As filed with the Securities and Exchange Commission on November 27, 2000
1933 Act File No. 33-572
1940 Act File No. 811-4409
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933 [ ]
POST-EFFECTIVE AMENDMENT NO. 83 [x]
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940 [ ]
AMENDMENT NO. 85 [x]
EATON VANCE MUNICIPALS TRUST
----------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
THE EATON VANCE BUILDING, 255 STATE STREET, BOSTON, MASSACHUSETTS 02109
-----------------------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(617) 482-8260
--------------
(REGISTRANT'S TELEPHONE NUMBER)
ALAN R. DYNNER
THE EATON VANCE BUILDING, 255 STATE STREET, BOSTON, MASSACHUSETTS 02109
-----------------------------------------------------------------------
(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 December 1, 2000 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.
Arizona Municipals Portfolio, Colorado Municipals Portfolio, Connecticut
Municipals Portfolio, Michigan Municipals Portfolio, Minnesota Municipals
Portfolio, New Jersey Municipals Portfolio, Pennsylvania Municipals Portfolio
and Texas Municipals Portfolio have also executed this Registration Statement.
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<PAGE>
{LOGO} Mutual Funds
EATON VANCE for People
Mutual Funds Who Pay
Taxes(R)
Eaton Vance Arizona Municipals Fund
Eaton Vance Colorado Municipals Fund
Eaton Vance Connecticut Municipals Fund
Eaton Vance Michigan Municipals Fund
Eaton Vance Minnesota Municipals Fund
Eaton Vance New Jersey Municipals Fund
Eaton Vance Pennsylvania Municipals Fund
Eaton Vance Texas Municipals Fund
Mutual funds providing tax-exempt income
Prospectus Dated
December 1, 2000
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.
Information in this prospectus
Page Page
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Fund Summaries 2 Sales Charges 16
Investment Objectives & Principal Redeeming Shares 17
Policies and Risks 13 Shareholder Account
Management and Organization 14 Features 18
Valuing Shares 15 Tax Information 19
Purchasing Shares 15 Financial Highlights 22
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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 Municipals Fund. You will find more
specific information about each Fund in the pages that follow.
INVESTMENT OBJECTIVES AND PRINCIPAL STRATEGIES
The investment objective 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
(those rated BBB or Baa or higher), but may also invest in lower quality
obligations. Each Fund normally invests in municipal obligations with maturities
of ten years or more.
Each Fund may concentrate in certain types of municipal obligations (such as
industrial development bonds, housing bonds, hospital bonds or utility bonds),
so Fund shares could be affected by events that adversely affect a particular
sector. Each Fund may purchase derivative instruments (such as inverse floaters,
futures contracts and options thereon, interest rate swaps, and forward rate
contracts), bonds that do not make regular payment of interest, bonds issued on
a when-issued basis and municipal leases. A portion of each Fund's distributions
generally will be subject to alternative minimum tax.
Each portfolio manager purchases and sells securities to maintain a competitive
yield and to enhance return based upon the relative value of the securities in
the marketplace. The portfolio managers 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
Obligations with maturities of ten years or more may offer higher yields than
obligations with shorter maturities, but they are subject to greater
fluctuations in value when interest rates change. When interest rates rise or
when the supply of suitable bonds exceeds the market demand, the value of Fund
shares typically will decline. The Fund's yield will also fluctuate over time.
Each Fund invests a significant portion of assets in obligations of issuers
located in a single state and 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.
Because obligations rated BBB or Baa and below (so-called "junk bonds") 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 higher quality obligations. Obligations rated BBB or Baa
have speculative characteristics, while lower rated obligations are
predominantly speculative. 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.
A Fund's use of derivatives is subject to certain limitations and may expose the
Fund to increased risk of principal loss due to imperfect correlation, failure
of the counterparty or unexpected price or interest rate movements. Inverse
floaters are volatile and involve leverage risk. Bonds that do not make regular
interest payments may experience greater volatility in response to interest rate
changes. When-issued securities are subject to the risk that when delivered to
the Fund they will be worth less than the price the Fund agreed to pay for them.
Municipal leases often require a legislative appropriation of funds for payment.
If the necessary appropriation is not made, the issuer of the lease may not be
able to meet its obligations.
No Fund is a complete investment program and you may lose money by investing in
a Fund. 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 Arizona Municipals Fund
The Arizona Fund's investment objective is to provide current income exempt from
regular federal income taxes and Arizona state personal income taxes. The Fund
currently invests its assets in the Arizona Municipals Portfolio (the "Arizona
Portfolio"). Arizona does not issue general obligation bonds. Obligations issued
for a particular project are rated based on the specific project's
creditworthiness.
Performance Information. The following bar chart and table provide information
about the Arizona 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, 1999 and do not reflect a sales charge. If the sales charge was reflected,
the returns would be lower.
8.03% 14.99% -9.68% 19.56% 2.40% 8.94% 5.28% -6.70%
--------------------------------------------------------------------------------
1992 1993 1994 1995 1996 1997 1998 1999
The highest quarterly total return for Class B was 9.11% for the quarter ended
March 31, 1995, and the lowest quarterly return was -7.81% for the quarter ended
March 31, 1994. The year-to-date total return through the end of the most recent
calendar quarter (December 31, 1999 to September 30, 2000) was 7.06%. For the 30
days ended July 31, 2000, the SEC yield and SEC tax-equivalent yield (assuming a
combined state and federal tax rate of 42.64%) for Class A shares were 4.94% and
8.62%, respectively, and for Class B shares were 4.41% and 7.69%, respectively.
A lower tax rate would result in lower tax-equivalent yields. For current yield
information call 1-800-225-6265
Average Annual Total Returns One Five Life of
as of December 31, 1999 Year Years Fund
--------------------------------------------------------------------------------
Class A Shares -10.47% 5.07% 5.17%
Class B Shares -11.16% 5.23% 5.57%
Lehman Brothers Municipal Bond Index -2.06% 6.91% 6.63%
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 13, 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 25, 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. (Source for
Lehman Brothers Municipal Bond Index: Lipper Inc.)
3
<PAGE>
Eaton Vance Colorado Municipals Fund
The Colorado Fund's investment objective is to provide current income exempt
from regular federal income taxes and Colorado state personal income taxes. The
Fund currently invests its assets in the Colorado Municipals Portfolio (the
"Colorado Portfolio"). There currently are no Colorado general obligations
outstanding. Obligations issued for a particular project are rated based on the
specific project's creditworthiness.
Performance Information. The following bar chart and table provide information
about the Colorado 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, 1999 and do not reflect a sales charge. If the sales charge was reflected,
the returns would be lower.
13.07% -9.52% 18.61% 2.50% 10.54% 4.14% -6.08%
--------------------------------------------------------------------------------
1993 1994 1995 1996 1997 1998 1999
The highest quarterly total return for Class B was 8.61% for the quarter ended
March 31, 1995, and the lowest quarterly return was -7.95% for the quarter ended
March 31, 1994. The year-to-date total return through the end of the most recent
calendar quarter (December 31, 1999 to September 30, 2000) was 6.09%. For the 30
days ended July 31, 2000, the SEC yield and SEC tax-equivalent yield (assuming a
combined state and federal tax rate of 42.47%) for Class A shares were 5.29% and
9.20%, respectively, and for Class B shares were 4.82% and 8.38%, respectively.
A lower tax rate would result in lower tax-equivalent yields. For current yield
information call 1-800-225-6265.
Average Annual Total Returns One Five Life of
as of December 31, 1999 Year Years Fund
--------------------------------------------------------------------------------
Class A Shares -9.91% 5.13% 4.33%
Class B Shares -10.56% 5.30% 4.62%
Lehman Brothers Municipal Bond Index -2.06% 6.91% 5.92%
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 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. (Source for
Lehman Brothers Municipal Bond Index: Lipper Inc.)
4
<PAGE>
Eaton Vance Connecticut Municipals Fund
The Connecticut Fund's investment objective is to provide current income exempt
from regular federal income taxes and Connecticut state personal income taxes.
The Fund currently invests its assets in the Connecticut Municipals Portfolio
(the "Connecticut Portfolio"). Connecticut general obligations currently are
rated Aa3, AA and AA by Moody's, S&P and Fitch, respectively.
Performance Information. The following bar chart and table provide information
about the Connecticut 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, 1999 and do not reflect a sales charge. If the sales charge was reflected,
the returns would be lower.
12.40% -10.36% 17.79% 2.78% 8.49% 4.94% -4.52%
--------------------------------------------------------------------------------
1993 1994 1995 1996 1997 1998 1999
The highest quarterly total return for Class B was 8.21% for the quarter ended
March 31, 1995, and the lowest quarterly return was -7.12% for the quarter ended
March 31, 1994. The year-to-date total return through the end of the most recent
calendar quarter (December 31, 1999 to September 30, 2000) was 6.34%. For the 30
days ended July 31, 2000, the SEC yield and SEC tax-equivalent yield (assuming a
combined state and federal tax rate of 42.32%) for Class A shares were 4.83% and
8.37%, respectively, and for Class B shares were 4.26% and 7.39%, respectively.
A lower tax rate would result in lower tax-equivalent yields. For current yield
information call 1-800-225-6265.
Average Annual Total Returns One Five Life of
as of December 31, 1999 Year Years Fund
--------------------------------------------------------------------------------
Class A Shares -8.32% 5.42% 4.59%
Class B Shares -9.10% 5.32% 4.61%
Lehman Brothers Municipal Bond Index -2.06% 6.91% 6.22%
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 April 19, 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 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. (Source for
Lehman Brothers Municipal Bond Index: Lipper Inc.)
5
<PAGE>
Eaton Vance Michigan Municipals Fund
The Michigan Fund's investment objective is to provide current income exempt
from regular federal income taxes and Michigan state and city income and single
business taxes. The Fund currently invests its assets in the Michigan Municipals
Portfolio (the "Michigan Portfolio"). Michigan general obligations currently are
rated Aaa, AAA and AA+ by Moody's, S&P and Fitch, respectively.
Performance Information. The following bar chart and table provide information
about the Michigan 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, 1999 and do not reflect a sales charge. If the sales charge was reflected,
the returns would be lower.
7.59% 12.06% -8.54% 17.95% 2.34% 8.39% 4.45% -7.07%
--------------------------------------------------------------------------------
1992 1993 1994 1995 1996 1997 1998 1999
The highest quarterly total return for Class B was 7.93% for the quarter ended
March 31, 1995, and the lowest quarterly 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, 1999 to September 30, 2000) was 7.28%. For the 30
days ended July 31, 2000, the SEC yield and SEC tax-equivalent yield (assuming a
combined state and federal tax rate of 42.86%) for Class A shares were 4.88% and
8.54%, respectively, and for Class B shares were 4.41% and 7.72%, respectively.
A lower tax rate would result in lower tax-equivalent yields. For current yield
information call 1-800-225-6265.
Average Annual Total Returns One Five Life of
as of December 31, 1999 Year Years Fund
--------------------------------------------------------------------------------
Class A Shares -10.73% 4.36% 4.57%
Class B Shares -11.52% 4.57% 4.99%
Lehman Brothers Municipal Bond Index -2.06% 6.91% 6.68%
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 April 19, 1991. Life of Fund returns are calculated from April 30,
1991. The Lehman Brothers Municipal Bond Index is an unmanaged index of
municipal bonds. Investors cannot invest directly in an Index. (Source for
Lehman Brothers Municipal Bond Index: Lipper Inc.)
6
<PAGE>
Eaton Vance Minnesota Municipals Fund
The Minnesota Fund's investment objective is to provide current income exempt
from regular federal income taxes and regular Minnesota state personal income
taxes. The Fund currently invests its assets in the Minnesota Municipals
Portfolio (the "Minnesota Portfolio"). The Minnesota Fund will invest at least
95% of its total assets in Minnesota municipal obligations. Minnesota general
obligations currently 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 Minnesota 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, 1999 and do not reflect a sales charge. If the sales charge was reflected,
the returns would be lower.
7.49% 11.60% -9.01% 16.88% 1.62% 8.82% 5.40% -6.80%
--------------------------------------------------------------------------------
1992 1993 1994 1995 1996 1997 1998 1999
The highest quarterly total return for Class B was 7.93% for the quarter ended
March 31, 1995, and the lowest quarterly return was -6.99% for the quarter ended
March 31, 1994. The year-to-date total return through the end of the most recent
calendar quarter (December 31, 1999 to September 30, 2000) was 6.20%. For the 30
days ended July 31, 2000, the SEC yield and SEC tax-equivalent yield (assuming a
combined state and federal tax rate of 44.43%) for Class A shares were 5.17% and
9.30%, respectively, and for Class B shares were 4.63% and 8.33%, respectively.
A lower tax rate would result in lower tax-equivalent yields. For current yield
information call 1-800-225-6265.
Average Annual Total Returns One Five Life of
as of December 31, 1999 Year Years Fund
--------------------------------------------------------------------------------
Class A Shares -10.48% 4.48% 4.49%
Class B Shares -11.26% 4.56% 4.56%
Lehman Brothers Municipal Bond Index -2.06% 6.91% 6.63%
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 July 29, 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. (Source for
Lehman Brothers Municipal Bond Index: Lipper Inc.)
7
<PAGE>
Eaton Vance New Jersey Municipals Fund
The New Jersey Fund's investment objective is to provide current income exempt
from regular federal income taxes and New Jersey state personal income taxes.
The Fund currently invests its assets in the New Jersey Municipals Portfolio
(the "New Jersey Portfolio"). New Jersey general obligations currently are rated
Aa1, AA+ and AA+ by Moody's, S&P and Fitch, respectively.
Performance Information. The following bar chart and table provide information
about the New Jersey 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, 1999 and do not reflect a sales charge. If the sales charge was reflected,
the returns would be lower.
7.79% 12.61% -8.20% 15.86% 2.78% 9.41% 4.85% -6.65%
--------------------------------------------------------------------------------
1992 1993 1994 1995 1996 1997 1998 1999
The highest quarterly total return for Class B was 6.90% for the quarter ended
March 31, 1995, and the lowest quarterly return was -6.31% for the quarter ended
March 31, 1994. The year-to-date total return through the end of the most recent
calendar quarter (December 31, 1999 to September 30, 2000) was 6.78%. For the 30
days ended July 31, 2000, the SEC yield and SEC tax-equivalent yield (assuming a
combined state and federal tax rate of 43.45%) for Class A shares were 5.31% and
9.39%, respectively, and for Class B shares were 4.80% and 8.49%, respectively.
A lower tax rate would result in lower tax-equivalent yields. For current yield
information call 1-800-225-6265
Average Annual Total Returns One Five Life of
as of December 31, 1999 Year Years Fund
--------------------------------------------------------------------------------
Class A Shares -10.26% 4.82% 5.32%
Class B Shares -11.11% 4.65% 5.24%
Lehman Brothers Municipal Bond Index -2.06% 6.91% 6.75%
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 April 13, 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 January 8, 1991. Life of Fund returns are calculated from January
31, 1991. The Lehman Brothers Municipal Bond Index is an unmanaged index of
municipal bonds. Investors cannot invest directly in an Index. (Source for
Lehman Brothers Municipal Bond Index: Lipper Inc.)
8
<PAGE>
Eaton Vance Pennsylvania Municipals Fund
The Pennsylvania Fund's investment objective is to provide current income exempt
from regular federal income taxes and Pennsylvania state and local taxes in the
form of an investment exempt from Pennsylvania personal property taxes. The Fund
currently invests its assets in the Pennsylvania Municipals Portfolio (the
"Pennsylvania Portfolio"). Pennsylvania general obligations currently are rated
Aa3, AA and AA by Moody's, S&P and Fitch, respectively.
Performance Information. The following bar chart and table provide information
about the Pennsylvania 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, 1999 and do not reflect a sales charge. If the sales charge was reflected,
the returns would be lower.
7.65% 12.47% -9.64% 17.25% 3.33% 8.86% 2.16% -5.10%
--------------------------------------------------------------------------------
1992 1993 1994 1995 1996 1997 1998 1999
The highest quarterly total return for Class B was 7.77% for the quarter ended
March 31, 1995, and the lowest quarterly return was -7.21% for the quarter ended
March 31, 1994. The year-to-date total return through the end of the most recent
calendar quarter (December 31, 1999 to September 30, 2000) was 4.94%. For the 30
days ended July 31, 2000, the SEC yield and SEC tax-equivalent yield (assuming a
combined state and federal tax rate of 41.29%) for Class A shares were 5.57% and
9.49%, respectively, and for Class B shares were 5.09% and 8.67%, respectively.
A lower tax rate would result in lower tax-equivalent yields. For current yield
information call 1-800-225-6265
Average Annual Total Returns One Five Life of
as of December 31, 1999 Year Years Fund
--------------------------------------------------------------------------------
Class A Shares -8.92% 4.80% 5.14%
Class B Shares -9.63% 4.71% 5.13%
Lehman Brothers Municipal Bond Index -2.06% 6.91% 6.75%
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 June 1, 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 January 8, 1991. Life of Fund returns are calculated from January
31, 1991. The Lehman Brothers Municipal Bond Index is an unmanaged index of
municipal bonds. Investors cannot invest directly in an Index. (Source for
Lehman Brothers Municipal Bond Index: Lipper Inc.)
9
<PAGE>
Eaton Vance Texas Municipals Fund
The Texas Fund's investment objective is to provide current income exempt from
regular federal income taxes. The state of Texas does not impose a state income
tax on individuals. The Fund currently invests its assets in the Texas
Municipals Portfolio (the "Texas Portfolio"). Texas general obligations
currently are rated Aa1, AA and AA+ by Moody's, S&P and Fitch, respectively.
Performance Information. The following bar chart and table provide information
about the Texas 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, 1999 and do not reflect a sales charge. If the sales charge was reflected,
the returns would be lower.
12.58% -8.07% 17.83% 2.97% 9.35% 5.56% -6.24%
--------------------------------------------------------------------------------
1993 1994 1995 1996 1997 1998 1999
The highest quarterly total return for Class B was 8.56% for the quarter ended
March 31, 1995, and the lowest quarterly return was -7.68% for the quarter ended
March 31, 1994. The year-to-date total return through the end of the most recent
calendar quarter (December 31, 1999 to September 30, 2000) was 6.64%. For the 30
days ended July 31, 2000, the SEC yield and SEC tax-equivalent yield (assuming a
federal tax rate of 39.60%) for Class A shares were 4.85% and 8.03%,
respectively, and for Class B shares were 4.35% and 7.20%, respectively. A lower
tax rate would result in lower tax-equivalent yields. For current yield
information call 1-800-225-6265.
Average Annual Total Returns One Five Life of
as of December 31, 1999 Year Years Fund
--------------------------------------------------------------------------------
Class A Shares -9.99% 5.07% 4.68%
Class B Shares -10.72% 5.27% 5.22%
Lehman Brothers Municipal Bond Index -2.06% 6.91% 6.37%
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 8, 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 March 24, 1992. Life of Fund returns are calculated from March 31,
1992. The Lehman Brothers Municipal Bond Index is an unmanaged index of
municipal bonds. Investors cannot invest directly in an Index. (Source for
Lehman Brothers Municipal Bond Index: Lipper Inc.)
10
<PAGE>
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 (Load) (as a percentage
of offering price) 4.75% None
Maximum Deferred Sales Charge (Load) (as a
percentage of the lower of net asset value
at time of purchase or time of redemption) None 5.00%
Maximum Sales Charge (Load) Imposed on
Reinvested Distributions None None
Exchange Fee None None
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)
<TABLE>
Management Distribution and Other Total Annual Fund
Fees Service (12b-1) Fees Expenses* Operating Expenses
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Arizona Fund Class A shares 0.36% 0.00% 0.53% 0.89%
Class B shares 0.36% 0.95% 0.33% 1.64%
---------------------------------------------------------------------------------------------------------------
Colorado Fund Class A shares 0.23% 0.00% 0.56% 0.79%
Class B shares 0.23% 0.95% 0.36% 1.54%
---------------------------------------------------------------------------------------------------------------
Connecticut Fund Class A shares 0.41% 0.00% 0.44% 0.85%
Class B shares 0.41% 0.95% 0.24% 1.60%
---------------------------------------------------------------------------------------------------------------
Michigan Fund Class A shares 0.38% 0.00% 0.52% 0.90%
Class B shares 0.38% 0.95% 0.32% 1.65%
---------------------------------------------------------------------------------------------------------------
Minnesota Fund Class A shares 0.30% 0.00% 0.51% 0.81%
Class B shares 0.30% 0.95% 0.31% 1.56%
---------------------------------------------------------------------------------------------------------------
New Jersey Fund Class A shares 0.46% 0.00% 0.41% 0.87%
Class B shares 0.46% 0.95% 0.21% 1.62%
---------------------------------------------------------------------------------------------------------------
Pennsylvania Fund Class A shares 0.46% 0.00% 0.47% 0.93%
Class B shares 0.46% 0.95% 0.27% 1.68%
---------------------------------------------------------------------------------------------------------------
Texas Fund Class A shares 0.16% 0.00% 0.86% 1.02%
Class B shares 0.16% 0.95% 0.66% 1.77%
</TABLE>
* Other Expenses for Class A of each Fund includes a service fee of 0.20%.
