective June 23, 1997
filed as Exhibit (15)(b) to Post-Effective Amendment No. 69 and
incorporated herein by reference.
(3) Eaton Vance Municipals Trust Class C Distribution Plan adopted
June 23, 1997 with attached Schedule A effective June 23, 1997
filed as Exhibit (15)(c) to Post-Effective Amendment No. 69 and
incorporated herein by reference.
(n)(1) Financial Data Schedule for the fiscal year ended August 31, 1998
for Eaton Vance Alabama Municipals Fund-Class A filed herewith.
(2) Financial Data Schedule for the fiscal year ended August 31, 1998
for Eaton Vance Alabama Municipals Fund-Class B filed herewith.
(3) Financial Data Schedule for the fiscal year ended August 31, 1998
for Eaton Vance Arkansas Municipals Fund-Class A filed herewith.
(4) Financial Data Schedule for the fiscal year ended August 31, 1998
for Eaton Vance Arkansas Municipals Fund-Class B filed herewith.
(5) Financial Data Schedule for the fiscal year ended August 31, 1998
for Eaton Vance Georgia Municipals Fund-Class A filed herewith.
(6) Financial Data Schedule for the fiscal year ended August 31, 1998
for Eaton Vance Georgia Municipals Fund-Class B filed herewith.
C-2
<PAGE>
(7) Financial Data Schedule for the fiscal year ended August 31, 1998
for Eaton Vance Kentucky Municipals Fund-Class A filed herewith.
(8) Financial Data Schedule for the fiscal year ended August 31, 1998
for Eaton Vance Kentucky Municipals Fund-Class B filed herewith.
(9) Financial Data Schedule for the fiscal year ended August 31, 1998
for Eaton Vance Louisiana Municipals Fund-Class A filed herewith.
(10) Financial Data Schedule for the fiscal year ended August 31, 1998
for Eaton Vance Louisiana Municipals Fund-Class B filed herewith.
(11) Financial Data Schedule for the fiscal year ended August 31, 1998
for Eaton Vance Maryland Municipals Fund-Class A filed herewith.
(12) Financial Data Schedule for the fiscal year ended August 31, 1998
for Eaton Vance Maryland Municipals Fund-Class B filed herewith.
(13) Financial Data Schedule for the fiscal year ended August 31, 1998
for Eaton Vance Missouri Municipals Fund-Class A filed herewith.
(14) Financial Data Schedule for the fiscal year ended August 31, 1998
for Eaton Vance Missouri Municipals Fund-Class B filed herewith.
(15) Financial Data Schedule for the fiscal year ended August 31, 1998
for Eaton Vance North Carolina Municipals Fund-Class A filed
herewith.
(16) Financial Data Schedule for the fiscal year ended August 31, 1998
for Eaton Vance North Carolina Municipals Fund-Class B filed
herewith.
(17) Financial Data Schedule for the fiscal year ended August 31, 1998
for Eaton Vance Oregon Municipals Fund-Class A filed herewith.
(18) Financial Data Schedule for the fiscal year ended August 31, 1998
for Eaton Vance Oregon Municipals Fund-Class B filed herewith.
(19) Financial Data Schedule for the fiscal year ended August 31, 1998
for Eaton Vance South Carolina Municipals Fund-Class A filed
herewith.
(20) Financial Data Schedule for the fiscal year ended August 31, 1998
for Eaton Vance South Carolina Municipals Fund-Class B filed
herewith.
(21) Financial Data Schedule for the fiscal year ended August 31, 1998
for Eaton Vance Tennessee Municipals Fund-Class A filed herewith.
(22) Financial Data Schedule for the fiscal year ended August 31, 1998
for Eaton Vance Tennessee Municipals Fund-Class B filed herewith.
(23) Financial Data Schedule for the fiscal year ended August 31, 1998
for Eaton Vance Virginia Municipals Fund-Class A filed herewith.
C-3
<PAGE>
(24) Financial Data Schedule for the fiscal year ended August 31, 1998
for Eaton Vance Virginia Municipals Fund-Class B filed herewith.
(25) Financial Data Schedule for the fiscal year ended August 31, 1998
for Alabama Municipals Portfolio filed herewith.
(26) Financial Data Schedule for the fiscal year ended August 31, 1998
for Arkansas Municipals Portfolio filed herewith.
