<PAGE>
As filed with the Securities and Exchange Commission on April 25, 1995
1933 Act File No. 33-1121
1940 Act File No. 811-4443
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933 [X]
POST-EFFECTIVE AMENDMENT NO. 32 [X]
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 35 [X]
Eaton Vance Investment Trust
----------------------------------------
(Exact Name of Registrant as Specified in Charter)
24 Federal Street, Boston, Massachusetts 02110
---------------------------------------
(Address of Principal Executive Offices)
(617) 482-8260
--------------------
(Registrant's Telephone Number)
H. DAY BRIGHAM, JR.
24 Federal Street, Boston, Massachusetts 02110
---------------------------------
(Name and Address of Agent for Service)
It is proposed that this Post-Effective Amendment will become effective on
July 14, 1995 pursuant to paragraph (a) of Rule 485.
The exhibit index required by Rule 483(a) under the Securities Act of 1933
is located on page in the sequential numbering system of the manually signed
copy of this Registration Statement.
The Registrant has filed a Declaration pursuant to Rule 24f-2 and on or
before May 31, 1995 intends to file its "Notice" as required by that Rule for
the fiscal year ended March 31, 1995.
Arizona Limited Maturity Tax Free Portfolio, North Carolina Limited
Maturity Tax Free Portfolio and Virginia Limited Maturity Tax Free Portfolio
have each also executed this Registration Statement.
===============================================================================
<PAGE>
This Amendment to the registration statement on Form N-1A consists of the
following documents and papers:
Cross Reference Sheet required by Rule 481(a) under Securities Act of 1933
Part A--The Combined Prospectus of:
EV Marathon Arizona Limited Maturity Tax Free Fund
EV Marathon North Carolina Limited Maturity Tax Free Fund
EV Marathon Virginia Limited Maturity Tax Free Fund
Part B--The Statements of Additional Information of:
EV Marathon Arizona Limited Maturity Tax Free Fund
EV Marathon North Carolina Limited Maturity Tax Free Fund
EV Marathon Virginia Limited Maturity Tax Free Fund
Part C--Other Information
Signatures
Exhibit Index Required by Rule 483(b) under the Securities Act of 1933
Exhibits
This Amendment is not intended to amend the Prospectus and Statement of
Additional Information of any other series of the Registrant not identified
above.
<PAGE>
EATON VANCE INVESTMENT TRUST
EV Marathon Arizona Limited Maturity Tax Free Fund
EV Marathon North Carolina Limited Maturity Tax Free Fund
EV Marathon Virginia Limited Maturity Tax Free Fund
CROSS REFERENCE SHEET
ITEMS REQUIRED BY FORM N-1A
---------------------------
PART A ITEM NO. ITEM CAPTION PROSPECTUS CAPTION
- -------------- ------- ---------------------------------
1. .......... Cover Page Cover Page
2. .......... Synopsis Shareholder and Fund Expenses
3. .......... Condensed Financial The Funds' Financial Highlights;
Information Performance
Information
4. .......... General Description of The Funds' Investment Objective;
Registrant How the Funds and the
Portfolios Invest their Assets;
Organization of the Funds and
the Portfolios
5. .......... Management of the Fund Management of the Funds and the
Portfolios
5A. ......... Management's Discussion of Not Applicable
Fund
Performance
6. .......... Capital Stock and Other Organization of the Funds and the
Securities Portfolios; Reports to
Shareholders; The Lifetime
Investing Account/Distribution
Options; Distributions and
Taxes
7. .......... Purchase of Securities Valuing Fund Shares; How to Buy
Being Offered Fund Shares; The Lifetime
Investing Account/Distribution
Options; Distribution Plans;
The Eaton Vance Exchange
Privilege; Eaton Vance
Shareholder Services; Statement
of Intention and Escrow
Agreement
8. .......... Redemption or Repurchase How to Redeem Fund Shares
9. .......... Pending Legal Proceedings Not Applicable
STATEMENT OF ADDITIONAL
PART B ITEM NO. ITEM CAPTION INFORMATION CAPTION
- -------------- ------- ---------------------------------
10. .......... Cover Page Cover Page
11. .......... Table of Contents Table of Contents
12. .......... General Information and Other Information
History
13. .......... Investment Objectives and Investment Objective and
Policies Policies; Investment
Restrictions
14. .......... Management of the Fund Trustees and Officers; Fee and
Expenses
15. .......... Control Persons and Control Persons and Principal
Principal Holders of Holders of
Securities Securities
16. .......... Investment Advisory and Investment Adviser and
Other Services Administrator; Distribution
Plan; Custodian; Independent
Certified Public Accountant;
Fee and Expenses
17. .......... Brokerage Allocation and Portfolio Security Transactions;
Other Fee and Expenses
Practices
18. .......... Capital Stock and Other Other Information
Securities
19. .......... Purchase, Redemption and Determination of Net Asset Value;
Pricing of Principal Underwriter; Service
Securities Being Offered for Withdrawal; Distribution
Plan; Fee and Expenses
20. .......... Tax Status Taxes
21. .......... Underwriters Principal Underwriter; Fee and
Expenses
22. .......... Calculation of Performance Investment Performance;
Data Performance Information
23. .......... Financial Statements Financial Statements
<PAGE>
Part A
Information Required in a Prospectus
EV MARATHON
LIMITED MATURITY TAX FREE FUNDS
EV MARATHON ARIZONA LIMITED MATURITY TAX FREE FUND
EV MARATHON NORTH CAROLINA LIMITED MATURITY TAX FREE FUND
EV MARATHON VIRGINIA LIMITED MATURITY TAX FREE FUND
THE EV MARATHON LIMITED MATURITY TAX FREE FUNDS (THE "FUNDS") ARE MUTUAL
FUNDS SEEKING TO PROVIDE A HIGH LEVEL OF CURRENT INCOME EXEMPT FROM REGULAR
FEDERAL INCOME TAX AND THEIR RESPECTIVE STATE TAXES DESCRIBED UNDER "THE FUNDS"
INVESTMENT OBJECTIVES" IN THIS PROSPECTUS. EACH FUND INVESTS ITS ASSETS IN A
CORRESPONDING NON-DIVERSIFIED OPEN-END INVESTMENT COMPANY (A "PORTFOLIO") HAVING
THE SAME INVESTMENT OBJECTIVE AS THE FUND, RATHER THAN BY DIRECTLY INVESTING IN
AND MANAGING ITS OWN PORTFOLIO OF SECURITIES AS WITH HISTORICALLY STRUCTURED
MUTUAL FUNDS. EACH FUND IS A SERIES OF EATON VANCE INVESTMENT TRUST (THE
"TRUST").
Shares of the Funds are not deposits or obligations of, or guaranteed or
endorsed by, any bank or other insured depository institution, and are not
federally insured by the Federal Deposit Insurance Corporation, the Federal
Reserve Board or any other government agency. Shares of the Funds involve
investment risks, including fluctuations in value and the possible loss of some
or all of the principal investment.
This combined Prospectus is designed to provide you with information you
should know before investing. Please retain this document for future reference.
A combined Statement of Additional Information dated July 14, 1995 for the
Funds, 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 Funds' principal
underwriter, Eaton Vance Distributors, Inc. (the "Principal Underwriter"), 24
Federal Street, Boston, MA 02110 (telephone (800) 225-6265). The Portfolios'
investment adviser is Boston Management and Research (the "Investment Adviser"),
a wholly-owned subsidiary of Eaton Vance Management, and Eaton Vance Management
is the administrator (the "Administrator") of the Funds. The offices of the
Investment Adviser and the Administrator are located at 24 Federal Street,
Boston, MA 02110.
AS OF THE DATE OF THIS COMBINED PROSPECTUS, A FUND MAY NOT BE AVAILABLE FOR
PURCHASE IN CERTAIN STATES. PLEASE CONTACT THE PRINCIPAL UNDERWRITER OR YOUR
BROKER FOR FURTHER INFORMATION.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROS- PECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
PROSPECTUS DATED JULY 14, 1995
<PAGE>
TABLE OF CONTENTS
Shareholder and Fund Expenses ........................................ 3
The Funds' Financial Highlights ...................................... 5
The Funds' Investment Objectives ..................................... 6
How the Funds and the Portfolios Invest their Assets ................. 6
Organization of the Funds and the Portfolios ......................... 11
Management of the Funds and the Portfolios ........................... 13
Distribution Plans ................................................... 15
Valuing Fund Shares .................................................. 17
How to Buy Fund Shares ............................................... 18
How to Redeem Fund Shares ............................................ 19
Reports to Shareholders .............................................. 21
The Lifetime Investing Account/Distribution Options .................. 22
The Eaton Vance Exchange Privilege .................................. 23
Eaton Vance Shareholder Services ..................................... 24
Distributions and Taxes .............................................. 25
Performance Information .............................................. 26
Appendix -- State Specific Information ............................... 28
<PAGE>
SHAREHOLDER AND FUND EXPENSES (1)
- ------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES
Sales Charges Imposed on Purchases of Shares None
Sales Charges Imposed on Reinvested Distributions None
Fees to Exchange Shares None
Range of Declining Contingent Deferred Sales Charges
Imposed on Redemption during the First Five Years
(as a percentage of redemption proceeds exclusive of all
reinvestments and capital appreciation in the account)(2) 3.00%-0%
ANNUAL FUND AND ALLOCATED PORTFOLIO OPERATING EXPENSES
<TABLE>
<CAPTION>
(as a percentage of average daily net assets) ARIZONA NORTH CAROLINA VIRGINIA
FUND FUND FUND
------- -------------- --------
<S> <C> <C> <C>
Investment Adviser Fee(3) 0.45% 0.45% 0.45%
Rule 12b-1 Distribution (and Service) Fees(4) 0.80 0.80 0.80
Other Expenses 0.20 0.20 0.20
---- ---- ----
Total Operating Expenses 1.45% 1.45% 1.45%
==== ==== ====
EXAMPLE
An investor would pay the following contingent deferred sales charge and expenses on a $1,000 investment, assuming
(a) 5% annual return and (b) redemption at the end of each period:
<CAPTION>
ARIZONA NORTH CAROLINA VIRGINIA
FUND FUND FUND
------- -------------- --------
1 Year ......................................................... $45 $45 $45
3 Years ......................................................... 66 66 66
An investor would pay the following expenses on the same investment, assuming (a) 5% annual return and (b) no redemptions:
1 Year ......................................................... $15 $15 $15
3 Years ......................................................... 46 46 46
</TABLE>
Notes:
(1) The purpose of the above table and the Example is to summarize the aggregate
expenses of the Funds and the Portfolios and to assist investors in
understanding the various costs and expenses that investors in each Fund
will bear directly or indirectly. The Trustees of the Trust believe that
over time the aggregate per share expenses of a Fund and its corresponding
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 its corresponding Portfolio. Since the Funds do not yet have a
sufficient operating history, the percentages indicated as Annual Fund and
Allocated Portfolio Operating Expenses in the table and the amounts included
in the Example are based on the Funds' and the Portfolios' projected fees
and expenses for the current fiscal year ending March 31, 1996. The Example
should not be considered a representation of future expenses since future
expenses may be greater or less than those shown. The Example assumes a 5%
annual return and the Funds' actual performance may result in an annual
return greater or less than 5%. For further information regarding the
expenses of the Funds and the Portfolios see "The Funds" Financial
Highlights", "Organization of the Funds and the Portfolios", "Management of
the Funds and the Portfolios" and "How to Redeem Fund Shares". Because the
Funds make payments under their Distribution Plans adopted under Rule 12b-1,
a long-term shareholder may pay more than the economic equivalent of the
maximum front-end sales charge permitted by a rule of the National
Association of Securities Dealers, Inc. See "Distribution Plans."
(2) No contingent deferred sales charge is imposed on (a) shares purchased more
than four years prior to the redemption, (b) shares acquired through the
reinvestment of dividends and distributions or (c) any appreciation in value
of other shares in the account (see "How to Redeem Fund Shares"), and no
such charge is imposed on exchanges of shares for shares of the funds
currently listed under "The Eaton Vance Exchange Privilege".
(3) Each Portfolio's monthly advisory fee has two components, a fee based on
daily net assets and a fee based on daily gross income, as set forth in the
fee schedule on page 13.
(4) The percentages have been restated because the Funds expect to begin
accruing for their service fee payments during the quarter ending December
31, 1995.
(5) Other investment companies with different distribution arrangements and fees
are investing in the Portfolios and additional such companies may do so in
the future. See "Organization of the Funds and the Portfolios".
<PAGE>
THE FUNDS' FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------
The following information should be read in conjunction with the financial
statements included in the Statement of Additional Information. Further
information regarding the performance of a Fund is contained in its annual
report to shareholders which may be obtained without charge by contacting the
Principal Underwriter, Eaton Vance Distributors, Inc.
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED MARCH 31, 1995
(UNAUDITED)<F6>
---------------------------------------
NORTH
ARIZONA CAROLINA VIRGINIA
FUND FUND FUND
----------- ------------ ------------
<S> <C> <C> <C>
NET ASSET VALUE, beginning of period ....................................... $10.000 $10.000 $10.000
------- ------- -------
INCOME (LOSS) FROM OPERATIONS:
Net investment income .................................................... $ 0.155 $ 0.112 $ 0.150
Net realized and unrealized gain (loss) on investments ................... 0.253 0.236 0.343
------- ------- -------
Total income from operations ........................................... $ 0.408 $ 0.348 $ 0.493
------- ------- -------
LESS DISTRIBUTIONS:
From net investment income ............................................... $(0.155) $(0.112) $(0.150)
In excess of net investment income<F3>.................................... (0.003) (0.026) (0.003)
------- ------- -------
Total distributions .................................................... $(0.158) $(0.138) $(0.153)
NET ASSET VALUE, end of period ............................................. $10.250 $10.210 $10.340
======= ======= =======
TOTAL RETURN<F4>............................................................ 4.02% 3.31% 4.82%
RATIOS/SUPPLEMENTAL DATA<F1>:
Net assets, end of period (000 omitted) .................................. $499 $135 $118
Ratio of net expenses to average net assets<F5>........................... 0.74%<F2> 0.75% 0.92%<F2>
Ratio of net investment income to average net assets...................... 3.78%<F2> 3.04% 3.78%<F2>
<FN>
<F1>For the period from the start of business, November 3, 1994, November 28, 1994 and November 11, 1994, respectively, to March
31, 1995, the operating expenses of the Funds and Portfolios may reflect a reduction of expenses by the Administrator. Had
such actions not been taken, net investment income per share and the ratios would have been as follows:
NET INVESTMENT INCOME PER SHARE ............................................ $ 0.077 $(0.113) $(0.106)
======= ======= =======
Ratios (As a percentage of average daily net assets):
Expenses<F2>............................................................ 2.64% 6.86% 7.37%<F2>
Net investment income .................................................. 1.88% (3.07%) (2.67%)<F2>
<F2>Computed on an annualized basis.
<F3>Distributions from paid-in capital for the period ended March 31, 1995 have been restated to conform with the treatment
permitted under current financial reporting standards.
<F4>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.
<F5>Includes each Fund's share of its corresponding Portfolio's allocated expenses.
<F6>For the Arizona Fund, North Carolina Fund and Virginia Fund, the Financial Highlights are for the period from the start of
business, November 3, 1994, November 28, 1994, and November 11, 1994, respectively, to March 31, 1995.
</TABLE>
<PAGE>
THE FUNDS' INVESTMENT OBJECTIVES
- ------------------------------------------------------------------------------
The investment objective of each Fund is set forth below. Each Fund seeks to
meet its investment objective by investing its assets in a separate
corresponding open-end management investment company (a "Portfolio") which
invests primarily in municipal obligations (as described below) having a dollar
weighted average duration of between three and nine years and which are rated at
least investment grade by a major rating agency or, if unrated, determined to be
of investment grade quality by the Investment Adviser. Each Portfolio has the
same investment objective as its corresponding Fund.
EV MARATHON ARIZONA LIMITED MATURITY TAX FREE FUND (the "Arizona Fund")
seeks to provide (1) a high level of current income exempt from regular Federal
income tax and Arizona State personal income taxes, and (2) limited principal
fluctuation. The Arizona Fund seeks to meet its objective by investing its
assets in the Arizona Limited Maturity Tax Free Portfolio (the "Arizona
Portfolio").
EV MARATHON NORTH CAROLINA LIMITED MATURITY TAX FREE FUND (the "North
Carolina Fund") seeks to provide (1) a high level of current income exempt from
regular Federal income tax and North Carolina State personal income taxes in the
form of an investment exempt from North Carolina intangibles tax, and (2)
limited principal fluctuation. The North Carolina Fund seeks to meet its
objective by investing its assets in the North Carolina Limited Maturity Tax
Free Portfolio (the "North Carolina Portfolio").
EV MARATHON VIRGINIA LIMITED MATURITY TAX FREE FUND (the "Virginia Fund")
seeks to provide (1) a high level of current income exempt from regular Federal
income tax and Virginia State personal income taxes, and (2) limited principal
fluctuation. The Virginia Fund seeks to meet its objective by investing its
assets in the Virginia Limited Maturity Tax Free Portfolio (the "Virginia
Portfolio").
HOW THE FUNDS AND THE PORTFOLIOS INVEST THEIR ASSETS
- ------------------------------------------------------------------------------
EACH FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY INVESTING EITHER DIRECTLY
OR INDIRECTLY THROUGH ANOTHER OPEN-END MANAGEMENT INVESTMENT COMPANY PRIMARILY
(I.E., AT LEAST 80% OF ITS NET ASSETS DURING PERIODS OF NORMAL MARKET
CONDITIONS) IN DEBT OBLIGATIONS ISSUED BY OR ON BEHALF OF ITS CORRESPONDING
STATE AND ITS POLITICAL SUBDIVISIONS, AND THE GOVERNMENTS OF PUERTO RICO, THE
U.S. VIRGIN ISLANDS AND GUAM, 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 STATE TAXES SET FORTH ABOVE. The foregoing
policy is a fundamental policy of each Fund and its corresponding Portfolio,
which may not be changed unless authorized by a vote of the Fund's shareholders
or that Portfolio's investors, as the case may be.
At least 80% of each 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. Municipal obligations rated Baa or BBB may have
speculative characteristics. Also, changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments than in the case of higher rated obligations. Each
Portfolio may invest up to 20% of its net assets in municipal obligations rated
below investment grade (but not lower than B by Moody's, S&P or Fitch) and
unrated municipal obligations considered to be of comparable quality by the
Investment Adviser. Securities rated below BBB or Baa are commonly known as
"junk bonds". See "Credit Quality - Risks." A 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 no Portfolio's
holdings of obligations rated below investment grade will exceed 35% of its net
assets. For a description of municipal obligation ratings, see the Statement of
Additional Information.
In pursuing its investment objective, each Portfolio seeks to invest in a
portfolio having a dollar weighted average duration of between three and nine
years. Duration represents the dollar weighted average maturity of expected cash
flows (i.e., interest and principal payments) on one or more debt obligations,
discounted to their present values. The duration of an obligation is usually not
more than its stated maturity and is related to the degree of volatility in the
market value of the obligation. Maturity measures only the time until a bond or
other debt security provides its final payment; it does not take into account
the pattern of a security's payments over time. Duration takes both interest and
principal payments into account and, thus, in the Investment Adviser's opinion,
is a more accurate measure of a debt security's sensitivity to changes in
interest rates. In computing the duration of its portfolio, a Portfolio will
have to estimate the duration of debt obligations that are subject to prepayment
or redemption by the issuer, based on projected cash flows from such
obligations.
Each Portfolio may use various techniques to shorten or lengthen the dollar
weighted average duration of its portfolio, including the acquisition of debt
obligations at a premium or discount, and transactions in futures contracts and
options on futures. Subject to the requirement that its dollar weighted average
portfolio duration will not exceed nine years, a Portfolio may invest in
individual debt obligations of any maturity.
MUNICIPAL OBLIGATIONS. Municipal 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, a
Portfolio will invest at least 65% of its total assets in obligations issued by
its respective State 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 a Fund derived
from such interest) is treated as a tax preference item which could subject the
recipient to or increase the recipient's liability for the Federal alternative
minimum tax. A Portfolio may not invest more than 20% of its net assets in these
obligations and obligations subject to regular Federal income tax and/or the
relevant State taxes. As of March 31, 1995, the Portfolios had not invested in
private activity bonds. For corporate shareholders, each 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.
CONCENTRATION. Each Portfolio will concentrate its investments in municipal
obligations issued by its respective State. Each Portfolio is, therefore, more
susceptible to factors adversely affecting issuers in one State than mutual
funds which do not concentrate in a specific State. Municipal obligations of
issuers in a single State may be adversely effected by economic developments and
by legislation and other governmental activities in that State. To the extent
that a Portfolio's assets are concentrated in municipal obligations of issuers
of a single State, that Portfolio may be subject to an increased risk of loss.
Each Portfolio may also invest in obligations issued by the governments of
Puerto Rico, the U.S. Virgin Islands and Guam (the "Territories"). See the
Appendix to this Prospectus for a description of economic and other factors
relating to the relevant States and the Territories.
In addition, each Portfolio may invest 25% or more of its assets in
municipal obligations of the same type, including, without limitation, the
following: general obligations of its respective State 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 a Portfolio more susceptible to adverse economic, political, or
regulatory occurrences affecting a particular category of issuer. For example,
health care-related issuers are susceptible to medicaid reimbursement policies,
and national and state health care legislation. As a Portfolio's concentration
increases, so does the potential for fluctuation in the value of the
corresponding Fund's shares.
NON-DIVERSIFIED STATUS. Each Portfolio's classification under the Investment
Company Act of 1940 as a "non-diversified" investment company allows it to
invest, with respect to 50% of its assets, more than 5% of its assets in the
securities of any issuer. Because of the small number of municipal obligations
issued by a State, a Portfolio is likely to invest a greater percentage of its
assets in the securities of a single issuer than would a diversified fund.
Therefore, a Portfolio would be more susceptible to any single adverse economic
or political occurrence or development affecting issuers of the relevant State's
municipal obligations. A Portfolio will also 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. It is also possible that sufficient
suitable State municipal obligations will not be available for a Portfolio to
achieve its investment objective.
- --------------------------------------------------------------------------------
EACH FUND AND PORTFOLIO HAVE ADOPTED CERTAIN FUNDAMENTAL INVESTMENT RESTRICTIONS
WHICH ARE ENUMERATED IN DETAIL IN THE STATEMENT OF ADDITIONAL INFORMATION AND
WHICH MAY NOT BE CHANGED UNLESS AUTHORIZED BY A SHAREHOLDER VOTE AND AN INVESTOR
VOTE, RESPECTIVELY. EXCEPT FOR SUCH ENUMERATED RESTRICTIONS AND AS OTHERWISE
INDICATED IN THIS PROSPECTUS, THE INVESTMENT OBJECTIVE AND POLICIES OF EACH FUND
AND PORTFOLIO ARE NOT FUNDAMENTAL POLICIES AND ACCORDINGLY MAY BE CHANGED BY THE
TRUSTEES OF THE TRUST AND THE PORTFOLIO WITHOUT OBTAINING THE APPROVAL OF A
FUND'S SHAREHOLDERS OR INVESTORS IN THE CORRESPONDING PORTFOLIO, AS THE CASE MAY
BE. IF ANY CHANGES WERE MADE IN A 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.
- --------------------------------------------------------------------------------
MUNICIPAL LEASES. Each Portfolio may invest in municipal leases and
participations therein, which arrangements frequently involve special risks.
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. In
addition, certain municipal lease obligations may be deemed illiquid for the
purpose of each Portfolio's 15% limitation on investments in illiquid
securities. In the event a Portfolio acquires an unrated municipal lease
obligation, the Investment Adviser will be responsible for determining the
credit quality of such obligation on an ongoing basis, including an assessment
of the likelihood that the lease may or may not be cancelled.
ZERO COUPON BONDS. Each 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
municipal obligations that provide for regular payments of interest. A Portfolio
will accrue income on such bonds for tax and accounting purposes in accordance
with applicable law, the corresponding Fund's proportionate share of which
income is distributable to shareholders of that Fund. Because no cash is
received at the time such income is accrued, a Portfolio may be required to
liquidate other portfolio securities to generate cash that a Fund may withdraw
from the Portfolio to satisfy the Fund's distribution obligations.
CREDIT QUALITY -- RISKS. Many municipal obligations offering high current income
are in the lowest investment grade category (Baa or BBB), lower categories or
may be unrated. As indicated above, each Portfolio may invest in municipal
obligations rated below investment grade (but not lower than B by Moody's, S&P
or Fitch) and comparable unrated obligations. The lowest investment grade, lower
rated and comparable unrated municipal obligations in which a Portfolio may
invest will have speculative characteristics in varying degrees. While such
obligations may have some quality and protective characteristics, these
characteristics can be expected to be offset or outweighed by uncertainties or
major risk exposures to adverse conditions. Lower rated and comparable unrated
municipal obligations are subject to the risk of an issuer's inability to meet
principal and interest payments on the obligations (credit risk) and may also be
subject to greater price volatility due to such factors as interest rate
sensitivity, market perception of the creditworthiness of the issuer and general
market liquidity (market risk). Lower rated or unrated municipal obligations are
also more likely to react to real or perceived developments affecting market and
credit risk than are more highly rated obligations, which react primarily to
movements in the general level of interest rates. Each Portfolio may retain
defaulted obligations in its portfolio when such retention is considered
desirable by the Investment Adviser. In the case of a defaulted obligation, a
Portfolio may incur additional expense seeking recovery of its investment. For a
description of municipal obligation ratings, see the Statement of Additional
Information.
INSURED OBLIGATIONS. Each Portfolio may purchase municipal bonds that are
additionally secured by insurance, bank credit agreements, or escrow accounts.
The credit quality of companies which provide such credit enhancements will
affect the value of those securities. Although the insurance feature reduces
certain financial risks, the premiums for insurance and the higher market price
paid for insured obligations may reduce a Fund's current yield. Insurance
generally will be obtained from insurers with a claims-paying ability rated Aaa
by Moody's or AAA by S&P or Fitch. The insurance does not guarantee the market
value of the insured obligations or the net asset value of a Fund's shares.
MARKET CONDITIONS. The management of the Portfolios believes that, in general,
the secondary market for some municipal obligations issued within a State
(including issues which are privately placed with a Portfolio) is less liquid
than that for taxable debt obligations or for large issues of municipal
obligations that trade in a national market. No established resale market exists
for certain of the municipal obligations in which a Portfolio may invest. The
market for obligations rated below investment grade is also likely to be less
liquid than the market for higher rated obligations. These considerations may
restrict the availability of such obligations, may affect the choice of
securities sold to meet redemption requests and may limit a 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 shares of a Fund will change
in response to fluctuations in prevailing interest rates and changes in the
value of the securities held by its corresponding Portfolio. When interest rates
decline, the value of securities held by a Portfolio can be expected to rise.
Conversely, when interest rates rise, the value of most portfolio security
holdings can be expected to decline. The degree of price volatility is related
to the duration of a portfolio security, with shorter duration securities
exhibiting less price volatility than longer duration securities with the same
changes in interest rates. Because each Portfolio intends to limit its average
portfolio duration to no more than nine years, the net asset value of its
corresponding Fund can be expected to be less sensitive to changes in interest
rates than a fund with a longer average portfolio duration. An investment in
shares of a Fund will not constitute a complete investment program.
SHORT-TERM TRADING. Each 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 a Portfolio believes to be a temporary disparity in the
normal yield relationship between the two securities. Yield disparities may
occur for reasons not directly related to the investment quality of particular
issues or the general movement of interest rates, such as changes in the overall
demand for or supply of various types of municipal obligations or changes in the
investment objectives of investors. Such trading may be expected to increase
portfolio turnover rate and the expenses incurred in connection with such
trading. Each 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. Each Portfolio may purchase securities on a "when-
issued" basis, which means that payment and delivery occur on a future
settlement date. The price and yield of such securities are generally fixed on
the date of commitment to purchase. However, the market value of the securities
may fluctuate prior to delivery and upon delivery the securities may be worth
more or less than a Portfolio agreed to pay for them. A Portfolio will not
accrue income in respect of when-issued securities prior to the stated delivery
date of such securities. Each Portfolio will maintain in a segregated account
sufficient assets to cover its outstanding purchase obligations.
FUTURES AND OPTIONS TRANSACTIONS. To hedge against changes in interest rates,
each Portfolio may purchase and sell various kinds of futures contracts, and
purchase and write call and put options on futures contracts. Each 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. Each Portfolio will engage in futures and
related options transactions for bona fide hedging or non-hedging purposes as
defined in or permitted by regulations of the Commodity Futures Trading
Commission. A 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.
A 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 a Portfolio's transactions in futures contracts or options on
futures, except that at least 80% of the Portfolio's net assets will be invested
in municipal obligations as described above. These transactions involve
brokerage costs, require margin deposits and, in the case of futures contracts
and options requiring a 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 municipal 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 a 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. Distribution by a Fund from any net income or gains
realized on its corresponding Portfolio's transactions in futures and options on
futures will be taxable.
ORGANIZATION OF THE FUNDS AND THE PORTFOLIOS
- ------------------------------------------------------------------------------
EACH FUND IS A 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
Funds) it is known as a "series company." The Trust is initially offering Class
I shares of each Fund. After receipt of certain regulatory approvals, the
Trustees will divide the shares of each Fund into two or more classes (Class I,
Class II and, possibly, Class III) and fix and determine the relative rights and
preferences as between, and all provisions applicable to, each of such Classes.
Shares of different classes may be sold under different sales arrangements. Each
Class of shares of a Fund will represent interests in the same assets held by
the Fund, except that: (1) Class I shares will be subject to the Fund's Rule
12b-1 distribution plan, which provides for payments of sales commissions and
distribution fees to the Principal Underwriter in amounts not exceeding .75% of
the Fund's average daily net assets attributable to the Class I shares for each
fiscal year, and subject to service fees payable under the plan (see
"Distribution Plans"); (2) Class II shares would be subject to service fees
payable under such plan; (3) any other Class of shares established may be
subject to a Rule 12b-1 distribution plan or service fee applicable thereto; (4)
a higher transfer agency fee may be imposed on Class I shares than on other
Classes of shares; (5) only the Class I shares will have a conversion feature
providing for the automatic conversion to Class II shares four full years after
purchase; (6) the shareholders of any Class subject to a Rule 12b-1 distribution
plan will have exclusive voting rights with respect to the plan applicable to
their respective Class; (7) each Class of shares may have different exchange
privileges; and (8) subject to regulatory approvals, each Class of shares will
bear the expenses which are properly attributable to such Class. Upon creation
of additional Classes of shares, the Funds' offering documents will be revised
in an appropriate manner to reflect such events.
When issued and outstanding, each Fund's 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. In the event of the liquidation
of a Fund, shareholders of each Class of that Fund are entitled to share pro
rata in the net assets attributable to the Class available for distribution to
shareholders.
EACH PORTFOLIO IS ORGANIZED AS A TRUST UNDER THE LAWS OF THE STATE OF NEW
YORK AND INTENDS TO BE TREATED AS A PARTNERSHIP FOR FEDERAL TAX PURPOSES. The
Portfolios, as well as the Trust, intend to comply with all applicable Federal
and state securities laws. Each Portfolio's Declaration of Trust provides that
its corresponding Fund and other entities permitted to invest in that Portfolio
(e.g., other U.S. and foreign investment companies, and common and commingled
trust funds) will each be liable for all obligations of the Portfolio. However,
the risk of a Fund incurring financial loss on account of such liability is
limited to circumstances in which both inadequate insurance exists and the
Portfolio itself is unable to meet its obligations. Accordingly, the Trustees of
the Trust believe that neither the Funds nor their shareholders will be
adversely affected by reason of the Funds investing in the Portfolios.
SPECIAL INFORMATION ON THE FUND/PORTFOLIO INVESTMENT STRUCTURE. An investor in a
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 its corresponding Portfolio
(although a Fund may temporarily hold a de minimus amount of cash), which is a
separate investment company with an identical investment objective. Therefore, a
Fund's interest in the securities owned by its corresponding Portfolio is
indirect. In addition to selling an interest to its corresponding Fund, a
Portfolio may sell interests to other affiliated and non-affiliated mutual funds
or institutional investors. Such investors will invest in a Portfolio on the
same terms and conditions and will pay a proportionate share of the Portfolio's
expenses. However, the other investors investing in a Portfolio are not required
to sell their shares at the same public offering price as the corresponding Fund
due to variations in sales commissions and other operating expenses. Therefore,
investors in a Fund should be aware that these differences may result in
differences in returns experienced by investors in the different funds that
invest in its corresponding 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 Portfolios, see "The Funds" Investment Objectives" and
"How the Funds and the Portfolios Invest their Assets". Further information
regarding investment practices may be found in the Statement of Additional
Information.
The Trustees of the Trust have considered the advantages and disadvantages
of investing the assets of each Fund in its corresponding Portfolio, as well as
the advantages and disadvantages of the two-tier format. The Trustees believe
that the structure offers opportunities for substantial growth in the assets of
the Portfolios, and affords the potential for economies of scale for each Fund,
at least when the assets of its corresponding Portfolio exceed $500 million.
A Fund may withdraw (completely redeem) all its assets from its
corresponding Portfolio at any time if the Board of Trustees of the Trust
determines that it is in the best interest of that Fund to do so. The investment
objective and the nonfundamental investment policies of each Fund and Portfolio
may be changed by the Trustees of the Trust and the Portfolio without obtaining
the approval of the shareholders of that Fund or the investors in that
Portfolio. Any such change of an investment objective 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. If a shareholder redeems shares because of a
change in the nonfundamental objective or policies of a Fund, those shares may
be subject to a contingent deferred sales charge, as described in "How to Redeem
Fund Shares". In the event a Fund withdraws all of its assets from its
corresponding Portfolio, or the Board of Trustees of the Trust determines that
the investment objective of such Portfolio is no longer consistent with the
investment objective of the Fund, such Trustees would consider what action might
be taken, including investing the assets of such Fund in another pooled
investment entity or retaining an investment adviser to manage the Fund's assets
in accordance with its investment objective. A Fund's investment performance may
be affected by a withdrawal of all its assets from its corresponding Portfolio.
Information regarding other pooled investment entities or funds which invest
in a 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 investors in a Portfolio may be adversely affected by the
actions of larger investors in the Portfolio. For example, if a large investor
withdraws from a Portfolio, the remaining investors may experience higher pro
rata operating expenses, thereby producing lower returns. Additionally, a
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 Funds may be subject to additional regulations than
historically structured funds.
Each Portfolio's Declaration of Trust provides that the Portfolio will
terminate 120 days after the complete withdrawal of a 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 Portfolios
as partnerships for Federal income tax purposes. See "Distributions and Taxes"
for further information. Whenever a Fund as an investor in a Portfolio is
requested to vote on matters pertaining to the Portfolio (other than the
termination of the Portfolio's business, which may be determined by the Trustees
of the Portfolio without investor approval), the Fund will hold a meeting of
Fund shareholders and will vote its interest in the Portfolio for or against
such matters proportionately to the instructions to vote for or against such
matters received from Fund shareholders. A Fund shall vote shares for which it
receives no voting instructions in the same proportion as the shares for which
it receives voting instructions. Other investors in a Portfolio may alone or
collectively acquire sufficient voting interests in the Portfolio to control
matters relating to the operation of the Portfolio, which may require the
corresponding Fund to withdraw its investment in the Portfolio or take other
appropriate action. Any such withdrawal could result in a distribution "in kind"
of portfolio securities (as opposed to a cash distribution from the Portfolio).
If securities are distributed, a Fund could incur brokerage, tax or other
charges in converting the securities to cash. In addition, the distribution in
kind may result in a less diversified portfolio of investments or adversely
affect the liquidity of a Fund. Notwithstanding the above, there are other means
for meeting shareholder redemption requests, such as borrowing.
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 each Portfolio are the same. Such procedures require
each Board to take action to resolve any conflict of interest between a Fund and
its corresponding Portfolio, and it is possible that the creation of separate
boards may be considered. For further information concerning the Trustees and
officers of each of the Trust and the Portfolios, see the Statement of
Additional Information.
Although each Fund offers only its own shares of beneficial interest, it is
possible that a Fund might become liable for a misstatement or omission in this
Prospectus regarding another Fund because the Funds use this combined
Prospectus. The Trustees of the Trust have considered this factor in approving
the use of a combined Prospectus.
MANAGEMENT OF THE FUNDS AND THE PORTFOLIOS
- ------------------------------------------------------------------------------
EACH PORTFOLIO ENGAGES BOSTON MANAGEMENT AND RESEARCH ("BMR"), A WHOLLY-OWNED
SUBSIDIARY OF EATON VANCE MANAGEMENT ("EATON VANCE"), AS ITS INVESTMENT ADVISER.
EATON VANCE, ITS AFFILIATES AND ITS PREDECESSOR COMPANIES HAVE BEEN MANAGING
ASSETS OF INDIVIDUALS AND INSTITUTIONS SINCE 1924 AND MANAGING INVESTMENT
COMPANIES SINCE 1931.
Acting under the general supervision of the Board of Trustees of each
Portfolio, BMR manages each Portfolio's investments and affairs. Under its
investment advisory agreement with a Portfolio, BMR receives a monthly advisory
fee equal to the aggregate of
(a) a daily asset based fee computed by applying the annual asset rate
applicable to that portion of the total daily net assets in each
Category as indicated below, plus
(b) a daily income based fee computed by applying the daily income rate
applicable to that portion of the total daily gross income (which
portion shall bear the same relationship to the total daily gross income
on such day as that portion of the total daily net assets in the same
Category bears to the total daily net assets on such day) in each
Category as indicated below:
<TABLE>
<CAPTION>
ANNUAL DAILY
CATEGORY DAILY NET ASSETS ASSET RATE INCOME RATE
-------- ---------------- ---------- -----------
<S> <C> <C> <C>
1 up to $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%
Each Portfolio paid (or, absent a fee reduction, would have paid) advisory
fees for the period from the start of business, November 3, 1994, November 28,
1994 and November 11, 1994, respectively, to March 31, 1995 equivalent to the
following annualized percentage of average daily net assets:
</TABLE>
NET ASSETS AS
OF
MARCH 31, ADVISORY
PORTFOLIO 1995 FEE
--------- --------
Arizona ......................................... $590,456 0.15%\1/
North Carolina .................................. 235,759 0.15%\2/
Virginia ........................................ 220,628 0.15%\3/
\1/ To enhance the net income of the Arizona Portfolio, BMR made a preliminary
reduction of its advisory fee in the full amount of such fee and BMR was
allocated $1,639 of expenses related to the operation of such Portfolio.
\2/ To enhance the net income of the North Carolina Portfolio, BMR made a
preliminary reduction of its advisory fee in the full amount of such fee and
BMR was allocated $1,083 of expenses related to the operation of such
Portfolio.
\3/ To enhance the net income of the Virigina Portfolio, BMR made a preliminary
reduction of its advisory fee in the full amount of such fee and BMR was
allocated $1,160 of expenses related to the operation of such Portfolio.
BMR also furnishes for the use of each Portfolio office space and all
necessary office facilities, equipment and personnel for servicing the
investments of the Portfolios. Each Portfolio is responsible for the payment of
all expenses other than those expressly stated to be payable by BMR under its
investment advisory agreement.
Raymond E. Hender has acted as the portfolio manager of the Arizona
Portfolio since it commenced operations. He joined Eaton Vance and BMR as a Vice
President in 1992. Previously, he was a Senior Vice President of Bank of New
England (1989-1992) and a Portfolio Manager of Fidelity Management & Research
Company (1977-1988).
William H. Ahern has acted as the portfolio manager of the North Carolina
and Virginia Portfolios since they commenced operations. He has been an
Assistant Vice President of Eaton Vance since 1994 and an employee since 1989.
Municipal obligations are normally traded on a net basis (without
commission) through broker-dealers and banks acting for their own account. Such
firms attempt to profit from such transactions by buying at the bid price and
selling at the higher asked price of the market, and the difference is
customarily referred to as the spread. In selecting firms which will execute
portfolio transactions, BMR judges their professional ability and quality of
service and uses its best efforts to obtain execution at prices which are
advantageous to the Portfolios and at reasonably competitive spreads. Subject to
the foregoing, BMR may consider sales of shares of the Funds or of other
investment companies sponsored by BMR or Eaton Vance as a factor in the
selection of firms to execute portfolio transactions.
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 Funds. The Trust has not retained the services of an investment adviser
since the Trust seeks to achieve the investment objective of each Fund by
investing its assets in the corresponding Portfolio. As Administrator, Eaton
Vance provides the Funds with general office facilities and supervises the
overall administration of the Fund. For these services Eaton Vance currently
receives no compensation. The Trustees of the Trust may determine, in the
future, to compensate Eaton Vance for such services.
The Portfolios and the Funds, as the case may be, will each be responsible
for all of its 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 Portfolios and the Funds, as the case
may be, include, without limitation; custody and transfer agency fees and
expenses, including those incurred 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 Portfolios and the Funds will also each bear
expenses incurred in connection with litigation in which each of the Portfolios
or the Funds, as the case may be, is a party and any legal obligation to
indemnify its respective officers and Trustees with respect thereto.