11
<PAGE>
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:
<TABLE>
1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Arizona Fund Class A shares $562 $745 $ 945 $1,519
Class B shares $667 $917 $1,092 $1,944
--------------------------------------------------------------------------------------------------
Colorado Fund Class A shares $552 $715 $ 893 $1,406
Class B shares $657 $886 $1,039 $1,834
--------------------------------------------------------------------------------------------------
Connecticut Fund Class A shares $558 $733 $ 924 $1,474
Class B shares $663 $905 $1,071 $1,900
--------------------------------------------------------------------------------------------------
Michigan Fund Class A shares $562 $748 $ 950 $1,530
Class B shares $668 $920 $1,097 $1,955
--------------------------------------------------------------------------------------------------
Minnesota Fund Class A shares $554 $721 $ 903 $1,429
Class B shares $659 $893 $1,050 $1,856
--------------------------------------------------------------------------------------------------
New Jersey Fund Class A shares $560 $739 $ 934 $1,497
Class B shares $665 $911 $1,081 $1,922
--------------------------------------------------------------------------------------------------
Pennsylvania Fund Class A shares $565 $757 $ 965 $1,564
Class B shares $671 $930 $1,113 $1,987
--------------------------------------------------------------------------------------------------
Texas Fund Class A shares $574 $784 $1,011 $1,664
Class B shares $680 $957 $1,159 $2,084
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Arizona Fund Class A shares $562 $745 $ 945 $1,519
Class B shares $167 $517 $ 892 $1,944
--------------------------------------------------------------------------------------------------
Colorado Fund Class A shares $552 $715 $ 893 $1,406
Class B shares $157 $486 $ 839 $1,834
--------------------------------------------------------------------------------------------------
Connecticut Fund Class A shares $558 $733 $ 924 $1,474
Class B shares $163 $505 $ 871 $1,900
--------------------------------------------------------------------------------------------------
Michigan Fund Class A shares $562 $748 $ 950 $1,530
Class B shares $168 $520 $ 897 $1,955
--------------------------------------------------------------------------------------------------
Minnesota Fund Class A shares $554 $721 $ 903 $1,429
Class B shares $159 $493 $ 850 $1,856
--------------------------------------------------------------------------------------------------
New Jersey Fund Class A shares $560 $739 $ 934 $1,497
Class B shares $165 $511 $ 881 $1,922
--------------------------------------------------------------------------------------------------
Pennsylvania Fund Class A shares $565 $757 $ 965 $1,564
Class B shares $171 $530 $ 913 $1,987
--------------------------------------------------------------------------------------------------
Texas Fund Class A shares $574 $784 $1,011 $1,664
Class B shares $180 $557 $ 959 $2,084
</TABLE>
12
<PAGE>
INVESTMENT OBJECTIVES & PRINCIPAL 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
certain 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.
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, 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 and in unrated municipal obligations considered to
be of comparable quality by the investment adviser. Municipal obligations rated
Baa or BBB have speculative characteristics, while lower quality obligations are
predominantly speculative. 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. Lower rated obligations
also may be subject to greater price volatility than higher rated obligations.
No Portfolio will invest more than 10% of its net assets in obligations rated
below B by Moody's, S&P or Fitch, or in unrated obligations considered to be of
comparable quality by the investment adviser.
Municipal obligations include bonds, notes and commercial paper issued by a
municipality for a wide variety of both public and private purposes. Municipal
obligations also include municipal leases and participations in municipal
leases. The obligation of the issuer to meet its obligations under such leases
is often subject to the appropriation by the appropriate legislative body, on an
annual or other basis, of funds for the payment of the obligations. Certain
municipal obligations may be purchased on a "when-issued" basis, which means
that payment and delivery occur on a future settlement date. The price and yield
of such securities are generally fixed on the date of commitment to purchase.
Many obligations permit the issuer at its option to "call", or redeem, its
securities. If an issuer calls securities during a time of declining interest
rates, it may not be possible to reinvest the proceeds in securities providing
the same investment return as the securities redeemed.
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 generally will 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.
Although each Portfolio may invest in securities of any maturity, it is expected
that a Portfolio will normally invest a substantial portion of its assets in
securities with maturities of ten years or more. The average maturity of a
Portfolio's holdings may vary (generally between 15 and 30 years) depending on
anticipated market conditions.
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 Baa1, 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 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 that obligation.
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
13
<PAGE>
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. Each Portfolio may also enter interest
rate swaps and forward rate contracts, as well as purchase an instrument that
has greater or lesser credit risk than the municipal bonds underlying the
instrument. 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. Derivative hedging
transactions may not be effective because of imperfect correlations and other
factors.
Each Portfolio may invest in zero coupon bonds, which do not require the issuer
to make periodic interest payments. The values of these bonds are subject to
greater fluctuation in response to changes in market interest rates than bonds
which pay interest currently. Each Portfolio accrues income on these investments
and each Fund is required to distribute its share of Portfolio income each year.
Each Portfolio may be required to sell securities to obtain cash needed for
income distributions.
The limited liquidity of certain securities in which each Portfolio may invest
(including those eligible for resale under Rule 144A of the Securities Act of
1933) could affect their market prices, thereby adversely affecting net asset
value and the ability to pay income. The amount of publicly available
information about certain municipal obligations may be limited and the
investment performance of a Portfolio may be more dependent on the portfolio
manager's analysis than if this were not the case.
Each Portfolio may borrow amounts up to one-third of the value of its total
assets (including borrowings), but it will not borrow more than 5% of the value
of its total assets except to satisfy redemption requests or for other temporary
purposes. Such borrowings would result in increased expense to a Fund and, while
they are outstanding, would magnify increases or decreases in the value of Fund
shares. No Portfolio will purchase additional investment securities while
outstanding borrowings exceed 5% of the value of its total assets.
During unusual market conditions, each Portfolio may temporarily invest up to
50% of its total assets in cash or cash equivalents, which is not consistent
with a Fund's investment objective. While temporarily invested, a Fund may not
achieve its objective, and interest income from temporary investments may be
taxable. While at times a Portfolio may use alternative investment strategies in
an effort to limit its losses, it may choose not to do so.
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.
MANAGEMENT AND ORGANIZATION
Management. Each Portfolio's investment adviser is Boston Management and
Research ("BMR"), a subsidiary of Eaton Vance Management ("Eaton Vance"), with
offices at The Eaton Vance Building, 255 State Street, Boston, Massachusetts
02109. Eaton Vance has been managing assets since 1924 and managing mutual funds
since 1931. Eaton Vance and its subsidiaries currently manage over $45 billion
on behalf of mutual funds, institutional clients and individuals.
The investment adviser manages the investments of each Portfolio. 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>
Annual Daily
Category Daily Net Asset Asset Rate Income Rate
---------------------------------------------------------------------------------------------------
<S> <S> <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>
14
<PAGE>
For the fiscal year ended July 31, 2000, each Portfolio paid advisory fees
equivalent to the percentage of average daily net assets stated below.
Net Assets on
Portfolio July 31, 2000 Advisory Fee
------------------------------------------------------------
Arizona $ 73,624,003 0.36%
Colorado $ 30,619,677 0.23%
Connecticut $133,136,655 0.41%
Michigan $ 85,576,468 0.38%
Minnesota $ 48,847,888 0.30%
New Jersey $248,399,517 0.46%
Pennsylvania $237,692,163 0.46%
Texas $ 11,010,420 0.16%
William H. Ahern is the portfolio manager of the Colorado Portfolio (since June
1, 1997), the Connecticut Portfolio (since November 24, 1997) and the Michigan
Portfolio (since January 17, 2000). Cynthia J. Clemson is the portfolio manager
of the Arizona Portfolio (since January 1, 1994)and the Pennsylvania Portfolio
(since January 17, 2000). Robert B. MacIntosh is the portfolio manager of the
New Jersey Portfolio (since it commenced operations) and the Minnesota Portfolio
(since November 1, 1996). Thomas M. Metzold is the portfolio manager of the
Texas Portfolio (since November 24, 1997). Each portfolio manager also manages
other Eaton Vance portfolios, has been an Eaton Vance portfolio manager for more
than 5 years, and is a Vice President of Eaton Vance and BMR.
Administration. Eaton Vance serves as the administrator of each Fund. In this
capacity, Eaton Vance administers the affairs of each Fund and provides certain
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. Each Fund offers multiple classes of shares. Each
Class represents a pro rata interest in the Fund, but is subject to different
expenses and rights. 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 purchase
price of Fund shares is their net asset value (plus a sales charge for Class A
shares), which is derived from Portfolio holdings. Municipal obligations are
normally valued on the basis of valuations furnished by a pricing service.
When purchasing or redeeming Fund shares, your investment dealer must
communicate your order to the principal underwriter by a specific time each day
in order for the purchase price or the redemption price to be based on that
day's net asset value 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 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.
15
<PAGE>
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 of
shares 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 and certain group
purchase plans.
You may purchase Fund shares 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.
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:
<TABLE>
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> <C> <C>
Less than $25,000 4.75% 4.99% 4.50%
$25,000 but less than $100,000 4.50% 4.71% 4.25%
$100,000 but less than $250,000 3.75% 3.90% 3.50%
$250,000 but less than $500,000 3.00% 3.09% 2.75%
$500,000 but less than $1,000,000 2.00% 2.04% 2.00%
$1,000,000 or more 0.00* 0.00* 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. Class A shares purchased at net asset value in amounts of
$1 million or more 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
at the time of redemption. Shares acquired through the reinvestment of
distributions are exempt from the CDSC. Redemptions are made first from shares
that are not subject to a CDSC.
Reducing or Eliminating Sales Charges. Front-end sales charges on purchases of
Class A shares may be reduced under the right of accumulation or under a
statement of intention. Under the right of accumulation, the sales charges you
pay are reduced if the current market value of your current holdings (based on
the current offering price), plus your new purchases, total $25,000 or more.
Class A shares of other Eaton Vance funds owned by you can be included as part
of your current holdings for this purpose. Under a statement of intention,
purchases of $25,000 or more made over a 13-month period are eligible for
reduced sales charges. Under a statement of intention, 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 you satisfy the statement or the 13-month period
expires.
Class A shares are offered at net asset value to clients of financial
intermediaries who charge a fee for their services; accounts affiliated with
those financial intermediaries; investment and institutional clients of Eaton
Vance; certain persons affiliated with Eaton Vance; and certain Eaton Vance and
fund service providers. Ask your investment dealer for details. Class A shares
are also sold at net asset value if the amount invested represents redemption
16
<PAGE>
proceeds from a mutual fund not affiliated with Eaton Vance, provided the
redemption occurred within 60 days of the Fund share purchase and the redeemed
shares were subject to a sales charge. Class A shares so acquired will be
subject to a 0.50% CDSC if they are redeemed within 12 months of purchase.
Investment dealers will be paid a commission on such sales equal to 0.50% of the
amount invested.
CDSCs are waived for certain 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 all or any portion 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. Under these circumstances your
account will be credited with any CDSC paid in connection with the redemption.
Any CDSC period applicable to the shares you acquire upon reinvestment will run
from the date of your original share purchase. 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 in effect 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 0.75% 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 equal to 0.20% of average
daily net assets annually. The principal underwriter pays commissions to
investment dealers on sales of Class B shares (except exchange transactions and
reinvestments). The sales commission equals 4% of the purchase price of the
shares. After the sale of shares, the principal underwriter receives service
fees for one year and thereafter investment dealers generally receive them based
on the value of shares sold by such dealers. Although there is no present
intention to do so, each Class could pay service fees of up to 0.25% annually
upon Trustee approval.
Class B distribution fees are subject to termination when payments under the
Rule 12b-1 plans are sufficient to extinguish uncovered distribution charges. As
described more fully in the Statement of Additional Information, uncovered
distribution charges of a Class are increased by a sales commission payable by
the class to the principal underwriter in connection with sales of shares of
that Class and by an interest factor tied to the U.S. Prime Rate. Uncovered
distribution charges are reduced by the distribution fees paid by the Class and
by CDSCs paid to the Fund by redeeming shareholders. The amount of the sales
commission payable by Class B to the principal underwriter in connection with
sales of Class B shares is significantly less than the maximum permitted by the
sales charge rule of the National Association of Securities Dealers, Inc. To
date, Class B uncovered distribution charges have not been fully covered.
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 and shares that are subject to fiduciary
arrangements cannot be redeemed by telephone.
Through an
Investment Dealer Your investment dealer is responsible for transmitting
the order promptly. An investment dealer may charge a
fee for this service.
17
<PAGE>
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 purchase 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(R) 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.
Withdrawal Plan. You may redeem shares on a regular monthly or quarterly basis
by establishing a systematic withdrawal plan. Withdrawals will not be subject to
any applicable CDSC if they are, in the aggregate, less than or equal to 12%
annually of the greater of either the initial account balance or the current
account balance. A minimum account size of $5,000 is required to establish a
systematic withdrawal plan. Because purchases of Class A shares are generally
subject to an initial 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 hold Class A shares for less than six months and exchange them for
shares subject to a higher sales charge, you will be charged the difference
between the two sales charges. 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, 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 (exchanged from one fund to another and back
again) within 12 months, it will be deemed to be market timing. The exchange
privilege may be terminated for market timing accounts.
18
<PAGE>
Telephone and Electronic Transactions. You can redeem or exchange shares by
telephone as described in this prospectus. In addition, certain transactions may
be conducted through the Internet. The transfer agent and the principal
underwriter have procedures in place to authenticate telephone and electronic
instructions (such as using security codes or verifying personal account
information). As long as the transfer agent and principal underwriter follow
reasonable procedures, they will not be responsible for unauthorized telephone
or electronic transactions and you bear the risk of possible loss resulting from
these 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. You will not be able to
utilize a number of shareholder features, such as telephone transactions,
directly with the Fund. 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 and ordinarily pays distributions monthly.
Different Classes will distribute different dividend amounts. 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 monthly distribution of the Fund's daily dividends
ordinarily will constitute tax-exempt income to you. Distributions of any net
realized gains will be made once each year (usually in December).
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 long-term capital gains. Distributions of interest on certain
municipal obligations are a tax preference item under the AMT provisions
applicable to individuals and corporations, and all tax-exempt distributions may
affect a corporation's AMT liability. Each Fund's distributions will be treated
as described above for federal income tax purposes whether they are paid in cash
or reinvested in additional shares. A redemption of Fund shares, including an
exchange for shares of another fund, is a taxable transaction.
Shareholders, particularly corporations, recipients of social security or
railroad retirement benefits and those subject to 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.
Arizona. Based upon the advice of special tax counsel to the Arizona Fund, the
management of the Fund believes that under Arizona law, dividends paid by the
Fund will be exempt from Arizona income tax imposed on individuals, corporations
and estates and trusts that are subject to Arizona taxation to the extent such
dividends are excluded from gross income for federal income tax purposes and are
derived from interest payments on Arizona obligations. In addition, dividends
paid by the Fund will be exempt from Arizona income tax imposed on such persons,
though included in gross income for federal income tax purposes, to the extent
such dividends are derived from interest payments on direct obligations of the
United States. Other distributions from the Fund, including distributions
derived from net short-term and long-term capital gains, are generally not
exempt from Arizona income tax. Interest or indebtedness and other related
expenses which are incurred or continued by a shareholder to purchase or carry
shares of the Fund generally will not be deductible for Arizona income tax
purposes.
Colorado. In the opinion of special tax counsel to the Colorado Fund, provided
that the Fund qualifies as a regulated investment company under the Internal
Revenue Code (the "Code") and the Portfolio is treated as a partnership for
federal income tax purposes, individuals, trusts, estates, and corporations who
are holders of the Fund and who are subject to the Colorado income tax will not
be subject to Colorado tax on Fund dividends to the extent that: (a) such
dividends qualify as exempt-interest dividends of a regulated investment company
under Section 852(b)(5) of the Code and are derived from interest received by
the Fund on obligations of Colorado or any of its political subdivisions issued
on or after May 1, 1980 or (b) such dividends are attributable to interest on
obligations of the United States or its possessions to the extent included in
federal taxable income. To the extent that Fund distributions are attributable
19
<PAGE>
to sources not described in the preceding sentence, such as long or short-term
capital gains, such distributions will not be exempt from Colorado income tax.
There are no municipal income taxes in Colorado. As intangibles, shares in the
Fund will be exempt from Colorado property taxes.
Connecticut. In the opinion of special tax counsel to the Connecticut Fund,
shareholders of the Connecticut Fund will not be subject to the Connecticut
personal income tax, which is imposed on the Connecticut taxable income of
individuals, trusts, and, estates, in the case of distributions received from
the Connecticut Fund to the extent that such distributions qualify as
exempt-interest dividends for federal income tax purposes and are derived from
interest on obligations issued by or on behalf of the State of Connecticut, any
political subdivision thereof, or public instrumentality, state or local
authority, district or similar public entity created under Connecticut law
("Connecticut Obligations"), or on obligations the interest on which Connecticut
is prohibited from taxing by federal law, e.g., tax-exempt obligations that are
issued by the governments of Puerto Rico, the U.S. Virgin Islands or Guam.
Other distributions from the Connecticut Fund, including dividends attributable
to interest on obligations of issuers in other states and all long-term and
short-term capital gains, will not be exempt from the Connecticut personal
income tax, except that, in the case of shareholders holding shares of the
Connecticut Fund as capital assets, distributions qualifying as capital gain
dividends for federal income tax purposes will not be subject to such tax to the
extent they are derived from Connecticut Obligations. Distributions from the
Connecticut Fund that constitute items of tax preference for purposes of the
federal alternative minimum tax will not be subject to the net Connecticut
minimum tax applicable to taxpayers subject to the Connecticut personal income
tax and required to pay the federal alternative minimum tax, to the extent they
qualify as exempt-interest dividends derived from Connecticut Obligations or
from obligations the interest on which Connecticut is prohibited from taxing by
federal law, but other such distributions from the Connecticut Fund could cause
or increase liability for the net Connecticut minimum tax. The Connecticut Fund
will report annually to its shareholders the percentage and source, on a
state-by-state basis, of interest income distributed by the Connecticut Fund on
municipal bonds during the preceding year.
Distributions from investment income and capital gains, including
exempt-interest dividends derived from interest that is exempt from federal
income tax, will be subject to the Connecticut Corporation Business Tax if
received by a corporation subject to such tax, but a portion of such
distributions not qualifying as exempt-interest dividends or capital gain
dividends for federal income tax purposes might qualify for the
dividends-received deduction provided under that Connecticut tax.
Michigan. The Michigan Fund has received an opinion from special tax counsel to
the Michigan Fund, to the effect that shareholders of the Michigan Fund who are
subject to the Michigan state income tax, municipal income tax or single
business tax will not be subject to such taxes on their Michigan Fund dividends
to the extent that such distributions are exempt-interest dividends for federal
income tax purposes and are attributable to interest on obligations held by the
Michigan Portfolio and allocated to the Michigan Fund which is exempt from
regular federal income tax and is exempt from Michigan State and city income
taxes and Michigan single business tax ("Michigan tax-exempt obligations").
Other distributions with respect to shares of the Michigan Fund including, but
not limited to, long or short-term capital gains, will be subject to the
Michigan income tax or single business tax and may be subject to the city income
taxes imposed by certain Michigan cities.
Minnesota. In the opinion of special tax counsel to the Minnesota Fund, provided
that the Fund qualifies as a "regulated investment company" under the Code, and
subject to the discussion in the paragraph below, exempt-interest dividends paid
by the Fund will be exempt from the regular Minnesota personal income tax
imposed on individuals, estates and trusts that are subject to Minnesota
taxation to the extent that such dividends qualify as exempt-interest dividends
of a regulated investment company under section 852(b)(5) of the Code which are
derived from interest income on tax-exempt obligations of Minnesota, or its
political or governmental subdivisions, municipalities, governmental agencies or
instrumentalities ("Minnesota Sources"); provided, however, such exemption from
the regular Minnesota personal income tax is available only if the portion of
the exempt-interest dividends from such Minnesota Sources that is paid to all
shareholders represents 95% or more of the exempt-interest dividends that are
paid by the Fund. Even if the 95% test is met, to the extent that
exempt-interest dividends paid by the Fund are not derived from Minnesota
Sources, they generally will be subject to the regular Minnesota personal income
tax. Other distributions of the Fund, including distributions derived from net
short-term and long-term capital gains, are generally not exempt from the
regular Minnesota personal income tax imposed on individuals, estates and
trusts.
Pursuant to Minnesota legislation enacted in 1995, exempt-interest dividends
that are derived from interest income on obligations of the Minnesota Sources
described above may become subject to tax in the case of individuals, estates,
and trusts if the exemption of such income were judicially determined to
discriminate against interstate commerce.
20
<PAGE>
Minnesota imposes an alternative minimum tax on individuals, estates, and trusts
that is based, in part, on such taxpayers' federal alternative minimum taxable
income. Accordingly, exempt-interest dividends that constitute tax preference
items for purposes of the federal alternative minimum tax, even though they are
derived from the Minnesota Sources described above, will be included in the base
upon which such Minnesota alternative minimum tax is computed. In addition, the
entire portion of exempt-interest dividends that is derived from sources other
than the Minnesota Sources described above generally will be subject to the
Minnesota alternative minimum tax imposed on such individuals, estates and
trusts. Furthermore, should the 95% test that is described above fail to be met,
all of the exempt-interest dividends that are paid by the Fund, including all of
those derived from the Minnesota Sources described above, generally will be
subject to the Minnesota alternative minimum tax imposed on such shareholders.
Distributions from the Fund will be included in taxable income and in
alternative minimum taxable income, for purposes of determining the Minnesota
franchise tax imposed on corporations subject to Minnesota taxation. Such
distributions may also be taken into account in certain cases in determining the
minimum fee that is imposed on corporations, S corporations, and partnerships.
Interest on indebtedness which is incurred or continued by an individual, a
trust or an estate to purchase or carry shares of the Fund generally will not be
deductible for regular Minnesota personal income tax purposes or Minnesota
alternative minimum tax purposes.
New Jersey. The New Jersey Fund intends to satisfy New Jersey's statutory
requirements for treatment as a "Qualified Investment Fund". The Fund has
obtained an opinion of special tax counsel to the New Jersey Fund, that,
provided the New Jersey Fund limits its investments to those described in this
prospectus and otherwise satisfies such statutory requirements, shareholders of
the New Jersey Fund which are individuals, estates or trusts will not be
required to include in their New Jersey gross income distributions from the New
Jersey Fund that are attributable to interest or gain realized by the New Jersey
Fund from obligations the interest on which is exempt from regular federal
income tax and is exempt from New Jersey State personal income tax or other
obligations statutorily free from New Jersey taxation. However, with regard to
corporate shareholders, such counsel is also of the opinion that distributions
from the New Jersey Fund will not be excluded from net income and shares of the
New Jersey Fund will not be excluded from investment capital in determining New
Jersey corporation business (franchise) and corporation income taxes for
corporate shareholders.
Pennsylvania. Interest derived by the Pennsylvania Fund from obligations which
are statutorily free from state taxation in Pennsylvania ("Exempt Obligations")
are not taxable on pass through to shareholders for purposes of the Pennsylvania
personal income tax. The term "Exempt Obligations" includes (i) those
obligations issued by the Commonwealth of Pennsylvania and its political
subdivisions, agencies and instrumentalities, the interest from which is
statutorily free from state taxation in the Commonwealth of Pennsylvania, and
(ii) certain qualifying obligations of U.S. territories and possessions, or U.S.
Government obligations. Distributions attributable to most other sources,
including capital gains, will not be exempt from Pennsylvania personal income
tax.
Corporate shareholders that are subject to the Pennsylvania corporate net income
tax will not be subject to corporate net income tax on distributions of interest
made by the Pennsylvania Fund, provided such distributions are attributable to
Exempt Obligations. Distributions of capital gain attributable to Exempt
Obligations are subject to the Pennsylvania corporate net income tax. An
investment in the Pennsylvania Fund is also exempt from the Pennsylvania Gross
Premiums tax.