(27) Financial Data Schedule for the fiscal year ended August 31, 1998
for Georgia Municipals Portfolio filed herewith.
(28) Financial Data Schedule for the fiscal year ended August 31, 1998
for Kentucky Municipals Portfolio filed herewith.
(29) Financial Data Schedule for the fiscal year ended August 31, 1998
for Louisiana Municipals Portfolio filed herewith.
(30) Financial Data Schedule for the fiscal year ended August 31, 1998
for Maryland Municipals Portfolio filed herewith.
(31) Financial Data Schedule for the fiscal year ended August 31, 1998
for Missouri Municipals Portfolio filed herewith.
(32) Financial Data Schedule for the fiscal year ended August 31, 1998
for North Carolina Municipals Portfolio filed herewith.
(33) Financial Data Schedule for the fiscal year ended August 31, 1998
for Oregon Municipals Portfolio filed herewith.
(34) Financial Data Schedule for the fiscal year ended August 31, 1998
for South Carolina Municipals Portfolio filed herewith.
(35) Financial Data Schedule for the fiscal year ended August 31, 1998
for Tennessee Municipals Portfolio filed herewith.
(36) Financial Data Schedule for the fiscal year ended August 31, 1998
for Virginia Municipals Portfolio filed herewith.
(o) 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.
(p)(1) 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.
(2) Power of Attorney for Eaton Vance Municipals Trust dated November
16, 1998 filed as Exhibit (p)(2) to Post-Effective Amendment No.
75 and incorporated herein by reference.
(3) 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
C-4
<PAGE>
Portfolio, Massachusetts Municipals Portfolio, Michigan
Municipals Portfolio, Minnesota Municipals Portfolio, Mississippi
Municipals Portfolio, Missouri Municipals Portfolio, National
Municipals Portfolio, New Jersey Municipals Portfolio, 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.
(4) 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 Portfolio, 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 November 16, 1998 filed as
Exhibit (p)(4) to Post-Effective Amendment No. 75 and
incorporated herein by reference.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL
Not applicable
ITEM 25. INDEMNIFICATION
Article IV of the Registrant's Amended and Restated Declaration of Trust
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 loss incurred by reason of negligent errors
and omissions committed in their capacities as such.
The distribution agreements of the Registrant also provide for reciprocal
indemnity of the principal underwriter, on the one hand, and the Trustees and
officers, on the other.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT Adviser
Reference is made to: (i) the information set forth under the caption
"Management and Organization" in the Statement of Additional Information; (ii)
the Eaton Vance Corp. 10-K filed under the Securities Exchange Act of 1934 (File
No. 1-8100); and (iii) the Form ADV of Eaton Vance (File No. 801-15930) and BMR
(File No. 801-43127) filed with the Commission, all of which are incorporated
herein by reference.
ITEM 27. 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:
C-5
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Eaton Vance Advisers Senior Floating-Rate Fund Eaton Vance Municipals Trust II
Eaton Vance Growth Trust Eaton Vance Mutual Funds Trust
Eaton Vance Income Fund of Boston Eaton Vance Prime Rate Reserves
Eaton Vance Investment Trust Eaton Vance Special Investment Trust
Eaton Vance Municipals Trust EV Classic Senior Floating-Rate Fund
</TABLE>
(b)
<TABLE>
<CAPTION>
<S> <C> <C>
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address* with Principal Underwiter with Registrant
----------------- ------------------------- ---------------
Albert F. Barbaro Vice President None
Chris Berg Vice President None
Kate B. Bradshaw Vice President None
David B. Carle Vice President None
Mark Carlson Vice President None
Daniel C. Cataldo Vice President None
Raymond Cox Vice President None
Peter Crowley Vice President None
Mark P. Doman Vice President None
Alan R. Dynner Vice President Secretary
Richard A. Finelli Vice President None
Kelly Flynn Vice President None
James Foley Vice President None
Michael A. Foster Vice President None
William M. Gillen Senior Vice President None
Hugh S. Gilmartin Vice President None
James B. Hawkes Vice President and Director Vice President and Trustee
Perry D. Hooker Vice President None
Brian Jacobs Senior Vice President None
Thomas P. Luka Vice President None
