<PAGE>
EV TRADITIONAL CALIFORNIA MUNICIPALS FUND
EV TRADITIONAL FLORIDA TAX FREE FUND
EV TRADITIONAL NATIONAL MUNICIPALS FUND
EV TRADITIONAL NEW YORK TAX FREE FUND
SUPPLEMENT TO PROSPECTUSES DATED NOVEMBER 25, 1994
EATON VANCE INCOME FUND OF BOSTON
SUPPLEMENT TO PROSPECTUS DATED FEBRUARY 1, 1995
THE FOLLOWING SENTENCE IS ADDED TO "HOW TO BUY FUND SHARES" IN THE EV
TRADITIONAL CALIFORNIA MUNICIPALS FUND, EV TRADITIONAL FLORIDA TAX FREE FUND, EV
TRADITIONAL NATIONAL MUNICIPALS FUND, AND EV TRADITIONAL NEW YORK TAX FREE FUND
PROSPECTUSES:
Fund shares may be sold at net asset value where the amount invested
represents redemption proceeds from a mutual fund unaffiliated with
Eaton Vance, if the redemption occurred no more than 60 days prior to
the purchase of Fund shares and the redeemed shares were subject to a
sales charge.
IN ADDITION, THE FOLLOWING CHANGES (1-5) APPLY TO FUND SHARES PURCHASED ON
OR AFTER MARCH 27, 1995:
1. THE SHAREHOLDER TRANSACTION EXPENSES TABLE UNDER "SHAREHOLDER AND FUND
EXPENSES" IS REPLACED BY THE FOLLOWING TABLE:
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) 3.75%
Sales Charges Imposed on Reinvested Distributions None
Redemption Fees None
Fees to Exchange Shares None
Contingent Deferred Sales Charges Imposed on Redemptions None
Based on the Shareholder Transaction Expenses shown above and on the
total operating expenses shown in the relevant Prospectus, an investor would
pay expenses $10 less than the expenses for one year and three years shown
in the Example under "Shareholder and Fund Expenses".
2. THE FIRST PARAGRAPH UNDER "THE EATON VANCE EXCHANGE PRIVILEGE" IS
REPLACED BY THE FOLLOWING PARAGRAPH:
Shares of the Fund may currently be exchanged for shares of any of
the following funds: Eaton Vance Cash Management Fund, Eaton Vance
Income Fund of Boston, Eaton Vance Municipal Bond Fund L.P., Eaton Vance
Tax Free Reserves and any fund in the Eaton Vance Traditional Group of
Funds on the basis of the net asset value per share of each fund at the
time of the exchange (plus, in the case of an exchange made within six
months of the date of purchase, an amount equal to the difference, if
any, between the sales charge previously paid on the shares being
exchanged and the sales charge payable on the shares being acquired).
Such exchange offers are available only in states where shares of the
fund being acquired may be legally sold.
<PAGE>
3. THE SALES CHARGE AND DEALER COMMISSION TABLES UNDER "HOW TO BUY FUND
SHARES" ARE REPLACED BY THE FOLLOWING TABLE:
The current sales charges and dealer commissions are:
<TABLE>
<CAPTION>
SALES CHARGE SALES CHARGE DEALER COMMISSION
AS PERCENTAGE OF AS PERCENTAGE OF AS PERCENTAGE OF
AMOUNT OF PURCHASE OFFERING PRICE AMOUNT INVESTED OFFERING PRICE
<S> <C> <C> <C>
Less than $50,000 3.75% 3.90% 4.00%
$50,000 but less than $100,000 2.75% 2.83% 3.00%
$100,000 but less than $250,000 2.25% 2.30% 2.50%
$250,000 but less than $500,000 1.75% 1.78% 2.00%
$500,000 but less than
$1,000,000 1.25% 1.27% 1.50%
$1,000,000 or more 0.00%<F1> 0.00%<F1> 0.25%<F2>
<FN>
<F1> Fund shares purchased before March 27, 1995, at net asset value with no
initial sales charge by virtue of the purchase having been in the amount of
$1 million or more may be subject to a contingent deferred sales charge
upon redemption.
<F2> The Principal Underwriter may pay Authorized Firms that initiate and are
responsible for purchases of $1 million or more a commission at an annual
rate of 0.25% of average daily net assets paid quarterly for one year.
</TABLE>
4. IN THE DESCRIPTIONS OF THE STATEMENT OF INTENTION AND THE RIGHT OF
ACCUMULATION UNDER "EATON VANCE SHAREHOLDER SERVICES," THE $100,000 AMOUNTS ARE
REPLACED BY $50,000 AMOUNTS.
5. REFERENCES TO A CONTINGENT DEFERRED SALES CHARGE OR "CDSC" DO NOT APPLY
TO FUND SHARES PURCHASED ON OR AFTER MARCH 27, 1995.
March 27, 1995 T-11/94PS
<PAGE>
EV TRADITIONAL CALIFORNIA MUNICIPALS FUND
EV TRADITIONAL CALIFORNIA MUNICIPALS FUND (THE "FUND") IS A MUTUAL FUND
SEEKING TO PROVIDE CURRENT INCOME EXEMPT FROM BOTH THE REGULAR FEDERAL INCOME
TAX AND THE CALIFORNIA PERSONAL INCOME TAX. THE FUND INVESTS ITS ASSETS IN
CALIFORNIA TAX FREE PORTFOLIO (THE "PORTFOLIO"), A DIVERSIFIED OPEN-END
INVESTMENT COMPANY HAVING THE SAME INVESTMENT OBJECTIVE AS THE FUND, RATHER THAN
BY DIRECTLY INVESTING IN AND MANAGING ITS OWN PORTFOLIO OF SECURITIES AS WITH
HISTORICALLY STRUCTURED MUTUAL FUNDS. THE FUND IS A SERIES OF EATON VANCE
INVESTMENT TRUST (THE "TRUST").
Shares of the Fund are not deposits or obligations of, or guaranteed or
endorsed by, any bank or other insured depository institution, and are not
federally insured by the Federal Deposit Insurance Corporation, the Federal
Reserve Board or any other government agency. Shares of the Fund involve
investment risks, including fluctuations in value and the possible loss of some
or all of the principal investment.
This Prospectus is designed to provide you with information you should know
before investing. Please retain this document for future reference. A Statement
of Additional Information dated November 25, 1994 for the Fund, as supplemented
from time to time, has been filed with the Securities and Exchange Commission
and is incorporated herein by reference. This Statement of Additional
Information is available without charge from the Fund's Principal Underwriter,
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110 (telephone
(800) 225-6265). The Portfolio's investment adviser is Boston Management and
Research (the "Investment Adviser"), a wholly-owned subsidiary of Eaton Vance
Management, and Eaton Vance Management is the administrator (the
"Administrator") of the Fund. The offices of the Investment Adviser and the
Administrator are located at 24 Federal Street, Boston, MA 02110.
- -------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROS- PECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C> <S> <C>
Shareholder and Fund Expenses ................... 2 How to Redeem Fund Shares ................... 18
The Fund's Financial Highlights ................. 3 Reports to Shareholders ..................... 20
The Fund's Investment Objective ................. 4 The Lifetime Investing Account/Distribution
How the Fund and the Portfolio Invest their Options ................................... 20
Assets ........................................ 4 The Eaton Vance Exchange Privilege .......... 21
Organization of the Fund and the Portfolio ...... 11 Eaton Vance Shareholder Services ............ 22
Management of the Fund and the Portfolio ........ 14 Distributions and Taxes ..................... 23
Service Plan .................................... 15 Performance Information ..................... 24
Valuing Fund Shares ............................. 16 Statement of Intention and Escrow Agreement . 25
How to Buy Fund Shares .......................... 16
</TABLE>
- ------------------------------------------------------------------------------
PROSPECTUS DATED NOVEMBER 25, 1994
<PAGE>
SHAREHOLDER AND FUND EXPENSES (1)
- ------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases (as
a percentage of offering price) 4.75%
Sales Charges Imposed on Reinvested Distributions None
Redemption Fees None
Fees to Exchange Shares None
Contingent Deferred Sales Charges (on purchases of $ 1
million or more) Imposed on Redemptions During the First
Eighteen Months (as a percentage of redemption proceeds
exclusive of all reinvestments and capital appreciation in
the account)(2) 1.00%
ANNUAL FUND AND ALLOCATED PORTFOLIO OPERATING EXPENSES
(as a percentage of average net assets)
Investment Adviser Fee(3) 0.50%
Rule 12b-1 Fees (Service Plan) 0.05
Other Expenses 0.20
----
Total Operating Expenses 0.75%
====
EXAMPLE 1 YEAR 3 YEARS
------ -------
An investor would pay the following expenses (including
initial maximum sales charge) on a $1,000 investment,
assuming (a) 5% annual return and (b) redemption at the end
of each time period:
$55 $70
Notes:
(1) The purpose of the above table and Example is to summarize the aggregate
expenses of the Fund and the Portfolio and to assist investors in
understanding the various costs and expenses that investors in the Fund will
bear directly or indirectly. The Trustees of the Trust believe that over
time the aggregate per share expenses of the Fund and the Portfolio should
be approximately equal to the per share expenses which the Fund would incur
if the Trust retained the services of an investment adviser and the assets
of the Fund were invested directly in the type of securities being held by
the Portfolio. Since the Fund does not yet have a sufficient operating
history, the percentages indicated as Annual Fund and Allocated Portfolio
Operating Expenses and the amounts included in the Example are based on the
Fund's and Portfolio's projected fees and expenses for the current fiscal
year ending September 30, 1995. The table and Example should not be
considered a representation of future expenses since future expenses may be
greater or less than those shown. For further information regarding the
expenses of both the Fund and the Portfolio see "The Fund's Financial
Highlights," "Organization of the Fund and the Portfolio," "Management of
the Fund and the Portfolio", "Service Plan" and "How to Redeem Fund Shares."
Other investment companies with different distribution arrangements and fees
are investing in the Portfolio and additional such companies may do so in
the future. See "Organization of the Fund and the Portfolio."
(2) If shares of the Fund are purchased at net asset value with no initial sales
charge by virtue of the purchase having been in the amount of $1 million or
more and are redeemed within 18 months after the end of the calendar month
in which the purchase was made, a contingent deferred sales charge of 1%
will be imposed on such redemption. See "How to Buy Fund Shares," "How to
Redeem Fund Shares" and "Eaton Vance Shareholder Services."