Shares of the Pennsylvania Fund which are held by individual shareholders who
are Pennsylvania residents and subject to the Pennsylvania county personal
property tax will be exempt from such tax to the extent that the obligations
held by the Pennsylvania Portfolio consist of Exempt Obligations on the annual
assessment date. Corporations are not subject to Pennsylvania personal property
taxes.
For individual shareholders who are residents of the City of Philadelphia,
distributions of interest derived from Exempt Obligations will not be taxable
for purposes of the Philadelphia School District Investment Net Income Tax
("Philadelphia School District Tax"), provided that the Pennsylvania Portfolio
reports to its investors the percentage of Exempt Obligations held by it for the
year. The Pennsylvania Portfolio will report such percentage to its investors.
Texas. Texas does not impose a state income tax on individuals. To the extent
that distributions from the Texas Fund are included in a corporate shareholder's
surplus, they will be subject to the Texas franchise tax that is based on net
worth.
21
<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 August 1, 1997. Prior to that date, each Fund offered only
Class B shares and Class A existed as a separate fund.
<TABLE>
<CAPTION>
ARIZONA FUND
------------------------------------------------------------------------------------
YEAR ENDED JULY 31,
------------------------------------------------------------------------------------
2000(1) 1999(1) 1998(1) 1997 1996
------------------------------------------------------------------------------------
CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B CLASS B CLASS B
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value - Beginning of year $ 9.850 $10.950 $10.200 $11.340 $10.090 $11.220 $ 10.680 $ 10.530
------- ------- ------- ------- ------- ------- -------- --------
Income (loss) from operations
Net investment income $ 0.495 $ 0.476 $ 0.504 $ 0.472 $ 0.499 $ 0.476 $ 0.486 $ 0.482
Net realized and unrealized gain (loss) (0.363) (0.409) (0.348) (0.381) 0.126 0.134 0.539 0.161
------- ------- ------- ------- ------- ------- -------- --------
Total income from operations $ 0.132 $ 0.067 $ 0.156 $ 0.091 $ 0.625 $ 0.610 $ 1.025 $ 0.643
------- ------- ------- ------- ------- ------- -------- --------
Less distributions
From net investment income $(0.493) $(0.473) $(0.504) $(0.472) $(0.499) $(0.476) $ (0.485) $ (0.488)
In excess of net investment income (0.009) (0.004) (0.002) (0.009) (0.016) (0.014) -- (0.005)
------- ------- ------- ------- ------- ------- -------- --------
Total distributions $(0.502) $(0.477) $(0.506) $(0.481) $(0.515) $(0.490) $ (0.485) $ (0.493)
------- ------- ------- ------- ------- ------- -------- --------
Net asset value - End of year $ 9.480 $10.540 $ 9.850 $10.950 $10.200 $11.340 $ 11.220 $ 10.680
------- ------- ------- ------- ------- ------- -------- --------
Total return(2) 1.56% 0.81% 1.48% 0.74% 6.34% 5.54% 9.85% 6.17%
Ratios/Supplemental Data
Net assets, end of year (000's omitted) $ 5,064 $68,378 $ 5,409 $88,682 $ 3,498 $99,293 $109,379 $127,681
Ratios (as a percentage of average daily
net assets):
Expenses(3) 0.89% 1.63% 0.77% 1.56% 0.78% 1.57% 1.58% 1.56%
Expenses after custodian fee reduction(3) 0.88% 1.62% 0.76% 1.55% 0.76% 1.55% 1.57% 1.55%
Net investment income 5.30% 4.58% 4.90% 4.16% 4.88% 4.22% 4.50% 4.49%
Portfolio Turnover of the Portfolio 25% 25% 38% 38% 23% 23% 10% 18%
</TABLE>
(See footnotes on last page.)
22
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
COLORADO FUND
----------------------------------------------------------------------------------
YEAR ENDED JULY 31,
----------------------------------------------------------------------------------
2000 1999 1998 1997 1996
----------------------------------------------------------------------------------
CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B CLASS B CLASS B
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value - Beginning of year $ 9.570 $10.410 $ 9.950 $10.820 $ 9.920 $10.800 $10.170 $10.020
------- ------- ------- ------- ------- ------- ------- -------
Income (loss) from operations
Net investment income $ 0.495 $ 0.468 $ 0.507 $ 0.467 $ 0.507 $ 0.478 $ 0.491 $ 0.480
Net realized and unrealized gain (loss) (0.402) (0.440) (0.374) (0.401) 0.038 0.025 0.621 0.162
------- ------- ------- ------- ------- ------- ------- -------
Total income from operations $ 0.093 $ 0.028 $ 0.133 $ 0.066 $ 0.545 $ 0.503 $ 1.112 $ 0.642
------- ------- ------- ------- ------- ------- ------- -------
Less distributions
From net investment income $(0.503) $(0.468) $(0.513) $(0.476) $(0.515) $(0.483) $(0.482) $(0.492)
------- ------- ------- ------- ------- ------- ------- -------
Total distributions $(0.503) $(0.468) $(0.513) $(0.476) $(0.515) $(0.483) $(0.482) $(0.492)
------- ------- ------- ------- ------- ------- ------- -------
Net asset value - End of year $ 9.160 $ 9.970 $ 9.570 $10.410 $ 9.950 $10.820 $10.800 $10.170
------- ------- ------- ------- ------- ------- ------- -------
Total return(2) 1.18% 0.45% 1.27% 0.54% 5.62% 4.74% 11.26% 6.46%
Ratios/Supplemental Data+
Net assets, end of year (000's omitted) $ 2,026 $28,446 $ 2,021 $35,703 $ 2,172 $37,535 $40,786 $42,972
Ratios (as a percentage of average daily net
assets):
Net expenses(3) 0.78% 1.52% 0.63% 1.46% 0.74% 1.51% 1.53% 1.49%
Net expenses after custodian fee reduction(3) 0.75% 1.49% 0.59% 1.42% 0.71% 1.48% 1.49% 1.45%
Net investment income 5.48% 4.75% 5.09% 4.32% 5.14% 4.40% 4.75% 4.69%
Portfolio Turnover of the Portfolio 14% 14% 33% 33% 18% 18% 14% 53%
</TABLE>
+ The operating expenses of the Colorado 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:
<TABLE>
<CAPTION>
<S> <C>
Ratios (as a percentage of average daily net assets):
Expenses 1.51%
Expenses after custodian fee reduction 1.46%
Net investment income 4.67%
Net investment income per share $0.478
</TABLE>
(See footnotes on last page.)
23
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
CONNECTICUT FUND
---------------------------------------------------------------------------------------
YEAR ENDED JULY 31,
---------------------------------------------------------------------------------------
2000 1999 1998(1) 1997 1996
---------------------------------------------------------------------------------------
CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B CLASS B CLASS B
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value - Beginning of year $10.460 $ 10.400 $10.710 $10.640 $10.640 $10.570 $10.120 $9.970
------- -------- ------- -------- ------- -------- -------- --------
Income (loss) from operations
Net investment income $ 0.521 $ 0.439 $0.539 $0.440 $0.529 $0.438 $0.453 $0.452
Net realized and unrealized gain (loss) (0.323) (0.321) (0.258) (0.243) 0.091 0.080 0.450 0.169
------- -------- ------- -------- ------- -------- -------- --------
Total income from operations $ 0.198 $ 0.118 $0.281 $0.197 $0.620 $0.518 $0.903 $0.621
------- -------- ------- -------- ------- -------- -------- --------
Less distributions
From net investment income $(0.518) $ 0.428) $(0.531) $(0.437) $(0.529) $(0.438) $(0.453) $(0.452)
In excess of net investment income -- -- -- -- (0.021) (0.010) -- (0.019)
------- -------- ------- -------- ------- -------- -------- --------
Total distributions $(0.518) $ (0.428) $(0.531) $(0.437) $(0.550) $(0.448) $(0.453) $(0.471)
------- -------- ------- -------- ------- -------- -------- --------
Net asset value - End of year $10.140 $ 10.090 $10.460 $10.400 $10.710 $10.640 $10.570 $10.120
------- -------- ------- -------- ------- -------- -------- --------
Total return(2) 2.09% 1.31% 2.60% 1.84% 5.97% 4.99% 9.17% 6.30%
Ratios/Supplemental Data
Net assets, end of year (000's omitted) $ 8,851 $123,978 $9,222 $149,024 $5,193 $159,125 $171,634 $181,608
Ratios (as a percentage of average daily
net assets):
Expenses(3) 0.82% 1.60% 0.75% 1.56% 0.76% 1.59% 1.60% 1.58%
Expenses after custodian fee reduction(3) 0.80% 1.58% 0.73% 1.54% 0.75% 1.58% 1.60% 1.57%
Net investment income 5.23% 4.46% 4.89% 4.11% 4.93% 4.14% 4.45% 4.45%
Portfolio Turnover of the Portfolio 20% 20% 18% 18% 7% 7% 11% 23%
</TABLE>
(See footnotes on last page.)
24
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
MICHIGAN FUND
--------------------------------------------------------------------------------------
YEAR ENDED JULY 31,
--------------------------------------------------------------------------------------
2000(1) 1999(1) 1998(1) 1997 1996
--------------------------------------------------------------------------------------
CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B CLASS B CLASS B
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value - Beginning of year $ 9.430 $10.520 $ 9.820 $ 10.950 $ 9.750 $ 10.870 $ 10.420 $ 10.250
------- ------- ------- -------- ------- -------- -------- --------
Income (loss) from operations
Net investment income $ 0.480 $ 0.459 $ 0.471 $ 0.440 $ 0.474 $ 0.448 $ 0.460 $ 0.464
Net realized and unrealized gain (loss) (0.356) (0.401) (0.385) (0.420) 0.092 0.097 0.454 0.195
------- ------- ------- -------- ------- -------- -------- --------
Total income from operations $ 0.124 $ 0.058 $ 0.086 $ 0.020 $ 0.566 $ 0.545 $ 0.914 $ 0.659
------- ------- ------- -------- ------- -------- -------- --------
Less distributions
From net investment income $(0.471) $(0.445) $(0.461) $ (0.435) $(0.496) $ (0.448) $ (0.462) $ (0.481)
In excess of net investment income -- -- -- -- -- $ (0.017) $ (0.002) $ (0.008)
From net realized gain -- -- (0.015) (0.015) -- -- -- --
In excess of net realized gain (0.043) (0.043) -- -- -- -- -- --
------- ------- ------- -------- ------- -------- -------- --------
Total distributions $(0.514) $(0.488) $(0.476) $ (0.450) $(0.496) $ (0.465) $ (0.464) $ (0.489)
------- ------- ------- -------- ------- -------- -------- --------
Net asset value - End of year $ 9.040 $10.090 $ 9.430 $ 10.520 $ 9.820 $ 10.950 $ 10.870 $ 10.420
------- ------- ------- -------- ------- -------- -------- --------
Total return(2) 1.55% 0.75% 0.81% 0.11% 5.95% 5.11% 9.01% 6.50%
Ratios/Supplemental Data
Net assets, end of year (000's omitted) $ 2,701 $82,580 $ 1,737 $107,357 $ 1,526 $128,216 $148,542 $171,067
Ratios (as a percentage of average daily
net assets):
Expenses(3) 0.81% 1.60% 0.80% 1.58% 0.83% 1.59% 1.60% 1.61%
Expenses after custodian fee reduction(3) 0.81% 1.60% 0.79% 1.57% 0.81% 1.57% 1.58% 1.60%
Net investment income 5.40% 4.61% 4.81% 4.03% 4.85% 4.12% 4.40% 4.44%
Portfolio Turnover of the Portfolio 30% 30% 31% 31% 26% 26% 16% 49%
</TABLE>
(See footnotes on last page.)
25
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
MINNESOTA FUND
----------------------------------------------------------------------------------
YEAR ENDED JULY 31,
----------------------------------------------------------------------------------
2000 1999(1) 1998(1) 1997 1996
----------------------------------------------------------------------------------
CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B CLASS B CLASS B
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value - Beginning of year $ 9.460 $10.170 $ 9.820 $10.540 $ 9.770 $10.490 $10.070 $ 9.950
------- ------- ------- ------- ------- ------- ------- -------
Income (loss) from operations
Net investment income $ 0.491 $ 0.453 $ 0.490 $ 0.446 $ 0.492 $ 0.439 $ 0.466 $ 0.468
Net realized and unrealized gain (loss) (0.395) (0.418) (0.351) (0.369) 0.073 0.073 0.415 0.123
------- ------- ------- ------- ------- ------- ------- -------
Total income from operations $ 0.096 $ 0.035 $ 0.139 $ 0.077 $ 0.565 $ 0.512 $ 0.881 $ 0.591
------- ------- ------- ------- ------- ------- ------- -------
Less distributions
From net investment income $(0.486) $(0.435) $(0.490) $(0.446) $(0.515) $(0.439) $(0.461) $(0.468)
In excess of net investment income -- -- (0.009) (0.001) -- (0.023) -- (0.003)
------- ------- ------- ------- ------- ------- ------- -------
Total distributions $(0.486) $(0.435) $(0.499) $(0.447) $(0.515) $(0.462) $(0.461) $(0.471)
------- ------- ------- ------- ------- ------- ------- -------
Net asset value - End of year $ 9.070 $ 9.770 $ 9.460 $10.170 $ 9.820 $10.540 $10.490 $10.070
------- ------- ------- ------- ------- ------- ------- -------
Total return(2) 1.21% 0.52% 1.34% 0.65% 5.94% 4.99% 9.01% 6.00%
Ratios/Supplemental Data
Net assets, end of year (000's omitted) $ 5,079 $43,660 $ 4,822 $55,355 $ 3,995 $62,899 $67,781 $74,374
Ratios (as a percentage of average daily net
assets):
Expenses(3) 0.79% 1.55% 0.73% 1.55% 0.73% 1.58% 1.58% 1.56%
Expenses after custodian fee reduction(3) 0.77% 1.53% 0.71% 1.53% 0.71% 1.56% 1.55% 1.54%
Net investment income 5.48% 4.74% 4.97% 4.21% 5.03% 4.19% 4.62% 4.63%
Portfolio Turnover of the Portfolio 12% 12% 19% 19% 23% 23% 22% 45%
</TABLE>
(See footnotes on last page.)
26
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
NEW JERSEY FUND
---------------------------------------------------------------------------------------
YEAR ENDED JULY 31,
---------------------------------------------------------------------------------------
2000(1) 1999(1) 1998(1) 1997 1996
---------------------------------------------------------------------------------------
CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B CLASS B CLASS B
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value - Beginning of year $10.190 $ 10.610 $10.590 $11.020 $10.530 $10.940 $10.440 $10.360
------- -------- ------- -------- ------- -------- -------- --------
Income (loss) from operations
Net investment income $ 0.543 $ 0.489 $ 0.548 $0.481 $0.558 $0.491 $0.506 $0.505
Net realized and unrealized gain (loss) (0.430) (0.443) (0.394) (0.409) 0.082 0.089 0.493 0.084
------- -------- ------- -------- ------- -------- -------- --------
Total income from operations $ 0.113 $ 0.046 $ 0.154 $0.072 $0.640 $0.580 $0.999 $0.589
------- -------- ------- -------- ------- -------- -------- --------
Less distributions
From net investment income $(0.540) $ (0.476) $(0.548) $(0.481) $(0.558) $(0.491) $(0.499) $(0.505)
In excess of net investment income (0.003) -- (0.006) (0.001) (0.022) (0.009) -- (0.004)
------- -------- ------- -------- ------- -------- -------- --------
Total distributions $(0.543) $ (0.476) $(0.554) $(0.482) $(0.580) $(0.500) $(0.499) $(0.509)
------- -------- ------- -------- ------- -------- -------- --------
Net asset value - End of year $ 9.760 $ 10.180 $10.190 $10.610 $10.590 $11.020 $10.940 $10.440
------- -------- ------- -------- ------- -------- -------- --------
Total return(2) 1.34% 0.63% 1.39% 0.59% 6.24% 5.41% 9.85% 5.74%
Ratios/Supplemental Data
Net assets, end of year (000's omitted) $14,690 $233,230 $18,897 $289,219 $11,570 $316,155 $345,080 $378,649
Ratios (as a percentage of average daily
net assets):
Expenses(3) 0.83% 1.60% 0.73% 1.57% 0.77% 1.61% 1.59% 1.57%
Expenses after custodian fee reduction(3) 0.83% 1.60% 0.72% 1.56% 0.75% 1.59% 1.57% 1.56%
Net investment income 5.64% 4.88% 5.14% 4.37% 5.25% 4.48% 4.82% 4.80%
Portfolio Turnover of the Portfolio 26% 26% 32% 32% 14% 14% 24% 39%
</TABLE>
(See footnotes on last page.)
27
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
PENNSYLVANIA FUND
--------------------------------------------------------------------------------------
YEAR ENDED JULY 31,
--------------------------------------------------------------------------------------
2000(1) 1999(1) 1998 1997 1996
--------------------------------------------------------------------------------------
CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B CLASS B CLASS B
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value - Beginning of year $ 9.990 $ 10.310 $10.400 $ 10.730 $10.550 $ 10.900 $ 10.430 $ 10.320
------- -------- ------- -------- ------- -------- -------- --------
Income (loss) from operations
Net investment income $ 0.534 $ 0.477 $ 0.546 $ 0.477 $ 0.578 $ 0.506 $ 0.522 $ 0.512
Net realized and unrealized gain (loss) (0.492) (0.508) (0.393) (0.404) (0.143) (0.156) 0.458 0.108
------- -------- ------- -------- ------- -------- -------- --------
Total income (loss) from operations $ 0.042 $ (0.031) $ 0.153 $ 0.073 $ 0.435 $ 0.350 $ 0.980 $ 0.620
------- -------- ------- -------- ------- -------- -------- --------
Less distributions
From net investment income $(0.534) $ (0.475) $(0.546) $ (0.483) $(0.578) $ (0.520) $ (0.510) $ (0.510)
In excess of net investment income (0.018) (0.004) (0.017) (0.010) (0.007) -- -- --
------- -------- ------- -------- ------- -------- -------- --------
Total distributions $(0.552) $ (0.479) $(0.563) $ (0.493) $(0.585) $ (0.520) $ (0.510) $ (0.510)
------- -------- ------- -------- ------- -------- -------- --------
Net asset value - End of year $ 9.480 $ 9.800 $ 9.990 $ 10.310 $10.400 $ 10.730 $ 10.900 $ 10.430
------- -------- ------- -------- ------- -------- -------- --------
Total return(2) 0.58% (0.15)% 1.42% 0.64% 4.17% 3.23% 9.66% 6.08%
Ratios/Supplemental Data
Net assets, end of year (000's omitted) $ 9,302 $227,779 $10,652 $303,150 $ 8,552 $349,593 $395,974 $441,104
Ratios (as a percentage of average daily
net assets):
Expenses(3) 0.90% 1.66% 0.75% 1.58% 0.74% 1.59% 1.61% 1.58%
Expenses after custodian fee reduction(3) 0.90% 1.66% 0.71% 1.54% 0.70% 1.55% 1.56% 1.54%
Net investment income 5.63% 4.86% 5.29% 4.47% 5.40% 4.63% 4.93% 4.89%
Portfolio Turnover of the Portfolio 18% 18% 27% 27% 13% 13% 17% 30%
</TABLE>
(See footnotes on last page.)
28
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
TEXAS FUND
----------------------------------------------------------------------------------
YEAR ENDED JULY 31,
----------------------------------------------------------------------------------
2000 1999 1998 1997 1996
----------------------------------------------------------------------------------
CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B CLASS B CLASS B
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value - Beginning of year $ 9.560 $10.710 $ 9.890 $11.080 $ 9.770 $10.960 $10.440 $10.280
------- ------- ------- ------- ------- ------- ------- -------
Income (loss) from operations
Net investment income $ 0.472 $ 0.456 $ 0.511 $ 0.485 $ 0.515 $ 0.496 $ 0.489 $ 0.492
Net realized and unrealized gain (loss) (0.327) (0.380) (0.336) (0.368) 0.110 0.120 0.526 0.177
------- ------- ------- ------- ------- ------- ------- -------
Total income from operations $ 0.145 $ 0.076 $ 0.175 $ 0.117 $ 0.625 $ 0.616 $ 1.015 $ 0.669
------- ------- ------- ------- ------- ------- ------- -------
Less distributions
From net investment income $(0.480) $(0.467) $(0.505) $(0.487) $(0.505) $(0.496) $(0.495) $(0.509)
In excess of net investment income (0.015) (0.009) -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- -------
Total distributions $(0.495) $(0.476) $(0.505) $(0.487) $(0.505) $(0.496) $(0.495) $(0.509)
------- ------- ------- ------- ------- ------- ------- -------
Net asset value - End of year $ 9.210 $10.310 $ 9.560 $10.710 $ 9.890 $11.080 $10.960 $10.440
------- ------- ------- ------- ------- ------- ------- -------
Total return(2) 1.74% 0.91% 1.72% 1.01% 6.55% 5.74% 10.00% 6.60%
Ratios/Supplemental Data+
Net assets, end of year (000's omitted) $ 343 $10,648 $ 458 $15,219 $ 373 $16,988 $21,283 $23,996
Ratios (as a percentage of average daily net
assets):
Net expenses(3) 0.97% 1.77% 0.75% 1.54% 0.72% 1.49% 1.57% 1.43%
Net expenses after custodian fee reduction(3) 0.97% 1.77% 0.72% 1.51% 0.69% 1.46% 1.55% 1.39%
Net investment income 5.33% 4.54% 5.11% 4.37% 5.22% 4.50% 4.61% 4.70%
Portfolio Turnover of the Portfolio 35% 35% 55% 55% 17% 17% 17% 39%
</TABLE>
+ The operating expenses of the Texas 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:
<TABLE>
<CAPTION>
<S> <C>
Ratios (as a percentage of average daily net assets):
Expenses(3) 1.53%
Expenses after custodian fee reduction(3) 1.49%
Net investment income 4.60%
Net investment income per share $0.482
</TABLE>
(1) Net investment income per share was computed using average shares
outstanding.
(2) Total return is calculated assuming a purchase at the net asset value on
the first day and a sale at the net asset value on the last day of each
period reported. Distributions, if any, are assumed to be reinvested at the
net asset value on the reinvestment date. Total return is not computed on
an annualized basis.