John Macejka Vice President None
Stephen Marks Vice President None
Joseph T. McMenamin Vice President None
Morgan C. Mohrman Senior Vice President None
James A. Naughton Vice President None
Joseph Nelson Vice President None
Mark D. Nelson Vice President None
Linda D. Newkirk Vice President None
James L. O'Connor Vice President Treasurer
Andrew Ogren Vice President None
Thomas Otis Secretary and Clerk None
George D. Owen, II Vice President None
Enrique M. Pineda Vice President None
F. Anthony Robinson Vice President None
Frances Rogell 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
Teresa A. Sheehan Vice President None
William M. Steul Vice President and Director None
Cornelius J. Sullivan Senior Vice President None
Peter Sykes Vice President None
David M. Thill Vice President None
John M. Trotsky Vice President None
Jerry Vainisi Vice President None
Chris Volf Vice President None
Wharton P. Whitaker President and Director None
Sue Wilder Vice President None
</TABLE>
- ------------------------------------------
* Address is 24 Federal Street, Boston, MA 02110
C-6
<PAGE>
(c) Not applicable
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
All applicable accounts, books and documents required to be maintained by
the Registrant by Section 31(a) of the Investment Company Act of 1940 and the
Rules promulgated thereunder are in the possession and custody of the
Registrant's custodian, Investors Bank & Trust Company, 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 01581-5120,
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 29. MANAGEMENT SERVICES
Not applicable
ITEM 30. UNDERTAKINGS
Not applicable
C-7
<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 December 15, 1998.
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 on December 15, 1998.
SIGNATURE TITLE
--------- -----
/s/ Thomas J. Fetter
- -------------------- President (Chief Executive Officer)
Thomas J. Fetter
/s/ James L. O'Connor
- --------------------- Treasurer (Principal
James L. O'Connor Financial and Accounting Officer)
Jessica M. Bibliowicz*
- ---------------------- Trustess
Jessica M. Bibliowicz
Donald R. Dwight*
- ----------------- Trustee
Donald R. Dwight
/s/ James B. Hawkes
- ------------------- Trustee
James B. Hawkes
Samuel L. Hayes, III*
- --------------------- Trustee
Samuel L. Hayes
Norton H. Reamer*
- ----------------- Trustee
Norton H. Reamer
Lynn A. Stout*
- -------------- Trustee
Lynn A. Stout
John L. Thorndike*
- ------------------ Trustee
John L. Thorndike
Jack L. Treynor*
- ----------------- Trustee
Jack L. Treynor
*By: /s/ Alan R. Dynner
-----------------------------------
Alan R. Dynner (As attorney-in-fact)
C-8
<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 December 15,
1998.
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 on December 15, 1998.
SIGNATURE TITLE
--------- -----
/s/ Thomas J. Fetter
- -------------------- President (Chief Executive Officer)
Thomas J. Fetter
/s/ James L. O'Connor
- --------------------- Treasurer (Principal
James L. O'Connor Financial and Accounting Officer)
Donald R. Dwight*
- ----------------- Trustee
Donald R. Dwight
/s/ James B. Hawkes
- ------------------- Trustee
James B. Hawkes
Samuel L. Hayes, III*
- --------------------- Trustee
Samuel L. Hayes
Norton H. Reamer*
- ----------------- Trustee
Norton H. Reamer
John L. Thorndike*
- ------------------ Trustee
John L. Thorndike
Jack L. Treynor*
- ---------------- Trustee
Jack L. Treynor
*By: /s/ Alan R. Dynner
---------------------------------
Alan R. Dynner (As attorney-in-fact)
C-9
<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 December 15,
1998.
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 December 15, 1998.
SIGNATURE TITLE
--------- -----
/s/ Thomas J. Fetter President (Chief Executive Officer)
- ------------------------
Thomas J. Fetter
/s/ James L. O'Connor
- --------------------- Treasurer (Principal
James L. O'Connor Financial and Accounting Officer)
Donald R. Dwight*
- ----------------- Trustee
Donald R. Dwight
/s/ James B. Hawkes
- ------------------- Trustee
James B. Hawkes
Samuel L. Hayes, III*
- --------------------- Trustee
Samuel L. Hayes
Norton H. Reamer*
- ----------------- Trustee
Norton H. Reamer
John L. Thorndike*
- ------------------ Trustee
John L. Thorndike
Jack L. Treynor*
- ---------------- Trustee
Jack L. Treynor
*By: /s/ Alan R. Dynner
---------------------------------
Alan R. Dynner (As attorney-in-fact)
C-10
<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 December 15,
1998.