(3) The Portfolio's monthly advisory fee has two components, a fee based on
daily net assets and a fee based on daily gross income, as set forth in the
fee schedule on page 14.
<PAGE>
THE FUND'S FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------
The following information should be read in conjunction with the financial
statements included in the Statement of Additional Information, all of which has
been so included in reliance upon reports of Deloitte & Touche LLP, independent
certified public accountants, as experts in accounting and auditing. Further
information regarding the performance of the Fund will be contained in the
Fund's annual report to shareholders which may be obtained without charge by
contacting the Fund's Principal Underwriter, Eaton Vance Distributors, Inc.
- ------------------------------------------------------------------------------
FOR THE PERIOD FROM THE START OF BUSINESS, MAY 27, 1994, TO SEPTEMBER 30, 1994
NET ASSET VALUE, beginning of period ........................... $ 10.000
---------
Income from operations:
Net investment income ...................................... $ 0.209
Net realized and unrealized loss on investments ............ (0.158)++
---------
Total income from operations ............................. $ 0.051
---------
LESS DISTRIBUTIONS:
From net investment income ................................. $ (0.209)
In excess of net investment income ......................... (0.002)
---------
Total distributions ...................................... $ (0.211)
---------
NET ASSET VALUE, end of period ................................. $ 9.84
=========
TOTAL RETURN(2) ................................................ 0.50%
RATIOS/SUPPLEMENTAL DATA*:
Net assets, end of period (000 omitted) .................... $ 3,101
Ratio of net expenses to average net assets(1) ............. 0.54%+
Ratio of net investment income to average net assets ....... 5.60%+
* For the period from the start of business, May 27, 1994, to September 30,
1994, the operating expenses of the Fund reflect an allocation of expenses to
the Administrator. Had such action not been taken, net investment income per
share and the ratios would have been as follows:
NET INVESTMENT INCOME PER SHARE ................................ $ 0.158
=========
RATIOS (As a percentage of average net assets):
Expenses(1)................................................. 1.92%+
Net investment income ...................................... 4.22%+
+ Computed on an annualized basis.
++ The per share amount is not in accord with the net realized and unrealized
gians and losses for the period because of the timing of sales of Fund
shares and the amount of per share realized and unrealized gains and losses
at such time.
(1) Includes the Fund's share of its California Tax Free Portfolio's allocated
expenses.
(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. Dividends and distributions, if any, are assumed to be reinvested
at the net asset value on the payable date.
<PAGE>
THE FUND'S INVESTMENT OBJECTIVE
- ------------------------------------------------------------------------------
The Fund's investment objective is to provide current income exempt from both
the regular Federal income tax and the California personal income tax. The Fund
seeks to meet its investment objective by investing its assets in the California
Tax Free Portfolio (the "Portfolio"), a separate registered investment company
which invests primarily in a diversified portfolio of California obligations (as
defined below) which are rated at least investment grade by a major rating
agency or, if unrated, determined to be of at least investment grade quality by
the Investment Adviser.
HOW THE FUND AND THE PORTFOLIO INVEST THEIR ASSETS
- ------------------------------------------------------------------------------
The Fund seeks to achieve its investment objective by investing either directly
or indirectly through another open-end management investment company primarily
(i.e., at least 80% of its assets during periods of normal market conditions) in
debt obligations issued by or on behalf of the State of California and its
political subdivisions, the interest on which is exempt from both the regular
Federal income tax and the California personal income tax ("California
obligations"). The foregoing policy is a fundamental policy which may not be
changed unless authorized by a vote of the shareholders of the Fund. The
Portfolio seeks to achieve its investment objective by investing primarily
(i.e., at least 80% of its assets during periods of normal market conditions) in
debt obligations issued by or on behalf of the State of California and its
political subdivisions, the interest on which is exempt from regular Federal
income tax, is not a tax preference item under the Federal alternative minimum
tax and is exempt from the California personal income tax. The foregoing policy
is a fundamental policy of the Portfolio which may not be changed unless
authorized by a vote of the investors in the Portfolio.
At least 75% of the Portfolio's net assets will normally be invested in
obligations rated at least investment grade (which are those rated Baa or higher
by Moody's Investors Service, Inc. ("Moody's") or BBB or higher by either
Standard & Poor's Ratings Group ("S&P") or Fitch Investors Service, Inc.
("Fitch")) or, if unrated, determined by the Investment Adviser to be of at
least investment grade quality. California obligations rated Baa or BBB may have
speculative characteristics. Also, changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments than in the case of higher rated obligations. The
Portfolio may invest up to 25% of its net assets in California obligations rated
below investment grade (but not lower than B by Moody's, S&P or Fitch) and
unrated California obligations considered to be of comparable quality by the
Investment Adviser. Securities rated below BBB or Baa are commonly known as
"junk bonds". See "Credit Quality -- Risks." The Portfolio may retain an
obligation whose rating drops below B after its acquisition if such retention is
considered desirable by the Investment Adviser; provided, however, that the
Portfolio's holdings of obligations rated below investment grade will not exceed
35% of its net assets. For a description of municipal obligation ratings, see
the Fund's Statement of Additional Information.
CALIFORNIA OBLIGATIONS. California obligations include bonds, notes and
commercial paper issued by a municipality for a wide variety of both public and
private purposes. Public purpose municipal bonds include general obligation and
revenue bonds. General obligation bonds are backed by the taxing power of the
issuing municipality. Revenue bonds are backed by the revenues of a project or
facility. Municipal notes include bond anticipation, tax anticipation, revenue
anticipation and construction loan notes. Bond, tax and revenue anticipation
notes are short-term obligations that will be retired with the proceeds of an
anticipated bond issue, tax revenue or facility revenue, respectively.
Construction loan notes are short-term obligations that will be retired with the
proceeds of long-term mortgage financing. Under normal market conditions, the
Portfolio will invest at least 65% of its total assets in obligations issued by
California or its political subdivisions.
Interest on certain "private activity bonds" issued after August 7, 1986 is
exempt from the regular Federal income tax applicable to individuals (and
corporations), but such interest (including a distribution by the Fund derived
from such interest) is treated as a tax preference item which could subject the
recipient to or increase his liability for the Federal alternative minimum tax;
as at September 30, 1994, the Portfolio had 12.7% of its net assets invested in
such private activity bonds. The Portfolio may not invest more than 20% of its
assets in these obligations and obligations that pay interest subject to regular
Federal income tax and/or California personal income taxes. For corporate
shareholders, the Fund's distributions derived from interest on all municipal
obligations (whenever issued) is included in "adjusted current earnings" for
purposes of the Federal alternative minimum tax applicable to corporations.
The Omnibus Budget Reconciliation Act of 1993 changed the federal income tax
treatment of market discount on long-term tax-exempt municipal obligations
(i.e., obligations with a term of more than one year) purchased in the secondary
market after April 30, 1993 from taxable capital gain to taxable ordinary
income. A long-term debt obligation is generally treated as acquired at a market
discount if the secondary market purchase price is 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. The Portfolio may
acquire municipal obligations at a market discount from time to time, and the
Fund's distributions will (when so required) include taxable income reflecting
the realization of such accrued discount by the Portfolio and its allocation to
the Fund.
MATURITY. It is expected that the Portfolio will normally contain substantial
amounts of long-term California obligations with maturities of ten years or more
because such long-term obligations generally produce higher income than
short-term obligations. Such long-term obligations are more susceptible to
market fluctuations resulting from changes in interest rates than shorter term
obligations. Since the Portfolio's objective is to provide current income, the
Portfolio will invest in California obligations with an emphasis on income and
not on stability of the Portfolio's net asset value. The average maturity of the
Portfolio's holdings may vary (generally between 15 and 30 years) depending on
anticipated market conditions.
Although the Portfolio will normally attempt to invest substantially all of
its assets in California obligations, the Portfolio may, under normal market
conditions, invest up to 20% of its assets in short-term obligations the
interest on which is subject to regular Federal income tax, Federal alternative
minimum tax and/or California personal income taxes. Such short-term taxable
obligations may include, but are not limited to, certificates of deposit,
commercial paper, short-term notes and obligations issued or guaranteed by the
U.S. Government or any of its agencies or instrumentalities. During periods of
adverse market conditions, the Portfolio may temporarily invest more than 20% of
its assets in such short-term taxable obligations, which will be rated no lower
than investment grade.
DIVERSIFIED STATUS. The Portfolio is a "diversified" investment company under
the Investment Company Act of 1940. This means that with respect to 75% of its
total assets (1) the 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)
the Portfolio may not own more than 10% of the outstanding voting securities of
any one issuer. Since California obligations are not voting securities, there is
no limit on the percentage of a single issuer's obligations which the Portfolio
may own so long as it does not invest more than 5% of its total assets in the
securities of that issuer. Consequently, the Portfolio may invest in a greater
percentage of the outstanding securities of a single issuer than would an
investment company which invests in voting securities. As for the remaining 25%
of the Portfolio's total assets not subject to the limitations described above,
there is no diversification requirement with respect to these assets, so that
all of such assets may be invested in the securities of any one issuer. Because
of the relatively small number of issues of California obligations, the
Portfolio is likely to invest a greater percentage of its assets in the
securities of a single issuer than is an investment company which invests in a
broad range of municipal obligations. To the extent that the Portfolio is less
diversified than that of other investment companies, it may be subject to an
increased risk of loss if the issuer is unable to make interest or principal
payments or if the market value of such securities declines.
CONCENTRATION. The Portfolio may invest 25% or more of its assets in California
obligations of the same type, including without limitation the following:
general obligations of the State of California and its political subdivisions,
lease rental obligations of State and local authorities, obligations of State
and local housing finance authorities, municipal utilities systems or public
housing authorities; obligations for hospitals or life care facilities; or
industrial development or pollution control bonds issued for electric utility
systems, steel companies, paper companies or other purposes. This may make the
Portfolio more susceptible to adverse economic, political, or regulatory
occurrences affecting a particular category of issuers. For example, health
care-related issuers are susceptible to medicaid reimbursement policies and
national or state health care legislation. As the Portfolio's concentration in
the securities of a particular category of issuer increases, the potential for
fluctuation in the value of the Fund's shares also increases.
CONCENTRATION IN CALIFORNIA ISSUES -- RISKS. Because the Portfolio will
ordinarily invest 80% or more of its assets in California obligations, it is
more susceptible to factors affecting California issuers than is a comparable
municipal bond fund not concentrated in the obligations of issuers located in a
single state.