(3) Includes the Fund's share of its corresponding Portfolio's allocated
expenses.
29
<PAGE>
{LOGO} Mutual Funds
EATON VANCE for People
Mutual Funds Who Pay
Taxes(R)
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.
The Eaton Vance Building
255 State Street
Boston, MA 02109
1-800-225-6265
website: www.eatonvance.com
You will find and may copy information about each Fund (including the
statement of additional information and shareholder reports): at the
Securities and Exchange Commission's public reference room in Washington,
DC (call 1-202-942-8090 for information on the operation of the public
reference room); on the EDGAR Database on the SEC's Internet site (http://
www.sec.gov); or, upon payment of copying fees, by writing to the SEC's
public reference section, Washington, DC 20549-0102, or by electronic mail
at [email protected].
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:
--------------------------------------------------------------------------------
PFPC, Inc.
P.O. Box 9653
Providence, RI 02904-9653
1-800-262-1122
The Funds' SEC File No. is 811-4409. C12/1ABP
<PAGE>
STATEMENT OF
ADDITIONAL INFORMATION
December 1, 2000
Eaton Vance Arizona Municipals Fund
Eaton Vance Colorado Municipals Fund
Eaton Vance Connecticut Municipals Fund
Eaton Vance Michigan Municipals Fund
Eaton Vance Minnesota Municipals Fund
Eaton Vance New Jersey Municipals Fund
Eaton Vance Pennsylvania Municipals Fund
Eaton Vance Texas Municipals Fund
The Eaton Vance Building
255 State Street
Boston, Massachusetts 02109
1-800-225-6265
This Statement of Additional Information ("SAI") provides general information
about the Funds 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 Page
Strategies and Risks 2 Sales Charges 16
Investment Restrictions 7 Performance 19
Management and Organization 8 Taxes 20
Investment Advisory and Administrative Portfolio Securities
Services 13 Transactions 22
Other Service Providers 14 Financial Statements 24
Purchasing and Redeeming Shares 14
Appendices
Appendix A: Class A Fees,
Performance and Ownership 26 Appendix D: Tax Equivalent
Appendix B: Class B Fees, Yield Tables 38
Performance and Ownership 29 Appendix E: Ratings 41
Appendix C: State Specific
Information 32
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 SAI is NOT a prospectus and is authorized for distribution to prospective
investors only if preceded or accompanied by the Funds' prospectus dated
December 1, 2000, 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. In assessing the federal
income tax treatment of interest on any municipal obligation, each Portfolio
will generally rely on an opinion of the issuer's counsel (when available) and
will not undertake any independent verification of the basis for the opinion.
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) are
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).
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,
each 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
2
<PAGE>
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. Each 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 each Portfolio. Each Portfolio will incur additional
expenditures in taking protective action with respect to portfolio obligations
in (or anticipated to be 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, a 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. Each Portfolio may
also invest to a limited extent in obligations issued by the N. Marianna
Territories and American Samoa. Information about some of these conditions and
developments is included in Appendix C.
Sector 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 ("IDBs") 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.
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 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
by a Portfolio 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
3
<PAGE>
reasonable period of time) dispose of such obligations as it deems necessary in
order to comply with each 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. The investment
adviser may also purchase structured derivative products with greater or lesser
credit risk than the underlying bonds. Such bonds may be rated investment grade,
as well as below investment grade. For a description of municipal bond ratings,
see Appendix E.
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, installment purchase or
conditional sales contract (which typically provide for the title to the leased
asset to pass to the governmental issuer) 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 a Portfolio may be deemed illiquid
for the purpose of the Portfolio's 15% limitation on investments in illiquid
securities, unless determined by the investment adviser, pursuant to guidelines
adopted by the Trustees of the Portfolio, to be liquid securities for the
purpose of such limitation. In determining the liquidity of municipal lease
obligations, the investment adviser will consider a variety of factors
including: (1) the willingness of dealers to bid for the security; (2) the
number of dealers willing to purchase or sell the obligation and the number of
other potential buyers; (3) the frequency of trades and quotes for the
obligation; and (4) the nature of the marketplace trades. In addition, the
investment adviser will consider factors unique to particular lease obligations
affecting the marketability thereof. These include the general creditworthiness
of the municipality, the importance of the property covered by the lease to the
municipality, and the likelihood that the marketability of the obligation will
be maintained throughout the time the obligation is held by 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.
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
4
<PAGE>
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 a 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 a 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.
Variable Rate Obligations. Each Portfolio may purchase variable rate
obligations. Variable rate instruments provide for adjustments in the interest
rate at specified intervals (weekly, monthly, semi-annually, etc.). The revised
rates are usually set at the issuer's discretion in which case the investor
normally enjoys the right to "put" the security back to the issuer or his agent.
Rate revisions may alternatively be determined by formula or in some other
contractual fashion. Variable accrued interest and which are frequently secured
by letters of credit or other support arrangements provide by banks. To the
extent that such letters of credit or other arrangements constitute an
unconditional guarantee of the issuer's obligations, a bank may be treated as
the issuer of a security for the purposes of complying with the diversification
requirements set forth in Section 5(b) of the 1940 Act and Rule 5b-2 thereunder.
A Portfolio would anticipate using these bonds as cash equivalents pending
longer term investment of its funds.
Interest Rate Swaps and Forward Rate Contracts. Interest rate swaps involve the
exchange by a Portfolio with another party of their respective commitments to
pay or receive interest, e.g., an exchange of fixed rate payments for floating
rate payments. A Portfolio will only enter into interest rate swaps on a net
basis, i.e., the two payment streams are netted out with the Portfolio receiving
or paying, as the case may be, only the net amount of the two payments. Each
Portfolio may also enter forward rate contracts. Under these contracts, the
buyer locks in an interest rate at a future settlement date. If the interest
rate on the settlement date exceeds the lock rate, the buyer pays the seller the
difference between the two rates. If the lock rate exceeds the interest rate on
the settlement date, the seller pays the buyer the difference between the two
rates. Any such gain received by the Fund would be taxable.
If the other party to an interest rate swap or forward rate contract defaults, a
Portfolio's risk of loss consists of the net amount of payments that the
Portfolio is contractually entitled to receive. The net amount of the excess, if
any, of a Portfolio's obligations over its entitlements will be maintained in a
segregated account by the Portfolio's custodian. No Portfolio will enter into
any interest rate swap or forward rate contract unless the claims-paying ability
of the other party thereto is considered to be investment grade by the
investment adviser. If there is a default by the other party to such a
transaction, a Portfolio will have contractual remedies pursuant to the
agreements related to the transaction. These instruments are traded in the
over-the-counter market.
5
<PAGE>
Illiquid Obligations. At times, a substantial portion of a 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, a 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 a Portfolio's net asset
value. Illiquid securities may also include those legally restricted as to
resale, and securities eligible for resale pursuant to Rule 144A thereunder.
Rule 144A securities may be treated as liquid securities if the investment
adviser determines that such treatment is warranted. Even if determined to be
liquid, holdings of these securities may increase the level of Portfolio
illiquidity if eligible buyers become uninterested in purchasing them.
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 own 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. Each Portfolio may purchase and write call and
put options on futures contracts which are traded on a United States exchange or
board of trade. Each 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 a 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. Each 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 Internal Revenue Code of 1986, as
amended (the "Code"), for maintaining qualification of a Fund as a regulated
investment company for federal income tax purposes.
Asset Coverage Requirements. Transactions involving when-issued securities,
futures contracts and options (other than options that a Portfolio has
purchased), interest rate swaps or forward rate contracts may expose a 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
6
<PAGE>
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.
Temporary Investments. Under unusual market conditions, each Portfolio may
invest temporarily in cash or cash equivalents. Cash equivalents are highly
liquid, short-term securities such as commercial paper, certificates of deposit,
short-term notes and short-term U.S. Government obligations. These securities
may be subject to federal income, state income and/or other state taxes.
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 a
Portfolio.
Diversified Status. Each Portfolio is a "diversified" investment company under
the 1940 Act. This means that with respect to 75% of its total assets (1) a
Portfolio may not invest more than 5% of its total assets in the securities of
any one issuer (except U.S. Government obligations) and (2) a Portfolio may not
own more than 10% of the outstanding voting securities of any one issuer (which
generally is inapplicable because municipal debt obligations are not voting
securities).
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.
7
<PAGE>
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.
Each Fund and Portfolio has adopted the following investment policies which may
be changed by the Trustees with respect to a Fund without approval by the Fund's
shareholders or, with respect to the Portfolio, without approval of the Fund or
its other investors. Each Fund and 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. Any such determination by a delegate will be
made pursuant to procedures adopted by the Board.
No Fund or Portfolio will invest 25% or more of its total assets in any one
industry. For purposes of the foregoing policy, securities of the U.S.
Government, its agencies, or instrumentalities are not considered to represent
industries. Municipal obligations backed by the credit of a governmental entity
are also not considered to represent industries. However, municipal obligations
backed only by the assets and revenues of non-governmental users may for this
purpose be deemed to be issued by such non-governmental users. The foregoing 25%
limitation would apply to these issuers. As discussed in the prospectus and this
SAI, a Fund or a Portfolio may invest more than 25% of its total assets in
certain economic sectors, such as revenue bonds, housing, hospitals and other
health care facilities, and industrial development bonds. Each Fund and
Portfolio reserves the right to invest more than 25% of total assets in each of
these sectors.
For purposes of a Portfolio's investment restrictions and diversification
status, 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 an acquisition by a Fund and Portfolio 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 made by a rating service, will not compel a Fund and Portfolio to dispose
of such security or other asset. Where applicable and notwithstanding the
foregoing, under normal market conditions a Fund and Portfolio must take actions
necessary to comply with the policy of investing at least 65% of total assets in
a particular state. Moreover, each Fund and Portfolio must always be in
compliance with the limitation on investing in illiquid securities and 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 The Eaton Vance Building, 255 State Street, Boston,
Massachusetts 02109. Those Trustees who are "interested persons" of the Trust
and the Portfolios, as defined in the 1940 Act, are indicated by an asterisk(*).
JESSICA M. BIBLIOWICZ (41), Trustee*
President and Chief Executive Officer of National Financial Partners (a
financial services company (since April, 1999). President and Chief Operating
Officer of John A. Levin & Co. (a registered investment advisor) (July, 1997 to
April, 1999) and a Director of Baker, Fentress & Company which owns John A.
8
<PAGE>
Levin & Co. (July, 1997 to April, 1999). 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: 1301 Avenue of the Americas, New York,
New York 10019
DONALD R. DWIGHT (69), Trustee
President of Dwight Partners, Inc. (a corporate relations and communications
company). Trustee/Director of the Royce Funds (mutual funds). Trustee of various
investment companies managed by Eaton Vance or BMR. Address: Clover Mill Lane,
Lyme, New Hampshire 03768
JAMES B. HAWKES (59), 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 (65), Trustee
Jacob H. Schiff Professor of Investment Banking Emeritus, Harvard University
Graduate School of Business Administration. Trustee of the Kobrick 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 (65), Trustee
Chairman and Chief Operating Officer, Hellman, Jordan Management Co. (an
investment management company) and President, Jordan Simmons Capital LLC
(manager of energy related investments) (since November, 2000). President,
Unicorn (an investment and financial advisory services company) (since
September, 2000). Formerly Chairman of the Board, United Asset Management
Corporation (a holding company owning institutional investment management firms)
and 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 (43), 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
JACK L. TREYNOR (70), 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 (57), President
Vice President of BMR and Eaton Vance. Officer of various investment companies
managed by Eaton Vance or BMR.
ROBERT B. MACINTOSH (43), Vice President
Vice President of BMR and Eaton Vance. Officer of various investment companies
managed by Eaton Vance or BMR.
JAMES L. O'CONNOR (55), Treasurer
Vice President of BMR and Eaton Vance. Officer of various investment companies
managed by Eaton Vance or BMR.
ALAN R. DYNNER (60), Secretary
Vice President, Secretary and Chief Legal Officer of BMR, Eaton Vance and EVC.
Prior to joining Eaton Vance on November 1, 1996, he was a Partner of the law
firm of Kirkpatrick & Lockhart LLP, New York and Washington, D.C. Officer of
various investment companies managed by Eaton Vance or BMR.
JANET E. SANDERS (65), Assistant Secretary
Vice President of BMR and Eaton Vance. Officer of various investment companies
managed by Eaton Vance or BMR.
A. JOHN MURPHY (37), Assistant Secretary
Vice President of BMR and Eaton Vance. Officer of various investment companies
managed by Eaton Vance or BMR.
9
<PAGE>
ERIC G. WOODBURY (43), 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, (41), Vice President of Eaton Vance and BMR, is a
Vice President of the Colorado, Connecticut and Michigan Portfolios. Cynthia J.
Clemson (37), Vice President of Eaton Vance and BMR, is a Vice President of the
Arizona and Pennsylvania Portfolios. Thomas M. Metzold (42), Vice President of
Eaton Vance and BMR, is a Vice President of the Texas Portfolio. Ms. Clemson,
and Messrs. Ahern and Metzold are officers of various investment companies
managed by Eaton Vance or BMR.
The Nominating Committee of the Board of Trustees of the Trust and the
Portfolios is comprised of the Trustees who are not "interested persons" as that
term is defined under the 1940 Act ("noninterested Trustees"). 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 or its affiliates.
Messrs. Hayes (Chairman), Dwight and Reamer and Ms. Stout are members of the
Special Committee of the Board of Trustees of the Trust and 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 Trust 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, Portfolios or investors therein.
Messrs. Treynor (Chairman), Dwight and Reamer are members of the Audit Committee
of the Board of Trustees of the Trust and the Portfolios. The Audit Committee's
functions include making recommendations to the Trustees regarding the selection
and performance of the independent accountants, and reviewing matters relative
to accounting and auditing practices and procedures, accounting records, and the
internal accounting controls, of the Trust and the Portfolios, and certain
service providers.
Trustees of each Portfolio who are not affiliated with the investment adviser
may elect to defer receipt of all or a percentage of their annual fees in
accordance with the terms of a Trustees Deferred Compensation Plan (the
"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 a Portfolio's 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 Trust nor the Portfolios has a retirement plan for
its Trustees.
The fees and expenses of the noninterested Trustees of the Trust and the
Portfolios are paid by the Funds (and 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
and the Portfolios). During the fiscal year ended July 31, 2000, the
noninterested Trustees of the Trust and the Portfolios earned the following
compensation in their capacities as Trustees from the Trust and the Portfolios.
For the year ended December 31, 1999, the noninterested Trustees earned the
following compensation in their capacities as Trustees of the funds in the Eaton
Vance fund complex(1):
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<PAGE>
<TABLE>
Source of Jessica M. Donald R. Samuel L. Norton H. Lynn A. Jack L.
Compensation Bibliowicz Dwight(3) Hayes Reamer Stout(4) Treynor
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Trust(2) $ 6,166 $ 4,948 $ 5,831 $ 5,639 $ 6,099 $ 6,065
Arizona Portfolio 735 745 731 672 727 761
Colorado Portfolio 193 310 183 177 191 190
Connecticut Portfolio 966 930 951 884 956 989
Michigan Portfolio 735 745 731 672 727 761
Minnesota Portfolio 735 745 731 672 727 761
New Jersey Portfolio 1,740 1,551 1,682 1,591 1,721 1,749
Pennsylvania Portfolio 1,740 1,551 1,682 1,591 1,721 1,749
Texas Portfolio 19 171 18 18 19 19
Trust and Fund Complex 160,000 160,000(5) 170,000 160,000 160,000(6) 170,000
</TABLE>
(1) As of December 1, 2000, the Eaton Vance fund complex consists of 146
registered investment companies or series thereof.
(2) The Trust consisted of 29 Funds as of July 31, 2000.
(3) Includes deferred compensation as follows: Arizona -- $405; Colorado --
$169; Connecticut -- $506; Michigan -- $405; Minnesota -- $405; New Jersey
-- $843; Pennsylvania -- $843; and Texas -- $93.
(4) Includes deferred compensation as follows: Arizona -- $107; Colorado --
$28; Connecticut -- $142; Michigan -- $108; Minnesota -- $108; New Jersey
-- $255; Pennsylvania -- $255; and Texas -- $3.
(5) Includes $60,000 of deferred compensation.
(6) Includes $16,000 of deferred compensation.
Organization. Each Fund is a series of the Trust, which was organized under
Massachusetts law on January 11, 1993 and is operated as an open-end management
investment company. Each Fund was reorganized into multiple classes and changed
its name to Eaton Vance [state name] Municipals Fund on August 1, 1997. The
operations of the Class B reflect the operations of a Fund prior to August 1,
1997. Each Fund's 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 a Fund). 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.
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's By-laws provide that the Trust will
indemnify its Trustees and officers against liabilities and expenses incurred in
connection with any litigation or proceeding in which they may be involved
because of their offices with the Trust. However, no indemnification will be
provided to any Trustee or officer for any liability to the Trust or
shareholders by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his or her office.
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<PAGE>
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.
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 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 Fund property 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 each Fund are
readily marketable and will ordinarily substantially exceed its liabilities. In
light of the nature of each 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 was organized as a trust under the laws of the state of New York
on May 1, 1992 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 a Fund incurring financial
loss on account of such liability is limited to circumstances in which both
inadequate insurance exists and the Portfolio itself is unable to meet its
obligations. Accordingly, the Trustees of the Trust believe that neither the
Fund nor its shareholders will be adversely affected by reason of a 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 the Portfolio at any
time if the Board of Trustees of the Trust determines that it is in the best
interest of the Fund to do so. 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 the Portfolio is no longer
consistent with the investment objective of the Fund, the Trustees would
12
<PAGE>
consider what action might be taken, including investing the assets of the Fund
in another pooled investment entity or retaining an investment adviser to manage
the Fund's assets in accordance with its investment objective. 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 the Portfolio.
INVESTMENT ADVISORY AND ADMINISTRATIVE SERVICES
Investment Advisory Services. The investment adviser manages the investments and
affairs of each Portfolio and provides related office facilities and personnel
subject to the supervision of the Portfolio's Board of Trustees. The investment
adviser furnishes to each Portfolio investment research, advice and supervision,
furnishes an investment program and determines what securities will be
purchased, held or sold by the Portfolio and what portion, if any, of the
Portfolio's assets will be held uninvested. Each Investment Advisory Agreement
requires the investment adviser to pay the salaries and fees of all officers and
Trustees of the Portfolio who are members of the investment adviser's
organization and all personnel of the investment adviser performing services
relating to research and investment activities.
For a description of the compensation that each Portfolio pays the investment
adviser, 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
July 31, 2000.
Advisory Fee Paid for Fiscal Years Ended
----------------------------------------
Portfolio Net Assets at 7/31/00 7/31/00 7/31/99 7/31/98
--------- --------------------- ------- ------- -------
Arizona $ 73,642,003 $ 291,302 $ 386,713 $ 413,386
Colorado 30,619,677 75,588 94,915 97,947
Connecticut 133,136,655 581,800 681,988 703,463
Michigan 85,576,468 355,554 477,860 562,200
Minnesota 48,847,888 158,394 217,205 228,670
New Jersey 248,399,517 1,216,412 1,481,949 1,535,921
Pennsylvania 237,692,163 1,223,892 1,558,973 1,758,264
Texas 11,010,420 21,272 26,732 31,780
Each Investment Advisory Agreement with the investment adviser 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 the investment adviser may render services to others.
Each Agreement also provides that the investment adviser shall not be liable for
any loss incurred in connection with the performance of its duties, or action
taken or omitted under the 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 each Fund's affairs,
subject to the supervision of the Trustees of the Trust, and shall furnish
office space and all necessary office facilities, equipment and personnel for
administering the affairs of each Fund.
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. EV, Eaton Vance and BMR 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, John G.L. Cabot, Leo I. Higdon, Jr., John M. Nelson,
Vincent M. O'Reilly and Ralph Z. Sorenson. All of the issued and outstanding
shares of BMR and Eaton Vance are owned by Eaton Vance and EVC, respectively.
All shares of the outstanding Voting Common Stock of EVC are deposited in a
Voting Trust, the Voting Trustees of which are Messrs. Hawkes, Jeffrey P. Beale,
Alan R. Dynner, Thomas E. Faust, Jr., Thomas J. Fetter, Scott H. Page, Duncan W.
Richardson, William M. Steul, Payson F. Swaffield, Michael W. Weilheimer, and
Wharton P. Whitaker (all of whom are officers of Eaton Vance). 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
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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.
Code of Ethics. The investment adviser and each Fund and each 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.
Expenses. Each Fund and Portfolio is responsible for all expenses not expressly
stated to be payable by another party (such as expenses required to be paid
pursuant to an agreement with the investment adviser, the principal underwriter
or the administrator). 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, the fee paid to the principal
underwriter for handling repurchase transactions and certain other
class-specific expenses.
OTHER SERVICE PROVIDERS
Principal Underwriter. Eaton Vance Distributors, Inc. ("EVD"), The Eaton Vance
Building, 255 State Street, Boston, Massachusetts 02109, is the principal
underwriter of each Fund. The principal underwriter acts as principal in selling
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 the
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 Trust has authorized the principal underwriter to act as its agent in
repurchasing shares at a rate of $2.50 for each repurchase transaction handled
by the principal underwriter. EVD is a wholly-owned subsidiary of EVC. Mr.
Hawkes is a Vice President and Director, Mr. Dynner is a Vice President,
Secretary and Clerk, Mr. O'Connor is a Vice President, and Mr. Murphy is
Assistant Secretary and Assistant Clerk of EVD.
Custodian. Investors Bank & Trust Company ("IBT"), 200 Clarendon Street, Boston,
MA 02116, serves as custodian to each Fund and Portfolio. 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 each Fund. In such capacity
it attends to details in connection with the sale, exchange, substitution,
transfer or other dealings with each Portfolio's investments, receives and
disburses all funds and performs various other ministerial duties upon receipt
of proper instructions from the Trust and each Portfolio. 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 each Fund or each Portfolio and such
banks.
Independent Accountants. Deloitte & Touche LLP, 200 Berkeley Street, Boston, MA
02116, are the independent accountants of each Fund and each Portfolio,
providing audit services, tax return preparation, and assistance and
consultation with respect to the preparation of filings with the SEC.
Transfer Agent. PFPC, Inc., P.O. Box 9653, Providence, RI 02904-9653, serves as
transfer and dividend disbursing agent for each Fund.
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. Each Fund and
Portfolio 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.