DISTRIBUTION PLANS
- ------------------------------------------------------------------------------
EACH FUND FINANCES DISTRIBUTION ACTIVITIES WHICH ARE PRIMARILY INTENDED TO
RESULT IN THE SALE OF ITS CLASS I SHARES AND HAS ADOPTED A DISTRIBUTION PLAN (A
"PLAN") PURSUANT TO RULE 12B-1 UNDER THE INVESTMENT COMPANY ACT OF 1940. Rule
12b-1 permits a mutual fund, such as a Fund, to finance distribution activities
and bear expenses associated with the distribution of its shares provided that
any payments made by the fund are made pursuant to a written plan adopted in
accordance with the Rule. Each Plan is subject to, and complies with, the sales
charge rule of the National Association of Securities Dealers, Inc. (the "NASD
Rule"). Each Fund's Plan is described in the Statement of Additional
Information, and the following is a brief description of the salient features of
the Plans. Each Fund's Plan provides that the Fund, subject to the NASD Rule,
will pay sales commissions and distribution fees to the Principal Underwriter
only after and as a result of the sale of Class I shares of the Fund. On each
sale of Class I shares (excluding reinvestment of dividends and distributions) a
Fund will pay the Principal Underwriter (i) sales commissions equal to 3.5% of
the amount received by a Fund for each Class I share sold and (ii) distribution
fees calculated by applying the rate of 1% over the prime rate then reported in
The Wall Street Journal to the outstanding balance of Uncovered Distribution
Charges (as described below) of the Principal Underwriter. The Principal
Underwriter currently expects to pay sales commissions (except on exchange
transactions and reinvestments) to a financial service firm (an "Authorized
Firm") at the time of sale equal to 2.5% of the purchase price of the Class I
shares sold by such Firm. The Principal Underwriter will use its own funds
(which may be borrowed from banks) to pay such commissions. Because the payment
of the sales commissions and distribution fees to the Principal Underwriter is
subject to the NASD Rule described below, it will take the Principal Underwriter
a number of years to recoup the sales commissions paid by it to Authorized Firms
from the payments received by it from a Fund pursuant to a Plan.
THE NASD RULE REQUIRES EACH FUND TO LIMIT ITS ANNUAL PAYMENTS OF SALES
COMMISSIONS AND DISTRIBUTION FEES TO THE PRINCIPAL UNDERWRITER TO AN AMOUNT NOT
EXCEEDING .75% OF THE FUND'S AVERAGE DAILY NET ASSETS ATTRIBUTABLE TO THE CLASS
I SHARES FOR EACH FISCAL YEAR. Under its Plan a Fund accrues daily an amount at
the rate of 1/365 of .75% of the Fund's net assets attributable to Class I
shares, and pays such accrued amounts monthly to the Principal Underwriter. Each
Plan requires such accruals to be automatically discontinued during any period
in which there are no outstanding Uncovered Distribution Charges under the Plan.
Uncovered Distribution Charges are calculated daily and, briefly, are equivalent
to all unpaid sales commissions and distribution fees to which the Principal
Underwriter is entitled under a Plan less all contingent deferred sales charges
theretofore paid to the Principal Underwriter. The Eaton Vance organization may
be considered to have realized a profit under a Fund's Plan if at any point in
time the aggregate amounts of all payments received by the Principal Underwriter
from the Fund pursuant to the Plan, including any contingent deferred sales
charges, have exceeded the total expenses theretofore incurred by such
organization in distributing Class I shares of the Fund. Total expenses for this
purpose will include an allocable portion of the overhead costs of such
organization and its branch offices.
In a transaction involving a sale of Class I shares of a Fund resulting from
an exchange of shares of the funds currently listed under "The Eaton Vance
Exchange Privilege," the Principal Underwriter will not pay a sales commission
to an Authorized Firm, inasmuch as the Principal Underwriter will have
previously paid a sales commission to the Authorized Firm when the shares of the
exchanged fund were sold.
Because of the NASD Rule limitation on the amount of sales commissions and
distribution fees paid to the Principal Underwriter during any fiscal year, a
high level of sales of Class I shares during the initial years of a Fund's
operations would cause a large portion of the sales commissions attributable to
a sale of Class I shares to be accrued and paid by the Fund to the Principal
Underwriter in fiscal years subsequent to the year in which such shares were
sold. This spreading of sales commissions payments under each Fund's Plan over
an extended period would result in the incurrence and payment of increased
distribution fees under the Plan.
For the period ended March 31, 1995, each Fund paid sales commissions under
its Plan equivalent to .75% (annualized) of such Fund's average daily net
assets. As of March 31, 1995, the outstanding Uncovered Distribution Charges of
the Principal Underwriter on such day calculated under each Fund's Plan amounted
to approximately $4,000 (equivalent to .008% of net assets on such day) in the
case of the Arizona Fund, $5,000 (equivalent to .037% of net assets on such day)
in the case of the North Carolina Fund, and $3,000 (equivalent to .025% of net
assets on such day) in the case of the Virginia Fund.
THE PLANS ALSO AUTHORIZE THE FUNDS TO MAKE PAYMENTS OF SERVICE FEES TO THE
PRINCIPAL UNDERWRITER, AUTHORIZED FIRMS AND OTHER PERSONS IN AMOUNTS NOT
EXCEEDING .25% OF AVERAGE DAILY NET ASSETS ATTRIBUTABLE TO ALL CLASSES OF SHARES
FOR EACH FISCAL YEAR. The Trustees of the Trust have initially implemented this
provision of each Fund's Plan by authorizing the Fund to make quarterly payments
of service fees to the Principal Underwriter and Authorized Firms in amounts not
expected to exceed .15% of the Fund's average daily net assets attributable to
both Class I and Class II shares for each fiscal year based on the value of Fund
shares sold by such persons and remaining outstanding for at least twelve
months. However, each Fund's Plan authorizes the Trustees of the Trust on behalf
of the Fund to increase payments to the Principal Underwriter, Authorized Firms
and other persons from time to time without further action by shareholders of
the Fund, provided that the aggregate amount of payments made to such persons
under the Plan in any fiscal year of the Fund does not exceed .25% of the Fund's
average daily net assets attributable to all Classes of shares. As permitted by
the NASD Rule, such payments are made for personal services and/or the
maintenance of shareholder accounts. Service fees are separate and distinct from
the sales commissions and distribution fees payable by a Fund to the Principal
Underwriter, and as such are not subject to automatic discontinuance when there
are no outstanding Uncovered Distribution Charges of the Principal Underwriter.
The Funds expect to begin accruing for service fee payments during the quarter
ending December 31, 1995.
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 a Fund's Class I 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 Class I
shares. In addition, the Principal Underwriter may from time to time increase or
decrease the sales commissions payable to Authorized Firms.
Each Fund may, in its absolute discretion, suspend, discontinue or limit the
offering of its Class I shares at any time. In determining whether any such
action should be taken, the Funds' management intends to consider all relevant
factors, including without limitation the size of a Fund, the investment climate
and market conditions, the volume of sales and redemptions of Class I shares,
and the amount of Uncovered Distribution Charges of the Principal Underwriter.
Each Plan may continue in effect and payments may be made under the Plan
following any such suspension, discontinuance or limitation of the offering of
Class I shares; however, no Fund is contractually obligated to continue its Plan
for any particular period of time. Suspension of the offering of Class I shares
would not, of course, affect a shareholder's ability to redeem shares.
VALUING FUND SHARES
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EACH 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). Each 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 a Fund's total assets, less
its liabilities, by the number of shares outstanding. Because each Fund invests
its assets in an interest in its corresponding Portfolio, 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).
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 Fund share. It is the Authorized Firms'
responsibility to transmit orders promptly to the Principal Underwriter, which
is a wholly-owned subsidiary of Eaton Vance.
Each Portfolio's net asset value is also determined as of the close of
regular trading on the Exchange by IBT (as custodian and agent for the
Portfolio), based on market or fair value in the manner authorized by the
Trustees of the Portfolio. Municipal obligations will normally be valued on the
basis of valuations furnished by a pricing service. For further information
regarding the valuation of the Portfolios' assets, see "Determination of Net
Asset Value" in the Statement of Additional Information. Eaton Vance Corp. owns
77.3% of the outstanding stock of IBT, the Funds' and the Portfolios' custodian.
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SHAREHOLDERS MAY DETERMINE THE VALUE OF THEIR INVESTMENT BY MULTIPLYING THE
NUMBER OF FUND SHARES OWNED BY THE CURRENT NET ASSET VALUE PER SHARE.
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HOW TO BUY FUND SHARES
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CLASS I SHARES OF A FUND MAY BE PURCHASED FOR CASH OR MAY BE ACQUIRED IN
EXCHANGE FOR SECURITIES. Pursuant to a rule of the Commission, each Fund has
adopted a multi-class plan and may offer more than one Class of shares after
receiving a private letter ruling from the Internal Revenue Service. There is no
assurance that a Fund will be able to obtain such ruling.
CLASS I SHARES
Investors may purchase Class I shares of a Fund through Authorized Firms
without an initial sales charge at the net asset value per Class I share of the
Fund next determined after an order is effective. A Fund may suspend the
offering of shares at any time and may refuse an order for the purchase of
shares. Shares of each Fund are offered for sale only in States where such
shares may be legally sold.
An initial investment in Class I shares of a 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 Funds' 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 Automated Investing
accounts, which may be established with an investment of $50 or more. See "Eaton
Vance Shareholder Services."
CONVERSION FEATURE. All distributions on Class I shares which the shareholder
elects to reinvest will be reinvested in Class I shares; for purposes of
conversion to Class II shares, Class I shares acquired through reinvestment of
such distributions will be considered to be held in a separate sub-account.
Class I shares (except those in the sub-account) held for four full years will
be, at the commencement of the fifth year, automatically converted into Class II
shares, and a pro rata portion of the Class I shares in the sub-account will
also convert to Class II shares (such portion to be determined by the ratio that
the shareholder's Class I shares being converted bears to the shareholder's
total Class I shares not acquired through reinvestment of distributions). A
Fund's ability to implement this conversion feature will be dependent on
obtaining the ruling referred to above.
CLASS II SHARES (to be issued only after receipt of a private letter ruling from
the Internal Revenue Service).
Class II shares will be issued automatically in connection with the
conversion feature referred to above. Class II shares are not subject to the
sales commissions and distribution fees payable from assets attributable to the
Class I shares, but bear service fees payable under a Fund's distribution plan
(see "Distribution Plans"). Class II shares may bear lower transfer agency fees
than Class I shares. The Trustees of the Trust may also allow Class II shares to
be available for acquisition by limited classes of investors identified in the
Funds' offering documents.
If deemed appropriate by the Trustees, a Fund may in the future offer
additional Classes of shares the terms of which would be determined by the
Trustees.
ACQUIRING FUND SHARES IN EXCHANGE FOR SECURITIES. IBT, as escrow agent, will
receive securities acceptable to Eaton Vance, as Administrator, in exchange for
Class I shares at their net asset value as determined 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 Class I
shares to be issued in exchange for securities will be the aggregate proceeds
from the sale of such securities, divided by the applicable net asset value 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 Trust Co.
Broker #2212
Investors Bank & Trust Company
For A/C EV Marathon [State name] Limited Maturity Tax Free Fund
IN THE CASE OF PHYSICAL DELIVERY:
Investors Bank & Trust Company
Attention: EV Marathon [State name] Limited Maturity Tax Free Fund
Physical Securities Processing Settlement Area
89 South Street
Boston, MA 02111
Investors who are contemplating an exchange of securities for shares of a
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.
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IF YOU DON'T HAVE AN AUTHORIZED FIRM, EATON VANCE CAN RECOMMEND ONE.
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HOW TO REDEEM FUND SHARES
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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 share of the applicable Fund 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., a 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 (1) applicable contingent deferred sales charges described below imposed
on Class I shares and (2) Federal income tax required to be withheld. Although
each 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 a Fund, either totally or partially, by
a distribution in kind of readily marketable securities withdrawn by that Fund
from its corresponding Portfolio. The securities so distributed would be valued
pursuant to the Portfolio's valuation procedures. If a shareholder received a
distribution in kind, the shareholder could incur brokerage or other charges in
converting the securities to cash.
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 Funds' 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, each Fund reserves the
right to redeem 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 a Fund if the cause of the low
account balance was a reduction in the net asset value of Fund shares. No
contingent deferred sales charge will be imposed with respect to such
involuntary redemptions.
CONTINGENT DEFERRED SALES CHARGE. Class I shares redeemed within the first four
years of their purchase (except shares acquired through the reinvestment of
distributions) generally will be subject to a contingent deferred sales charge.
This contingent deferred sales charge is imposed on any redemption the amount of
which exceeds the aggregate value at the time of redemption of (a) all Class I
shares in the account purchased more than four years prior to the redemption,
(b) all Class I shares in the account acquired through reinvestment of monthly
distributions and capital gains distributions, and (c) the increase, if any, in
the value of all other shares in the account (namely those purchased within the
four years preceding the redemption) over the purchase price of such shares.
Redemptions are processed in a manner to maximize the amount of redemption
proceeds which will not be subject to a contingent deferred sales charge; i.e.,
each redemption will be assumed to have been made first from the exempt amounts
referred to in clauses (a), (b) and (c) above, and second through liquidation of
those shares in the account referred to in clause (c) on a first-in-first-out
basis. Any contingent deferred sales charge which is required to be imposed on
share redemptions will be made in accordance with the following schedule:
YEAR OF CONTINGENT
REDEMPTION DEFERRED SALES
AFTER PURCHASE CHARGE
-------------- --------------
First ....................... 3.0%
Second ...................... 2.5%
Third ....................... 2.0%
Fourth ...................... 1.0%
Fifth and following ......... 0.0%
In calculating the contingent deferred sales charge upon the redemption of
Class I shares acquired in an exchange of shares of a fund currently listed
under "The Eaton Vance Exchange Privilege," the purchase of Class I shares
acquired in the exchange is deemed to have occurred at the time of the original
purchase of exchanged shares. The contingent deferred sales charge applicable to
Class I shares will be waived for shares redeemed (1) pursuant to a Withdrawal
Plan (see "Eaton Vance Shareholder Services"), (2) as part of a required
distribution from a tax-sheltered retirement plan or (3) following the death of
all beneficial owners of such shares, provided the redemption is requested
within one year of death (a death certificate and other applicable documents may
be required.
Redemption requests placed by shareholders who own both Class I and Class II
shares of a Fund will be satisfied first by redeeming the shareholder's Class II
shares, unless the shareholder has made a specific election to redeem Class I
shares.
No contingent deferred sales charge will be imposed on redemptions of Class
II shares of a Fund which have been sold to Eaton Vance, its affiliates, their
respective employees or clients. The contingent deferred sales charge will be
paid to the Principal Underwriter or the Fund. When paid to the Principal
Underwriter it will reduce the amount of Uncovered Distribution Charges
calculated under the Fund's Distribution Plan. See "Distribution Plans."
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THE FOLLOWING EXAMPLE ILLUSTRATES THE OPERATION OF THE CONTINGENT DEFERRED SALES
CHARGE. ASSUME THAT AN INVESTOR PURCHASES $10,000 OF A FUND'S CLASS I SHARES AND
THAT 16 MONTHS LATER THE VALUE OF THE ACCOUNT HAS GROWN THROUGH INVESTMENT
PERFORMANCE AND REINVESTMENT OF DIVIDENDS TO $12,000. THE INVESTOR THEN MAY
REDEEM UP TO $2,000 OF CLASS I SHARES WITHOUT INCURRING A CONTINGENT DEFERRED
SALES CHARGE. IF THE INVESTOR SHOULD REDEEM $3,000 OF CLASS I SHARES, A CHARGE
WOULD BE IMPOSED ON $1,000 OF THE REDEMPTION. THE RATE WOULD BE 2.5% BECAUSE IT
WAS IN THE SECOND YEAR AFTER THE PURCHASE WAS MADE AND THE CHARGE WOULD BE $25.
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REPORTS TO SHAREHOLDERS
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EACH FUND WILL ISSUE TO ITS SHAREHOLDERS SEMI-ANNUAL AND ANNUAL REPORTS
CONTAINING FINANCIAL STATEMENTS. Financial statements included in annual reports
are audited by the Funds' independent certified public accountants. Shortly
after the end of each calendar year, each Fund will furnish its shareholders
with information necessary for preparing Federal and State tax returns.
THE LIFETIME INVESTING ACCOUNT/DISTRIBUTION OPTIONS
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AFTER AN INVESTOR MAKES AN INITIAL PURCHASE OF FUND SHARES, THE FUNDS' TRANSFER
AGENT, THE SHAREHOLDER SERVICES GROUP, INC., WILL SET UP A LIFETIME INVESTING
ACCOUNT FOR THE INVESTOR ON THE APPLICABLE 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 and Class of shares owned. A Fund will not issue
share certificates except upon request.
At least quarterly, shareholders will receive a statement showing complete
details of any transaction and the current share balance and Class of shares in
the account. THE LIFETIME INVESTING ACCOUNT ALSO PERMITS A SHAREHOLDER TO MAKE
ADDITIONAL INVESTMENTS IN SHARES BY SENDING A CHECK FOR $50 OR MORE to The
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 Funds' 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 of the same Class.
Income Option -- Dividends will be paid in cash, and capital gains will be
reinvested in additional shares of the same Class.
Cash Option -- Dividends and capital gains will be paid in cash.
The Share Option will be assigned if no other option is specified.
Distributions, including those reinvested, will be reduced by any withholding
required under the Federal income tax laws.
If the Income Option or Cash Option has been selected, dividend and/or
capital gains distribution checks which are returned by the United States Postal
Service as not deliverable or which remain uncashed for six months or more will
be reinvested in the account in the same Class of shares at the then current net
asset value. Furthermore, the distribution option on the account will be
automatically changed to the Share Option until such time as the shareholder
selects a different option.
DISTRIBUTION INVESTMENT OPTION. In addition to the distribution options set
forth above, dividends and/or capital gains may be invested in additional shares
of another Eaton Vance fund. Before selecting this option, a shareholder should
obtain a prospectus of the other Eaton Vance fund and consider its objectives
and policies carefully.
"STREET NAME" ACCOUNTS. If shares of a 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 a 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.
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UNDER A LIFETIME INVESTING ACCOUNT A SHAREHOLDER CAN MAKE ADDITIONAL INVESTMENTS
IN SHARES OF A FUND BY SENDING A CHECK FOR $50 OR MORE.
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THE EATON VANCE EXCHANGE PRIVILEGE
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Shares of a Fund may currently be exchanged for shares of one or more other
funds in the Eaton Vance Marathon Group of Funds (which includes Eaton Vance
Equity-Income Trust, EV Marathon Strategic Income Fund and any EV Marathon Fund)
or Eaton Vance Money Market Fund, which are distributed subject to a contingent
deferred sales charge. Shares of each Fund may also be exchanged for shares of
Eaton Vance Prime Rate Reserves which are distributed with an early withdrawal
charge. Any such exchange will be made on the basis of the net asset value per
share of each fund at the time of the exchange, provided that such offer is
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 at least
$1,000. The exchange privilege may be changed or discontinued without penalty.
Shareholders will be given sixty (60) days notice prior to any termination or
material amendment of the exchange privilege. The Funds do not permit the
exchange privilege to be used for "Market Timing" and may terminate the exchange
privilege for any shareholder account engaged in Market Timing activity. Any
shareholder account for which more than two round-trip exchanges are made within
any twelve month period will be deemed to be engaged in Market Timing.
Furthermore, a group of unrelated accounts for which exchanges are entered
contemporaneously by a financial intermediary will be considered to be engaged
in Market Timing.
The 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 other funds are available from Authorized Firms or the Principal
Underwriter. The prospectus for each fund describes its investment objectives
and policies, and shareholders should obtain a prospectus and consider these
objectives and policies carefully before requesting an exchange.
No contingent deferred sales charge is imposed on exchanges. For purposes of
calculating the contingent deferred sales charge upon redemption of shares
acquired in an exchange, the contingent deferred sales charge schedule
applicable to the shares at the time of purchase will apply and the purchase of
shares acquired in one or more exchanges is deemed to have occurred at the time
of the original purchase of the exchanged shares. For the contingent deferred
sales charge or early withdrawal charge schedule applicable to Class I shares of
the Funds, EV Marathon Strategic Income Fund and Eaton Vance Prime Rate
Reserves, see "How to Redeem Fund Shares". The contingent deferred sales charge
schedule applicable to the other EV Marathon Funds is 5%, 5%, 4%, 3%, 2% or 1%
in the event of redemption occurring in the first, second, third, fourth, fifth
or sixth year, respectively, after the original share purchase.
Shares of certain other funds advised or administered by Eaton Vance may be
exchanged for Class I shares of a Fund at net asset value 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 Funds, 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.
EATON VANCE SHAREHOLDER SERVICES
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THE FUNDS OFFER 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, is available from Authorized Firms or the Principal Underwriter. The
cost of administering such services for the benefit of shareholders who
participate in them is borne by the applicable Fund 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
being purchased 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, the Class of shares and
the account number should accompany each investment.
BANK AUTOMATED INVESTING -- FOR REGULAR SHARE ACCUMULATION: Cash investments of
$50 or more may be made automatically each month or quarter from a shareholder's
bank account. The $1,000 minimum initial investment and small account redemption
policy are waived for these accounts.
WITHDRAWAL PLAN: A shareholder may draw on shareholdings systematically with
monthly or quarterly checks in an aggregate amount that does not exceed annually
12% of the account balance at the time the Plan is established. Such amount will
not be subject to a contingent deferred sales charge. See "How to Redeem Fund
Shares". A minimum deposit of $5,000 in shares is required.
REINVESTMENT PRIVILEGE: A SHAREHOLDER WHO HAS REPURCHASED OR REDEEMED CLASS I
SHARES MAY REINVEST, WITH CREDIT FOR ANY CONTINGENT DEFERRED SALES CHARGES PAID
ON THE REDEEMED OR REPURCHASED CLASS I SHARES, 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 CLASS I
SHARES OF A FUND, provided that the reinvestment is effected within 30 days
after such repurchase or redemption. Class I 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 a Fund (or by the
Fund's Transfer Agent). To the extent that any Class I shares of a Fund are sold
at a loss and the proceeds are reinvested in Class I shares of the Fund (or
other Class I shares of the Fund are acquired within 30 days before or after the
redemption) some or all of the loss will not be allowed as a tax deduction.
Shareholders should consult their tax advisers concerning the tax consequences
of reinvestments.
DISTRIBUTIONS AND TAXES
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SUBSTANTIALLY ALL OF THE INVESTMENT INCOME ALLOCATED TO A FUND BY ITS
CORRESPONDING PORTFOLIO, LESS THE FUND'S DIRECT AND ALLOCATED EXPENSES (OTHER
THAN SALES COMMISSIONS INCURRED ON SALE OF CLASS I SHARES, WHICH COMMISSIONS ARE
CHARGED TO THE FUND'S PAID-IN-CAPITAL WITH RESPECT TO CLASS I SHARES FOR TAX
PURPOSES), 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 fifteenth day of
each month or the next business day thereafter. It is anticipated that each
monthly distribution on Class I shares will exceed a Fund's net investment
income with respect to such shares as calculated for financial statement
reporting purposes during the applicable period by an amount substantially equal
to the amount of sales commissions charged to the Fund's paid-in-capital with
respect to such shares for tax purposes during such period. In accordance with
generally accepted accounting principles, such excess distributions will be
reported for financial statement purposes as distributions in excess of net
investment income. Each Fund anticipates that for tax purposes the entire
distribution (including the excess amount), whether paid in cash or additional
shares of the Fund, will constitute tax-exempt income to the Class I
shareholders, except for the proportionate part of the distribution that may be
considered taxable income if the Fund has taxable income during the calendar
year. Therefore, the Funds believe that a shareholder should make no adjustment
to the tax basis of existing shareholdings as a result of the monthly
distribution. Shareholders reinvesting the monthly distribution should continue
to treat the amount of the entire distribution as the tax cost basis of the
additional Class I 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 of a
Fund 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. A
Fund's net realized capital gains, if any, consist of the net realized capital
gains allocated to the Fund by its corresponding Portfolio for tax purposes,
after taking into account any available capital loss carryovers; a Fund's net
realized capital gains, if any, will be distributed at least once a year,
usually in December.
In order to qualify as a regulated investment company under the Internal
Revenue Code (the "Code"), each 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, each Fund will
treat itself as owning its proportionate share of each of its corresponding
Portfolio's assets and as entitled to the income of the Portfolio properly
attributable to such share.
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AS A REGULATED INVESTMENT COMPANY UNDER THE CODE, EACH FUND DOES NOT PAY FEDERAL
INCOME OR EXCISE TAXES TO THE EXTENT THAT IT DISTRIBUTES TO SHAREHOLDERS ITS NET
INVESTMENT INCOME AND NET REALIZED CAPITAL GAINS IN ACCORDANCE WITH THE TIMING
REQUIREMENTS IMPOSED BY THE CODE. AS PARTNERSHIPS UNDER THE CODE, THE PORTFOLIOS
ALSO DO 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 7). 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 a Fund.
Tax-exempt distributions received from a Fund are includable in the tax base
for determining the taxability of social security and railroad retirement
benefits.
Interest on indebtedness incurred or continued by a shareholder to purchase
or carry shares of a 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 a 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.
See the Appendix to this Prospectus for information concerning State taxes.
Shareholders should consult their own tax advisers with respect to the State,
local and foreign tax consequences of investing in a Fund.
PERFORMANCE INFORMATION
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FROM TIME TO TIME, EACH FUND MAY ADVERTISE THE YIELD AND/OR AVERAGE ANNUAL TOTAL
RETURN OF CLASS I SHARES. The current yield for the Class will be calculated by
dividing the net investment income per share of the Class during a recent 30 day
period by the maximum offering price per share (net asset value) of the Class 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. Each Fund's average annual total return of
Class I shares is determined by computing the average annual percentage change
in value of $1,000 invested in Class I shares at the maximum public offering
price (net asset value) for specified periods ending with the most recent
calendar quarter, assuming reinvestment of all distributions. The average annual
total return calculation assumes a complete redemption of the investment and the
deduction of any contingent deferred sales charge for Class I shares at the end
of the period. The Funds may publish annual and cumulative total return figures
for Class I shares from time to time.
The Funds may also publish the distribution rate and/or the effective
distribution rate for Class I shares. The distribution rate of the Class is
computed by dividing the most recent monthly distribution per share of the Class
annualized, by the current net asset value per share of the Class. The effective
distribution rate of the Class 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
yield on Class I shares 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 on Class
I shares is based on a 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").
Performance figures published by a Fund which do not include the effect of
any applicable contingent deferred sales charge would be reduced if it were
included.
Comparative information about the yield or distribution rate of the shares
of a Fund and about average rates of return on certificates of deposit, bank
money market deposit accounts, money market mutual funds and other short-term
investments may also be included in advertisements and communications of the
Fund. A bank certificate of deposit, unlike Fund shares, pays a fixed rate of
interest and entitles the depositor to receive the face amount of the
certificate of deposit at maturity. A bank money market deposit account is a
form of savings account which pays a variable rate of interest. Unlike Fund
shares, bank certificates of deposit and bank money market deposit accounts are
insured by the Federal Deposit Insurance Corporation. A money market mutual fund
is designed to maintain a constant value of $1.00 per share and, thus, a money
market fund's shares are subject to less price fluctuation than a Fund's shares.
Investors should note that the investment results of a 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 a Fund or its corresponding Portfolio are paid by
Eaton Vance, the Fund's performance will be higher.
<PAGE>
APPENDIX
STATE SPECIFIC INFORMATION
Because each Portfolio will normally invest at least 65% of its assets in
the obligations within its corresponding State, it is susceptible to factors
affecting that State. Each Portfolio may also invest up to 5% of its net assets
in obligations issued by the governments of Guam and the U.S. Virgin Islands and
up to 35% of its assets in obligations issued by the government of Puerto Rico.
Set forth below is certain economic and tax information concerning the States in
which the Portfolios invest, Puerto Rico, Guam and the U.S. Virgin Islands (the
"Territories"). The bond ratings of a State or Territory provided below are
current as of the date of this Prospectus and are based on economic conditions
which may not continue; moreover, there can be no assurance that particular bond
issues may not be adversely affected by changes in economic, political or other
conditions.
ARIZONA. Arizona's economy is primarily based on the service, high-tech
manufacturing, construction and tourism industries, as well as the military. The
State experienced rapid economic and population growth in the 1980s, which has
slowed somewhat in the 1990s. The problems associated with such growth (air
quality, transportation and public infrastructure) continue to be addressed by
the State legislature. The State's unemployment rate in March 1994 was 5.5%,
below the national rate of 6.5%.
The State's ability to raise revenues is limited by Constitutional and
legislative restrictions on property tax increases. There is also a limit on
annual spending. The State does not issue general obligation bonds, but relies
on pay-as-you-go capital outlays, revenue bonds and certificates of
participation to finance projects. Each of these projects is individually rated
based on its specific creditworthiness.
ARIZONA TAXES. Based upon the advice of Arizona tax counsel, the management
of the Fund believes that under Arizona law, dividends paid by the Fund will be
exempt from Arizona income tax imposed on individuals, corporations and estates
and trusts that are subject to Arizona taxation to the extent such dividends are
excluded from gross income for Federal income tax purposes and are derived from
interest payments on Arizona obligations. In addition, dividends paid by the
Fund will be exempt from Arizona income tax imposed on such persons, though
included in gross income for Federal income tax purposes, to the extent such
dividends are derived from interest payments on direct obligations of the United
States. Other distributions from the Fund, including distributions derived from
net short-term and long-term capital gains, are generally not exempt from
Arizona income tax.
Interest on indebtedness and other related expenses which are incurred or
continued by a shareholder to purchase or carry shares of the Fund generally
will not be deductible for Arizona income tax purposes.
NORTH CAROLINA. North Carolina has an economy largely dependent on textile
and furniture manufacturing and agriculture, (primarily eggs, tobacco and
poultry) although finance, services and trade are becoming increasingly
important. Manufacturing, which continues to be far more important in North
Carolina than in the nation, has been adversely affected by international
competition. Tobacco farming continues to be affected by Federal legislation and
regulatory measures and by international competition. State personal wealth
levels remain well below those of the nation.
The North Carolina State Constitution requires that the total expenditures
of the State for a fiscal period shall not exceed the total of receipts during
the fiscal period and the surplus remaining in the State Treasury at the
beginning of the period. In certain of the past several years, the State has had
to restrict expenditures to comply with the State Constitution. The State has a
long record of sound financial operations. However, the long-term effects of
restrictions on spending imposed to balance the budget are unclear.
For 1993, an $8.2 billion budget was enacted with no new tax increases.
Revenues came in higher than originally budgeted. This resulted in an
improvement in the General Fund from a deficit in fiscal 1992 of $74 million to
a surplus of $367 million. This surplus includes $124.5 million deposited into
the "rainy day fund." Fiscal 1993 ended with a General Fund surplus for the
second straight year. The surplus brought the balance to $681 million (6.3% of
expenditures). A $9.03 billion budget has been passed for fiscal 1994 with no
new tax increases. During fiscal 1994, North Carolina has issued $400 million in
new general obligation bonds to date, but the State's debt per capita is still
low at $150.
General obligations of the State of North Carolina are rated Aaa, AAA and
AAA by Moody's, S&P and Fitch, respectively. In July, 1992, S&P revised its
outlook for the State's general obligations from "Negative" to stable. Fitch
views the State's credit trend as "Stable".
NORTH CAROLINA TAXES. Based upon the advice of North Carolina tax counsel
the management of the Fund believes that distributions from the Fund will not be
subject to North Carolina individual, trust, or estate income taxation to the
extent that such distributions are either (i) excluded from Federal gross income
and represent interest the Fund, either directly or through the Portfolio,
receives on obligations of North Carolina or its political subdivisions,
non-profit educational institutions organized or chartered under the laws of
North Carolina, or Puerto Rico, United States Virgin Islands, or Guam or (ii)
represent interest the Fund, either directly or through the Portfolio, receives
on direct obligations of the United States. These North Carolina income tax
exemptions will be available only if the Fund complies with the requirement of
the Code that at least 50% of the value of its assets at the close of each
quarter of its taxable years is invested, either directly or through the
Portfolio, in state, municipal, or other obligations described in (S) 103(a) of
the Code. The Fund intends to comply with that requirement.
Any capital gains distributed by the Fund (except for capital gains
attributable to the sale by the Fund or the Portfolio of an obligation the
profit from which is exempt by North Carolina statute) or gains realized by the
shareholder from a redemption or sale of shares of the Fund will be subject to
North Carolina individual, trust, or estate income taxation.
Interest on indebtedness incurred (directly or indirectly) by a shareholder
of the Fund to purchase or carry shares of the Fund generally will not be
deductible for North Carolina income tax purposes.
Each shareholder of the Fund who is an individual, trust, or estate subject
to North Carolina intangibles tax may deduct from the December 31 value of his
shares in the Fund otherwise taxable for intangibles tax purposes the percentage
of the value of the Fund on December 31 that represents the value of (i)
obligations issued by North Carolina or its political subdivisions, nonprofit
educational institutions organized or chartered under the laws of North
Carolina, or Puerto Rico, United States Virgin Islands, or Guam or (ii) direct
obligations of the United States owned, either directly or through the
Portfolio, by the Fund on December 31. The Fund intends to supply to
shareholders the information about Fund assets needed to claim that deduction.
The advice of North Carolina tax counsel is based on a ruling of the North
Carolina Department of Revenue obtained by it on behalf of a fund basically
identical to the Fund. That ruling is subject to change.
VIRGINIA. The Constitution of Virginia requires a balanced budget and limits
the ability of the Commonwealth to create debt. General obligation debt may be
incurred to meet certain short-term needs, to finance capital projects and,
under less stringent restrictions, to finance revenue-producing capital
projects. Also, "special fund" revenue bonds, to which the constitutional debt
restrictions do not apply and which are not supported by the full faith and
credit of the Commonwealth, may be issued to finance qualifying Commonwealth
revenue projects.
General obligations of cities, towns and counties are payable from the
general revenues of the entity, including ad valorem tax revenues on property
within the jurisdiction. Revenue obligations issued by other entities are
customarily payable only from revenues from the particular project or projects
involved.
The economy of Virginia is based primarily on manufacturing, the government
and service sectors, agriculture, mining and tourism, and unemployment rates are
typically below the national average. September 1993 unemployment was 5.3%
versus a national rate of 6.7%. The Commonwealth has a long history of fiscal
stability, due in large part to a conservative financial philosophy, broad-based
employment opportunities and diverse sources of revenue. In the past decade,
however, the Commonwealth has experienced cycles of financial stringency. The
closing General Fund balance at June 30, 1992 was $195.1 million, of which
$142.3 million was reappropriated, leaving $52.8 million as an unreserved,
undesignated balance, the first such balance in four years. The fiscal 1993
ending balance for the General Fund was $331.8 million, of which $59.7 million
is unreserved, undesignated. Revenues for the 1993 fiscal year were 8.9% higher
than fiscal year 1992, a $103 million increase.
In the November 1992 elections, a constitutional "Rainy Day" Fund was
approved which, beginning in fiscal year 1995, will receive one half of growth
above estimates in the income and sales taxes. For fiscal 1993, almost $80
million was deposited into the "Rainy Day" Fund. This fund would be used to
provide funding for one half of shortfalls exceeding 2% with the remainder to be
met through expenditure cuts. Any withdrawals must be appropriated and not more
than one half of the fund may be used in any given year.
Recent years have also seen an increase in limited obligation borrowing by
the Commonwealth and its agencies to support various capital projects and other
programs. Increases in retail sales and motor vehicle related taxes were enacted
in 1986 to support a substantial transportation bonding program. No significant
general tax increases have been enacted by the General Assembly since then.
In the case of Harper v. Virginia Department of Taxation, the United States
Supreme Court ruled that the Commonwealth must return collected taxes that were
subsequently found to be unconstitutional on federal grounds. Virginia's
potential liability is $467.4 million. The control over monetary awards has been
left up to Virginia State Courts. In January 1994, a Circuit Court Judge ruled
that the State does not have to refund any money because the plaintiffs could
have protested the tax before paying it but they did not. The plaintiffs are
appealing. There is no time frame on the appeal. There can be no assurance that
the payment of any award will not have a negative effect on the Commonwealth's
finances.
General obligations of Virginia are rated "Aaa", "AAA", and "AAA" by
Moody's, S&P and Fitch, respectively. On October 27, 1992, S&P affirmed
Virginia's AAA rating and revised its outlook from "Negative" to "Stable" citing
the Commonwealth's reaction to fiscal stress caused by the recession.
Fitch views the credit trend as "Stable."
VIRGINIA TAXES. Based upon the advice of Virginia tax counsel, the
management of the Fund believes that under existing Virginia law, distributions
from the Fund will not be subject to Virginia individual, trust, estate, or
corporate income taxation to the extent that such distributions are either (i)
excluded from Federal gross income and attributable to interest the Fund, either
directly or through the Portfolio, receives on obligations of Virginia, its
political subdivisions, or its instrumentalities, or Puerto Rico, United States
Virgin Islands, or Guam or (ii) attributable to interest the Fund, either
directly or through the Portfolio, receives on direct obligations of the United
States. These Virginia income tax exemptions will be available only if the Fund
complies with the requirement of the Code that at least 50% of the value of its
assets at the close of each quarter of its taxable year is invested, either
directly or through the Portfolio, in state, municipal, or other obligations
described in (S) 103(a) of the Code. The Fund intends to comply with that
requirement.
Other distributions from the Fund, including capital gains, generally will
not be exempt from Virginia income taxation.
Interest on indebtedness incurred (directly or indirectly) by shareholders
to purchase or carry shares of the Fund generally will not be deductible for
Virginia income tax purposes.
Neither the Trust nor the Fund will be subject to any Virginia intangible
property tax on any obligations in the Portfolio. In addition, shares of the
Fund held for investment purposes will not be subject to any Virginia intangible
personal property tax.
<PAGE>
PORTFOLIO INVESTMENT ADVISER
Boston Management and Research
24 Federal Street
Boston, MA 02110
FUND ADMINISTRATOR
Eaton Vance Management
24 Federal Street
Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc.
24 Federal Street
Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company
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 MARATHON LIMITED MATURITY
TAX FREE FUNDS
24 FEDERAL STREET
BOSTON, MA 02110
M-CL7/14P
PROSPECTUS
JULY 14, 1995
o EV MARATHON
ARIZONA
LIMITED MATURITY
TAX FREE FUND
o EV MARATHON
NORTH CAROLINA
LIMITED MATURITY
TAX FREE FUND
o EV MARATHON
VIRGINIA
LIMITED MATURITY
TAX FREE FUND
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
July 14, 1995
EV MARATHON LIMITED MATURITY TAX FREE FUNDS
EV MARATHON ARIZONA LIMITED MATURITY TAX FREE FUND
EV MARATHON NORTH CAROLINA LIMITED MATURITY TAX FREE FUND
EV MARATHON VIRGINIA LIMITED MATURITY TAX FREE FUND
24 Federal Street
Boston, Massachusetts 02110
(800) 225-6265
This Statement of Additional Information consists of two parts. Part I
provides information about the Funds listed above and certain other EV Marathon
Limited Maturity Tax Free Funds and each Part II provides information about a
Fund. Where appropriate, Part I includes cross-references to the relevant
sections of Part II that provide additional, Fund-specific information. Each
Fund is a series of Eaton Vance Investment (the "Trust") and, as described in
the Prospectus, invests substantially all its assets in a separate registered
investment company (a "Portfolio") with the same objective and policies as the
Fund.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page Page
<S> <C> <C> <C>
Additional Information About Investment Policies ....... 1 Taxes .............................................. 16
Investment Restrictions ................................ 8 Principal Underwriter .............................. 18
Trustees and Officers .................................. 9 Distribution Plan .................................. 18
Investment Adviser and Administrator ................... 11 Portfolio Security Transactions .................... 20
Custodian .............................................. 13 Other Information .................................. 21
Service for Withdrawal ................................. 13 Independent Certified Public Accountants ........... 23
Determination of Net Asset Value .........................13 Appendix ........................................... 24
Investment Performance ................................. 14
</TABLE>
PART II
EV Marathon Arizona Limited Maturity Tax Free Fund ...................... a-1
EV Marathon North Carolina Limited Maturity Tax Free Fund ............... b-1
EV Marathon Virginia Limited Maturity Tax Free Fund ..................... c-1
Financial Statements .................................................... d-1
Although each Fund offers only its shares of beneficial interest, it is
possible that a Fund might become liable for a misstatement or omission in this
Statement of Additional Information regarding another Fund because the Funds use
this combined Statement of Additional Information. The Trustees of the Trust
have considered this factor in approving the use of a combined Statement of
Additional Information.
THIS COMBINED STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY THE FUNDS' PROSPECTUS DATED JULY 14, 1995, AS SUPPLEMENTED FROM
TIME TO TIME. THIS COMBINED STATEMENT OF ADDITIONAL INFORMATION SHOULD BE READ
IN CONJUNCTION WITH SUCH PROSPECTUS, A COPY OF WHICH MAY BE OBTAINED WITHOUT
CHARGE BY CONTACTING EATON VANCE DISTRIBUTORS, INC. (THE "PRINCIPAL
UNDERWRITER") (SEE BACK COVER FOR ADDRESS AND PHONE NUMBER).
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART I
The following provides information about the Fund and certain other EV
Marathon Limited Maturity Tax Free Funds.