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 December 15, 1998.
SIGNATURE TITLE
--------- -----
/s/ Thomas J. Fetter President (Chief Executive Officer)
- ------------------------
Thomas J. Fetter
/s/ James L. O'Connor
- --------------------- Treasurer (Principal
James L. O'Connor Financial and Accounting Officer)
Donald R. Dwight*
- ----------------- Trustee
Donald R. Dwight
/s/ James B. Hawkes
- ------------------- Trustee
James B. Hawkes
Samuel L. Hayes, III*
- --------------------- Trustee
Samuel L. Hayes
Norton H. Reamer*
- ----------------- Trustee
Norton H. Reamer
John L. Thorndike*
- ------------------ Trustee
John L. Thorndike
Jack L. Treynor*
- ---------------- Trustee
Jack L. Treynor
*By: /s/ Alan R. Dynner
---------------------------------
Alan R. Dynner (As attorney-in-fact)
C-11
<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 December 15,
1998.
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 December 15, 1998.
SIGNATURE TITLE
--------- -----
/s/ Thomas J. Fetter
- -------------------- President (Chief Executive Officer)
Thomas J. Fetter
/s/ James L. O'Connor Treasurer (and Principal
- --------------------- Financial and Accounting Officer)
James L. O'Connor
Donald R. Dwight*
- ----------------- Trustee
Donald R. Dwight
/s/ James B. Hawkes
- ------------------- Trustee
James B. Hawkes
Samuel L. Hayes, III*
- --------------------- Trustee
Samuel L. Hayes
Norton H. Reamer*
- ----------------- Trustee
Norton H. Reamer
John L. Thorndike*
- ------------------ Trustee
John L. Thorndike
Jack L. Treynor*
- ---------------- Trustee
Jack L. Treynor
*By: /s/ Alan R. Dynner
---------------------------------
Alan R. Dynner (As attorney-in-fact)
C-12
<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 December 15,
1998.
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 December 15, 1998.
SIGNATURE TITLE
--------- -----
/s/ Thomas J. Fetter
- -------------------- President (Chief Executive Officer)
Thomas J. Fetter
/s/ James L. O'Connor Treasurer (and Principal
- --------------------- Financial and Accounting Officer)
James L. O'Connor
Donald R. Dwight*
- ----------------- Trustee
Donald R. Dwight
/s/ James B. Hawkes
- ------------------- Trustee
James B. Hawkes
Samuel L. Hayes, III*
- --------------------- Trustee
Samuel L. Hayes
Norton H. Reamer*
- ----------------- Trustee
Norton H. Reamer
John L. Thorndike*
- ------------------ Trustee
John L. Thorndike
Jack L. Treynor*
- ---------------- Trustee
Jack L. Treynor
*By: /s/ Alan R. Dynner
---------------------------------
Alan R. Dynner (As attorney-in-fact)
C-13
<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 December 15,
1998.
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 December 15, 1998.
SIGNATURE TITLE
--------- ------
/s/ Thomas J. Fetter
- -------------------- President (Chief Executive Officer)
Thomas J. Fetter
/s/ James L. O'Connor
- --------------------- Treasurer (Principal
James L. O'Connor Financial and Accounting Officer)
Donald R. Dwight*
- ----------------- Trustee
Donald R. Dwight
/s/ James B. Hawkes
- ------------------- Trustee
James B. Hawkes
Samuel L. Hayes, III*
- --------------------- Trustee
Samuel L. Hayes
Norton H. Reamer*
- ----------------- Trustee
Norton H. Reamer
John L. Thorndike*
- ------------------ Trustee
John L. Thorndike
Jack L. Treynor*
- ---------------- Trustee
Jack L. Treynor
*By: /s/ Alan R. Dynner
---------------------------------
Alan R. Dynner (As attorney-in-fact)
C-14
<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 December 15,
1998.
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 December 15, 1998.