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Inasmuch as the market for municipal obligations is a dealer market with no
central trading location or continuous quotation system, it is not feasible to
obtain last transaction prices for most municipal obligations held by a
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.
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.
Additional Information About Purchases. Fund shares are offered for sale only in
states where they are registered. Fund shares are continuously offered through
investment dealers which have entered agreements with the principal underwriter.
The sales charge included in the public offering price of Class A shares 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".
In connection with employee benefit or other continuous group purchase plans, a
Fund may accept initial investments of less than $1,000 on the part of an
individual participant. In the event a shareholder who is a participant of such
a plan terminates participation in the plan, his or her shares will be
transferred to a regular individual account. However, such account will be
subject to the right of redemption by a Fund as described below.
Suspension of Sales. 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.
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 shares
acquired on the day such proceeds are received. Eaton Vance will use reasonable
efforts to obtain the then current market price for such securities but does not
guarantee the best available price. Eaton Vance will absorb any transaction
costs, such as commissions, on the sale of the securities. Securities determined
to be acceptable should be transferred via book entry or physically delivered,
in proper form for transfer, through an investment dealer, together with a
completed and signed Letter of Transmittal in approved form (available from
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<PAGE>
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 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.
Due to the high cost of maintaining small accounts, the Trust reserves the right
to redeem accounts with balances of less than $750. Prior to such a redemption,
shareholders will be given 60 days' written notice to make an additional
purchase. However, no such redemption would be required by the Trust if the
cause of the low account balance was a reduction in the net asset value of
shares. No CDSC will be imposed with respect to such involuntary redemptions.
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 the
Portfolio. The securities so distributed would be valued pursuant to the
Portfolio's valuation procedures. If a shareholder received a distribution in
kind, the shareholder could incur brokerage or other charges in converting the
securities to cash.
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 may terminate the withdrawal plan at any time without penalty.
SALES CHARGES
Dealer Commissions. 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 and portfolios; to
clients (including custodial, agency, advisory and trust accounts) and current
and retired officers and employees of Eaton Vance, its affiliates and other
investment advisers of Eaton Vance sponsored funds; to officers and employees of
IBT and the transfer agent; to persons associated with law firms, consulting
firms and others providing services to Eaton Vance and the Eaton Vance funds;
and to such persons' spouses, parents, siblings and children and their
beneficial accounts. Such shares may also be issued at net asset value (1) in
connection with the merger (or similar transaction) of an investment company (or
series or class thereof) or personal holding company with a Fund (or class
thereof), (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. Class A shares may also be sold at net asset
value to registered representatives and employees of investment dealers and bank
employees who refer customers to registered representatives of investment
dealers. 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. Any new or
revised sales charge or CDSC waiver will be prospective only.
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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, the Statement of
Intention section of the account application should be completed 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. If you make a Statement of Intention, the transfer agent is
authorized 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. A Statement of Intention does not obligate the shareholder to purchase
or the Fund to sell the full amount indicated in the Statement.
If the amount actually purchased during the 13-month period is less than that
indicated in the Statement, the shareholder will be requested to pay the
difference between the sales charge applicable to the shares purchased and the
sales charge paid under the Statement of Intention. If the payment is not
received in 20 days, the appropriate number of escrowed shares will be redeemed
in order to realize such difference. If the total purchases during the 13-month
period are large enough to qualify for a lower sales charge than that applicable
to the amount specified in the Statement, all transactions will be computed at
the expiration date of the Statement to give effect to the lower sales charge.
Any difference will be refunded to the shareholder in cash or applied to the
purchase of additional shares, as specified by the shareholder. This refund will
be made by the investment dealer and the principal underwriter. If at the time
of the recomputation, the investment dealer for the account has changed, the
adjustment will be made only on those shares purchased through the current
investment dealer for the account.
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.
Exchange Privilege. In addition to exchanges into the same class of another
Eaton Vance fund, Class B shares may be exchanged for shares of a money market
fund sponsored by an investment dealer and approved by the principal underwriter
(an "investment dealer fund"). For purposes of calculating the CDSC applicable
to investment dealer fund shares acquired in an exchange, the CDSC schedule
applicable to the exchanged shares will apply and the purchase of investment
dealer fund shares is deemed to have occurred at the time of the original
purchase of the exchanged shares, except that the time during which a
shareholder holds such investment dealer fund shares will not be credited toward
completion of the CDSC period.
Distribution and Service Plans
Class A Service Plan. The Trust has in effect 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 0.25% of its
average daily net assets for any fiscal year. For the service fees paid by Class
A shares, see Appendix A.
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 equal to 0.20% of its average
daily net assets for any fiscal year which is based on the value of Class A
shares sold by such persons. However, the Class A Plan authorizes the Trustees
of the Trust to increase payments without action by Class A shareholders of a
Fund, provided that the aggregate amount of payments made in any fiscal year
does not exceed 0.25% of average daily net assets.
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Class B Distribution Plan. The Trust also has in effect a compensation-type
Distribution Plan ("Class B Plan") pursuant to Rule 12b-1 under the 1940 Act for
each Fund's Class B shares. Under the Class B Plan, investors are permitted to
purchase shares through an investment dealer without incurring an initial sales
charge and the principal underwriter is permitted to compensate investment
dealers in connection therewith. Each Fund will pay sales commissions and
distribution fees to the principal underwriter under the Class B Plan only after
and as a result of the sale of Class B shares of a 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 a 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 0.75% of its average daily net assets
to finance the distribution of its shares. Such fees compensate the principal
underwriter for the sales commissions paid by it to investment dealers on the
sale of Class B shares and for interest expenses.
For Class B shares, 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. Each Class B Plan provides that a 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
Class B 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 a 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 Class B Plan.
The Class B Plan also authorizes the payment of service fees to the principal
underwriter, investment dealers and other persons in amounts not exceeding 0.25%
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 quarterly service fee payments to
the principal underwriter and investment dealers in amounts equal to 0.20% of
the average daily net assets for any fiscal year which is based on the value of
Class B shares sold by such persons. This fee is paid quarterly in arrears based
on the value of Class B shares sold by such persons. For the service fees paid,
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 each Class B Plan through an increase in Fund assets
(thereby increasing the advisory fee payable to the investment adviser 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 Class B Plan
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if at any point in time the aggregate amounts theretofore received by the
principal underwriter pursuant to the Class B Plan and from CDSCs have exceeded
the total expenses theretofore incurred by such organization in distributing
Class B shares of a 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 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 Plans were approved by the Trustees, including the Plan Trustees, on June
23, 1997. The Trustees of the Trust who are "interested" persons of the Trust
have an indirect financial interest in the Plans because their employers (or
affiliates thereof) receive distribution and/or service fees under the Plans or
agreements related thereto.
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. 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 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 of any
initial sales charge from the initial $1,000 purchase, (iii) a complete
redemption of the investment at the end of the period, and (iv) the deduction of
any applicable CDSC at the end of the period. If shares are subject to a sales
charge, total return figures may be calculated based on reduced sales charges or
at net asset value. These returns would be lower if the full sales charge was
imposed. For total return information, see Appendix A and Appendix B.
Yield is computed pursuant to a standardized formula by dividing the net
investment income per share earned during a recent thirty-day period by the
maximum offering price (including the maximum of any initial sales charge) per
share on the last day of the period and annualizing the resulting figure. Net
investment income per share is calculated from the yields to maturity of all
debt obligations held by a Portfolio based on prescribed methods, reduced by
accrued expenses for the period with the resulting number being divided by the
average daily number of shares outstanding and entitled to receive distributions
during the period. Yield figures do not reflect the deduction of any applicable
CDSC, but assume the maximum of any initial sales charge. (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.
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. Investor
publications may also refer 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.
19
<PAGE>
Investors may be provided with information on municipal bond investing, which
may include comparative performance information, evaluations of Fund
performance, charts and/or illustrations prepared by independent sources, and
narratives (including editorial comments). Performance may be compared to
relevant indices and comparable investments, and to averages, performance
rankings or ratings, or other information prepared by recognized mutual fund
statistical services. Information included in advertisements and materials
furnished to present and prospective investors may also include charts and
illustrations showing the effects of inflation and taxes (including their
effects on the dollar and the return on various investments), the effects of
compounding earnings, and statistics, data and performance studies prepared by
independent organizations or included in various publications reflecting the
performance achieved by various asset classes or types of investments. Such
information may also include commentary prepared by Eaton Vance investment
professionals, including portfolio managers.
Investors may be provided with information concerning Fund volatility or risk,
including but not limited to beta, standard deviation and Sharpe ratio. Beta is
a measure of risk which shows Fund volatility relative to a market index. A fund
with a beta of 1 would perform exactly like the market index; a beta of 2 would
mean its performance was twice as volatile as the index, positive or negative.
Standard deviation is a measure of a security's volatility, or variability, in
expected return. Sharpe ratio is a measure of risk-adjusted performance. The
higher the Sharpe ratio the better a fund's historical risk-adjusted return.
Information concerning Fund distribution payments (or the payment record of
issuers in which the Fund may invest) may also be provided to investors.
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 a particular
type of securities or in mutual funds. Information provided to investors may
also include profiles of different types of investors and different strategies
for achieving investment goals (such as asset allocation strategies).
Hypothetical examples may be used to demonstrate the foregoing.
Information about portfolio allocation, portfolio turnover and portfolio
holdings of a Portfolio at a particular date may be included in advertisements
and other material furnished to present and prospective shareholders.
Descriptions of Eaton Vance and other Fund and Portfolio service providers,
their investment styles, other investment products, personnel and Fund
distribution channels, as well as information on the use of investment
professionals, also may be provided.
A Fund's performance may differ from that of other investors in the Portfolio,
including other investment companies.
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 net
income (including tax-exempt income) and net short-term and long-term capital
gains (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. To the
extent it qualifies for treatment as a RIC, the Fund will not be subject to
federal income tax on income paid to its shareholders in the form of dividends
or capital gain distributions. Each Fund so qualified for its fiscal year ended
July 31, 2000.
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, 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 Portfolio and (ii) will be entitled to the gross income of the
Portfolio attributable to such share.
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<PAGE>
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 (i) at least 98% of its ordinary income (not including
tax-exempt income) for such year, (ii) 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 any available capital loss
carryforwards and (iii) 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.
If a Fund does not qualify as a RIC for any taxable year, the Fund's taxable
income will be subject to corporate income taxes, and all distributions from
earnings and profits, including distributions of net capital gain (if any), will
be taxable to the shareholder as ordinary income. In addition, in order to
requalify for taxation as a RIC, the Fund may be required to recognize
unrealized gains, pay substantial taxes and interest, and make certain
distributions.
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 accrued daily by the Portfolio and, in order to
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 so that the Fund may make required distributions to its shareholders.
Investments in lower-rated or unrated securities may present special tax issues
for a Portfolio 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 the Portfolio as exempt-interest dividends to its shareholders, the Fund must
and intends to satisfy certain requirements, including the requirement that, at
the close of each quarter of its taxable year, at least 50% of the value of its
total assets consists of obligations the interest on which is exempt from
regular federal income tax under Code Section 103(a). For purposes of applying
this 50% requirement, a 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. In addition, corporate shareholders must include the
full amount of exempt-interest dividends in computing the preference items for
the purposes of the AMT. Shareholders of a Fund are required to report
tax-exempt interest on their federal income tax returns.
Tax-exempt distributions received from a Fund are taken into account in
determining, and may increase, the portion of social security and certain
railroad retirement benefits that may be subject to federal income tax.
Interest on indebtedness incurred or continued by a shareholder to purchase or
carry shares of a Fund is not deductible to the extent it is deemed related to
the Fund's distributions of tax-exempt interest. Further, entities or persons
who are "substantial users" (or persons related to "substantial users") of
facilities financed by industrial development or private activity bonds should
consult their tax advisers before purchasing shares of a Fund. "Substantial
user" is defined in applicable Treasury regulations to include a "non-exempt
person" who regularly uses in its trade or business a part of a facility
financed from the proceeds of industrial development bonds, and the same
definition should apply in the case of private activity bonds.
Any recognized gain or income attributable to market discount on long-term
tax-exempt municipal obligations (i.e., obligations with a term of more than one
year) purchased after April 30, 1993 except to the extent of a portion of the
discount attributable to original issue discount, 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
21
<PAGE>
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 well as other taxable
income. Any distributions by a Fund of its share of such capital gains (after
reduction by any capital loss carryforwards) or other 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 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 investments in options, futures contracts, hedging transactions,
forward contracts and certain other transactions will be subject to special tax
rules (including mark-to-market), constructive sale, straddle, wash sale, short
sale and other rules), the effect of which may be to accelerate income to a
Portfolio, defer Portfolio losses, cause adjustments in the holding periods of
Portfolio securities, convert capital gain into ordinary income and convert
short-term capital losses into long-term capital losses. These rules could
therefore affect the amount, timing and character of distributions to investors.
Any loss realized upon the sale or exchange of Fund shares with a tax holding
period of 6 months or less will be disallowed to the extent of any distributions
treated as tax-exempt interest with respect to such shares and if the loss
exceeds the disallowed amount, will be treated as a long-term capital loss to
the extent of any distributions treated as long-term capital gain with respect
to such shares. In addition, all or a portion of a loss realized on a redemption
or other disposition of Fund shares may be disallowed under "wash sale" rules to
the extent the shareholder acquired other shares of the same Fund (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. Any disallowed loss will result in an adjustment to the
shareholder's tax basis in some or all of the other shares acquired.
Sales charges paid upon a purchase of Class A shares cannot be taken into
account for purposes of determining gain or loss on a redemption or exchange of
the shares before the 91st day after their purchase to the extent a sales charge
is reduced or eliminated in a subsequent acquisition of shares of the Fund (or
of another fund) pursuant to the reinvestment or exchange privilege. Any
disregarded amounts will result in an adjustment to the shareholder's tax basis
in some or all of any other shares acquired.
Dividends and distributions on a Fund's shares are generally subject to federal
income tax as described herein to the extent they do not exceed the Fund's
realized income and gains, even though such dividends and distributions may
economically represent a return of a particular shareholder's investment. Such
distributions are likely to occur in respect of shares purchased at a time when
the Fund's net asset value reflects gains that are either unrealized, or
realized but not distributed. Such realized gains may be required to be
distributed even when a Fund's net asset value also reflects unrealized losses.
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, foreign investors,
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 certain states.
PORTFOLIO SECURITIES TRANSACTIONS
Decisions concerning the execution of portfolio security transactions, including
the selection of the market and the executing firm, are made by BMR. BMR is also
responsible for the execution of transactions for all other accounts managed by
it. BMR places the portfolio security transactions of each Portfolio and of all
other accounts managed by it for execution with many firms. BMR uses its best
efforts to obtain execution of portfolio security transactions at prices which
are advantageous to each Portfolio and at reasonably competitive spreads or
(when a disclosed commission is being charged) at reasonably competitive
commission rates. In seeking such execution, BMR will use its best judgment in
evaluating the terms of a transaction, and will give consideration to various
22
<PAGE>
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 each
Portfolio are generally traded in the over-the-counter market on a net basis
(i.e., without commission) through broker-dealers and banks acting for their own
account rather than as brokers, or otherwise involve transactions directly with
the issuer of such obligations. Such firms attempt to profit from such
transactions by buying at the bid price and selling at the higher asked price of
the market for such obligations, and the difference between the bid and asked
price is customarily referred to as the spread. Each Portfolio 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 each Portfolio and BMR's other clients for providing
brokerage and research services to BMR.
As authorized in Section 28(e) of the Securities Exchange Act of 1934, a broker
or dealer who executes a portfolio transaction on behalf of 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 transactions for a Portfolio 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.
A Portfolio 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 its affiliates 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
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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 its affiliates. 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 a Portfolio 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 a
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.
The following table shows brokerage commissions paid by each Portfolio during
the three fiscal years ended July 31, 2000, as well as the amount of a
Portfolio's security transactions for the most recent fiscal year that were
directed to firms which provided some research services to BMR or its affiliates
and the commissions paid in connection therewith (although many of such firms
may have been selected in any particular transaction primarily because of their
execution capabilities):
<TABLE>
Amount of Transactions Commissions Paid on Transactions
Directed to Firms Directed to Firms
Brokerage Commissions Paid for the Fiscal Year Ended Providing Research Providing Research
---------------------------------------------------- ---------------------- --------------------------------
Portfolio 7/31/00 7/31/99 7/31/98 7/31/00 7/31/00
--------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Arizona $ 274 $ 1,268 $ -0- $ 4,991,504 -0-
Colorado 1,032 3,927 5,307 17,303,821 -0-
Connecticut -0- 15,637 15,890 -0- -0-
Michigan 3,197 7,489 -0- 52,884,500 -0-
Minnesota 236 -0- 3,856 4,109,726 -0-
New Jersey 1,400 6,451 12,088 25,321,909 -0-
Pennsylvania 5,629 21,445 31,468 104,570,817 -0-
Texas -0- -0- 312 -0- -0-
</TABLE>
FINANCIAL STATEMENTS
The audited financial statements of, and the reports of independent auditors'
for, the Funds and Portfolios, appear in the Funds' most recent annual report to
shareholders and are incorporated by reference into this SAI. A copy of the
annual report accompanies this SAI.
Householding. Consistent with applicable law, duplicate mailings of shareholder
reports and certain other Fund information to shareholders residing at the same
address may be eliminated.
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Registrant incorporates by reference the audited financial information for the
Funds and the Portfolios listed below for the fiscal year ended July 31, 2000,
as previously filed electronically with the SEC:
Eaton Vance Arizona Municipals Fund Arizona Municipals Portfolio
Eaton Vance Colorado Municipals Fund Colorado Municipals Portfolio
Eaton Vance Connecticut Municipals Fund Connecticut Municipals Portfolio
Eaton Vance Michigan Municipals Fund Michigan Municipals Portfolio
Eaton Vance Minnesota Municipals Fund Minnesota Municipals Portfolio
Eaton Vance New Jersey Municipals Fund New Jersey Municipals Portfolio
Eaton Vance Pennsylvania Municipals Fund Pennsylvania Municipals Portfolio
Eaton Vance Texas Municipals Fund Texas Municipals Portfolio
(Accession No. 0000912057-00-043485)
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APPENDIX A
Class A Fees, Performance & Ownership
Sales Charges, Service Fees and Repurchase Transaction Fees. For the fiscal year
ended July 31, 2000, the following table shows (1) total sales charges paid by
the Funds, (2) sales charges paid to investment dealers, (3) sales charges paid
to the principal underwriter, (4) total service fees paid by the Funds, (5)
service fees paid to investment dealers and (6)repurchase transaction fees paid
to the principal underwriter. Service fees that were not paid to investment
dealers were retained by the principal underwriter.
<TABLE>
Repurchase
Total Service Fees Transaction Fees
Total Sales Sales Charges to Sales Charges to Service Paid to Paid to
Fund Charges Paid Investment Dealers Principal Underwriter Fees Paid Investment Dealers Principal Underwriter
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Arizona $21,955 $20,633 $1,321 $10,700 $ 7,321 $ 57.50
Colorado 17,069 16,078 991 3,853 3,469 72.50
Connecticut 58,771 55,669 3,102 14,727 13,007 165.00
Michigan 23,418 22,752 666 3,815 2,660 60.00
Minnesota 40,652 39,334 1,318 8,454 7,325 90.00
New Jersey 83,048 78,854 4,194 25,748 23,356 217.50
Pennsylvania 40,714 38,576 2,138 15,463 13,997 152.50
Texas 714 675 39 719 636 15.00
</TABLE>
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 August 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. 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. Any return presented with two asterisks (**) includes the
effect of subsidizing expenses. A return would have been lower without
subsidies.
The "Initial Value" reflects the deduction of the maximum initial sales charge.
Arizona Fund
<TABLE>
Total Return Excluding Total Return Including
Maximum Sales Charge Maximum Sales Charge
Period* Ended Investment Initial Value on ---------------------- ----------------------
July 31, 2000 Date Value July 31, 2000 Cumulative Annualized Cumulative Annualized
------------- ---------- ------- ------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of Fund** 7/25/91 $952.23 $1,646.07 72.87% 6.26% 64.61% 5.68%
Five Years 7/31/95 $952.90 $1,227.90 28.86% 5.20% 22.79% 4.19%
One Year 7/31/99 $952.61 $ 967.49 1.56% 1.56% -3.25% -3.25%
</TABLE>
* Predecessor Fund commenced operations December 13, 1993.
Colorado Fund
<TABLE>
Total Return Excluding Total Return Including
Maximum Sales Charge Maximum Sales Charge
Period* Ended Investment Initial Value on ---------------------- ----------------------
July 31, 2000 Date Value July 31, 2000 Cumulative Annualized Cumulative Annualized
------------- ---------- ------- ------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of Fund** 8/25/92 $952.17 $1,445.65 51.82% 5.41% 44.56% 4.76%
Five Years** 7/31/95 $952.53 $1,231.31 29.27% 5.27% 23.13% 4.25%
One Year 7/31/99 $952.23 $ 963.46 1.18% 1.18% -3.65% -3.65%
</TABLE>
* Predecessor Fund commenced Operations December 10, 1993.
26
<PAGE>
Connecticut Fund
<TABLE>
Total Return Excluding Total Return Including
Maximum Sales Charge Maximum Sales Charge
Period* Ended Investment Initial Value on ---------------------- ----------------------
July 31, 2000 Date Value July 31, 2000 Cumulative Annualized Cumulative Annualized
------------- ---------- ------- ------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of Fund** 5/1/92 $952.74 $1,499.68 57.41% 5.65% 49.97% 5.03%
Five Years 7/31/95 $952.79 $1,243.98 30.56% 5.48% 24.40% 4.46%
One Year 7/31/99 $952.64 $ 972.59 2.09% 2.09% -2.74% -2.74%
</TABLE>
* Predecessor Fund commenced operations April 19, 1994.
Michigan Fund
<TABLE>
Total Return Excluding Total Return Including
Maximum Sales Charge Maximum Sales Charge
Period* Ended Investment Initial Value on ---------------------- ----------------------
July 31, 2000 Date Value July 31, 2000 Cumulative Annualized Cumulative Annualized
------------- ---------- ------- ------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of Fund** 4/19/91 $952.89 $1,573.85 65.17% 5.55% 57.38% 5.00%
Five Years 7/31/95 $952.68 $1,204.10 26.39% 4.80% 20.41% 3.78%
One Year 7/31/99 $952.52 $ 967.34 1.55% 1.55% -3.27% -3.27%
</TABLE>
* Predecessor Fund commenced operations December 7, 1993.