ADDITIONAL INFORMATION ABOUT INVESTMENT POLICIES
STATE OBLIGATIONS
State obligations are issued to obtain funds for various public and private
purposes. Such obligations include bonds as well as tax-exempt commercial paper,
project notes and municipal notes such as tax, revenue and bond anticipation
notes of short maturity, generally less than three years. In general, there are
three categories of State obligations the interest on which is also exempt from
all types of Federal income taxes applicable to individuals: (i) certain "public
purpose" obligations (whenever issued), which include obligations issued
directly by state and local governments or their agencies to fulfill essential
governmental functions; (ii) certain obligations issued before August 8, 1986
for the benefit of non-governmental persons or entities; and (iii) certain
"private activity bonds" issued after August 7, 1986 which include "qualified
Section 501(c)(3) bonds" or refundings of certain obligations included in the
second category. A fourth category of obligations subject to the alternative
minimum tax is described in the Prospectus. In assessing the Federal income tax
treatment of interest on any State obligation, the Portfolio will generally rely
on an opinion of counsel (when available) obtained by the issuer and will not
undertake any independent verification of the basis for the opinion. The two
principal classifications of municipal bonds are "general obligation" and
"revenue" bonds.
Issuers of general obligation bonds include states, counties, cities, towns
and regional districts. The proceeds of these obligations are used to fund a
wide range of public projects including the construction or improvement of
schools, highways and roads, water and sewer systems and a variety of other
public purposes. The basic security of general obligation bonds is the issuer's
pledge of its faith, credit, and taxing power for the payment of principal and
interest. The taxes that can be levied for the payment of debt service may be
limited or unlimited as to rate and amount.
The principal security for a revenue bond is generally the net revenues
derived from a particular facility or group of facilities or, in some cases,
from the proceeds of a special excise or other specific revenue source. Revenue
bonds have been issued to fund a wide variety of capital projects including:
electric, gas, water, sewer and solid waste disposal systems; highways, bridges
and tunnels; port, airport and parking facilities; transportation systems;
housing facilities, colleges and universities and hospitals. Although the
principal security behind these bonds varies widely, many provide additional
security in the form of a debt service reserve fund whose monies may be used to
make principal and interest payments on the issuer's obligations. Housing
finance authorities have a wide range of security including partially or fully
insured, rent subsidized and/or collateralized mortgages, and/or the net
revenues from housing or other public projects. In addition to a debt service
reserve fund, some authorities provide further security in the form of a state's
ability (without legal obligation) to make up deficiencies in the debt service
reserve fund. Lease rental revenue bonds issued by a state or local authority
for capital projects are normally secured by annual lease rental payments from
the state or locality to the authority sufficient to cover debt service on the
authority's obligations. Such payments are usually subject to annual
appropriations by the state or locality.
Industrial development and pollution control bonds are in most cases revenue
bonds and are generally not secured by the taxing power of the municipality, but
are usually secured by the revenues derived by the authority from payments of
the industrial user or users.
The Portfolio may on occasion acquire revenue bonds which carry warrants or
similar rights covering equity securities. Such warrants or rights may be held
indefinitely, but if exercised, the Portfolio anticipates that it would, under
normal circumstances, dispose of any equity securities so acquired within a
reasonable period of time.
While most municipal bonds pay a fixed rate of interest semi-annually in
cash, there are exceptions. Some bonds pay no periodic cash interest, but rather
make a single payment at maturity representing both principal and interest.
Bonds may be issued or subsequently offered with interest coupons materially
greater or less than those then prevailing, with price adjustments reflecting
such deviation.
The obligations of any person or entity to pay the principal of and interest
on a State obligation are subject to the provisions of bankruptcy, insolvency
and other laws affecting the rights and remedies of creditors, such as the
Federal Bankruptcy Act, and laws, if any, which may be enacted by Congress or
state legislatures extending the time for payment of principal or interest, or
both, or imposing other constraints upon enforcement of such obligations. There
is also the possibility that as a result of litigation or other conditions the
power or ability of any person or entity to pay when due principal of and
interest on a municipal obligation may be materially affected. There have been
recent instances of defaults and bankruptcies involving municipal obligations
which were not foreseen by the financial and investment communities. The
Portfolio will take whatever action it considers appropriate in the event of
anticipated financial difficulties, default or bankruptcy of either the issuer
of any municipal obligation or of the underlying source of funds for debt
service. Such action may include retaining the services of various persons or
firms (including affiliates of Boston Management and Research (the "Investment
Adviser")) to evaluate or protect any real estate, facilities or other assets
securing any such obligation or acquired by the Portfolio as a result of any
such event, and the Portfolio may also manage (or engage other persons to
manage) or otherwise deal with any real estate, facilities or other assets so
acquired. The Portfolio anticipates that real estate consulting and management
services may be required with respect to properties securing various municipal
obligations in its portfolio or subsequently acquired by the Portfolio. The
Portfolio will incur additional expenditures in taking protective action with
respect to portfolio obligations in default and assets securing such
obligations.
The yields on State obligations will be dependent on a variety of factors,
including purposes of issue and source of funds for repayment, general money
market conditions, general conditions of the municipal bond market, size of a
particular offering, maturity of the obligation and rating of the issue. The
ratings of Moody's Investors Service, Inc. ("Moody's"), Standard & Poor's
Ratings Group ("S&P") and Fitch Investors Service, Inc. ("Fitch") represent
their opinions as to the quality of the obligations which they undertake to
rate. It should be emphasized, however, that ratings are based on judgment and
are not absolute standards of quality. Consequently, State obligations with the
same maturity, coupon and rating may have different yields while obligations of
the same maturity and coupon with different ratings may have the same yield. In
addition, the market price of such obligations will normally fluctuate with
changes in interest rates, and therefore the net asset value of the Portfolio
will be affected by such changes.
RISKS OF CONCENTRATION
STATE OBLIGATIONS. For a discussion of the risks associated with the Portfolio's
policy of concentrating its investments in State issuers, see "Risks of
Concentration -- State Obligations" in Part II of this Statement of Additional
Information.
OBLIGATIONS OF PUERTO RICO, U.S. VIRGIN ISLANDS AND GUAM. Subject to the Fund's
investment policies as set forth in the Prospectus, the Portfolio may invest in
the obligations of Puerto Rico, the U.S. Virgin Islands and Guam. Accordingly,
the Portfolio may be adversely affected by local political and economic
conditions and developments within Puerto Rico affecting the issuers of such
obligations.
Puerto Rico has a diversified economy dominated by the manufacturing and
service sectors. Manufacturing is the largest sector in terms of gross domestic
product and is more diversified than during earlier phases of Puerto Rico's
industrial development. Manufacturing employment was flat in fiscal year 1992
and increased 2.4% in the twelve months ended June, 1993. This decline was broad
based among all manufacturing industries. The North American Free Trade
Agreement ("NAFTA"), which became effective January 1, 1994, could lead to the
loss of Puerto Rico's lower salaried or labor intensive jobs to Mexico.
The Commonwealth of Puerto Rico exercises virtually the same control over
its internal affairs as do the fifty states; however, it differs from the states
in its relationship with the Federal government. Most Federal taxes, except
those such as social security taxes that are imposed by mutual consent, are not
levied in Puerto Rico. However, in conjunction with the 1993 U.S. budget plan,
Section 936 was amended and provided for two alternative limitations to the
Section 936 credit. The first option will limit the credit against such income
to 40% of the credit allowable under current law, with a five year phase-in
period starting at 60% of the allowable credit. The second option is a wage and
depreciation based credit. The reduction of the tax benefits to those U.S.
companies with operations in Puerto Rico may lead to slower growth in the
future. There can be no assurance that these modifications will not lead to a
weakened economy, a lower rating on Puerto Rico's debt or lower prices for
Puerto Rican bonds that may be held by the Portfolio.
Puerto Rico's financial reporting was first conformed to generally accepted
accounting principles in fiscal 1990. Nonrecurring revenues have been used
frequently to balance recent years' budgets. In November, 1993 Puerto Ricans
voted on whether they wished to retain their Commonwealth status, become a state
or establish an independent nation. The measure was defeated, with 48.5% voting
to remain a Commonwealth, 46% voting for statehood and 4% voting for
independence. Retaining Commonwealth status will leave intact the current
relationship with the Federal government. There can be no assurance that the
statehood issue will not be brought to a vote in the future. A successful
statehood vote in Puerto Rico would then require the U.S. Congress to ratify the
election.
The United States Virgin Islands (USVI) are located approximately 1,100
miles east-southeast of Miami and are made up of St. Croix, St. Thomas and St.
John. Population, after reaching a peak of 110,800 in 1985, declined to 101,809
in 1990. The economy is heavily reliant on the tourism industry, with roughly
43% of non-agricultural employment in tourist-related trade and services. As of
April, 1993, unemployment stood at 2.7%. The tourism industry is economically
sensitive and would likely be adversely affected by a recession in either the
United States or Europe.
An important component of the USVI revenue base is the Federal excise tax on
rum exports. Tax revenues rebated by the Federal government to the USVI provide
the primary security of many outstanding USVI bonds. Since more than 90% of the
rum distilled in the USVI is distilled at one plant, any interruption in its
operations (as occurred after Hurricane Hugo in 1989) would adversely affect
these revenues. Consequently, there can be no assurance that rum exports to the
United States and the rebate of tax revenues to the USVI will continue at their
present levels. The preferential tariff treatment the USVI rum industry
currently enjoys could be reduced under NAFTA. Increased competition from
Mexican rum producers could reduce USVI rum imported to the U.S., decreasing
excise tax revenues generated. The USVI experienced budget deficits in fiscal
years 1989 and 1990: in 1989 due to wage settlements with the unionized
government employees, and in 1990 as a result of Hurricane Hugo. The USVI
recorded a small surplus in fiscal year 1991. At the end of fiscal 1992, the
last year for which results are available, the USVI had an unreserved General
Fund deficit of approximately $8.31 million, or approximately 2.1% of
expenditures. In order to close a forecasted fiscal 1994 revenue gap of $45.6
million, the Department of Finance has proposed several tax increases and fund
transfers. There is currently no rated, unenhanced Virgin Islands debt
outstanding.
Guam, an unincorporated U.S. territory, is located 1,500 miles southeast of
Tokyo. Population, currently 133,000, has grown consistently since 1970. The
U.S. military is a key component of Guam's economy. The Federal government
directly comprises more than 10% of the employment base, with a substantial
component of the service sector to support these personnel. Guam is expected to
benefit from the closure of the Subic Bay Naval Base and the Clark Air Force
Base in the Philippines. The Naval Air Station, one of several U.S. military
facilities on the island, has been slated for closure by the Defense Base
Closure and Realignment Committee; however, the administration plans to use
these facilities to expand the Island's commercial airport. Guam is also heavily
reliant on tourists, particularly the Japanese. Unemployment was 3.2% in 1991.
The financial position of Guam has weakened as the General Fund incurred a
negative position for 1992. Lower than expected revenue collection due to the
economic downturn caused the poor performance. The administration has taken
steps to improve its financial position; however, there are no guarantees that
an improvement will be realized. Guam's general obligation debt is rated Baa by
Moody's.
OBLIGATIONS OF PARTICULAR TYPES OF ISSUERS. The Portfolio may invest 25% or more
of its total assets in State obligations of the same type. There could be
economic, business or political developments which might affect all State
obligations of a similar type. In particular, investments in the industrial
revenue bonds listed above might involve without limitation the following risks.
Hospital bond ratings are often based on feasibility studies which contain
projections of expenses, revenues and occupancy levels. Among the influences
affecting a hospital's gross receipts and net income available to service its
debt are demand for hospital services, the ability of the hospital to provide
the services required, management capabilities, economic developments in the
service area, efforts by insurers and government agencies to limit rates and
expenses, confidence in the hospital, service area economic developments,
competition, availability and expense of malpractice insurance, Medicaid and
Medicare funding and possible Federal legislation limiting the rates of increase
of hospital charges.
Electric utilities face problems in financing large construction programs in
an inflationary period, cost increases and delay occasioned by safety and
environmental considerations (particularly with respect to nuclear facilities),
difficulty in obtaining fuel at reasonable prices, and in achieving timely and
adequate rate relief from regulatory commissions, effects of energy conservation
and limitations on the capacity of the capital market to absorb utility debt.
Pollution control and other industrial development bonds are issued by state
or local agencies to finance various projects, including those of domestic steel
producers, and may be backed solely by agreements with such companies. Domestic
steel companies are expected to suffer the consequences of such adverse trends
as high labor costs, high foreign imports encouraged by foreign productivity
increases and a strong U.S. dollar, and other cost pressures such as those
imposed by anti-pollution legislation. Domestic steel capacity is being reduced
currently by large-scale plant closings and this period of rationalization may
not end until further legislative protection is provided through tariff price
supports or mandatory import quotas, such as those recently enacted for certain
specialty steel products.
Life care facilities are an alternative form of long-term housing for the
elderly which offer residents the independence of a condominium life style and,
if needed, the comprehensive care of nursing home services. Bonds to finance
these facilities have been issued by various state industrial development
authorities. Since the bonds are normally secured only by the revenues of each
facility and not by state or local government tax payments, they are subject to
a wide variety of risks. Primarily, the projects must maintain adequate
occupancy levels to be able to provide revenues sufficient to meet debt service
payments. Moreover, since a portion of housing, medical care and other services
may be financed by an initial deposit, it is important that the facility
maintain adequate financial reserves to secure estimated actuarial liabilities.
The ability of management to accurately forecast inflationary cost pressures is
an important factor in this process. The facilities may also be affected
adversely by regulatory cost restrictions applied to health care delivery in
general, particularly state regulations or changes in Medicare and Medicaid
payments or qualifications, or restrictions imposed by medical insurance
companies. They may also face competition from alternative health care or
conventional housing facilities in the private or public sector.
MUNICIPAL LEASES
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.
Certain municipal lease obligations owned by the Portfolio may be determined
by the Investment Adviser, pursuant to guidelines adopted by the Trustees of the
Portfolio, to be liquid securities. 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.
ZERO COUPON BONDS
Zero coupon bonds are debt obligations which do not require the periodic
payment of interest and are issued at a significant discount from face value.
The discount approximates the total amount of interest the bonds will accrue and
compound over the period until maturity at a rate of interest reflecting the
market rate of the security at the time of issuance. Zero coupon bonds benefit
the issuer by mitigating its need for cash to meet debt service, but also
require a higher rate of return to attract investors who are willing to defer
receipt of such cash.
INSURANCE
Insured State obligations held by the Portfolio (if any) will be insured as
to their scheduled payment of principal and interest under either (i) an
insurance policy obtained by the issuer or underwriter of the obligation at the
time of its original issuance or (ii) an insurance policy obtained by the
Portfolio or a third party subsequent to the obligation's original issuance
(which may not be reflected in the obligation's market value. In either event,
such insurance may provide that in the event of non-payment of interest or
principal when due with respect to an insured obligation, the insurer is not
required to make such payment until a specified time has lapsed (which may be 30
days or more after notice).
CREDIT QUALITY
The Portfolio is dependent on the Investment Adviser's judgment, analysis
and experience in evaluating the quality of State obligations. In evaluating the
credit quality of a particular issue, whether rated or unrated, the Investment
Adviser will normally take into consideration, among other things, the financial
resources of the issuer (or, as appropriate, of the underlying source of funds
for debt service), its sensitivity to economic conditions and trends, any
operating history of and the community support for the facility financed by the
issue, the ability of the issuer's management and regulatory matters. The
Investment Adviser will attempt to reduce the risks of investing in the lowest
investment grade, below investment grade and comparable unrated obligations
through active portfolio management, credit analysis and attention to current
developments and trends in the economy and the financial markets.
The Portfolio will also take such action as it considers appropriate in the
event of anticipated financial difficulties, default or bankruptcy of either the
issuer of any such obligation or of the underlying source of funds for debt
service. Such action may include retaining the services of various persons and
firms (including affiliates of the Investment Adviser) to evaluate or protect
any real estate, facilities or other assets securing any such obligation or
acquired by the Portfolio as a result of any such event. The Portfolio
anticipates that real estate consulting and management services may be required
with respect to properties securing various municipal obligations in its
portfolio or subsequently acquired by the Portfolio. The Portfolio will incur
additional expenditures in taking protective action with respect to portfolio
obligations in default and assets securing such obligations.
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 loans
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. The
Portfolio has no present intention of engaging in securities lending.
WHEN ISSUED SECURITIES
New issues of State and other types of municipal obligations are sometimes
offered on a "when-issued" basis, that is, delivery and payment for the
securities normally taking place within a specified number of days after the
date of the Portfolio's commitment and are subject to certain conditions such as
the issuance of satisfactory legal opinions. The Portfolio may also purchase
securities on a when-issued basis pursuant to refunding contracts in connection
with the refinancing of an issuer's outstanding indebtedness. Refunding
contracts generally require the issuer to sell and the Portfolio to buy such
securities on a settlement date that could be several months or several years in
the future.
The Portfolio will make commitments to purchase when-issued securities only
with the intention of actually acquiring the securities, but may sell such
securities before the settlement date if it is deemed advisable as a matter of
investment strategy. The payment obligation and the interest rate that will be
received on the securities are fixed at the time the Portfolio enters into the
purchase commitment. The Portfolio's custodian will segregate cash or high grade
liquid debt securities in a separate account of the Portfolio in an amount at
least equal to the when-issued commitments. If the value of the securities
placed in the separate account declines, additional cash or high grade liquid
debt securities will be placed in the account on a daily basis so that the value
of the account will at least equal the amount of the Portfolio's when-issued
commitments. When the Portfolio commits to purchase a security on a when-issued
basis it records the transaction and reflects the value of the security in
determining its net asset value. Securities purchased on a when-issued basis and
the securities held by the Portfolio are subject to changes in value based upon
the perception of the creditworthiness of the issuer and changes in the level of
interest rates (i.e. appreciation when interest rates decline and depreciation
when interest rates rise). Therefore, to the extent that the Portfolio remains
substantially fully invested at the same time that it has purchased securities
on a when- issued basis, there will be greater fluctuations in the Portfolio's
net asset value than if it solely set aside cash to pay for when-issued
securities.
FLOATING OR VARIABLE RATE OBLIGATIONS
The Portfolio may purchase floating or variable rate obligations. Floating
or variable rate instruments provide for adjustments in the interest rate at
specified intervals (weekly, monthly, semi-annually, etc.). The revised rates
are usually set at the issuer's discretion, in which case the investor normally
enjoys the right to "put" the security back to the issuer or his agent. Rate
revisions may alternatively be determined by formula or in some other
contractual fashion. Floating or variable rate obligations normally provide that
the holder can demand payment of the obligation on short notice at par with
accrued interest and are frequently secured by letters of credit or other credit
support arrangements provided by banks. To the extent that such letters of
credit or other arrangements constitute an unconditional guarantee of the
issuer's obligations, a bank may be treated as the issuer of a security for the
purpose of complying with the diversification requirements set forth in Section
5(b) of the Investment Company Act of 1940 and Rule 5b-2 thereunder. The
Portfolio would anticipate using these obligations as cash equivalents pending
longer term investment of its funds.
REDEMPTION, DEMAND AND PUT FEATURES
Most municipal bonds have a fixed final maturity date. However, it is
commonplace for the issuer to reserve the right to call the bond earlier. Also,
some bonds may have "put" or "demand" features that allow early redemption by
the bondholder. Interest income generated by certain bonds having demand
features may not qualify as tax-exempt interest. Longer term fixed-rate bonds
may give the holder a right to request redemption at certain times (often
annually after the lapse of an intermediate term). These bonds are more
defensive than conventional long term bonds (protecting to some degree against a
rise in interest rates) while providing greater opportunity than comparable
intermediate term bonds, since the Portfolio may retain the bond if interest
rates decline. By acquiring these kinds of obligations the Portfolio obtains the
contractual right to require the issuer of the security or some other person
(other than a broker or dealer) to purchase the security at an agreed upon
price, which right is contained in the obligation itself rather than in a
separate agreement with the seller or some other person. Since this right is
assignable with the security, which is readily marketable and valued in the
customary manner, the Portfolio will not assign any separate value to such
right.
LIQUIDITY AND PROTECTIVE PUT OPTIONS
The Portfolio may also enter into a separate agreement with the seller of
the security or some other person granting the Portfolio the right to put the
security to the seller thereof or the other person at an agreed upon price. The
Portfolio intends to limit this type of transaction to institutions (such as
banks or securities dealers) which the Investment Adviser believes present
minimal credit risks and would engage in this type of transaction to facilitate
portfolio liquidity or (if the seller so agrees) to hedge against rising
interest rates. There is no assurance that this kind of put option will be
available to the Portfolio or that selling institutions will be willing to
permit the Portfolio to exercise a put to hedge against rising interest rates. A
separate put option may not be marketable or otherwise assignable, and sale of
the security to a third party or lapse of time with the put unexercised may
terminate the right to exercise the put. The Portfolio does not expect to assign
any value to any separate put option which may be acquired to facilitate
portfolio liquidity, inasmuch as the value (if any) of the put will be reflected
in the value assigned to the associated security; any put acquired for hedging
purposes would be valued in good faith under methods or procedures established
by the Trustees of the Portfolio after consideration of all relevant factors,
including its expiration date, the price volatility of the associated security,
the difference between the market price of the associated security and the
exercise price of the put, the creditworthiness of the issuer of the put and the
market prices of comparable put options. Interest income generated by certain
bonds having put features may not qualify as tax-exempt interest.
FUTURES CONTRACTS
A change in the level of interest rates may affect the value of the
securities held by the Portfolio (or of securities that the Portfolio expects to
purchase). To hedge against changes in rates or for non-hedging purposes, the
Portfolio may enter into (i) futures contracts for the purchase or sale of debt
securities, (ii) futures contracts on securities indices and (iii) futures
contracts on other financial instruments and indices. All futures contracts
entered into by the Portfolio are traded on exchanges or boards of trade that
are licensed and regulated by the Commodity Futures Trading Commission ("CFTC")
and must be executed through a futures commission merchant or brokerage firm
which is a member of the relevant exchange.
FUTURES CONTRACTS ON DEBT SECURITIES. A futures contract on a debt security is a
binding contractual commitment which, if held to maturity, will result in an
obligation to make or accept delivery, during a particular month, of securities
having a standardized face value and rate of return. By purchasing futures on
debt securities, the Portfolio will legally obligate itself to accept delivery
of the underlying security and pay the agreed price; by selling futures on debt
securities, it will legally obligate itself to make delivery of the security
against payment of the agreed price. Open futures positions on debt securities
are valued at the most recent settlement price, unless such price does not
reflect the fair value of the contract, in which case the positions will be
valued by or under the direction of the Trustees of the Portfolio.
Positions taken in the futures markets for debt securities are not normally
held to maturity, but are instead liquidated through offsetting transactions
which may result in a profit or a loss. While futures positions on debt
securities taken by the Portfolio will usually be liquidated in this manner, it
may instead make or take delivery of the underlying securities whenever it
appears economically advantageous for the Portfolio to do so. A clearing
corporation associated with the exchange on which futures on debt securities are
traded guarantees that, if still open, the sale or purchase will be performed on
the settlement date.
FUTURES CONTRACTS ON SECURITIES INDICES. Futures contracts on securities or
other indices do not require the physical delivery of securities, but merely
provide for profits and losses resulting from changes in the market value of a
contract to be credited or debited at the close of each trading day to the
respective accounts of the parties to the contract. On the contract's expiration
date a final cash settlement occurs and the futures positions is simply closed
out. Changes in the market value of a particular futures contract reflect
changes in the level of the index on which the futures contract is based.
HEDGING STRATEGIES. Hedging by use of futures contracts seeks to establish more
certainly than would otherwise be possible the effective rate of return on
portfolio securities or securities that the Portfolio proposes to acquire. The
Portfolio may, for example, take a "short" position in the futures market by
selling futures contracts in order to hedge against an anticipated rise in
interest rates that would adversely affect the value of the securities held by
the Portfolio. Such futures contracts may include contracts for the future
delivery of debt securities held by the Portfolio or debt securities with
characteristics similar to those of the securities held by the Portfolio. If, in
the opinion of the Investment Adviser, there is a sufficient degree of
correlation between price trends for the securities held by the Portfolio and
futures contracts based on other financial instruments, securities indices or
other indices, the Portfolio may also enter into such futures contracts as part
of its hedging strategy. Although under some circumstances prices of securities
held by the Portfolio may be more or less volatile than prices of such futures
contracts, the Investment Adviser will attempt to estimate the extent of this
difference in volatility based on historical patterns and to compensate for it
by having the Portfolio enter into a greater or lesser number of futures
contracts or by attempting to achieve only a partial hedge against price changes
affecting the securities held by the Portfolio. When hedging of this character
is successful, any depreciation in the value of portfolio securities will be
substantially offset by appreciation in the value of the futures position.
On other occasions, the Portfolio may take a "long" position by purchasing
such futures contracts. This would be done, for example, when the Portfolio
anticipates the subsequent purchase of particular securities when it has the
necessary cash, but expects the prices then available in the securities market
to be less favorable than the prices that are currently available.
OPTIONS ON FUTURES CONTRACTS
The Portfolio may purchase and write call and put options on futures
contracts which are traded on a United States or foreign exchange or board of
trade. An option on a futures contract gives the purchaser the right, in return
for the premium paid, to assume a position in a futures contract at a specified
exercise price at any time during the option period. Upon exercise of the
option, the writer of the option is obligated to convey the appropriate futures
position to the holder of the option. If an option is exercised on the last
trading day before the expiration date of the option, a cash settlement will be
made in an amount equal to the difference between the closing price of the
futures contract and the exercise price of the option.
The Portfolio may use options on futures contracts for bona fide hedging
purposes as defined below or for non-hedging purposes subject to the limitations
imposed by CFTC regulations. If the Portfolio purchases a call (put) option on a
futures contract it benefits from any increase (decrease) in the value of the
futures contract, but is subject to the risk of decrease (increase) in value of
the futures contract. The benefits received are reduced by the amount of the
premium and transaction costs paid by the Portfolio for the option. If market
conditions do not favor the exercise of the option, the Portfolio's loss is
limited to the amount of such premium and transaction costs paid by the
Portfolio for the option.
If the Portfolio writes a call (put) option on a futures contract, the
Portfolio receives a premium but assumes the risk of a rise (decline) in value
in the underlying futures contract. If the option is not exercised, the
Portfolio gains the amount of the premium, which may partially offset
unfavorable changes in the value of securities held or to be acquired for the
Portfolio. If the option is exercised, the Portfolio will incur a loss, which
will be reduced by the amount of the premium it receives. However, depending on
the degree of correlation between changes in the value of its portfolio
securities and changes in the value of futures positions, the Portfolio's losses
from writing options on futures may be partially offset by favorable changes in
the value of portfolio securities or in the cost of securities to be acquired.
The holder or writer of an option on a futures contract may terminate its
position by selling or purchasing an offsetting option of the same series. There
is no guarantee that such closing transactions can be effected. The Portfolio's
ability to establish and close out positions on such options will be subject to
the development and maintenance of a liquid market.
LIMITATIONS ON THE USE OF FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
The Portfolio will engage in futures and related options transactions for
bona fide hedging or non-hedging purposes as defined in or permitted by CFTC
regulations. The Portfolio will determine that the price fluctuations in the
futures contracts and options on futures used for hedging purposes are
substantially related to price fluctuations in securities held by the Portfolio
or which it expects to purchase. Except as stated below, the Portfolio's futures
transactions will be entered into for traditional hedging purposes -- that is,
futures contracts will be sold to protect against a decline in the price of
securities that the Portfolio owns, or futures contracts will be purchased to
protect the Portfolio against an increase in the price of securities it intends
to purchase. As evidence of this hedging intent, the Portfolio expects that on
75% or more of the occasions on which it takes a long futures (or option)
position (involving the purchase of futures contracts), the Portfolio will have
purchased, or will be in the process of purchasing, equivalent amounts of
related securities in the cash market at the time when the futures (or option)
position is closed out. However, in particular cases, when it is economically
advantageous for the Portfolio to do so, a long futures position may be
terminated (or an option may expire) without the corresponding purchase of
securities. As an alternative to compliance with the bona fide hedging
definition, a CFTC regulation permits the Portfolio to elect to comply with a
different test, under which the aggregate initial margin and premiums required
to establish non-hedging positions in futures contracts and options on futures
will not exceed 5% of the Portfolio's net asset value after taking into account
unrealized profits and losses on such positions and excluding the in-the-money
amount of such options. The Portfolio will engage in transactions in futures and
related options contracts only to the extent such transactions are consistent
with the requirements of the Internal Revenue Code for maintaining qualification
of the Fund as a regulated investment company for Federal income tax purposes
(see "Taxes").
The Portfolio will be required, in connection with transactions in futures
contracts and the writing of options on futures, to make margin deposits, which
will be held by the Portfolio's custodian for the benefit of the futures
commission merchant through whom the Portfolio engages in such futures and
options transactions. Cash or liquid high grade debt securities required to be
segregated in connection with a "long" futures position taken by the Portfolio
will also be held by the custodian in a segregated account and will be marked to
market daily.
SHORT-TERM OBLIGATIONS
Although the Portfolio will normally attempt to invest substantially all of
its assets in State obligations, the Portfolio may, under normal market
conditions, invest up to 20% of its net assets in short-term obligations the
interest on which is subject to regular Federal income tax, Federal alternative
minimum tax and/or State taxes. Although the Portfolio is permitted to invest up
to 20% of its assets in short-term taxable obligations under normal market
conditions, the Portfolio does not expect to invest more than 5% of its assets
in such securities under such conditions. 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, all of which will be high quality.
PORTFOLIO TURNOVER
The Portfolio cannot accurately predict its portfolio turnover rate, but it
is anticipated that the annual turnover rate will generally not exceed 100%
(excluding turnover of securities having a maturity of one year or less). A 100%
annual turnover rate would occur, for example, if all the securities held by the
Portfolio were replaced once in a period of one year. A high turnover rate (100%
or more) necessarily involves greater expenses to the Portfolio. The Portfolio
engages in portfolio trading (including short-term trading) if it believes that
a transaction including all costs will help in achieving its investment
objective.
INVESTMENT RESTRICTIONS
The Fund's investment restrictions are designated as fundamental policies
and as such cannot be changed without the approval of the holders of a majority
of the Fund's outstanding voting securities, which as used in this Statement of
Additional Information means the lesser of (a) 67% of the shares of the Fund
present or represented by proxy at a meeting if the holders of more than 50% of
the shares are present or represented at the meeting or (b) more than 50% of the
shares of the Fund. The Fund's fundamental investment restrictions are set forth
under "Investment Restrictions" in Part II of this Statement of Additional
Information.
The Portfolio has adopted substantially the same fundamental investment
restrictions as the investment restrictions adopted by the Fund; such
restrictions cannot be changed without the approval of a "majority of the
outstanding voting securities" of the Portfolio, which as used in this Statement
of Additional Information means the lesser of (a) 67% of the outstanding voting
securities of the Portfolio present or represented by proxy at a meeting if the
holders of more than 50% of the outstanding voting securities of the Portfolio
are present or represented at the meeting or (b) more than 50% of the
outstanding voting securities of the Portfolio. The term "voting securities" as
used in this paragraph has the same meaning as in the Investment Company Act of
1940 (the "1940 Act"). Whenever the Trust is requested to vote on a change in
the fundamental investment restrictions of the Portfolio (or the Portfolio's 80%
investment policy with respect to State tax-exempt obligations described in the
Fund's current prospectus), the Trust will hold a meeting of Fund shareholders
and will cast its vote as instructed by the shareholders.
The Fund and the Portfolio have also adopted nonfundamental investment
policies which may be changed by the Trustees of the Trust with respect to the
Fund without approval by the Fund's shareholders or by the Trustees of the
Portfolio with respect to the Portfolio without the approval of the Fund or the
Portfolio's other investors. The Fund's non-fundamental investment policies are
set forth under "Investment Restrictions" in Part II of this Statement of
Additional Information.
For purposes of the Portfolio's investment restrictions, the determination
of the "issuer" of a municipal obligation which is not a general obligation bond
will be made by the Portfolio's Investment Adviser on the basis of the
characteristics of the obligation and other relevant factors, the most
significant of which is the source of funds committed to meeting interest and
principal payments of such obligations.
TRUSTEES AND OFFICERS
The Trustees and officers of the Trust and the Portfolio are listed below.
Except as indicated, each individual has held the office shown or other offices
in the same company for the last five years. Unless otherwise noted, the
business address of each Trustee and officer is 24 Federal Street, Boston,
Massachusetts 02110, which is also the address of the Portfolio's investment
adviser, Boston Management and Research ("BMR"), which is a wholly-owned
subsidiary of Eaton Vance Management ("Eaton Vance"); of Eaton Vance's parent,
Eaton Vance Corp. ("EVC"); and of BMR's and Eaton Vance's trustee, Eaton Vance,
Inc. ("EV"). Eaton Vance and EV are both wholly-owned subsidiaries of EVC. Those
Trustees and officers who are "interested persons" of the Trust, the Portfolio,
BMR, Eaton Vance, EVC or EV, as defined in the 1940 Act, by virtue of their
affiliation with any one or more of the Trust, the Portfolio, BMR, Eaton Vance,
EVC or EV, are indicated by an asterisk(*).
TRUSTEES OF THE TRUST AND THE PORTFOLIO
DONALD R. DWIGHT (64), Trustee
President of Dwight Partners, Inc. (a corporate relations and communications
company) founded in 1988; Chairman of the Board of Newspapers of New England,
Inc., since 1983. Director or Trustee of various investment companies managed
by Eaton Vance or BMR.
Address: Clover Mill Lane, Lyme, New Hampshire 03768
JAMES B. HAWKES (53), Trustee and Vice President*
Executive Vice President of BMR, Eaton Vance, EVC and EV, and a Director of EVC
and EV. Director, Trustee and officer of various investment companies managed
by Eaton Vance or BMR.
SAMUEL L. HAYES, III (60), Trustee
Jacob H. Schiff Professor of Investment Banking, Harvard University, Graduate
School of Business Administration. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: Harvard Business School, Soldiers Field Road, Boston, Massachusetts
02134
NORTON H. REAMER (59), Trustee
President and Director, United Asset Management Corporation, a holding company
owning institutional investment management firms. Chairman, President and
Director, The Regis Fund, Inc. (mutual fund). Director or Trustee of various
investment companies managed by Eaton Vance or BMR.
Address: One International Place, Boston, Massachusetts 02110
JOHN L. THORNDIKE (68), Trustee
Director, Fiduciary Trust Company. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: 175 Federal Street, Boston, Massachusetts 02110
JACK L. TREYNOR (65), Trustee
Investment Adviser and Consultant. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: 504 Via Almar, Palos Verdes Estates, California 90274
OFFICERS OF THE TRUST AND THE PORTFOLIO
THOMAS J. FETTER (51), President*
Vice President of BMR, Eaton Vance and EV. Mr. Fetter was elected a Vice
President of the Trust on December 17, 1990 and President of the Trust and the
Portfolio on December 13, 1993. Officer of various investment companies
managed by Eaton Vance or BMR.
ROBERT B. MACINTOSH (38), Vice President*
Vice President of Eaton Vance and EV, and of BMR since August 11, 1992, and
employee of Eaton Vance since March 8, 1991. Fidelity Investments -- Portfolio
Manager (1986-1991). Officer of various investment companies managed by Eaton
Vance or BMR. Mr. MacIntosh was elected Vice President of the Trust on March
22, 1993.
JAMES L. O'CONNOR (50), Treasurer*
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
THOMAS OTIS (63), Secretary*
Vice President and Secretary of BMR, Eaton Vance, EVC and EV. Officer of various
investment companies managed by Eaton Vance or BMR.
JANET E. SANDERS (59), Assistant Secretary*
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
A. JOHN MURPHY (32), Assistant Secretary
Assistant Vice President of BMR, Eaton Vance and EV since March 1, 1994;
employee of Eaton Vance since March 1993. Officer of various investment
companies managed by Eaton Vance or BMR. (State Regulations Supervisor, The
Boston Company, 1991-1993 and Registration Specialist, Fidelity Management &
Research Co., 1986-1991.) Mr. Murphy was elected Assistant Secretary of the
Trust and the Portfolio on March 27, 1995.
Messrs. Thorndike (Chairman), Hayes and Reamer are members of the Special
Committee of the Board of Trustees of the Trust and of the Portfolio. The
Special Committee's functions include a continuous review of the Fund's
contractual relationship with the administrator and the Portfolio's contractual
relationship with the investment adviser, making recommendations to the Trustees
regarding the compensation of those Trustees who are not members of the Eaton
Vance organization, and making recommendations to the Trustees regarding
candidates to fill vacancies, as and when they occur, in the ranks of those
Trustees who are not "interested persons" of the Trust, the Portfolio, or the
Eaton Vance organization.
Messrs. Treynor (Chairman) and Dwight are members of the Audit Committee of
the Board of Trustees of the Trust and of the Portfolio. The Audit Committee's
functions include making recommendations to the Trustees regarding the selection
of the independent certified public accountants, and reviewing with such
accountants and the Treasurer of the Trust and of the Portfolio matters relative
to accounting and auditing practices and procedures, accounting records,
internal accounting controls, and the functions performed by the custodian and
transfer agent of the Fund and of the Portfolio.
Trustees of the Portfolio that are not affiliated with the Investment
Adviser may elect to defer receipt of all or a percentage of their annual fees
in accordance with the terms of a Trustees Deferred Compensation Plan (the
"Plan"). Under the Plan, an eligible Trustee may elect to have his deferred fees
invested by the Portfolio in the shares of one or more funds in the Eaton Vance
Family of Funds, and the amount paid to the Trustees under the Plan will be
determined based upon the performance of such investments. Deferral of Trustees'
fees in accordance with the Plan will have a negligible effect on the
Portfolio's assets, liabilities, and net income per share, and will not obligate
the Portfolio to retain the services of any Trustee or obligate the Portfolio to
pay any particular level of compensation to the Trustee. For the compensation
received by the noninterested Trustees of the Trust and the Portfolio, see "Fees
and Expenses" in the Fund's Part II of this Statement of Additional Information.
INVESTMENT ADVISER AND ADMINISTRATOR
The Portfolio engages BMR as investment adviser pursuant to an Investment
Advisory Agreement. BMR or Eaton Vance acts as investment adviser to investment
companies and various individual and institutional clients with combined assets
under management of approximately $15 billion.
Eaton Vance, its affiliates and its predecessor companies have been managing
assets of individuals and institutions since 1924 and managing investment
companies since 1931. They maintain a large staff of experienced fixed-income
and equity investment professionals to service the needs of their clients. The
fixed-income division focuses on all kinds of taxable investment- grade and
high-yield securities, tax-exempt investment-grade and high-yield securities,
and U.S. Government securities. The equity division covers stocks ranging from
blue chip to emerging growth companies.
BMR manages the investments and affairs of the Portfolio subject to the
supervision of the Portfolio's Board of Trustees. BMR furnishes to the Portfolio
investment research, advice and supervision, furnishes an investment program and
determines what securities will be purchased, held or sold by the Portfolio and
what portion, if any, of the Portfolio's assets will be held uninvested. The
Investment Advisory Agreement requires BMR to pay the salaries and fees of all
officers and Trustees of the Portfolio who are members of the BMR organization
and all personnel of BMR performing services relating to research and investment
activities. The Portfolio is responsible for all expenses not expressly stated
to be payable by BMR under the Investment Advisory Agreement, including, without
implied limitation, (i) expenses of maintaining the Portfolio and continuing its
existence, (ii) registration of the Portfolio under the 1940 Act, (iii)
commissions, fees and other expenses connected with the acquisition, holding and
disposition of securities and other investments, (iv) auditing, accounting and
legal expenses, (v) taxes and interest, (vi) governmental fees, (vii) expenses
of issue, sale and redemption of interests in the Portfolio, (viii) expenses of
registering and qualifying the Portfolio and interests in the Portfolio under
Federal and state securities laws and of preparing and printing registration
statements or other offering statements or memoranda for such purposes and for
distributing the same to investors, and fees and expenses of registering and
maintaining registrations of the Portfolio and of the Portfolio's placement
agent as broker-dealer or agent under state securities laws, (ix) expenses of
reports and notices to investors and of meetings of investors and proxy
solicitations therefor, (x) expenses of reports to governmental officers and
commissions, (xi) insurance expenses, (xii) association membership dues, (xiii)
fees, expenses and disbursements of custodians and subcustodians for all
services to the Portfolio (including without limitation safekeeping of funds,
securities and other investments, keeping of books, accounts and records, and
determination of net asset values, book capital account balances and tax capital
account balances), (xiv) fees, expenses and disbursements of transfer agents,
dividend disbursing agents, investor servicing agents and registrars for all
services to the Portfolio, (xv) expenses for servicing the accounts of
investors, (xvi) any direct charges to investors approved by the Trustees of the
Portfolio, (xvii) compensation and expenses of Trustees of the Portfolio who are
not members of BMR's organization, and (xviii) such non-recurring items as may
arise, including expenses incurred in connection with litigation, proceedings
and claims and the obligation of the Portfolio to indemnify its Trustees,
officers and investors with respect thereto.