California has experienced severe economic and fiscal stress over the past
four years. The recession that began in the U.S. in 1990 marked the start of the
deepest recession in California since the Great Depression. Between 1990 and
1993, California lost 3% of its total employment base and nearly 16% of higher
paying manufacturing jobs. This was during a period when population increased
6%. The unemployment rate in California was 9.1% in 1992 and 9.2% in 1993, well
above the U.S. rates of 7.4% and 6.8% for the same periods, respectively.
California's economic weakness has continued into 1994; unemployment was 8.3% in
May, compared to a U.S. rate of 6%.
The weak economy has seriously undermined the government's ability to
accurately estimate tax revenues and has increased social service expenditures
for recession-related welfare case loads. In addition, the continued influx of
illegal immigrants has strained the State's welfare and health care systems. The
result of these various problems is a $2 billion accumulated budget deficit and
a heavy reliance on short-term borrowing for day-to-day operations. Short-term
borrowing increased from 7.8% of general fund receipts in 1990 to 12.4% in 1992
to a projected 16% in 1995. In July, 1994, the State issued $7 billion in
short-term debt, an unprecedented amount for a state.
The $2 billion budget deficit built up during the 1991 and 1992 fiscal years
was not adequately addressed during the 1993 or 1994 fiscal years, despite a
Deficit Retirement and Reduction Plan put in place in June, 1993. The budget for
fiscal year 1995 (which commenced on July 1, 1994) includes general fund
expenditures of $40.9 billion, a 4.2% increase over 1993-94, and general fund
revenues of $41.9 billion, a 5.2% increase. A revised Deficit Retirement and
Reduction Plan was adopted which anticipated the elimination of the deficit by
April, 1996. Key to this revised plan is the assumed receipt of $2.8 billion in
Federal aid from the Federal government to offset the mounting costs associated
with illegal immigrants. As this money is in no way assured, the budget includes
a "trigger" mechanism that would require automatic spending cuts should actual
cash flow deviate significantly from projections. There can be no assurances
that bonds, some of which may be held by the Portfolio, issued by California
entities would not be adversely affected should this "trigger" be used.
On January 17, 1994, a major earthquake struck the Los Angeles area causing
significant property damage. Preliminary estimates of total property damage
approximate $15 billion. The Federal government has approved $9.5 billion for
earthquake relief. The Governor has estimated that the State will have to pay
approximately $1.9 billion for relief not otherwise covered by the Federal aid.
The Governor had proposed to cover $1.05 billion of relief costs from a general
obligation bond issue, but that proposal was rejected by California voters in
June 1994. The Governor subsequently announced that funds earmarked for other
projects would be used for earthquake relief.
California voters have approved a series of amendments to the California
State constitution which have imposed certain limits on the taxing and spending
powers of the State and local governments. While the State legislature has, in
the past, enacted legislation designed to assist California issuers in meeting
their debt service obligations, other laws limiting the State's authority to
provide financial assistance to localities have also been enacted. Because of
the uncertain impact of such constitutional amendments and statutes, the
possible inconsistencies in their respective terms and the impossibility of
predicting the level of future appropriations and applicability of related
statutes to such questions, it is not currently possible to assess the impact of
such legislation and policies on the ability of California issuers to pay
interest or repay principal on their obligations.
As of the date of this Prospectus, as a result of the significant economic
and fiscal problems described above, the State's debt has been downgraded by all
three rating agencies from Aa to A by Moody's, from A+ to A by S&P, and from AA
to A by Fitch. There can be no assurance that the economic conditions on which
these ratings are based will continue or that particular bond issues may not be
adversely affected by changes in economic, political or other conditions.
California obligations also include obligations of the governments of Puerto
Rico, the U.S. Virgin Islands and Guam to the extent that these obligations are
exempt from California personal income taxes. The Portfolio will not invest more
than 5% of its net assets in the obligations of each of the U.S. Virgin Islands
and Guam, and under normal circumstances the Portfolio will not invest in the
aggregate more than 20% of its assets in obligations of Puerto Rico, the U.S.
Virgin Islands and Guam. Accordingly, the Portfolio may be adversely affected by
local political and economic conditions and developments within Puerto Rico
affecting the issuers of such obligations. Currently, S&P rates Puerto Rico
general obligation debt A, while Moody's rates it Baa1; these ratings have been
in place since 1956 and 1976, respectively. The reliance on nonrecurring
revenues and economic weakness led S&P to change their outlook from stable to
negative. The economy of Puerto Rico is dominated by the manufacturing and
service sectors. Although the economy of Puerto Rico expanded significantly from
fiscal 1984 through fiscal 1990, the rate of this expansion slowed during fiscal
1992, 1993 and 1994. Growth in fiscal 1994 will depend on several factors,
including the state of the U.S. economy and the relative stability in the price
of oil, the exchange rate of the U.S. dollar and the cost of borrowing. Although
the Puerto Rico unemployment rate has declined substantially since 1985, the
seasonally adjusted unemployment rate for August, 1994 was approximately 14.5%.
The North American Free Trade Agreement (NAFTA), which became effective January
1, 1994, could lead to the loss of Puerto Rico's lower salaried or labor
intensive jobs to Mexico.
MUNICIPAL LEASES. The Portfolio may invest in municipal leases and
participations therein, which arrangements frequently involve special risks.
Municipal leases are obligations in the form of a lease or installment purchase
arrangement which is entered into by a state or local government to acquire
equipment and facilities. Interest income from such obligations is generally
exempt from local and state taxes in the state of issuance. "Participations" in
such leases are undivided interests in a portion of the total obligation.
Participations entitle their holders to receive a pro rata share of all payments
under the lease. A trustee is usually responsible for administering the terms of
the participation and enforcing the participants' rights in the underlying
lease. Leases and installment purchase or conditional sale contracts (which
normally provide for title to the leased asset to pass eventually to the
governmental issuer) have evolved as a means for governmental issuers to acquire
property and equipment without meeting the constitutional and statutory
requirements for the issuance of debt. State debt-issuance limitations are
deemed to be inapplicable to these arrangements because of the inclusion in many
leases or contracts of "non-appropriation" clauses that provide that the
governmental issuer has no obligation to make future payments under the lease or
contract unless money is appropriated for such purpose by the appropriate
legislative body on a yearly or other periodic basis. Such arrangements are,
therefore, subject to the risk that the governmental issuer will not appropriate
funds for lease payments.
Certain municipal lease obligations owned by the Portfolio may be deemed
illiquid for purposes of the Portfolio's 15% limitation on investing 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 the Portfolio. In
the event the Portfolio acquires an unrated municipal lease obligation, the
Investment Adviser will be responsible for determining the credit quality of
such obligation on an ongoing basis, including an assessment of the likelihood
that the lease may or may not be cancelled.
- --------------------------------------------------------------------------------
THE FUND AND THE PORTFOLIO HAVE ADOPTED CERTAIN FUNDAMENTAL INVESTMENT
RESTRICTIONS WHICH ARE ENUMERATED IN DETAIL IN THE STATEMENT OF ADDITIONAL
INFORMATION AND WHICH MAY NOT BE CHANGED UNLESS AUTHORIZED BY A SHAREHOLDER
VOTE AND INVESTOR VOTE, RESPECTIVELY. EXCEPT FOR SUCH ENUMERATED RESTRICTIONS
AND AS OTHERWISE INDICATED IN THIS PROSPECTUS THE INVESTMENT OBJECTIVE AND
POLICIES OF THE FUND AND THE PORTFOLIO ARE NOT FUNDAMENTAL POLICIES AND
ACCORDINGLY MAY BE CHANGED BY THE TRUSTEES OF THE TRUST AND THE PORTFOLIO
WITHOUT OBTAINING THE APPROVAL OF THE FUND'S SHAREHOLDERS OR OF THE INVESTORS
IN THE PORTFOLIO, AS THE CASE MAY BE. IF ANY CHANGES WERE MADE IN THE FUND'S
INVESTMENT OBJECTIVE, THE FUND MIGHT HAVE INVESTMENT OBJECTIVES DIFFERENT FROM
THE OBJECTIVE WHICH AN INVESTOR CONSIDERED APPROPRIATE AT THE TIME THE
INVESTOR BECAME A SHAREHOLDER IN THE FUND.
- --------------------------------------------------------------------------------
ZERO COUPON BONDS. The Portfolio may invest in zero coupon bonds, which are debt
obligations that do not require the periodic payment of interest and are issued
at a significant discount from their face value. Such bonds experience greater
volatility in market value due to changes in interest rates than debt
obligations that provide for regular payments of interest. The Portfolio will
accrue income on such bonds for tax and accounting purposes in accordance with
applicable law, the Fund's proportionate share of which income is distributable
to shareholders. Because no cash is received at the time such income is accrued,
the Portfolio may be required to liquidate other portfolio securities to
generate cash that the Fund may withdraw from the Portfolio to satisfy the
Fund's distribution obligations.
INVERSE FLOATERS. The Portfolio may invest in various types of derivative
municipal securities whose interest rates bear an inverse relationship to the
interest rate on another security or the value of an index ("inverse floaters").
Derivatives are securities that provide for payments based on or derived from
the performance of an underlying asset, index or other economic benchmark. An
investment in derivative instruments, such as inverse floaters, may involve
greater risk than an investment in a fixed rate bond. Because changes in the
interest rate on the other security or index inversely affect the residual
interest paid on the inverse floater, the value of an inverse floater is
generally more volatile than that of a fixed rate bond. Inverse floaters have
interest rate adjustment formulas which generally reduce or, in the extreme,
eliminate the interest paid to the Portfolio when short-term interest rates
rise, and increase the interest paid to the Portfolio when short-term interest
rates fall. Inverse floaters have varying degrees of liquidity, and the market
for these securities is new and relatively volatile. These securities tend to
underperform the market for fixed rate bonds in a rising interest rate
environment, but tend to outperform the market for fixed rate bonds when
interest rates decline. Shifts in long-term interest rates may alter this
tendency, however. Although volatile, inverse floaters typically offer the
potential for yields exceeding the yields available on fixed rate bonds with
comparable credit quality and maturity. These securities usually permit the
investor to convert the floating rate to a fixed rate (normally adjusted
downward), and this optional conversion feature may provide a partial hedge
against rising rates if exercised at an opportune time. Inverse floaters are
leveraged because they provide two or more dollars of bond market exposure for
every dollar invested.