Minnesota Fund
<TABLE>
Total Return Excluding Total Return Including
Maximum Sales Charge Maximum Sales Charge
Period* Ended Investment Initial Value on ---------------------- ----------------------
July 31, 2000 Date Value July 31, 2000 Cumulative Annualized Cumulative Annualized
------------- ---------- ------- ------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of Fund** 7/29/91 $952.56 $1,524.97 60.10% 5.36% 52.50% 4.79%
Five Years 7/31/95 $952.87 $1,208.83 26.87% 4.87% 20.88% 3.87%
One Year 7/31/99 $952.67 $ 964.20 1.21% 1.21% -3.58% -3.58%
</TABLE>
* Predecessor Fund commenced operations December 9, 1993.
New Jersey Fund
<TABLE>
Total Return Excluding Total Return Including
Maximum Sales Charge Maximum Sales Charge
Period* Ended Investment Initial Value on ---------------------- ----------------------
July 31, 2000 Date Value July 31, 2000 Cumulative Annualized Cumulative Annualized
------------- ---------- ------- ------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of Fund** 1/8/91 $952.43 $1,703.02 78.82% 6.27% 70.30% 5.73%
Five Years 7/31/95 $952.29 $1,230.29 29.19% 5.26% 23.03% 4.23%
One Year 7/31/99 $952.34 $ 965.11 1.34% 1.34% -3.49% -3.49%
</TABLE>
* Predecessor Fund commenced operations April 13, 1994.
Pennsylvania Fund
<TABLE>
Total Return Excluding Total Return Including
Maximum Sales Charge Maximum Sales Charge
Period* Ended Investment Initial Value on ---------------------- ----------------------
July 31, 2000 Date Value July 31, 2000 Cumulative Annualized Cumulative Annualized
------------- ---------- ------- ------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of Fund** 1/8/91 $952.88 $1,642.41 72.36% 5.86% 64.24% 5.33%
Five Years 7/31/95 $952.29 $1,199.27 25.93% 4.72% 19.93% 3.70%
One Year 7/31/99 $952.34 $ 957.89 0.58% 0.58% -4.21% -4.21%
</TABLE>
* Predecessor Fund commenced operations June 1, 1994.
27
<PAGE>
Texas Fund
<TABLE>
Total Return Excluding Total Return Including
Maximum Sales Charge Maximum Sales Charge
Period* Ended Investment Initial Value on ---------------------- ----------------------
July 31, 2000 Date Value July 31, 2000 Cumulative Annualized Cumulative Annualized
------------- ---------- ------- ------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of Fund** 3/24/92 $952.46 $1,516.88 59.25% 5.72% 51.69% 5.11%
Five Years** 7/31/95 $952.33 $1,240.57 30.26% 5.43% 24.06% 4.41%
One Year 7/31/99 $952.20 $ 968.75 1.74% 1.74% -3.12% -3.12%
</TABLE>
* Predecessor Fund commenced operations December 8, 1993.
Control Persons and Principal Holders of Securities. At November 1, 2000, the
Trustees and officers of the Trust, as a group, owned in the aggregate less than
1% of the outstanding shares of this Class of the Fund. In addition, as of the
same date, the following record owners held the amounts of shares indicated
below, which were held by investment dealers either (i) individually or (ii) on
behalf of their customers who are the beneficial owners of such shares and as to
which such dealers have voting power under certain limited circumstances:
<TABLE>
<S> <C>
Arizona Merrill Lynch, Pierce, Fenner & Smith, Inc. Jacksonville, FL 19.7%
H&R Block Financial Advisors, Inc. Detroit, MI 14.2%
Colorado H&R Block Financial Advisors, Inc. Detroit, MI 6.6%
Connecticut Fiserv Securities, Inc. Philadelphia, PA 7.2%
Michigan Merrill Lynch, Pierce, Fenner & Smith, Inc. Jacksonville, FL 40.9%
H&R Block Financial Advisors, Inc. Detroit, MI 8.8%
New Jersey H&R Block Financial Advisors, Inc. Detroit, MI 6.9%
Merrill Lynch, Pierce, Fenner & Smith, Inc. Jacksonville, FL 6.5%
Pennsylvania Donaldson Lufkin Jenrette Securities Corporation, Inc. Jersey City, NJ 10.7%
Ruane & Co. Ithaca, NY 9.3%
Merrill Lynch, Pierce, Fenner & Smith, Inc. Jacksonville, FL 5.1%
Texas Merrill Lynch, Pierce, Fenner & Smith, Inc. Jacksonville, FL 32.8%
</TABLE>
In addition, as of the same date, the following shareholders owned of record the
following percentages of this Class of the Fund:
<TABLE>
<S> <C>
Arizona Trust FBO Betty E. Howard Prescott, AZ 7.8%
Colorado Maxine M. Millen Lakewood, CO 10.5%
Prudential Securities, Inc. FBO Clyde J. Coates and Denver, CO 7.3%
Edna C. Anderson
Stifel Nicolaus & Co., Inc. FBO Judith A. & Peter S. Wycoff St. Louis, MO 5.7%
Michigan John H. Doyle Rev Trust St. Clair Shores, MI 5.4%
Minnesota Dorothy M. Allen Aitkin, MN 22.1%
New Jersey NFSC FBO David Eichler Belvedere, CA 7.9%
Pennsylvania Josephine J. Kuhn Pittsburgh, PA 9.6%
Texas PaineWebber FBO U. Dean Williams Lubbock, TX 21.4%
PaineWebber FBO Dr. H. David Medley and Dallas, TX 19.5%
Rosemary Medley
Margaret Aigeltinger Trust Tyler, TX 10.8%
Margaretha R. Lafferty Houston, TX 7.4%
</TABLE>
To the knowledge of the Trust, no other person owned of record or beneficially
5% or more of the outstanding shares of this Class of the Fund as of such date.
28
<PAGE>
APPENDIX B
Class B Fees, Performance & Ownership
Distribution, Service and Repurchase Transaction Fees. For the fiscal year ended
July 31, 2000, the following table shows (1) sales commissions paid by the
principal underwriter to investment dealers on sales of Class B shares, (2)
distribution fees to the principal underwriter under the Distribution Plan, (3)
CDSC payments to the principal underwriter, (4) uncovered distribution charges
under the Distribution Plan (dollar amount and as a percentage of net assets
attributable to Class B), (5) service fees paid under the Distribution Plan, (6)
the service fees paid to investment dealers, and (7) the repurchase transaction
fees paid to the principal underwriter. The service fees paid by the Funds that
were not paid to investment dealers were retained by the principal underwriter.
Distribution payments and CDSC payments reduce uncovered distribution charges
under the Distribution Plan.
<TABLE>
Distribution Repurchase
Fee CDSC Uncovered Service Fees Transaction
Paid to Paid to Distribution Charges Paid to Fees Paid to
Sales Principal Principal (as a % of Service Investment Principal
Fund Commission Underwriter Underwriter Class Net Assets) Fees Dealers Underwriter
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Arizona $ 75,005 $ 563,102 $166,000 $1,999,000(2.9%) $150,866 $137,971 $1,295.00
Colorado 76,706 233,575 50,000 1,184,000(4.2%) 57,191 55,699 550.00
Connecticut 144,298 990,437 97,000 3,351,000(2.7%) 250,789 241,809 1,695.00
Michigan 73,374 680,619 97,000 1,711,000(2.1%) 173,768 170,793 1,777.50
Minnesota 69,659 356,612 74,000 1,300,000(3.0%) 88,451 86,291 1,032.50
New Jersey 284,678 1,874,418 276,000 4,782,000(2.1%) 466,458 455,659 4,257.50
Pennsylvania 233,932 1,927,943 579,000 5,453,000(2.4%) 492,008 484,569 5,352.50
Texas 4,649 94,358 10,000 260,000(2.4%) 24,873 24,421 197.50
</TABLE>
Performance Information. The tables below indicate the cumulative and average
annual total return on a hypothetical investment of $1,000 in this Class of
shares for the periods shown in each table. 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. Any return
presented with two asterisks (**) includes the effect of subsidizing expenses. A
return would have been lower without subsidies.
Arizona Fund
<TABLE>
Value Before Value After Total Return Before Total Return After
Deducting Deducting Deducting Maximum CDSC Deducting Maximum CDSC
Period* Ended Investment Maximum CDSC Maximum CDSC ---------------------- ----------------------
July 31, 2000 Date on July 31, 2000 on July 31, 2000 Cumulative Annualized Cumulative Annualized
------------- ---------- ---------------- ---------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of Fund** 7/25/91 $1,692.12 $1,692.12 69.21% 6.00% 69.21% 6.00%
Five Years 7/31/95 $1,250.01 $1,230.01 25.00% 4.56% 23.00% 4.23%
One Year 7/31/99 $1,008.09 $ 959.96 0.81% 0.81% -4.00% -4.00%
</TABLE>
* Investment operations begain July 25, 1991.
Colorado Fund
<TABLE>
Value Before Value After Total Return Before Total Return After
Deducting Deducting Deducting Maximum CDSC Deducting Maximum CDSC
Period* Ended Investment Maximum CDSC Maximum CDSC ---------------------- ----------------------
July 31, 2000 Date on July 31, 2000 on July 31, 2000 Cumulative Annualized Cumulative Annualized
------------- ---------- ---------------- ---------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of Fund** 8/25/92 $1,468.82 $1,468.82 46.88% 4.97% 46.88% 4.97%
Five Years** 7/31/95 $1,253.06 $1,233.16 25.31% 4.62% 23.32% 4.28%
One Year 7/31/99 $1,004.49 $ 956.60 0.45% 0.45% -4.34% -4.34%
</TABLE>
* Investment operations began August 25, 1992.
Connecticut Fund
<TABLE>
Value Before Value After Total Return Before Total Return After
Deducting Deducting Deducting Maximum CDSC Deducting Maximum CDSC
Period* Ended Investment Maximum CDSC Maximum CDSC ---------------------- ----------------------
July 31, 2000 Date on July 31, 2000 on July 31, 2000 Cumulative Annualized Cumulative Annualized
------------- ---------- ---------------- ---------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of Fund** 5/1/92 $1,495.56 $1,495.56 49.56% 5.00% 49.56% 5.00%
Five Years 7/31/95 $1,257.03 $1,237.03 25.70% 4.68% 23.70% 4.35%
One Year 7/31/99 $1,013.10 $ 964.59 1.31% 1.31% -3.54% -3.54%
</TABLE>
* Investment operations began May 1, 1991.
29
<PAGE>
Michigan Fund
<TABLE>
Value Before Value After Total Return Before Total Return After
Deducting Deducting Deducting Maximum CDSC Deducting Maximum CDSC
Period* Ended Investment Maximum CDSC Maximum CDSC ---------------------- ----------------------
July 31, 2000 Date on July 31, 2000 on July 31, 2000 Cumulative Annualized Cumulative Annualized
------------- ---------- ---------------- ---------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of Fund** 4/19/91 $1,622.57 $1,622.57 62.26% 5.35% 62.26% 5.35%
Five Years 7/31/95 $1,230.92 $1,211.23 23.09% 4.24% 21.12% 3.91%
One Year 7/31/99 $1,007.54 $ 959.58 0.75% 0.75% -4.04% -4.04%
</TABLE>
* Investment operations began April 19, 1991.
Minnesota Fund
<TABLE>
Value Before Value After Total Return Before Total Return After
Deducting Deducting Deducting Maximum CDSC Deducting Maximum CDSC
Period* Ended Investment Maximum CDSC Maximum CDSC ---------------------- ----------------------
July 31, 2000 Date on July 31, 2000 on July 31, 2000 Cumulative Annualized Cumulative Annualized
------------- ---------- ---------------- ---------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of Fund** 7/29/91 $1,529.70 $1,529.70 52.97% 4.83% 52.97% 4.83%
Five Years 7/31/95 $1,227.38 $1,207.74 22.74% 4.18% 20.77% 3.85%
One Year 7/31/99 $1,005.17 $ 957.14 0.52% 0.52% -4.29% -4.29%
</TABLE>
* Investment Operations began July 29, 1991.
New Jersey Fund
<TABLE>
Value Before Value After Total Return Before Total Return After
Deducting Deducting Deducting Maximum CDSC Deducting Maximum CDSC
Period* Ended Investment Maximum CDSC Maximum CDSC ---------------------- ----------------------
July 31, 2000 Date on July 31, 2000 on July 31, 2000 Cumulative Annualized Cumulative Annualized
------------- ---------- ---------------- ---------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of Fund** 1/8/91 $1,685.82 $1,685.82 68.58% 5.61% 68.58% 5.61%
Five Years 7/31/95 $1,239.45 $1,219.80 23.94% 4.39% 21.98% 4.05%
One Year 7/31/99 $1,006.28 $ 958.31 0.63% 0.63% -4.17% -4.17%
</TABLE>
* Investment operations began January 8, 1991.
Pennsylvania Fund
<TABLE>
Value Before Value After Total Return Before Total Return After
Deducting Deducting Deducting Maximum CDSC Deducting Maximum CDSC
Period* Ended Investment Maximum CDSC Maximum CDSC ---------------------- ----------------------
July 31, 2000 Date on July 31, 2000 on July 31, 2000 Cumulative Annualized Cumulative Annualized
------------- ---------- ---------------- ---------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of Fund** 1/8/91 $1,634.57 $1,634.57 63.46% 5.27% 63.46% 5.27%
Five Years 7/31/95 $1,206.51 $1,187.52 20.65% 3.83% 18.75% 3.50%
One Year 7/31/99 $ 998.47 $ 950.94 -0.15% -0.15% -4.91% -4.91%
</TABLE>
* Investment operations began January 8, 1991.
Texas Fund
<TABLE>
Value Before Value After Total Return Before Total Return After
Deducting Deducting Deducting Maximum CDSC Deducting Maximum CDSC
Period* Ended Investment Maximum CDSC Maximum CDSC ---------------------- ----------------------
July 31, 2000 Date on July 31, 2000 on July 31, 2000 Cumulative Annualized Cumulative Annualized
------------- ---------- ---------------- ---------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of Fund** 3/24/92 $1,571.74 $1,571.74 57.17% 5.56% 57.17% 5.56%
Five Years** 7/31/95 $1,263.69 $1,243.69 26.37% 4.79% 24.37% 4.46%
One Year 7/31/99 $1,009.13 $ 961.00 0.91% 0.91% -3.90% -3.90%
</TABLE>
* Investment operations began March 24, 1992.
30
<PAGE>
Control Persons and Principal Holders of Securities. At November 1, 2000, the
Trustees and officers of the Trust, as a group, owned in the aggregate less than
1% of the outstanding shares of this Class of the Fund. In addition, as of the
same date, the following record owners held the amounts of shares indicated
below, which were held by investment dealers either (i) individually or (ii) on
behalf of their customers who are the beneficial owners of such shares and as to
which such dealers have voting power under certain limited circumstances:
<TABLE>
<S> <C>
Arizona Merrill Lynch, Pierce, Fenner & Smith, Inc. Jacksonville, FL 10.2%
Colorado Merrill Lynch, Pierce, Fenner & Smith, Inc. Jacksonville, FL 11.0%
Connecticut Merrill Lynch, Pierce, Fenner & Smith, Inc. Jacksonville, FL 17.2%
Michigan Merrill Lynch, Pierce, Fenner & Smith, Inc. Jacksonville, FL 15.8%
Minnesota Merrill Lynch, Pierce, Fenner & Smith, Inc. Jacksonville, FL 6.0%
New Jersey Merrill Lynch, Pierce, Fenner & Smith, Inc. Jacksonville, FL 8.7%
Pennsylvania Merrill Lynch, Pierce, Fenner & Smith, Inc. Jacksonville, FL 13.3%
Texas Merrill Lynch, Pierce, Fenner & Smith, Inc. Jacksonville, FL 23.8%
</TABLE>
To the knowledge of the Trust, no other person owned of record or beneficially
5% or more of the outstanding shares of this Class of the Fund as of such date.
31
<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.
Arizona. Under its Constitution, the state is not permitted to issue general
obligation bonds secured by the state's full faith and credit. However, agencies
and instrumentalities of the state are authorized under specified circumstances
to issue bonds secured by revenues. The state enters into certain lease
transactions that are subject to annual renewal at its option. Local
governmental units in the state are also authorized to incur indebtedness. The
major source of financing for such local government indebtedness is an ad
valorem property tax. In addition, to finance public projects, local governments
may issue revenue bonds to be paid from the revenues of an enterprise or the
proceeds of an excise tax, from assessment bonds payable from special proceeds
of an excise tax, or from assessment bonds payable by special assessments.
Arizona local governments have also financed public projects through leases that
are subject to annual appropriation at the option of the local government.
There are periodic attempts in the form of voter initiatives and legislative
proposals to further limit the amount of annual increases in taxes that can be
levied by the various taxing jurisdictions without voter approval. It is
possible that if such a proposal were enacted, there would be an adverse impact
on state or local government financing. It is not possible to predict whether
any such proposals will be enacted in the future or what would be their possible
impact on state or local government financing.
The state is required by law to maintain a balanced budget. To achieve this
objective, it has in the past utilized a combination of spending reductions and
tax increases. In recent years, the state's fiscal situation has improved, even
while tax reduction measures have been enacted each year since 1992. In 1992,
voters passed a measure that requires a two-thirds vote of the legislature to
increase state taxes.
For several decades, the population has grown at a substantially higher rate
than the population of the United States. The state's population is nearly 5
million and, due to continued employment expansion, is expected to record
above-average growth rates, with 150,000 new residents being added each year.
After population growth of 3% in 1999, growth of 2.7% is forecast for 2000 and
2.6% for 2001.
Overall, General Fund revenues are expected to continue to grow. The state
government closed FY 2000 with $22.8 million more than anticipated. These funds
carry forward and are available for use in FY 2001. It is projected that the
growth rate of 2001 revenues will be 7.2%.
State policy makers have been successful in recent years in depositing monies
into various accounts that have been established for a "rainy day." These monies
are reserved for a true budget emergency precipitated by an economic downturn.
By the end of fiscal year 2001, the rainy day fund is expected to reach $425
million, or 7.08% of the General Fund revenues.
Colorado. The major revenue sources of the state are the individual income tax
and the general sales and use tax. Because of limitations contained in the state
constitution, the state of Colorado issues no general obligation bonds. Several
agencies and instrumentalities of state government, however, are authorized by
statute to issue bonds secured by revenues from specific projects and
activities, and the state and its agencies may enter into lease-purchase
financings which are subject to annual appropriation. Additionally, the state is
authorized to issue short-term revenue anticipation notes. To the extent the
Portfolio holds debt of local units of government whose revenues may rely in
part on distributions from the state, the fiscal health of the state will have
an indirect effect on the Portfolio. The state is required to have a balanced
budget each fiscal year.
32
<PAGE>
Colorado's economy was robust for most of the 1990s, fueled in part by large
public construction projects, a healthy tourist economy, and increased
employment in the wholesale and retail trade and general services sectors and in
high tech manufacturing. The most recent forecast of the Office of the State
Planning and Budgeting, however, calls for a gradual slowing of the growth of
Colorado's economy. The primary factors contributing to this slowdown are a
scarcity of labor, a higher cost environment and a slowdown in the construction
industry.
There are approximately 2,000 units of local government in Colorado, including
counties, statutory cities and towns, home-rule cities and counties, school
districts and a variety of water, sewer and other special districts, all with
various constitutional and statutory authority to levy taxes and incur
indebtedness. The major sources of revenue for payment of local government
indebtedness are the ad valorem property tax, which presently is imposed and
collected solely at the local level, sales and use taxes, and revenue from
special projects.
A 1992 amendment to the state Constitution (the "TABOR Amendment") restricts
growth of state and local government spending to the rate of inflation plus
growth (as measured by population, school enrollment, or construction depending
on the government entity); and requires voter approval of (a) all new taxes or
tax increases and (b) the issuance of most types of debt. For fiscal year
2000-2001, "excess" revenues of over $1 billion are expected to be returned to
the residents of the state pursuant to the TABOR Amendment.
Connecticut. Connecticut's General Fund has recorded an operating surplus for
each fiscal year since the year ended June 30, 1991. For the fiscal year ended
June 30, 1999, the state's General Fund ran an operating surplus, based on the
state's budgetary method of accounting, of approximately $71,800,000. The
state's primary method for financing capital projects is through the sale of
general obligation bonds. These bonds are backed by the full faith and credit of
the state. As of January 1, 2000, the state had authorized direct general
obligation bond indebtedness totaling $13,310,385,000, of which $11,338,459,000
had been approved for issuance by the State Bond Commission and $9,872,122,000
had been issued. As of January 1, 2000, state direct general obligation
indebtedness outstanding was $6,795,705,000.
In 1995, the state established the University of Connecticut as a separate
corporate entity to issue bonds and construct certain infrastructure
improvements. The University is authorized to issue bonds secured by a state
debt service commitment totaling $962,000,000 to finance the improvements.
In addition, the state has limited or contingent liability on a significant
amount of other bonds issued by the following quasi-public agencies: the
Connecticut Housing Finance Authority, the Connecticut Development Authority,
the Connecticut Higher Education Supplemental Loan Authority, the Connecticut
Resources Recovery Authority and the Connecticut Health and Educational
Facilities Authority. Such bonds have also been issued by the cities of
Bridgeport and West Haven and the Southeastern Connecticut Water Authority.
In 1984, the state established a program to plan, construct and improve the
state's transportation system (other than Bradley International Airport). The
total cost of the program through June 30, 2004, is currently estimated to be
$14.0 billion, to be met from federal, state, and local funds. The state expects
to finance most of its $5.2 billion share of such cost by issuing $5.0 billion
of special tax obligation ("STO") bonds. The STO bonds are payable solely from
specified motor fuel taxes, motor vehicle receipts, and license, permit and fee
revenues pledged therefor and credited to the Special Transportation Fund, which
was established to budget and account for such revenues.
The state, its officers and its employees are defendants in numerous lawsuits.