The Portfolio pays BMR as compensation under the Investment Advisory
Agreement a monthly 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%
For additional information about the Investment Advisory Agreement,
including the net assets of the Portfolio and the investment advisory fees that
the Portfolio paid BMR under the Investment Advisory Agreement, see "Fees and
Expenses" in the Fund's Part II of this Statement of Additional Information.
A commitment may be made to a state securities authority that Eaton Vance
will take certain actions, if necessary, so that the Fund's expenses will not
exceed limitation requirements of such state. The commitment may be amended or
rescinded by Eaton Vance in response to changes in the requirements of the state
or for other reasons.
The Investment Advisory Agreement with BMR may be continued indefinitely so
long as such continuance is approved at least annually (i) by the vote of a
majority of the Trustees of the Portfolio who are not interested persons of the
Portfolio or of BMR cast in person at a meeting specifically called for the
purpose of voting on such approval and (ii) by the Board of Trustees of the
Portfolio or by vote of a majority of the outstanding voting securities of the
Portfolio. The Agreement may be terminated at any time without penalty on sixty
(60) days' written notice by the Board of Trustees of either party, or by vote
of the majority of the outstanding voting securities of the Portfolio, and the
Agreement will terminate automatically in the event of its assignment. The
Agreement provides that BMR may render services to others and engage in other
business activities and may permit other fund clients and other corporations and
organizations to use the words "Eaton Vance" or "Boston Management and Research"
in their names. The Agreement also provides that BMR shall not be liable for any
loss incurred in connection with the performance of its duties, or action taken
or omitted under that Agreement, in the absence of willful misfeasance, bad
faith, gross negligence in the performance of its duties or by reason of its
reckless disregard of its obligations and duties thereunder, or for any losses
sustained in the acquisition, holding or disposition of any security or other
investment.
As indicated in the Prospectus, Eaton Vance serves as Administrator of the
Fund under an agreement, but receives no compensation for providing
administrative services to the Fund. Eaton Vance has been engaged to administer
the Fund's affairs, subject to the supervision of the Trustees of the Trust, and
shall furnish for the use of the Fund office space and all necessary office
facilities, equipment and personnel for administering the affairs of the Fund.
The Fund pays all of its own expenses including, without limitation, (i)
expenses of maintaining the Fund and continuing its existence, (ii) its pro rata
share of the registration of the Trust under the 1940 Act, (iii) commissions,
fees and other expenses connected with the purchase or sale of securities and
other investments, (iv) auditing, accounting and legal expenses, (v) taxes and
interest, (vi) governmental fees, (vii) expenses of issue, sale, repurchase and
redemption of shares, (viii) expenses of registering and qualifying the Fund and
its shares under federal and state securities laws and of preparing and printing
prospectuses for such purposes and for distributing the same to shareholders and
investors, and fees and expenses of registering and maintaining registrations of
the Fund and of the Fund's principal underwriter, if any, as broker-dealer or
agent under state securities laws, (ix) expenses of reports and notices to
shareholders and of meetings of shareholders and proxy solicitations therefor,
(x) expenses of reports to governmental officers and commissions, (xi) insurance
expenses, (xii) association membership dues, (xiii) fees, expenses and
disbursements of custodians and subcustodians for all services to the Fund
(including without limitation safekeeping of funds, securities and other
investments, keeping of books and accounts and determination of net asset
values), (xiv) fees, expenses and disbursements of transfer agents, dividend
disbursing agents, shareholder servicing agents and registrars for all services
to the Fund, (xv) expenses for servicing shareholder accounts, (xvi) any direct
charges to shareholders approved by the Trustees of the Trust, (xvii)
compensation and expenses of Trustees of the Trust who are not members of the
Eaton Vance organization, and (xviii) such non-recurring items as may arise,
including expenses incurred in connection with litigation, proceedings and
claims and the obligation of the Trust to indemnify its Trustees and officers
with respect thereto.
BMR is a wholly-owned subsidiary of Eaton Vance. Eaton Vance and EV are both
wholly-owned subsidiaries of EVC. BMR and Eaton Vance are both Massachusetts
business trusts, and EV is the trustee of BMR and Eaton Vance. The Directors of
EV are Landon T. Clay, H. Day Brigham, Jr., M. Dozier Gardner, James B. Hawkes
and Benjamin A. Rowland, Jr. The Directors of EVC consist of the same persons
and John G. L. Cabot and Ralph Z. Sorenson. Mr. Clay is chairman and Mr. Gardner
is president and chief executive officer of EVC, BMR, Eaton Vance and EV. All of
the issued and outstanding shares of Eaton Vance and EV are owned by EVC. All of
the issued and outstanding shares of BMR are owned by Eaton Vance. All shares of
the outstanding Voting Common Stock of EVC are deposited in a Voting Trust which
expires on December 31, 1996, the Voting Trustees of which are Messrs. Clay,
Brigham, Gardner, Hawkes and Rowland. The Voting Trustees have unrestricted
voting rights for the election of Directors of EVC. All of the outstanding
voting trust receipts issued under said Voting Trust are owned by certain of the
officers of BMR and Eaton Vance who are also officers and Directors of EVC and
EV. As of March 31, 1995, Messrs. Clay, Gardner and Hawkes each owned 24% of
such voting trust receipts, and Messrs. Rowland and Brigham owned 15% and 13%,
respectively, of such voting trust receipts. Messrs. Hawkes and Otis are
officers or Trustees of the Trust and the Portfolio and are members of the EVC,
BMR, Eaton Vance and EV organizations. Messrs. Fetter, MacIntosh, Murphy and
O'Connor and Ms. Sanders, are officers of the Trust and the Portfolio and are
also members of the BMR, Eaton Vance and EV organizations. BMR will receive the
fees paid under the Investment Advisory Agreement and Eaton Vance's wholly-owned
subsidiary, Eaton Vance Distributors, Inc., as Principal Underwriter, will
receive its portion of the sales charge on shares of the Fund sold through
authorized firms.
Eaton Vance owns all of the stock of Energex Corporation, which is engaged
in oil and gas operations. EVC owns all of the stock of Marblehead Energy Corp.
(which engages in oil and gas operations) and 77.3% of the stock of Investors
Bank & Trust Company, custodian of the Fund and the Portfolio, which provides
custodial, trustee and other fiduciary services to investors, including
individuals, employee benefit plans, corporations, investment companies, savings
banks and other institutions. In addition, Eaton Vance owns all the stock of
Northeast Properties, Inc., which is engaged in real estate investment,
consulting and management. EVC owns all the stock of Fulcrum Management, Inc.,
MinVen Inc., which are engaged in the development of precious metal properties.
EVC, BMR, Eaton Vance and EV may also enter into other businesses.
EVC and its affiliates and their officers and employees from time to time
have transactions with various banks, including the custodian of the Fund and
the Portfolio, Investors Bank & Trust Company. It is Eaton Vance's opinion that
the terms and conditions of such transactions were not and will not be
influenced by existing or potential custodial or other relationships between the
Fund or the Portfolio and such banks.
CUSTODIAN
Investors Bank & Trust Company ("IBT"), 24 Federal Street, Boston,
Massachusetts (a 77.3% owned subsidiary of EVC) acts as custodian for the Fund
and the Portfolio. IBT has the custody of all cash and securities representing
the Fund's interest in the Portfolio, has custody of all the Portfolio's assets,
maintains the general ledger of the Portfolio and the Fund and computes the
daily net asset value of interests in the Portfolio and the net asset value of
shares of the Fund. In such capacity it attends to details in connection with
the sale, exchange, substitution, transfer or other dealings with the
Portfolio's investments, receives and disburses all funds and performs various
other ministerial duties upon receipt of proper instructions from the Fund and
the Portfolio. IBT charges fees which are competitive within the industry. A
portion of the fee relates to custody, bookkeeping and valuation services and is
based upon a percentage of Fund and Portfolio net assets and a portion of the
fee relates to activity charges, primarily the number of portfolio transactions.
These fees are then reduced by a credit for cash balances of the particular
investment company at the custodian equal to 75% of the 91-day, U.S. Treasury
Bill auction rate applied to the particular investment company's average daily
collected balances for the week. In view of the ownership of EVC in IBT, the
Portfolio is treated as a self-custodian pursuant to Rule 17f-2 under the 1940
Act, and the Portfolio's investments held by IBT as custodian are thus subject
to the additional examinations by the Portfolio's independent certified public
accountants as called for by such Rule. For the custody fees that the Portfolio
and the Fund paid to IBT, see "Fees and Expenses" in the Fund's Part II of this
Statement of Additional Information.
SERVICE FOR WITHDRAWAL
By a standard agreement, the Trust's Transfer Agent will send to the
shareholder regular monthly or quarterly payments of any designated amount based
upon the value of the shares held. The checks will be drawn from share
redemptions and hence, although they are a return of principal may give rise to
gain or loss for tax purposes. Income dividends and capital gains distributions
in connection with withdrawal accounts will be credited at net asset value as of
the record date for each distribution. Continued withdrawals in excess of
current income will eventually use up principal, particularly in a period of
declining market prices.
To use this service, at least $5,000 in cash or shares at the public
offering price (i.e., net asset value) will have to be deposited with the
Transfer Agent. A shareholder may not have a withdrawal plan in effect at the
same time he has authorized Bank Automated Investing or is otherwise making
regular purchases of Fund shares. Either the shareholder, the Transfer Agent or
the Principal Underwriter will be able to terminate the withdrawal plan at any
time without penalty.
DETERMINATION OF NET ASSET VALUE
The net asset value of the shares of the Fund is determined by IBT (as agent
and custodian for the Fund) in the manner described under "Valuing Fund Shares"
in the Fund's current prospectus. The net asset value of the Portfolio is also
computed by IBT (as agent and custodian for the Portfolio) by subtracting the
liabilities of the Portfolio from the value of its total assets. Inasmuch as the
market for State obligations is a dealer market with no central trading location
or continuous quotation system, it is not feasible to obtain last transaction
prices for most State obligations held by the Portfolio, and such obligations,
including those purchased on a when-issued basis, will normally be valued on the
basis of valuations furnished by a pricing service. The pricing services uses
information with respect to transactions in bonds, quotations from bond dealers,
market transactions in comparable securities, various relationships between
securities, and yield to maturity in determining value. Taxable obligations for
which price quotations are readily available normally will be valued at the mean
between the latest available bid and asked prices. Other assets are valued at
fair value using methods determined in good faith by the Trustees. The Fund and
the Portfolio will be closed for business and will not price their respective
shares or interests on the following business holidays: New Year's Day,
Washington's Birthday, Good Friday (a New York Stock Exchange holiday), Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Each investor in the Portfolio, including the Fund, may add to or reduce its
investment in the Portfolio on each day the New York Stock Exchange (the
"Exchange") is open for trading ("Portfolio Business Day") as of the close of
regular trading on the Exchange (the "Portfolio Valuation Time"). The value of
each investor's interest in the Portfolio will be determined by multiplying the
net asset value of the Portfolio by the percentage, determined on the prior
Portfolio Business Day, which represented that investor's share of the aggregate
interests in the Portfolio on such prior day. Any additions or withdrawals for
the current Portfolio Business Day will then be recorded. The investor's
percentage of the aggregate interest in the Portfolio will then be recomputed as
a percentage equal to the fraction (i) the numerator of which is the value of
such investor's investment in the Portfolio as of the Portfolio Valuation Time
on the prior Portfolio Business Day plus or minus, as the case may be, the
amount of any additions to or withdrawals from the investor's investment in the
Portfolio on the current Portfolio Business Day and (ii) the denominator of
which is the aggregate net asset value of the Portfolio as of the Portfolio
Valuation Time on the prior Portfolio Business Day plus or minus, as the case
may be, the amount of the net additions to or withdrawals from the aggregate
investment in the Portfolio on the current Portfolio Business Day by all
investors in the Portfolio. The percentage so determined will then be applied to
determine the value of the investor's interest in the Portfolio for the current
Portfolio Business Day.
INVESTMENT PERFORMANCE
The average annual total return is determined by multiplying a hypothetical
initial purchase order of $1,000 by the average annual compound rate of return
(including capital appreciation/depreciation, and dividends and distributions
paid and reinvested) for the stated period and annualizing the results. The
calculation assumes that all dividends and distributions are reinvested at net
asset value on the reinvestment dates during the period, a complete redemption
of the investment and, with respect to Class I shares, the deduction of the
maximum contingent deferred sales charge at the end of the period. For
information concerning the total return of the Fund, see "Performance
Information" in the Fund's Part II of this Statement of Additional Information.
The yield of the Fund is computed pursuant to a standardized formula by
dividing the net investment income per share earned during a recent thirty-day
period by the maximum offering price (net asset value) per share on the last day
of the period and annualizing the resulting figure. Net investment income per
share is calculated from the yields to maturity of all debt obligations held by
the Portfolio based on prescribed methods, reduced by accrued Fund expenses for
the period with the resulting number being divided by the average daily number
of Fund shares outstanding and entitled to receive dividends during the period.
This yield figure does not reflect the deduction of any contingent deferred
sales charges which are imposed upon certain redemptions of Class I shares at
the rates set forth under "How to Redeem Fund Shares" in the Fund's current
prospectus. A taxable-equivalent yield is computed by dividing the tax-exempt
yield by 1 minus the tax rate. For the yield and taxable equivalent yield of the
Fund, see "Performance Information" in the Fund's Part II of this Statement of
Additional Information.
The Fund may also publish the distribution rate and/or the effective
distribution rate. The Fund's distribution rate is computed by dividing the most
recent monthly distribution per share annualized, by the current net asset value
per share. 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.
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. For the Fund's
distribution rate and effective distribution rate, see "Performance Information"
in the Fund's Part II of this Statement of Additional Information.
The Fund's total return may be compared to the Consumer Price Index and to
the domestic securities indices of the Bond Buyer 25 Revenue Bond Index and the
Lehman Brothers Municipal Bond Index. The Fund's total return and comparisons
with these indices may be used in advertisements and in information furnished to
present or prospective shareholders. The Fund's performance may differ from that
of other investors in the Portfolio, including other investment companies.
From time to time, evaluations of the Fund's performance made by independent
sources, e.g., Lipper Analytical Services, Inc., CDA/Wiesenberger and
Morningstar, Inc., may be used in advertisements and in information
furnished to present or prospective shareholders.
From time to time, information, charts and illustrations relating to the
relative effects of changes in interest rates on values of securities of varying
durations may be included in advertisements and other material supplied to
present and prospective shareholders. For example, the following chart
illustrates that bond prices move inversely with interest rates -- values
decrease if interest rates rise, and values increase when rates fall. The
shorter a bond's duration, the less its price fluctuates for a given
interest-rate change. For example, if interest rates change by 1%, a limited
maturity bond with a 6-year duration will change by 6%, compared to a 12% change
for a 12-year duration bond. Source: Eaton Vance Management.
From time to time, information, charts and illustrations relating to
inflation and the effects of inflation on the dollar may be included in
advertisements and other material furnished to present and prospective
shareholders. For example, after 10 years, the purchasing power of $25,000 would
shrink to $16,621, $14,968, $13,465 and $12,100, if the annual rates of
inflation during such period were 4%, 5%, 6% and 7%, respectively. (To calculate
the purchasing power, the value at the end of each year is reduced by the above
inflation rates for 10 consecutive years.)
From time to time, information about portfolio allocation and holdings of
the Portfolio at a particular date (including ratings assigned by independent
ratings services such as Moody's, S&P and Fitch) may be included in
advertisements and other material furnished to present and prospective
shareholders. Such information may be stated as a percentage of the Portfolio's
bond holdings on such date.
The Fund is designed for investors seeking
o a higher level of after tax income than normally provided by taxable
and tax-free money funds, certificates of deposit or other short-term
investments, and
o more price stability than investments in long-term municipal bonds or
bond funds.
Comparative information about the yield or distribution rate of the Fund and
about average rates of return on certificates of deposit, bank money market
deposit accounts, money market mutual funds and other short-term investments may
also be included in advertisements, supplemental sales literature or
communications of the Fund. A bank certificate of deposit, unlike the Fund's
shares, pays a fixed rate of interest and entitles the depositor to receive the
face amount of the certificate of deposit at maturity. A bank money market
deposit account is a form of savings account which pays a variable rate of
interest. Unlike the Fund's shares, bank certificates of deposit and bank money
market deposit accounts are insured by the Federal Deposit Insurance
Corporation. A money market mutual fund is designed to maintain a constant value
of $1.00 per share and, thus, a money market fund's shares are subject to less
price fluctuation than the Fund's shares.
The average rates of return of money market mutual funds, certificates of
deposit and bank money market deposit accounts referred to in advertisements,
supplemental sales literature or communications of the Fund will be based on
rates published by the Federal Reserve Bank, Donoghues Money Fund Averages,
RateGram or The Wall Street Journal.
Advertisements and other material furnished to present and prospective
shareholders may also compare the taxable equivalent yield of the Fund to
after-tax yields of certificates of deposits, bank money market deposit accounts
and money market mutual funds over various Federal income tax brackets.
Such materials may also compare taxable certificate of deposit rates of
return with rates of return in intermediate municipal bond indices and taxable
equivalents of such rates of return. An example of such an index is the Lehman
Brothers, Inc. 7-Year General Obligation Municipal Bond Index.
From time to time, information, charts and illustrations relating to the
relative total return performance of Intermediate-Term Tax Free Funds and Tax
Free Money Market Funds, based on information supplied by Lipper Analytical
Services, Inc., may be included in advertisements and other materials furnished
to present and prospective shareholders. For example, for the 10 years ended
December 31, 1993, cumulative total returns were: Intermediate- Term Tax Free
Funds, 133.4%; Tax Free Money Market Funds, 53.4%.
A comparison of the Total Return Advantage of intermediate-term tax free
funds over 3-month certificates of deposit (after taxes, assuming a 36% Federal
bracket) and tax free money market mutual funds may also be provided. In such an
illustration, sources of information are Lipper Analytical Services, Inc., The
Federal Reserve Bulletin, and The Wall Street Journal.
Total return is a common way to evaluate the results of any mutual fund
investment, because it includes any change in principal value and assumes the
reinvestment of all dividends and capital gains in additional shares. Most tax
free money market funds are designed to maintain a $1 share price by investing
in short-term municipal instruments, while certificates of deposit are insured
by the FDIC. This illustration is not meant to imply or predict any future rate
of return for the Fund.
For additional information, charts and illustrations relating to the Fund's
investment performance, see "Performance Information" in the Fund's Part II of
this Statement of Additional Information.
Information used in advertisements and in materials furnished to present and
prospective shareholders may include statements or illustrations relating to the
appropriateness of types of securities and/or mutual funds which may be employed
to meet specific financial goals, such as (1) funding retirement, (2) paying for
children's education, and (3) financially supporting aging parents. These three
financial goals may be referred to in such advertisements or materials as the
"Triple Squeeze." Such information may also suggest the appropriateness of the
Fund as an investment for certain types of investors such as: conservative
investors who want higher after-tax income, but are concerned about the
potential volatility of long-term bonds or bond funds; dual-income couples in a
high tax bracket; and investors with long-term municipal bonds or fund
portfolios who are seeking diversification.
TAXES
Each series of the Trust is treated as a separate entity for Federal income
tax purposes. The Fund has elected to be treated and intends to qualify each
year, as a regulated investment company under the Internal Revenue Code of 1986,
as amended (the "Code"). See the notes to the Financial Statements. Accordingly,
the Fund intends to satisfy certain requirements relating to sources of its
income and diversification of its assets and to distribute its net investment
income (including tax-exempt income) and net realized capital gains in
accordance with the timing requirements imposed by the Code, so as to avoid any
Federal income or excise tax on the Fund. The Trust has applied for a private
letter ruling from the Internal Revenue Service to the effect that its
distributions will not constitute "preferential dividends" for tax purposes. The
multiple class structure proposed by the Fund resembles that sanctioned in many
existing private letter rulings. Because the Fund invests substantially all of
its assets in the Portfolio, the Portfolio normally must satisfy the applicable
source of income and diversification requirements in order for the Fund to
satisfy them. The Portfolio will allocate at least annually among its investors,
including the Fund, each investor's distributive share of the Portfolio's net
taxable (if any) and tax-exempt investment income, net realized capital gains,
and any other items of income, gain, loss, deduction or credit. For purposes of
applying the requirements of the Code regarding qualification as a regulated
investment company, the Fund will be deemed (i) to own its proportionate share
of each of the assets of the Portfolio and (ii) to be entitled to the gross
income of the Portfolio attributable to such share.
In order to avoid Federal excise tax, the Code requires that the Fund
distribute by December 31 of each calendar year at least 98% of its ordinary
income (not including tax-exempt income) for such year, at least 98% of the
excess of its realized capital gains over its realized capital losses, generally
computed on the basis of the one-year period ending on October 31 of such year,
after reduction by any available capital loss carryforwards, and 100% of any
income from the prior year (as previously computed) that was not paid out during
such year and on which the Fund paid no Federal income tax. Under current law,
provided that the Fund qualifies as a regulated investment company for Federal
income tax purposes and the Portfolio is treated as a partnership for
Massachusetts and Federal tax purposes, neither the Fund nor the Portfolio is
liable for any income, corporate excise or franchise tax in the Commonwealth of
Massachusetts.
The Portfolio's investment in zero coupon and certain other securities will
cause it to realize income prior to the receipt of cash payments with respect to
these securities. Such income will be allocated daily to interests in the
Portfolio and, in order to enable the Fund to distribute its proportionate share
of this income and avoid a tax payable by the Fund, the Portfolio may be
required to liquidate portfolio securities that it might otherwise have
continued to hold in order to generate cash that the Fund may withdraw from the
Portfolio for subsequent distribution to Fund shareholders.
Investments in lower-rated or unrated securities may present special tax
issues for the Portfolio and hence for the Fund to the extent actual or
anticipated defaults may be more likely with respect to such securities. Tax
rules are not entirely clear about issues such as when the Portfolio may cease
to accrue interest, original issue discount, or market discount; when and to
what extent deductions may be taken for bad debts or worthless securities; how
payments received on obligations in default should be allocated between
principal and income; and whether exchanges of debt obligations in a workout
context are taxable.
Distributions by the Fund of net tax-exempt interest income that are
properly designated as "exempt-interest dividends" may be treated by
shareholders as interest excludable from gross income under Section 103(a) of
the Code. In order for the Fund to be entitled to pay the tax-exempt interest
income allocated to it by the Portfolio as exempt-interest dividends to its
shareholders, the Fund must and intends to satisfy certain requirements,
including the requirement that, at the close of each quarter of its taxable
year, at least 50% of the value of its total assets consists of obligations the
interest on which is exempt from regular Federal income tax. For purposes of
applying this 50% requirement, the Fund will be deemed to own its proportionate
share of each of the assets of the Portfolio, and the Portfolio currently
intends to invest its assets in a manner such that the Fund can meet this 50%
requirement. Interest on certain municipal obligations is treated as a tax
preference item for purposes of the Federal alternative minimum tax.
Shareholders of the Fund are required to report tax-exempt interest on their
Federal income tax returns.
From time to time proposals have been introduced before Congress for the
purpose of restricting or eliminating the Federal income tax exemption for
interest on certain types of municipal obligations, and it can be expected that
similar proposals may be introduced in the future. Under Federal tax legislation
enacted in 1986, the Federal income tax exemption for interest on certain
municipal obligations was eliminated or restricted. As a result of such
legislation, the availability of municipal obligations for investment by the
Portfolio and the value of the securities held by the Portfolio may be affected.
In the course of managing its investments, the Portfolio may realize some
short-term and long-term capital gains (and/or losses) as a result of market
transactions, including sales of portfolio securities and rights to when- issued
securities and options and futures transactions. The Portfolio may also realize
taxable income from certain short-term taxable obligations, securities loans, a
portion of original issue discount with respect to certain stripped municipal
obligations or their stripped coupons and certain realized accrued market
discount. Any distributions by the Fund of its share of such capital gains
(after reduction by any capital loss carryforwards) would be taxable to
shareholders of the Fund. However, it is expected that such amounts, if any,
would normally be insubstantial in relation to the tax exempt interest earned by
the Portfolio and allocated to the Fund. Certain distributions of the Fund
declared in October, November or December and paid the following January will be
taxed to shareholders as if received on December 31 of the year in which they
are declared.
The Portfolio's transactions in options and futures contracts will be
subject to special tax rules that may affect the amount, timing and character of
Fund distributions to shareholders. For example, certain positions held by the
Portfolio on the last business day of each taxable year will be marked to market
(i.e., treated as if closed out on such day), and any resulting gain or loss
will generally be treated as 60% long-term and 40% short-term capital gain or
loss. Certain positions held by the Portfolio that substantially diminish the
Portfolio's risk of loss with respect to other positions in its portfolio may
constitute "straddles," which are subject to tax rules that may cause deferral
of Portfolio losses, adjustments in the holding period of Portfolio securities
and conversion of short-term into long-term capital losses. The Portfolio may
have to limit its activities in options and futures contracts in order to enable
the Fund to maintain its qualification as a regulated investment company.
Any loss realized upon the sale or exchange of shares of the Fund with a tax
holding period of 6 months or less will be treated as a long-term capital loss
to the extent of any distribution of net long-term capital gains with respect to
such shares. Any loss realized on the sale or exchange of shares which have been
held for tax purposes for 6 months or less (or such shorter period as may be
prescribed by Treasury regulations) will be disallowed to the extent the
shareholder has received tax-exempt interest with respect to such shares. In
addition, a loss realized on a redemption of Fund shares will be disallowed to
the extent the shareholder acquired other Fund shares within the period
beginning 30 days before the redemption of the loss shares and ending 30 days
after such date.
The foregoing discussion does not address the special tax rules applicable
to certain classes of investors, such as tax-exempt entities, insurance
companies and financial institutions. Shareholders should consult their own tax
advisers with respect to special tax rules that may apply in their particular
situations, as well as the state, local or foreign tax consequences of investing
in the Fund.
PRINCIPAL UNDERWRITER
Under the Distribution Agreement the Principal Underwriter acts as principal
in selling shares of the Fund. The expenses of printing copies of prospectuses
used to offer shares to financial service firms or investors and other selling
literature and of advertising are borne by the Principal Underwriter. The fees
and expenses of qualifying and registering and maintaining qualifications and
registrations of the Fund and its shares under Federal and state securities laws
are borne by the Fund. In addition, the Fund makes payments to the Principal
Underwriter pursuant to its Distribution Plan as described in the Fund's current
prospectus; the provisions of the plan relating to such payments are included in
the Distribution Agreement. The Distribution Agreement is renewable annually by
the Trust's Board of Trustees (including a majority of its Trustees who are not
interested persons of the Trust and who have no direct or indirect financial
interest in the operation of the Fund's Distribution Plan or the Distribution
Agreement), may be terminated on sixty days' notice either by such Trustees or
by vote of a majority of the outstanding voting securities of the Fund or on six
months' notice by the Principal Underwriter and is automatically terminated upon
assignment. The Principal Underwriter distributes Fund shares on a "best
efforts" basis under which it is required to take and pay for only such shares
as may be sold. The Fund has authorized the Principal Underwriter to act as its
agent in repurchasing shares at the rate of $2.50 for each repurchase
transaction handled by the Principal Underwriter. The Principal Underwriter
estimates that the expenses incurred by it in acting as repurchase agent for the
Fund will exceed the amounts paid therefor by the Fund. For the amount paid by
the Fund to the Principal Underwriter for acting as repurchase agent, see "Fees
and Expenses" in the Fund's Part II of this Statement of Additional Information.
DISTRIBUTION PLAN
The Distribution Plan ("the Plan") applicable to Class I shares is described
in the prospectus and is designed to meet the requirements of Rule 12b-1 under
the 1940 Act and the sales charge rule of the National Association of Securities
Dealers, Inc. (the "NASD Rule"). The purpose of the Plan is to compensate the
Principal Underwriter for its distribution services and facilities provided to
the Fund by paying the Principal Underwriter sales commissions and a separate
distribution fee in connection with sales of Fund shares. The following
supplements the discussion of the Plan contained in the Fund's prospectus.
The amount payable by a Fund to the Principal Underwriter pursuant to the
Plan as sales commissions and distribution fees with respect to each day will be
accrued on such day as a liability of Class I and will accordingly reduce the
net assets of the Class upon such accrual, all in accordance with generally
accepted accounting principles. The amount payable on each day by a Fund is
limited to 1/365 of .75% of the Fund's net assets attributable to Class I shares
on such day. The level of a Fund's net assets attributable to Class I shares
changes each day and depends upon the amount of sales and redemptions of Class I
shares, the changes in the value of the investments made by the corresponding
Portfolio, the expenses of the Fund attributable to Class I shares and of the
corresponding Portfolio accrued and allocated to the Fund on such day, income on
portfolio investments of the corresponding Portfolio accrued and allocated to
the Fund on such day, and any dividends and distributions declared on the Class
I shares. A Fund does not accrue possible future payments as a liability of
Class I or reduce the current net assets of the Class in respect of unknown
amounts which may become payable under its Plan in the future because the
standards for accrual of a liability under such accounting principles have not
been satisfied.
Each Fund's Plan provides that the Fund will receive all contingent deferred
sales charges and will make no payments to the Principal Underwrtier in respect
of any day on which there are no outstanding Uncovered Distribution Charges
under the Fund's Plan. Contingent deferred sales charges and accrued amounts
will be paid by a Fund to the Principal Underwriter whenever there exist
Uncovered Distribution Charges under the Fund's Plan.
The provisions of the Plans relating to payments of sales commissions and
distribution fees to the Principal Underwriter are also included in the
Distribution Agreements between the Trust on behalf of the Funds and the
Principal Underwriter. Each Plan provides that it shall continue in effect
through and including October 25, 1995, and shall continue in effect
indefinitely thereafter for so long as such continuance is approved at least
annually by the vote of both a majority of (i) the Trustees of the Trust who are
not interested persons of the Trust and who have no direct or indirect financial
interest in the operation of the Plan or any agreements related to the Plan (the
"Rule 12b-1 Trustees") and (ii) all of the Trustees then in office, and each
Distribution Agreement contains a similar provision. A Plan and Distribution
Agreement may be terminated with respect to one or more classes of shares by a
vote of a majority of the outstanding voting securities of that class.
Periods with a high level of sales of Class I shares accompanied by a low
level of early redemptions of Class I shares resulting in the imposition of
contingent deferred sales charges will tend to increase the time during which
there will exist Uncovered Distribution Charges of the Principal Underwriter.
Conversely, periods with a low level of sales of Class I shares accompanied by a
high level of early redemptions of Class I shares resulting in the imposition of
contingent deferred sales charges will tend to reduce the time during which
there will exist Uncovered Distribution Charges of the Principal Underwriter.
In calculating daily the amount of uncovered distribution charges,
distribution charges will include the aggregate amount of sales commissions and
distribution fees theretofore paid plus the aggregate amount of sales
commissions and distribution fees which the Principal Underwriter is entitled to
be paid under the Plan since its inception. Payments theretofore paid and
payable under the Plan by the Fund on behalf of Class I to the Principal
Underwriter and contingent deferred sales charges with respect to Class I shares
theretofore paid and payable to the Principal Underwriter will be subtracted
from such distribution charges; if the result of such subtraction is positive, a
distribution fee (computed at 1% over the prime rate then reported in The Wall
Street Journal) will be computed on such amount and added thereto, with the
resulting sum constituting the amount of outstanding uncovered distribution
charges with respect to such day. The amount of outstanding uncovered
distribution charges of the Principal Underwriter calculated on any day does not
constitute a liability recorded on the financial statements of the Fund.
The amount of uncovered distribution charges of the Principal Underwriter at
any particular time depends upon various changing factors, including the level
and timing of sales of Class I shares, the nature of such sales (i.e., whether
they result from exchange transactions, reinvestments or from cash sales through
Authorized Firms), the level and timing of redemptions of Class I shares upon
which a contingent deferred sales charge will be imposed, the level and timing
of redemptions of Class I shares upon which no contingent deferred sales charge
will be imposed (including redemptions involving exchanges of Class I shares for
shares of another fund which result in a reduction of uncovered distribution
charges), changes in the level of the net assets attributable to Class I shares,
and changes in the interest rate used in the calculation of the distribution fee
under the Plan. For the sales commission payments made by the Fund and the
outstanding uncovered distribution charges of the Principal Underwriter, see
"Fees and Expenses -- Distribution Plan" in the Fund's Part II of this Statement
of Additional Information. The Plan also authorizes the Fund to make payments of
service fees. For additional information concerning the service fee, see "Fees
and Expenses -- Distribution Plan" in the Fund's Part II of this Statement of
Additional Information.
Each Fund's Plan as currently implemented by the Trustees authorizes
payments of sales commissions and distribution fees to the Principal Underwriter
and service fees to the Principal Underwriter and Authorized Firms which may be
equivalent, on an aggregate basis during any fiscal year of the Fund, to .90% of
the Fund's average daily net assets for such year. The Funds believe that the
combined rate of all these payments may be higher than the rate of payments made
under distribution plans adopted by other investment companies pursuant to Rule
12b-1. Although the Principal Underwriter will use its own funds (which may be
borrowed from banks) to pay sales commissions and service fees at the time of
sale, it is anticipated that the Eaton Vance organization will profit by reason
of the operation of the Plan through an increase in the Fund's assets (thereby
increasing the advisory fee payable to BMR by the Portfolio) resulting from the
sale of Class I shares and through the sales commissions, distribution fees and
contingent deferred sales charges paid to the Principal Underwriter pursuant to
the Plan. The Eaton Vance organization may be considered to have realized a
profit under the Plan if at any point in time the aggregate amounts therefore
received by the Principal Underwriter pursuant to the Plan and from contingent
deferred sales charges have exceeded the total expenses theretofore incurred by
such organization in distributing Class I shares of the Fund. Total expenses for
this purpose will include an allocable portion of the overhead costs of such
organization and its branch offices, which costs will include without limitation
leasing expense, depreciation of building and equipment, utilities,
communication and postage expense, compensation and benefits of personnel,
travel and promotional expense, stationery and supplies, literature and sales
aids, interest expense, data processing fees, consulting and temporary help
costs, insurance, taxes other than income taxes, legal and auditing expense and
other miscellaneous overhead items. Overhead is calculated and allocated for
such purpose by the Eaton Vance organization in a manner deemed equitable to the
Fund.
Under the Plan the President or a Vice President of the Trust shall provide
to the Trustees for their review, and the Trustees shall review at least
quarterly, a written report of the amount expended under the Plan and the
purposes for which such expenditures were made. The Plan may not be amended to
increase materially the payments described therein without approval of the
shareholders of the affected class of the Fund, and all material amendments of
the Plan must also be approved by the Trustees as required by Rule 12b-1. So
long as the Plan is in effect, the selection and nomination of Trustees who are
not interested persons of the Trust shall be committed to the discretion of the
Trustees who are not such interested persons.
The Trustees believe that the Plan will be a significant factor in the
growth of the Fund's assets, resulting in increased investment flexibility and
advantages which will benefit the Fund and its shareholders. Payments for sales
commissions and distribution fees made to the Principal Underwriter under the
Plan will compensate the Principal Underwriter for its services and expenses in
distributing shares of the Fund. Service fee payments made to the Principal
Underwriter and Authorized Firms under the Plan provide incentives to provide
continuing personal services to investors and the maintenance of shareholder
accounts. By providing incentives to the Principal Underwriter and Authorized
Firms, the Plan is expected to result in the maintenance of, and possible future
growth in, the assets of the Fund. Based on the foregoing and other relevant
factors, the Trustees have determined that in their judgment there is a
reasonable likelihood that the Plan will benefit the Fund and its shareholders.
PORTFOLIO SECURITY TRANSACTIONS
Decisions concerning the execution of portfolio security transactions,
including the selection of the market and the executing firm, are made by BMR.
BMR is also responsible for the execution of transactions for all other accounts
managed by it.
BMR places the portfolio security transactions of the Portfolio and of all
other accounts managed by it for execution with many firms. BMR uses its best
efforts to obtain execution of portfolio security transactions at prices which
are advantageous to the Portfolio and at reasonably competitive spreads or (when
a disclosed commission is being charged) at reasonably competitive commission
rates. In seeking such execution, BMR will use its best judgment in evaluating
the terms of a transaction, and will give consideration to various relevant
factors, including without limitation the size and type of the transaction, the
nature and character of the market for the security, the confidentiality, speed
and certainty of effective execution required for the transaction, the general
execution and operational capabilities of the executing firm, the reputation,
reliability, experience and financial condition of the firm, the value and
quality of the services rendered by the firm in this and other transactions, and
the reasonableness of the spread or commission, if any. Municipal obligations,
including State obligations, purchased and sold by the Portfolio are generally
traded in the over-the-counter market on a net basis (i.e., without commission)
through broker-dealers and banks acting for their own account rather than as
brokers, or otherwise involve transactions directly with the issuer of such
obligations. Such firms attempt to profit from such transactions by buying at
the bid price and selling at the higher asked price of the market for such
obligations, and the difference between the bid and asked price is customarily
referred to as the spread. The Portfolio may also purchase municipal obligations
from underwriters, the cost of which may include undisclosed fees and
concessions to the underwriters. While it is anticipated that the Portfolio will
not pay significant brokerage commissions in connection with such portfolio
security transactions, on occasion it may be necessary or appropriate to
purchase or sell a security through a broker on an agency basis, in which case
the Portfolio will incur a brokerage commission. Although spreads or commissions
on portfolio security transactions will, in the judgment of BMR, be reasonable
in relation to the value of the services provided, spreads or commissions
exceeding those which another firm might charge may be paid to firms who were
selected to execute transactions on behalf of the Portfolio and BMR's other
clients for providing brokerage and research services to BMR.
As authorized in Section 28(e) of the Securities Exchange Act of 1934, a
broker or dealer who executes a portfolio transaction on behalf of the Portfolio
may receive a commission which is in excess of the amount of commission another
broker or dealer would have charged for effecting that transaction if BMR
determines in good faith that such commission was reasonable in relation to the
value of the brokerage and research services provided. This determination may be
made on the basis of either that particular transaction or on the basis of
overall responsibilities which BMR and its affiliates have for accounts over
which they exercise investment discretion. In making any such determination, BMR
will not attempt to place a specific dollar value on the brokerage and research
services provided or to determine what portion of the commission should be
related to such services. Brokerage and research services may include advice as
to the value of securities, the advisability of investing in, purchasing, or
selling securities, and the availability of securities or purchasers or sellers
of securities; furnishing analyses and reports concerning issuers, industries,
securities, economic factors and trends, portfolio strategy and the performance
of accounts; effecting securities transactions and performing functions
incidental thereto (such as clearance and settlement); and the "Research
Services" referred to in the next paragraph.
It is a common practice of the investment advisory industry and of the
advisers of investment companies, institutions and other investors to receive
research, statistical and quotation services, data, information and other
services, products and materials which assist such advisers in the performance
of their investment responsibilities ("Research Services") from broker-dealer
firms which execute portfolio transactions for the clients of such advisers and
from third parties with which such broker-dealers have arrangements. Consistent
with this practice, BMR receives Research Services from many broker-dealer firms
with which BMR places the Portfolio transactions and from third parties with
which these broker-dealers have arrangements. These Research Services include
such matters as general economic and market reviews, industry and company
reviews, evaluations of securities and portfolio strategies and transactions and
recommendations as to the purchase and sale of securities and other portfolio
transactions, financial, industry and trade publications, news and information
services, pricing and quotation equipment and services, and research oriented
computer hardware, software, data bases and services. Any particular Research
Service obtained through a broker-dealer may be used by BMR in connection with
client accounts other than those accounts which pay commissions to such
broker-dealer. Any such Research Service may be broadly useful and of value to
BMR in rendering investment advisory services to all or a significant portion of
its clients, or may be relevant and useful for the management of only one
client's account or of a few clients' accounts, or may be useful for the
management of merely a segment of certain clients' accounts, regardless of
whether any such account or accounts paid commissions to the broker-dealer
through which such Research Service was obtained. The advisory fee paid by the
Portfolio is not reduced because BMR receives such Research Services. BMR
evaluates the nature and quality of the various Research Services obtained
through broker-dealer firms and attempts to allocate sufficient commissions to
such firms to ensure the continued receipt of Research Services which BMR
believes are useful or of value to it in rendering investment advisory services
to its clients.
Subject to the requirement that BMR shall use its best efforts to seek and
execute portfolio security transactions at advantageous prices and at reasonably
competitive spreads or commission rates, BMR is authorized to consider as a
factor in the selection of any firm with whom portfolio orders may be placed the
fact that such firm has sold or is selling shares of the Fund or of other
investment companies sponsored by BMR or Eaton Vance. This policy is not
inconsistent with a rule of the National Association of Securities Dealers,
Inc., which rule provides that no firm which is a member of the Association
shall favor or disfavor the distribution of shares of any particular investment
company or group of investment companies on the basis of brokerage commissions
received or expected by such firm from any source.
Municipal obligations considered as investments for the Portfolio may also
be appropriate for other investment accounts managed by BMR or its affiliates.