CREDIT QUALITY -- RISKS. Many California obligations offering the current income
sought by the Portfolio are in the lowest investment grade category (Baa or
BBB), lower categories or may be unrated. As indicated above, the Portfolio may
invest in municipal obligations rated below investment grade (but not lower than
B by Moody's, S&P or Fitch) and comparable unrated obligations. The lowest
investment grade, lower rated and comparable unrated municipal obligations in
which the Portfolio may invest will have speculative characteristics in varying
degrees. While such obligations may have some quality and protective
characteristics, these characteristics can be expected to be offset or
outweighed by uncertainties or major risk exposures to adverse conditions. Lower
rated and comparable unrated municipal obligations are subject to the risk of an
issuer's inability to meet principal and interest payments on the obligations
(credit risk) and may also be subject to price volatility due to such factors as
interest rate sensitivity, market perception of the creditworthiness of the
issuer and general market liquidity (market risk). Lower rated or unrated
municipal obligations are also more likely to react to real or perceived
developments affecting market and credit risk than are more highly rated
obligations, which react primarily to movements in the general level of interest
rates. The Portfolio may retain defaulted obligations in its portfolio when such
retention is considered desirable by the Investment Adviser. In the case of
defaulted obligation, the Portfolio may incur additional expense seeking
recovery of its investment. For a description of municipal obligation ratings,
see the Statement of Additional Information
INSURED OBLIGATIONS. The Portfolio may purchase municipal bonds that are
additionally secured by insurance, bank credit agreements, or escrow accounts.
The credit quality of companies which provide such credit enhancements will
affect the value of those securities. Although the insurance feature reduces
certain financial risks, the premiums for insurance and the higher market price
paid for insured obligations may reduce the Fund's current yield. Insurance
generally will be obtained from insurers with a claims-paying ability rated Aaa
by Moody's or AAA by S&P or Fitch. The insurance does not guarantee the market
value of the insured obligations or the net asset value of the Fund's shares.
MARKET CONDITIONS. The management of the Portfolio believes that, in general,
the secondary market for California obligations (including issues which are
privately placed with the Portfolio) is less liquid than that for taxable debt
obligations or for large issues of municipal obligations that trade in a
national market. No established resale market exists for certain of the
California obligations in which the 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. These considerations may restrict the
availability of such obligations, may affect the choice of securities sold to
meet redemption requests and may limit the Portfolio's ability to sell or
dispose of such securities. Also, valuation of such obligations may be more
difficult.
NET ASSET VALUE FLUCTUATION. The net asset value of the Fund will change in
response to fluctuations in prevailing interest rates and changes in the value
of the securities held by the Portfolio. When interest rates decline, the value
of securities held by the Portfolio can be expected to rise. Conversely, when
interest rates rise, the value of existing portfolio security holdings can be
expected to decline. Therefore, an investment in shares of the Fund will not
constitute a complete investment program.
SHORT-TERM TRADING. The Portfolio may sell 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 the 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 California obligations or changes in
the investment objectives of investors. Such trading may be expected to increase
portfolio turnover rate and the expenses incurred in connection with such
trading. The Portfolio anticipates that its annual portfolio turnover rate will
generally not exceed 100% (excluding turnover of securities having a maturity of
one year or less).
WHEN-ISSUED SECURITIES. The Portfolio may purchase securities on a "when-
issued" basis, which means that payment and delivery occur on a future
settlement date. The price and yield of such securities are generally fixed on
the date of commitment to purchase. However, the market value of the securities
may fluctuate prior to delivery and upon delivery the securities may be worth
more or less than the Portfolio agreed to pay for them. The Portfolio will not
accrue income in respect of a when-issued security prior to its stated delivery
date. The Portfolio will maintain in a segregated account sufficient assets to
cover its outstanding purchase obligations.
SECURITIES LENDING. The Portfolio may seek to increase its income by lending
portfolio securities to broker-dealers or other institutional borrowers. Under
present regulatory policies of the Securities and Exchange Commission (the
"Commission"), such loans are required to be secured continuously by collateral
in cash, cash equivalents or U.S. Government securities held by the Portfolio's
custodian and maintained on a current basis at an amount at least equal to the
market value of the securities loaned, which will be marked to market daily.
Cash equivalents include short-term municipal obligations as well as taxable
certificates of deposit, commercial paper and other short-term money market
instruments. The Portfolio would have the right to call a loan and obtain the
securities loaned at any time on up to five business days' notice. During the
existence of a loan, the Portfolio will continue to receive the equivalent of
the interest paid by the issuer on the securities loaned and will also receive a
fee, or all or a portion of the interest on investment of the collateral, if
any. However, the Portfolio may pay lending fees to such borrowers. The
Portfolio would not have the right to vote any securities having voting rights
during the existence of the loan, but would call the loan in anticipation of an
important vote to be taken among holders of the securities or the giving or
withholding of their consent on a material matter affecting the investment. As
with other extensions of credit there are risks of delay in recovery or even
loss of rights in the securities loaned if the borrower of the securities fails
financially. However, the loans will be made only to organizations deemed by the
Portfolio's management to be of good standing and when, in the judgment of the
Portfolio's management, the consideration which can be earned from securities
loans of this type justifies the attendant risk. Distributions by the Fund of
any income realized by the Portfolio from securities loans will be taxable. If
the management of the Portfolio decides to make securities loans, it is intended
that the value of the securities loaned would not exceed 30% of the Portfolio's
total assets.
FUTURES AND OPTIONS TRANSACTIONS. To hedge against changes in interest rates,
the Portfolio may purchase and sell various kinds of futures contracts, and
purchase and write call and put options on futures contracts. The Portfolio may
also enter into closing purchase and sale transactions with respect to such
contracts and options. The futures contracts may be based on various debt
securities (such as U.S. Government securities), securities indices and other
financial instruments and indices. The Portfolio would engage in futures and
related options transactions for bona fide hedging or non-hedging purposes as
defined in regulations of the Commodity Futures Trading Commission. The
Portfolio will engage in such transactions for non-hedging purposes only in
order to enhance total return by using a futures position as a lower cost
substitute for a securities position that the Portfolio is otherwise authorized
to enter into.
The Portfolio may not purchase or sell futures contracts or purchase or sell
related options, except for closing purchase or sale transactions, if
immediately thereafter the sum of the amount of margin deposits on the
Portfolio's outstanding positions in futures and related options and the amount
of premiums paid for outstanding positions in options on futures would exceed 5%
of the market value of the Portfolio's net assets. There are no other percentage
limitations on the Portfolio's transactions on future contracts or options on
futures, except that at least 80% of the Portfolio's assets will be invested in
California obligations. These transactions involve brokerage costs, require
margin deposits and, in the case of futures contracts and options requiring the
Portfolio to purchase securities, require the Portfolio to segregate liquid high
grade debt securities in an amount equal to the underlying value of such
contracts and options. In addition, while transactions in futures contracts and
options on futures may reduce certain risks, such transactions themselves
involve (1) liquidity risk that contractual positions cannot be easily closed
out in the event of market changes, (2) correlation risk that changes in the
value of hedging positions may not match the market fluctuations intended to be
hedged (especially given that the only futures contracts currently available to
hedge California obligations are futures on various U.S. Government securities
and on municipal securities indices), (3) market risk that an incorrect
prediction by the Investment Adviser of interest rates may cause the Portfolio
to perform less well than if such positions had not been entered into, and (4)
skills different from those needed to select portfolio securities. Distributions
by the Fund from any net income or gains realized on the Portfolio's
transactions in futures and options on futures will be taxable.
ORGANIZATION OF THE FUND AND THE PORTFOLIO
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THE FUND IS A DIVERSIFIED SERIES OF EATON VANCE INVESTMENT TRUST (THE "TRUST"),
A BUSINESS TRUST ESTABLISHED UNDER MASSACHUSETTS LAW PURSUANT TO A DECLARATION
OF TRUST DATED OCTOBER 23, 1985, AS AMENDED. THE TRUST IS A MUTUAL FUND -- AN
OPEN-END MANAGEMENT INVESTMENT COMPANY. The Trustees of the Trust are
responsible for the overall management and supervision of its affairs. The Trust
may issue an unlimited number of shares of beneficial interest (no par value per
share) in one or more series and because the Trust can offer separate series
(such as the Fund) it is known as a "series company". Each share represents an
equal proportionate beneficial interest in the Fund. When issued and
outstanding, the shares are fully paid and nonassessable by the Trust and
redeemable as described under "How to Redeem Fund Shares". Shareholders are
entitled to one vote for each full share held. Fractional shares may be voted
proportionately. Shares have no preemptive or conversion rights and are freely
transferable. Upon liquidation of the Fund, shareholders are entitled to share
pro rata in the net assets of the Fund available for distribution to
shareholders.
CALIFORNIA TAX FREE PORTFOLIO (THE "PORTFOLIO") IS ORGANIZED AS A TRUST
UNDER THE LAWS OF THE STATE OF NEW YORK AND IS TREATED AS A PARTNERSHIP FOR
FEDERAL TAX PURPOSES. The Portfolio, as well as the Trust, intends to comply
with all applicable Federal and state securities laws. The Portfolio's
Declaration of Trust provides that the Fund and other entities permitted to
invest in the Portfolio (e.g., other U.S. and foreign investment companies, and
common and commingled trust funds) will each be liable for all obligations of
the Portfolio. However, the risk of the Fund incurring financial loss on account
of such liability is limited to circumstances in which both inadequate insurance
exists and the Portfolio itself is unable to meet its obligations. Accordingly,
the Trustees of the Trust believe that neither the Fund nor its shareholders
will be adversely affected by reason of the Fund investing in the Portfolio.
SPECIAL INFORMATION ON THE FUND/PORTFOLIO INVESTMENT STRUCTURE. An investor
in the Fund should be aware that the Fund, unlike mutual funds which directly
acquire and manage their own portfolios of securities, seeks to achieve its
investment objective by investing its assets in an interest in the Portfolio,
which is a separate investment company with an identical investment objective.
Therefore, the Fund's interest in the securities owned by the Portfolio is
indirect. In addition to selling an interest to the Fund, the Portfolio may sell
interests to other affiliated and non-affiliated mutual funds or institutional
investors. Such investors will invest in the Portfolio on the same terms and
conditions and will pay a proportionate share of the Portfolio's expenses.
However, the other investors investing in the Portfolio are not required to sell
their shares at the same public offering price as the Fund due to variations in
sales commissions and other operating expenses. Therefore, investors in the Fund
should be aware that these differences may result in differences in returns
experienced by investors in the different funds that invest in the Portfolio.