Although it is not possible to determine the outcome of these lawsuits, the
Attorney General has opined that an adverse decision in any of the following
cases might have a significant impact on the state's financial position: (i) a
class action by the Connecticut Criminal Defense Lawyers Association claiming a
campaign of illegal surveillance activity and seeking damages and injunctive
relief; (ii) an action on behalf of all persons with traumatic brain injury who
have been placed in certain state hospitals and other persons with acquired
brain injury who are in the custody of the Department of Mental Health and
Addiction Services, claiming that their constitutional rights are violated by
placement in state hospitals alleged not to provide adequate treatment and
training, and seeking placement in community residential settings with
appropriate support services; (iii) litigation involving claims by Indian tribes
to a portion of the state's land area; (iv) an action by certain students and
municipalities claiming that the state's formula for financing public education
violates the state's Constitution and seeking a declaratory judgment and
injunctive relief; and (v) an action for money damages for the death of a young
physician killed in an automobile accident allegedly as a result of negligence
of the state; (vi) actions by several hospitals claiming partial refunds of
taxes imposed on hospital gross earnings to the extent such taxes related to
tangible personal property transferred in the provision of services to patients;
(vii) an action against the state and the Attorney General by importers and
distributors of cigarettes previously sold by their manufacturers seeking
damages and injunctive relief relating to business losses alleged to result from
the 1998 Master Settlement Agreement entered into by most states in litigation
against the major domestic tobacco companies and challenging certain related
so-called Non Participating manufacturer statutes; and (viii) litigation
33
<PAGE>
on behalf of black and Hispanic school children in the City of Hartford seeking
"integrated education" within the Greater Hartford metropolitan area.
General obligation bonds issued by Connecticut municipalities are payable
primarily only from ad valorem taxes on property subject to taxation by the
municipality. Certain Connecticut municipalities have experienced severe fiscal
difficulties and have reported operating and accumulated deficits in recent
years. Regional economic difficulties, reductions in revenues, and increased
expenses could lead to further fiscal problems for the state and its political
subdivisions, authorities, and agencies. This could result in declines in the
value of their outstanding obligations, reductions in their ability to pay
interest and principal thereon, and increases in their future borrowing costs.
Michigan. Under the state Constitution, the raising of taxes by the Legislature
is limited if doing so would cause the ratio of Total State Revenues (except
federal aid) to Personal Income of Michigan (as such terms are defined in the
state Constitution) to exceed certain limits. The only exceptions to this
revenue limit are a majority approval of a referendum question or a specific
emergency declared by a two-thirds vote of the Legislature. However, this limit
does not apply to taxes imposed for the payment of principal and interest on
bonds of the state, if the bonds are approved by voters and authorized by a vote
of two-thirds of the members of each House of the Legislature and certain school
district loans. Local units of government and local authorities are authorized
to issue bonds and other evidences of indebtedness in a variety of situations
without the approval of electors, but the ability of the obligor to levy taxes
for the payment of such obligations is subject to the foregoing limitations
unless the obligations were authorized before December 23, 1978 or approved by
the electors. The Constitution prohibits the state from reducing the proportion
of total state spending paid to all local units of government, taken as a group,
below that proportion in effect in the 1978-79 fiscal year. The state may not
mandate new or increased levels of services to be provided by local units
without making appropriations to cover any increased costs.
Under the state Constitution, the total amount of general ad valorem taxes
imposed on taxable property in any year cannot exceed certain millage
limitations specified by the Constitution, statute or charter. The Constitution
prohibits local units of government from levying any tax not authorized by law
or charter, or from increasing the rate of an existing tax above the rate
authorized by law or charter. The Constitution also contains millage reduction
provisions. Under such provisions, should the value of taxable property
(exclusive of new construction and improvements) increase at a percentage
greater than the percentage increase in the Consumer Price Index ("CPI"), the
maximum authorized tax rate would be reduced by a factor which would result in
the same maximum potential tax revenues to the local taxing unit as if the
valuation of taxable property (less new construction and improvements) had grown
only at the CPI rate instead of at the higher actual growth rate. The
Constitution and state law also, generally, restrict the increase in the taxable
value of real property, subject to ad valorem property taxes, adjusted for
additions and losses, to a percentage which reflects the percentage increase in
the general price level from the previous year unless ownership of the property
is transferred.
Minnesota. The state of Minnesota has no obligation to pay any bonds of its
political or governmental subdivisions, municipalities, governmental agencies,
or instrumentalities. Minnesota relies heavily on a progressive individual
income tax and a retail sales tax for revenue, which results in a fiscal system
unusually sensitive to economic conditions.
Minnesota Taxes. Legislation enacted in 1995 provides that it is the intent of
the Minnesota legislature that interest income on obligations of Minnesota
governmental units, including obligations of Minnesota, or its political or
governmental subdivisions, municipalities, governmental agencies or
instrumentalities, and exempt-interest dividends that are derived from interest
income on such obligations, be included in the net income of individuals,
estates, and trusts for Minnesota income tax purposes if it is judicially
determined that the exemption by Minnesota of such interest or such
exempt-interest dividends unlawfully discriminates against interstate commerce
because interest income on obligations of governmental issuers located in other
states, or exempt-interest dividends derived from such obligations, is so
included. This provision provides that it applies to taxable years that begin
during or after the calendar year in which such judicial decision becomes final,
regardless of the date on which the obligations were issued, and that other
remedies apply for previous taxable years. The United States Supreme Court in
1995 denied certiorari in a case in which an Ohio state court upheld an
exemption for interest income on obligations of Ohio governmental issuers, even
though interest income on obligations of non-Ohio governmental issuers was
subject to tax. In 1997, the United States Supreme Court denied certiorari in a
subsequent case from Ohio, involving the same taxpayer and the same issue, in
which the Ohio Supreme Court refused to reconsider the merits of the case on the
ground that the previous final state court judgment barred any claim arising out
of the transaction that was the subject of the previous action. It cannot be
predicted whether a similar case will be brought in Minnesota or elsewhere, or
what the outcome of such case would be.
New Jersey. New Jersey ended Fiscal Year 1999 with a balance of $1.96 billion in
its General State Funds and is projected to end Fiscal 2000 with a balance of
$2.1 billion. The state's economic indicators for 1999 showed employment growth
of 1.3%; personal income growth of 5.0%; construction job growth of 2.1%; sales
of existing homes rising by 20%; and an unemployment rate remaining level at
4.6%.
34
<PAGE>
On February 18, 1999, New Jersey issued $360 million of its tax-exempt general
obligation bonds. As of June 30, 1999, the outstanding general obligation bond
indebtedness of New Jersey was $3.65 billion. Projects supported by general
obligation bonds are of economic, social and environmental importance, including
the construction of correctional and human service facilities, transportation
projects, higher education improvements and environmental projects. On December
30, 1998, the New Jersey Sports and Exposition Authority issued $100 million of
its State Contract Bonds, a portion of which was used to refund its outstanding
State Contract Bonds. On December 16, 1998, the New Jersey Transportation Trust
Fund Authority issued $700 million State Transportation System Bonds.
In June 1997, the New Jersey Economic Development Authority issued $2.75 billion
of State Pension Funding Bonds. Proceeds of this issue were used to fully fund
the state's unfunded accrued pension liability and will result in a reduction of
the General Fund costs for fiscal years 1997 and 1998 of $590 million.
Other state-related obligations include those created pursuant to the New Jersey
Building Authority Act, which has the power to construct facilities for leasing
to the state. On September 1, 1997, the New Jersey Building Authority issued
$224 million in refunding and new state revenue bonds. The funds were applied
for various projects including restoration of the State House Complex,
construction of South Woods State Prison, and several renovations of municipal
buildings.
The authorizing legislation for various state entities provides for specific
budgetary procedures with respect to certain obligations issued by such
entities. Bonds issued pursuant to authorizing legislation of this type are
sometimes referred to as "moral obligation" bonds. There is no statutory
limitation on the amount of moral obligation bonds which may be issued by
eligible state entities. Currently, there are two such entities available for
state appropriations to meet moral obligations. The New Jersey Housing and
Mortgage Finance Agency has not had a deficiency in a debt service reserve which
required New Jersey to appropriate funds. It is anticipated that the agency's
revenue will continue to be sufficient to cover debt service on its bonds. The
state provides the South Jersey Port Corporation with funds to cover all debt
service and property tax requirements when earned revenues are anticipated to be
insufficient to cover these obligations. In the past, anticipated revenues have,
in some cases, been insufficient to cover debt service and/or all property tax
requirements. There are numerous other state- created entities with outstanding
debt. This debt is supported by revenues derived from or assets of the various
projects financed by such entities.
The Local Budget Law imposes specific budgetary procedures upon counties and
municipalities, subject to review by the Director of the Division of Local
Government Services. State law also regulates the issuance of debt by counties
and municipalities by limiting the amount of tax anticipation notes that may be
issued and requiring their repayment within 120 days of the end of the fiscal
year in which they are issued. The Local Bond Law governs the issuance of bonds
and notes and bars the issuance of bonds for the payment of current expenses or
to pay outstanding obligations, except where permitted by the Local Finance
Board. State law also authorizes state officials to supervise fiscal
administration in any municipality facing financial difficulties.
Pennsylvania. The General Fund, the state's largest fund, receives all tax
receipts, revenues, federal grants and reimbursements that are not specified by
law to be deposited elsewhere. Debt service on all obligations, except those
issued for highway purposes or for the benefit of other special revenue funds,
is payable from the General Fund. The General Fund closed fiscal year 1998 with
a balance of $2,863 million.
Certain state-created agencies have statutory authorization to incur debt for
which no legislation providing for state appropriations to pay debt service
thereon is required. The debt of these agencies is supported by assets of or
revenues derived from the various projects financed; it is not an obligation of
the state. Some of these agencies, however, are indirectly dependent on state
appropriations. State-related agencies and their outstanding debt as of June 30,
1999 include the Delaware River Joint Toll Bridge Commission ($51.4 million),
the Delaware River Port Authority ($623.2 million), the Pennsylvania Economic
Development Financing Authority ($1,239.7 million), the Pennsylvania Energy
Development Authority ($42.1 million), the Pennsylvania Higher Education
Assistance Agency ($1,783.8 million), the Pennsylvania Higher Education
Facilities Authority ($3,522.5 million), the Pennsylvania Industrial Development
Authority ($373.8 million), the Pennsylvania Infrastructure Investment Authority
($186.9 million), the Pennsylvania Turnpike Commission ($1,573.1 million), the
Philadelphia Regional Port Authority ($57.9 million) and the state Public School
Building Authority ($347.5 million).
The only obligations of state-created agencies in Pennsylvania which bear a
moral obligation of the state are those issued by the Pennsylvania Housing
Finance Agency, a state-created agency which provides housing for lower and
moderate income families in the state, which had $2,749.3 million in bonds
outstanding at June 30, 1999, and the Hospitals and Higher Education Facilities
Authority of Philadelphia which issued $21.1 million in bonds in 1993.
35
<PAGE>
Pennsylvania is currently involved in certain litigation where adverse decisions
could have an adverse impact on its ability to pay debt service. For instance,
Pennsylvania Association of Rural and Small Schools v. Casey, the
constitutionality of Pennsylvania's system for funding local school districts
has been challenged. County of Allegheny v. Commonwealth of Pennsylvania
involves litigation regarding the state constitutionality of the statutory
scheme for county funding of the judicial system.
Texas. The state has no personal or corporate income tax, although the state
does impose a corporate franchise tax based on the amount of a corporation's
capital and surplus. The state finished the fiscal year ended August 31, 2000
with a $3.8 billion operating surplus in the General Revenue Fund.
Texas Taxes. In most every state which has an income tax, dividends paid by a
mutual fund attributable to investments in a particular state's municipal
obligations are exempt from both federal and such state's income tax. If Texas
adopts an income tax in the future, and assuming that its income tax policy with
respect to mutual funds investing in Texas state and local municipal obligations
would be similar to the general tax policy of other states, dividends paid by
the Fund would be exempt from Texas state income tax.
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 tourism,
construction and the high technology areas have compensated for that loss.
Puerto Rico's economy has expanded in the 1990's in step with the U.S. economy.
In 1999 Puerto Rico's GNP grew at 4.2%, the highest annual rate this decade.
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. Section
936 of the Code has provided a tax credit for certain qualified U.S.
corporations electing "possessions corporation" status. However, in 1993,
Section 936 was amended to provide for two alternative limitations on the
Section 936 credit attributable to certain active business income. The first
limitation was based on the economic activity of the Section 936 possessions
corporation. The second limited the credit to a specified percentage of the
credit allowed under prior law. In 1996, Section 936 credit was repealed except
that the credit attributable to possessions source business income with respect
to certain existing credit claimants was subjected to a phase out over a ten
year period (subject to additional caps).
Also in 1996, a new Section 30A was added to the Code. Section 30A permits a
"qualifying domestic corporation" that meets certain gross income tests to claim
a credit against the federal income tax in an amount equal to the portion of the
tax which is attributable to the taxable income from sources outside of the
United States, from the active conduct of a trade or business in Puerto Rico or
from the sale of substantially all the assets used in such a trade or business.
Section 30A will be phased out by January 1, 2006. The Governor of Puerto Rico
has proposed that Congress permanently extend Section 30A until the Puerto Rican
economy achieves certain economic improvements. Similarly, President Clinton has
proposed permanent extension of the Section 30A. To date, however, no action has
been taken.
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. The government of Puerto Rico has enacted its
own tax incentive programs for both industrial and tourist activities.
Puerto Ricans have periodically considered conversion to statehood and such a
vote is likely again in the future. The statehood proposal was defeated in
December 1998.
Puerto Rico is rated Baa1 by Moody's and A by S&P.
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. The last major hurricane to impact the USVI was Hurricane
Marilyn on September 15, 1995. 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
36
<PAGE>
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). In
addition, eventual elimination of the Section 936 tax credit for those companies
with operations in USVI may lead to slower growth in the future.
Guam. The U.S. territory of Guam derives a substantial portion of its economic
base from Japanese tourism. With a reduced U.S. military presence on the island,
Guam has relied more heavily on tourism in the past few years. During its 1997
fiscal year, the government was able to make noticeable progress on its
traditional budgetary problems operating with a balanced budget for that fiscal
year. However, during 1998, the Japanese recession combined with the impact of
typhoon Paka resulted in a budget deficit of $21 million. With hotels alone
accounting for 8.5% of Guam's employment and Japanese tourists comprising 86% of
total visitor arrivals, the Japanese recession and depreciation of the yen
versus the dollar earlier this year have had a negative impact on the island's
economy. Based on these factors, S&P downgraded Guam's rating to BBB- from BBB
with a negative outlook on May 26, 1999. There does seem to be some recent
improvement in the Japanese economy. According to the Guam Visitors Bureau,
visitor arrivals increased in April 2000 by 11.8% over April 1999. Visits from
Japan, Korea and the U.S. mainland increased 14.2%, 120.5% and 9.7%,
respectively.
37
<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 the rates specified below under the regular federal income
tax and applicable state and local tax rates applicable for 2000.
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 $128,950. The tax
brackets also do not show the effects of phaseout of personal exemptions for
single filers with adjusted gross income in excess of $128,950 and joint filers
with adjusted gross income in excess of $193,400. 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.
Arizona Fund
<TABLE>
A Federal & State Tax Exempt Yield of:
4% 4.5% 5% 5.5% 6% 6.5% 7%
Taxable income:* Combined Fed. & -------------------------------------------------------
Single Return Joint Return State Tax Rate+ is Equivalent to a Fully Taxable Yield of:
------------- ------------ --------------- -------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Up to $26,250 Up to $43,850 18.18% 4.89% 5.50% 6.11% 6.72% 7.33% 7.94% 8.56%
$26,251-$63,550 $43,851-$105,950 31.40 5.83 6.56 7.29 8.02 8.75 9.47 10.20
$63,551-$132,600 $105,951-$161,450 34.26 6.08 6.84 7.61 8.37 9.13 9.89 10.65
$132,601-$288,350 $161,451-$288,350 39.23 6.58 7.40 8.23 9.05 9.87 10.70 11.52
Over $288,350 Over $288,350 42.64 6.97 7.85 8.72 9.59 10.46 11.33 12.20
</TABLE>
* Net amount subject to federal and Arizona personal income tax after
deductions and exemptions.
+ The combined federal and Arizona tax brackets are calculated using the
highest Arizona tax rate within each bracket. Taxpayers with taxable income
within such brackets may have lower combined tax brackets and taxable
equivalent yields than indicated above. The combined tax brackets assume
that Arizona taxes are itemized deductions for federal income tax purposes.
Investors who do not itemize deductions on their federal income tax return
will have a higher combined bracket and higher taxable equivalent yield
than those indicated above. The applicable federal tax rates within the
brackets are 15%, 28%, 31%, 36% and 39.6%, over the same ranges of income.
Colorado Fund
<TABLE>
A Federal & State Tax Exempt Yield of:
4% 4.5% 5% 5.5% 6% 6.5% 7%
Taxable income:* Combined Fed. & -------------------------------------------------------
Single Return Joint Return State Tax Rate+ is Equivalent to a Fully Taxable Yield of:
------------- ------------ --------------- -------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Up to $26,250 Up to $43,850 18.94% 4.93% 5.55% 6.17% 6.78% 7.40% 8.02% 8.64%
$26,251-$63,550 $43,851-$105,950 31.33 5.83 6.55 7.28 8.01 8.74 9.47 10.19
$63,551-$132,600 $105,951-$161,450 34.19 6.08 6.84 7.60 8.36 9.12 9.88 10.64
$132,601-$288,350 $161,451- $288,350 38.96 6.55 7.37 8.19 9.01 9.83 10.65 11.47
Over $288,350 Over $288,350 42.40 6.94 7.81 8.68 9.55 10.42 11.28 12.15
</TABLE>
* Net amount subject to federal and Colorado personal income tax after
deductions and exemptions.
+ The Colorado income tax rate is 4.63%. The combined tax brackets assume
that Colorado taxes are itemized deductions for federal income tax
purposes. Investors who do not itemize deductions on their federal income
tax return will have a higher combined bracket and higher taxable
equivalent yield than those indicated above. The applicable federal tax
rates within the brackets are 15%, 28%, 31%, 36% and 39.6%, over the same
ranges of income.
38
<PAGE>
Connecticut Fund
<TABLE>
A Federal & State Tax Exempt Yield of:
4% 4.5% 5% 5.5% 6% 6.5% 7%
Taxable income:* Combined Fed. & -------------------------------------------------------
Single Return Joint Return State Tax Rate+ is Equivalent to a Fully Taxable Yield of:
------------- ------------ --------------- -------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Up to $26,250 Up to $43,850 18.83% 4.93% 5.54% 6.16% 6.78% 7.39% 8.01% 8.62%
$26,251-$ 63,550 $43,851-$105,950 31.24 5.82 6.54 7.27 8.00 8.73 9.45 10.18
$63,551-$132,600 $105,951-$161,450 34.11 6.07 6.83 7.59 8.35 9.11 9.86 10.62
$132,601-$288,350 $161,451-288,350 38.88 6.54 7.36 8.18 9.00 9.82 10.63 11.45
Over $288,350 Over $288,350 42.32 6.93 7.80 8.67 9.54 10.40 11.27 12.14
</TABLE>
* Net amount subject to federal and Connecticut personal income tax after
deductions and exemptions.
+ The combined federal and Connecticut tax brackets are calculated using the
highest Connecticut tax rate within each bracket, reduced by available tax
credits. Taxpayers with taxable income within these brackets may have a
lower combined tax bracket and taxable equivalent yield than indicated
above. Tax credits reduce the effective Connecticut tax rate for single
filers with taxable income up to $53,500 and joint filers up to $100,500.
The combined tax brackets assume that Connecticut taxes are itemized
deductions for federal income tax purposes. Investors who do not itemize
deductions on their federal income tax return will have a higher combined
bracket and higher taxable equivalent yield than those indicated above. The
applicable federal tax rates within the brackets are 15%, 28%, 31%, 36% and
39.6%, over the same ranges of income.
Michigan Fund
<TABLE>
A Federal & State Tax Exempt Yield of:
4% 4.5% 5% 5.5% 6% 6.5% 7%
Taxable income:* Combined Fed. & -------------------------------------------------------
Single Return Joint Return State Tax Rate+ is Equivalent to a Fully Taxable Yield of:
------------- ------------ --------------- -------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Up to $26,250 Up to $43,850 19.51% 4.97% 5.59% 6.21% 6.83% 7.45% 8.08% 8.70%
$26,251-$63,550 $43,851-$105,950 31.82 5.87 6.60 7.33 8.07 8.80 9.53 10.27
$63,551-$132,600 $105,951-$161,450 34.66 6.12 6.89 7.65 8.42 9.18 9.95 10.71
$132,601-$288,350 $161,451-$288,350 39.39 6.60 7.42 8.25 9.07 9.90 10.72 11.55
Over $288,350 Over $288,350 42.80 6.99 7.87 8.74 9.62 10.49 11.36 12.24
</TABLE>
* Net amount subject to federal and Michigan personal income tax after
deductions and exemptions.
+ The combined tax brackets include a Michigan tax rate of 4.3%, Michigan
City income tax rate of 1% (which may vary by city) and assume that
Michigan state and local taxes are itemized deductions for federal income
tax purposes. Investors who do not itemize deductions on their federal
income tax return will have a higher combined bracket and higher taxable
equivalent yield than those indicated above. The applicable federal tax
rates within the brackets are 15%, 28%, 31%, 36% and 39.6%, over the same
ranges of income.
Minnesota Fund
<TABLE>
A Federal & State Tax Exempt Yield of:
4% 4.5% 5% 5.5% 6% 6.5% 7%
Taxable income:* Combined Fed. & -------------------------------------------------------
Single Return Joint Return State Tax Rate+ is Equivalent to a Fully Taxable Yield of:
------------- ------------ --------------- -------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Up to $26,250 Up to $43,850 20.99% 5.06% 5.70% 6.33% 6.96% 7.59% 8.23% 8.86%
$26,251-$ 63,550 $43,851-$105,950 33.65 6.03 6.78 7.54 8.29 9.04 9.80 10.55
$63,551- $132,600 $105,951-$161,450 36.42 6.29 7.08 7.86 8.65 9.44 10.22 11.01
$132,601-$288,350 $161,451-$288,350 41.02 6.78 7.63 8.48 9.33 10.17 11.02 11.87
Over $288,350 Over $288,350 44.34 7.19 8.09 8.98 9.88 10.78 11.68 12.58
</TABLE>
* Net amount subject to federal and Minnesota personal income tax after
deductions and exemptions.
+ The first two combined tax brackets are calculated using the highest
Minnesota tax rate within each bracket. Taxpayers with taxable income
within such brackets may have lower combined tax brackets and taxable
equivalent yields than indicated above. The combined tax brackets assume
that Minnesota taxes are itemized deductions for federal income tax
purposes. Investors who do not itemize deductions on their federal income
tax return will have a higher combined bracket and higher taxable
equivalent yield than those indicated above. The applicable federal tax
rates within the brackets are 15%, 28%, 31%, 36% and 39.6%, over the same
ranges of income.