SIGNATURE TITLE
--------- -----
/s/ Thomas J. Fetter
- -------------------- President (Chief Executive Officer)
Thomas J. Fetter
/s/ James L. O'Connor
- --------------------- Treasurer (Principal
James L. O'Connor Financial and Accounting Officer)
Donald R. Dwight*
- ----------------- Trustee
Donald R. Dwight
/s/ James B. Hawkes
- ------------------- Trustee
James B. Hawkes
Samuel L. Hayes, III*
- --------------------- Trustee
Samuel L. Hayes
Norton H. Reamer*
- ----------------- Trustee
Norton H. Reamer
John L. Thorndike*
- ------------------ Trustee
John L. Thorndike
Jack L. Treynor*
- ---------------- Trustee
Jack L. Treynor
*By: /s/ Alan R. Dynner
---------------------------------
Alan R. Dynner (As attorney-in-fact)
C-15
<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 December 15,
1998.
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 December 15, 1998.
SIGNATURE TITLE
--------- -----
/s/ Thomas J. Fetter
- -------------------- President (Chief Executive Officer)
Thomas J. Fetter
/s/ James L. O'Connor
- --------------------- Treasurer (Principal
James L. O'Connor Financial and Accounting Officer)
Donald R. Dwight*
- ----------------- Trustee
Donald R. Dwight
/s/ James B. Hawkes
- ------------------- Trustee
James B. Hawkes
Samuel L. Hayes, III*
- --------------------- Trustee
Samuel L. Hayes
Norton H. Reamer*
- ----------------- Trustee
Norton H. Reamer
John L. Thorndike*
- ------------------ Trustee
John L. Thorndike
Jack L. Treynor*
- ---------------- Trustee
Jack L. Treynor
*By: /s/ Alan R. Dynner
---------------------------------
Alan R. Dynner (As attorney-in-fact)
C-16
<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 December 15,
1998.
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 December 15, 1998.
SIGNATURE TITLE
--------- -----
/s/ Thomas J. Fetter
- -------------------- President (Chief Executive Officer)
Thomas J. Fetter
/s/ James L. O'Connor
- --------------------- Treasurer (Principal
James L. O'Connor Financial and Accounting Officer)
Donald R. Dwight*
- ----------------- Trustee
Donald R. Dwight
/s/ James B. Hawkes
- ------------------- Trustee
James B. Hawkes
Samuel L. Hayes, III*
- --------------------- Trustee
Samuel L. Hayes
Norton H. Reamer*
- ----------------- Trustee
Norton H. Reamer
John L. Thorndike*
- ------------------ Trustee
John L. Thorndike
Jack L. Treynor*
- ---------------- Trustee
Jack L. Treynor
*By: /s/ Alan R. Dynner
---------------------------------
Alan R. Dynner (As attorney-in-fact)
C-17
<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 December 15,
1998.
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 December 15, 1998.
SIGNATURE TITLE
---------
/s/ Thomas J. Fetter
- -------------------- President (Chief Executive Officer)
Thomas J. Fetter
/s/ James L. O'Connor
- --------------------- Treasurer (Principal
James L. O'Connor Financial and Accounting Officer)
Donald R. Dwight*
- ----------------- Trustee
Donald R. Dwight
/s/ James B. Hawkes
- ------------------- Trustee
James B. Hawkes
Samuel L. Hayes, III*
- --------------------- Trustee
Samuel L. Hayes
Norton H. Reamer*
- ----------------- Trustee
Norton H. Reamer
John L. Thorndike*
- ------------------ Trustee
John L. Thorndike
Jack L. Treynor*
- ---------------- Trustee
Jack L. Treynor
*By: /s/ Alan R. Dynner
---------------------------------
Alan R. Dynner (As attorney-in-fact)
C-18
<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 December 15,
1998.
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 December 15, 1998.
SIGNATURE TITLE
--------- -----
/s/ Thomas J. Fetter
- -------------------- President (Chief Executive Officer)
Thomas J. Fetter
/s/ James L. O'Connor
- --------------------- Treasurer (Principal
James L. O'Connor Financial and Accounting Officer)
Donald R. Dwight*
- ----------------- Trustee
Donald R. Dwight
/s/ James B. Hawkes
- ------------------- Trustee
James B. Hawkes
Samuel L. Hayes, III*
- --------------------- Trustee
Samuel L. Hayes
Norton H. Reamer*
- ----------------- Trustee
Norton H. Reamer
John L. Thorndike*
- ------------------ Trustee
John L. Thorndike
Jack L. Treynor*
- ---------------- Trustee
Jack L. Treynor
*By: /s/ Alan R. Dynner
---------------------------------
Alan R. Dynner (As attorney-in-fact)
C-19
<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 December 15,
1998.
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 December 15, 1998.