BMR will attempt to allocate equitably portfolio security transactions among the
Portfolio and the portfolios of its other investment accounts purchasing
municipal obligations whenever decisions are made to purchase or sell securities
by the Portfolio and one or more of such other accounts simultaneously. In
making such allocations, the main factors to be considered are the respective
investment objectives of the Portfolio and such other accounts, the relative
size of portfolio holdings of the same or comparable securities, the
availability of cash for investment by the Portfolio and such accounts, the size
of investment commitments generally held by the Portfolio and such accounts and
the opinions of the persons responsible for recommending investments to the
Portfolio and such accounts. While this procedure could have a detrimental
effect on the price or amount of the securities available to the Portfolio from
time to time, it is the opinion of the Trustees of the Trust and the Portfolio
that the benefits available from the BMR organization outweigh any disadvantage
that may arise from exposure to simultaneous transactions. For the brokerage
commissions paid by the Portfolio on portfolio transactions, see "Fees and
Expenses" in the Fund's Part II of this Statement of Additional Information.
OTHER INFORMATION
Eaton Vance, pursuant to its agreement with the Trust, controls the use of
the words "Eaton Vance" in the Fund's name and may use the words "Eaton Vance"
in other connections and for other purposes.
Upon receipt of a private letter ruling of the Internal Revenue Service and
the necessary shareholder approvals, the Declaration of Trust will authorize the
Trustees to classify and reclassify the shares of the Fund, or any other series
of the Trust, into two or more Classes. Each Class of shares of the Fund
represents an equal proportionate interest in the assets belonging to the Fund.
Class I shares are offered to members of the public subject to a contingent
deferred sales charge in the event of certain redemption transactions in the
first four years that Class I shares are held. At the commencement of the fifth
year in which Class I shares are held, Class I shares automatically convert to
Class II shares. Class I shares have certain exclusive voting rights on matters
relating to the Class I Rule 12b-1 distribution plan. See "How to Buy Shares of
the Fund for Cash" and "How to Redeem or Sell Fund Shares" in the Fund's current
prospectus.
Class II shares (upon regulatory approval) may be offered to limited
categories of investors. Class II shares will not be subject to a contingent
deferred sales charge upon redemption and will not be subject to a Rule 12b-1
distribution plan.
Dividends paid by the Fund, if any, with respect to each Class of shares
will be calculated in the same manner, at the same time and on the same day and
will be in the same amount, except that (i) the distribution fees relating to
Class I will be borne exclusively by that Class and (ii) each Class of shares
will bear any other Class expenses properly attributable (subject to regulatory
approvals) to such Class of shares. Similarly, the net asset value per share
will vary depending on the Class of shares purchased.
As permitted by Massachusetts law, there will normally be no meetings of
shareholders for the purpose of electing Trustees unless and until such time as
less than a majority of the Trustees of the Trust holding office have been
elected by shareholders. In such an event the Trustees then in office will call
a shareholders' meeting for the election of Trustees. Except for the foregoing
circumstances and unless removed by action of the shareholders in accordance
with the Trust's by-laws, the Trustees shall continue to hold office and may
appoint successor Trustees.
The Trust's by-laws provide that no person shall serve as a Trustee if
shareholders holding two-thirds of the outstanding shares have removed him from
that office either by a written declaration filed with the Trust's custodian or
by votes cast at a meeting called for that purpose. The by-laws further provide
that under certain circumstances the shareholders may call a meeting to remove a
Trustee and that the Trust is required to provide assistance in communication
with shareholders about such a meeting.
The Trust's Declaration of Trust may be amended by the Trustees when
authorized by vote of a majority of the outstanding voting securities of the
Trust, the financial interests of which are affected by the amendment. The
Trustees may also amend the Declaration of Trust without the vote or consent of
shareholders to change the name of the Trust or any series or to make such other
changes as do not have a materially adverse effect on the financial interests of
shareholders or if they deem it necessary to conform it to applicable Federal or
state laws or regulations. The Trust or any series or Class thereof may be
terminated by: (1) the affirmative vote of the holders of not less than
two-thirds of the shares outstanding and entitled to vote at any meeting of
shareholders of the Trust or the appropriate series or Class thereof, or by an
instrument or instruments in writing without a meeting, consented to by the
holders of two-thirds of the shares of the Trust or a series or Class thereof,
provided, however, that, if such termination is recommended by the Trustees, the
vote of a majority of the outstanding voting securities of the Trust or a series
or Class thereof entitled to vote thereon shall be sufficient authorization; or
(2) by means of an instrument in writing signed by a majority of the Trustees,
to be followed by a written notice to shareholders stating that a majority of
the Trustees has determined that the continuation of the Trust or a series or a
Class thereof is not in the best interest of the Trust, such series or Class or
of their respective shareholders.
The Declaration of Trust further provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law; but nothing in the
Declaration of Trust protects a Trustee against any liability to which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
office. In addition, the By-Laws of the Trust provide that no natural person
shall serve as a Trustee of the Trust after the holders of record of not less
than two-thirds of the outstanding shares have declared that he be removed from
office either by declaration in writing filed with the custodian of the assets
of the Trust or by votes cast in person or by proxy at a meeting called for the
purpose. The By-Laws also provide that the Trustees shall promptly call a
meeting of shareholders for the purpose of voting upon a question of removal of
a Trustee when requested so to do by the record holders of not less than 10 per
centum of the outstanding shares.
In accordance with the Declaration of Trust of the Portfolio, there will
normally be no meetings of the investors for the purpose of electing Trustees
unless and until such time as less than a majority of the Trustees holding
office have been elected by investors. In such an event the Trustees of the
Portfolio then in office will call an investors' meeting for the election of
Trustees. Except for the foregoing circumstances and unless removed by action of
the investors in accordance with the Portfolio's Declaration of Trust, the
Trustees shall continue to hold office and may appoint successor Trustees.
The Declaration of Trust of the Portfolio provides that no person shall
serve as a Trustee if investors holding two-thirds of the outstanding interest
have removed him from that office either by a written declaration filed with the
Portfolio's custodian or by votes cast at a meeting called for that purpose. The
Declaration of Trust further provides that under certain circumstances the
investors may call a meeting to remove a Trustee and that the Portfolio is
required to provide assistance in communicating with investors about such a
meeting.
The right to redeem shares of the Fund can be suspended and the payment of
the redemption price deferred when the Exchange is closed (other than for
customary weekend and holiday closings), during periods when trading on the
Exchange is restricted as determined by the Commission, or during any emergency
as determined by the Commission which makes it impracticable for the Portfolio
to dispose of its securities or value its assets, or during any other period
permitted by order of the Commission for the protection of investors.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Deloitte & Touche LLP, 125 Summer Street, Boston, Massachusetts, are the
independent certified public accountants of the Fund and the Portfolio,
providing audit services, tax return preparation, and assistance and
consultation with respect to the preparation of filings with the Securities and
Exchange Commission.
For the financial statements of the Fund and the Portfolio, see "Financial
Statements" in this Statement of Additional Information.
<PAGE>
APPENDIX
DESCRIPTION OF SECURITIES RATINGS+
MOODY'S INVESTORS SERVICE, INC.
MUNICIPAL BONDS
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long term risk appear somewhat larger than the Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa: Bonds which are rated Baa are considered as medium-grade obligations (i.e.,
they are neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during other good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca: Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
ABSENCE OF RATING: Where no rating has been assigned or where a rating has
been suspended or withdrawn, it may be for reasons unrelated to the quality of
the issue.
Should no rating be assigned, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities or companies that
are not rated as a matter of policy.
3. There is a lack of essential data pertaining to the issue or issuer.
4. The issue was privately placed, in which case the rating is not
published in Moody's publications.
Suspension or withdrawal may occur if new and material circumstances arise, the
effects of which preclude satisfactory analysis; if there is no longer available
reasonable up-to-date data to permit a judgment to be formed; if a bond is
called for redemption; or for other reasons.
NOTE: Moody's applies numerical modifiers, 1, 2, and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
- ------------
+The ratings indicated herein are believed to be the most recent ratings
available at the date of this Statement of Additional Information for the
securities listed. Ratings are generally given to securities at the time of
issuance. While the rating agencies may from time to time revise such ratings,
they undertake no obligation to do so, and the ratings indicated do not
necessarily represent ratings which would be given to these securities on the
date of the Portfolio's fiscal year end.
MUNICIPAL SHORT-TERM OBLIGATIONS
RATINGS: Moody's ratings for state and municipal short-term obligations will be
designated Moody's Investment Grade or (MIG). Such rating recognizes the
differences between short term credit risk and long term risk. Factors effecting
the liquidity of the borrower and short term cyclical elements are critical in
short term ratings, while other factors of major importance in bond risk, long
term secular trends for example, may be less important over the short run.
A short term rating may also be assigned on an issue having a demand feature,
variable rate demand obligation (VRDO). Such ratings will be designated as
VMIG1, SG or if the demand feature is not rated, NR. A short term rating on
issues with demand features are differentiated by the use of the VMIG1 symbol to
reflect such characteristics as payment upon periodic demand rather than fixed
maturity dates and payment relying on external liquidity. Additionally,
investors should be alert to the fact that the source of payment may be limited
to the external liquidity with no or limited legal recourse to the issuer in the
event the demand is not met.
COMMERCIAL PAPER
Moody's commercial paper ratings are opinions of the ability of issuers to repay
punctually promissory obligations not having an original maturity in excess of
365 days.
Issuers (or supporting institutions) rated PRIME-1 or P-1 have a superior
ability for repayment of senior short-term debt obligations. Prime-1 or P-1
repayment ability will often be evidenced by many of the following
characteristics:
-- Leading market positions in well established industries.
-- High rates of return on funds employed.
-- Conservative capitalization structure with moderate reliance on debt and
ample asset protection.
-- Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
-- Well-established access to a range of financial markets and assured
sources of alternate liquidity.
PRIME-2
Issuers (or supporting institutions) rated PRIME-2 (P-2) have a strong ability
for repayment of senior short-term debt obligations. This will normally be
evidenced by many of the characteristics cited above, but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
PRIME-3
Issuers (or supporting institutions) rated PRIME-3 (P-3) have an acceptable
ability for repayment of senior short-term obligations. The effect of industry
characteristics and market compositions may be more pronounced. Variability in
earnings and profitability may result in changes in the level of debt protection
measurements and may require relatively high financial leverage.
Adequate alternate liquidity is maintained.
STANDARD & POOR'S RATINGS GROUP
INVESTMENT GRADE
AAA: Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the highest rated issues only in small degree.
A: Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB: Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibit adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay interest and repay principal for debt in this
category than in higher rated categories.
SPECULATIVE GRADE
Debt rated BB, B, CCC, CC, and C is regarded as having predominantly speculative
characteristics with respect to capacity to pay interest and repay principal. BB
indicates the least degree of speculation and C the highest. While such debt
will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major exposures to adverse conditions.
BB: Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB- rating.
B: Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB or BB-
rating.
CCC: Debt rated CCC has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The CCC rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
B or B- rating.
CC: The rating CC is typically applied to debt subordinated to senior debt which
is assigned an actual or implied CCC debt rating.
C: The rating C is typically applied to debt subordinated to senior debt which
is assigned an actual or implied CCC- debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed, but debt service
payments are continued.
C1: The Rating C1 is reserved for income bonds on which no interest is being
paid.
D: Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The D rating also will be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.
PLUS (+) OR MINUS (-): The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
P: The letter "p" indicates that the rating is provisional. A provisional rating
assumes the successful completion of the project being financed by the debt
being rated and indicates that payment of debt service requirements is largely
or entirely dependent upon the successful and timely completion of the project.
This rating, however, while addressing credit quality subsequent to completion
of the project, makes no comment on the likelihood of, or the risk of default
upon failure of such completion. The investor should exercise his own judgment
with respect to such likelihood and risk.
L: The letter "L" indicates that the rating pertains to the principal amount of
those bonds to the extent that the underlying deposit collateral is insured by
the Federal Deposit Insurance Corp. and interest is adequately collateralized.
In the case of certificates of deposit, the letter "L" indicates that the
deposit, combined with other deposits being held in the same right and capacity,
will be honored for principal and accrued pre-default interest up to the federal
insurance limits within 30 days after closing of the insured institution or, in
the event that the deposit is assumed by a successor insured institution, upon
maturity.
NR: NR indicates no rating has been requested, that there is insufficient
information on which to base a rating, or that S&P does not rate a particular
type of obligation as a matter of policy.
MUNICIPAL NOTES
S&P note ratings reflect the liquidity concerns and market access risks unique
to notes. Notes due in 3 years or less will likely receive a note rating. Notes
maturing beyond 3 years will most likely receive a long-term debt rating. The
following criteria will be used in making that assessment:
-- Amortization schedule (the larger the final maturity relative to other
maturities the more likely it will be treated as a note).
-- Sources of payment (the more dependent the issue is on the market for its
refinancing, the more likely it will be treated as a note).
Note rating symbols are as follows:
SP-1: Strong capacity to pay principal and interest. Those issues determined
to possess very strong characteristics will be given a plus(+) designation.
SP-2: Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse financial and economic changes over the term of the
notes.
SP-3: Speculative capacity to pay principal and interest.
COMMERCIAL PAPER
Standard & Poor's commercial paper ratings are a current assessments of the
likelihood of timely payment of debts considered short-term in the relevant
market.
A: Issues assigned this highest rating are regarded as having the greatest
capacity for timely payment. Issues in this category are delineated with the
numbers 1, 2 and 3 to indicate the relative degree of safety.
A-1: This designation indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus (+) sign designation.
A-2: Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1".
A-3: Issues carrying this designation have adequate capacity for timely
payment. They are, however, more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher designations.
B: Issues rated "B" are regarded as having only speculative capacity for
timely payment.
C: This rating is assigned to short term debt obligations with doubtful
capacity for payment.
D: Debt rated "D" is in payment default. The "D" rating category is used
when interest payments or principal payments are not made on the date due,
even if the applicable grace period had not expired, unless S&P believes
that such payments will be made during such grace period.
FITCH INVESTORS SERVICE, INC.
INVESTMENT GRADE BOND RATINGS
AAA: Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA: Bonds considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated "AAA". Because bonds rated in the "AAA" and
"AA" categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated "F- 1+".
A: Bonds considered to be investment grade and of high credit quality. The
obligors ability to pay interest and repay principal is considered to be strong,
but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB: Bonds considered to be investment grade and of satisfactory credit quality.
The obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however, are
more likely to have adverse impact on these bonds, and therefore, impair timely
payment. The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.
HIGH YIELD BOND RATINGS
BB: Bonds are considered speculative. The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified that could assist the
obligor in satisfying its debt service requirements.
B: Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue.
CCC: Bonds have certain identifiable characteristics which, if not remedied, may
lead to default. The ability to meet obligations requires an advantageous
business and economic environment.
CC: Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C: Bonds are in imminent default in payment of interest or principal.
DDD, DD, AND D: Bonds are in default on interest and/or principal payments. Such
bonds are extremely speculative and should be valued on the basis of their
ultimate recovery value in liquidation or reorganization of the obligor. "DDD"
represents the highest potential for recovery on these bonds, and "D" represents
the lowest potential for recovery.
PLUS (+) OR MINUS (-): The ratings from AA to C may be modified by the addition
of a plus or minus sign to indicate the relative position of a credit within the
rating category.
NR: Indicates that Fitch does not rate the specific issue.
CONDITIONAL: A conditional rating is premised on the successful completion of a
project or the occurrence of a specific event.
INVESTMENT GRADE SHORT-TERM RATINGS
Fitch's short-term ratings apply to debt obligations that are payable on demand
or have original maturities of generally up to three years, including commercial
paper, certificates of deposit, medium-term notes, and municipal and investment
notes.
F-1+: Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1: Very Stong Credit Quality. Issues assigned this rating reflect an assurance
of timely payment only slightly less in degree than issues rated "F- 1+".
F-2: Good Credit Quality. Issues carrying this rating have a satisfactory degree
of assurance for timely payment, but the margin of safety is not as great as the
"F-1+" and "F-1" categories.
F-3: Fair Credit Quality. Issues carrying this rating have characteristics
suggesting that the degree of assurance for timely payment is adequate, however,
near-term adverse change could cause these securities to be rated below
investment grade.
* * * * * * * *
NOTES: Bonds which are unrated expose the investor to risks with respect to
capacity to pay interest or repay principal which are similar to the risks of
lower-rated speculative bonds. The Portfolio is dependent on the Investment
Adviser's judgment, analysis and experience in the evaluation of such bonds.
Investors should note that the assignment of a rating to a bond by a
rating service may not reflect the effect of recent developments on the issuer's
ability to make interest and principal payments.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EV MARATHON ARIZONA LIMITED MATURITY
TAX FREE FUND. The investment objective of the Fund is to provide a high level
of current income exempt from regular Federal income tax and Arizona State
personal income taxes and limited principal fluctuation. The Fund seeks to
achieve its investment objective by investing its assets in the Arizona Limited
Maturity Tax Free Portfolio (the "Portfolio").
INVESTMENT RESTRICTIONS
The Fund may not:
(1) Purchase securities on margin (but the Fund may obtain such short-term
credits as may be necessary for the clearance of purchases and sales of
securities). The deposit or payment by the Fund of initial or maintenance margin
in connection with futures contracts or related options transactions is not
considered the purchase of a security on margin;
(2) Borrow money or issue senior securities except as permitted by the
Investment Company Act of 1940;
(3) Underwrite or participate in the marketing of securities of others,
except insofar as it may technically be deemed to be an underwriter in selling a
portfolio security under circumstances which may require the registration of the
same under the Securities Act of 1933;
(4) Purchase or sell real estate (including limited partnership interests in
real estate, but excluding readily marketable interests in real estate
investment trusts or readily marketable securities of companies which invest or
deal in real estate or securities which are secured by real estate);
(5) Purchase or sell physical commodities or contracts for the purchase or
sale of physical commodities; or
(6) Make loans to any person except by (a) the acquisition of debt
instruments and making portfolio investments, (b) entering into repurchase
agreements, and (c) lending portfolio securities.
Notwithstanding the investment policies and restrictions of the Fund, the
Fund may invest all of its investable assets in an open-end management
investment company with substantially the same investment objective, policies
and restrictions as the Fund.
In addition, as a matter of nonfundamental policy, neither the Fund nor the
Portfolio may (a) engage in options, futures or forward transactions if more
than 5% of its net assets, as measured by the aggregate of the premiums paid by
the Fund or the Portfolio, would be so invested; (b) make short sales of
securities or maintain a short position, unless at all times when a short
position is open it owns an equal amount of such securities or securities
convertible into or exchangeable, without payment of any further consideration,
for securities of the same issue as, and equal in amount to, the securities sold
short; (c) invest more than 15% of its net assets in investments which are not
readily marketable, including restricted securities and repurchase agreements
maturing in more than seven days. Restricted securities for the purposes of this
limitation do not include securities eligible for resale pursuant to Rule 144A
under the Securities Act of 1933 that the Board of Trustees of the Trust or the
Portfolio, or its delegate, determines to be liquid, based upon the trading
markets for the specific security; (d) purchase or retain in its portfolio any
securities issued by an issuer any of whose officers, directors, trustees or
security holders is an officer or Trustee of the Trust or the Portfolio or is a
member, officer, director or trustee of any investment adviser of the Trust or
the Portfolio, if after the purchase of the securities of such issuer by the
Fund or the Portfolio one or more of such persons owns beneficially more than
1/2 of 1% of the shares or securities or both (all taken at market value) of
such issuer and such persons owning more than 1/2 of 1% of such shares or
securities together own beneficially more than 5% of such shares or securities
or both (all taken at market value); or (e) purchase oil, gas or other mineral
leases or purchase partnership interests in oil, gas or other mineral
exploration or development programs.
In order to permit the sale of shares of the Fund in certain states, the
Fund may make commitments more restrictive than the fundamental policies
described above. Should the Fund determine that any such commitment is no longer
in the best interests of the Fund and its shareholders, it will revoke the
commitment by terminating sales of its shares in the state(s) involved.
RISKS OF CONCENTRATION
State Obligations. The following information as to certain Arizona
considerations is given to investors in view of the Portfolio's policy of
concentrating its investments in Arizona issuers. Such information is derived
from sources that are generally available to investors and is believed to be
accurate. Such information constitutes only a brief summary, does not purport to
be a complete description and is based on information from official statements
relating to securities offerings of Arizona issuers. Neither the Trust nor the
Portfolio has independently verified this information.
The composition of the Arizona economy has changed significantly in recent
years. Arizona has shifted from a resource based economy to one based in
services, high-tech manufacturing, construction, tourism and the military.
Continuation of the 1980's pattern of more rapid economic growth in the State
versus the Nation has slowed somewhat in the 1990's The population of the State
has increased 34.8%, from 2,718,215 in 1980 to 3,665,228 in 1990 with a ranking
of twenty-fourth among states for population. The State's unemployment rate of
5.5% in March 1994 is below the U.S. rate of 6.5%. Employment in Arizona grew
4.1% in the twelve months ended September 1993. After several slack years,
construction employment began picking up in 1992. The problems associated with
the phenomenal growth experienced in the 1984-1986 boom, i.e., air quality,
transportation, and public infrastructure, are being addressed by the Arizona
legislature and other public bodies.
The State's growth during the 1980's led to per capita state and local
expenditures which were above the national average. As a result, what was a
sizable general fund balance at the beginning of the decade declined to zero in
1983. Despite strong revenue growth during the national economic expansion,
beginning in 1983, the State faced structural deficit problems due to increased
costs in areas such as entitlements, education and corrections. This budgetary
pressure intensified when growth slowed starting in 1986. Beginning in fiscal
1985, the State was forced to deal with five successive years of budgetary gaps
through non-recurring revenues, internal fund transfers and budget cuts. In
1990, the Legislature passed a $250 million tax increase despite intense
anti-tax sentiment. This increase, together with further budget reducing
actions, enabled the State to end fiscal 1991 with a surplus approximately equal
to 2% of expenditures. Revenues in the fiscal year ended June 30, 1992 increased
3.8%, while expenditures, led by significant growth in health and welfare,
increased 8.9%. This resulted in a reduction of the fund balance from $45
million to $5.3 million (0.2% of expenditures). Revenue growth in fiscal year
1993 exceeded projections and produced an ending general fund balance of $86
million, 3% of expenditures. Expected revenue and expense growth for the 1994
budget is 2.4%. In November 1993, Arizona voters passed a measure that requires
a two-thirds vote of the Legislature to increase taxes. This will likely make it
more difficult to eliminate budgeting gaps that may occur in the future.
The ability of Arizona and its political subdivisions to respond to the
ever-increasing burdens placed upon them by the growth of the 1980's has been
limited, in part, by Constitutional and legislative restrictions on property tax
increases and limitations on annual expenditure increases. Subject to certain
exceptions, the maximum amount of property taxes levied by any Arizona county,
city, town or community college district for their operations and maintenance
expenditures cannot exceed the amount levied in a preceding year by more than
two percent. Certain taxes are specifically exempt from this limit, including
taxes levied for debt service payments.
Annual property tax levies for the payment of general obligation bonded
indebtedness are unlimited as to rate or amount. However, there are
Constitutional limitations on the aggregate amount of general obligation bonded
indebtedness an Arizona municipality may incur, and these limitations could
impede a municipality's ability to respond to the needs of a fast-growing
population for additional public facilities and services.
While general obligation bonds are often issued by local governments, the
State of Arizona is constitutionally prohibited from issuing general obligation
debt. Therefore, the State is not rated by Moody's, S&P or Fitch. The State
relies on pay-as-you-go capital outlays, revenue bonds and certificates of
participation to finance capital projects. Each of these projects is
individually rated based on its specific creditworthiness. Certificates of
Participation rely upon annual appropriations for debt service payments. Failure
of the obligated party to appropriate funds would have a negative impact upon
the price of the bond and could lead to a default.
FEES AND EXPENSES
INVESTMENT ADVISER
As at March 31, 1995, the Portfolio had net assets of $590,456. For the
period from the start of business, November 3, 1994, to March 31, 1995, the
Portfolio paid BMR advisory fees of $274 (equivalent to 0.15% (annualized) of
the Portfolio's average daily net assets for such period). To enhance the net
income of the Portfolio, BMR made a preliminary reduction in the full amount of
its advisory fee and BMR was allocated a portion of the expenses related to the
operation of the Portfolio in the amount of $1,639. The Portfolio's Investment
Advisory Agreement with BMR is dated October 25, 1994 and remains in effect
until February 28, 1996. The Agreement may be continued as described under
"Investment Adviser and Administrator" in Part I of this Statement of Additional
Information.
ADMINISTRATOR
As stated under "Investment Adviser and Administrator" in Part I of this
Statement of Additional Information, the Administrator receives no compensation
for providing administrative services to the Fund. For the period from the start
of business, November 3, 1994 to March 31, 1995, $1,359 of the Fund's operating
expenses were allocated to the Administrator.
DISTRIBUTION PLAN
The Distribution Plan and Distribution Agreement currently remain in effect
until October 25, 1995 and may be continued as described under "Distribution
Plan" in Part I of this Statement of Additional Information. Pursuant to Rule
12b-1, the Plan has been approved by the Fund's initial sole shareholder (Eaton
Vance) and by the Board of Trustees of the Trust, including the Rule 12b-1
Trustees. For the period from the start of business, November 3, 1994, to March
31, 1995, the Fund made sales commission payments under the Plan to the
Principal Underwriter aggregating $1,139, which amount was used by the
Prinicipal Underwriter to defray sales commissions aggregating $8,351 paid
during such period by the Principal Underwriter to Authorized Firms on sales of
Fund shares. During such period contingent deferred sales charges aggregating
approximately $800 were imposed on early redeeming shareholders and paid to the
Principal Underwriter to partially defray such sales commissions. As at March
31, 1995, the outstanding uncovered distribution charges of the Principal
Underwriter calculated under the Plan amounted to approximately $4,000 (which
amount was equivalent to 0.008% of the Fund's net assets on such day). The Fund
expects to begin accruing for its service fee payments during the quarter ending
December 31, 1995.
PRINCIPAL UNDERWRITER
For the period from the start of business, November 3, 1994, to March 31,
1995, the Fund paid no fee to the Principal Underwriter for repurchase
transactions handled by the Principal Underwriter (being $2.50 for each such
transaction).
CUSTODIAN
For the period from the start of business, November 3, 1994, to March 31,
1995, the Fund paid IBT $251. For the period from the start of business,
November 3, 1994, to March 31, 1995 the Portfolio paid no custodian fees to IBT.
BROKERAGE
For the period from the start of business, November 3, 1994, to March 31,
1995, the Portfolio paid no brokerage commissions on portfolio transactions.
TRUSTEES
The fees and expenses of those Trustees of the Trust and of the Portfolio
who are not members of the Eaton Vance organization (the noninterested Trustees)
are paid by the Fund (and the other series of the Trust) and the Portfolio,
respectively. (The Trustees of the Trust and the Portfolio who are members of
the Eaton Vance organization receive no compensation from the Fund or the
Portfolio.) During the fiscal year ended March 31, 1995, the noninterested
Trustees of the Trust and the Portfolio earned the following compensation in
their capacities as Trustees from the Fund, the Portfolio and the other funds in
the Eaton Vance fund complex\1/:
<TABLE>
<CAPTION>
AGGREGATE
AGGREGATE COMPENSATION RETIREMENT TOTAL COMPENSATION
COMPENSATION FROM BENEFIT ACCRUED FROM TRUST AND
NAME FROM FUND PORTFOLIO FROM FUND COMPLEX FUND COMPLEX
- ---------------- ------------- ------------- ------------------ ------------------
<S> <C> <C> <C> <C>
Donald R. Dwight $ 0 $ 0 $ 8,750 $135,000
Samuel L. Hayes, III 0 0 8,865 142,500
Norton H. Reamer 0 0 0 135,000
John L. Thorndike 0 0 0 140,000
Jack L. Treynor 0 0 0 140,000
<FN>
- --------
\1/The Eaton Vance fund complex consists of 201 registered investment companies
or series thereof.
</TABLE>
PERFORMANCE INFORMATION
The tables below indicate the total return (capital changes plus
reinvestment of all distributions) on a hypothetical investment of $1,000 in the
Fund covering the life of the Fund from November 3, 1994 through March 31, 1995.
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF
INVESTMENT VALUE OF INVEST- TOTAL RETURN BEFORE TOTAL RETURN AFTER
BEFORE DE- MENT AFTER DEDUCT- DEDUCTING THE CONTINGENT DEDUCTING THE CONTINGENT
DUCTING THE CON- ING THE CONTINGENT DEFERRED DEFERRED
TINGENT DEFERRED DEFERRED SALES SALES CHARGE SALES CHARGE<F2>
INVESTMENT INVESTMENT AMOUNT OF SALES CHARGE CHARGE<F2> -------------------------- ------------------------
PERIOD DATE INVESTMENT ON 3/31/95 ON 3/31/95 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ------------- ---------- ---------- ---------------- ------------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of the
Fund<F3> 11/3/94<F1> $1,000 $1,040.22 $1,010.22 4.02% -- 1.02% --
PERCENTAGE CHANGES 11/3/94 - 3/31/95
<CAPTION>
NET ASSET VALUE TO NET ASSET VALUE
NET ASSET VALUE TO NET ASSET VALUE AFTER DEDUCTING THE CONTINGENT DEFERRED
BEFORE DEDUCTING THE CONTINGENT DEFERRED SALES CHARGE<F2> WITH ALL DISTRIBUTIONS
SALES CHARGE WITH ALL DISTRIBUTIONS REINVESTED REINVESTED
---------------------------------------------- ----------------------------------------------
PERIOD ENDED ANNUAL CUMULATIVE AVERAGE ANNUAL ANNUAL CUMULATIVE AVERAGE ANNUAL
- -------------------- ---------- -------------- ------------------ ---------- -------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
3/31/95<F1> -- 4.02% -- -- 1.02% --
Past performance is not indicative of future results. Investment return and
principal value will fluctuate; shares, when redeemed, may be worth more or less
than their original cost.
<FN>
- ------------
<F1> Investment operations began on November 3, 1994.
<F2> No contingent deferred sales charge is imposed on shares purchased more
than four years prior to the redemption, shares acquired through the
reinvestment of dividends and distributions and any appreciation in value
or other shares in the account, and no such charge is imposed on exchanges
of Fund shares for shares of one or more other funds listed under "The
Eaton Vance Exchange Privilege" in the Prospectus.
<F3> If a portion of the Portfolio's and/or the Fund's expenses had not been
subsidized, the Fund would have had lower returns.
</TABLE>
For the thirty-day period ended March 31, 1995, the yield of the Fund was
4.05%. The yield required of a taxable security that would produce an after-tax
yield equivalent to that earned by the Fund of 4.05% would be 6.01%, assuming a
combined Federal and State tax rate of 32.61%. If a portion of the Portfolio's
and the Fund's expenses had not been allocated to the Investment Adviser and the
Administrator, respectively, the Fund would have had a lower yield.
The Fund's distribution rate (calculated on March 31, 1995 and based on the
Fund's monthly distribution paid March 15, 1995) was 3.95%, and the Fund's
effective distribution rate (calculated on the same date and based on the same
monthly distribution) was 4.02%. If a portion of the Portfolio's and the Fund's
expenses had not been allocated to the Investment Adviser and the Administrator,
respectively, the Fund would have had a lower distribution rate and effective
distribution rate.
The following information compares the taxable equivalent yield of an
investment in the Fund yielding a hypothetical 4.5% with the after-tax yield of
a certificate of deposit yielding 3.25%. The tax brackets used are the combined
Federal and Arizona income tax brackets applicable for 1994: 18.40% for single
filers with taxable income up to $22,750 and joint filers up to $38,000; 32.61%
for single filers with taxable income from $22,751 to $55,100 and joint filers
from $38,001 to $91,850; 35.42% for single filers with taxable income from
$55,101 to $115,000 and joint filers from $91,851 to $140,000; 40.42% for single
filers with taxable income from $115,001 to $250,000 and joint filers from
$140,001 to $250,000; and 43.77% for single and joint filers with taxable income
over $250,000. The applicable Federal tax rates within each of these combined
brackets are 15%, 28%, 31%, 36% and 39.6% over the same ranges of income. These
brackets assume that Arizona taxes are deducted on the Federal income tax
return, and do not take into account the phaseout of personal exemptions and
limitation on deductibility of itemized deductions over certain ranges of
income. Taxpayers who do not itemize or who are subject to such phaseout or
limitation will have higher combined brackets than indicated above. The brackets
are also based on the highest Arizona tax rate within each bracket. As a result,
some taxpayers may have lower tax brackets within these ranges of income.
Investors should consult with their tax advisers for more information.
<TABLE>
<CAPTION>
TAX BRACKET
18.40% 32.61% 35.42% 40.42% 43.77%
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Tax free yield ................................ 4.50% 4.50% 4.50% 4.50% 4.50%
Taxable equivalent ............................ 5.51 6.68 6.97 7.55 8.00
Certificates of deposit:
Yield ..................................... 3.25 3.25 3.25 3.25 3.25
After-tax yield ........................... 2.65 2.19 2.10 1.94 1.83
</TABLE>
The following is an illustration of the Tax Free Yield Advantage, comparing
the after-tax yields of a certificate of deposit yielding 3.25% and a
hypothetical tax free investment yielding 4.5%. This illustration also
quantifies the Federal income tax payable on hypothetical investments of
$100,000 in a certificate of deposit yielding 3.25% and a hypothetical tax free
investment yielding 4.5%, and compares the after-tax return of such investments.
The chart is based on 3-month bank CDs (Source: The Wall Street Journal) and
current limited maturity municipal bond yields, compiled by Eaton Vance
Management. The illustration is not meant to imply or predict any future rate of
return for the Fund. See your financial adviser for the Fund's current yield and
actual CD rates.
From time to time, information, charts and illustrations, showing changes in
certificate of deposit yields, and yields and taxable equivalent yields of
limited maturity municipal bonds may be included in advertisements and other
material supplied to present and prospective shareholders.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As at March 31, 1995, the Trustees and officers of the Trust, as a group,
owned in the aggregate less than 1% of the outstanding shares of the Fund. As of
March 31, 1995, Merrill Lynch, Pierce, Fenner & Smith, Inc., New Brunswick, NJ
was the record owner of approximately 52.7% of the outstanding shares, which
were held on behalf of its customers who are the beneficial owners of such
shares, and as to which it had voting power under certain limited circumstances.
In addition, as of such date, the following shareholders owned beneficially and
of record the percentage of outstanding shares of the Fund indicated after their
name: PaineWebber fbo Carmelita Cracchiolo TTEE the A&C Cracchiolo Family Trust
Agreement dtd 5/27/81, Tucson, AZ 85716 (9.7%); Smith Barney Inc., 00129214458,
New York, NY 10013 (9.4%) Elizabeth J. Slater & Kemper C. Tyson JTWROS, Phoenix,
AZ 85014 (8.3%); Smith Barney Inc., 00150808910, New York, NY 10013 (6.7%); and
Sherry L. Jabour TTEE Sherry L. Jabour Trust U/A dtd 3/12/90, Scottsdale, AZ
85258 (5.8%). To the knowledge of the Trust, no other person beneficially owns
5% or more of the Fund's outstanding shares.
OTHER INFORMATION
The Trust, which is a Massachusetts business trust established in 1985 was
originally called Eaton Vance California Municipals Trust. The Trust changed its
name to Eaton Vance Investment Trust on April 28, 1992.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EV MARATHON NORTH CAROLINA LIMITED
MATURITY TAX FREE FUND. The investment objective of the Fund, is to provide a
high level of current income exempt from regular Federal income tax and North
Carolina State personal income taxes in the form of an investment exempt from
North Carolina intangibles tax and limited principal fluctuation. The Fund seeks
to achieve its investment objective by investing its assets in the North
Carolina Limited Maturity Tax Free Portfolio (the "Portfolio").
INVESTMENT RESTRICTIONS
The Fund may not:
(1) Purchase securities on margin (but the Fund may obtain such short-term
credits as may be necessary for the clearance of purchases and sales of
securities). The deposit or payment by the Fund of initial or maintenance margin
in connection with futures contracts or related options transactions is not
considered the purchase of a security on margin;
(2) Borrow money or issue senior securities except as permitted by the
Investment Company Act of 1940;
(3) Underwrite or participate in the marketing of securities of others,
except insofar as it may technically be deemed to be an underwriter in selling a
portfolio security under circumstances which may require the registration of the
same under the Securities Act of 1933;
(4) Purchase or sell real estate (including limited partnership interests in
real estate, but excluding readily marketable interests in real estate
investment trusts or readily marketable securities of companies which invest or
deal in real estate or securities which are secured by real estate);
(5) Purchase or sell physical commodities or contracts for the purchase or
sale of physical commodities; or
(6) Make loans to any person except by (a) the acquisition of debt
instruments and making portfolio investments, (b) entering into repurchase
agreements, and (c) lending portfolio securities.
Notwithstanding the investment policies and restrictions of the Fund, the
Fund may invest all of its investable assets in an open-end management
investment company with substantially the same investment objective, policies
and restrictions as the Fund.
In addition, as a matter of nonfundamental policy, neither the Fund nor the
Portfolio may (a) engage in options, futures or forward transactions if more
than 5% of its net assets, as measured by the aggregate of the premiums paid by
the Fund or the Portfolio, would be so invested; (b) make short sales of
securities or maintain a short position, unless at all times when a short
position is open it owns an equal amount of such securities or securities
convertible into or exchangeable, without payment of any further consideration,
for securities of the same issue as, and equal in amount to, the securities sold
short; (c) invest more than 15% of its net assets in investments which are not
readily marketable, including restricted securities and repurchase agreements
maturing in more than seven days. Restricted securities for the purposes of this
limitation do not include securities eligible for resale pursuant to Rule 144A
under the Securities Act of 1933 that the Board of Trustees of the Trust or the
Portfolio, or its delegate, determines to be liquid, based upon the trading
markets for the specific security; (d) purchase or retain in its portfolio any
securities issued by an issuer any of whose officers, directors, trustees or
security holders is an officer or Trustee of the Trust or the Portfolio or is a
member, officer, director or trustee of any investment adviser of the Trust or
the Portfolio, if after the purchase of the securities of such issuer by the
Fund or the Portfolio one or more of such persons owns beneficially more than
1/2 of 1% of the shares or securities or both (all taken at market value) of
such issuer and such persons owning more than 1/2 of 1% of such shares or
securities together own beneficially more than 5% of such shares or securities
or both (all taken at market value); or (e) purchase oil, gas or other mineral
leases or purchase partnership interests in oil, gas or other mineral
exploration or development programs.
In order to permit the sale of shares of the Fund in certain states, the
Fund may make commitments more restrictive than the fundamental policies
described above. Should the Fund determine that any such commitment is no longer
in the best interests of the Fund and its shareholders, it will revoke the
commitment by terminating sales of its shares in the state(s) involved.
RISKS OF CONCENTRATION
STATE OBLIGATIONS. The following information as to certain North Carolina
considerations is given to investors in view of the Portfolio's policy of
concentrating its investments in North Carolina issuers. Such information is
derived from sources that are generally available to investors and is believed
to be accurate. Such information constitutes only a brief summary, does not
purport to be a complete description and is based on information from official
statements relating to securities offerings of North Carolina issuers. Neither
the Trust nor the Portfolio has independently verified this information.
The economic profile of the State consists of a combination of industry,
agriculture, tourism and mining. The State's seasonally adjusted unemployment
rate in March 1994 was 4.4% of the labor force, as compared with an unemployment
rate of 6.5% nationwide. The labor force has undergone significant change during
recent years. The State has moved from an agricultural to a service and "goods
producing" economy. Those persons displaced by farm mechanization and farm
consolidations have, in large measure, sought and found employment in other
pursuits.
Agriculture is a basic element in the economy of the State. Tobacco farming
in North Carolina has been, and is expected to continue to be, affected by major
Federal legislation and regulatory measures regarding tobacco production and
marketing and by international competition. Changes in such factors or any other
adverse conditions in the tobacco farming sector could have negative effects on
farm income and the North Carolina economy generally. The diversity of
agriculture in North Carolina and a continuing push in marketing efforts have
protected farm income from some of the wide variations that have been
experienced in other states where most of the agricultural economy is dependent
on a small number of agricultural commodities. A strong agribusiness sector also
supports farmers with farm inputs (fertilizer, insecticide, pesticide and farm
machinery) and processing of commodities produced by farmers (vegetable canning
and cigarette manufacturing).
The North Carolina State Constitution requires that the total expenditures
of the State for the fiscal period covered by the budget shall not exceed the
total of receipts during the fiscal period and the surplus remaining in the
State Treasury at the beginning of the period. In certain of the past several
years, the Governor and General Assembly have had to restrict expenditures to
comply with the State Constitution.
During fiscal 1991 and 1992, the State was forced to employ various
non-recurring items and budget reductions in order to balance the State's
budget. Among other things, the State deferred Basic Education Program
improvements. The need for educational and infrastructure spending is
increasing, and it is unlikely that its further deferral can be employed far
into the future without increased capital borrowing. In addition, the State also
implemented approximately $640 million in tax increases, including raising the
State sales tax from 3% to 4%. This 4% tax is the State's portion of the total
6% sales tax with the rest dedicated to local governments. A 4% corporate income
tax surcharge was also implemented and is scheduled to terminate on January 1,
1995. For 1993, an $8.2 billion budget was enacted with no new tax increases.
Fiscal 1993 ended with a General Fund surplus for the second straight year. The
surplus brought the General Fund balance to $681 million (6.63% of
expenditures). A $9.03 billion budget was enacted for fiscal 1994. Once again
there were no new taxes. During fiscal 1994, North Carolina issued $400 million
in new general obligation bonds, but the State's debt per capita is still low at
$150.