Such differences in returns are also present in other mutual fund structures,
including funds that have multiple classes of shares. For information regarding
the investment objective, policies and restrictions of the Portfolio, see "The
Fund's Investment Objective" and "How the Fund and the Portfolio Invest their
Assets". Further information regarding investment practices may also be found in
the Statement of Additional Information.
The Trustees of the Trust have considered the advantages and disadvantages
of investing the assets of the Fund in the Portfolio, as well as the advantages
and disadvantages of the two-tier format. The Trustees believe that the
structure offers opportunities for substantial growth in the assets of the
Portfolio, and affords the potential for economies of scale for the Fund, at
least when the assets of the Portfolio exceed $500 million.
The 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. The investment objective and the
nonfundamental investment policies of the Fund and the Portfolio may be changed
by the Trustees of the Trust and the Portfolio without obtaining the approval of
the shareholders of the Fund or the investors in the Portfolio. Any such change
of the investment objective of the Fund or the Portfolio will be preceded by
thirty days advance written notice to the shareholders of the Fund or the
investors in the Portfolio, as the case may be. In the event the Fund withdraws
all of its assets from the 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, such Trustees would
consider what action might be taken, including investing all 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. The Fund's
investment performance may be affected by a withdrawal of all its assets from
the Portfolio.
Information regarding other pooled investment entities or funds which invest
in the Portfolio may be obtained by contacting Eaton Vance Distributors, Inc.
(the "Principal Underwriter" or "EVD"), 24 Federal Street, Boston, MA 02110,
(617) 482-8260. Smaller funds investing in the Portfolio may be adversely
affected by the actions of larger funds investing in the Portfolio. For example,
if a large fund withdraws from the Portfolio, the remaining funds may experience
higher pro rata operating expenses, thereby producing lower returns.
Additionally, the Portfolio may become less diverse, resulting in increased
portfolio risk, and experience decreasing economies of scale. However, this
possibility exists as well for historically structured mutual funds which have
large or institutional investors.
Until recently, the Administrator sponsored and advised historically
structured funds. Funds which invest all their assets in interests in a separate
investment company are a relatively new development in the mutual fund industry
and, therefore, the Fund may be subject to additional regulations than
historically structured funds.
The Declaration of Trust of the Portfolio provides that the Portfolio will
terminate 120 days after the complete withdrawal of the Fund or any other
investor in the Portfolio, unless either the remaining investors, by unanimous
vote at a meeting of such investors, or a majority of the Trustees of the
Portfolio, by written instrument consented to by all investors, agree to
continue the business of the Portfolio. This provision is consistent with
treatment of the Portfolio as a partnership for Federal income tax purposes. See
"Distributions and Taxes" for further information. Whenever the Fund as an
investor in the 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. The 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 the
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, the 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 the Fund. Notwithstanding the above, there are other
means for meeting shareholder redemption requests, such as borrowing.
The Trustees of the Trust, including a majority of the noninterested
Trustees, have approved written procedures designed to identify and address any
potential conflicts of interest arising from the fact that the Trustees of the
Trust and the Trustees of the Portfolio are the same. Such procedures require
each Board to take actions to resolve any conflict of interest between the Fund
and the Portfolio, and it is possible that the creation of separate boards may
be considered. For further information concerning the Trustees and officers of
the Trust and the Portfolio, see the Statement of Additional Information.
MANAGEMENT OF THE FUND AND THE PORTFOLIO
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THE PORTFOLIO ENGAGES BOSTON MANAGEMENT AND RESEARCH ("BMR"), A WHOLLY-OWNED
SUBSIDIARY OF EATON VANCE MANAGEMENT ("EATON VANCE"), AS ITS INVESTMENT ADVISER.
EATON VANCE, ITS AFFILIATES AND ITS PREDECESSOR COMPANIES HAVE BEEN MANAGING
ASSETS OF INDIVIDUALS AND INSTITUTIONS SINCE 1924 AND MANAGING INVESTMENT
COMPANIES SINCE 1931.
Acting under the general supervision of the Board of Trustees of the
Portfolio, BMR manages the Portfolio's investments and affairs. Under its
investment advisory agreement with the Portfolio, BMR receives a monthly
advisory fee equal to the aggregate of
(a) a daily asset based fee computed by applying the annual asset rate
applicable to that portion of the total daily net assets in each
Category as indicated below, plus
(b) a daily income based fee computed by applying the daily income rate
applicable to that portion of the total daily gross income (which
portion shall bear the same relationship to the total daily gross income
on such day as that portion of the total daily net assets in the same
Category bears to the total daily net assets on such day) in each
Category as indicated below:
ANNUAL DAILY
CATEGORY DAILY NET ASSETS ASSET RATE INCOME RATE
- -------- ---------------- ---------- -----------
1 up to $500 million ........................... 0.300% 3.00%
2 $500 million but less than $1 billion ........ 0.275% 2.75%
3 $1 billion but less than $1.5 billion ........ 0.250% 2.50%
4 $1.5 billion but less than $2 billion ........ 0.225% 2.25%
5 $2 billion but less than $3 billion .......... 0.200% 2.00%
6 $3 billion and over .......................... 0.175% 1.75%
As at September 30, 1994, the Portfolio had net assets of $445,131,401. For
the fiscal year ended September 30, 1994, the Portfolio paid BMR advisory fees
equivalent to 0.50% (annualized) of the Portfolio's average daily net assets for
such period.
BMR also furnishes for the use of the Portfolio office space and all
necessary office facilities, equipment and personnel for servicing the
investments of the Portfolio. The Portfolio is responsible for the payment of
all expenses other than those expressly stated to be payable by BMR under the
investment advisory agreement.
Robert B. MacIntosh has acted as the portfolio manager since the Portfolio
commenced operations. Mr. MacIntosh has been a Vice President of Eaton Vance
since 1991 and of BMR since 1992. Prior to joining Eaton Vance, he was a
Portfolio Manager at Fidelity Management & Research Company (1986-1991).
Municipal obligations, including California obligations, are normally traded
on a net basis (without commission) through broker-dealers and banks acting for
their own account. Such firms attempt to profit from such transactions by buying
at the bid price and selling at the higher asked price of the market, and the
difference is customarily referred to as the spread. In selecting firms which
will execute portfolio transactions, BMR judges their professional ability and
quality of service and uses its best efforts to obtain execution at prices which
are advantageous to the Portfolio and at reasonably competitive spreads. Subject
to the foregoing, BMR may consider sales of shares of the Fund or of other
investment companies sponsored by BMR or Eaton Vance as a factor in the
selection of firms to execute portfolio transactions.
BMR OR EATON VANCE ACTS AS INVESTMENT ADVISER TO INVESTMENT COMPANIES AND
VARIOUS INDIVIDUAL AND INSTITUTIONAL CLIENTS WITH ASSETS UNDER MANAGEMENT OF
APPROXIMATELY $15 BILLION. Eaton Vance is a wholly-owned subsidiary of Eaton
Vance Corp., a publicly held holding company. Eaton Vance Corp., through its
subsidiaries and affiliates, engages in investment management and marketing
activities, fiduciary and banking services, oil and gas operations, real estate
investment, consulting and management, and development of precious metals
properties.
The Trust has retained the services of Eaton Vance to act as administrator
of the Fund. The Trust has not retained the services of an investment adviser
since the Trust seeks to achieve the investment objective of the Fund by
investing the Fund's assets in the Portfolio. As Administrator, Eaton Vance
provides the Fund with general office facilities and supervises the overall
administration of the Fund. For these services Eaton Vance receives no
compensation. The Trustees may determine, in the future, to compensate Eaton
Vance for such services.
The Portfolio and the Fund, as the case may be, will each be responsible for
all respective costs and expenses not expressly stated to be payable by BMR
under the investment advisory agreement, by Eaton Vance under the administrative
services agreement, or by EVD under the distribution agreement. Such costs and
expenses to be borne by the Portfolio and the Fund, as the case may be, include,
without limitation; custody and transfer agency fees and expenses, including
those for determining net asset value and keeping accounting books and records;
expenses of pricing and valuation services; the cost of share certificates;
membership dues in investment company organizations; expenses of acquiring,
holding and disposing of securities and other investments; fees and expenses of
registering under the securities laws and the governmental fees; expenses of
reporting to shareholders and investors; proxy statements and other expenses of
shareholders' or investors' meetings; insurance premiums; printing and mailing
expenses; interest, taxes and corporate fees; legal and accounting expenses;
compensation and expenses of Trustees not affiliated with BMR or Eaton Vance;
and investment advisory fees, and, if any, administrative services fees. The
Portfolio and the Fund will also each bear expenses incurred in connection with
litigation in which the Portfolio or the Fund, as the case may be, is a party
and any legal obligation to indemnify its respective officers and Trustees with
respect thereto.
SERVICE PLAN
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In addition to advisory fees and other expenses, the Fund pays service fees
pursuant to a Service Plan (the "Plan") designed to meet the requirements of
Rule 12b-1 under the Investment Company Act of 1940 and the service fee
requirements of the revised sales charge rule of the National Association of
Securities Dealers, Inc. The Plan is further described in the Statement of
Additional Information, and the following is a description of the salient
features of the Plan.
THE PLAN PROVIDES THAT THE FUND MAY MAKE SERVICE FEE PAYMENTS FOR PERSONAL
SERVICES AND/OR THE MAINTENANCE OF SHAREHOLDER ACCOUNTS TO THE PRINCIPAL
UNDERWRITER, AUTHORIZED FIRMS AND OTHER PERSONS IN AMOUNTS NOT EXCEEDING .25% OF
THE FUND'S AVERAGE DAILY NET ASSETS FOR ANY FISCAL YEAR. The Trustees of the
Trust have initially implemented the Plan by authorizing the Fund to make
service fee payments to the Principal Underwriter and Authorized Firms in
amounts not expected to exceed .25% of the Fund's average daily net assets for
any fiscal year which is based on the value of Fund shares sold by such persons
and remaining outstanding for at least twelve months. The Fund expects to
commence accruing service fee payments during the quarter ending June 30, 1995.
VALUING FUND SHARES
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THE FUND VALUES ITS SHARES ONCE ON EACH DAY THE NEW YORK STOCK EXCHANGE (THE
"EXCHANGE") IS OPEN FOR TRADING, as of the close of regular trading on the
Exchange (normally 4:00 p.m. New York time). The Fund's net asset value per
share is determined by its custodian, Investors Bank & Trust Company ("IBT"),
(as agent for the Fund) in the manner authorized by the Trustees of the Trust.