SIGNATURE TITLE
--------- -----
/s/ Thomas J. Fetter
- -------------------- President (Chief Executive Officer)
Thomas J. Fetter
/s/ James L. O'Connor
- --------------------- Treasurer (Principal
James L. O'Connor Financial and Accounting Officer)
Donald R. Dwight*
- ----------------- Trustee
Donald R. Dwight
/s/ James B. Hawkes
- ------------------- Trustee
James B. Hawkes
Samuel L. Hayes, III*
- --------------------- Trustee
Samuel L. Hayes
Norton H. Reamer*
- ----------------- Trustee
Norton H. Reamer
John L. Thorndike*
- ------------------ Trustee
John L. Thorndike
Jack L. Treynor*
- ---------------- Trustee
Jack L. Treynor
*By: /s/ Alan R. Dynner
---------------------------------
Alan R. Dynner (As attorney-in-fact)
C-20
<PAGE>
EXHIBIT INDEX
The following exhibits are filed as part of this amendment to the
Registration Statement pursuant to Rule 483 of Regulation C.
Exhibit No. Description
- ----------- -----------
(j) 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.
(n)(1) Financial Data Schedule for the fiscal year ended August 31, 1998
for Eaton Vance Alabama Municipals Fund-Class A .
(2) Financial Data Schedule for the fiscal year ended August 31, 1998
for Eaton Vance Alabama Municipals Fund-Class B .
(3) Financial Data Schedule for the fiscal year ended August 31, 1998
for Eaton Vance Arkansas Municipals Fund-Class A.
(4) Financial Data Schedule for the fiscal year ended August 31, 1998
for Eaton Vance Arkansas Municipals Fund-Class B .
(5) Financial Data Schedule for the fiscal year ended August 31, 1998
for Eaton Vance Georgia Municipals Fund-Class A.
(6) Financial Data Schedule for the fiscal year ended August 31, 1998
for Eaton Vance Georgia Municipals Fund-Class B.
(7) Financial Data Schedule for the fiscal year ended August 31, 1998
for Eaton Vance Kentucky Municipals Fund-Class A.
(8) Financial Data Schedule for the fiscal year ended August 31, 1998
for Eaton Vance Kentucky Municipals Fund-Class B.
(9) Financial Data Schedule for the fiscal year ended August 31, 1998
for Eaton Vance Louisiana Municipals Fund-Class A.
(10) Financial Data Schedule for the fiscal year ended August 31, 1998
for Eaton Vance Louisiana Municipals Fund-Class B.
(11) Financial Data Schedule for the fiscal year ended August 31, 1998
for Eaton Vance Maryland Municipals Fund-Class A.
(12) Financial Data Schedule for the fiscal year ended August 31, 1998
for Eaton Vance Maryland Municipals Fund-Class B .
C-21
<PAGE>
(13) Financial Data Schedule for the fiscal year ended August 31, 1998
for Eaton Vance Missouri Municipals Fund-Class A.
(14) Financial Data Schedule for the fiscal year ended August 31, 1998
for Eaton Vance Missouri Municipals Fund-Class B.
(15) Financial Data Schedule for the fiscal year ended August 31, 1998
for Eaton Vance North Carolina Municipals Fund-Class A.
(16) Financial Data Schedule for the fiscal year ended August 31, 1998
for Eaton Vance North Carolina Municipals Fund-Class B.
(17) Financial Data Schedule for the fiscal year ended August 31, 1998
for Eaton Vance Oregon Municipals Fund-Class A.
(18) Financial Data Schedule for the fiscal year ended August 31, 1998
for Eaton Vance Oregon Municipals Fund-Class B.
(19) Financial Data Schedule for the fiscal year ended August 31, 1998
for Eaton Vance South Carolina Municipals Fund-Class A.
(20) Financial Data Schedule for the fiscal year ended August 31, 1998
for Eaton Vance South Carolina Municipals Fund-Class B.
(21) Financial Data Schedule for the fiscal year ended August 31, 1998
for Eaton Vance Tennessee Municipals Fund-Class A.
(22) Financial Data Schedule for the fiscal year ended August 31, 1998
for Eaton Vance Tennessee Municipals Fund-Class B.
(23) Financial Data Schedule for the fiscal year ended August 31, 1998
for Eaton Vance Virginia Municipals Fund-Class A.