In 1988 and again in 1989, the General Assembly passed bills that contain
substantial revisions in State taxes. State tax legislation enacted in 1988
included a major revision to multistate corporate tax apportionment. In 1989,
the General Assembly enacted a number of new provisions affecting state taxes.
The Tax Fairness Act of 1989, effective for taxable years beginning on or after
January 1, 1989, revises the method of calculating taxable income for North
Carolina individual income tax purposes to conform more closely to the method of
calculating taxable income for Federal income tax purposes under the Internal
Revenue Code of 1986, as amended, with certain State adjustments and credits as
set forth in the Act. The Tax Fairness Act is intended to be a revenue-neutral
measure as regards the State budget. In addition, in connection with the
creation of the North Carolina Highway Trust Fund, described below, the General
Assembly approved increases or revisions affecting State sales and use taxes and
motor vehicle registration, licensing and certificate of title fees, and
approved a $.05 per gallon increase in the State tax on motor fuel. It cannot be
determined presently what effect these changes have had or may have on the
fiscal condition of the State and its political subdivisions. As of the date of
this Statement of Additional Information, general obligations of the State of
North Carolina were rated Aaa/AAA/AAA by Moody's, S&P and Fitch. In July, 1992,
S&P revised its outlook for the State's general obligations from "Negative" to
stable. Fitch views the State's credit trend as "Stable".
In response to a judgement against the State involving the taxing of federal
retirement benefits, the North Carolina Supreme Court will hear arguments in
June, 1994 concerning monetary awards. Potential damages might exceed $140
million.
FEES AND EXPENSES
INVESTMENT ADVISER
As at March 31, 1995, the Portfolio had net assets of $235,759. For the
period from the start of business, November 28, 1994, to March 31, 1995, the
Portfolio paid BMR advisory fees of $96 (equivalent to 0.15% (annualized) of the
Portfolio's average daily net assets for such period). To enhance the net income
of the Portfolio, BMR made a preliminary reduction in the full amount of its
advisory fee and BMR was allocated a portion of the expenses related to the
operation of the Portfolio in the amount of $1,083. The Portfolio's Investment
Advisory Agreement with BMR is dated October 25, 1994 and remains in effect
until February 28, 1996. The Agreement may be continued as described under
"Investment Adviser and Administrator" in Part I of this Statement of Additional
Information.
ADMINISTRATOR
As stated under "Investment Adviser and Administrator" in Part I of this
Statement of Additional Information, the Administrator receives no compensation
for providing administrative services to the Fund. For the period from the start
of business, November 28, 1994 to March 31, 1995, $1,370 of the Fund's operating
expenses were allocated to the Administrator.
DISTRIBUTION PLAN
The Distribution Plan and Distribution Agreement currently remain in effect
until October 25, 1995 and may be continued as described under "Distribution
Plan" in Part I of this Statement of Additional Information. Pursuant to Rule
12b-1, the Plan has been approved by the Fund's initial sole shareholder (Eaton
Vance) and by the Board of Trustees of the Trust, including the Rule 12b-1
Trustees. For the period from the start of business, November 28, 1994, to March
31, 1995, the Fund made sales commission payments under the Plan to the
Principal Underwriter aggregating $239, which amount was used by the Prinicipal
Underwriter to defray sales commissions aggregating $675 paid during such period
by the Principal Underwriter to Authorized Firms on sales of Fund shares. As at
March 31, 1995, the outstanding uncovered distribution charges of the Principal
Underwriter calculated under the Plan amounted to approximately $5,000 (which
amount was equivalent to 0.037% of the Fund's net assets on such day). The Fund
expects to begin accruing for its service fee payments during the quarter ending
December 31, 1995.
PRINCIPAL UNDERWRITER
For the period from the start of business, November 28, 1994, to March 31,
1995, the Fund paid no fee to the Principal Underwriter for repurchase
transactions handled by the Principal Underwriter (being $2.50 for each such
transaction).
CUSTODIAN
For the period from the start of business, November 28, 1994, to March 31,
1995, the Fund paid IBT $251. For the period from the start of business,
November 28, 1994, to March 31, 1995 the Portfolio paid no custodian fees to
IBT.
BROKERAGE
For the period from the start of business, November 28, 1994, to March 31,
1995, the Portfolio paid no brokerage commissions on portfolio transactions.
TRUSTEES
The fees and expenses of those Trustees of the Trust and of the Portfolio
who are not members of the Eaton Vance organization (the noninterested Trustees)
are paid by the Fund (and the other series of the Trust) and the Portfolio,
respectively (the Trustees of the Trust and the Portfolio who are members of the
Eaton Vance organization receive no compensation from the Fund or the
Portfolio). During the fiscal year ended March 31, 1995, the noninterested
Trustees of the Trust and the Portfolio earned the following compensation in
their capacities as Trustees from the Fund, the Portfolio and the other funds in
the Eaton Vance fund complex\1/:
<TABLE>
<CAPTION>
AGGREGATE
AGGREGATE COMPENSATION RETIREMENT TOTAL COMPENSATION
COMPENSATION FROM BENEFIT ACCRUED FROM TRUST AND
NAME FROM FUND PORTFOLIO FROM FUND COMPLEX FUND COMPLEX
- ---- ------------- ------------- ------------------ ------------------
<S> <C> <C> <C> <C>
Donald R. Dwight $ 0 $ 0 $ 8,750 $135,000
Samuel L. Hayes, III 0 0 8,865 142,500
Norton H. Reamer 0 0 0 135,000
John L. Thorndike 0 0 0 140,000
Jack L. Treynor 0 0 0 140,000
</TABLE>
- --------
\1/The Eaton Vance fund complex consists of 201 registered investment companies
or series thereof.
PERFORMANCE INFORMATION
The tables below indicate the total return (capital changes plus
reinvestment of all distributions) on a hypothetical investment of $1,000 in the
Fund covering the life of the Fund from November 28, 1994 through March 31,
1995.
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF
INVESTMENT VALUE OF INVEST- TOTAL RETURN BEFORE TOTAL RETURN AFTER
BEFORE DE- MENT AFTER DEDUCT- DEDUCTING THE CONTINGENT DEDUCTING THE CONTINGENT
DUCTING THE CON- ING THE CONTINGENT DEFERRED DEFERRED
TINGENT DEFERRED DEFERRED SALES SALES CHARGE SALES CHARGE<F2>
INVESTMENT INVESTMENT AMOUNT OF SALES CHARGE CHARGE<F2> -------------------------- --------------------------
PERIOD DATE INVESTMENT ON 3/31/95 ON 3/31/95 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ------------- ---------- ---------- ---------------- ------------------ ------------ ------------ ------------ ------------
Life of the
Fund<F3> 11/28/94<F1> $1,000 $1,033.14 $1,003.14 3.31% -- 0.31% --
PERCENTAGE CHANGES 11/28/94 - 3/31/95
<CAPTION>
NET ASSET VALUE TO NET ASSET VALUE
NET ASSET VALUE TO NET ASSET VALUE AFTER DEDUCTING THE CONTINGENT DEFERRED
BEFORE DEDUCTING THE CONTINGENT DEFERRED SALES CHARGE<F2> WITH ALL DISTRIBUTIONS
SALES CHARGE WITH ALL DISTRIBUTIONS REINVESTED REINVESTED
---------------------------------------------- ----------------------------------------------
PERIOD ENDED ANNUAL CUMULATIVE AVERAGE ANNUAL ANNUAL CUMULATIVE AVERAGE ANNUAL
- -------------------- ---------- -------------- ------------------ ---------- -------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
3/31/95<F3> -- 3.31% -- -- 0.31% --
Past performance is not indicative of future results. Investment return and
principal value will fluctuate; shares, when redeemed, may be worth more or less
than their original cost.
<FN>
- ------------
<F1> Investment operations began on November 28, 1994.
<F2> No contingent deferred sales charge is imposed on shares purchased more
than four years prior to the redemption, shares acquired through the
reinvestment of dividends and distributions and any appreciation in value
or other shares in the account, and no such charge is imposed on exchanges
of Fund shares for shares of one or more other funds listed under "The
Eaton Vance Exchange Privilege" in the Prospectus.
<F3> If a portion of the Portfolio's and/or the Fund's expenses had not been
subsidized, the Fund would have had lower returns.
</TABLE>
For the thirty-day period ended March 31, 1995, the yield of the Fund was
2.82%. The yield required of a taxable security that would produce an after-tax
yield equivalent to that earned by the Fund of 2.82% would be 4.20%, assuming a
combined Federal and State tax rate of 33.04%. If a portion of the Portfolio's
and the Fund's expenses had not been allocated to the Investment Adviser and the
Administrator, respectively, the Fund would have had a lower yield.
The Fund's distribution rate (calculated on March 31, 1995 and based on the
Fund's monthly distribution paid March 15, 1995) was 3.97%, and the Fund's
effective distribution rate (calculated on the same date and based on the same
monthly distribution) was 4.04%. If a portion of the Portfolio's and the Fund's
expenses had not been allocated to the Investment Adviser and the Administrator,
respectively, the Fund would have had a lower distribution rate and effective
distribution rate.
The State of North Carolina generally imposes an intangible personal
property tax on the value of all stocks, notes, bonds and mutual fund shares.
The rate of intangibles tax after exemptions in North Carolina is $.25 per $100
in value. Bank deposits such as bank money market deposit accounts and
certificates of deposit are exempt from the North Carolina intangibles tax.
The North Carolina intangibles tax, which is a fixed rate based on the fair
market value of an investment, will vary as a percentage of income with the
yield of the investment subject to tax. For example, shares of a mutual fund
valued at $10,000 would generally be subject to North Carolina intangibles tax
equaling $25. If the mutual fund shares were yielding 4.5%, generating $450 in
annual income, the intangibles tax expressed as a percentage of income would be
$25/$450 or 5.56%.
The following information compares the taxable equivalent yield of an
investment in the Fund yielding a hypothetical 4.5% with the after-tax yield of
a certificate of deposit yielding 3.25%. The tax brackets used are the combined
tax brackets applicable to a North Carolina resident subject to Federal and
North Carolina State income taxes and North Carolina intangibles taxes on mutual
fund shares yielding 4.5%. These combined tax brackets, which are based on 1994
tax rates, are 25.67% for single filers with taxable income up to $22,750 and
joint filers up to $38,000; 37.04% for single filers with taxable income from
$22,751 to $55,100 and joint filers from $38,001 to $91,850; 40.18% for single
filers with taxable income from $55,101 to $115,000 and joint filers from
$91,851 to $140,000; 44.52% for single filers with taxable income from $115,001
to $250,000 and joint filers from $140,001 to $250,000; and 47.64% for single
and joint filers with taxable income over $250,000. The applicable Federal tax
rates within each of these combined brackets are 15%, 28%, 31%, 36% and 39.6%
over the same ranges of income. The combined brackets are not simply the sum of
each of the three taxes, as they assume that state taxes are deducted on the
Federal income tax return, reducing the effective combined tax brackets. The
after-tax yields of the certificate of deposit reflect slightly lower tax
brackets applicable to a bank deposit yielding 3.25% because individuals do not
pay North Carolina intangibles taxes on such deposits. The tax brackets used in
calculating the after-tax certificate of deposit yields are 20.95%, 33.04%,
36.35%, 40.96% and 44.28% over the same ranges of income. These tax brackets
also do not take into account the phaseout of personal exemptions and limitation
on deductibility of itemized deductions over certain ranges of income. Taxpayers
who do not itemize or who are subject to such phaseout or limitation will have a
higher combined tax bracket than indicated above. In addition, the combined tax
brackets were calculated using the highest state income tax rate within each
bracket. Accordingly, some taxpayers will have lower combined tax brackets and
taxable equivalent yields over these ranges of income. See your tax adviser for
additional information.
<TABLE>
<CAPTION>
TAX BRACKET
25.67% 37.04% 40.18% 44.52% 47.64%
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Tax free yield ................................ 4.50% 4.50% 4.50% 4.50% 4.50%
Taxable equivalent ............................ 6.05 7.15 7.52 8.11 8.59
<CAPTION>
TAX BRACKET<F1>
20.95% 33.04% 36.35% 40.96% 44.28%
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Certificates of deposit:
Yield ..................................... 3.25 3.25 3.25 3.25 3.25
After-tax yield ........................... 2.57 2.18 2.07 1.92 1.81
<FN>
<F1>Bank CDs are not subject to North Carolina intangibles tax. Accordingly, the
combined tax brackets applicable to after-tax yields are 20.95%, 33.04%,
36.35%, 40.96% and 44.28%.
</TABLE>
The following is an illustration of the Tax Free Yield Advantage, comparing
the after-tax yields of a certificate of deposit yielding 3.25% and a
hypothetical tax free investment yielding 4.5%. This illustration also
quantifies the Federal income tax payable on hypothetical investments of
$100,000 in a certificate of deposit yielding 3.25% and a hypothetical tax free
investment yielding 4.5%, and compares the after-tax return of such investments.
The chart is based on 3-month bank CDs (Source: The Wall Street Journal) and
current limited maturity municipal bond yields, compiled by Eaton Vance
Management. (The tax bracket used in calculating the CD after-tax yield is
40.96%, as bank CDs are not subject to North Carolina intangibles tax.) The
illustration is not meant to imply or predict any future rate of return for the
Fund. See your financial adviser for the Fund's current yield and actual CD
rates.
From time to time, information, charts and illustrations, showing changes in
certificate of deposit yields, and yields and taxable equivalent yields of
limited maturity municipal bonds may be included in advertisements and other
material supplied to present and prospective shareholders.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As at March 31, 1995, the Trustees and officers of the Trust, as a group,
owned in the aggregate less than 1% of the outstanding shares of the Fund. As of
March 31, 1995, Merrill Lynch, Pierce, Fenner & Smith, Inc., New Brunswick, NJ
was the record owner of approximately 20.1% of the outstanding shares, which
were held on behalf of its customers who are the beneficial owners of such
shares, and as to which it had voting power under certain limited circumstances.
In addition, as of such date, the following shareholder owned beneficially and
of record the percentage of outstanding shares of the Fund indicated after its
name: Eaton Vance Management, Boston, MA 02110 (79.8%).
OTHER INFORMATION
The Trust, which is a Massachusetts business trust established in 1985 was
originally called Eaton Vance California Municipals Trust. The Trust changed its
name to Eaton Vance Investment Trust on April 28, 1992.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EV MARATHON VIRGINIA LIMITED
MATURITY TAX FREE FUND. The investment objective of the Fund is to provide a
high level of current income exempt from regular Federal income tax and Virginia
State personal income taxes and limited principal fluctuation. The Fund seeks to
achieve its investment objective by investing its assets in the Virginia Limited
Maturity Tax Free Portfolio (the "Portfolio").
INVESTMENT RESTRICTIONS
The Fund may not:
(1) Purchase securities on margin (but the Fund may obtain such short-term
credits as may be necessary for the clearance of purchases and sales of
securities). The deposit or payment by the Fund of initial or maintenance margin
in connection with futures contracts or related options transactions is not
considered the purchase of a security on margin;
(2) Borrow money or issue senior securities except as permitted by the
Investment Company Act of 1940;
(3) Underwrite or participate in the marketing of securities of others,
except insofar as it may technically be deemed to be an underwriter in selling a
portfolio security under circumstances which may require the registration of the
same under the Securities Act of 1933;
(4) Purchase or sell real estate (including limited partnership interests in
real estate, but excluding readily marketable interests in real estate
investment trusts or readily marketable securities of companies which invest or
deal in real estate or securities which are secured by real estate);
(5) Purchase or sell physical commodities or contracts for the purchase or
sale of physical commodities; or
(6) Make loans to any person except by (a) the acquisition of debt
instruments and making portfolio investments, (b) entering into repurchase
agreements, and (c) lending portfolio securities.
Notwithstanding the investment policies and restrictions of the Fund, the
Fund may invest all of its investable assets in an open-end management
investment company with substantially the same investment objective, policies
and restrictions as the Fund.
In addition, as a matter of nonfundamental policy, neither the Fund nor the
Portfolio may (a) engage in options, futures or forward transactions if more
than 5% of its net assets, as measured by the aggregate of the premiums paid by
the Fund or the Portfolio, would be so invested; (b) make short sales of
securities or maintain a short position, unless at all times when a short
position is open it owns an equal amount of such securities or securities
convertible into or exchangeable, without payment of any further consideration,
for securities of the same issue as, and equal in amount to, the securities sold
short; (c) invest more than 15% of its net assets in investments which are not
readily marketable, including restricted securities and repurchase agreements
maturing in more than seven days. Restricted securities for the purposes of this
limitation do not include securities eligible for resale pursuant to Rule 144A
under the Securities Act of 1933 that the Board of Trustees of the Trust or the
Portfolio, or its delegate, determines to be liquid, based upon the trading
markets for the specific security; (d) purchase or retain in its portfolio any
securities issued by an issuer any of whose officers, directors, trustees or
security holders is an officer or Trustee of the Trust or the Portfolio or is a
member, officer, director or trustee of any investment adviser of the Trust or
the Portfolio, if after the purchase of the securities of such issuer by the
Fund or the Portfolio one or more of such persons owns beneficially more than
1/2 of 1% of the shares or securities or both (all taken at market value) of
such issuer and such persons owning more than 1/2 of 1% of such shares or
securities together own beneficially more than 5% of such shares or securities
or both (all taken at market value); or (e) purchase oil, gas or other mineral
leases or purchase partnership interests in oil, gas or other mineral
exploration or development programs.
In order to permit the sale of shares of the Fund in certain states, the
Fund may make commitments more restrictive than the fundamental policies
described above. Should the Fund determine that any such commitment is no longer
in the best interests of the Fund and its shareholders, it will revoke the
commitment by terminating sales of its shares in the state(s) involved.
RISKS OF CONCENTRATION
STATE OBLIGATIONS. The following information as to certain Virginia
considerations is given to investors in view of the Portfolio's policy of
concentrating its investments in Virginia issuers. Such information is derived
from sources that are generally available to investors and is believed to be
accurate. Such information constitutes only a brief summary, does not purport to
be a complete description and is based on information from official statements
relating to securities offerings of Virginia issuers. Neither the Trust nor the
Portfolio has independently verified this information.
The Commonwealth of Virginia has had a tradition of low debt, and a large
proportion of its general obligation bonds has been supported by particular
revenue-producing projects. However, a trend towards more use of non-general
obligation debt, which is not subject to constitutional limits on borrowing, is
now changing the Commonwealth's debt profile. In recent years, the Commonwealth
has expanded its limited obligation borrowings through various financing
vehicles such as the Virginia Public Building Authority and the Virginia College
Building Authority, and has embarked upon a substantial transportation bonding
program to which certain increases in retail sales and motor vehicle-related
taxes enacted in 1986 are dedicated.
While the Commonwealth has had a long history of sound financial operations,
variations of a cyclical nature have occurred during the past several years.
During fiscal year 1992, financial operations were somewhat more favorable than
expected. Revenues of $5.6 billion exceeded expenditures by approximately $150
million with $44 million in increased revenues and the balance in decreased
expenditures ordered by the Governor in December of 1991. The closing balance at
June 30, 1992 was $195.1 million, of which $142.3 million will be
reappropriated, leaving $52.8 million as an unreserved, undesignated balance,
the first such balance in four years. The fiscal 1993 ending balance for the
General Fund was $331.8 million of which $59.7 million is unreserved,
undesignated. Revenues for the 1993 fiscal year were 8.9% higher than fiscal
year 1992, a $103 million increase.
In the November 1992 elections, a constitutional "Rainy Day" Fund was
approved which, beginning in fiscal year 1995, will receive one half of growth
above estimates in the income and sales taxes. For fiscal 1993, almost $80
million was deposited into the "Rainy Day" Fund. This fund would be used to
provide funding for one half of shortfalls exceeding 2% with the remainder to be
met through expenditure cuts. Any withdrawals must be appropriated and not more
than one half of the fund may be used in any given year.
The General Fund is the Commonwealth's major operating fund and accounts for
about half of Commonwealth expenditures. It covers all functions except highways
and Federal grant disbursements, for which there are special revenue funds. The
administration's budget proposals contemplate an unappropriated General Fund
balance for the 1990-92 biennium of approximately $200 million.
Virginia's economy is generally affected by economic trends throughout the
country and in the Mid-Atlantic region, and it is particularly influenced by
Federal civilian and military installations and the growth of suburban
communities around Washington, D.C. Also significant to the economy of Virginia
are manufacturing (such as electronic equipment, shipbuilding and chemical
products), minerals (chiefly coal), service sector occupations (including
banking and insurance), agriculture and tourism. Unemployment rates are
typically below the national average, but because of a large military and
civilian government employment component, and the related civilian employment, a
substantial decrease in defense or other governmental spending could have a
material adverse effect on both the unemployment rate and the economy of the
Commonwealth in general.
The Commonwealth's unemployment rate of 4.5% as of March 1994 continues to
compare favorably to the 6.7% unemployment rate nationwide.
In the case of Harper v. Virginia Department of Taxation, the United States
Supreme Court ruled that the Commonwealth must return collected taxes that were
subsequently found to be unconstitutional on federal grounds. Virginia's
potential liability is $467.4 million. The control over monetary awards has been
left up to the Virginia State courts. In January, 1994, a Circuit Court Judge
ruled that the State does not have to refund any money because the plaintiffs
should have protested the tax before paying it, but they did not. The plaintiffs
are appealing. There is no time frame on the appeal. There can be no assurance
that the payment of any award will not have a negative effect on the
Commonwealth.
FEES AND EXPENSES
INVESTMENT ADVISER
As at March 31, 1995, the Portfolio had net assets of $220,628. For the
period from the start of business, November 11, 1994, to March 31, 1995, the
Portfolio paid BMR advisory fees of $101 (equivalent to 0.15% (annualized) of
the Portfolio's average daily net assets for such period). To enhance the net
income of the Portfolio, BMR made a preliminary reduction in the full amount of
its advisory fee and BMR was allocated a portion of the expenses related to the
operation of the Portfolio in the amount of $1,160. The Portfolio's Investment
Advisory Agreement with BMR is dated October 25, 1994 and remains in effect
until February 28, 1996. The Agreement may be continued as described under
"Investment Adviser and Administrator" in Part I of this Statement of Additional
Information.
ADMINISTRATOR
As stated under "Investment Adviser and Administrator" in Part I of this
Statement of Additional Information, the Administrator receives no compensation
for providing administrative services to the Fund. For the period from the start
of business, November 11, 1994 to March 31, 1995, $1,284 of the Fund's operating
expenses were allocated to the Administrator.
DISTRIBUTION PLAN
The Distribution Plan and Distribution Agreement currently remain in effect
until October 25, 1995 and may be continued as described under "Distribution
Plan" in Part I of this Statement of Additional Information. Pursuant to Rule
12b-1, the Plan has been approved by the Fund's initial sole shareholder (Eaton
Vance) and by the Board of Trustees of the Trust, including the Rule 12b-1
Trustees. For the period from the start of business, November 11, 1994, to March
31, 1995, the Fund made sales commission payments under the Plan to the
Principal Underwriter aggregating $220, which amount was used by the Prinicipal
Underwriter to defray sales commissions aggregating $265 paid during such period
by the Principal Underwriter to Authorized Firms on sales of Fund shares. During
such period contingent deferred sales charges aggregating approximately $300
were imposed on early redeeming shareholders and paid to the Principal
Underwriter to defray such sales commissions and reduce uncovered distribution
charges. As at March 31, 1995, the outstanding uncovered distribution charges of
the Principal Underwriter calculated under the Plan amounted to approximately
$3,000 (which amount was equivalent to 0.025% of the Fund's net assets on such
day). The Fund expects to begin accruing for its service fee payments during the
quarter ending December 31, 1995.
PRINCIPAL UNDERWRITER
For the period from the start of business, November 11, 1994, to March 31,
1995, the Fund paid no fee to the Principal Underwriter for repurchase
transactions handled by the Principal Underwriter (being $2.50 for each such
transaction).
CUSTODIAN
For the period from the start of business, November 11, 1994, to March 31,
1995, the Fund paid IBT $251. For the period from the start of business,
November 11, 1994, to March 31, 1995 the Portfolio paid no custodian fees to
IBT.
BROKERAGE
For the period from the start of business, November 11, 1994, to March 31,
1995, the Portfolio paid no brokerage commissions on portfolio transactions.
TRUSTEES
The fees and expenses of those Trustees of the Trust and of the Portfolio
who are not members of the Eaton Vance organization (the noninterested Trustees)
are paid by the Fund (and the other series of the Trust) and the Portfolio,
respectively. (The Trustees of the Trust and the Portfolio who are members of
the Eaton Vance organization receive no compensation from the Fund or the
Portfolio.) During the fiscal year ended March 31, 1995, the noninterested
Trustees of the Trust and the Portfolio earned the following compensation in
their capacities as Trustees from the Fund, the Portfolio and the other funds in
the Eaton Vance fund complex\1/:
<TABLE>
<CAPTION>
AGGREGATE
AGGREGATE COMPENSATION RETIREMENT TOTAL COMPENSATION
COMPENSATION FROM BENEFIT ACCRUED FROM TRUST AND
NAME FROM FUND PORTFOLIO FROM FUND COMPLEX FUND COMPLEX
- ---- ------------- ------------- ------------------ ------------------
<S> <C> <C> <C> <C>
Donald R. Dwight $ 0 $ 0 $ 8,750 $135,000
Samuel L. Hayes, III 0 0 8,865 142,500
Norton H. Reamer 0 0 0 135,000
John L. Thorndike 0 0 0 140,000
Jack L. Treynor 0 0 0 140,000
<FN>
- ------------
\1/The Eaton Vance fund complex consists of 201 registered investment companies
or series thereof.
</TABLE>
PERFORMANCE INFORMATION
The tables below indicate the total return (capital changes plus
reinvestment of all distributions) on a hypothetical investment of $1,000 in the
Fund covering the life of the Fund from November 11, 1994 through March 31,
1995.
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF
INVESTMENT VALUE OF INVEST- TOTAL RETURN BEFORE TOTAL RETURN AFTER
BEFORE DE- MENT AFTER DEDUCT- DEDUCTING THE CONTINGENT DEDUCTING THE CONTINGENT
DUCTING THE CON- ING THE CONTINGENT DEFERRED DEFERRED
TINGENT DEFERRED DEFERRED SALES SALES CHARGE SALES CHARGE<F2>
INVESTMENT INVESTMENT AMOUNT OF SALES CHARGE CHARGE<F2> -------------------------- --------------------------
PERIOD DATE INVESTMENT ON 3/31/95 ON 3/31/95 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ------------- ---------- ---------- ---------------- ------------------ ------------ ------------ ------------ ------------
Life of the
Fund<F3> 11/11/94<F1> $1,000 $1,048.21 $1,018.21 4.82% -- 1.82% --
PERCENTAGE CHANGES 11/11/94 - 3/31/95
<CAPTION>
NET ASSET VALUE TO NET ASSET VALUE
NET ASSET VALUE TO NET ASSET VALUE AFTER DEDUCTING THE CONTINGENT DEFERRED
BEFORE DEDUCTING THE CONTINGENT DEFERRED SALES CHARGE<F2> WITH ALL DISTRIBUTIONS
SALES CHARGE WITH ALL DISTRIBUTIONS REINVESTED REINVESTED
---------------------------------------------- ----------------------------------------------
PERIOD ENDED ANNUAL CUMULATIVE AVERAGE ANNUAL ANNUAL CUMULATIVE AVERAGE ANNUAL
- -------------------- ---------- -------------- ------------------ ---------- -------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
3/31/95<F3> -- 4.82% -- -- 1.82% --
Past performance is not indicative of future results. Investment return and principal value will fluctuate; shares, when
redeemed, may be worth more or less than their original cost.
<FN>
- ------------
<F1> Investment operations began on November 11, 1994.
<F2> No contingent deferred sales charge is imposed on shares purchased more
than four years prior to the redemption, shares acquired through the
reinvestment of dividends and distributions and any appreciation in value
or other shares in the account, and no such charge is imposed on exchanges
of Fund shares for shares of one or more other funds listed under "The
Eaton Vance Exchange Privilege" in the Prospectus.
<F3>If a portion of the Portfolio's and/or the Fund's expenses had not been
subsidized, the Fund would have had lower returns.
</TABLE>
For the thirty-day period ended March 31, 1995, the yield of the Fund was
3.06%. The yield required of a taxable security that would produce an after-tax
yield equivalent to that earned by the Fund of 3.06% would be 4.51%, assuming a
combined Federal and State tax rate of 32.14%. If a portion of the Portfolio's
and the Fund's expenses had not been allocated to the Investment Adviser and the
Administrator, respectively, the Fund would have had a lower yield.
The Fund's distribution rate (calculated on March 31, 1995 and based on the
Fund's monthly distribution paid March 15, 1995) was 3.92%, and the Fund's
effective distribution rate (calculated on the same date and based on the same
monthly distribution) was 3.99%. If a portion of the Portfolio's and the Fund's
expenses had not been allocated to the Investment Adviser and the Administrator,
respectively, the Fund would have had a lower distribution rate and effective
distribution rate.
The following information compares the taxable equivalent yield of an
investment in the Fund yielding a hypothetical 4.5% with the after-tax yield of
a certificate of deposit yielding 3.25%. The tax brackets used are the combined
Federal and Virginia income tax brackets applicable for 1994: 19.89% for single
filers with taxable income up to $22,750 and joint filers up to $38,000; 32.14%
for single filers with taxable income from $22,751 to $55,100 and joint filers
from $38,001 to $91,850; 34.97% for single filers with taxable income from
$55,101 to $115,000 and joint filers from $91,851 to $140,000; 39.68% for single
filers with taxable income from $115,001 to $250,000 and joint filers from
$140,001 to $250,000; and 43.07% for single and joint filers with taxable income
over $250,000. The applicable Federal tax rates within each of these combined
brackets are 15%, 28%, 31%, 36% and 39.6%, over the same ranges of income. These
brackets also do not take into account the phaseout of personal exemptions and
limitation on deductibility of itemized deductions over certain ranges of
income, which increase the effective top Federal tax rate for certain taxpayers.
Taxpayers who do not itemize or who are subject to such phaseout or limitation
will have higher combined brackets than indicated above. The first tax bracket
is calculated using the highest Virginia tax rate within the bracket. Taxpayers
with taxable income within this bracket may have a lower combined bracket and
taxable equivalent yield than indicated above. Investors should consult with
their tax advisers for additional information.
<TABLE>
<CAPTION>
TAX BRACKET
19.89% 32.14% 34.97% 39.68% 43.07%
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Tax free yield ................................ 4.50% 4.50% 4.50% 4.50% 4.50%
Taxable equivalent ............................ 5.62 6.63 6.92 7.46 7.90
Certificates of deposit:
Yield ..................................... 3.25 3.25 3.25 3.25 3.25
After-tax yield ........................... 2.60 2.21 2.11 1.96 1.85
</TABLE>
The following is an illustration of the Tax Free Yield Advantage, comparing
the after-tax yields of a certificate of deposit yielding 3.25% and a
hypothetical tax free investment yielding 4.5%. This illustration also
quantifies the Federal income tax payable on hypothetical investments of
$100,000 in a certificate of deposit yielding 3.25% and a hypothetical tax free
investment yielding 4.5%, and compares the after-tax return of such investments.
The chart is based on 3-month bank CDs (Source: The Wall Street Journal) and
current limited maturity municipal bond yields, compiled by Eaton Vance
Management. The illustration is not meant to imply or predict any future rate of
return for the Fund. See your financial adviser for the Fund's current yield and
actual CD rates.
From time to time, information, charts and illustrations, showing changes in
certificate of deposit yields, and yields and taxable equivalent yields of
limited maturity municipal bonds may be included in advertisements and other
material supplied to present and prospective shareholders.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As at March 31, 1995, the Trustees and officers of the Trust, as a group,
owned in the aggregate less than 1% of the outstanding shares of the Fund. As of
March 31, 1995, the following shareholders owned beneficially and of record the
percentage of outstanding shares of the Fund indicated after their name: Eaton
Vance Management, Boston, MA 02110 (51.5%); Henry Michael Tacaronte and Patricia
Ann Tacaronte JTWROS, Chesapeake, VA 23323 (26.3%); and PaineWebber fbo The
Carol Baker Avery Revocalbe Trust dtd 10/12/92, Roanoke, VA 24014 (21.9%). To
the knowledge of the Trust, no other person beneficially owns 5% or more of the
Fund's outstanding shares.
OTHER INFORMATION
The Trust, which is a Massachusetts business trust established in 1985, was
originally called Eaton Vance California Municipals Trust. The Trust changed its
name to Eaton Vance Investment Trust on April 28, 1992.
<PAGE>
FINANCIAL STATEMENTS
STATEMENTS OF ASSETS AND LIABILITIES
MARCH 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
-----------------------------------------------
MARATHON MARATHON MARATHON
ARIZONA NORTH CAROLINA VIRGINIA
LIMITED FUND LIMITED FUND LIMITED FUND
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS:
Investments-
Identified cost $475,884 $129,592 $112,484
Unrealized appreciation 10,262 2,496 2,711
-------- -------- --------
Total investment in Portfolio, at value (Note 1A) $486,146 $132,088 $115,195
Receivable for Fund shares sold 10,010 - -
Receivable from the Administrator (Note 4) 1,359 1,370 1,284
Deferred organization expenses (Note 1D) 3,106 5,673 3,513
-------- -------- --------
Total assets $500,621 $139,131 $119,992
-------- -------- --------
LIABILITIES:
Dividends payable $847 $211 $203
Payable to affiliates -
Custodian fees 101 197 108
Accrued expenses 985 3,604 1,411
-------- -------- --------
Total liabilities 1,933 4,012 1,722
-------- -------- --------
NET ASSETS $498,688 $135,119 $118,270
======== ======== ========
SOURCES OF NET ASSETS:
Paid-in capital $488,494 $132,844 $115,615
Accumulated net realized gain (loss) on investment
and financial futures transactions (computed on
the basis of identified (8) 3 (32)
Accumulated distributions in excess of net investment (60) (224) (24)
Unrealized appreciation of investments from Portfolio
(computed on the basis of identified cost) 10,262 2,496 2,711
-------- -------- --------
Total $498,688 $135,119 $118,270
======== ======== ========
SHARES OF BENEFICIAL INTEREST 48,666 13,229 11,434
-------- -------- --------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE
PER SHARE (net assets / shares of beneficial interest) $10.25 $10.21 $10.34
-------- -------- --------
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
STATEMENTS OF OPERATIONS
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
PERIOD ENDED MARCH 31, 1995 (UNAUDITED)<F1>
--------------------------------------------------------
MARATHON MARATHON MARATHON
ARIZONA NORTH CAROLINA VIRGINIA
LIMITED FUND LIMITED FUND LIMITED FUND
- ---------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 1B):
<S> <C> <C> <C>
Interest income allocated from Portfolio $ 6,929 $1,219 $1,386
Expenses allocated from Portfolio 0 0 0
------- ------ ------
Total investment income $ 6,929 $1,219 $1,386
------- ------ ------
Expenses --
Distribution costs (Note 5) $ 1,139 $239 $220
Custodian fees (Note 4) 251 251 251
Transfer and dividend disbursing agent fees 38 18 17
Printing and postage 742 652 739
Legal and accounting 25 25 25
Amortization of organization expenses (Note 1 D) 276 413 293
Miscellaneous 27 12 11
------- ------ ------
Total expenses $ 2,498 $1,610 $1,556
Deduct allocation of expenses to the Administrator (Note 4) 1,359 1,370 1,284
------- ------ ------
Net expenses $ 1,139 $240 $ 272
------- ------ ------
Net investment income $ 5,790 $979 $1,114
------- ------ ------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) from Portfolio -
Investment transactions (identified cost basis) $ (8) $ 3 $ (32)
Financial futures contracts - - -
------- ------ ------
Net realized gain (loss) on investments $ (8) $ 3 $ (32)
Unrealized appreciation of investments 10,262 2,496 2,711
------- ------ ------
Net realized and unrealized gain (loss) $10,254 $2,499 $2,679
------- ------ ------
Net increase in net assets from operations $16,044 $3,478 $3,793
======= ====== ======
<FN>
- -------------
<F1> For the Marathon Arizona Limited Fund, Marathon North Carolina Limited Fund
and Marathon Virginia Limited Fund, the Statements of Operations are for
the period from the start of business, November 3, 1994, November 28, 1994,
and November 11, 1994, respectively, to March 31, 1995.
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------------------------------------
<CAPTION>
PERIOD ENDED MARCH 31, 1995 (UNAUDITED)<F1>
----------------------------------------------
MARATHON MARATHON MARATHON
ARIZONA NORTH CAROLINA VIRGINIA
LIMITED FUND LIMITED FUND LIMITED FUND
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations -
Net investment income $ 5,790 $ 979 $ 1,114
Net realized gain (loss) on investments (8) 3 (32)
Unrealized appreciation of investments 10,262 2,496 2,711
--------- --------- ---------
Net increase in net assets from operations $ 16,044 $ 3,478 $ 3,793
--------- --------- ---------
Distributions to shareholders (Note 2) -
From net investment income $ (5,790) $ (979) $ (1,114)
In excess of net investment income (109) (224) (26)
--------- --------- ---------
Total distributions to shareholders $ (5,899) $ (1,203) $ (1,140)
--------- --------- ---------
Transactions in shares of beneficial interest (Note 3) -
Proceeds from sales of shares $ 483,938 $ 184,541 $ 144,741
Net asset value of shares issued to shareholders in payment
of distributions declared 4,605 905 906
Cost of shares redeemed 0 (52,602) (30,030)
--------- --------- ---------
Increase in net assets from Fund share transactions $ 488,543 $ 132,844 $ 115,617
--------- --------- ---------
Net increase in net assets $ 498,688 $ 135,119 $ 118,270
NET ASSETS:
At beginning of period -- -- --
--------- --------- ---------
At end of period $ 498,688 $ 135,119 $ 118,270
========= ========= =========
ACCUMULATED DISTRIBUTIONS IN EXCESS OF NET
INVESTMENT INCOME INCLUDED IN NET ASSETS AT END OF PERIOD $ 60 $ 224 $ 24
========= ========= =========
<FN>
- ------------
<F1> For the Marathon Arizona Limited Fund, Marathon North Carolina Limited Fund
and Marathon Virginia Limited Fund, the Statements of Changes in Net Assets
are for the period from the start of business, November 3, 1994, November
28, 1994, and November 11, 1994, respectively, to March 31, 1995.
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------------------------
<CAPTION>
PERIOD ENDED MARCH 31, 1995 (UNAUDITED)<F3>
--------------------------------------------
MARATHON MARATHON MARATHON
ARIZONA NORTH CAROLINA VIRGINIA
LIMITED LIMITED LIMITED
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.000 $ 10.000 $ 10.000
--------- --------- ---------
INCOME(LOSS) FROM OPERATIONS:
Net investment income $ 0.155 $ 0.112 $ 0.150
Net realized and unrealized gain(loss) on
investments 0.253 0.236 0.343
--------- --------- ---------
Total income from operations $ 0.408 $ 0.348 $ 0.493
--------- --------- ---------
LESS DISTRIBUTIONS:
From net investment income $ (0.155) $ (0.112) $ (0.150)
In excess of net investment income (0.003) (0.026) (0.003)
--------- --------- ---------
Total distributions $ (0.158) $ (0.138) $ (0.153)
--------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 10.250 $ 10.210 $ 10.340
========= ========= =========
Total Return 4.02% 3.31% 4.82%
Ratios/Supplemental Data<F1>:
Net assets, end of period (000 omitted) $ 499 $ 135 $ 118
Ratio of net expenses to average daily net
assets<F3> 0.74%<F4> 0.75%<F4> 0.92%<F4>
Ratio of net investment income to average
daily assets 3.78%<F4> 3.04%<F4> 3.78%<F4>
<FN>
<F1> For the period from the start of business, November 3, 1994, to November
28, and November 11, 1994, respectively, to March 31, 1995, the operating
expenses of the Funds and Portfolios may reflect a reduction of expenses by
the Administrator. Had such actions not been taken, net investment income
per share and the ratios would have been as follows:
NET INVESTMENT INCOME PER SHARE $0.077 $(0.113) $(0.106)
====== ======== ========
Ratios (As a percentage of average daily net assets):
Expenses (1) 2.64%<F4> 6.86% <F4> 7.37% <F4>
Net investment income 1.88%<F4> (3.07%)<F4> (2.67%)<F4>
<F2> Computed on an annualized basis.
<F3> Includes each Fund's share of its corresponding Portfolio's allocated
expenses.
<F4> For the Marathon Arizona Limited Fund, Marathon North Carolina Limited Fund
and Marathon Virginia Limited Fund, the Financial Highlights are for the
period from the start of business, November 3, 1994, November 28, 1994, and
November 11, 1994, respectively, to March 31, 1995.