39
<PAGE>
New Jersey Fund
<TABLE>
A Federal & State Tax Exempt Yield of:
4% 4.5% 5% 5.5% 6% 6.5% 7%
Taxable income:* Combined Fed. & -------------------------------------------------------
Single Return Joint Return State Tax Rate+ is Equivalent to a Fully Taxable Yield of:
------------- ------------ --------------- -------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Up to $26,250 Up to $43,850 16.49% 4.79% 5.39% 5.99% 6.59% 7.18% 7.78% 8.38%
$26,251-$63,550 $43,851-$105,950 31.98 5.88 6.62 7.35 8.09 8.82 9.56 10.29
$63,551-$132,600 $105,951-$161,450 35.40 6.19 6.97 7.74 8.51 9.29 10.06 10.84
$132,601-$288,350 $161,451- $288,350 40.08 6.68 7.51 8.34 9.18 10.01 10.85 11.68
Over $288,350 Over $288,350 43.45 7.07 7.96 8.84 9.73 10.61 11.49 12.38
</TABLE>
* Net amount subject to federal and New Jersey personal income tax after
deductions and exemptions.
+ The combined federal and New Jersey tax brackets are calculated using the
highest New Jersey tax rate applicable within each bracket. Taxpayers with
taxable income within such brackets may have lower combined tax brackets
and taxable equivalent yields than indicated above. The combined tax
brackets assume that New Jersey taxes are itemized deductions for federal
income tax purposes. Investors who do not itemize deductions on their
federal income tax return will have a higher combined bracket and higher
taxable equivalent yield then those indicated above. The applicable federal
tax rates within the brackets are 15%, 28%, 31%, 36% and 39.6%, over the
same ranges of income.
Pennsylvania Fund
<TABLE>
Federal, State,
Federal, State County and
Taxable Income: Federal State Federal and and Philadelphia
Single Return Joint Return Tax Rate Tax Rate State Taxes County Taxes(2) Taxes(2)
------------- ------------ -------- -------- ----------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Up to $26,250 Up to $43,850 15.00% 2.80% 7.26% 7.80% 8.22%
$26,251-$63,550 $43,851-$105,950 28.00 2.80 8.57 9.20 9.70
$63,551-$132,600 $105,951-$161,450 31.00 2.80 8.95 9.60 10.12
$132,601-$288,350 $161,451-$288,350 36.00 2.80 9.65 10.36 10.91
Over $288,350 Over $288,350 39.60 2.80 10.22 10.97 11.56
</TABLE>
Equivalent yields are based on a fixed $1,000 investment with all taxes deducted
from income. Included in all areas are the effects of: federal income tax and a
2.8% Pennsylvania income tax. (1) Includes a 4 mil county personal property tax
imposed by most counties. (2) includes a 4 mil county personal property and a
4.6135% Philadelphia school income tax. The equivalent yields assume that the
Pennsylvania state and local taxes referred to above are itemized deductions for
federal income tax purposes. Investors who do not itemize deductions on their
federal income tax return will have a higher equivalent yield than indicated.
Texas Fund
<TABLE>
A Federal & State Tax Exempt Yield of:
4% 4.5% 5% 5.5% 6% 6.5% 7%
Taxable income:* Combined Fed. & -------------------------------------------------------
Single Return Joint Return State Tax Rate is Equivalent to a Fully Taxable Yield of:
------------- ------------ --------------- -------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Up to $26,250 Up to $43,850 15.00% 4.71% 5.29% 5.88% 6.47% 7.06% 7.65% 8.24%
$26,251-$63,550 $43,851-$105,950 28.00 5.56 6.25 6.94 7.64 8.33 9.03 9.72
$63,551-$132,600 $105,951-$161,450 31.00 5.80 6.52 7.25 7.97 8.70 9.42 10.14
$132,601-$288,350 $161,451-$288,350 36.00 6.25 7.03 7.81 8.59 9.38 10.16 10.94
Over $288,350 Over $288,350 39.60 6.62 7.45 8.28 9.11 9.93 10.76 11.59
</TABLE>
* Net amount subject to federal personal income tax after deductions and
exemptions.
40
<PAGE>
APPENDIX E
DESCRIPTION OF SECURITIES RATINGS
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.
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.
Moody's Investors Service, Inc.
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long term risk appear somewhat larger than the Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa: Bonds which are rated Baa are considered as medium-grade obligations (i.e.,
they are neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during other good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca: Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Absence of Rating: Where no rating has been assigned or where a rating has been
suspended or withdrawn, it may be for reasons unrelated to the quality of the
issue.
Should no rating be assigned, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities or companies that
are not rated as a matter of policy.
3. There is a lack of essential data pertaining to the issue or issuer.
4. The issue was privately placed, in which case the rating is not
published in Moody's publications.
41
<PAGE>
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.
42
<PAGE>
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.
43
<PAGE>
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.
44
<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 filed September 15, 1995 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 filed July 3, 1997
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 filed November 25,
1996 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 filed September 15, 1995 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
filed September 15, 1995 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 filed July 3, 1997 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 filed December 28, 1995 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 filed September 15, 1995 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 filed November 15, 1995 and incorporated herein by
reference.
(3) Amendment to Master Custodian Agreement with Investors Bank & Trust
Company dated December 21, 1998 filed as Exhibit (g)(3) to
Post-Effective Amendment No. 78 filed January 25, 1999 and
incorporated herein by reference.
C-1
<PAGE>
(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 filed September 15, 1995 and incorporated herein by
reference.
(b) Amendment to Schedule A dated June 23, 1997 to the Amended
Administrative Services Agreement dated June 19, 1995 filed as
Exhibit (9)(a)(2) to Post-Effective Amendment No. 67 filed July 3,
1997 and incorporated herein by reference.
(2)(a) 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) filed February 25, 1998 and
incorporated herein by reference.
(b) Amendment to the Transfer Agency Agreement dated October 18, 1999
filed as Exhibit (h)(2)(a) to Post-Effective Amendment No. 81 filed
December 20, 1999 and incorporated herein by reference.
(i)(1) Opinion of Internal Counsel filed as Exhibit (i) to Post-Effective
Amendment No. 73 filed October 1, 1998 and incorporated herein by
reference.
(2) Consent of Counsel dated November 24, 2000 filed herewith.
(j) Consent of Independent Auditors for Eaton Vance Arizona Municipals
Fund, Eaton Vance Colorado Municipals Fund, Eaton Vance Connecticut
Municipals Fund, Eaton Vance Michigan Municipals Fund, Eaton Vance
Minnesota Municipals Fund, Eaton Vance New Jersey Municipals Fund,
Eaton Vance Pennsylvania Municipals Fund, and Eaton Vance Texas
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 filed July 3,
1997 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 filed September
29, 1997 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 filed September
29, 1997 and incorporated herein by reference.
(n) Not applicable
(o) Amended and Restated Multiple Class Plan for Eaton Vance Funds dated
June 19, 2000 filed as Exhibit (o)(1) to Post-Effective Amendment
No. 61 of Eaton Vance Mutual Funds Trust (File Nos. 02-90946,
811-4015) filed June 23, 2000 and incorporated herein by reference.
C-2
<PAGE>
(p) Code of Ethics adopted by Eaton Vance Corp., Eaton Vance Management,
Boston Management and Research, Eaton Vance Distributors, Inc. and
the Eaton Vance Funds effective September 1, 2000 filed as Exhibit
(p) to Post-Effective Amendment No. 67 of Eaton Vance Mutual Funds
Trust (File Nos. 02-90946, 811-4015) filed August 31, 2000 and
incorporated herein by reference.
(q)(1) Power of Attorney for Eaton Vance Municipals Trust dated April 22,
1997 filed as Exhibit (17)(a) to Post-Effective Amendment No. 65
filed June 2, 1997 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
filed November 24, 1998 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 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 filed June 2, 1997 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 filed November 24, 1998 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.
C-3
<PAGE>
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 Management (File No.
801-15930) and Boston Management and Research (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:
Eaton Vance Advisers Senior Floating-Rate Fund
Eaton Vance Growth Trust
Eaton Vance Income Fund of Boston
Eaton Vance Institutional Senior Floating-Rate Fund
Eaton Vance Investment Trust
Eaton Vance Municipals Trust
Eaton Vance Municipals Trust II
Eaton Vance Mutual Funds Trust
Eaton Vance Prime Rate Reserves
Eaton Vance Special Investment Trust
EV Classic Senior Floating-Rate Fund
(b)
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address* with Principal Underwriter with Registrant
----------------- -------------------------- ---------------
Albert F. Barbaro Vice President None
Ira Baron Vice President None
Chris Berg Vice President None
Kate B. Bradshaw Vice President None
Mark Carlson Vice President None
Daniel C. Cataldo Vice President None
and Treasurer
Raymond Cox Vice President None
Peter Crowley Vice President None
Ellen Duffy Vice President None
Alan R. Dynner Vice President, Secretary Secretary
and
Clerk
Richard A. Finelli Vice President None
Kelly Flynn Vice President None
James Foley Vice President None
Michael A. Foster Vice President None
Anne Marie Gallagher Vice President None
William M. Gillen Senior Vice President None
Hugh S. Gilmartin Vice President None
Robert Hammond Vice President None
James B. Hawkes Vice President and Director Vice President
and Trustee
Perry D. Hooker Vice President None
Steve Jones Vice President None
Kara Lawler Vice President None
Thomas P. Luka Vice President None
John Macejka Vice President None
Geoff Marshall Vice President None
Tim McEwan 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
C-4
<PAGE>
Mark D. Nelson Vice President None
Linda D. Newkirk Vice President None
James L. O'Connor Vice President Treasurer
Andrew Ogren Vice President None
George D. Owen, II Vice President None
Philip Pace Vice President None
Margaret Pier Vice President None
Enrique M. Pineda Vice President None
Matt Raynor Vice President None
F. Anthony Robinson Vice President None
Frances Rogell Vice President None
Jay S. Rosoff Vice President None
Stephen M. Rudman Vice President None
Kevin Schrader Vice President None
Teresa A. Sheehan Vice President None
Lawrence Sinsimer Senior 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
John Vaughan Vice President None
Chris Volf Vice President None
Debra Wekstein Vice President None
Wharton P. Whitaker President and Director None
Sue Wilder Vice President None
------------------------------------------
* Address is The Eaton Vance Building, 255 State Street, Boston, MA 02109
(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, PFPC,
Inc., 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 of the administrator and investment adviser. 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
The Registrant undertakes to include the information required by Item 5 of
Form N-1A in its annual reports to shareholders under Rule 30d-1.
C-5
<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 November 24, 2000.
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 their capacities on November 24, 2000.
Signature Title
--------- -----
/s/ Thomas J. Fetter President (Chief Executive Officer)
----------------------------
Thomas J. Fetter
/s/ James L. O'Connor Treasurer (Principal Financial and
---------------------------- Accounting Officer)
James L. O'Connor
Jessica M. Bibliowicz* Trustee
----------------------------
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, III
Norton H. Reamer* Trustee
----------------------------
Norton H. Reamer
Lynn A. Stout* Trustee
----------------------------
Lynn A. Stout
Jack L. Treynor* Trustee
----------------------------
Jack L. Treynor
*By: /s/ Alan R. Dynner
------------------------------------
Alan R. Dynner (As attorney-in-fact)
C-6
<PAGE>
SIGNATURES
Arizona Municipals Portfolio has duly caused this Amendment to the
Registration Statement on Form N-1A of Eaton Vance Municipals Trust (File No.
33-572) to be signed on its behalf by the undersigned, thereunto duly authorized
in the City of Boston and the Commonwealth of Massachusetts on November 24,
2000.
ARIZONA MUNICIPALS PORTFOLIO
By: /s/ THOMAS J. FETTER
------------------------------------
Thomas J. Fetter, President
This Amendment to the Registration Statement on Form N-1A of Eaton Vance
Municipals Trust (File No. 33-572) has been signed below by the following
persons in their capacities on November 24, 2000.
Signature Title
--------- -----
/s/ Thomas J. Fetter President (Chief Executive Officer)
----------------------------
Thomas J. Fetter
/s/ James L. O'Connor Treasurer (Principal Financial and
---------------------------- Accounting Officer)
James L. O'Connor
Jessica M. Bibliowicz* Trustee
----------------------------
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, III
Norton H. Reamer* Trustee
----------------------------
Norton H. Reamer
Lynn A. Stout* Trustee
----------------------------
Lynn A. Stout
Jack L. Treynor* Trustee
----------------------------
Jack L. Treynor
*By: /s/ Alan R. Dynner
------------------------------------
Alan R. Dynner (As attorney-in-fact)
C-7
<PAGE>
SIGNATURES
Colorado Municipals Portfolio has duly caused this Amendment to the
Registration Statement on Form N-1A of Eaton Vance Municipals Trust (File No.
33-572) to be signed on its behalf by the undersigned, thereunto duly authorized
in the City of Boston and the Commonwealth of Massachusetts on November 24,
2000.
COLORADO MUNICIPALS PORTFOLIO
By: /s/ THOMAS J. FETTER
----------------------------------
Thomas J. Fetter, President
This Amendment to the Registration Statement on Form N-1A of Eaton Vance
Municipals Trust (File No. 33-572) has been signed below by the following
persons in their capacities on November 24, 2000.
Signature Title
--------- -----
/s/ Thomas J. Fetter President (Chief Executive Officer)
----------------------------
Thomas J. Fetter
/s/ James L. O'Connor Treasurer (Principal Financial and
---------------------------- Accounting Officer)
James L. O'Connor
Jessica M. Bibliowicz* Trustee
----------------------------
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, III
Norton H. Reamer* Trustee
----------------------------
Norton H. Reamer
Lynn A. Stout* Trustee
----------------------------
Lynn A. Stout
Jack L. Treynor* Trustee
----------------------------
Jack L. Treynor
*By: /s/ Alan R. Dynner
------------------------------------
Alan R. Dynner (As attorney-in-fact)
C-8
<PAGE>
SIGNATURES
Connecticut Municipals Portfolio has duly caused this Amendment to the
Registration Statement on Form N-1A of Eaton Vance Municipals Trust (File No.
33-572) to be signed on its behalf by the undersigned, thereunto duly authorized
in the City of Boston and the Commonwealth of Massachusetts on November 24,
2000.
CONNECTICUT MUNICIPALS PORTFOLIO
By: /s/ THOMAS J. FETTER
------------------------------------
Thomas J. Fetter, President
This Amendment to the Registration Statement on Form N-1A of Eaton Vance
Municipals Trust (File No. 33-572) has been signed below by the following
persons in their capacities on November 24, 2000.
Signature Title
--------- -----
/s/ Thomas J. Fetter President (Chief Executive Officer)
----------------------------
Thomas J. Fetter
/s/ James L. O'Connor Treasurer (Principal Financial and
---------------------------- Accounting Officer)
James L. O'Connor
Jessica M. Bibliowicz* Trustee
----------------------------
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, III
Norton H. Reamer* Trustee
----------------------------
Norton H. Reamer
Lynn A. Stout* Trustee
----------------------------
Lynn A. Stout
Jack L. Treynor* Trustee
----------------------------
Jack L. Treynor
*By: /s/ Alan R. Dynner
------------------------------------
Alan R. Dynner (As attorney-in-fact)
C-9
<PAGE>
SIGNATURES
Michigan Municipals Portfolio has duly caused this Amendment to the
Registration Statement on Form N-1A of Eaton Vance Municipals Trust (File No.
33-572) to be signed on its behalf by the undersigned, thereunto duly authorized
in the City of Boston and the Commonwealth of Massachusetts on November 24,
2000.
MICHIGAN MUNICIPALS PORTFOLIO
By: /s/ THOMAS J. FETTER
-----------------------------------
Thomas J. Fetter, President
This Amendment to the Registration Statement on Form N-1A of Eaton Vance
Municipals Trust (File No. 33-572) has been signed below by the following
persons in their capacities on November 24, 2000.
Signature Title
--------- -----
/s/ Thomas J. Fetter President (Chief Executive Officer)
----------------------------
Thomas J. Fetter
/s/ James L. O'Connor Treasurer (Principal Financial and
---------------------------- Accounting Officer)
James L. O'Connor
Jessica M. Bibliowicz* Trustee
----------------------------
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, III
Norton H. Reamer* Trustee
----------------------------
Norton H. Reamer
Lynn A. Stout* Trustee
----------------------------
Lynn A. Stout
Jack L. Treynor* Trustee
----------------------------
Jack L. Treynor
*By: /s/ Alan R. Dynner
------------------------------------
Alan R. Dynner (As attorney-in-fact)
C-10
<PAGE>
SIGNATURES
Minnesota Municipals Portfolio has duly caused this Amendment to the
Registration Statement on Form N-1A of Eaton Vance Municipals Trust (File No.
33-572) to be signed on its behalf by the undersigned, thereunto duly authorized
in the City of Boston and the Commonwealth of Massachusetts on November 24,
2000.
MINNESOTA MUNICIPALS PORTFOLIO
By: /s/ THOMAS J. FETTER
-----------------------------------
Thomas J. Fetter, President
This Amendment to the Registration Statement on Form N-1A of Eaton Vance
Municipals Trust (File No. 33-572) has been signed below by the following
persons in their capacities on November 24, 2000.
Signature Title
--------- -----
/s/ Thomas J. Fetter President (Chief Executive Officer)
----------------------------
Thomas J. Fetter
/s/ James L. O'Connor Treasurer (Principal Financial and
---------------------------- Accounting Officer)
James L. O'Connor
Jessica M. Bibliowicz* Trustee
----------------------------
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, III
Norton H. Reamer* Trustee
----------------------------
Norton H. Reamer
Lynn A. Stout* Trustee
----------------------------
Lynn A. Stout
Jack L. Treynor* Trustee
----------------------------
Jack L. Treynor
*By: /s/ Alan R. Dynner
------------------------------------
Alan R. Dynner (As attorney-in-fact)
C-11
<PAGE>
SIGNATURES
New Jersey Municipals Portfolio has duly caused this Amendment to the
Registration Statement on Form N-1A of Eaton Vance Municipals Trust (File No.
33-572) to be signed on its behalf by the undersigned, thereunto duly authorized
in the City of Boston and the Commonwealth of Massachusetts on November 24,
2000.
NEW JERSEY MUNICIPALS PORTFOLIO
By: /s/ THOMAS J. FETTER
-----------------------------------
Thomas J. Fetter, President
This Amendment to the Registration Statement on Form N-1A of Eaton Vance
Municipals Trust (File No. 33-572) has been signed below by the following
persons in their capacities on November 24, 2000.
Signature Title
--------- -----
/s/ Thomas J. Fetter President (Chief Executive Officer)
----------------------------
Thomas J. Fetter
/s/ James L. O'Connor Treasurer (Principal Financial and
---------------------------- Accounting Officer)
James L. O'Connor
Jessica M. Bibliowicz* Trustee
----------------------------
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, III
Norton H. Reamer* Trustee
----------------------------
Norton H. Reamer
Lynn A. Stout* Trustee
----------------------------
Lynn A. Stout
Jack L. Treynor* Trustee
----------------------------
Jack L. Treynor
*By: /s/ Alan R. Dynner
------------------------------------
Alan R. Dynner (As attorney-in-fact)
C-12
<PAGE>
SIGNATURES
Pennsylvania Municipals Portfolio has duly caused this Amendment to the
Registration Statement on Form N-1A of Eaton Vance Municipals Trust (File No.
33-572) to be signed on its behalf by the undersigned, thereunto duly authorized
in the City of Boston and the Commonwealth of Massachusetts on November 24,
2000.
PENNSYLVANIA MUNICIPALS PORTFOLIO
By: /s/ THOMAS J. FETTER
------------------------------------
Thomas J. Fetter, President
This Amendment to the Registration Statement on Form N-1A of Eaton Vance
Municipals Trust (File No. 33-572) has been signed below by the following
persons in their capacities on November 24, 2000.
Signature Title
--------- -----
/s/ Thomas J. Fetter President (Chief Executive Officer)
----------------------------
Thomas J. Fetter
/s/ James L. O'Connor Treasurer (Principal Financial and
---------------------------- Accounting Officer)
James L. O'Connor
Jessica M. Bibliowicz* Trustee
----------------------------
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, III
Norton H. Reamer* Trustee
----------------------------
Norton H. Reamer
Lynn A. Stout* Trustee
----------------------------
Lynn A. Stout
Jack L. Treynor* Trustee
----------------------------
Jack L. Treynor
*By: /s/ Alan R. Dynner
------------------------------------
Alan R. Dynner (As attorney-in-fact)
C-13
<PAGE>
SIGNATURES
Texas Municipals Portfolio has duly caused this Amendment to the
Registration Statement on Form N-1A of Eaton Vance Municipals Trust (File No.
33-572) to be signed on its behalf by the undersigned, thereunto duly authorized
in the City of Boston and the Commonwealth of Massachusetts on November 24,
2000.
TEXAS MUNICIPALS PORTFOLIO
By: /s/ THOMAS J. FETTER
-----------------------------------
Thomas J. Fetter, President
This Amendment to the Registration Statement on Form N-1A of Eaton Vance
Municipals Trust (File No. 33-572) has been signed below by the following
persons in their capacities on November 24, 2000.
Signature Title
--------- -----
/s/ Thomas J. Fetter President (Chief Executive Officer)
----------------------------
Thomas J. Fetter
/s/ James L. O'Connor Treasurer (Principal Financial and
---------------------------- Accounting Officer)
James L. O'Connor
Jessica M. Bibliowicz* Trustee
----------------------------
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, III
Norton H. Reamer* Trustee
----------------------------
Norton H. Reamer
Lynn A. Stout* Trustee
----------------------------
Lynn A. Stout
Jack L. Treynor* Trustee
----------------------------
Jack L. Treynor
*By: /s/ Alan R. Dynner
------------------------------------
Alan R. Dynner (As attorney-in-fact)
C-14
<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
----------- -----------
(i)(2) Consent of Counsel dated November 24, 2000
(j) Consent of Independent Auditors for Eaton Vance Arizona
Municipals Fund, Eaton Vance Colorado Municipals Fund, Eaton
Vance Connecticut Municipals Fund, Eaton Vance Michigan
Municipals Fund, Eaton Vance Minnesota Municipals Fund, Eaton
Vance New Jersey Municipals Fund, Eaton Vance Pennsylvania
Municipals Fund, and Eaton Vance Texas Municipals Fund.
C-15