Net asset value is computed by dividing the value of the Fund's total assets,
less its liabilities, by the number of shares outstanding. Because the Fund
invests substantially all of its assets in an interest in the Portfolio, the
Fund's net asset value will reflect the value of its interest in the Portfolio
(which, in turn, reflects the underlying value of the Portfolio's assets and
liabilities).
Financial service firms ("Authorized Firms") must communicate an investor's
order to the Principal Underwriter prior to the close of the Principal
Underwriter's business day to receive that day's net asset value per share and
the public offering price based thereon. It is the Authorized Firms'
responsibility to transmit orders promptly to the Principal Underwriter, which
is a wholly-owned subsidiary of Eaton Vance.
The Portfolio's net asset value is also determined as of the close of
regular trading on the Exchange by IBT (as custodian and agent for the
Portfolio) based on market or fair value in the manner authorized by the
Trustees of the Portfolio. California obligations will normally be valued on the
basis of valuations furnished by a pricing service. For further information
regarding the valuation of the Portfolio's assets, see "Determination of Net
Asset Value" in the Statement of Additional Information. Eaton Vance Corp. owns
77.3% of the outstanding stock of IBT, the Fund's and the Portfolio's custodian.
- --------------------------------------------------------------------------------
SHAREHOLDERS MAY DETERMINE THE VALUE OF THEIR INVESTMENT BY MULTIPLYING THE
NUMBER OF FUND SHARES OWNED BY THE CURRENT NET ASSET VALUE.
- ------------------------------------------------------------------------------
HOW TO BUY FUND SHARES
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SHARES OF THE FUND MAY BE PURCHASED FOR CASH OR MAY BE ACQUIRED IN EXCHANGE FOR
SECURITIES. Investors may purchase shares of the Fund through Authorized Firms
at the effective public offering price, which price is based on the effective
net asset value per share plus the applicable sales charge. The Fund receives
the net asset value, while the sales charge is divided between the Authorized
Firm and the Principal Underwriter. The Principal Underwriter will furnish the
names of Authorized Firms to an investor upon request. The Fund may suspend the
offering of shares at any time and may refuse an order for the purchase of
shares.
The sales charge may vary depending on the size of the purchase and the
number of shares of Eaton Vance funds the investor may already own, any
arrangement to purchase additional shares during a 13-month period or special
purchase programs. Complete details of how investors may purchase shares at
reduced sales charges under a Statement of Intention, Right of Accumulation, or
various employee benefit plans are available from Authorized Firms or the
Principal Underwriter.
The current sales charges are:
SALES CHARGE SALES CHARGE
AS PERCENTAGE OF AS PERCENTAGE OF
AMOUNT OF PURCHASE OFFERING PRICE AMOUNT INVESTED
Under $100,000 ...................... 4.75% 4.99%
$100,000 but less than $250,000 ..... 3.75 3.90
$250,000 but less than $500,000 ..... 2.75 2.83
$500,000 but less than $1,000,000 ... 2.00 2.04
$1,000,000 or more .................. 0* 0*
*No sales charge is payable at the time of purchase on investments of $1
million or more. A contingent deferred sales charge ("CDSC") of 1% will be
imposed on such investments, as described below, in the event of certain
redemption transactions within 18 months of purchase.
The current dealer commission is:
DEALER COMMISSION
AS PERCENTAGE OF
AMOUNT OF PURCHASE OFFERING PRICE
Under $100,000 ................................................ 5.00%
$100,000 but less than $250,000 ............................... 4.00
$250,000 but less than $500,000 ............................... 3.00
$500,000 but less than $1,000,000 ............................. 2.25
$1,000,000 or more ............................................ 0**
**The Principal Underwriter may pay a commission to Authorized Firms who
initiate and are responsible for purchases of $1 million or more as follows:
1.00% on sales up to $2 million, plus 0.80% on the next $1 million, 0.20% on
the next $2 million and 0.08% on the excess over $5 million.
The Principal Underwriter may at times allow discounts up to the full sales
charge. During periods when the discount includes the full sales charge, such
Firms may be deemed to be underwriters as that term is defined in the Securities
Act of 1933.
The Principal Underwriter may, from time to time, at its own expense,
provide additional incentives to Authorized Firms which employ registered
representatives who sell a minimum dollar amount of the Fund's shares and/or
shares of other funds distributed by the Principal Underwriter. In some
instances, such additional incentives may be offered only to certain Authorized
Firms whose representatives are expected to sell significant amounts of shares.
An initial investment in the Fund must be at least $1,000. Once an account
has been established the investor may send investments of $50 or more at any
time directly to the Fund's transfer agent as follows: The Shareholder Services
Group, Inc., BOS725, P.O. Box 1559, Boston, MA 02104. The $1,000 minimum initial
investment is waived for Bank Draft Investing accounts, which may be established
with an investment of $50 or more. See "Eaton Vance Shareholder Services".
Shares of the Fund may be sold at net asset value to current and retired
Directors and Trustees of Eaton Vance funds, including the Portfolio; to
officers and employees and clients of Eaton Vance and its affiliates; to
registered representatives and employees of Authorized Firms; and bank employees
who refer customers to registered representatives of Authorized Firms; and to
such persons' spouses and children under the age of 21 and their beneficial
accounts. Shares may also be issued at net asset value in connection with the
merger of an investment company with the Fund and 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.
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 at the applicable public offering price as shown above. The minimum
value of securities or securities and cash accepted for deposit is $5,000.
Securities accepted will be sold by IBT as agent for the account of their owner
on the day of their receipt by IBT 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 per Fund share on the day such proceeds are received. EATON VANCE
WILL USE REASONABLE EFFORTS TO OBTAIN THE CURRENT MARKET PRICE FOR SUCH
SECURITIES BUT DOES NOT GUARANTEE THE BEST AVAILABLE PRICE. EATON VANCE WILL
ABSORB ANY TRANSACTION COSTS, SUCH AS COMMISSIONS, ON THE SALE OF THE
SECURITIES.
Securities determined to be acceptable should be transferred via book entry
or physically delivered, in proper form for transfer, through an Authorized
Firm, together with a completed and signed Letter of Transmittal in approved
form (available from Authorized Firms), as follows:
IN THE CASE OF BOOK ENTRY:
Deliver through Depository Fund Co.
Broker #2212
Investors Bank & Trust Company
For A/C EV Traditional California Municipals Fund
IN THE CASE OF PHYSICAL DELIVERY:
Investors Bank & Trust Company
Attention: EV Traditional California Municipals Fund
Physical Securities Processing Settlement Area
89 South Street
Boston, MA 02111
Investors who are contemplating an exchange of securities for shares of the
Fund, or their representatives, must contact Eaton Vance to determine whether
the securities are acceptable before forwarding such securities to IBT. Eaton
Vance reserves the right to reject any securities. Exchanging securities for
Fund 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 for Fund shares.
- --------------------------------------------------------------------------------
IF YOU DON'T HAVE AN AUTHORIZED FIRM, EATON VANCE CAN RECOMMEND ONE.
- ------------------------------------------------------------------------------
HOW TO REDEEM FUND SHARES
- -------------------------------------------------------------------------------
A SHAREHOLDER MAY REDEEM FUND SHARES BY DELIVERING TO THE SHAREHOLDER SERVICES
GROUP, INC., BOS725, P.O. BOX 1559, BOSTON, MASSACHUSETTS 02104, during its
business hours a written request for redemption in good order, plus any share
certificates with executed stock powers. The redemption price will be based on
the net asset value per Fund share next computed after such delivery. Good order
means that all relevant documents must be endorsed by the record owner (s)
exactly as the shares are registered and the signature(s) must be guaranteed by
a member of either the Securities Transfer Association's STAMP program or the
New York Stock Exchange's Medallion Signature Program, or certain banks, savings
and loan institutions, credit unions, securities dealers, securities exchanges,
clearing agencies and registered securities associations as required by a
regulation of the Securities and Exchange Commission and acceptable to The
Shareholder Services Group, Inc. In addition, in some cases, good order may
require the furnishing of additional documents such as where shares are
registered in the name of a corporation, partnership or fiduciary.
Within seven days after receipt of a redemption request in good order by The
Shareholder Services Group, Inc., the Fund will make payment in cash for the net
asset value of the shares as of the date determined above, reduced by the amount
of any Federal income tax required to be withheld. Although the Fund normally
expects to make payment 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 the Fund, either totally or partially, by a
distribution in kind of readily marketable securities withdrawn by the Fund 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.
To sell shares at their net asset value through an Authorized Firm (a
repurchase), a shareholder can place a repurchase order with the Authorized
Firm, which may charge a fee. The value of such shares is based upon the net
asset value calculated after EVD, as the Fund's agent, receives the order. It is
the Authorized Firm's responsibility to transmit promptly repurchase orders to
EVD. Throughout this Prospectus, the word "redemption" is generally meant to
include a repurchase.
If shares were recently purchased, the proceeds of redemption (or
repurchase) will not be sent until the check (including a certified or cashier's
check) received for the shares purchased has cleared. Payment for shares
tendered for redemption may be delayed up to 15 days from the purchase date when
the purchase check has not yet cleared. Redemptions or repurchases may result in
a taxable gain or loss.
Due to the high cost of maintaining small accounts, the Fund reserves the
right to redeem Fund accounts with balances of less than $1,000. Prior to such a
redemption, shareholders will be given 60 days written notice to make an
additional purchase. Thus, an investor making an initial investment of $1,000
would not be able to redeem shares without being subject to this policy.
However, no such redemption would be required by the Fund if the cause of the
low account balance was a reduction in the net asset value of Fund shares.
If shares have been purchased at net asset value with no initial sales
charge by virtue of the purchase having been in the amount of $1 million or more
and are redeemed within 18 months after the end of the calendar month in which
the purchase was made, a CDSC of 1% will be imposed on such redemption. The CDSC
will be retained by the Principal Underwriter.
The CDSC will be imposed on an amount equal to the lesser of the current
market value or the original purchase price of the shares redeemed. Accordingly,
no CDSC will be imposed on increases in account value above the initial purchase
price, including any dividends or distributions that have been reinvested in
additional shares. In determining whether a CDSC is applicable to a redemption,
the calculation will be made in a manner that results in the lowest possible
rate being charged. It will be assumed that redemptions are made first from any
shares in the shareholder's account that are not subject to a CDSC.