</TABLE>
See notes to financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(1) SIGNIFICANT ACCOUNTING POLICIES
Eaton Vance Investment Trust (the Trust) is an entity of the type commonly known
as a Massachusetts business trust and is registered under the Investment Company
Act of 1940, as amended, as an open-end management investment company. The Trust
presently consists of twenty-six Funds, three of which are included in these
financial statements. They include EV Marathon Arizona Limited Maturity Tax Free
Fund, ("Marathon Arizona Limited Fund"), EV Marathon North Carolina Limited
Maturity Tax Free Fund ("Marathon North Carolina Limited Fund") and EV Marathon
Virginia Limited Maturity Tax Free Fund ("Marathon Virginia Limited Fund"). Each
Fund invests all of its investable assets in interests in a separate
corresponding open-end management investment company (a "Portfolio"), a New York
Trust, having the same investment objective as its corresponding Fund. The
Marathon Arizona Limited Fund invests its assets in the Arizona Limited Maturity
Tax Free Portfolio, the Marathon North Carolina Limited Fund invests its assets
in the North Carolina Limited Maturity Tax Free Portfolio, and the Marathon
Virginia Limited Fund invests its assets in the Virginia Limited Maturity Tax
Free Portfolio. The value of each Fund's investment in its corresponding
Portfolio reflects the Fund's proportionate interest in the net assets of that
Portfolio (82.30%, 56.00%, and 52.20%, at March 31, 1995 for the Marathon
Arizona Limited Fund, Marathon North Carolina Limited Fund, and Marathon
Virginia Limited Fund, respectively). The performance of each Fund is directly
affected by the performance of its corresponding Portfolio. The financial
statements of each Portfolio, including the portfolio of investments, are
included elsewhere in this report and should be read in conjunction with each
Fund's financial statements. The following is a summary of significant
accounting policies consistently followed by the Trust in the preparation of its
financial statements. The policies are in conformity with generally accepted
accounting principles.
A. INVESTMENT VALUATION - Valuation of securities by the Portfolios is discussed
in Note 1 of the Portfolios' Notes to Financial Statements which are included
elsewhere in this report.
B. INCOME - Each Fund's net investment income consists of the Fund's pro rata
share of the net investment income of its corresponding Portfolio, less all
actual and accrued expenses of each Fund determined in accordance with generally
accepted accounting principles.
C. FEDERAL TAXES - Each Fund's policy is to comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute to shareholders each year all of its taxable and tax-exempt income,
including any net realized gain on investments. Accordingly, no provision for
federal income or excise tax is necessary. Dividends paid by each Fund from net
interest on tax-exempt municipal bonds allocated from its corresponding
Portfolio are not includable by shareholders as gross income for federal income
tax purposes because each Fund and Portfolio intend to meet certain requirements
of the Internal Revenue Code applicable to regulated investment companies which
will enable the Funds to pay exempt-interest dividends. The portion of such
interest, if any, earned on private activity bonds issued after August 7, 1986,
may be considered a tax preference item to shareholders.
D. DEFERRED ORGANIZATION EXPENSES - Costs incurred by a Fund in connection with
its organization, including registration costs, are being amortized on the
straight-line basis over five years beginning on the date each Fund commenced
operations.
<PAGE>
E. DISTRIBUTION COSTS - For book purposes, commissions paid on the sale of a
Fund shares and other distribution costs are charged to operations. For tax
purposes, commissions paid were charged to paid-in capital prior to November 16,
1994 and subsequently charged to operations. The change in the tax accounting
practice was prompted by a recent Internal Revenue ruling and has no effect on
either the Funds current yield or total return (Note 5).
F. OTHER - Investment transactions are accounted for on a trade date basis.
F. INTERIM FINANCIAL INFORMATION - The interim financial statements relating to
March 31, 1995 and for the period then ended have not been audited by
independent certified public accountants, but in the opinion of the Fund's
management, reflect all adjustments, consisting only of normal recurring
adjustments, necessary for the fair presentation of the financial statements.
(2) DISTRIBUTIONS TO SHAREHOLDERS
The net income of a Fund is determined daily and substantially all of the net
income so determined is declared as a dividend to shareholders of record at the
time of declaration. In addition, each Fund declares each day an amount equal to
the excess of tax basis net income over book net income, which amount is
reported for financial statement purposes as a distribution in excess of net
investment income. Distributions are paid monthly. Distributions of allocated
realized capital gains, if any, are made at least annually. Shareholders may
reinvest capital gain distribution in additional shares of a Fund at the net
asset value as of the ex-dividend date. Distributions are paid in the form of
additional shares or, at the election of the shareholder, in cash. The Funds
distinguish between distributions on a tax basis and a financial reporting
basis. Generally accepted accounting principles require that only distributions
in excess of tax basis earnings and profits be reported in the financial
statements as a return of capital. Differences in the recognition or
classification of income between the financial statements and tax earnings and
profits which result in temporary over distributions for financial statements
purposes are classified as distributions in excess of net investment income or
accumulated net realized gains. Permanent differences between book and tax
accounting relating to distributions are reclassified to paid-in capital. During
the period from the start of business to March 31, 1995, $49, and $2, was
reclassified from distributions in excess of net investment income to paid in
capital, due to permanent differences between book and tax accounting for
distribution costs for the Marathon Arizona Limited Fund, and Marathon Virginia
Limited Fund, respectively. Net investment income, net realized gains and net
assets were not affected by these reclassifications.
(3) SHARES OF BENEFICIAL INTEREST
The Funds' Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares for the period from the start of business to March
31 ,1995, were as follows:
MARATHON MARATHON MARATHON
ARIZONA NORTH CAROLINA VIRGINIA
LIMITED LIMITED LIMITED
FUND FUND FUND
------- -------------- ---------
Sales $48,212 $ 18,400 $ 14,328
Issued to shareholders electing
to receive payments of
distributions in Fund shares 454 89 88
Redemptions - (5,260) (2,982)
------- -------- ------
Net increase 48,666 13,229 11,434
======= ======== =======
<PAGE>
(4) TRANSACTIONS WITH AFFILIATES
Eaton Vance Management (EVM) serves as the administrator of each Fund, but
receives no compensation. The Portfolios have engaged Boston Management and
Research (BMR), a subsidiary of EVM, to render investment advisory services. See
Note 2 of the Portfolios' Notes to Financial Statements which are included
elsewhere in this report. To enhance the net income of the Funds $1,359, $1,370,
and $1,284 of expenses related to the operation of the Marathon Arizona Limited
Fund, Marathon North Carolina Limited, and Marathon Virginia Limited Fund,
respectively, were allocated, on a preliminary basis, to EVM. Except as to
Trustees of the Funds and the Portfolios who are not members of EVM's or BMR's
organization, officers and Trustees receive remuneration for their services to
each Fund out of such investment adviser fee. Investors Bank & Trust Company
(IBT), an affiliate of EVM, serves as custodian to the Funds and the Portfolios.
Pursuant to the respective custodian agreements, IBT receives a fee reduced by
credits which are determined based on the average cash balances the Funds or the
Portfolios maintain with IBT. Certain of the officers and Trustees of the Funds
and Portfolios are officers and directors/trustees of the above organizations
(Note 5).
(5) DISTRIBUTION PLAN
Each Fund has adopted a distribution plan (the Plan) pursuant to Rule 12b-1
under the Investment Company Act of 1940. The Plans require the Funds to pay the
principal underwriter, Eaton Vance Distributors, Inc. (EVD), amounts equal to
1/365 of 0.75% of each Funds daily net assets, for providing ongoing
distribution services and facilities to the respective Fund. A Fund will
automatically discontinue payments to EVD during any period in which there are
no outstanding Uncovered Distribution Charges, which are equivalent to the sum
of (i) 3 1/2% of the aggregate amount received by the Fund for Class I shares
sold plus (ii) distribution fees calculated by applying the rate of 1% over the
prevailing prime rate to the outstanding balance of Uncovered Distribution
Charges of EVD, reduced by the aggregate amount of contingent deferred sales
charges (see Note 6) and daily amounts theretofore paid to EVD. The amount
payable to EVD with respect to each day is accrued on such day as a liability of
each Fund and, accordingly, reduces the Funds net assets. For the period from
the start of business to March 31, 1995, Marathon Arizona Limited Fund, Marathon
North Carolina Limited Fund, and Marathon Virginia Limited Fund, paid or accrued
$1,139, $239, and $220, respectively, to or payable to EVD representing 0.75%
(annualized) of average daily net assets. At March 31, 1995, the amount of
Uncovered Distribution Charges of EVD calculated under the Plans for Marathon
Arizona Limited Fund, Marathon North Carolina Limited Fund, and Marathon
Virginia Limited Fund, were approximately $4,000, $5,000 and $3,000,
respectively.
In addition, the Plans authorize the Funds to make payments of service fees
to the Principal Underwriter, Authorized Firms and other persons in amounts not
exceeding 0.25% of each Fund's average daily net assets for each fiscal year.
The Trustees have initially implemented the Plans by authorizing the Funds to
make quarterly service fee payments to the Principal Underwriter and Authorized
Firms in amounts not expected to exceed 0.15% of each Fund's average daily net
assets based on the value of Class I shares sold by such persons and remaining
outstanding for at least one year. Service fee payments are made for personal
services and/or maintenance of shareholder accounts. Service fees paid to EVD
and Authorized Firms are separate and distinct from the sales commissions and
distribution fees payable by a Fund to EVD, and as such are not subject to
automatic discontinuance when there are no outstanding Uncovered Distribution
Charges of EVD. No provision for service fee payments was made for the period
from the start of business to March 31, 1995.
Certain of the officers and Trustees of the Funds are officers or directors
of EVD.
<PAGE>
(6) CONTINGENT DEFERRED SALES CHARGE
A contingent deferred sales charge (CDSC) is imposed on any redemption of Class
I shares made within three years of purchase. Generally the CDSC is based on the
lower of the net asset value at date of redemption or date of purchase. No
charge is levied on Class I shares acquired by reinvestment of dividends or
capital gain distributions. No CDSC is levied on shares which have been sold to
EVM or its affiliates or to their respective employees or clients. CDSC charges
are paid to EVD to reduce the amount of Uncovered Distribution Charges
calculated under each Fund's Distribution Plan. CDSC charges received when no
Uncovered Distribution Charges exist will be credited to the corresponding Fund.
EVD received approximately $800, and $300,respectively, of CDSC paid by
shareholders of Marathon Arizona Limited Fund and Marathon Virginia Limited
Fund, for the period ended March 31, 1995.
(7) INVESTMENT TRANSACTIONS
Increases and decreases in each Fund's investment in its corresponding Portfolio
for the period from the start of business to March 31, 1995 were as follows:
MARATHON MARATHON MARATHON
ARIZONA NORTH CAROLINA VIRGINIA
LIMITED LIMITED LIMITED
FUND FUND FUND
--------- -------------- ----------
Increases $ 477,295 $ 184,597 $ 144,732
Decreases 8,342 56,238 33,611
<PAGE>
<TABLE>
Arizona Limited Maturity Tax Free Portfolio
Portfolio of Investments
March 31, 1995
(Unaudited)
- ---------------------------------------------------------------------------------------------------------
Tax-Exempt Investments - 100%
- ---------------------------------------------------------------------------------------------------------
<CAPTION>
Ratings(unaudited)
Principal
Standard Amount
Moody's & Poor's (000 omitted) Security Value
- ------------------------------------------------------------------------------------------------------------
EDUCATION - 2.9%
<S> <C> <C> <C> <C>
A1 AA $15 Arizona State University Revenue Bonds, 6.50%, 7/1/01 $ 16,025
--------
ESCROWED - 27.4%
Aaa AAA $20 Arizona State Municipal Financing Authority, Certificates of
Participation, (BIGI), Prerefunded to 8/1/96, 8.125%,8/1/17 $ 21,135
Aaa AAA 10 Maricopa County, Arizona, Hospital Revenue, Escrowed
to Maturity, 6.50%, 1/1/97 10,159
Aaa AAA 20 Maricopa County, Arizona, School District #28, (Kyrene
Elementary), (FGIC), Prerefunded to 7/1/01, 6.00%, 7/1/13 20,949
NR AA+ 20 Phoenix, Arizona, Prerefunded to 7/1/98, 6.50%, 7/1/01 21,317
NR AAA 15 Phoenix, Arizona, Civic Improvement Corporation, Prerefunded
to 7/1/03, 6.125%, 7/1/14 16,115
NR AA+ 20 Scottsdale, Arizona, Prerfunded to 7/1/00, 6.00%, 7/1/10 21,076
NR AA- 15 Tuscon, Arizona, Prerefunded to 7/1/01, 6.75%, 7/1/15 16,373
Aaa AAA 20 University of Arizona Medical Center Corporation, (MBIA),
Prerefunded to 7/1/01, 7.00%, 7/1/11 22,354
--------
$149,478
GENERAL OBLIGATIONS - 15.2%
Aa AA $15 Phoenix, Arizona, 5.90%, 7/1/00 $ 15,670
Aa A+ 25 Pima County, Arizona, 6.20%, 7/1/99 26,256
Baa1 A 20 Commonwealth of Puerto Rico, 6.00%, 7/1/05 20,443
A1 A+ 20 Tempe Union High School District #213, (Maricopa County,
Arizona), 5.90%,7/1/03 20,711
--------
$ 83,080
INSURED EDUCATION - 12.4%
Aaa AAA $25 Arizona Educational Loan Marketing Corporation, (MBIA),
6.80%, 9/1/98 (1) $ 26,413
Aaa AAA 20 East Valley, Arizona, Institute of Technology, District 401,
(AMBAC), 5.90%, 7/1/03 20,702
Aaa AAA 20 Northern Arizona University, (AMBAC), 6.00%, 6/1/06 20,430
--------
$ 67,545
INSURED GENERAL OBLIGATIONS - 11.4%
Aaa AAA $20 Maricopa County, Arizona, School District #40, (AMBAC),
5.75%, 7/1/03 $ 20,593
Aaa AAA 20 Maricopa County, Arizona, (FGIC), 6.25%, 7/1/00 21,043
Aaa AAA 20 Yavapai County, Arizona, School District, (AMBAC),
6.00%, 7/1/01 20,776
--------
$ 62,412
INSURED SPECIAL TAX REVENUE - 3.0%
Aaa AAA $15 Arizona State Transportation Board Excise Tax, (Maricopa
County Regional Area Road Fund), (MBIA), 6.90, 7/1/99 $ 16,133
--------
LEASE REVENUE/CERTIFICATES OF PARTICIPATION - 4.9%
Baa1 A $25 Puerto Rico Public Building Authority, 6.50%, 7/1/03 $ 26,703
--------
<PAGE>
SPECIAL TAX REVENUE - 7.5%
A A- $25 Glendale, Arizona Improvement District #59, 6.00%, 1/1/03 $ 25,618
A1 AA+ 15 Tempe, Arizona, Municipal Property Corporation, 5.50%, 7/1/03 15,117
--------
$ 40,735
TRANSPORTATION - 2.9%
A A+ $15 Arizona Street & Highway User Bonds, 6.10%, 7/1/01 $ 15,766
--------
UTILITIES - 4.7%
Baa1 A $10 Puerto Rico Electric Power Authority, 6.75%, 1/1/01 $ 10,022
Aa AA 15 Salt River, Project, Arizona, Agricultural Improvement &
Power District Electric System, 6.75%, 1/1/97 15,502
--------
$ 25,524
--------
WATER & SEWER - 7.7%
A1 AA- $15 Central Arizona Water Conservation District, 6.00%, 5/1/98 $ 15,477
Baa1 A 15 Puerto Rico Aqueduct & Sewer Authority, 7.875%, 7/1/17 16,325
Aa AA- 10 Scottsdale, Arizona, Water & Sewer, 5.75%, 7/1/03 10,363
--------
$ 42,165
--------
TOTAL INVESTMENTS (IDENTIFIED COST $529,348) $545,566
========
(1) Bond has been designated as collateral for financial futures contracts.
The Portfolio invests primarily in debt securities issued by Arizona
municipalities. The ability of the issuers of the debt securities to meet their
obligations may be affected by economic developments in a specific industry or
municipality. In order to reduce the risk associated with such economic
developments, at March 31, 1995, 26.8% of the securities in the portfolio of
investments are backed by bond insurance of various financial institutions and
financial guaranty assurance agencies. The aggregate percentage by financial
institution ranged from 7.1% to 14.0% of total investments.
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
North Carolina Limited Maturity Tax Free Portfolio
Portfolio of Investments
March 31, 1995
(Unaudited)
- ----------------------------------------------------------------------------------------------------------------
Tax-Exempt Investment - 100%
- ----------------------------------------------------------------------------------------------------------------
<CAPTION>
Ratings(unaudited)
Principal
Standard Amount
Moody's & Poor's (000 omitted) Security Value
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ESCROWED/PREREFUNDED - 6.9%
NR NR $10 Newton, North Carolina, Prerefunded to 6/1/96, 7.30%, 6/1/99 $ 10,458
--------
GENERAL OBLIGATIONS - 51.8%
Aaa AAA $15 Durham County, North Carolina, 5.80%, 4/1/02 $ 15,637
Aa1 AA+ 10 Forsyth County, North Carolina, 6.20%, 3/1/04 10,587
Aa1 AAA 10 Greensborough, North Carolina Public Improvements, 6.25%,
3/1/07 10,580
Aaa AAA 10 Mecklenberg County, North Carolina, 5.75%, 3/1/02 10,379
Baa1 A 10 Puerto Rico, 6.00%, 7/1/05 10,221
A A+ 10 Rocky Mount, North Carolina, 5.75%, 5/1/00 10,228
A1 A+ 10 Union County, North Carolina, 6.50%, 4/1/05 10,701
--------
$ 78,333
--------
HOUSING - 10.1%
Aaa AAA $15 Durham, North Carolina New Public Housing, 5.75%, 10/1/00 $ 15,300
--------
INSURED GENERAL OBLIGATIONS - 17.3%
Aaa AAA $15 Gaston County, North Carolina, (MBIA), 5.70%, 3/1/02 $ 15,597
Aaa AAA 10 Lincoln County, North Carolina, (MBIA), 6.10%, 6/1/01 10,543
--------
$ 26,140
--------
INSURED LEASE REVENUE - 7.0%
Aaa AAA $10 Harnett County, North Carolina COP, (AMBAC), 6.00%, 12/1/01 $ 10,536
--------
LEASE REVENUE/CERTIFICATE OF PARTICIPATION - 6.9%
Baa1 A $10 Puerto Rico Public Building Authority, 6.10%, 7/1/00 $ 10,385
--------
TOTAL INVESTMENTS (IDENTIFIED COST $146,358) $151,152
--------
The Portfolio invests primarily in debt securities issued by North Carolina
municipalities. The ability of the issuers of the debt securities to meet their
obligations may be affected by economic developments in a specific industry or
municipality. In order to reduce the risk associated with such economic
developments, at March 31, 1995, 24.3% of the securities in the portfolio of
investments are backed by bond insurance of various financial institutions and
financial guaranty assurance agencies. The aggregate percentage by financial
institution ranged from 4.5% to 11.1% of total investments.
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
Virginia Limited Maturity Tax Free Portfolio
Portfolio of Investments
March 31, 1995
(Unaudited)
- --------------------------------------------------------------------------------------------------------------------------
Tax-Exempt Investment - 100%
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Ratings(unaudited)
Principal
Standard Amount
Moody's & Poor's (000 omitted) Security Value
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ESCROWED/PREREFUNDED - 24.4%
Aaa AAA $10 Prince William County, Virginia Water and Sewer, Prerefunded
to 7/1/02, 6.50%, 7/1/21 $ 10,913
Aaa AAA 10 Roanoke Hospital, Prerefunded to 7/1/00, 6.50%, 7/1/25 10,682
Aaa AAA 20 Winchester Medical Center, Prerefunded to 1/1/00, (AMBAC),
7.25%, 1/1/15 22,190
--------
$ 43,785
--------
GENERAL OBLIGATIONS - 26.2%
A1 A+ $10 Botetourt County, Virginia, 5.70%, 7/15/03 $ 10,298
A1 A 10 Montgomery County, Virginia, 6.25%, 11/1/97 10,392
Aa AA- 15 Newport News, Virginia, 6.20%, 12/1/01 15,767
Aaa AAA 10 State of Virginia, 6.00%, 6/1/01 10,523
--------
$ 46,980
--------
INSURED GENERAL OBLIGATION - 5.7%
Aaa AAA $10 Frankiln County, Virginia, (FGIC), 6.00%, 7/15/07 $ 10,274
--------
INSURED LEASE REVENUE/CERTIFICATES OF PARTICIPATION - 11.6%
Aaa AAA $10 Frederick County, Virginia COP, (MBIA), 5.85%, 12/1/03 $ 10,490
Aaa AAA 10 Louden County, Virginia COP, (FSA), 5.90%, 3/1/00 10,307
--------
$ 20,797
--------
INSURED MISCELLANEOUS - 5.7%
Aaa AAA $10 Richmond Redevelopment and Housing Authority, Old
Manchester Project, (CGIC), 5.70%, 3/1/01 $ 10,328
LEASE REVENUE/CERTIFICATES OF PARTICIPATION - 11.8%
Aa AA $10 Henrico County, Virginia Industrial development Authority,
6.50%, 8/1/06 $ 10,877
Baa1 A 10 Puerto Rico Public Building Authority, 6.10%, 7/1/00 10,385
--------
$ 21,262
--------
MISCELLANEOUS - 5.9%
Aa AA $10 Virginia Public Building Authority, 6.25%, 8/1/01 $ 10,686
========
SPECIAL TAX - 8.7%
Aa AA $15 Virginia Public Schools, 6.60%, 6/1/00 $ 15,678
--------
TOTAL INVESTMENTS (IDENTIFIED COST $173,447) $179,790
========
The Portfolio invests primarily in debt securities issued by Virginia
municipalities. The ability of the issuers of the debt securities to meet their
obligations may be affected by economic developments in a specific industry or
municipal- ity. In order to reduce the risk associated with such economic
developments, at March 31, 1995, 23.0% of the securities in the portfolio of
investments are backed by bond insurance of various financial institutions and
financial guaranty assurance agencies. The aggregate percentage by financial
institution ranged from 9.6% to 10.1% of total investments.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS
<TABLE>
STATEMENTS OF ASSETS AND LIABILITIES
- ----------------------------------------------------------------------------------------------------
MARCH 31, 1995
- ----------------------------------------------------------------------------------------------------
<CAPTION>
(UNAUDITED)
---------------------------------------
ARIZONA NORTH CAROLINA VIRGINIA
LIMITED LIMITED LIMITED
PORTFOLIO PORTFOLIO PORTFOLIO
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS:
Investments-
Identified cost $529,348 $146,358 $173,447
Unrealized appreciation 16,218 4,794 6,343
-------- -------- --------
Total investments, at value (Note 1A) $545,566 $151,152 $179,790
Cash 32,442 78,195 34,006
Interest receivable 8,187 2,655 3,096
Receivable from the Investment Adviser 1,639 1,083 1,160
Deferred organization expenses (Note 1D) 4,081 4,078 3,989
-------- -------- --------
Total assets $591,915 $237,163 $222,041
-------- -------- --------
LIABILITIES:
Accrued expenses 1,459 1,404 1,413
-------- -------- --------
Total liabilities $ 1,459 $ 1,404 $ 1,413
-------- -------- --------
Net Assets applicable to investors' interest in Portfolio $590,456 $235,759 $220,628
-------- -------- --------
SOURCES OF NET ASSETS:
Net proceeds from capital contributions and withdrawals $577,638 $230,965 $214,285
Unrealized appreciation of investments
(computed on the basis of identified cost) 12,818 4,794 6,343
-------- -------- --------
Total $590,456 $235,759 $220,628
-------- -------- --------
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
STATEMENTS OF OPERATIONS
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
PERIOD ENDED MARCH 31, 1995 (UNAUDITED)<F1>
----------------------------------------
ARIZONA NORTH CAROLOLINA VIRGINIA
LIMITED LIMITED LIMITED
PORTFOLIO PORTFOLIO PORTFOLIO
- ----------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
<S> <C> <C> <C>
Interest income $ 8,686 $ 2,582 $ 3,160
Expenses-
Investment adviser fee (Note 2) $ 274 $ 96 $ 101
Bond pricing 823 775 834
Amortization of organization expenses (Note 1D) 346 298 326
Miscellaneous 470 10 0
Total expenses $ 1,913 $ 1,179 $ 1,261
Deduct -
Preliminary reduction of investment adviser fee (Note 2) $ 274 $ 96 $ 101
Preliminary allocation of expenses to the Investment Adviser
(Note 2) 1,639 1,083 1,160
Net expenses 0 0 0
Net investment income $ 8,686 $ 2,582 $ 3,160
Realized and Unrealized Gain (Loss) on Investments:
Net realized gain (loss) -
Investment transactions (identified cost basis) $ (11) $ 14 $ (6)
Financial futures contracts $ 0 $ 0 $ 0
Net realized gain (loss) on investments $ (11) $ 14 $ (6)
Unrealized appreciation (depreciation)
Investments $ 16,218 $ 0 $ 0
Financial futures contracts (3,400) 0 0
Net realized and unrealized gain (loss) on investments $ 12,818 $ 0 $ 0
Net increase in net assets from operations $ 21,493 $ 2,596 $ 3,154
<FN>
- ----------
<F1> For the Arizona Limited Portfolio, North Carolina Limited Portfolio and
Virginia Limited Portfolio, the Statements of Operations are for the period
from the start of business, November 3, 1994, November 28, 1994, and
November 11, 1994, respectively, to March 31, 1995.
</TABLE>
See notes to financial statements
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
- -----------------------------------------------------------------------------------------------------------
<CAPTION>
PERIOD ENDED MARCH 31, 1995 (UNAUDITED)<F1>
--------------------------------------------
ARIZONA NORTH CAROLINA VIRGINIA
LIMITED LIMITED LIMITED
PORTFOLIO PORTFOLIO PORTFOLIO
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Increase (Decrease) in Net Assets:
From operations -
Net investment income $ 8,686 $ 2,582 $ 3,160
Net realized gain (loss) on investment transactions (11) 14 (6)
Unrealized appreciation of investments 12,818 4,794 6,343
-------- -------- --------
Net increase in net assets from operations $ 21,493 $ 7,390 $ 9,497
-------- -------- --------
Capital transactions -
Contributions $477,295 $184,597 $144,732
Withdrawals (8,342) (56,238) (33,611)
-------- -------- --------
Increase in net assets resulting from capital
transactions $468,953 $128,359 $111,121
-------- -------- --------
Total increase in net assets $490,446 $135,749 $120,618
Net Assets:
At beginning of period 100,010 100,010 100,010
-------- -------- --------
At end of period $590,456 $235,759 $220,628
======== ======== ========
<FN>
- ------------
<F1> For the Arizona Limited Portfolio, North Carolina Limited Portfolio and
Virginia Limited Portfolio, the Statements of Changes in Net Assets are for
the period from the start of business, November 3, 1994, November 28, 1994,
and November 11, 1994, respectively, to March 31, 1995.
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
SUPPLEMENTARY DATA
- ----------------------------------------------------------------------------------------------------
PERIOD ENDED MARCH 31, 1995 (UNAUDITED)<F4>
----------------------------------------------
ARIZONA NORTH CAROLINA VIRGINIA
LIMITED LIMITED LIMITED
PORTFOLIO PORTFOLIO PORTFOLIO
- ----------------------------------------------------------------------------------------------------
RATIOS (AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)<F1>:
<S> <C> <C> <C>
Net expenses 0.00%<F2> 0.00%<F2> 0.00%<F2>
Net investment income 4.32%<F2> 3.98%<F2> 4.69%<F2>
PORTFOLIO TURNOVER 1% 16% 33%
<FN>
- --------------
<F1> The operating expenses of the Portfolios reflect a reduction of the
investment adviser fee and/or an allocation of expenses to the Investment
Adviser. Had such actions not been taken, the ratios would have been as
follows:
Ratios (As a percentage of average daily net assets):
Expenses 0.95%<F2> 1.82%<F2> 1.87%<F2>
Net investment income 3.37%<F2> 2.16%<F2> 2.82%<F2>
<F2> Annualized.
<F3> For the period from the start of business November 3, 1994, November 28,
1994 and November 11, 1994, respectively, to March 31, 1995.
</TABLE>
See notes to financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(1) SIGNIFICANT ACCOUNTING POLICIES
Arizona Limited Maturity Tax Free Portfolio (Arizona Limited Portfolio), North
Carolina Limited Maturity Tax Free Portfolio (North Carolina Limited Portfolio),
and Virginia Limited Maturity Tax Free Portfolio (Virginia Limited Portfolio),
collectively the Portfolios, are registered under the Investment Company Act of
1940 as non-diversified open-end investment companies which were organized as
trusts under the laws of the State of New York on August 1, 1994. The
Declarations of Trust permit the Trustees to issue interests in the Portfolios.
The following is a summary of significant accounting policies of the Portfolios.
The policies are in conformity with generally accepted accounting principles.
A. INVESTMENT VALUATIONS - Municipal bonds are normally valued on the basis of
valuations furnished by a pricing service. Taxable obligations, if any, for
which price quotations are readily available are normally valued at the mean
between the latest bid and asked prices. Futures contracts listed on commodity
exchanges are valued at closing settlement prices. Short-term obligations,
maturing in sixty days or less, are valued at amortized cost, which approximates
value. Investments for which valuations or market quotations are unavailable are
valued at fair value using methods determined in good faith by or at the
direction of the Trustees.
B. INCOME - Interest income is determined on the basis of interest accrued,
adjusted for amortization of premium or discount when required for federal
income tax purposes.
C. INCOME TAXES - The Portfolios are treated as partnerships for Federal tax
purposes. No provision is made by the Portfolios for federal or state taxes on
any taxable income of the Portfolios because each investor in the Portfolios are
ultimately responsible for the payment of any taxes. Since some of the
Portfolios' investors are regulated investment companies that invest all or
substantially all of their assets in the Portfolios, the Portfolios normally
must satisfy the applicable source of income and diversification requirements
(under the Internal Revenue Code) in order for their respective investors to
satisfy them. The Portfolios will allocate at least annually among their
respective investors each investor's distributive share of the Portfolios' net
taxable (if any) and tax-exempt investment income, net realized capital gains,
and any other items of income, gain, loss, deductions or credit. Interest income
received by the Portfolios on investments in municipal bonds, which is
excludable from gross income under the Internal Revenue Code, will retain its
status as income exempt from federal income tax when allocated to each
Portfolio's investors. The portion of such interest, if any, earned on private
activity bonds issued after August 7, 1986, may be considered a tax preference
item for investors. <PAGE>
D. DEFERRED ORGANIZATION EXPENSES - Costs incurred by a Portfolio in connection
with its organization are being amortized on the straight-line basis over five
years beginning on the date each Portfolio commenced operations.
E. FINANCIAL FUTURES CONTRACTS - Upon the entering of a financial futures
contract, a Portfolio is required to deposit ("initial margin") either in cash
or securities an amount equal to a certain percentage of the purchase price
indicated in the financial futures contract. Subsequent payments are made or
received by a Portfolio ("margin maintenance") each day, dependent on the daily
fluctuations in the value of the underlying security, and are recorded for book
purposes as unrealized gains or losses by a Portfolio. A Portfolio's investment
in financial futures contracts is designed only to hedge against anticipated
future changes in interest rates. Should interest rates move unexpectedly, a
Portfolio may not achieve the anticipated benefits of the financial futures
contractions and may realize a loss.
F. OTHER - Investment transactions are accounted for on a trade date basis.
F. INTERIM FINANCIAL INFORMATION - The interim financial statements relating to
March 31, 1995, and for the period then ended have not been audited by
independent certified public accountants, but in the opinion of the Fund's
management, reflect all adjustments, consisting only of normal recurring
adjustments, necessary for the fair presentation of the financial statements.
(2) INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES The investment
adviser fee is earned by Boston Management and Research (BMR), a wholly-owned
subsidiary of Eaton Vance Management (EVM), as compensation for management and
investment advisory services rendered to each Portfolio. The fee is based upon a
percentage of average daily net assets plus a percentage of gross income (i.e.,
income other than gains from the sale of securities). For the period from the
start of business to March 31, 1995, each Portfolio paid advisory fees as
follows:
Period Ended
March 31, 1995
------------------------
Portfolio Amount Effective Rate**
- --------- ------ ----------------
Arizona Limited $274 0.15%
North Carolina Limited $ 96 0.15%
Virginia Limited $101 0.15%
**Advisory fees paid as a percentage of average daily net assets (annualized).
*To enhance the net income of the Arizona Limited Portfolio, North Carolina
Limited Portfolio and Virginia Limited Portfolio, BMR made a preliminary
reduction in its fees in the amounts of $274, $96, and $101, respectively, for
the period from the start of business to March 31, 1995. Also, $1,639, $1,083
and $1,160 of expenses related to the operation of the Arizona Limited
Portfolio, North Carolina Limited Portfolio and Virginia Limited Portfolio,
respectively, were allocated to BMR for the period from the start of business to
March 31, 1995.
Except as to Trustees of the Portfolios who are not members of EVM's or BMR's
organization, officers and Trustees receive remuneration for their services to
the Portfolios out of such investment adviser fee. Investors Bank & Trust
Company (IBT), an affiliate of EVM and BMR, serves as custodian of the
Portfolios. Pursuant to the custodian agreements, IBT receives a fee reduced by
credits which are determined based on the average daily cash balances each
Portfolio maintains with IBT. Certain of the officers and Trustees of the
Portfolios are officers and directors/trustees of the above organizations.
Trustees of the Portfolio that are not affiliated with the Investment Adviser
may elect to defer receipt of all or a portion of their annual fees in
accordance with the terms of the Trustee Deferred Compensation Plan.
<PAGE>
(3) INVESTMENTS
Purchases and sales of investments, other than U.S. Government securities and
short-term obligations, for the period from the start of business to March 31,
1995, were as follows:
ARIZONA NORTH CAROLINA VIRGINIA
LIMITED LIMITED LIMITED
PORTFOLIO PORTFOLIO PORTFOLIO
---------- -------------- ----------
Purchases $ 534,824 $ 172,442 $ 230,768
Sales 5,000 26,013 57,136
(4) FEDERAL INCOME TAX BASIS OF INVESTMENTS
The cost and unrealized depreciation/appreciation in value of the investments
owned by each Portfolio at March 31, 1995, as computed on a federal income tax
basis, are as follows:
ARIZONA NORTH CAROLINA VIRGINIA
LIMITED LIMITED LIMITED
PORTFOLIO PORTFOLIO PORTFOLIO
---------- -------------- ----------
Aggregate cost $ 529,348 $ 146,358 $ 173,446
========= ========= =========
Gross unrealized depreciation $ - $ - $ -
Gross unrealized appreciation 16,218 4,794 6,343
--------- --------- ---------
Net unrealized apprecation $ 16,218 $ 4,794 $ 6,343
========= ========= =========
(5) LINE OF CREDIT
The Portfolios participate with other portfolios and funds managed by BMR and
EVM in a $120 million unsecured line of credit agreement with a bank. The line
of credit consists of a $20 million committed facility and a $100 million
discretionary facility. Borrowings will be made by the Portfolios solely to
facilitate the handling of unusual and/or unanticipated short-term cash
requirements. Interest is charged to each portfolio or fund based on its
borrowings at an amount above either the bank's adjusted certificate of deposit
rate, a variable adjusted certificate of deposit rate, or a federal funds
effective rate. In addition, a fee computed at an annual rate of 1/4 of 1% on
the $20 million committed facility and on the daily unused portion of the $100
million discretionary facility is allocated among the participating funds and
portfolios at the end of each quarter. The Portfolios did not have any
significant borrowings or allocated fees during the period.
(6) FINANCIAL INSTRUMENTS
The Portfolios regularly trade in financial instruments with off-balance sheet
risk in the normal course of their investing activities to assist in managing
exposure to various market risks. These financial instruments include written
options and futures contracts and may involve, to a varying degree, elements of
risk in excess of the amounts recognized for financial statement purposes.
The notional or contractual amounts of these instruments represent the
investment a Portfolio has in particular classes of financial instruments and
does not necessarily represent the amounts potentially subject to risk. The
measurement of the risks associated with these instruments is meaningful only
when all related and offsetting transactions are considered.
A summary of obligations under these financial instruments at March 31, 1995, is
as follows:
<TABLE>
<CAPTION>
Futures Contracts Net Unrealized
Portfolio Expiration Date Contracts Position Depreciation
- --------------- --------------------- --------- -------- --------------
<S> <C> <C> <C> <C>
Arizona Limited 6/95 US Treasury Bond 2 Short (3,400)
</TABLE>
<PAGE>
PORTFOLIO INVESTMENT ADVISER
Boston Management and Research
24 Federal Street
Boston, MA 02110
FUND ADMINISTRATOR
Eaton Vance Management
24 Federal Street
Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc.
24 Federal Street
Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company
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 MARATHON
TAX FREE FUNDS
24 FEDERAL STREET
BOSTON, MA 02110
MCL7/14SAI
STATEMENT OF ADDITIONAL
INFORMATION
JULY 14, 1995
0 EV MARATHON
ARIZONA
LIMITED MATURITY
TAX FREE FUND
o EV MARATHON
NORTH CAROLINA
LIMITED MATURITY
TAX FREE FUND
o EV MARATHON
VIRGINIA
LIMITED MATURITY
TAX FREE FUND
<PAGE>
PART C
OTHER INFORMATION
ITEM 24: FINANCIAL STATEMENTS AND EXHIBITS
(A) FINANCIAL STATEMENTS
INCLUDED IN PART A:
For EV Marathon Arizona Limited Maturity Tax Free Fund:
Financial Highlights for the period from the start of
business, November 3, 1994, to March 31, 1995
For EV Marathon North Carolina Limited Maturity Tax Free Fund:
Financial Highlights for the period from the start of
business, November 28, 1994, to March 31, 1995
For EV Marathon Virginia Limited Maturity Tax Free Fund:
Financial Highlights for the period from the start of
business, November 11, 1994, to March 31, 1995
INCLUDED IN PART B:
For EV Marathon Arizona Limited Maturity Tax Free Fund
Financial Statements are as follows:
Statement of Assets and Liabilities as of March 31, 1995
(Unaudited)
Statement of Operations for the period from the start of
business, November 3, 1994, to March 31, 1995 (Unaudited)
Statement of Changes in Net Assets for the period from the
start of business, November 3, 1994, to March 31, 1995
(Unaudited)
Financial Highlights for the period from the start of
business, November 3, 1994, to March 31, 1995 (Unaudited)
Notes to Financial Statements (Unaudited)
For Arizona Limited Maturity Tax Free Portfolio
Financial Statements are as follows:
Portfolio of Investments as of March 31, 1995 (Unaudited)
Statement of Assets and Liabilities as of March 31, 1995
(Unaudited)
Statement of Operations for the period from the start of
business, November 3, 1994, to March 31, 1995 (Unaudited)
Statement of Changes in Net Assets for the period from the
start of business, November 3, 1994, to March 31, 1995
(Unaudited)
Supplementary Data for the period from the start of
business, November 3, 1994, to March 31, 1995 (Unaudited)
Notes to Financial Statements (Unaudited)
For EV Marathon North Carolina Limited Maturity Tax Free Fund
Financial Statements are as follows:
Statement of Assets and Liabilities as of March 31, 1995
(Unaudited)
Statement of Operations for the period from the start of
business, November 28, 1994, to March 31, 1995 (Unaudited)
Statement of Changes in Net Assets for the period from the
start of business, November 28, 1994, to March 31, 1995
(Unaudited)
Financial Highlights for the period from the start of
business, November 28, 1994, to March 31, 1995 (Unaudited)
Notes to Financial Statements (Unaudited)
For North Carolina Limited Maturity Tax Free Portfolio
Financial Statements are as follows:
Portfolio of Investments as of March 31, 1995 (Unaudited)
Statement of Assets and Liabilities as of March 31, 1995
(Unaudited)
Statement of Operations for the period from the start of
business, November 28, 1994, to March 31, 1995 (Unaudited)
Statement of Changes in Net Assets for the period from the
start of business, November 28, 1994, to March 31, 1995
(Unaudited)
Supplementary Data for the period from the start of
business, November 28, 1994, to March 31, 1995 (Unaudited)
Notes to Financial Statements (Unaudited)
For EV Marathon Virginia Limited Maturity Tax Free Fund
Financial Statements are as follows:
Statement of Assets and Liabilities as of March 31, 1995
(Unaudited)
Statement of Operations for the period from the start of
business, November 11, 1994, to March 31, 1995 (Unaudited)
Statement of Changes in Net Assets for the period from the
start of business, November 11, 1994, to March 31, 1995
(Unaudited)
Financial Highlights for the period from the start of
business, November 11, 1994, to March 31, 1995 (Unaudited)
Notes to Financial Statements (Unaudited)
For Virginia Limited Maturity Tax Free Portfolio
Financial Statements are as follows:
Portfolio of Investments as of March 31, 1995 (Unaudited)
Statement of Assets and Liabilities as of March 31, 1995
(Unaudited)
Statement of Operations for the period from the start of
business, November 11, 1994, to March 31, 1995 (Unaudited)
Statement of Changes in Net Assets for the period from the
start of business, November 11, 1994, to March 31, 1995
(Unaudited)
Supplementary Data for the period from the start of
business, November 11, 1994, to March 31, 1995 (Unaudited)
Notes to Financial Statements (Unaudited)
(B) EXHIBITS:
(1)(a) Amended and Restated Declaration of Trust for Eaton Vance
Investment Trust dated January 11, 1993 filed as Exhibit (1) to
Post-Effective Amendment No. 23 and incorporated herein by
reference.