(24) Financial Data Schedule for the fiscal year ended August 31, 1998
for Eaton Vance Virginia Municipals Fund-Class B.
(25) Financial Data Schedule for the fiscal year ended August 31, 1998
for Alabama Municipals Portfolio.
(26) Financial Data Schedule for the fiscal year ended August 31, 1998
for Arkansas Municipals Portfolio.
(27) Financial Data Schedule for the fiscal year ended August 31, 1998
for Georgia Municipals Portfolio.
(28) Financial Data Schedule for the fiscal year ended August 31, 1998
for Kentucky Municipals Portfolio.
(29) Financial Data Schedule for the fiscal year ended August 31, 1998
for Louisiana Municipals Portfolio.
(30) Financial Data Schedule for the fiscal year ended August 31, 1998
for Maryland Municipals Portfolio.
C-22
<PAGE>
(31) Financial Data Schedule for the fiscal year ended August 31, 1998
for Missouri Municipals Portfolio.
(32) Financial Data Schedule for the fiscal year ended August 31, 1998
for North Carolina Municipals Portfolio.
(33) Financial Data Schedule for the fiscal year ended August 31, 1998
for Oregon Municipals Portfolio.
(34) Financial Data Schedule for the fiscal year ended August 31, 1998
for South Carolina Municipals Portfolio.
(35) Financial Data Schedule for the fiscal year ended August 31, 1998
for Tennessee Municipals Portfolio.
(36) Financial Data Schedule for the fiscal year ended August 31, 1998
for Virginia Municipals Portfolio. .
C-23
<PAGE>
EXHIBIT (J)
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 77 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 2, 1998, relating to the
Funds referenced above and of our report dated October 2, 1998, 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
Potfolio, Tennessee Municipals Portfolio, and Virginia Municipals Portfolio,
which reports are included in the Annual Report to Shareholders for the year
ended August 31, 1998, 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 "Financial
Highlights" in the Prospectus of the Registration Statement and under the
heading "Other Service Providers" in the Statement of Additional Information of
the Registration Statement.
/s/ Deloitte & Touche LLP
--------------------------
DELOITTE & TOUCHE LLP
December 28, 1998
- -----------------
Boston, Massachusetts
C-24
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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<ACCUMULATED-NET-GAINS> (2370)
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<ACCUM-APPREC-OR-DEPREC> 4519
<NET-ASSETS> 1286
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<INTEREST-INCOME> 0
<OTHER-INCOME> 3100
<EXPENSES-NET> 638
<NET-INVESTMENT-INCOME> 2462
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<APPREC-INCREASE-CURRENT> 1139
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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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<NAME> EATON VANCE LOUISIANA MUNICIPALS FUND - CLASS A
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<NAME> EATON VANCE LOUISIANA MUNICIPALS FUND - CLASS B
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<NAME> EATON VANCE MARYLAND MUNICIPALS FUND - CLASS A
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<NAME> EATON VANCE MARYLAND MUNICIPALS FUND - CLASS B
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
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<NAME> EATON VANCE MISSOURI MUNICIPALS FUND - CLASS A
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<NAME> EATON VANCE MISSOURI MUNICIPALS FUND - CLASS B
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<NAME> EATON VANCE NORTH CAROLINA MUNICIPALS FUND - CLASS A
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<NAME> EATON VANCE OREGON MUNICIPALS FUND - CLASS A
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<NAME> EATON VANCE OREGON MUNICIPALS FUND - CLASS B
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<NAME> EATON VANCE SOUTH CAROLINA MUNICIPALS FUND - CLASS A
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<NAME> EATON VANCE SOUTH CAROLINA MUNICIPALS FUND - CLASS B
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
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<NAME> EATON VANCE TENNESSEE MUNICIPALS FUND - CLASS A
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<NAME> EATON VANCE TENNESSEE MUNICIPALS FUND - CLASS B
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<NAME> EATON VANCE VIRGINIA MUNICIPALS FUND - CLASS A
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<NAME> ALABAMA MUNICIPALS PORTFOLIO
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<NAME> ARKANSAS MUNICIPALS PORTFOLIO
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<NAME> GEORGIA MUNICIPALS PORTFOLIO
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<NAME> MARYLAND MUNICIPALS PORTFOLIO
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<NAME> OREGON MUNICIPALS PORTFOLIO
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<NAME> SOUTH CAROLINA MUNICIPALS PORTFOLIO
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