The CDSC is waived for redemptions involving certain liquidation, merger or
acquisition transactions involving other investment companies. If a shareholder
reinvests redemption proceeds within the 30-day period and in accordance with
the conditions set forth under "Eaton Vance Shareholder Services -- Reinvestment
Privilege," the shareholder's account will be credited with the amount of any
CDSC paid on such redeemed shares.
REPORTS TO SHAREHOLDERS
- ------------------------------------------------------------------------------
THE FUND WILL ISSUE TO ITS SHAREHOLDERS SEMI-ANNUAL AND ANNUAL REPORTS
CONTAINING FINANCIAL STATEMENTS. Financial statements included in annual reports
are audited by the Fund's independent certified public accountants. Shortly
after the end of each calendar year, the Fund will furnish all shareholders with
information necessary for preparing Federal income tax and California tax
returns.
THE LIFETIME INVESTING ACCOUNT/DISTRIBUTION OPTIONS
- ------------------------------------------------------------------------------
AFTER AN INVESTOR MAKES AN INITIAL PURCHASE OF FUND SHARES, THE FUND'S TRANSFER
AGENT, THE SHAREHOLDER SERVICES GROUP, INC., WILL SET UP A LIFETIME INVESTING
ACCOUNT FOR THE INVESTOR ON THE FUND'S RECORDS. This account is a complete
record of all transactions between the investor and the Fund which at all times
shows the balance of shares owned. The Fund will not issue share certificates
except upon request.
At least quarterly, the shareholder will receive a statement showing
complete details of any transaction and the current share balance in the
account. THE LIFETIME INVESTING ACCOUNT ALSO PERMITS A SHAREHOLDER TO MAKE
ADDITIONAL INVESTMENTS BY SENDING A CHECK FOR $50 OR MORE to The Shareholder
Services Group, Inc.
Any questions concerning a shareholder's account or services available may
be directed by telephone to EATON VANCE SHAREHOLDER SERVICES at 800-225-6265,
extension 2, or in writing to The Shareholder Services Group, Inc., BOS725, P.O.
Box 1559, Boston, MA 02104 (please provide your name and account number).
THE FOLLOWING DISTRIBUTION OPTIONS WILL BE AVAILABLE TO ALL LIFETIME
INVESTING ACCOUNTS and may be changed as often as desired by written notice to
the Fund's dividend disbursing agent, The Shareholder Services Group, Inc.,
BOS725, P.O. Box 1559, Boston, MA 02104. The currently effective option will
appear on each confirmation statement.
Share Option -- Dividends and capital gains will be reinvested in additional
shares.
Income Option -- Dividends, will be paid in cash, and capital gains will be
reinvested in additional shares.
Cash Option -- Dividends and capital gains will be paid in cash.
The Share Option will be assigned if no other option is specified.
Distributions, including those reinvested, will be reduced by any withholding
required under the Federal income tax laws.
If the Income Option or Cash Option has been selected, dividend and/or
capital gains distribution checks which are returned by the United States Postal
Service as not deliverable or which remain uncashed for six months or more will
be reinvested in the account at the then current net asset value. Furthermore,
the distribution option on the account will be automatically changed to the
Share Option until such time as the shareholder selects a different option.
DISTRIBUTION INVESTMENT OPTION. In addition to the distribution options set
forth above, dividends and/or capital gains may be invested in additional shares
of another Eaton Vance fund. Before selecting this option, a shareholder should
obtain a prospectus of the other Eaton Vance fund and consider its objectives
and policies carefully.
"STREET NAME" ACCOUNTS. If shares of the Fund are held in a "street name"
account with an Authorized Firm, all recordkeeping, transaction processing and
payments of distributions relating to the beneficial owner's account will be
performed by the Authorized Firm, and not by the Fund and its transfer agent.
Since the Fund will have no record of the beneficial owner's transactions, a
beneficial owner should contact the Authorized Firm to purchase, redeem or
exchange shares, to make changes in or give instructions concerning the account,
or to obtain information about the account. The transfer of shares in a "street
name" account to an account with another dealer or to an account directly with
the Fund involves special procedures and will require the beneficial owner to
obtain historical purchase information about the shares in the account from the
Authorized Firm. Before establishing a "street name" account with an investment
firm, or transferring the account to another investment firm, an investor
wishing to reinvest distributions should determine whether the firm which will
hold the shares allows reinvestment of distributions in "street name" accounts.
- --------------------------------------------------------------------------------
UNDER A LIFETIME INVESTING ACCOUNT A SHAREHOLDER CAN MAKE ADDITIONAL
INVESTMENTS BY SENDING A CHECK FOR $50 OR MORE.
- ------------------------------------------------------------------------------
THE EATON VANCE EXCHANGE PRIVILEGE
- ------------------------------------------------------------------------------
Shares of the Fund may be exchanged for shares of any of the following funds:
Eaton Vance Cash Management Fund, Eaton Vance Income Fund of Boston, Eaton Vance
Municipal Bond Fund L.P., Eaton Vance Tax Free Reserves and any fund in the
Eaton Vance Traditional Group of Funds on the basis of net asset value per share
of each fund at the time of the exchange, provided that such exchange offers are
available only in states where shares of the fund being acquired may be legally
sold.
Each exchange must involve shares which have a net asset value of $1,000.
The exchange privilege may be changed or discontinued without penalty.
Shareholders will be given sixty (60) days notice prior to any termination or
material amendment of the exchange privilege. The Fund does not permit the
exchange privilege to be used for "Market Timing" and may terminate the exchange
privilege for any shareholder account engaged in Market Timing activity. Any
shareholder account for which more than two round-trip exchanges are made within
any twelve month period will be deemed to be engaged in Market Timing.
Furthermore, a group of unrelated accounts for which exchanges are entered
contemporaneously by a financial intermediary will be considered to be engaged
in Market Timing.
Shares of the Fund which are subject to a CDSC may be exchanged into any of
the above funds without incurring the CDSC. The shares acquired in an exchange
may be subject to a CDSC upon redemption. For purposes of computing the CDSC
payable upon redemption of shares acquired in an exchange, the holding period of
the original shares is added to the holding period of the shares acquired in the
exchange.
The Shareholder Services Group, Inc. makes exchanges at the next determined
net asset value after receiving an exchange request in good order (see "How to
Redeem Fund Shares"). Consult The Shareholder Services Group, Inc. for
additional information concerning the exchange privilege. Applications and
prospectuses of the other funds are available from Authorized Firms or the
Principal Underwriter. The prospectus for each fund describes its investment
objectives and policies, and shareholders should obtain a prospectus and
consider these objectives and policies carefully before requesting an exchange.
Shares of certain other funds for which Eaton Vance acts as investment
adviser or administrator may be similarly exchanged for Fund shares at their
respective net asset values per share, but subject to any restrictions or
qualifications set forth in the current prospectus of any such fund.
Telephone exchanges are accepted by The Shareholder Services Group, Inc.
provided the investor has not disclaimed in writing the use of the privilege. To
effect such exchanges, call The Shareholder Services Group, Inc. at 800-
262-1122 or, within Massachusetts, 617-573-9403, Monday through Friday, 9:00
a.m. to 4:00 p.m. (Eastern Standard Time). Shares acquired by telephone exchange
must be registered in the same name(s) and with the same address as the shares
being exchanged. Neither the Fund, the Principal Underwriter nor The Shareholder
Services Group, Inc. will be responsible for the authenticity of exchange
instructions received by telephone; provided that reasonable procedures to
confirm that instructions communicated are genuine have been followed. Telephone
instructions will be tape recorded. In times of drastic economic or market
changes, a telephone exchange may be difficult to implement. An exchange may
result in a taxable gain or loss.
EATON VANCE SHAREHOLDER SERVICES
- ------------------------------------------------------------------------------
THE FUND OFFERS THE FOLLOWING SERVICES, WHICH ARE VOLUNTARY, INVOLVE NO EXTRA
CHARGE, AND MAY BE CHANGED OR DISCONTINUED WITHOUT PENALTY AT ANY TIME. Full
information on each of the services described below and an application, where
required, are available from Authorized Firms or the Principal Underwriter. The
cost of administering such services for the benefit of shareholders who
participate in them is borne by the Fund as an expense to all shareholders.
INVEST-BY-MAIL -- FOR PERIODIC SHARE ACCUMULATION: Once the $1,000 minimum
investment has been made, checks of $50 or more payable to the order of the Fund
may be mailed directly to The Shareholder Services Group, Inc., BOS725, P.O. Box
1559, Boston, MA 02104 at any time -- whether or not dividends are reinvested.
The name of the shareholder, the Fund and the account number should accompany
each investment.
BANK DRAFT INVESTING -- FOR REGULAR SHARE ACCUMULATION: Cash investments of $50
or more may be made through the shareholder's checking account via bank draft
each month or quarter. The $1,000 minimum initial investment and small account
redemption policy are waived for these accounts.
STATEMENT OF INTENTION: Purchases of $100,000 or more made over a 13-month
period are eligible for reduced sales charges. See "Statement of Intention and
Escrow Agreement".
RIGHT OF ACCUMULATION: Purchases may qualify for reduced sales charges when the
current market value of holdings (shares at current offering price), plus new
purchases, reaches $100,000 or more. Shares of the Eaton Vance funds mentioned
under "The Eaton Vance Exchange Privilege" may be combined under the Statement
of Intention and Right of Accumulation.
WITHDRAWAL PLAN: A shareholder may draw on shareholdings systematically with
monthly or quarterly checks in an amount specified by the shareholder. A minimum
deposit of $5,000 in shares is required.
REINVESTMENT PRIVILEGE: A SHAREHOLDER WHO HAS REPURCHASED OR REDEEMED SHARES MAY
REINVEST ANY PORTION OR ALL OF THE REPURCHASE OR REDEMPTION PROCEEDS (PLUS THAT
AMOUNT NECESSARY TO ACQUIRE A FRACTIONAL SHARE TO ROUND OFF THE PURCHASE TO THE
NEAREST FULL SHARE) IN SHARES OF THE FUND, or, provided that the shares
repurchased or redeemed have been held for at least 30 days, in shares of any of
the other funds offered by the Principal Underwriter with an initial sales
charge at net asset value, provided that the reinvestment is effected within 30
days after such repurchase or redemption. Shares are sold to a reinvesting
shareholder at the next determined net asset value following timely receipt of a
written purchase order by the Principal Underwriter or by the fund whose shares
are to be purchased (or by such fund's transfer agent). The privilege is also
available to holders of shares of the other funds offered with an initial sales
charge by the Principal Underwriter who wish to reinvest such redemption or
repurchase proceeds in shares of the Fund. If a shareholder reinvests redemption
proceeds within the 30 day period the shareholder's account will be credited
with the amount of any CDSC paid on such redeemed shares. A reinvesting
shareholder may realize a gain or loss for Federal tax purposes as a result of
such repurchase or redemption. Special rules may apply to the computation of
gain or loss and to the deduction of loss on a repurchase or redemption followed
by a reinvestment. See "Distributions and Taxes". Shareholders should consult
their tax advisers concerning the tax consequences of reinvestments.