(b) Establishment and Designation of Series dated October 25, 1993
filed as Exhibit (1)(b) to Post-Effective Amendment No. 23 and
incorporated herein by reference.
(c) Amendment and Restatement of Establishment and Designation of
Series dated January 7, 1994 filed as Exhibit (1)(c) to
Post-Effective Amendment No. 23 and incorporated herein by
reference.
(d) Amendment and Restatement of Establishment and Designation of
Series dated February 23, 1994 filed as Exhibit (1)(d) to
Post-Effective Amendment No. 24 and incorporated herein by
reference.
(e) Amendment and Restatement of Establishment and Designation of
Series dated August 1, 1994 filed as Exhibit (1)(e) to
Post-Effective Amendment No. 28 and incorporated herein by
reference.
(f) Amendment and Restatement of Establishment and Designation of
Series dated October 25, 1994 filed as Exhibit (1)(f) to
Post-Effective Amendment No. 31 and incorporated herein by
reference.
(2)(a) By-Laws as amended December 15, 1987, filed as Exhibit (2) to Post-
Effective Amendment No. 6 and incorporated herein by reference.
(b) Amendment to By-Laws of Eaton Vance Investment Trust dated December
13, 1993 filed as Exhibit 2(b) to Post-Effective Amendment No. 23
and incorporated herein by reference.
(3) Not applicable
(4) Not applicable
(5) Not applicable
(6)(a)(1) Amended Distribution Agreement with Eaton Vance Distributors, Inc.
dated July 7, 1993 for Eaton Vance California Municipals Fund filed
as Exhibit (6)(a)(1) to Post-Effective Amendment No. 19 and
incorporated herein by reference.
(2) Amended Distribution Agreement between Eaton Vance California
Limited Maturity Tax Free Fund (now EV Marathon California Limited
Maturity Tax Free Fund) and Eaton Vance Distributors, Inc. with
attached schedule under Rule 8b-31 regarding other series of the
Registrant, filed as Exhibit (6)(a)(2) to Post-Effective Amendment
No. 27 and incorporated herein by reference.
(x) Amended schedule under Rule 8b-31 adding additional series of
the Registrant, filed as Exhibit (6)(a)(2)(x) to Post-Effective
Amendment No. 28 and incorporated herein by reference.
(3) Distribution Agreement between EV Classic California Municipals
Fund and Eaton Vance Distributors, Inc. with attached schedule
under Rule 8b-31 regarding other series of the Registrant, filed as
Exhibit (6) (a)(3) to Post-Effective Amendment No. 27 and
incorporated herein by reference.
(4) Distribution Agreement between EV Traditional California Municipals
Fund and Eaton Vance Distributors, Inc. with attached schedule
under Rule 8b-31 regarding other series of the Registrant, filed as
Exhibit (6)(a)(4) to Post-Effective Amendment No. 27 and
incorporated herein by reference.
(b) Selling Group Agreement between Eaton Vance Distributors, Inc. and
Authorized Dealers filed as Exhibit (6)(b) to Post-Effective
Amendment No. 29 and incorporated herein by reference.
(c) Schedule of Dealer Discounts and Sales Charges filed as Exhibit (6)
(c) to Post-Effective Amendment No. 29 and incorporated herein by
reference.
(7) Not applicable
(8) Custodian Agreement with Investors Bank & Trust Company dated
December 17, 1990 filed as Exhibit (8) to Post-Effective Amendment
No. 8 and incorporated herein by reference.
(a) Amended schedule under Rule 8b-31 adding additional series of the
Registrant, filed as Exhibit (9)(a) to Post-Effective Amendment No.
28 and incorporated herein by reference.
(10) Not applicable.
(11) Not applicable.
(12) Not applicable.
(13) Letter Agreement with Eaton Vance Management, Inc., filed as
Exhibit (13) to Pre-Effective Amendment No. 1 and incorporated
herein by reference.
(14) Not applicable
(15)(a) Amended Distribution Plan pursuant to Rule 12b-1 under the
Investment Company Act of 1940 dated July 7, 1993 for Eaton Vance
California Municipals Fund filed as Exhibit (15)(a) to Post-
Effective Amendment No. 19 and incorporated herein by reference.
(b) Revised Distribution Plan pursuant to Rule 12b-1 under the
Investment Company Act of 1940 for Eaton Vance California Limited
Maturity Tax Free Fund (now EV Marathon California Limited Maturity
Tax Free Fund) with attached schedule under Rule 8b-31 regarding
other series of Registrant, filed as Exhibit (15)(b) to Post-
Effective Amendment No. 27 and incorporated herein by reference.
(1) Amended schedule under Rule 8b-31 adding additional series of the
Registrant, filed as Exhibit (15)(a)(1) to Post-Effective Amendment
No. 28 and incorporated herein by reference.
(c) Distribution Plan pursuant to Rule 12b-1 under the Investment
Company Act of 1940 for EV Classic California Municipals Fund with
attached schedule under Rule 8b-31 regarding other series of
Registrant, filed as Exhibit (15)(c) to Post-Effective Amendment
No. 27 and incorporated herein by reference.
(d) Service Plan pursuant to Rule 12b-1 under the Investment Company
Act of 1940 for EV Traditional California Municipals Fund with
attached schedule under Rule 8b-31 regarding other series of
Registrant, filed as Exhibit (15)(d) to Post-Effective Amendment
No. 27 and incorporated herein by reference.
(16) Schedules for Computation of Performance Quotations filed herewith.
(17)(a) Power of Attorney for Eaton Vance Investment Trust dated February
8, 1994 filed as Exhibit (17)(a) to Post-Effective Amendment No. 23
and incorporated herein by reference.
(b) Power of Attorney for California Limited Maturity Tax Free
Portfolio, California Tax Free Portfolio, Connecticut Limited
Maturity Tax Free Portfolio, Florida Limited Maturity Tax Free
Portfolio, Massachusetts Limited Maturity Tax Free Portfolio,
Michigan Limited Maturity Tax Free Portfolio, National Limited
Maturity Tax Free Portfolio, New Jersey Limited Maturity Tax Free
Portfolio, New York Limited Maturity Tax Free Portfolio, Ohio
Limited Maturity Tax Free Portfolio and Pennsylvania Limited
Maturity Tax Free Portfolio dated February 8, 1994 filed as Exhibit
(17)(b) to Post-Effective Amendment No. 23 and incorporated herein
by reference.
(c) Power of Attorney for Arizona Limited Maturity Tax Free Portfolio
filed as Exhibit (17)(c) to Post-Effective Amendment No. 28 and
incorporated herein by reference.
(d) Power of Attorney for North Carolina Limited Maturity Tax Free
Portfolio filed as Exhibit (17)(d) to Post-Effective Amendment No.
28 and incorporated herein by reference.
(e) Power of Attorney for Virginia Limited Maturity Tax Free Portfolio
filed as Exhibit (17)(e) to Post-Effective Amendment No. 28 and
incorporated herein by reference.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not applicable
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
<TABLE>
<CAPTION>
(1) (2)
TITLE OF CLASS NUMBER OF RECORD HOLDERS
Shares of beneficial interest without par value as of March 31, 1995
<S> <C>
EV Marathon Arizona Limited Maturity Tax Free Fund 10
EV Classic California Municipals Fund 41
EV Marathon California Municipals Fund 8,442
EV Traditional California Municipals Fund 36
EV Classic California Limited Maturity Tax Free Fund 93
EV Marathon California Limited Maturity Tax Free Fund 1,176
EV Classic Connecticut Limited Maturity Tax Free Fund 44
EV Marathon Connecticut Limited Maturity Tax Free Fund 413
EV Classic Florida Limited Maturity Tax Free Fund 151
EV Marathon Florida Limited Maturity Tax Free Fund 3,923
EV Traditional Florida Limited Maturity Tax Free Fund 7
EV Classic Massachusetts Limited Maturity Tax Free Fund 103
EV Marathon Massachusetts Limited Maturity Tax Free Fund 2,871
EV Classic Michigan Limited Maturity Tax Free Fund 102
EV Marathon Michigan Limited Maturity Tax Free Fund 691
EV Classic National Limited Maturity Tax Free Fund 325
EV Marathon National Limited Maturity Tax Free Fund 3,044
EV Traditional National Limited Maturity Tax Free Fund 14
EV Classic New Jersey Limited Maturity Tax Free Fund 87
EV Marathon New Jersey Limited Maturity Tax Free Fund 2,811
EV Classic New York Limited Maturity Tax Free Fund 163
EV Marathon New York Limited Maturity Tax Free Fund 4,056
EV Traditional New York Limited Maturity Tax Free Fund 14
EV Marathon North Carolina Limited Maturity Tax Free Fund 2
EV Classic Ohio Limited Maturity Tax Free Fund 97
EV Marathon Ohio Limited Maturity Tax Free Fund 1,100
EV Classic Pennsylvania Limited Maturity Tax Free Fund 161
EV Marathon Pennsylvania Limited Maturity Tax Free Fund 2,930
EV Marathon Virginia Limited Maturity Tax Free Fund 4
</TABLE>
ITEM 27. INDEMNIFICATION
No change from the original filing has been made.
Registrant's Trustees and officers are insured under a standard mutual fund
errors and omissions insurance policy covering insured by reason of negligent
errors and omissions committed in their capacities as such.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Reference is made to the information set forth under the caption
"Investment Adviser and Administrator" in the Statement of Additional
Information, which information is incorporated herein by reference.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Registrant's principal underwriter, Eaton Vance Distributors, Inc., a
wholly-owned subsidiary of Eaton Vance Management, is the principal
underwriter for each of the investment companies named below:
<TABLE>
<S> <C>
EV Classic Alabama Tax Free Fund EV Classic Michigan Tax Free Fund
EV Classic Arizona Tax Free Fund EV Classic Minnesota Tax Free Fund
EV Classic Arkansas Tax Free Fund EV Classic Mississippi Tax Free Fund
EV Classic California Limited Maturity EV Classic Missouri Tax Free Fund
Tax Free Fund EV Classic National Limited Maturity Tax Free Fund
EV Classic California Municipals Fund EV Classic National Municipals Fund
EV Classic Colorado Tax Free Fund EV Classic New Jersey Limited Maturity
EV Classic Connecticut Limited Maturity Tax Free Fund
Tax Free Fund EV Classic New Jersey Tax Free Fund
EV Classic Connecticut Tax Free Fund EV Classic New York Limited Maturity
EV Classic Florida Insured Tax Free Fund Tax Free Fund
EV Classic Florida Limited Maturity EV Classic New York Tax Free Fund
Tax Free Fund EV Classic North Carolina Tax Free Fund
EV Classic Florida Tax Free Fund EV Classic Ohio Limited Maturity Tax Free Fund
EV Classic Georgia Tax Free Fund EV Classic Ohio Tax Free Fund
EV Classic Government Obligations Fund EV Classic Oregon Tax Free Fund
EV Classic Greater China Growth Fund EV Classic Pennsylvania Limited Maturity
EV Classic Growth Fund Tax Free Fund
EV Classic Hawaii Tax Free Fund EV Classic Pennsylvania Tax Free Fund
EV Classic High Income Fund EV Classic Rhode Island Tax Free Fund
EV Classic Investors Fund EV Classic Strategic Income Fund
EV Classic Kansas Tax Free Fund EV Classic South Carolina Tax Free Fund
EV Classic Kentucky Tax Free Fund EV Classic Special Equities Fund
EV Classic Louisiana Tax Free Fund EV Classic Senior Floating-Rate Fund
EV Classic Maryland Tax Free Fund EV Classic Stock Fund
EV Classic Massachusetts Limited Maturity EV Classic Tennessee Tax Free Fund
Tax Free Fund EV Classic Texas Tax Free Fund
EV Classic Massachusetts Tax Free Fund EV Classic Total Return Fund
EV Classic Michigan Limited Maturity EV Classic Virginia Tax Free Fund
Tax Free Fund EV Classic West Virginia Tax Free Fund
EV Marathon Alabama Tax Free Fund EV Marathon North Carolina Tax Free Fund
EV Marathon Arizona Limited Maturity EV Marathon Ohio Limited Maturity Tax Free Fund
Tax Free Fund EV Marathon Ohio Tax Free Fund
EV Marathon Arizona Tax Free Fund EV Marathon Oregon Tax Free Fund
EV Marathon Arkansas Tax Free Fund EV Marathon Pennsylvania Limited Maturity
EV Marathon California Limited Maturity Tax Free Fund
Tax Free Fund EV Marathon Pennsylvania Tax Free Fund
EV Marathon California Municipals Fund EV Marathon Rhode Island Tax Free Fund
EV Marathon Colorado Tax Free Fund EV Marathon Strategic Income Fund
EV Marathon Connecticut Limited Maturity EV Marathon South Carolina Tax Free Fund
Tax Free Fund EV Marathon Special Equities Fund
EV Marathon Connecticut Tax Free Fund EV Marathon Stock Fund
EV Marathon Emerging Markets Fund EV Marathon Tennessee Tax Free Fund
Eaton Vance Equity - Income Trust EV Marathon Texas Tax Free Fund
EV Marathon Florida Insured Tax Free Fund EV Marathon Total Return Fund
EV Marathon Florida Limited Maturity EV Marathon Virginia Limited Maturity
Tax Free Fund Tax Free Fund
EV Marathon Florida Tax Free Fund EV Marathon Virginia Tax Free Fund
EV Marathon Georgia Tax Free Fund EV Marathon West Virginia Tax Free Fund
EV Marathon Gold & Natural Resources Fund EV Traditional California Municipals Fund
EV Marathon Government Obligations Fund EV Traditional Connecticut Tax Free Fund
EV Marathon Greater China Growth Fund EV Traditional Emerging Markets Fund
EV Marathon Greater India Fund EV Traditional Florida Insured Tax Free Fund
EV Marathon Growth Fund EV Traditional Florida Limited Maturity
EV Marathon Hawaii Tax Free Fund Tax Free Fund
EV Marathon High Income Fund EV Traditional Florida Tax Free Fund
EV Marathon Investors Fund EV Traditional Government Obligations Fund
EV Marathon Kansas Tax Free Fund EV Traditional Greater China Growth Fund
EV Marathon Kentucky Tax Free Fund EV Traditional Greater India Fund
EV Marathon Louisiana Tax Free Fund EV Traditional Growth Fund
EV Marathon Maryland Tax Free Fund Eaton Vance Income Fund of Boston
EV Marathon Massachusetts Limited Maturity EV Traditional Investors Fund
Tax Free Fund Eaton Vance Municipal Bond Fund L.P.
EV Marathon Massachusetts Tax Free Fund EV Traditional National Limited Maturity
EV Marathon Michigan Limited Maturity Tax Free Fund Tax Free Fund
EV Marathon Michigan Tax Free Fund EV Traditional National Municipals Fund
EV Marathon Minnesota Tax Free Fund EV Traditional New Jersey Tax Free Fund
EV Marathon Mississippi Tax Free Fund EV Traditional New York Limited Maturity
EV Marathon Missouri Tax Free Fund Tax Free Fund
EV Marathon National Limited Maturity EV Traditional New York Tax Free Fund
Tax Free Fund EV Traditional Pennsylvania Tax Free Fund
EV Marathon National Municipals Fund EV Traditional Special Equities Fund
EV Marathon New Jersey Limited Maturity EV Traditional Stock Fund
Tax Free Fund EV Traditional Total Return Fund
EV Marathon New Jersey Tax Free Fund Eaton Vance Cash Management Fund
EV Marathon New York Limited Maturity Eaton Vance Liquid Assets Fund
Tax Free Fund Eaton Vance Money Market Fund
EV Marathon New York Tax Free Fund Eaton Vance Prime Rate Reserves
EV Marathon North Carolina Limited Maturity Eaton Vance Short-Term Treasury Fund
Tax Free Fund Eaton Vance Tax Free Reserves
Massachusetts Municipal Bond Portfolio
</TABLE>
(B)
<TABLE>
<CAPTION>
(1) (2) (3)
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICE
BUSINESS ADDRESS WITH PRINCIPAL UNDERWRITER WITH REGISTRANT
------------------- -------------------------- --------------------
<S> <C> <C>
James B. Hawkes* Vice President and Director Vice President and Trustee
William M. Steul* Vice President and Director None
Wharton P. Whitaker* President and Director None
Howard D. Barr Vice President None
2750 Royal View Court
Oakland, Michigan
Nancy E. Belza Vice President None
463-1 Buena Vista East
San Francisco, California
Chris Berg Vice President None
45 Windsor Lane
Palm Beach Gardens, Florida
H. Day Brigham, Jr.* Vice President None
Susan W. Bukima Vice President None
106 Princess Street
Alexandria, Virginia
Jeffrey W. Butterfield Vice President None
9378 Mirror Road
Columbus, Indiana
Mark A. Carlson* Vice President None
Jeffrey Chernoff Vice President None
115 Concourse West
Bright Waters, New York
William A. Clemmer* Vice President None
James S. Comforti Vice President None
1859 Crest Drive
Encinitas, California
Mark P. Doman Vice President None
107 Pine Street
Philadelphia, Pennsylvania
Michael A. Foster Vice President None
850 Kelsey Court
Centerville, Ohio
William M. Gillen Vice President None
280 Rea Street
North Andover, Massachusetts
Hugh S. Gilmartin Vice President None
1531-184th Avenue, NE
Bellevue, Washington
Richard E. Houghton* Vice President None
Brian Jacobs* Senior Vice President None
Stephen D. Jonhson Vice President None
13340 Providence Lake Drive
Alpharetta, Georgia
Thomas J. Marcello Vice President None
553 Belleville Avenue
Glen Ridge, New Jersey
Timothy D. McCarthy Vice President None
9801 Germantown Pike
Lincoln Woods Apt. 416
Lafayette Hill, Pennsylvania
Morgan C. Mohrman* Senior Vice President None
Gregory B. Norris Vice President None
6 Halidon Court
Palm Beach Gardens, Florida
Thomas Otis* Secretary and Clerk Secretary
George D. Owen Vice President None
1911 Wildwood Court
Blue Springs, Missouri
F. Anthony Robinson Vice President None
510 Gravely Hill Road
Wakefield, Rhode Island
Benjamin A. Rowland, Jr.* Vice President, None
Treasurer and Director
John P. Rynne* Vice President None
George V.F. Schwab, Jr. Vice President None
9501 Hampton Oaks Lane
Charlotte, North Carolina
Cornelius J. Sullivan* Vice President None
Maureen C. Tallon Vice President None
518 Armistead Drive
Nashville, Tennessee
David M. Thill Vice President None
126 Albert Drive
Lancaster, New York
William T. Toner Vice President None
747 Lilac Drive
Santa Barbara, California
Chris Volf Vice President None
6517 Thoroughbred Loop
Odessa, Florida
Donald E. Webber* Senior Vice President None
Sue Wilder Vice President None
141 East 89th Street
New York, New York
- ---------
<FN>
*Address is 24 Federal Street, Boston, MA 02110
</TABLE>
(C) Not applicable
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All applicable accounts, books and documents required to be maintained by
the Registrant by Section 31(a) of the Investment Company Act of 1940 and the
Rules promulgated thereunder are in the possession and custody of the
Registrant's custodian, Investors Bank & Trust Company, 24 Federal Street,
Boston, MA 02110 and 89 South Street, Boston, MA 02111 and its transfer agent,
The Shareholder Services Group, Inc., 53 State Street, Boston, MA 02104, with
the exception of certain corporate documents and portfolio trading documents
which are in the possession and custody of Eaton Vance Management, 24 Federal
Street, Boston, MA 02110. Registrant is informed that all applicable accounts,
books and documents required to be maintained by registered investment advisers
are in the custody and possession of Eaton Vance Management and Boston
Management and Research.
ITEM 31. MANAGEMENT SERVICES
Not applicable
ITEM 32. UNDERTAKINGS
The Registrant undertakes to furnish to each person to whom a prospectus is
delivered a copy of the latest annual report to shareholders, upon request and
without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Amendment to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized in the City of Boston, and the Commonwealth of
Massachusetts on the 21st day of April, 1995.
EATON VANCE INVESTMENT TRUST
By: /s/ THOMAS J. FETTER
--------------------
THOMAS J. FETTER, President
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment to the Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
President (Chief Executive
/s/ THOMAS J. FETTER Officer) April 21, 1995
- ------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and
/s/ JAMES L. O'CONNOR Accounting Officer April 21, 1995
- ------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee April 21, 1995
- ------------------------------
DONALD R. DWIGHT
/s/ JAMES B. HAWKES Trustee April 21, 1995
- ------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee April 21, 1995
- ------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee April 21, 1995
- ------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee April 21, 1995
- ------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee April 21, 1995
- ------------------------------
JACK L. TREYNOR
*By: /s/ H. DAY BRIGHAM, JR.
-------------------------
As attorney-in-fact
</TABLE>
<PAGE>
SIGNATURES
Arizona Limited Maturity Tax Free Portfolio has duly caused this Amendment
to the Registration Statement on Form N-1A of Eaton Vance Investment Trust (File
no. 33-1121) to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Boston and the Commonwealth of Massachusetts on the
21st day of April, 1995.
ARIZONA LIMITED MATURITY TAX FREE PORTFOLIO
By: /s/ THOMAS J. FETTER
--------------------
THOMAS J. FETTER, President
This Amendment to the Registration Statement on Form N-1A of Eaton Vance
Investment Trust (File No. 33-1121) has been signed below by the following
persons in the capacities on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
President (Chief Executive
/s/ THOMAS J. FETTER Officer) April 21, 1995
- ------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and
/s/ JAMES L. O'CONNOR Accounting Officer April 21, 1995
- ------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee April 21, 1995
- ------------------------------
DONALD R. DWIGHT
/s/ JAMES B. HAWKES Trustee April 21, 1995
- ------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee April 21, 1995
- ------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee April 21, 1995
- ------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee April 21, 1995
- ------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee April 21, 1995
- ------------------------------
JACK L. TREYNOR
*By: /s/ H. DAY BRIGHAM, JR.
-------------------------
As attorney-in-fact
</TABLE>
<PAGE>
SIGNATURES
North Carolina Limited Maturity Tax Free Portfolio has duly caused this
Amendment to the Registration Statement on Form N-1A of Eaton Vance Investment
Trust (File no. 33-1121) to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boston and the Commonwealth of
Massachusetts on the 21st day of April, 1995.
NORTH CAROLINA LIMITED MATURITY
TAX FREE PORTFOLIO
By: /s/ THOMAS J. FETTER
--------------------
THOMAS J. FETTER, President
This Amendment to the Registration Statement on Form N-1A of Eaton Vance
Investment Trust (File No. 33-1121) has been signed below by the following
persons in the capacities on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
President (Chief Executive
/s/ THOMAS J. FETTER Officer) April 21, 1995
- ------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and
/s/ JAMES L. O'CONNOR Accounting Officer April 21, 1995
- ------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee April 21, 1995
- ------------------------------
DONALD R. DWIGHT
/s/ JAMES B. HAWKES Trustee April 21, 1995
- ------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee April 21, 1995
- ------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee April 21, 1995
- ------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee April 21, 1995
- ------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee April 21, 1995
- ------------------------------
JACK L. TREYNOR
*By: /s/ H. DAY BRIGHAM, JR.
-------------------------
As attorney-in-fact
</TABLE>
<PAGE>
SIGNATURES
Virginia Limited Maturity Tax Free Portfolio has duly caused this Amendment
to the Registration Statement on Form N-1A of Eaton Vance Investment Trust (File
no. 33-1121) to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Boston and the Commonwealth of Massachusetts on the
21st day of April, 1995.
VIRGINIA LIMITED MATURITY TAX FREE PORTFOLIO
By: /s/ THOMAS J. FETTER
--------------------
THOMAS J. FETTER, President
This Amendment to the Registration Statement on Form N-1A of Eaton Vance
Investment Trust (File No. 33-1121) has been signed below by the following
persons in the capacities on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
President (Chief Executive
/s/ THOMAS J. FETTER Officer) April 21, 1995
- ------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and
/s/ JAMES L. O'CONNOR Accounting Officer April 21, 1995
- ------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee April 21, 1995
- ------------------------------
DONALD R. DWIGHT
/s/ JAMES B. HAWKES Trustee April 21, 1995
- ------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee April 21, 1995
- ------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee April 21, 1995
- ------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee April 21, 1995
- ------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee April 21, 1995
- ------------------------------
JACK L. TREYNOR
*By: /s/ H. DAY BRIGHAM, JR.
-------------------------
As attorney-in-fact
</TABLE>
<PAGE>
EXHIBIT INDEX
The following exhibits are filed as part of this amendment to the Registration
Statement pursuant to General Instructions E of Form N-1A.
<TABLE>
<CAPTION>
PAGE IN SEQUENTIAL
EXHIBIT NO. DESCRIPTION NUMBERING SYSTEM
- ----------- ----------- ----------------
<S> <C> <C>
(16) Schedules for Computation of Performance Quotations.
</TABLE>
EX-99.16
INVESTMENT PERFORMANCE CHARTS
AR, NC, VA LTD.
<TABLE>
EV MARATHON ARIZONA LIMITED MATURITY TAX FREE FUND INVESTMENT PERFORMANCE
The table below indicates the total return (capital changes plus reinvestment of
all distributions) on a hypothetical investment of $1,000 in the Fund covering
the life of the Fund ending March 31, 1995. Past performance is not indicative
of future results. Investment return and principal value will fluctuate and
shares, when redeemed, may be worth more or less than their original cost.
<CAPTION>
TOTAL TOTAL
RETURN RETURN
03/31/95 03/31/95 THROUGH THOUGH
VALUE OF VALUE OF 03/31/95 03/31/95
NO. OF SHARES TOTAL INVEST- INVEST- BEFORE AFTER
NO. OF NAV ON GAINED THROUGH NO. OF MENT MENT DEDUCTING DEDUCTING
INVEST- INVEST- AMT OF SHARES DATE OF REINVESTMENT OF SHARES BEFORE AFTER THE CDSC THE CDSC*
MENT MENT INVEST- PUR- INVEST- ALL DISTRIBUTIONS AS OF 03/31/95 DEDUCTING DEDUCTING ---------- -----------
PERIOD DATE MENT CHASED MENT THROUGH 03/31/95 03/31/95 NAV+ THE CDSC THE CDSC* CUMUL^ ANN++ CUMUL^^ ANN++
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LIFE OF 11/03/94 $1,000 100.000 $10.00 1.485 101.485 $10.25 $1,040.22 $1,010.22 4.02% NA 1.02% NA
THE FUND
(0.41 YEARS)
* No contingent deferred sales charge (CDSC) is imposed on shares purchased more than four years prior to the redemption, shares
acquired through the reinvestment of dividends and distributions and any appreciation in value of other shares in the account,
and no such charge is imposed on exchanges of fund shares for shares of one or more other funds in the Eaton Vance Marathon
Group of Funds.
^ Cumulative total return (net asset value to net asset value) is calculated by dividing the cumulative net asset value on
03/31/95 by the initial net asset value.
^^ Cumulative total return (net asset value to net asset value) is calculated by dividing the cumulative net asset value on
03/31/95 by the initial net asset value and subtracting the CDSC.
+ 03/31/95 Net Asset Value is an unaudited figure
++ Average annual total return is the average annual compounded rate of return based on the cumulative value for each period. It
is calculated by taking the nth root of 1 + the cumulative total return, where n = the number of years invested.
</TABLE>
<PAGE>
EV MARATHON ARIZONA LIMITED MATURITY
TAX FREE FUND
CALCULATION OF DISTRIBUTION RATE
AND EFFECTIVE DISTRIBUTION RATE
AS OF 03/31/95
DISTRIBUTION RATE
- ------------------------------------------------------------------------------
Annualize
Most Recent
Monthly : ( $0.031068520 / 28) x 365
Distribution
Divide by
Current Maximum : $10.25
Offering Price
Distribution
Rate Equals : 0.0395 ( or 3.95% )
EFFECTIVE DISTRIBUTION RATE
- ------------------------------------------------------------------------------
Divide
Distribution : 0.0395
Rate by 365/28 ------ + 1
( or 13.036 ) 13.036
and Add 1.
The Resulting
Number Equals : 1.0030
Take this
Number to the 13.036
365/28th ( or : ( 1.0030 ) - 1
13.036 ) power
and Subtract 1.
Effective
Distribution : 0.0402 ( or 4.02% )
Rate Equals
<PAGE>
Exhibit 16
EV MARATHON ARIZONA LIMITED MATURITY TAX FREE FUND
TAX EQUIVALENT YIELD CALCULATION
For the 30 days ended 3/31/95:
Interest Income Earned: $1,887
Plus Dividend Income Earned:
----------
Equal Gross Income: $1,887
Minus Expenses: $299
----------
Equal Net Investment Income: $1,588
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 46,333
----------
Equal Net Investment Income Earned Per Share: $0.0343
Net Asset Value Per Share 3/31/95: $10.25
30 Day Yield*: 4.05%
Divided by One minus the Tax Rate of 31%: 0.69
-----------
Equal Tax Equivalent Yield **: 5.87%
Divided by one minus a tax rate of 32.61%: 0.6739
----------
Equal Tax Equivalent Yield***: 6.01%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0343/$10.25)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and Arizona tax rate of 32.61%
<PAGE>
Exhibit 16
EV MARATHON ARIZONA LIMITED MATURITY TAX FREE FUND
CALCULATION OF YIELD
For the 30 days ended 03/31/95:
Interest Income Earned: $1,887
Plus Dividend Income Earned:
----------
Equal Gross Income: $1,887
Minus Expenses: $299
----------
Equal Net Investment Income: $1,588
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 46,333
----------
Equal Net Investment Income Earned Per Share: $0.0343
Maximum Offering Price Per Share 3/31/95: $10.25
30 Day Yield*: 4.05%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0343/$10.25)+1)-1]
<PAGE>
<TABLE>
EV MARATHON NORTH CAROLINA LIMITED MATURITY TAX FREE FUND INVESTMENT PERFORMANCE
The table below indicates the total return (capital changes plus reinvestment of
all distributions) on a hypothetical investment of $1,000 in the Fund covering
the life of the Fund ending March 31, 1995. Past performance is not indicative
of future results. Investment return and principal value will fluctuate and
shares, when redeemed, may be worth more or less than their original cost.
<CAPTION>
TOTAL TOTAL
RETURN RETURN
03/31/95 03/31/95 THROUGH THOUGH
VALUE OF VALUE OF 03/31/95 03/31/95
NO. OF SHARES TOTAL INVEST- INVEST- BEFORE AFTER
NO. OF NAV ON GAINED THROUGH NO. OF MENT MENT DEDUCTING DEDUCTING
INVEST- INVEST- AMT OF SHARES DATE OF REINVESTMENT OF SHARES BEFORE AFTER THE CDSC THE CDSC*
MENT MENT INVEST- PUR- INVEST- ALL DISTRIBUTIONS AS OF 03/31/95 DEDUCTING DEDUCTING ---------- -----------
PERIOD DATE MENT CHASED MENT THROUGH 03/31/95 03/31/95 NAV+ THE CDSC THE CDSC* CUMUL^ ANN++ CUMUL^^ ANN++
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LIFE OF 11/28/94 $1,000 100.000 $10.00 1.189 101.189 $10.21 $1,033.14 $1,003.14 3.31% NA 0.31% NA
THE FUND
(0.34 YEARS)
* No contingent deferred sales charge (CDSC) is imposed on shares purchased more than four years prior to the redemption, shares
acquired through the reinvestment of dividends and distributions and any appreciation in value of other shares in the account,
and no such charge is imposed on exchanges of fund shares for shares of one or more other funds in the Eaton Vance Marathon
Group of Funds.
^ Cumulative total return (net asset value to net asset value) is calculated by dividing the cumulative net asset value on
03/31/95 by the initial net asset value.
^^ Cumulative total return (net asset value to net asset value) is calculated by dividing the cumulative net asset value on
03/31/95 by the initial net asset value and subtracting the CDSC.
+ 03/31/95 Net Asset Value is an unaudited figure
++ Average annual total return is the average annual compounded rate of return based on the cumulative value for each period. It
is calculated by taking the nth root of 1 + the cumulative total return, where n = the number of years invested.
</TABLE>
<PAGE>
EV MARATHON NORTH CAROLINA LIMITED MATURITY TAX FREE FUND
CALCULATION OF DISTRIBUTION RATE
AND EFFECTIVE DISTRIBUTION RATE
AS OF 03/31/95
DISTRIBUTION RATE
Annualize
Most Recent
Monthly : ( $0.031068520 / 28) x 365
Distribution
Divide by
Current Maximum : $10.21
Offering Price
Distribution
Rate Equals : 0.0397 ( or 3.97% )
EFFECTIVE DISTRIBUTION RATE
Divide
Distribution : 0.0397
Rate by 365/28 ------ + 1
( or 13.036 ) 13.036
and Add 1.
The Resulting
Number Equals : 1.0030
Take this
Number to the 13.036
365/28th ( or : ( 1.0030 ) - 1
13.036 ) power
and Subtract 1.
Effective
Distribution : 0.0404 ( or 4.04% )
Rate Equals
<PAGE>
Exhibit 16
EV MARATHON NORTH CAROLINA LIMITED MATURITY TAX FREE FUND
TAX EQUIVALENT YIELD CALCULATION
For the 30 days ended 3/31/95:
Interest Income Earned: $353
Plus Dividend Income Earned:
----------
Equal Gross Income: $353
Minus Expenses: $76
----------
Equal Net Investment Income: $277
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 11,636
----------
Equal Net Investment Income Earned Per Share: $0.0238
Net Asset Value Per Share 3/31/95: $10.21
30 Day Yield*: 2.82%
Divided by One minus the Tax Rate of 31%: 0.69
-----------
Equal Tax Equivalent Yield **: 4.08%
Divided by one minus a tax rate of 33.04%: 0.6696
----------
Equal Tax Equivalent Yield***: 4.20%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0238/$10.21)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and North Carolina tax rate of 33.04%
<PAGE>
Exhibit 16
EV MARATHON NORTH CAROLINA LIMITED MATURITY TAX FREE FUND
CALCULATION OF YIELD
For the 30 days ended 3/31/95:
Interest Income Earned: $353
Plus Dividend Income Earned:
----------
Equal Gross Income: $353
Minus Expenses: $76
----------
Equal Net Investment Income: $277
Divided by Average daily number of shares
outstanding that were entitled
To receive dividends: 11,636
----------
Equal Net Investment Income Earned Per Share: $0.0238
Maximum Offering Price Per Share 3/31/95: $10.21
30 Day Yield*: 2.82%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0238/$10.21)+1)-1]
<PAGE>
<TABLE>
EV MARATHON VIRGINIA LIMITED MATURITY TAX FREE FUND INVESTMENT PERFORMANCE
The table below indicates the total return (capital changes plus reinvestment of
all distributions) on a hypothetical investment of $1,000 in the Fund covering
the life of the Fund ending March 31, 1995. Past performance is not indicative
of future results. Investment return and principal value will fluctuate and
shares, when redeemed, may be worth more or less than their original cost.
<CAPTION>
TOTAL TOTAL
RETURN RETURN
03/31/95 03/31/95 THROUGH THOUGH
VALUE OF VALUE OF 03/31/95 03/31/95
NO. OF SHARES TOTAL INVEST- INVEST- BEFORE AFTER
NO. OF NAV ON GAINED THROUGH NO. OF MENT MENT DEDUCTING DEDUCTING
INVEST- INVEST- AMT OF SHARES DATE OF REINVESTMENT OF SHARES BEFORE AFTER THE CDSC THE CDSC*
MENT MENT INVEST- PUR- INVEST- ALL DISTRIBUTIONS AS OF 03/31/95 DEDUCTING DEDUCTING ---------- -----------
PERIOD DATE MENT CHASED MENT THROUGH 03/31/95 03/31/95 NAV+ THE CDSC THE CDSC* CUMUL^ ANN++ CUMUL^^ ANN++
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LIFE OF 11/11/94 $1,000 100.000 $10.00 1.374 101.374 $10.34 $1,048.21 $1,018.21 4.82% NA 1.82% NA
THE FUND
(0.38 YEARS)
* No contingent deferred sales charge (CDSC) is imposed on shares purchased more than four years prior to the redemption, shares
acquired through the reinvestment of dividends and distributions and any appreciation in value of other shares in the account,
and no such charge is imposed on exchanges of fund shares for shares of one or more other funds in the Eaton Vance Marathon
Group of Funds.
^ Cumulative total return (net asset value to net asset value) is calculated by dividing the cumulative net asset value on
03/31/95 by the initial net asset value.
^^ Cumulative total return (net asset value to net asset value) is calculated by dividing the cumulative net asset value on
03/31/95 by the initial net asset value and subtracting the CDSC.
+ 03/31/95 Net Asset Value is an unaudited figure
++ Average annual total return is the average annual compounded rate of return based on the cumulative value for each period. It
is calculated by taking the nth root of 1 + the cumulative total return, where n = the number of years invested.
</TABLE>
<PAGE>
EV MARATHON VIRGINIA LIMITED MATURITY
TAX FREE FUND
CALCULATION OF DISTRIBUTION RATE
AND EFFECTIVE DISTRIBUTION RATE
AS OF 03/31/95
DISTRIBUTION RATE
Annualize
Most Recent
Monthly : ( $0.031068520 / 28) x 365
Distribution
Divide by
Current Maximum : $10.34
Offering Price
Distribution
Rate Equals : 0.0392 ( or 3.92% )
EFFECTIVE DISTRIBUTION RATE
Divide
Distribution : 0.0392
Rate by 365/28 ------ + 1
( or 13.036 ) 13.036
and Add 1.
The Resulting
Number Equals : 1.0030
Take this
Number to the 13.036
365/28th ( or : ( 1.0030 ) - 1
13.036 ) power
and Subtract 1.
Effective
Distribution : 0.0399 ( or 3.99% )
Rate Equals
<PAGE>
Exhibit 16
EV MARATHON VIRGINIA LIMITED MATURITY TAX FREE FUND
TAX EQUIVALENT YIELD CALCULATION
For the 30 days ended 3/31/95:
Interest Income Earned: $392
Plus Dividend Income Earned:
----------
Equal Gross Income: $392
Minus Expenses: $113
----------
Equal Net Investment Income: $279
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 10,645
----------
Equal Net Investment Income Earned Per Share: $0.0262
Net Asset Value Per Share 3/31/95: $10.34
30 Day Yield*: 3.06%
Divided by One minus the Tax Rate of 31%: 0.69
-----------
Equal Tax Equivalent Yield **: 4.43%
Divided by one minus a tax rate of 32.14%: 0.6786
----------
Equal Tax Equivalent Yield***: 4.51%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0262/$10.34)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and Virginia tax rate of 32.14%
<PAGE>
Exhibit 16
EV MARATHON VIRGINIA LIMITED MATURITY TAX FREE FUND
CALCULATION OF YIELD
For the 30 days ended 3/31/95:
Interest Income Earned: $392
Plus Dividend Income Earned:
----------
Equal Gross Income: $392
Minus Expenses: $113
----------
Equal Net Investment Income: $279
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 10,645
----------
Equal Net Investment Income Earned Per Share: $0.0262
Maximum Offering Price Per Share 3/31/95: $10.34
30 Day Yield*: 3.06%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0262/$10.34)+1)-1]
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000779991
<NAME> EATON VANCE INVESTMENT TRUST
<SERIES>
<NUMBER> 27
<NAME> EV MARATHON ARIZONA LIMITED MATURITY TAX FREE FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 5-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> MAR-31-1995
<INVESTMENTS-AT-COST> 475
<INVESTMENTS-AT-VALUE> 486
<RECEIVABLES> 11
<ASSETS-OTHER> 3
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 500
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2
<TOTAL-LIABILITIES> 2
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 488
<SHARES-COMMON-STOCK> 49
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 10
<NET-ASSETS> 498
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 7
<EXPENSES-NET> 1
<NET-INVESTMENT-INCOME> 6
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 10
<NET-CHANGE-FROM-OPS> 16
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 6
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 48
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 1
<NET-CHANGE-IN-ASSETS> 498
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3
<AVERAGE-NET-ASSETS> 375
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> .155
<PER-SHARE-GAIN-APPREC> .253
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (0.158)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.25
<EXPENSE-RATIO> 0.74
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000028748
<NAME> EATON VANCE INVESTMENT TRUST
<SERIES>
<NUMBER> 27
<NAME> EV ARIZONA LIMITED MATURITY TAX FREE PORTFOLIO
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 5-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> MAR-31-1995
<INVESTMENTS-AT-COST> 529
<INVESTMENTS-AT-VALUE> 546
<RECEIVABLES> 9
<ASSETS-OTHER> 36
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 591
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1
<TOTAL-LIABILITIES> 1
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 577
<SHARES-COMMON-STOCK> 49
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 13
<NET-ASSETS> 590
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 9
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 9
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 13
<NET-CHANGE-FROM-OPS> 22
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 590
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2
<AVERAGE-NET-ASSETS> 462
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000779991
<NAME> EATON VANCE INVESTMENT TRUST
<SERIES>
<NUMBER> 28
<NAME> EV MARATHON NORTH CAROLINA LIMITED MATURITY TAX FREE FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 5-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> MAR-31-1995
<INVESTMENTS-AT-COST> 130
<INVESTMENTS-AT-VALUE> 132
<RECEIVABLES> 1
<ASSETS-OTHER> 6
<OTHER-ITEMS-ASSETS> 0
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