DISTRIBUTIONS AND TAXES
- ------------------------------------------------------------------------------
SUBSTANTIALLY ALL OF THE INVESTMENT INCOME ALLOCATED TO THE FUND BY THE
PORTFOLIO, LESS THE FUND'S DIRECT AND ALLOCATED EXPENSES, WILL BE DECLARED DAILY
AS A DISTRIBUTION TO FUND SHAREHOLDERS OF RECORD AT THE TIME OF DECLARATION.
Such distributions, whether taken in cash or reinvested in additional shares,
will ordinarily be paid on the last day of each month or the next business day
thereafter. The Fund anticipates that for tax purposes, the entire distribution,
whether taken in cash or additional shares of the Fund, will constitute
tax-exempt income to the shareholders for Federal income tax purposes, except
for the proportionate part of the distribution that may be considered taxable
income if the Fund has taxable income during the calendar year. Shareholders
reinvesting the monthly distribution should continue to treat the amount of the
entire distribution as the tax cost basis of the additional shares acquired by
reason of such reinvestment. Daily distribution crediting will commence on the
day that collected funds for the purchase of Fund shares are available at the
Transfer Agent. Shareholders will receive timely Federal income tax information
as to the tax-exempt or taxable status of all distributions made by the Fund
during the calendar year. The Fund's net realized capital gains, if any, consist
of the net realized capital gains allocated to the Fund by the Portfolio for tax
purposes, after taking into account any available capital loss carryovers; the
Fund's net realized capital gains, if any, will be distributed at least once a
year, usually in December.
Sales charges paid upon a purchase of Fund 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 shares of the
Fund or of another fund are subsequently acquired pursuant to the Fund's
reinvestment or exchange privilege. In addition, losses realized on a redemption
of Fund shares may be disallowed under certain "wash sale" rules if within a
period beginning 30 days before and ending 30 days after the date of redemption
other shares of the Fund are acquired. Any disregarded or disallowed amounts
will result in an adjustment to the shareholder's tax basis in some or all of
any other shares acquired.
In order to qualify as a regulated investment company under the Internal
Revenue Code (the "Code"), the Fund must satisfy certain requirements relating
to the sources of its income, the distribution of its income, and the
diversification of its assets. In satisfying these requirements, the Fund will
treat itself as owning its proportionate share of each of the Portfolio's assets
and as entitled to the income of the Portfolio properly attributable to such
share.
- ------------------------------------------------------------------------------
AS A REGULATED INVESTMENT COMPANY UNDER THE CODE, THE FUND DOES NOT PAY
FEDERAL INCOME OR EXCISE TAXES TO THE EXTENT THAT IT DISTRIBUTES TO
SHAREHOLDERS ITS NET INVESTMENT INCOME AND NET REALIZED CAPITAL GAINS IN
ACCORDANCE WITH THE TIMING REQUIREMENTS IMPOSED BY THE CODE. AS A PARTNERSHIP
UNDER THE CODE, THE PORTFOLIO DOES NOT PAY FEDERAL INCOME OR EXCISE TAXES.
- ------------------------------------------------------------------------------
Distributions of interest on certain municipal obligations constitute a tax
preference item under the alternative minimum tax provisions applicable to
individuals and corporations (see page 5). Distributions of taxable income
(including a portion of any original issue discount with respect to certain
stripped municipal obligations and stripped coupons and accretion of certain
market discount) and net short-term capital gains will be taxable to
shareholders as ordinary income. Distributions of long-term capital gains are
taxable to shareholders as such for Federal income tax purposes, regardless of
the length of time Fund shares have been owned by the shareholder. Distributions
are taxed in the manner described above whether paid in cash or reinvested in
additional shares of the Fund.
Tax-exempt distributions received from the Fund are includable in the tax
base for determining the taxability of social security and railroad retirement
benefits.
Interest on indebtedness incurred or continued by a shareholder to purchase
or carry shares of the Fund is not deductible to the extent it is deemed related
to the Fund's distribution 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 the Fund. "Substantial
user " is defined in applicable Treasury regulations to include a "non-exempt
person" who regularly uses in trade or business a part of a facility financed
from the proceeds of industrial development bonds and would likely be
interpreted to include private activity bonds issued to finance similar
facilities.
California law provides that dividends paid by the Fund and designated by
the Fund as tax-exempt are exempt from California personal income tax on
individuals who reside in California to the extent such dividends are derived
from interest payments on California obligations, provided that at least 50% of
the assets of the Portfolio at the close of each quarter of its taxable year are
invested in obligations the interest on which is exempt under either Federal or
California law from taxation by the State of California. Distributions of
short-term capital gains are treated as ordinary income, and distributions of
long-term capital gains are treated as long-term capital gains under the
California personal income tax.
Shareholders should consult their own tax advisers with respect to the
state, local and foreign tax consequences of investing in the Fund.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
FROM TIME TO TIME, THE FUND MAY ADVERTISE ITS YIELD AND/OR AVERAGE ANNUAL TOTAL
RETURN. The current yield for the Fund will be calculated by dividing the net
investment income per share during a recent 30 day period by the maximum
offering price per share of the Fund on the last day of the period and
annualizing the resulting figure. A taxable-equivalent yield is computed by
using the tax-exempt yield figure and dividing by 1 minus the tax rate. The
Fund's average annual total return is determined by multiplying a hypothetical
initial purchase order of $1,000 by the average annual compounded rate of return
(including capital appreciation/depreciation, and dividends and distributions
paid and reinvested) for the stated period and annualizing the result. The
calculation assumes the maximum sales charge is deducted from the initial $1,000
purchase order and that all dividends are reinvested at net asset value on the
reinvestment dates during the period. The Fund may also publish annual and
cumulative total return figures from time to time.
The Fund may also publish its distribution rate and/or its effective
distribution rate. The Fund's distribution rate is computed by dividing the most
recent monthly distribution per share annualized, by the current maximum
offering price per share. The Fund's effective distribution rate is computed by
dividing the distribution rate by the ratio used to annualize the most recent
monthly distribution and reinvesting the resulting amount for a full year on the
basis of such ratio. The effective distribution rate will be higher than the
distribution rate because of the compounding effect of the assumed reinvestment.
Investors should note that the Fund's yield is calculated using a standardized
formula the income component of which is computed from the yields to maturity of
all debt obligations held by the Portfolio based on prescribed methods (with all
purchases and sales of securities during such period included in the income
calculation on a settlement date basis), whereas the distribution rate is based
on the Fund's last monthly distribution which tends to be relatively stable and
may be more or less than the amount of net investment income and short-term
capital gain actually earned by the Fund during the month (see "Distributions
and Taxes").
Investors should note that the investment results of the Fund will fluctuate
over time, and any presentation of the Fund's current yield or total return for
any prior period should not be considered a representation of what an investment
may earn or what an investor's yield or total return may be in any future
period. If the expenses of the Fund or the Portfolio are paid by Eaton Vance,
the Fund's performance will be higher.
STATEMENT OF INTENTION AND ESCROW AGREEMENT
- ------------------------------------------------------------------------------
TERMS OF ESCROW. If the investor, on an application, makes a Statement of
Intention to invest a specified amount over a thirteen month period, then out of
the initial purchase (or subsequent purchases if necessary) 5% of the dollar
amount specified on the application shall be held in escrow by the escrow agent
in the form of shares (computed to the nearest full share at the public offering
price applicable to the initial purchase hereunder) registered in the investor's
name. All income dividends and capital gains distributions on escrowed shares
will be paid to the investor or to the investor's order.
When the minimum investment so specified is completed, the escrowed shares
will be delivered to the investor. If the investor has an accumulation account
the shares will remain on deposit under his account.
If total purchases under this Statement of Intention are less than the
amount specified, the investor will promptly remit to EVD any difference between
the sales charge on the amount specified and on the amount actually purchased.
If the investor does not within 20 days after written request by EVD or the
Authorized Firm pay such difference in sales charge, the escrow agent will
redeem an appropriate number of the escrowed shares in order to realize such
difference. Full shares remaining after any such redemption together with any
excess cash proceeds of the shares so redeemed will be delivered to the investor
or to the investor's order by the escrow agent.
In signing the application, the investor irrevocably constitutes and
appoints the escrow agent as attorney to surrender for redemption any or all
escrowed shares with full power of substitution in the premises.
PROVISION FOR RETROACTIVE PRICE ADJUSTMENT. If total purchases made under this
Statement are large enough to qualify for a lower sales charge than that
applicable to the amount specified, all transactions will be computed at the
expiration date of this Statement to give effect to the lower charge. Any
difference in sales charge will be refunded to the investor in cash, or applied
to the purchase of additional shares at the lower charge if specified by the
investor. This refund will be made by the Authorized Firm and by EVD. If at the
time of the recomputation a firm other than the original firm is placing the
orders, the adjustment will be made only on those shares purchased through the
firm then handling the account.
<PAGE>
INVESTMENT ADVISER OF
CALIFORNIA TAX FREE PORTFOLIO
Boston Management and Research
24 Federal Street
Boston, MA 02110
ADMINISTRATOR OF
EV TRADITIONAL CALIFORNIA
MUNICIPALS FUND
Eaton Vance Management
24 Federal Street
Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc.
24 Federal Street
Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company
24 Federal Street
Boston, MA 02110
TRANSFER AGENT
The Shareholder Services Group, Inc.
BOS725
P.O. Box 1559
Boston, MA 02104
(800) 262-1122
AUDITORS
Deloitte & Touche LLP
125 Summer Street
Boston, MA 02110
EV TRADITIONAL CALIFORNIA
MUNICIPALS FUND
24 FEDERAL STREET
BOSTON, MA 02110
T-CAP
EV TRADITIONAL
CALIFORNIA
MUNICIPALS FUND
PROSPECTUS
NOVEMBER 25, 1994
